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

  #721 (permalink)
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Good stuff, guys!!


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  #722 (permalink)
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Another positive day

Well, things are going better for me this week. I used the KC on the 6R in combination with the 6R for entry.

Still don't have it down and probably wont for a while. But it sure was interesting to see how prices reacted to the 5min chart levels. That chart is pretty powerful. If at some point I can stand the heat in terms of the larger stop, I may move back to it as my trading chart. But for now, the 6R is ok.

As predicted, the KC is better for the range bound areas BUT I think there is some value for the runners as well. Still looking at the nuances of the method.

What I did wrong today:
1. I miss read the 6 range and bought just as the 5 min chart was getting ready to continue the short trend.
2. I hesitated on TONS of possible trades. Really gotta work on this.
3. On item #1, I placed the trade and then left the room. During the trade, it gave me a chance to get out at BE or a little better. PA was telling me during the trade that it was a loser so I MIGHT have gotten out of it without a loss.

What I did right today:
1. I was very patient. I took only the trades I really felt comfortable with. This accounted for the missed trades noted above. So this attribute is a double edge sword.
2. I held my trades to completion today. Even the one that went wrong.
3. I stayed really focused today.
4. Never went in the red today, that is a good feeling.
5. I was able to mark the charts in real time since I was so patient. It gave me time to reflect and mark it up.

So three days left to go in the week. If I do well, it will have been my best week in a while and my best 10-15 days in a while as well.

Simplicity is the ultimate sophistication, Leonardo da Vinci


Most people chose unhappiness over uncertainty, Tim Ferris
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Zen & the Art of The Small Account-2011-03-08_0829.png   Zen & the Art of The Small Account-2011-03-08_0830.png   Zen & the Art of The Small Account-2011-03-08_0830_001.png   Zen & the Art of The Small Account-2011-03-08_0831.png   Zen & the Art of The Small Account-2011-03-08_0842.png  
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  #723 (permalink)
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AZ,

When you say, "100% retracement" then you mean double bottom, or do you mean 100% extension, or do you mean 100% extension (H&S) off of using the fibs backwards? Just curious.

I can see where you would have got out of the one trade. Very obvious with price action.

How do you determine 5M trend direction? After so many bars or off of a trendline etc..?

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  #724 (permalink)
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Good job. Keep logging the hours as there's really no substitute for watching a given chart setup play out in real time.

Your current setup is quite similar to mine, although you're using range charts and I'm using tick charts. For what it's worth, here's what I generally look for:

1. Price action establishes a confirmed trend (HH, HL, etc.).

2. Pullback within the trend extending past the SMA (the black line in your KC setup), but not past the opposite channel.

3. Enter in direction of trend on break of prior bar's H/L.

If price is indeed trending, this method will generally get you into the trend at a favorable price. From there it's a matter of money management, stop placement, etc., and that's really a function of personal risk tolerance.

One other element I find helpful is a "pace of tape" type indicator that measures how quickly the bars are forming. I equate faster trading with trending conditions, slower trading with chop.

Not sure any of this will work for you so feel free to ignore if not helpful.

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  #725 (permalink)
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bluemele View Post
AZ,

When you say, "100% retracement" then you mean double bottom, or do you mean 100% extension, or do you mean 100% extension (H&S) off of using the fibs backwards? Just curious.

I can see where you would have got out of the one trade. Very obvious with price action.

How do you determine 5M trend direction? After so many bars or off of a trendline etc..?

The 100% retracement was on the 5 min chart, it was in fact, a double bottom. I drew a fib from the bottom of the leg to the top and it pulled back all the way to the starting point, hence my use of the term 100% pull back.

The five min trend is the thing I a still working on , but essentially its HH/HL or LH/LL in concert with the ideas gained from @MWinfrey's thread. He is using an 8SMA to determine trend and it just so happens that the KC has as its center line, something that closely approximates the 8SMA. I am NOT defining the trend exactly like Mike but close. I am also using the inside bar as a reference point for indecision. Ideally, you would identify the trend, look for the inside bar, and then go with the trend. The other idea is to look for the established trend, wait for a pull back to the center line of the KC, and then a close beyond the most recent bar in the pull back.

I have marked up the 5min chart a bit so you can see what I was thinking more or less.

All works in progress, but so far, I like what I am seeing.

Simplicity is the ultimate sophistication, Leonardo da Vinci


Most people chose unhappiness over uncertainty, Tim Ferris
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  #726 (permalink)
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Thanks for sharing!

Very interesting. I had a couple of systems I traded forex using Bollinger Bands with certain setups. Some were promising, but never found the right fit after a few weeks and gave up on it. I was also using like 12 different currencies so trying to figure out how they all moved was difficult to say the least.

 
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Early day today

I stopped out real quick today. I think I may have been overconfident from the previous few days success. This is a certainty.

However, looking at the chart, and realizing what I did, the overconfidence was a hindrance but it did not solve the root issue which was/is jumping on the trades I like and holding them.

You can see from the chart there were two excellent trades that should have gotten me to my daily target.

Instead, I bailed on one and passed on the next, even though it set up exactly like I want them to.

So the difference between a real nice morning and a stop out is the little mental things. Nothing more.

What I did right today:
1. Not much.

What I did wrong today:
1. Over confidence
2.Not sure why I hesitated on the second trade considering item #1.
3. I did not hold the first long to completion. I got scared.
4. I failed to read the filter chart correctly....actually I think I did read it correctly but refused to believe it. See what I wanted to do was go short, BUT the signal candle was really big and I did not want a stop that large, So I manufactured a long out of thin air to justify me not taking the short when I was supposed to. See chart two for the exact location I made the error.
5. I re-entered a second time after the failed long attempt in an effort to prove I was right about the long but was just early.....

Today was a sobering lesson on the very subtle difference between a profitable day and a losing day. Its often not the big things that trip you up, its the little things...as it almost always is in competitive pursuits. Trading can be a game of inches as the saying goes.

For the first time in a long time, I feel like I am in the arena of conscious competence. The state of mind where I know I can and I know why....but execution is still the key. I am breaking even mostly, but need to move to the next level of making profit every day and that will only come with time I think and intense work on the mental game.

Simplicity is the ultimate sophistication, Leonardo da Vinci


Most people chose unhappiness over uncertainty, Tim Ferris
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  #728 (permalink)
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some random thoughts

My trading buddy asked me today if I am learning anything with regards to trading. This was after I told him about my expensive lesson today. To be honest, it was a difficult question. Easy to answer yes, as we learn every day right? But tough in the respect that I can point to a gradual step by step methodical learning experience but not any one thing in particular. Like "I learned a new trading method today. It has these arrows and these eye candy dots and sure enough, if I just do what it says, I make money". Nothing like that.

So what is my answer to the question....am I learning anything?

I answer yes. Each day that goes by, I learn something new....but its day's like today that drive home the points.

I like trading. I like the journey I am on. I like the challenge. I like the uncertainty....this is new for me...the uncertainty part. I always wanted a guarantee, but there is none....now I like it.

And each day that goes by, I like the smaller time frames less. I thought I was a scalper and maybe I am, but the 5 min chart is signing a siren song of seduction. The risk is bigger but so are the rewards AND there are much fewer trades....this I like a lot.

The only trouble is this, I may not have what it takes to hold a trade long enough to make up for the risk I would need to take.

So I am going to spend the remainder of the day looking at the best way to trade the 5 min chart AND minimize risk....

Break for personal business out of the office.......

While out driving, I had one of those moments in which you say things like. "oh, thats how you do that"....a moment of clarity that brings a sense of OMG, I can't believe it took me so long to figure that out.


And now I think I have a real answer to the question, "am I learning anything?" And the answer is yes. I think I finally after much stumbling around, figured out how to really use a five min chart. Today I will look at how to minimize risk with BOTH size and a smaller time frame chart.

More on this as it becomes available. I will post a chart later today of what I think I learned.

Simplicity is the ultimate sophistication, Leonardo da Vinci


Most people chose unhappiness over uncertainty, Tim Ferris
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  #729 (permalink)
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I was going to say that. Why not just reduce the # of contracts until you get comfortable?

I am sure you thought of that, but that for me is the only way to 'minimize'. I used to have a coach that would freak out if you said 'minimize risk'. "OPTIMIZE OPPORTUNITY COULD BE YOUR FOCUS!" So when I see that, I just think about how you would take that into account as I am thinking that way as well.

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  #730 (permalink)
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Is this an aha moment?


Here are 4 charts.

I went through the entire day looking at the 5M chart and comparing to my range chart. The results are very much what I expected but have been to blind to see.

So lets set the table.

I spent the first 6-9 months of my trading career following a fellow that used something that looked very much like Perry's platform. The only difference was that he used multiple time frames to set up the trades which happened on a 55Tick chart. This was during the crazy days of the ES moving 25-50 points a day...ES was moving like CL does today. It was too fast and the teacher was pretty rude when asked questions. I left the room when I asked a question about how to use multiple time frames. I believed he was right about the multiple time frames but I never learned how to use them. Its only in the last few weeks that I have learned to use them just a little.

I won't go into the details here but he had a trading philosophy that I have tested over the last two years and have found that his ideas while presented quite rudely were spot on.

I then spent the next 18 months trying different things to overcome my multiple time frame skill deficiency. This seems to be pretty difficult because the options here are limited....you must scalp in a vacuum. I recognized this and decided to become good at it....but the stress levels are high....I don't like this.....so back to the drawing board.

Then @MWinfrey came up with his 5 Min Odyssey. I followed along with it and then at one point, put up the 5 min as a filter chart. This was a nice addition. But I still did not get it. I tried with multiple moving averages and that worked a little bit, but still was the wrong solution.

As time as gone by, my ability to see trades on the 5 min chart has gotten much better, but the risk is much to high for me at the moment.....and then today, an expensive lesson about trading against what it is telling me.

Ok, back to the story about the fellow mentioned above. As I mentioned, he used something that looked like Perry's platform without the oscillators....just the MA's. It was simple and easy to implement on any platform. No special programing needed. I like this. But what I hated about this was his usage of the method in the multiple time frame context. The other item he used was fib re-tracements. I like this regardless of why it works. They just do. BUT which one to take the trades at? That is the question. The deeper the re-tracement without violating a trend the better. This is what the MA's are for. To see the pull back and then re-enter on the MA confirmation.

Today, my aha moment took place in the car, thinking about the 5M chart in relation to the range chart. So what I did was take a look at the 5M chart and then compare what my original teacher taught me about moving averages, trends and transition zones.

The attached charts are the results of that analysis.

The basics are this:

1. Trade with the larger term trend....duh...but never figured this out from a practical standpoint....today that is defined by the 5M chart and the 8SMA....this from @Mwinfey's thread. This is not the only way but it works for now.
2. DO NOT enter until you have a possible signal on the 5 min chart...Inside bars, trend reversals, etc....
3. Enter on the range chart on a pull back that mimics the pull back on the 5M chart.....use the 3 MA filter to do this.
4. OK to trade counter trend, just recognize what it is. And be careful.
5. Be very aware of support and resistance. Look left to be right....to coin a phrase.
6. Change the size of the range chart based on the average daily range....basic rule I came up with is this. ADR x 10%/2 equals the range chart size.
7. Targets equal to twice the size of the range bar..for now
8. Stops behind the most recent swing...hopefully the entry bar IS the swing.
9. Number of lots based on the size of the bar. Control risk with size.
10. Try to capture 50% of the daily ADR..For instance, the ADR at the open was 185 ticks....50% would have been 92.5 ticks round it to 90 ticks and there you have the daily target. I've never made this many ticks in a single day but after looking at the charts today, it was totally possible....is it probable? Not right now, but I think in time it can be.

Items 6-10 are items I made up as I was looking at today's charts....if they are valid or not remains to be seen.

These tactics represent all I have learned from the journey, a return to what I am most familiar with in terms of the MA's as well as what I hope is new found revelation regarding the 5M chart as the higher time frame.

Here is what I want from this post....I want my readers to tear this apart and tell me where I am wrong and point out the flaws in my thinking.......and tell me where I am right and how to capitalize on it.

So there it is....a short history of my trading in one post and what I think I learned today.

I'm a little nervous about putting this out there as it represents both a confession of my ignorance, a stab at something I may know nothing about thereby revealing further ignorance and it represents about three hours of work that may amount to nothing.......again, revealing more ignorance. And it represents a departure from the work I have recently done with regards to keltner channels....even though this was just an experiment.

Simplicity is the ultimate sophistication, Leonardo da Vinci


Most people chose unhappiness over uncertainty, Tim Ferris
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