Come into the Trader's Den

[tnsn2345]

Just adding to what Dan and TT were discussing.

TT I enjoy your "probability" oriented posts a lot. Keep them going.

Anyway, I don't think the combinations you mentioned are practically valid. Now, going by what Dan has mentioned, there are two things which are in our hands out of the three mentioned. THat is, we know which Time we trade (hence we also know what our targets should likely be), we also know what volatility should do (keeping in mind that volatility is more easily predictable than price).

We are left with Direction, which in my opinion forms the crux. Statistically predicting direction holds a 50-50 odd, but in reality, it is here where majority of traders go wrong. Once one figures out a way to get direction right, then Time and volatility can contribute further to enhance profitability.

Tc

Dear Raunak, TT,

Of the three D, L and T. Only T (time) is what we can be 100% sure and which is by all means within our CONTROL. But most of the traders, novice, experienced, inconsistent traders mess with this simple and controlable aspect of trading.

While novice traders are not able to get the 'D' right, so L and T are irrelevant. After a few years of experience and different methods, experienced traders get the 'D' right. But in the quest of getting the 'L' right they modify the controlable 'T' and eventually prove right 'D' to wrong by holding the position from profit to loss just to achieve the wrongly defined 'L'.

Successuful and consistently profitable traders focus (in order of priority) :

T : 50%
D : 40%
L : 10 %

Defining correct 'T' is so very important as your method and tools should be able go give you the most porbable outcome within a defined time period. 'L' is inconsequential. I would not mind to earn the smallest of small profit (L) in the shortest possible time (T) with highest probablity of direction (D)

Regards,

 

[DanPickUp]

Dear Raunak, TT,

Of the three D, L and T. Only T (time) is what we can be 100% sure and which is by all means within our CONTROL. But most of the traders, novice, experienced, inconsistent traders mess with this simple and controlable aspect of trading.

While novice traders are not able to get the 'D' right, so L and T are irrelevant. After a few years of experience and different methods, experienced traders get the 'D' right. But in the quest of getting the 'L' right they modify the controlable 'T' and eventually prove right 'D' to wrong by holding the position from profit to loss just to achieve the wrongly defined 'L'.

Successuful and consistently profitable traders focus (in order of priority) :

T : 50%
D : 40%
L : 10 %

Defining correct 'T' is so very important as your method and tools should be able go give you the most porbable outcome within a defined time period. 'L' is inconsequential. I would not mind to earn the smallest of small profit (L) in the shortest possible time (T) with highest probablity of direction (D)

Regards,

Hi tnsn2345

Interesting post. Even then, I am still not clear, why should I value any entry of a trade in the market with 50% T / 40% D and 10% L.

Many times it is written in this forum, that it is a learning forum.

I may, as I know you, have understood some thing wrong or I may explained it the wrong way by my self. I know the deepness of your thinking and so I write down my thought's as you did. As long as there are discussions witch show the look from different angel, then we learn.

I sit now in front of my screen and I think about different trading plans which can be traded under different circumstances.

I then tried to value them in priority to what you explained. I asked my self : Does this plan belong more to time or direction or length ?

I then decided to make three sheets and put this plans in it.

As you say : Successful and consistently profitable traders focus (in order of priority) T : 50% / D : 40% / L : 10 %

Finally I am a little bit confused. There are situations, I prefer to implement on breakouts. There are situations I prefer to trade a range. There are situations I prefer to trade a possible event. There are situations I just place orders on possibility. There are situation I just like to follow a trend. There are situations I like to enter the trade naked. Some other times with synthetics and other times with spreads.

With other words: A whole mess. No such result that I would see that all this trading plans would belong in the mentioned line you explained successful and consistently and profitable traders trade.



Is it maybe, that every trader still has his own profile and this profile we not just can put in a drawer and say : So it is ?

Just some thoughts

DanPickUp

 

[oilman5]

a great Q........by DANPICKUP.........for discreationary trading........a great puzzle to solve!!!!!!!!

 

[Placebo]

I asked my self : Does this plan belong more to time or direction or length ?

Hi Dan.

Its quite interesting what you stated in the above post , specially the above line . I do understand that you have a wide variety of strategies in your armory but i am quite curious to know how do you really determine which is more important in any strategy ? (i.e if you don't mind telling us)

Now coming back to basics , why is there so much emphasis on only direction ? Determining the direction is not even 5% of the equation , its clubbing this direction with an entry which is suitable in terms of risk management and reward anticipation. This entry is almost 70% of the game since a good entry puts the account in green in hardly any time.

Surely time and length are quite important. Trading the length of a trend is directly proportional to the mentality of the trader and specially the ability to read charts correctly in real time. Some would exit at a pre-determined point based on money management while the cream traders would trade the majority of the directional movement and exit when they perceive that exhaustion is taking place.

Time does play an important role specially while trading extremely volatile assets like certain commodities , USD etc. But isn't time most useful when an important economic announcement is due. So often almost everyone talks about catalyst and the impact of the announcement on direction of prices. I'm sorry to say this but i really fail to understand this mentality of judging direction based on some announcements. One should just be glad that volatility will pick up and so will the chance for increasing bank balance. The direction should be determined without any outside influences and solely based on demand/supply. If that means order flow analysis then so be it if not then anything which helps in anticipating the direction.

There is so much amazing stuff on the internet that it amazes me. If one just takes some time and studies the work of Richard D Wyckoff , Tom Williams , Jesse Livermore , Nicholas Darvas , William O'Neil , Larry Williams , Peter Steidlmayer etc , then most of the problems that one is going through will seem so fragile and get eliminated. Maybe i got carried away and wrote more than i should have but i hope it helps whoever is looking for help.

Cheers And Happy Trading

 

[DanPickUp]

Hi

Now I am one step further. I heard time from tnsn2345 and I heard entry from placebo.

If I combine, I will get a word like : time entry.

Ok, I will start again. I now have four sheets ( Time / Direction / Length / Time entry )

DanPickUp

 

[tnsn2345]

Hi tnsn2345

Interesting post. Even then, I am still not clear, why should I value any entry of a trade in the market with 50% T / 40% D and 10% L.
......I sit now in front of my screen and I think about different trading plans which can be traded under different circumstances.

.....I then decided to make three sheets and put this plans in it.

.....Finally I am a little bit confused. There are situations, I prefer to implement on breakouts. There are situations I prefer to trade a range. There are situations I prefer to trade a possible event. There are situations I just place orders on possibility. There are situation I just like to follow a trend. There are situations I like to enter the trade naked. Some other times with synthetics and other times with spreads.

With other words: A whole mess. No such result that I would see that all this trading plans would belong in the mentioned line you explained successful and consistently and profitable traders trade.

Dear Dan,

Ok let me explain this, when we decide on a pattern, entry point basis our method, charts etc there is one thing we are SURE of (at least in mind) about the outcome likely to happen for the NEXT FEW MORE observation periods, e.g. if you are trading 5 min chart and a pattern suggests you something, you are sure of that outcome say for a period of 10 min or at max 15 mins time horizon, it is not easy or the probability of predicting what could happen after 20 - 30 mins or beyond is difficult to guess on the basis of 5 mins chart, in our given example.

So once we decide on an entry point (ideally it should be the point at which the movement will happen in your favour either continual or reversal) we decide on the likely outcome of the movement within the DEFINED period of time. And this is the ONLY THING we can likely define. I do not know the length, but I LIKELY know the direction and SURELY know the time by which it HAS TO HAPPEN. Now what happens during this time period could be either what I HAD predicted, NOT what I predicted or OPPOSITE to what I predicted. In any of the three outcomes, I am exiting at the end of the holding period. I am happy to earn, lose or exit at par the end of the holding period on the basis of my judgement rather than hold and ride the profits if there is a sudden move in my favour and is likely to continue even after the holding period is over. This orientation is the BASIS for not holding and riding into major losses if there is a sudden move not in my favour.

My decision and thinking till the end of holding period is only on the basis of pattern TILL THE TIME OF ENTRY. The new additions to the pattern, charts etc are IGNORED as they bring in the noise and emotions and they invariably to give you a call to hold you positions.

I trade on simple and minimal trading plans and spend most of the time just observing (sometimes even feeling sleepy while observing) if I can't define the time and the likely direction I stay put. Only when almost sure, would I enter, observe the movement during the holding period, adjust the positions and exit at the end of the holding period.

But all this was learnt the hard way when a simple definition helped me in define my trading objective :

The most important objective for me is:

1. Do not lose money : So the movement I am in trade i.e. I have TAKEN the risk, from the first review period of the position after a predefined time interval , I start REDUCING the risk, reduce risk, reduce risk....
2. Do what you know: I trade only on FAMILIAR market conditions and not all the times. Infact most of the times I am not holding a position but always have eye, mind and soul in the underlying instrument. And wait for THAT opportunity to strike big and strike hard.
3. Know what you do: Trade on simple and manageable plan/method including my Options holdings.

Hope the above helps to remove some confusion.

Regards,

 

[tnsn2345]

...There are situations, I prefer to implement on breakouts. There are situations I prefer to trade a range. There are situations I prefer to trade a possible event. There are situations I just place orders on possibility. There are situation I just like to follow a trend. There are situations I like to enter the trade naked. Some other times with synthetics and other times with spreads.

With other words: A whole mess....

Dear Dan,

If you are a multi specaility trader (trading different conditions) here too, if you define 'Time' for your event to occur - viz, a breakout to happen, range bound movement to continue or stop, volatility to continue/ increase/ decrease, a possible news event to occur etc, then your decision making will be in a controlled environment with specific thing likely to happen by SPECIFIC TIME.

Initially I also traded various conditions as stated by you and then carried positions from one condition to another and ended losing or carrying loss making trade longer. Till I refined myself to trade only 'FAMILIAR' conditions and wait for them. The opportunities are lesser, the profits are smaller, but the losses are even smaller, and the kitty grows. For me it is better than being in the market all the times, profiting some, losing some, and eventually heading nowhere at the end of the month.

Regards,

 

[Placebo]

Time

if you define 'Time' for your event to occur - viz, a breakout to happen, range bound movement to continue or stop, volatility to continue/ increase/ decrease, a possible news event to occur etc, then your decision making will be in a controlled environment with specific thing likely to happen by SPECIFIC TIME.

This whole concept of setting max time and min time is very intriguing actually. How exactly do you determine how much time to give every trade to work out or not work out ? Was it through back testing data over a period of time or by tracking the ability to get impatient after a particular point of time or any other method ?

Sorry for asking all these semi retarded questions. The way you look at "time" is quite different and refreshing. Would like to hear more from you.

Cheers And Happy Trading

 

[SavantGarde]

Guys,

Hope It Makes Sense...

For Intraday Traders....

Be A Reluctant Buyer & Eager Seller

For Positional Traders....

Be A Reluctant Buyer & Patient Seller

Happy & Safer Trading

SavantGarde

 

[tnsn2345]

Re: Time

This whole concept of setting max time and min time is very intriguing actually. How exactly do you determine how much time to give every trade to work out or not work out ? Was it through back testing data over a period of time or by tracking the ability to get impatient after a particular point of time or any other method ?

Sorry for asking all these semi retarded questions. The way you look at "time" is quite different and refreshing. Would like to hear more from you.

Cheers And Happy Trading

Dear Placebo,

I think over a period of time every trader develops a method which will give him a reasonable indication of what I discussed above. Now to what extent the definition of time is accurate would depend some thought and analysis of circumstances prevailing at that point of time. It will all depend on the method one uses for trading, I had mentioned somewhere on this forum that I use just plain candlesticks (after using and dumping most of the indicators, charts available), for me it is now a 'glimpse' of a candlestick chart which helps me tap the pulse of the underlying. For you it could be something else.

The initial predictions of Time may not be accurate or may be partially right or partially wrong but over a period of time consistency will increase. There will be a lot of heartburn when your desired direction and movement happens after you have exited at the end of your holding period i.e. your defined Time. But with patience and practice one can overcome this.

Again, I have quoted somewhere on this forum : Treat trading decisions as per Indian legal system which states that - the law can afford to acquit a guilty due to benefit of doubt /lack of evidence just to ensure that an innocent is not convicted. Similarly, in trading, we can afford to let go a very high 'probable' opportunity due to some 'element of doubt/lack of compelling evidence' just to 'ensure' that we don't pick the wrong trades and lose.

Regards,