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Zen & the Art of The Small Account
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Zen & the Art of The Small Account

  #361 (permalink)
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Goal Accomplished

My goal was to hold one trade without moving the stop: I did this on the first trade: Winner. Then on the second trade: Loser. Down commission now. Then I got nervous for some reason. Passed on a BUNCH of great trades. I marked them in real time. They all worked. Then decided it was time to get back in the game: Loser but small, I have an ATM for times like this. A small target with a small stop. Its just a way to get back in it without risking a bunch of money. It worked. The nervousness went a way, then took the next set up. It was executed perfectly and now I am profitable and done for the day. I am on my way to do some volunteer work today.....

Now that I think about it, all five trades were held without moving the stop or target. 3 winners and 2 losers and the winners bigger than the losers. Back on track.

Cheers

Simplicity is the ultimate sophistication, Leonardo da Vinci


Most people chose unhappiness over uncertainty, Tim Ferris
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  #362 (permalink)
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aztrader9 View Post
Not the programing language, the grade.



I got another short signal right away and took this one as well. This trade was executed perfectly. Stop placed properly, and I held through the heat. Actually what I did was put the target and stop in and closed my eyes. .


AZ, Help me learn here.... How is a stop placed properly?? Is it based around support / resistance levels??


AJ
Nashville, Tennessee


"Life On The Edge of SR"
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  #363 (permalink)
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tderrick View Post
AZ, Help me learn here.... How is a stop placed properly?? Is it based around support / resistance levels??

This is the question every one asks. Here is the what I consider the right answer. The stop is placed correctly when it is in the location where the premise of the trade is no longer valid. This means the stop could be anywhere from one tick below your entry to 100 ticks below your entry in the case of a long. The trouble here is this: It is entirely dependent on your method of trading. If you are scalping, maybe its just a few ticks, if you are swing trading, maybe its 50-100 ticks....its all relative.

So the bigger question really is this. How much are you willing to risk on any one trade? 1-2% of your account? $100, what is the number? Once you figure that out, you need a system that allows you to trade with that level of risk and be able to place your stop in the appropriate place with that level of risk.

In other words, say you are willing to risk $100 per trade. If you have a system that says your average risk reward ratio is 2:1, you would be risking $100 to make $200. Keep in mind I am making these numbers up as i go ok. Next say your system says to trade support/resistance or S/R. That means when prices approach an area of S/R, you have a decision to make. Where do you enter the trade AND make sure your stop is within your margin of risk. Example: Prices are at 75.50 on CL. There is resistance at 80.00 and you have a ten tick stop tolerance or $100. You would need to enter your trade for a short between 70.00 and 80.00. The stop would need to go a few ticks above 80.00 to ensure the stop is not violated before the premise of the trade is invalid. So, the smart money says place your entry as close to 80.00 as possible so your stop can be as small as possible. You'd rather not risk the entire $100 if you did not have to right. So placing the stop at 85.00 and your entry is 80.00 means you are only risking $50.00 instead of $100. If you enter at 70.00, you stop still needs to be a few ticks above 80.00 and so you are now risking 15 ticks or $150.00 to make that same $200.00

If you trade a Moving Average (MA) system, then the stop needs to be placed where the MA's say the trade is over. Since there is no way for me to know what kind of MA or how many you may use, I can't really comment further about that. You'd need to play around with it and see where the most logical stop would be.

Another way to do it is this: You can default out to a fixed stop. Say 10 ticks. Then you must be disciplined to never take a trade that exceeds this risk threshold. I know many people trade this way. The reason is pretty simple. If they take ever signal their system gives them, many times the stop would need to be much further away and that is uncomfortable for them. So they are more selective on the trades presented. This is my preferred method. I don't always get it within my stop tolerance but most of the time I do.

Of course, all this supposes you have a system that is repeatable, has a legitimate place where the trade really is invalid and you can quantify this with a simple statement such as: "In a short, when prices move above X moving average, the trade is no longer valid". At that point you can either manually exit a trade or wait for the stop to get hit. If the point of invalidation is inside your existing stop, then manually close it out. Don't wait for the stop.

Lastly, NEVER NEVER NEVER NEVER EVER, move your stop to give the trade some more room. If you are trading a valid method, this will lead to certain doom. If the method is valid and you keep getting your stop hit, your stop is too close or your method is not working.

I would add to this, it may be important to also never move your stop closer to the entry. For instance, my method does not call for a trailing stop. There is no need. I do move my stop to BE+1 once my profit target has painted on the chart and did not fill my order. At this point, I don't want to turn a winner into a loser. But other than that, there in reason to move the stop. At least in my method.

Long answer to a short question. I hope it helps.

Simplicity is the ultimate sophistication, Leonardo da Vinci


Most people chose unhappiness over uncertainty, Tim Ferris
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  #364 (permalink)
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aztrader9 View Post
The answer is easy...its your emotions/psychology. No need to wonder. You must trade real money in order to conquer the emotions.


This may be the theme for this entire thread...

Even though at this point I have very little capital to work with, I am gaining massive experience in managing fear, anger, et. al., by trading with real cash.

As soon as I learned the software and was winning 50% of my trades in Market Replay, I was out. That took
a couple of months I would guess... to feel somewhat comfortable.

My hand was still shaking on that first live trade, however!! lol

Love ya, AZ




Love ya, AZ


AJ
Nashville, Tennessee


"Life On The Edge of SR"
 
  #365 (permalink)
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Finished!! Entire Thread Read

Well, AZ....


I've completed the entire thread and I've learned quite a bit!!

It seems you've really come a long way with your emotions. Well done!!

Are these last few trades, all with live money???


Thank you for sharing your incredible journey....


AJ
Nashville, Tennessee


"Life On The Edge of SR"
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  #366 (permalink)
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tderrick View Post
Well, AZ....


I've completed the entire thread and I've learned quite a bit!!

It seems you've really come a long way with your emotions. Well done!!

Are these last few trades, all with live money???


Thank you for sharing your incredible journey....

All trades since August 1st has been with live money. I took a few sim trades here and there after I was done for the day, but yes, the ones I write about are all live money.

Simplicity is the ultimate sophistication, Leonardo da Vinci


Most people chose unhappiness over uncertainty, Tim Ferris
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  #367 (permalink)
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Ouch day and week

I finished the week with a net loss. Got caught in the chop twice. Stopped trading each time. I think this may not be a good strategy. A friend said you're not a real trader until you have the mental strength to dig out of a hole. Ok so I think both ideas have merit. The first one: Stop when you are losing is good as it preserves capital, but it does not really strengthen your mental muscles. Instead it sets you up for the false expectation that all trades will be winners. If the edge is right, you have money in your account, keep trading. On the other hand, if you are in a mental fog due to the losers, stop. Otherwise, I think my friend might be right. Subject to a daily max of course which I hit today but not the other losing days. Those days, my daily stop was just mental distress at losing.

So over the weekend, I'll revisit my daily stop limit. Adjust if needed and then just trade until my daily goals are hit or my daily stop is hit. That simple.

I am also moving back to CL permanently. Been trading TF for a while only because the margin requirement is a little looser and I hate it. Its not smooth like CL and there are far fewer opportunities there as well. I think this is perhaps one reason I've struggled this week is I just hate the instrument and its hard to do something you hate. This may be pure conjecture on my part but it sounds good anyway.

Since I've been away from CL for a few weeks, I will be simming for at least a week to get my CL legs back. I have been reviewing it every day but thats not the same as trading. I'll let you know when I go back live on CL.

I'll post my CL results on sim every day next week.

Cheers and have a great weekend.

Simplicity is the ultimate sophistication, Leonardo da Vinci


Most people chose unhappiness over uncertainty, Tim Ferris
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  #368 (permalink)
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Clarification on "Chop"

Hi Az,

I've just started reading your journal and find it very good and informative. I am really new to all of this and have not ecountered the term "chop". Would it be possible for you to explain what "chop" is? And how did you get caught in it twice.

Cheers
DK

 
  #369 (permalink)
 R.I.P. 1960-2010 
 
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Read the Al Brooks thread, he calls chop barb wire. Or His site or Watch his Webinar. All price action based.

R.I.P. Andy Zektzer (ZTR), 1960-2010.
Please visit this thread for more information.
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  #370 (permalink)
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aztrader9 View Post
All trades since August 1st has been with live money. I took a few sim trades here and there after I was done for the day, but yes, the ones I write about are all live money.



Great work....


AJ
Nashville, Tennessee


"Life On The Edge of SR"
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