The Pro's "je ne sais quoi"

[0007]

.........

the only stop you should employ (imo) is a dead stop in case of loss of connection or other technical failure.

Agree with that. Mental stops to guide your trade, dead stop to save your @rse. If the trade doesn't go your way you might as well get out and find something more worthwhile anyway.

 

[oildaytrader]

Yes, which is exactly why trades exist as part of a portfolio. That means that I (and people like myself) don't care about choppiness and my equity curve is left in a perfectly fine shape, thank you very much. Moreover, this should answer your question about timeframe.

Well, you would say that you have it all figured out, wouldn't you? If you have done that, indeed, you should be able to categorize your methodology into one of the several broad types of approaches. You can use your own terminology if you like; I should be able to understand.

I have two types of trading ,one is fully automated and the other is a manual discretionary method.They are entirely different methods.

The automated method used a portfolio of systems to cater for all market conditions.There are 40 systems ready and approved to go on beta.They have previously returned 40 % per annum and 20 % per annum in the last two years.It has also produced 30 % on live accounts during the last two years.This method includes momentum,s/r, contrarian,cci,stochastics,6 other custom indicator strategies,breakouts,ranging strategies and trending strategies on european and U S sessions.I use 6 custom indicators as filters ,the indicators trigger trades and relay readings to the eas.

The manual discretionary method is still kept under wraps and can generate 1,000 % a year without compounding and much more with compounding.It takes calculated risk and gets the rewards.We are trying to trade every move we can , minimising risk and maximising reward.This method can generate 800 pips a day on 15 currency pairs.They are intraday trades ,some are hedged and some high probability trades with high risk trades .Some gambling/betting systems/position sizing are used to increase odds in our favour.

 

[oildaytrader]

ODT, i think i can comfortably say i am less of a twat than you, that's bad for you because, and arabian and many other great traders can vouch this, i'm a ****ing idiot.

i actually think you're making it up, you couldn't consistently be such an imbecile for so long without it being a **** take.

as for retailers vs professional; i'd say prop/IB would have waaaay lower comissions and probably better info and chat than the average forex skype room, i think it was lipschutz who said it was the flow of information from the interbank trading 'circle' that gave him his edge

Arab is only good for JIG JIG

 

[0007]

I have a suspicion that most retailers have a go at daytrading at some point on their journey primarily because of (1) ego and (2) attracted by the lure of being in/out loads of times a day and making a mint quickly as you say. There is an upside to this. You end up doing a lot of trades. As you do a lot of trades you accelerate your learning because of the amount of screen time you end up dedicating to it. As your screen time goes up, your swing and position trading improves. You then end up realising that day trading is a load of agro but your swing trading has improved a right lot. You can then get selective about the odd day trade that is a no-brainer and jumps out at you.

I agree that the money is in the longer timeframe. I also think retailers lack patience on the whole. It took me 18 months to figure that one out.

You can also be the swinging day trader! No need for ego or the attraction of being a "day trader" - just 2 or 3 good trades a day when available, often lasting for 4 or 5 hours can be very profitable and hassle-free. No worries about overnight stops, opening gaps etc. I've gradually moved my timeframe down as I've gained experience because, the maths of my trading show more profit in this style. Rarely keep a trade open longer than 3 days now.

But this was learnt by hard graft and debrief of past trades. No magic systems.

 

[Chartsy]

Arab is only good for JIG JIG

what's jig jig lol

 

[scose-no-doubt]

stops are a massive difference between what the average retail joe and a professional will do.

stops are just a sales tactic used by brokers to fill more orders/generate more commission, disguised as 'education' and 'good risk management'. any one who makes a living in the markets knows this. spread betters love them and it seems even create special order types called trailing stops to encourage people to use them. why?

stops are probably one reason so many lose.

if one is skilled at reading a market, there is no need to put a stop in the market (usually at a point where everyone else has a stop based on TA). you keep a mental stop, and wait for the market to reach that point. hopefully it wont. if it does, sit and watch how the market trades at that level. will it continue or reverse? it avoids losing a good position and then seeing the market continue in your direction.

ta levels attract a load of liquidity/stops which are great to fiddle cos you know thats where the liqidity is.

the only stop you should employ (imo) is a dead stop in case of loss of connection or other technical failure.

Don't forget that using stops enables retail traders to leverage to the high heavens though I wouldn't know anything about that

 

[oildaytrader]

what's jig jig lol

It stands for oversexed and underpaid traders.

 

[DionysusToast]

stops are a massive difference between what the average retail joe and a professional will do.

stops are just a sales tactic used by brokers to fill more orders/generate more commission, disguised as 'education' and 'good risk management'. any one who makes a living in the markets knows this. spread betters love them and it seems even create special order types called trailing stops to encourage people to use them. why?

stops are probably one reason so many lose.

if one is skilled at reading a market, there is no need to put a stop in the market (usually at a point where everyone else has a stop based on TA). you keep a mental stop, and wait for the market to reach that point. hopefully it wont. if it does, sit and watch how the market trades at that level. will it continue or reverse? it avoids losing a good position and then seeing the market continue in your direction.

ta levels attract a load of liquidity/stops which are great to fiddle cos you know thats where the liqidity is.

the only stop you should employ (imo) is a dead stop in case of loss of connection or other technical failure.

This is total nonsense.

Of course, putting your stop above/below the last swing high/low will put you in the company of many other people. Those with deep pockets do make a run at these areas and the tape clearly shows when stops have been run because of the price acceleration that occurs. Some consideration should be given to putting your entries at these points, instead of your exits.

I agree that stops in obvious places are silly but to say a mental stop is better than a resting stop at your broker is ludicrous. No-one can see your stops. Just don't put them where everone else does.

Breakout trading is tough for precisely this reason - on a breakout how much room do you want to give your trade ? Down to the last swing, knowing everyone else likely has a stop there too ? This is why it's better to buy when others are selling, when the market is pulling back or is showing signs of topping. Even better if lots of 1 lot traders are doing all the selling without any size going thru on the taps. Then you can have a stop that gives the trade room to breathe AND is hanging out in mid-air so to speak.

 

[oildaytrader]

This is total nonsense.

Of course, putting your stop above/below the last swing high/low will put you in the company of many other people. Those with deep pockets do make a run at these areas and the tape clearly shows when stops have been run because of the price acceleration that occurs. Some consideration should be given to putting your entries at these points, instead of your exits.

I agree that stops in obvious places are silly but to say a mental stop is better than a resting stop at your broker is ludicrous. No-one can see your stops. Just don't put them where everone else does.

Breakout trading is tough for precisely this reason - on a breakout how much room do you want to give your trade ? Down to the last swing, knowing everyone else likely has a stop there too ? This is why it's better to buy when others are selling, when the market is pulling back or is showing signs of topping. Even better if lots of 1 lot traders are doing all the selling without any size going thru on the taps. Then you can have a stop that gives the trade room to breathe AND is hanging out in mid-air so to speak.

Price does not always return to the previous level , on longer time frame trending and breakout systems this can be an advantage .Example euro was 0.88 10 years ago and 1.58 2 years ago.

On breakout trading stops have to wide enough not to be hit,100 pip stops are much less likely to be hit than 30 pip stops, this results in higher profitability.

Let them see your stops and challenge them to move prices against the odds, by having a decent stop.

 

[robster970]

You can also be the swinging day trader! No need for ego or the attraction of being a "day trader" - just 2 or 3 good trades a day when available, often lasting for 4 or 5 hours can be very profitable and hassle-free. No worries about overnight stops, opening gaps etc. I've gradually moved my timeframe down as I've gained experience because, the maths of my trading show more profit in this style. Rarely keep a trade open longer than 3 days now.

But this was learnt by hard graft and debrief of past trades. No magic systems.

That's interesting, not specifically the method but the drift in timeframe over time. Was that deliberate through analysis or was something else dragging you back (like a desire to trade more frequently)?

I ask specifically because I was drawn to day trading because of a desire to trade more frequently. I stopped when I realised I was mediocre at it (breaking even only) but knew that there were 3-4 trades per month off M5 like the 3pm/3.30pm bounces/testing the RTH close on ES that were no brainers. So now I blend 4-5 swings per month with 3-4 single day trades per month. Also means I'm maintaining screen time too which I always find useful.

Just curious really.

 

[DionysusToast]

In my opinion, the advantage in day trading is the fact that there are markets where you can read real buying/selling pressure as it occurs it is by no ways infallable. This does not apply to forex but does to stocks & futures.

If you are an anal retentive like myself, it may be that you are simply more comfortable at the 'nuts n bolts' level of the market where not much else matters in the next few moments other than the order book & order flow. This doesn't mean you need to scalp but it does mean you only try to enter in quite favourable conditions.

I believe personality has a lot to do with it.

If the idea is to use candlesticks and oscillators in a higher timeframe & then bring the same technique to a lower timeframe, there is going to be an epic fail.

 

[Chartsy]

yeh with a forex chart all you have is price, maybe some other markets but with stocks etc tape is there, much more to look at

 

[meanreversion]

stops are a massive difference between what the average retail joe and a professional will do.

stops are just a sales tactic used by brokers to fill more orders/generate more commission, disguised as 'education' and 'good risk management'. any one who makes a living in the markets knows this. spread betters love them and it seems even create special order types called trailing stops to encourage people to use them. why?

stops are probably one reason so many lose.

the only stop you should employ (imo) is a dead stop in case of loss of connection or other technical failure.

This might work for you, but in my experience the no. 1 cause of account wipe-outs (almost by definition) are losses which are run too far. The average trader wants to be RIGHT more than he wants to make money, this is a human condition. This leads to cutting profits too soon and not cutting losses in time (can't admit to being wrong).

If you have the mental strength to use .. er .. mental stops, then that's fine, but I would suggest the majority of traders do not. They should enter a stop alongside the trade, and then only move that stop in the direction of the trade thereafter.

I saw many countless examples of losses being run too far at an institutional level and am aware of this problem in myself, despite 15yrs+ of trading. Read "The Big Short" by Michael Lewis (an excellent book), which details a trade one Morgan Stanley trader ran from 98 c to 7 c, costing his firm $4bio. He had multiple chances to take it off on the way down, but refused.

"Pros" are less likely to be susceptible to running losses too far, but it does happen. However, they tend to have a 3rd party safeguard in the form of risk managers, but it doesn't always work like it should.

 

[DionysusToast]

This might work for you, but in my experience the no. 1 cause of account wipe-outs (almost by definition) are losses which are run too far. The average trader wants to be RIGHT more than he wants to make money, this is a human condition. This leads to cutting profits too soon and not cutting losses in time (can't admit to being wrong).

Indeed - Charlie Chan will change his tune when he has a scalp turn into a long term investment.

Ohhh - just a little bit more room...


ooooh - just a little bit more....

It's gonna turn any minute....

Really - now it's gonna turn....

Balls - I can't afford to lose that much - let's keep it forever...

 

[meanreversion]

Toast, your avatar is of Clint Eastwood, unless my eyes deceive me.

He has just revealed he was offered both the James Bond and Superman roles, way back when.

Clint Eastwood in tights??? It just would not have been right.

 

[charliechan]

This is total nonsense.

Of course, putting your stop above/below the last swing high/low will put you in the company of many other people. Those with deep pockets do make a run at these areas and the tape clearly shows when stops have been run because of the price acceleration that occurs. Some consideration should be given to putting your entries at these points, instead of your exits.

I agree that stops in obvious places are silly but to say a mental stop is better than a resting stop at your broker is ludicrous. No-one can see your stops. Just don't put them where everone else does.

Breakout trading is tough for precisely this reason - on a breakout how much room do you want to give your trade ? Down to the last swing, knowing everyone else likely has a stop there too ? This is why it's better to buy when others are selling, when the market is pulling back or is showing signs of topping. Even better if lots of 1 lot traders are doing all the selling without any size going thru on the taps. Then you can have a stop that gives the trade room to breathe AND is hanging out in mid-air so to speak.

if it's nonsense, why are you agreeing with the idea?
:clap:

if putting a stop at a ta level isn't so bright, surely some other 'random' place such as x points dictated by some strange concept of 2% of account size being risked is equally thoughtless.

at the end of the day, the whole concept of a 'stop' is to get out when you decide the market is no longer in your favour. does one print at some 'magic number' really tell you that probability is against you, or would that best be decided to see how the market reacts at that level over a few more prints (eg)?

to have a target and hard stop and waiting to see which gets hit first is just a gamble. it isnt speculating. even if a target is x times further away than the stop, your still flipping a (slightly weighted?) coin.

a trader need to learn how to read a market and manage the trade. not simply bail (win or lose) because some price has printed that is significant to the trader and the trader alone.

 

[charliechan]

This might work for you, but in my experience the no. 1 cause of account wipe-outs (almost by definition) are losses which are run too far. The average trader wants to be RIGHT more than he wants to make money, this is a human condition. This leads to cutting profits too soon and not cutting losses in time (can't admit to being wrong).

If you have the mental strength to use .. er .. mental stops, then that's fine, but I would suggest the majority of traders do not. They should enter a stop alongside the trade, and then only move that stop in the direction of the trade thereafter.

I saw many countless examples of losses being run too far at an institutional level and am aware of this problem in myself, despite 15yrs+ of trading. Read "The Big Short" by Michael Lewis (an excellent book), which details a trade one Morgan Stanley trader ran from 98 c to 7 c, costing his firm $4bio. He had multiple chances to take it off on the way down, but refused.

"Pros" are less likely to be susceptible to running losses too far, but it does happen. However, they tend to have a 3rd party safeguard in the form of risk managers, but it doesn't always work like it should.

you make some good points.

the fact that most cant keep a mental stop, is imo a reason why so many fail - that ol' chesnut discipline.

your pont about the ms trader brings us to another aspect: i think we need to distinguish between 'pro' and 'professional'.

lets call yourself a 'pro' defined by your attitude and approach.
lest call ms trader you mention a 'professional' because he is employed by someone else to do the job, probably after working as some gobby broker or analyst and was clearly and woefully unable to run a sack race, let alone a position. just because someone works at a bank, doesnt mean they are a 'pro' in our sense.

im sure gamma jammer will agree that the types of trading banks get up to is very different mostly to the types of trading most retail clowns try and attempt as others have pointed out. i'm sure gj in his experience will also attest to the fact that around 50% of hedge funds - if not more dont make it past 3 years for the same lack of discipline and general judgement that cause the rest of traders to fail.

just because one is a professional, it doesnt make one a pro (is what im trying to say i guess)

 

[meanreversion]

CC, you're right of course, simply being employed by a bank does not make one a master trader.

But let's go back to the original point of the thread .. why do "pros" make money.

The simple answer is they have clients. Retail investors do not have clients.

Are the "pros" all brilliant and disciplined traders? No, some of them suck but they have clients from whom they make money. Howie Hubler (he of MS fame) made money for years off his clients. When he then headed up a spun off prop unit within the bank, he nearly took the bank down with him.

I have two main points really -

1. stop imagining that institutional traders are all amazing.. I would estimate the ratio of brilliant traders to be fewer than 10 pct. The profits come mainly from clients.

2. you can intellectualise stop losses however you want, but for the vast majority of traders, not entering a stop when the trade is entered is a route to disaster. You, CC, are different and I commend your discipline, but it is unusual.

 

[MrGecko]

just because one is a professional, it doesnt make one a pro (is what im trying to say i guess)

Along a similar line, I would say that you can lose money and still be a pro trader. It's the "pro" part that gets you out the other side, and avoid becoming another of the 95% (or whatever) crowd.

EDIT: also I think we need to draw a distinction between Buyside vs. Sellside

 

[DionysusToast]

Toast, your avatar is of Clint Eastwood, unless my eyes deceive me.

He has just revealed he was offered both the James Bond and Superman roles, way back when.

Clint Eastwood in tights??? It just would not have been right.

True - but Clint in Miss Moneypenny would have made up for it.