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

  #881 (permalink)
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Simplify, Simplify

I have had some tough emotional issues to overcome with regards to letting winners run. Today I think I finally got over it. I had no runners but saw several of my normal entries just run away after my small profit target got hit.

So I did some math. It was not pretty. I have been netting between $300-800 a day with the occasional daily stop thrown in. The overall effect is to be slightly better than break even as a trader overall. The cure for this is runners of course but I have never been able to hold them.

But I remembered something today. Last summer I was trading multiple lots on sim to try to build a trading system that worked. And it did...I made good money on sim. But when I went live, it was back to one contract and all the issues that came with that.

So today, I made the decision to use two lots and scale the first one out at 15 ticks which makes the second contract risk free to do whatever it will do. I will use a 14 tick stop on both and a 50 tick target on the second contract. I'll trail the stop behind the major swings as the trade progresses.

This will keep me in the trade longer, reduce the number of trades and hopefully make me think harder about trade selection. I want to take trades that have 50+ tick potential.

So the math exercise told me that between yesterday and today, had I used the scale out method, I'd have $5000+ instead of the $980 or so that I have. And the nasty day on Monday would have been a slightly better than BE.....good enough for me.

So tomorrow, a major change in my trading style.....

Cheers.

Simplicity is the ultimate sophistication, Leonardo da Vinci


Most people chose unhappiness over uncertainty, Tim Ferris
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  #882 (permalink)
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aztrader9 View Post
So today, I made the decision to use two lots and scale the first one out at 15 ticks which makes the second contract risk free to do whatever it will do. I will use a 14 tick stop on both and a 50 tick target on the second contract. I'll trail the stop behind the major swings as the trade progresses.

This will keep me in the trade longer, reduce the number of trades and hopefully make me think harder about trade selection. I want to take trades that have 50+ tick potential.

I have been playing with that very same idea with regards to trade management; but here is a thought... dont limit the second contract to 50 ticks... make it 300 ticks, and then just let the stop not trail immediately for the second contract.. that way you can benefit from the larger directional moves that tend to happen rather than still get your 50t but then see it run another 100t..

just my 2cents for whatever they are worth..

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  #883 (permalink)
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sysot1t View Post
I have been playing with that very same idea with regards to trade management; but here is a thought... dont limit the second contract to 50 ticks... make it 300 ticks, and then just let the stop not trail immediately for the second contract.. that way you can benefit from the larger directional moves that tend to happen rather than still get your 50t but then see it run another 100t..

just my 2cents for whatever they are worth..

I agree on not trading a fixed extended target...u can use what mentioned above, that is a trailing stop to maximize a directional move or u can define a logical destination trade which is > than 50 ticks (like Y High, Globex High, Y VPOC, Gap Close, etc).

Regarding trailing, I would test how that performs on your 5m chart one timeframing the trail stop....just move it below every new CLOSED 5m bar until a low is taken.

these are my 2cents....u now have 4 more cents !!!

GT
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  #884 (permalink)
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sysot1t View Post
I have been playing with that very same idea with regards to trade management; but here is a thought... dont limit the second contract to 50 ticks... make it 300 ticks, and then just let the stop not trail immediately for the second contract.. that way you can benefit from the larger directional moves that tend to happen rather than still get your 50t but then see it run another 100t..

just my 2cents for whatever they are worth..

I thought about that as well....and I will eventually. For now though, 50 is a huge victory if I can get it done. After a couple weeks of this, I'll see how it goes and if I am able to handle it, I'll go 100 ticks and work with that.

Simplicity is the ultimate sophistication, Leonardo da Vinci


Most people chose unhappiness over uncertainty, Tim Ferris
 
  #885 (permalink)
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There are traders here who trade in multiples of 3, which makes good sense to me. They scale out 1 lot at a time. The first is scaled out at 15, the second at 30, and the final is let run. I did this on sim for some of my trades and instead of walking away with $300-$400 on a day, it was closer to $2000 on a single entry with a scaling stoploss. Obviously this is a unique day, but shows the potential of scaling out.

I think my biggest problem will be altering my style to the scale out, instead of hitting x ticks or waiting for x signal and then getting out.

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  #886 (permalink)
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I've found that CL tends to be attracted to round numbers. You might consider putting your target near the next round dollar amount in the direction of the trade, whether that be 40 ticks or 75 ticks. So if you enter long at 109.20, target might be 109.95 or so (keep target below 110 as round numbers can also act as resistance).

Just a thought anyway.

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  #887 (permalink)
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worldwary View Post
I've found that CL tends to be attracted to round numbers. You might consider putting your target near the next round dollar amount in the direction of the trade, whether that be 40 ticks or 75 ticks. So if you enter long at 109.20, target might be 109.95 or so (keep target below 110 as round numbers can also act as resistance).

Just a thought anyway.


I second this.

Setting an arbitrary number, like 50 cents, does not make much sense. I'd say it's better to set targets at either, as Worldwary says, round dollar amounts, or at support and resistance points. Something technical on the charts, like the crossing of the red and white lines on your charts or if you trade by price action alone then set targets based on that.

Congratulations on attempting to get over this hurdle! I'm working on the same thing and have found that hindsight is a great teacher. Going over previous charts and asking yourself where would it have made sense to hold till? What about on a different day's chart; is there a pattern?

However, as you said, holding even for a 50 cent target is an improvement. Working on letting your winners run is worthwhile, regardless of the method you employ.

Will you be entering at the same price level with all of the contracts or scaling in?


Last edited by TriggerShy; April 21st, 2011 at 01:18 PM.
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  #888 (permalink)
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johnnycakes78704 View Post
There are traders here who trade in multiples of 3, which makes good sense to me. They scale out 1 lot at a time. The first is scaled out at 15, the second at 30, and the final is let run. I did this on sim for some of my trades and instead of walking away with $300-$400 on a day, it was closer to $2000 on a single entry with a scaling stoploss. Obviously this is a unique day, but shows the potential of scaling out.

I think my biggest problem will be altering my style to the scale out, instead of hitting x ticks or waiting for x signal and then getting out.

I've been trading CL like this for years and feel it's the best way. I scale out @ .15 and .30 and let my remaining 1/3 trail letting the market take me out. It allows you to participate in the big moves that CL often provides while booking profits and removing risk along the way. If I get 2/3's filled, I'm guaranteed to make a profit on the trade even if my remaining 1/3 is a full stop out. I don't begin to trail my last 1/3 until my 2nd target of .30 is hit of course.

Hopefully this is helpful in determining your money management and strategy.

Cheers,
PB

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  #889 (permalink)
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1st trading day with bigger targets

Well today was the wrong day to test big targets, but I still gave it a go. After the slow opening, I thought we were either gonna blast out to the topside or just trade in a range which is what ended up happening.

That being said, price was structured fairly decently and I managed to make a profit even with having to modify the profit targets.

There were two trades that could have given me 50+ on them but I did not have the nerve to take one and I completely missed the first one which was a short off the top of the morning range. The other one was a long that I talked myself out of....but was a beautiful long......

Other than those mental errors, I had one mechanical error that cost me two ticks. My DOM reset itself (again) after a service disconnection and instead of placing a stop order below the market, it fired a trailing limit order at the market. I instantly closed the position and fixed the DOM to once again place stop orders.

After the first ill advised loss, I was forced to go back to one lot and I went WLWW to get back to above zero for the day. After that I went 2 lots with smaller targets on both lots due to the narrow range. I kept notes on the MFE on these trades and a 20-25 tick target would have been good....So I left some money on the table here.

My last trade I used the scale out method and took a net of 46 on the trade. I had some negative slippage on both the entry and the exit.

I ended the day net +74 ticks between the singles and double lot trades. Not bad considering the range was only 148 ticks top to bottom and it spent the majority of the time in between that. Of course it could have been better had I taken the two trades that actually ran but I am satisfied.

I think if I can maintain what I did today and hold the runners next week, I will have a very nice week come Friday next week. I rather like the idea of a runner or two most days.

Everyone have a great Easter weekend.

Cheers.

Simplicity is the ultimate sophistication, Leonardo da Vinci


Most people chose unhappiness over uncertainty, Tim Ferris
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Last edited by PandaWarrior; April 21st, 2011 at 05:49 PM.
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  #890 (permalink)
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Private Banker View Post
I've been trading CL like this for years and feel it's the best way. I scale out @ .15 and .30 and let my remaining 1/3 trail letting the market take me out. It allows you to participate in the big moves that CL often provides while booking profits and removing risk along the way. If I get 2/3's filled, I'm guaranteed to make a profit on the trade even if my remaining 1/3 is a full stop out. I don't begin to trail my last 1/3 until my 2nd target of .30 is hit of course.

Hopefully this is helpful in determining your money management and strategy.

Cheers,
PB

Although I use slightly different values, I also trade this way. The way the CL moves, it absolutely makes sense to scale out. All my research has found that this improves profitability, at least for my strategy, significantly.

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