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Zen & the Art of The Small Account

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  #431 (permalink)
 PandaWarrior 
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tderrick View Post
Careful, Az.... I think you may be morphing into a Break Out Trader! ; )

You're well on your way to being a very successful trader. I'm glad I'm here for the voyage.

Break out trader in the sense I take break out trades.....not gonna happen....break out trader in the sense I might break out of the dead zone and make some money.....I sure hope so!

Simplicity is the ultimate sophistication, Leonardo da Vinci


Most people chose unhappiness over uncertainty, Tim Ferris
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  #432 (permalink)
 PandaWarrior 
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mattz View Post
@ aztrader9

You inspired me with this thread and reminded me of the human side of the people behind the Point and Click.
You are awesome! I will write a big post one of these days while addressing some things that were discussed in these 40+ pages of your thread.

I'm glad you like the thread. However, lets wait a bit on the awesome thing. I'm just an average guy trying to figure out how to make an above average living trading CL futures.

Simplicity is the ultimate sophistication, Leonardo da Vinci


Most people chose unhappiness over uncertainty, Tim Ferris
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  #433 (permalink)
 PandaWarrior 
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Tomorrow I start a new challenge. This will be a sim challenge only. No live money for this one. I will do my normal trading of course and when that is over, I've decided to sim trade with no fixed target in mind other than what my chart says is support/resistance for targets. I'll manage the trade instead with a trailing stop using the previous swings for stops. Once I have 50 ticks of profit on any single trade, I'll tighten the stop up to protect at least 40 of those ticks. That represents 4 "normal" trades. The initial stop will be the most recent swing low/high regardless of distance away from current prices. For the sake of this challenge, the stop will be almost inconsequential. I just want a worst case scenario stop in place and give the trade room to work itself out.

These trades will only be taken if there is at least 50+ ticks between current prices and the furthest possible target represented by S/R on my chart. In other words, looking for a HPE along with room to run.

The challenge will be one month long and I am starting with a sim account of $25,000. I can risk no more than 1% on any one trade and I must stop trading if I lose 1% of my account on any one day. So for those of you with math issues; this works out to risking $250 a day. If the first trade stops out and I have risked the entire 1% on that trade, I am done for the day. I also must stop trading for the month if I lose 8% of the account in the first two weeks.

The math works out to trading one contract with a 25 tick stop, two with a 12 tick stop and 3 with an 8 tick stop. So I will follow these sizing rules. If the stop is more than 25 ticks away, I will pass on the trade completely as it would not allow me to trade even one contract and keep the risk at 1%

The point here is this, I am learning about capital preservation and risk management. Even though this thread started out as a thread about a small account, the more I trade and learn about risk and money management, the more I realize that trading with a small account is most likely going to be a disaster. The reason, stops must be so small that you will experience MANY stops and while they will be small ones, it is literally death by a thousand cuts.

So the experiment is to tell me if its better to have bigger targets AND bigger stops and hopefully grow the account faster that way or is it better to continue to have small stops and hope your method produces many more winners than losers.

Depending on the answer, it could be that a small account can be traded with bigger stops even though the risk is much greater than 1% initially as you are trading as though the bigger stop was 1%. In theory, I think this works, in practicality, probably not.

I suspect in the end, I will end up in the camp that says to not even begin to trade until the risk capital is at least $25,000 AND you've put in at least 1000 hours of sim on the SAME set ups. This is where my thoughts and research is leading me. However, I need to try.

One final thing, I will be trading between 6-8AMPST and maybe the last hour of the trading day. The last hour only IF I have not achieved satisfactory results in the AM session. Both my normal trading and the sim trading will need to be accomplished during this time frame. This means that some days I may not make it to the sim challenge due to normal trading not being completed.

If this challenge is successful, meaning I have added significantly to the sim account during the month and the normal trading does not match those results, then I will probably stop trading live until I can accumulate enough in my account from other sources to enable me to trade on the 1% rule and have a stop that this challenge says is the most optimum for the method.

On another issue, I THINK I may have found a way to avoid the chop. Well not completely but most of it. Here it is: @Big Mike mentioned something the other day that made me start to look for a chop set up. He said he did not take a trade for 5 hours then hit a 100 tick winner. Now this is big news. For those of you that missed this, you need to read it. What was my take away from this post? That I needed a way to deal with chop. I do have one but my system almost always will give me a really good signal right before a runner, so sometimes I've taken every signal only to be stopped out trying to "catch the big one". Then when I read his post, I realized something. I no longer have to be afraid of "missing the big one". Why, you ask, because almost every time a move comes out of chop, it signals its about to. But the signal is really subtle and often looks like the actual move. But its not, its just notice that one is about to start. In my system, this looks like a first and then second entry opportunity. So from now on, I'll be looking only for that second entry after the range of S/R has been broken.

These are the places I will be looking to press the trade, putting on 2-3 contracts in the sim challenge. Then as the account grows, 5-10 cars even if that represents a risk greater than 1% if I can demonstrate a high probability trade.

Stay tuned, fun times ahead!

Til tomorrow.

Simplicity is the ultimate sophistication, Leonardo da Vinci


Most people chose unhappiness over uncertainty, Tim Ferris
Started this thread
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  #434 (permalink)
 gtichauer 
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aztrader9 View Post
Tomorrow I start a new challenge. This will be a sim challenge only. No live money for this one. I will do my normal trading of course and when that is over, I've decided to sim trade with no fixed target in mind other than what my chart says is support/resistance for targets. I'll manage the trade instead with a trailing stop using the previous swings for stops. Once I have 50 ticks of profit on any single trade, I'll tighten the stop up to protect at least 40 of those ticks. That represents 4 "normal" trades. The initial stop will be the most recent swing low/high regardless of distance away from current prices. For the sake of this challenge, the stop will be almost inconsequential. I just want a worst case scenario stop in place and give the trade room to work itself out.

These trades will only be taken if there is at least 50+ ticks between current prices and the furthest possible target represented by S/R on my chart. In other words, looking for a HPE along with room to run.

The challenge will be one month long and I am starting with a sim account of $25,000. I can risk no more than 1% on any one trade and I must stop trading if I lose 1% of my account on any one day. So for those of you with math issues; this works out to risking $250 a day. If the first trade stops out and I have risked the entire 1% on that trade, I am done for the day. I also must stop trading for the month if I lose 8% of the account in the first two weeks.

The math works out to trading one contract with a 25 tick stop, two with a 12 tick stop and 3 with an 8 tick stop. So I will follow these sizing rules. If the stop is more than 25 ticks away, I will pass on the trade completely as it would not allow me to trade even one contract and keep the risk at 1%

The point here is this, I am learning about capital preservation and risk management. Even though this thread started out as a thread about a small account, the more I trade and learn about risk and money management, the more I realize that trading with a small account is most likely going to be a disaster. The reason, stops must be so small that you will experience MANY stops and while they will be small ones, it is literally death by a thousand cuts.

So the experiment is to tell me if its better to have bigger targets AND bigger stops and hopefully grow the account faster that way or is it better to continue to have small stops and hope your method produces many more winners than losers.

Depending on the answer, it could be that a small account can be traded with bigger stops even though the risk is much greater than 1% initially as you are trading as though the bigger stop was 1%. In theory, I think this works, in practicality, probably not.

I suspect in the end, I will end up in the camp that says to not even begin to trade until the risk capital is at least $25,000 AND you've put in at least 1000 hours of sim on the SAME set ups. This is where my thoughts and research is leading me. However, I need to try.

One final thing, I will be trading between 6-8AMPST and maybe the last hour of the trading day. The last hour only IF I have not achieved satisfactory results in the AM session. Both my normal trading and the sim trading will need to be accomplished during this time frame. This means that some days I may not make it to the sim challenge due to normal trading not being completed.

If this challenge is successful, meaning I have added significantly to the sim account during the month and the normal trading does not match those results, then I will probably stop trading live until I can accumulate enough in my account from other sources to enable me to trade on the 1% rule and have a stop that this challenge says is the most optimum for the method.

On another issue, I THINK I may have found a way to avoid the chop. Well not completely but most of it. Here it is: @Big Mike mentioned something the other day that made me start to look for a chop set up. He said he did not take a trade for 5 hours then hit a 100 tick winner. Now this is big news. For those of you that missed this, you need to read it. What was my take away from this post? That I needed a way to deal with chop. I do have one but my system almost always will give me a really good signal right before a runner, so sometimes I've taken every signal only to be stopped out trying to "catch the big one". Then when I read his post, I realized something. I no longer have to be afraid of "missing the big one". Why, you ask, because almost every time a move comes out of chop, it signals its about to. But the signal is really subtle and often looks like the actual move. But its not, its just notice that one is about to start. In my system, this looks like a first and then second entry opportunity. So from now on, I'll be looking only for that second entry after the range of S/R has been broken.

These are the places I will be looking to press the trade, putting on 2-3 contracts in the sim challenge. Then as the account grows, 5-10 cars even if that represents a risk greater than 1% if I can demonstrate a high probability trade.

Stay tuned, fun times ahead!

Til tomorrow.

I bet that if done with discipline, your sim challenge should give better results long term....but as u mention u have to survive to less (but bigger) winners.....easy to say, hard to do.

But one thing u must consider IMHO is that as you say your challenge will be developed AFTER u ended your live trading, and sometimes u may even not do it due to this.......can u really get and extrapolate real life conclusions with this challenge if u are most probably not doing it in the best context (as it depends on your previous trading, which is supposed to be when the best conext for trading is)???

GT
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 PandaWarrior 
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gtichauer View Post
I bet that if done with discipline, your sim challenge should give better results long term....but as u mention u have to survive to less (but bigger) winners.....easy to say, hard to do.

But one thing u must consider IMHO is that as you say your challenge will be developed AFTER u ended your live trading, and sometimes u may even not do it due to this.......can u really get and extrapolate real life conclusions with this challenge if u are most probably not doing it in the best context (as it depends on your previous trading, which is supposed to be when the best conext for trading is)???

You make good points which I have thought about. However, if done properly (easy to say, hard to do) I'm normally done by 7AM. This gives me an hour to test the new theory. If I don't get to the new theory in that time frame, at least I'll go back and use my 100% accurate hindsight indicator to see if the new theory would have played out. Not perfect of course but the best I can do right now. I've just started noticing some of these things and so it's not ready for real trading yet. I am actually ok just looking at it in hindsight if I don't get to it real time. At least I'll be tracking the set ups daily which is something I've not done so far. At the very least, I'll have some data to potentially base a real trade on at some point in the future.

Simplicity is the ultimate sophistication, Leonardo da Vinci


Most people chose unhappiness over uncertainty, Tim Ferris
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  #436 (permalink)
 PandaWarrior 
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Good set ups today. First trade was a stop out, next one +15, next one +10 then another +10 for a net of 27 ticks on 4 trades.

I also did an over night trade off one of my normal set ups with a 50 tick target and a trailing stop. +35 ticks on that one.....however it was a sim trade. Just wanted to see if it worked.

Gonna possibly look for a runner today. But I got one already in "practice". When the fourth trade was over, I tracked it like it had a 50 tick target. And this time through, the 50 ticks would have been hit. I "locked in" 40 ticks when it painted 50 but the target was hit before the 40 trail stop would have been hit.

All in all, a good day.

Simplicity is the ultimate sophistication, Leonardo da Vinci


Most people chose unhappiness over uncertainty, Tim Ferris
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 tderrick 
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aztrader9 View Post
....break out trader in the sense I might break out of the dead zone and make some money.....I sure hope so!


Ha!! ha!! No worries....


AJ
Nashville, Tennessee


"Life On The Edge of SR"
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  #438 (permalink)
 tderrick 
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aztrader9 View Post
Good set ups today. First trade was a stop out, next one +15, next one +10 then another +10 for a net of 27 ticks on 4 trades.

I also did an over night trade off one of my normal set ups with a 50 tick target and a trailing stop. +35 ticks on that one.....however it was a sim trade. Just wanted to see if it worked.

Gonna possibly look for a runner today. But I got one already in "practice". When the fourth trade was over, I tracked it like it had a 50 tick target. And this time through, the 50 ticks would have been hit. I "locked in" 40 ticks when it painted 50 but the target was hit before the 40 trail stop would have been hit.

All in all, a good day.


Very nice work.


AJ
Nashville, Tennessee


"Life On The Edge of SR"
Follow me on Twitter Visit my futures io Trade Journal
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  #439 (permalink)
 itrade2win 
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aztrader9 View Post
Good set ups today. First trade was a stop out, next one +15, next one +10 then another +10 for a net of 27 ticks on 4 trades.

I also did an over night trade off one of my normal set ups with a 50 tick target and a trailing stop. +35 ticks on that one.....however it was a sim trade. Just wanted to see if it worked.

Gonna possibly look for a runner today. But I got one already in "practice". When the fourth trade was over, I tracked it like it had a 50 tick target. And this time through, the 50 ticks would have been hit. I "locked in" 40 ticks when it painted 50 but the target was hit before the 40 trail stop would have been hit.

All in all, a good day.

AZ,

Would you mind sharing your charts? I'm trading the CL and my charts have been completely sideways. I would like to see what you're seeing. I tend to wait for a trending market, but if I can make winning trades on a choppy day that would be just as good.

Ryan

 
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  #440 (permalink)
 PandaWarrior 
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My 100% accurate hindsight indicator gave two trades today. Both of which I took real time for small targets. However, treating them as entries for larger targets produced a target of 25 ticks on the first trade with 3 contracts due to stop being 8 ticks and the second one produced 50 ticks with 2 contracts and a 12 tick stop. Net on two trades, $1700.

The first target of 25 ticks was the 75 Fib line from my entry and the second one was HOD +10 ticks or 100% fib extension and the set up was a continuation trade from the 50% fib.

TechSmith | Screencast.com, online video sharing, 2010-10-25_0800

Simplicity is the ultimate sophistication, Leonardo da Vinci


Most people chose unhappiness over uncertainty, Tim Ferris
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