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Zen & the Art of The Small Account


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Zen & the Art of The Small Account

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  #901 (permalink)
 gtichauer 
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aztrader9 View Post
Rules:
1. Wait for pull back to 50SMA

2. Wait for price to form a trend color HeinkenAshi bar, enter at the body (not the wick) of the trend direction. This should also close with trend beyond the 8SMA as well....8SMA should be color of trend.

3. If price moves beyond 50SMA, price could be reversing trend direction. In this case, price must move away from the 50SMA in the counter trend direction and then pull back to the 50SMA to have a valid entry. Price should close beyond the 8SMA in the new trend direction and beyond the body of the most recent HeikenAshi bar that was part of the pull back leg.


This is the first time in two years I've really been able to condense and make rules super simple. The part that pulled it all together was @MWinfrey's requirement there be separation from the MA to take the pull back. This kills the chop issue and clarifies the trend issue.

Cheers

AZ very nice chart and pretty clear....one question reg the separation for rule 3....is it just a visual separation u use or have some hard condition like "n" bars ?? Have u tested some standard dev from the 50SMA or similar? maybe using a Keltner Channel on a 50SMA.....

Worked very nice on a narrow range day so your should really exploit this on trend days.....thanks for sharing.

GT
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  #902 (permalink)
 PandaWarrior 
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gtichauer View Post
AZ very nice chart and pretty clear....one question reg the separation for rule 3....is it just a visual separation u use or have some hard condition like "n" bars ?? Have u tested some standard dev from the 50SMA or similar? maybe using a Keltner Channel on a 50SMA.....

Worked very nice on a narrow range day so your should really exploit this on trend days.....thanks for sharing.

No hard and fast rules. But I think I would like to see at least one bar NOT touching the MA before it comes back to the MA. That will be something I watch closely. For now, a nice move away and then back is probably more along the lines of what I am looking for. Will be playing this one by ear for now.....

Simplicity is the ultimate sophistication, Leonardo da Vinci


Most people chose unhappiness over uncertainty, Tim Ferris
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  #903 (permalink)
 PandaWarrior 
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Ended day -$60 after 5 trades.

I passed on both the perfect set ups early, missed my 100 ticks those set ups gave me and then tried to manufacture set ups out of the chop. Managed to be profitable most of the morning and then gave it back right at the end.

Very frustrating day, but at least I kept the loss really small. It could have been much worse.

I made one mental error and that was the difference between making my profit goal and ending in a loss. Its a game of inches as they say.

No charts today.

Simplicity is the ultimate sophistication, Leonardo da Vinci


Most people chose unhappiness over uncertainty, Tim Ferris
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  #904 (permalink)
 Lornz 
Oslo, Norway
 
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aztrader9 View Post
For now, 1st lot off at 15, second at 50 and trail stop under MAJOR swings......

When I can swing three lots, it will be just like Private Banker.....1st off at 15, 2nd at 30 and the last undefined....maybe 100-250 ticks and trail the stop....this is down the road a bit and probably not this year. The risk is to large on a three lot trade and it will be to large for quite some time. I still struggle a bit with the two lot trade but thats how you make money....

I read a story somewhere about a quote on the bathroom wall at the Chicago Merc...it said, "If you're not sweating while in a trade, you're not trading big enough." Two lots makes me sweat...when its no big deal, I'll go to three.

I would advise you to research what fits your strategy best. It would be better than to use arbitrary numbers. These kinds of optimizations can have a big impact on your bottom line. E.g., if price moves at least 10 ticks in your favor 80% of the time (including failed trades), but only reach 15 40% of the time, 10 ticks would be a better first target.
You can use an ema for your trailing stop e.g. Or possibly scale out using extreme values of a trend or momentum indicator.

I'm not really advocating use of either, I'm just trying to make the point that static targets might not be the best way to go....

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  #905 (permalink)
 PandaWarrior 
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First to recap the week. It did not play out as I had envisioned....me confidently taking trades with a 50 tick runner and boldly holding for the target come hell or high water. Well not so much...but I did take nearly every trade with two lots with a runner and I did hold some of them for quite a long time.....a work in progress I suppose. Once again, the week is profitable....less than desired but better than last week.

I've begun a very detailed trade tracking or should I say, resumed a very detailed trade tracking....it worked so well the first time I stopped doing it....but statistics are a necessary evil and I am once again committed to keeping a detailed personal journal beyond what I do here in the thread. I've included my daily score card, my trade log with the details of why I entered, and new to the journal, a chart marked up and printed to staple to the trade log. All nicely holed punched and inserted into my three ring binder subdivided by month.....

So here are my random thoughts:

As a small retail trader, from the beginning my ( and I suspect everyone's) desire has been to minimize risk. This has sent me and plenty of others on the quest for the perfect ENTRY method to allow me (us) to have tiny stops. This requires perfection in calling the direction but more importantly, it requires perfection in calling the timing. Here is the rub....getting the timing right 100% of the time is NEVER gonna happen. We get it right just enough to make us think we can do it again and again. This is really bad news. We keep our stops ultra tight, and ratchet down our targets again and again to make sure we get those few ticks quickly so the stop does not have a chance to get hit.

BUT so many times, we get stopped out to the tick and then trade turns and hits our profit target without us as we are to afraid to re-enter.

It occurred to me yesterday, that this thinking is really ass backwards. Instead of spending 95% of my time thinking about the perfect entry, I should spend 95% of my time thinking about the exit....both a stop and target.....I remember a trader saying "Let some random person pick a random entry either long or short and let me manage the exit and over a 100 trade sample I will be profitable." Its the exits that count. BFO.....I get the direction right about 90% of the time, maybe more and yet I am still break even at this point. Whats up with that?

So yesterday afternoon, I decided that from now on, all stops will be placed far enough away to let the trade develop and yet close enough that if it gets hit, I am within my risk parameters. What this does to the entry is this, it demands I be selective about the trades I choose.....in other words, I need to know where my exit is before I trade and it has to fit my risk profile. This basically means it must be a low risk trade. And in my world, that means really deep pull backs with a clearly defined stop placement area.

This means I cannot overly rely on my MA for guidance as there are many occasions where price is on the wrong side of the MA for the trade but yet the swing against which I am gauging the pull back has not been broken. I saw it happen several times today and while I traded one of them, I passed on several others....all left money on the table.

Another thing occurred to me yesterday, if the exit is so darn important, that means selecting correct target areas is as important as the stop....and so, gone are the arbitrary targets. I will still put them on via the ATM strat I use but I will move the target to the correct areas......regardless of distance from the entry.....of course it needs to be far enough away to justify the risk....more or less but watching this play out yesterday and today, many times those targets were really far away and I needed to be willing to at least give it a chance to get there.....which often times it did.

Today I traded with the larger stop.....which produced a much better result. I had no losses today, small targets....15 ticks due to the narrow range......most of the time the R:R was inverted....but so what, I had good entries and I knew where to put the stop....which would have been the right place regardless of the R:R.

So I know I've had this stop and target discussion before. I read my thread yesterday afternoon...what an eye opener that was! I could not believe all the different chart configurations and "trade methods" I've used and all the promises I made myself and then broken almost immediately....and what about all the great advice from others which I completely ignored. Crazy stuff...but I recognized this one thing....I can trade any of those systems and methods now.....it almost doesn't matter which one I use...or where the entries are.....as long as I keep the main thing the main thing....know where the proper exits are. Thats it.

As I move forward, I think I will be posting only once a week from now on....not to many people read the thread anymore, its not about them anyway. I keep a detailed journal privately with my thoughts and personal things in it and am not really feeling motivated to post everyday at this point. I've even thought of closing this thread and perhaps starting a new one focused on exit management.....I mean I'm not Buddhist, I don't practice Zen meditation or anything like that so the title of the thread is misleading in many ways....the accurate thing about it was and still is, the small account portion.....

Here's to better exits.....

And speaking of exits....I need to make one now...I have honey do's today.

Cheers.

Simplicity is the ultimate sophistication, Leonardo da Vinci


Most people chose unhappiness over uncertainty, Tim Ferris
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  #906 (permalink)
 PandaWarrior 
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Wow, I just noticed I have over 2000 thanks....thats pretty cool....not bad for a guys with only two threads......one of which has not been written in for about a year.....thanks everyone that liked the material enough to say thanks.....

Simplicity is the ultimate sophistication, Leonardo da Vinci


Most people chose unhappiness over uncertainty, Tim Ferris
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  #907 (permalink)
 Big Mike 
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aztrader9 View Post
Wow, I just noticed I have over 2000 thanks....thats pretty cool....not bad for a guys with only two threads......one of which has not been written in for about a year.....thanks everyone that liked the material enough to say thanks.....

Congrats

And I'm happy you have sat down and re-read your thread, I think that is one of the best things anyone can do who takes the time to journal - re-read your posts so you can learn from them over and over again.

Mike

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  #908 (permalink)
 tderrick 
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aztrader9 View Post



As I move forward, I think I will be posting only once a week from now on....not to many people read the thread anymore, its not about them anyway. I keep a detailed journal privately with my thoughts and personal things in it and am not really feeling motivated to post everyday at this point. I've even thought of closing this thread and perhaps starting a new one focused on exit management.....I mean I'm not Buddhist, I don't practice Zen meditation or anything like that so the title of the thread is misleading in many ways....the accurate thing about it was and still is, the small account portion.....

Here's to better exits.....

And speaking of exits....I need to make one now...I have honey do's today.

Cheers.


The rest of this game lies between our ears, my friend. You have a firm grasp of all the mechanics.

Good luck this week ... I hope to stop by for a visit....


AJ
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  #909 (permalink)
 PandaWarrior 
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+81 ticks today. Had my first 50 tick runner today. Very nice.

That was fun!


Simplicity is the ultimate sophistication, Leonardo da Vinci


Most people chose unhappiness over uncertainty, Tim Ferris
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  #910 (permalink)
 PandaWarrior 
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-48 ticks today. Yuck....My only mistake? Not waiting for the trend to confirm.....Tried to pick the tops and bottoms......Not good....but lesson learned.....I have a rule....wait for separation from the chop BEFORE trading....Did not do that today and got an expensive reminder of why I had that rule in the first place.

Continued on after my lunch....just marking trades (no real trades) and demanding a separation from the chop zone before trading resulted in some very nice trades.....go figure.....morning session....-48 ticks....late morning session...+120 ticks and only one runner of 50 ticks...the other 70 came from nice scalps in the narrow range......

I can do this.

Simplicity is the ultimate sophistication, Leonardo da Vinci


Most people chose unhappiness over uncertainty, Tim Ferris
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