Best Thread Firewalker's Journey: A path of discovery in search for enlightenment

[JillyB]

Ok, so I'm going to stick my head above the parapet here and say that I do post trades, live - before the event - in my journal. I've been doing this now since the beginning of May (with the exception of holidays).

I post them before the event - so no-one can accuse me of cheating and it gives a fair analysis of the system I have developed.

I've been trading less than 2 years now and it's only recently that everything has started to fall into place. Up until then I felt like I was wandering around in the dark, trying lots of different methods, indicators, strategies but with none of them giving me results I felt comfortable with. I don't mind saying that I lost quite a bit of money trying various methods. First I tried the FTSE 100, then I moved on to UK stocks using RSI and Stochastics as indicators. Then I tried UK stocks before and after dividend dates - this was actually reasonably successful. Then I moved onto the Dow - initially ok, but then after a bad run, I was left looking for explanations and guidance.

I too have read quite a few books and visited countless websites - including this one - looking for this guidance we all seek. What I did find was that I had to ignore what everybody else was saying and look at what I thought/believed/derived from the charts. For every person that said it was going to 'up' today, there would be another one who said it was going to go 'down'. Now, as a newbie I believed these people knew far more about the markets than I did, so who was I to question their statements? But then where did that leave me? Not knowing whether I was coming or going, trading a buy or a sell - so I tended to stay out of the markets and get frustrated.

Then I found a variation on the bollinger band width - with two settings and looked for when the 1 hour candle spiked through, then looked for a retrace. This works well in consolidating markets but once there's a trend going, the candles tend to hug the top/bottom bollingers and the system delivers quite a number of failed trades. After a losing streak - I scrapped this method.

For me the enlightening moment came by a chance remark from my other half one day - who happened to comment - 'Have you noticed how many times the Dow goes back to yesterdays close from where it opened today?' This sparked some interst in me.

I have to admit that I do enjoy working on strategies and I did expect that this one would be like many of the others I had tried - work for a while and then start to fail. But so far it hasn't.

Just to give a little insight into it - the strategy uses the high, low and close of yesterday together with todays open and then predicts the trades (either 1 or 2 of them), taken from the open. It seems quite simple to say it like that, but in actual fact there are quite a number of variations you can get. For a start the high and the low give you the days range - this could be as low as say 50 (getting ready for a big breakout) or as high as 200+. So the following days trades would be different for these - if you see my point. Then the open could be near the high, or near to the close - different scenario here too - and so on.

For me the system works well. I am not a patient trader and hate leaving trades overnight and this suits me - others don't like to be tied to a screen all day, so it's horses for course - you have to find what suits you. Is it holding trades for weeks or months? Or getting in and out in minutes or hours?

Again you have to find what you like to trade, what makes you feel comfortable. My partner trades the Cable, but for the life of me I cannot get my head around it. I just don't see what he does in the charts. But vice versa, he can't see what I see in the Dow. Perhaps when you trade something or watch it for a certain length of time you get to know it - a bit like having a new friend - and you get to anticipate how it will react.

Anyway that's just my 2ps worth.

 

[barjon]

firewalker

As wasp has said in his journal http://www.trade2win.com/boards/showpost.php?p=271154&postcount=120 you do seem to be going around in ever decreasing circles (but I hope you don't disappear 'cos it's all good stuff )

I think what the experienced are trying to get over is that - like the title to your thread - this is a voyage of self-discovery. They could post a thousand and one examples, but they are meaningless because they are only specific to their personal method and set-up etc.

Similarly, it's not possible to answer questions such as what expectancy, what stop, what "target" etc in a general sense since the answers are all specific to the particular method and set-up employed.

You seem to have chosen DAX as your trading instrument and you have printed off many charts and examined them and I'm assuming you have already determined your preferred style in terms of long term, medium, term, short term etc. Various posssibilities are probably emerging sufficient for you to mount some concrete trading hypothesis which you can set about testing. You may be attracted by support and resistance levels, for example, and noted that price seems to move significantly if the previous day's levels are broken (don't know if that's the case by the way ).

So, using that example, you can start off with with that hypothesis and firm it up into a rough set-up. That will immediately raise a series of questions that you need to answer and establish definitions. eg: what is a "break" of s/r - one tick, a close, x%, or what - what is "significant" - what degree of adverse move will invalidate the trade etc, etc.

Having answered all those questions via looking at what has happened in the past you can then build all that into a more concrete trading plan with associatede set-up and rules which you can back test to see how it goes. As you do that a number of other variables may have occured to you - was the moving average pointing up or down, was the volume high or low etc, etc, etc, etc - and you will want to establish if any of those have sufficient significance to be included in your rules.

That back testing will then answer questions about expectancy, stop loss, "target" etc.

I suspect you're well aware of all this but, if not, I hope it's helpful.

jon

 

[rols]

Good post Jilly B!

I think many of us have experienced the learning curve as above and for some it is steeper than others. We are all unique but all the same and that's the confusing part. There are other issues as well such as some people are better at learning than others only because they have identified which method of learning works best for them. For ex. I cannot take verbal instruction and learn best by osmosis and by learning from my own mistakes and being able to pick myself up again and again, as somebody once said to me, "mistakes are your friend". However in order to do this one needs a positive self image and Firewalker gives the impression of a bruised self image and probably for good reason. Reminds of another Chinese proverb along the lines of 'the man who has been bitten by a snake is now afraid of rope." FW has had a great deal of attention and help, especially from DB. I say again, you cannot learn to swim by reading a book. You have do go and do it and take responsibility for your own actions. Read the autobios of many successful traders and entrepreneurs, most of them have been wiped out financially more than once before getting where they want to go. The meaning of Wittgenstein's ladder applies to trading especially. He (Ludwig) spent five years writing a book about logic and at the end says the following

My propositions are elucidatory in this way: he who understands me finally recognises them as senseless, when he has climbed out through them, on them, over them. (He must so to speak throw away the ladder, after he has climbed up on it.)
He must surmount these propositions; then he sees the world rightly.

BTW I know FA

 

[JillyB]

Good post Jilly B!

I think many of us have experienced the learning curve as above and for some it is steeper than others. We are all unique but all the same and that's the confusing part. There are other issues as well such as some people are better at learning than others only because they have identified which method of learning works best for them. For ex. I cannot take verbal instruction and learn best by osmosis and by learning from my own mistakes and being able to pick myself up again and again, as somebody once said to me, "mistakes are your friend". However in order to do this one needs a positive self image and Firewalker gives the impression of a bruised self image and probably for good reason. Reminds of another Chinese proverb along the lines of 'the man who has been bitten by a snake is now afraid of rope." FW has had a great deal of attention and help, especially from DB. I say again, you cannot learn to swim by reading a book. You have do go and do it and take responsibility for your own actions. Read the autobios of many successful traders and entrepreneurs, most of them have been wiped out financially more than once before getting where they want to go. The meaning of Wittgenstein's ladder applies to trading especially. He (Ludwig) spent five years writing a book about logic and at the end says the following

My propositions are elucidatory in this way: he who understands me finally recognises them as senseless, when he has climbed out through them, on them, over them. (He must so to speak throw away the ladder, after he has climbed up on it.)
He must surmount these propositions; then he sees the world rightly.

BTW I know FA

I totally agree, it is about getting out there and doing it for yourself. And it will go wrong at times, there is no getting away from it. But when it does, it's about picking yourself up and carrying on. The secret here is,not to let the failed trade affect the way you approach your next trade, or it will cloud your judgement.

If trading is something that you really enjoy, then you will continue to get back up every time it knocks you down, because it's something deep down that you know you can eventually master.

I read somewhere once, that if you persevere with trading long enough and keep coming back every time it knocks you down, then eventually you will be successful at it.

The statistics of the 90% of traders who lose and give up, are those who IMHO are looking for the quick buck and give up once the going gets tough. Those who stick at it and learn through their mistakes - and boy they'll probably be some big ones - are those who will eventually succeed at it.

 

[dbphoenix]

O.K WHAT IS THE PRIMARY TOPIC, TO ENGAGE IN ENDLESS GENERAL DISCUSSION WITH HARDLY ANY PRACTICAL EXAMPLES.

Quote:
Originally Posted by Porks
db quote,

'You're not going to get anywhere until you stop waiting around for somebody to tell you what to do and start the work. If you have absolutely no idea how to locate a pattern, try the First Steps forum. Or hire a mentor. But all of these "what would you do" questions are pointless.'

I think you're wrong here....it's not pointless at all.

Learning by example is effective for many people.

But hey it's your thread so up to you.

Just consider whether your approach is working, because although your theoritical explanations make a lot of sense, turning this into a profitable approach seems very difficult, even for those who are willing to study the market until their eyes bleed.



Porks.

1. You are right Porks& FW in many ways, although there is quite a lot to learn regarding P/V on this thread, it can be quite daunting for relative newbies.

2. Interesting to note that there are over 900posts in here with hardly any examples of real live trades or practical applications, however whenever a general topic is posted(setups, forecasting, expectancy blah,blah,blah), suddenly everybody emerges out of their caves to engage in esoteric ratiocinations, but if a chart is put up with a question "what next", deafening silence , adopt the familiar strategy, bombard and grill the chap who posted it in the first place with questions without bothering to provide some pointers.

3.If folks really believe that their "Edge" is unique to them and that even if they explained it, others would not automatically be able to implement it without real hard grind, then there should not be any problem posting them. Whichever instrument you are trading , the principles of demand and supply work across the board on any timeframe, why not put up a chart of yesterday , marking the relevant S/R levels, then during the day post a couple of realtime trades, with some explanation, others will then be encouraged to follow the same route generating much more worthwhile practical discussions.
4. This must surely lead to exchange of ideas, tactics, and enhance one's own trading, not to mention the benefit the newbies would derive.

A CANLDE DOES NOT LOSE ITS BRIGHTNESS BY LIGHTING ANOTHER CANDLE

I don't know why I'm doing this, but I'll address this stuff once again.

A. Hypothesizing is not the same as floating around in an ether of abstractedness. See the Trading Journal thread below (I've lost count of how many times I've said that). Dithering about expectancy when one has yet to be able to locate any sort of pattern in a chart is, at best, irrelevant.

B. "Learning by example" does not occur without some sort of focus. If it did, everyone, given the hundreds of thousands of examples provided over decades, would have learned everything there is to learn. Sitting around like a passive vessel waiting to be filled is the most inefficient and generally ineffective form of learning.

C. The purpose of learning to evaluate what is in front of one is to be able to act on that evaluation in real time when one has developed a strategy and a trading plan. The obsessive focus on "what happens next" is distracting and irrelevant and has nothing to do with what is involved in developing a trading strategy.

D. Encouraging others to follow one's examples of trades and "follow the same route" is the exact opposite of what should be happening in the process of developing a trading strategy. Those who clamor for this are offended when someone says that they are doing no more than waiting around to be told what to do, but that is in fact what they are doing. As for posting yesterday's charts, I posted charts in real time for four days showing S/R levels in an effort to show how these are plotted throughout the trading day. Did anyone do anything with them? No.

E. One who's gone through the process of developing a consistently profitable trading strategy and posts that strategy does not encourage "the exchange of ideas" but rather a parasitic dependency that leaves the parasite in an aimless drift once the faucet is turned off. This is because those who clamor for the strategies of others have no interest in creating their own, or, at best, have no interest in making anything more than the minimum modifications in order to make somebody else's strategy work for them. Fortunately, they have a lot to choose from: Darvas, Schabacker, O'Neil, Elder, Ross, Wyckoff, Crabel, Landry, Raschke, Smith, etc etc etc.

For these reasons and others, I've stopped working with beginners on specifics unless they are willing to meet me halfway by opening up a journal. This alters the relationship more toward 50:50 and less toward 100:0. Has anyone been willing to do that? Yes. A few. And, except for those who balked at every request I made and dropped out almost before they started, they all benefited from the experience. But the vast majority aren't willing to make even that small step, and I can't think of any reason why I should give away my time to those who aren't willing to put forth even the slightest effort to learn how to trade.

Therefore, if after all the books and all the courses and all the seminars and all the websites and all the message boards one cannot yet detect a pattern on a chart, then he can begin with an off-the-shelf pattern, such as the Darvas Box, or the Cup With Handle, or one of many other such patterns. Then he can begin the attempt to locate this pattern in charts. If he cannot be bothered to do even that, then I can't think why I should waste my time nagging him to do so, unless for some reason I choose to adopt him.

There's one huge problem when starting out - deafness.

That's because 99% of newbies are deaf when they are told by genuine traders the real hard facts that they need to know about trading. First of all they put their hands up in horror, then they give a mouthful to the person who has told them, and then they firmly slap their hands over their ears so that they can't hear any more.

And then someone comes along who tells them all the sorts of things they want to hear. Wonderful cosy things such as how easy it all is, how it only takes a few hours to master the markets, how money just falls over itself to jump into their accounts, how special software will only select winning stocks, how a newsletter will reveal all the secrets, how there are secret formulae and secret pivot levels which are guaranteed to work, there's a guaranteed money-back offer, etc, etc. They are wooed by these softly spoken people and happily hand over thousands of pounds and wait eagerly with their wheelbarrows to cart off all the promised riches from the market. And they end up having to sell the wheelbarrow to get the bus fare for the trip home.

There are things newbies NEED to know, but these are never the things they WANT to know.

-- Skimbleshanks

 

[Lightning McQueen]

Ok, so I'm going to stick my head above the parapet here and say that I do post trades, live - before the event - in my journal. I've been doing this now since the beginning of May (with the exception of holidays).

Hi JillyB, firewalker99 and wasp

I must admit to enjoying your journals, may I ask you all whether you feel any gain from them, I mean do they help you focus on your journey are they a help or a hindrance?

For me personally I nearly started one but for now prefer to keep my daily inner ramblings offline.

Don

 

[trendie]

Hi JillyB, firewalker99 and wasp

I must admit to enjoying your journals, may I ask you all whether you feel any gain from them, I mean do they help you focus on your journey are they a help or a hindrance?

For me personally I nearly started one but for now prefer to keep my daily inner ramblings offline.

Don

journalling is a good idea, for forward testing ideas. I wrote one here, but have stopped.
I now tend to keep a journal in visual form, on charts.
(much like wasp, detailing entries and exits on the chart )
I find these more instructive to me, and has helped me enormously.
written journal loses the context of the trade in relation to the state of the market.

 

[dbphoenix]

journalling is a good idea, for forward testing ideas. I wrote one here, but have stopped.
I now tend to keep a journal in visual form, on charts.
(much like wasp, detailing entries and exits on the chart )
I find these more instructive to me, and has helped me enormously.
written journal loses the context of the trade in relation to the state of the market.

There's more than one reason, though, for starting and maintaining a journal.

For some people, a journal is little more than a log. Many of the journals in the Journals Forum are of this type.

For others, a journal is a means of testing out modifications to a proven system, such as when the market undergoes changes that are significant enough to increase the number of losing trades or to decrease the profit:loss ratio. These are often very short-term.

Still others may begin journalling again because they're bored with what they're doing and want to try something different. This is more involved than the above and will likely take much more time, though not nearly as much time as the following since the process is so familiar.

Then there are those who begin journals in order to learn market dynamics and to develop a consistently profitable trading strategy. This takes the most effort and takes the longest amount of time. It also requires the greatest focus and concentration. If one drifts in the abstract rather than stay firmly rooted in the concrete and cannot maintain the discipline to contribute to the journal on a daily basis (if he or she trades daily), then this type of journalling is not likely to be satisfying.

So, next time you stumble across an argument about how journals are indispensable no journals are a waste of time (much like the perpetual arguments about paper-trading), ask yourself just what it is these people are talking about. They are very likely not talking about the same thing.

Db

 

[firewalker99]

journalling is a good idea, for forward testing ideas. I wrote one here, but have stopped.
I now tend to keep a journal in visual form, on charts.
(much like wasp, detailing entries and exits on the chart )
I find these more instructive to me, and has helped me enormously.
written journal loses the context of the trade in relation to the state of the market.

I would encourage anyone to take up a journal, no matter of what kind it is. However, keep in mind that you're doing it for yourself. As JillB pointed out, it can help you, but ony I've you set out the goals before, i.e. what aspect of your trading do you want to improve. Also, don't let yourself me influenced by others, it's your journal, you decide what you post, when you post it, and if you post it.

 

[dbphoenix]

So why do the not-so-novice traders on this forum who have the experience and knowledge, refrain from posting (just a thought) a simple practical example: a chart of the previous day with realtime trades, where and why they took an entry, where and why they exited the trade, why they have fixed or variable targets, what they do if the trade doesn't seem to go in the right direction, and so forth. Apart from wasps journal (who uses MA crossovers), I still have to look at the first PV with that kind of annotations made in realtime, not a hindsight analysis. I think this would encourage others to do the same, but instead newbies are fired with questions like "what is your trading plan? describe your setup in detail? what kind of testing did you use? why would you enter there, what is your target" which they are unable to resolve, exactly because they are still in the process of figuring that all out. The participant's perspectives are clouded while the bystander's views are clear.

That reminds me of a Chinese proverb:
“Tell me and I'll forget; show me and I may remember; involve me and I'll understand.”

Since so many are climbing on this particular bandwagon, I'll respond to it.

If one wants to mimic what somebody else does, there are virtually limitless examples of hindsight trades which explain where the trade was taken, why it was taken, what the target was, what the stop was, etc etc etc. These are available in books, on websites, in chat rooms, and even here, if one will only take the time and make the minor effort required to look for them. Those who expect instruction on demand can't expect to receive much of value in return.

On the other hand, if one wants to develop his own strategy and plan, there are a number of ways to achieve that goal. I have one way, which is among the simpler ways, but it is not the only way. For me, a trading plan hinges on a strategy. The strategy is based on at least one setup. The setup is based on a pattern. If one cannot detect a pattern in the charts he studies (assuming that he has studied charts at all), then there are dozens of patterns which others have found which he can use for his testing.

If the "participant" cannot select a pattern to use (assuming that he cannot detect patterns on his own), or if he can select a pattern but cannot maintain focus and concentration long enough to do anything with it or follow the suggestions made by the "bystander", that's hardly the bystander's fault.

There are, of course, other ways of learning how to trade other than by studying price movement through charts. One can, for example, abandon charts altogether and learn to trade by focusing on LII and T&S and DOM and so forth, and if that's what the "participant" wants, great. But whatever road the participant chooses, he is in fact going to have to participate, and that implies some sort of action on his part.

In short, you get out of it what you put into it.

Db

 

[dbphoenix]

Copied here just so you don't miss it.

What surprise me the most is that - although all the succesfull traders claim to have been through the same stages, troubles, emotions, difficulties, etc - they are unable to bring a message which is apparently that "plain and simple". As for the last paragraph, I've read it already somewhere else on this forum and yes it seems to be a copy of a post somewhere else. So you guys keep on re-iterating the same stuff over and over again, that others told you in the beginning, right? Could it perhaps be then, that the message isn't landing because of the medium and it's unwilligness to understand the "newbies" that still have to reach that level of understanding they have acquired.

Okay, FW. Let's assume that you know what a stop is.

Now, go to the first post in the S/R thread. Look at all the charts posted, beginning with the first chart of the trading day. Pretend you're taking every breakout through every S/R level.

What is the tightest stop that will enable you to stay out of bad trades and the widest stop that will enable you to take full advantage of winning trades? (This is, of course, in lieu of asking people again and again what stops they use and where and what kind and how tight.)

Db

 

[firewalker99]

Copied here just so you don't miss it.

Okay, FW. Let's assume that you know what a stop is.

Now, go to the first post in the S/R thread. Look at all the charts posted, beginning with the first chart of the trading day. Pretend you're taking every breakout through every S/R level.

What is the tightest stop that will enable you to stay out of bad trades and the widest stop that will enable you to take full advantage of winning trades? (This is, of course, in lieu of asking people again and again what stops they use and where and what kind and how tight.)

Db

Just for the record: I've never declared to know how to identify a stop, if I recall correctly I even posted questions in my journal about that. Then I mentioned I used ATR as a stop, and 2x ATR for first target, 3x ATR for second.

Ok, I checked the charts in the S/R thread, and picked up the first chart that doesn't span more than one day and attached it in this post.

Now as there are many S/R lines where I would one see about half of them, I'd only trade those I would draw and were already confirmed from previous days or weeks. But as we're pretending to take every breakout, I would assume the probability of the trade going in the right direction is pretty high otherwise the breakout strategy itself would be of no use. For that matter, a very tight stop near your entry would be most useful. But as I don't know where the entry takes place, I'm not sure how to define the location of the stop. I'm assuming right at the breakout through R you go long, short if through S.

For taking into account any false outbreaks, one could set his stop at exactly the S/R line and if price were to continue in the right direction change it to a trailing stop, depending on what targets were feasible according to his setup. I would determine the maximum movement that price would go against my direction by the ATR, therefore closing my position.

*Edit: still hope somebody else tries to answer it

 

[dbphoenix]

Just for the record: I've never declared to know how to identify a stop

Within this context, a stop is an order for which the specified price is below the current market price and the order is to sell, if long. If short, a stop is an order for which the specified price is above the current market price and the order is to buy.

Ok, I checked the charts in the S/R thread, and picked up the first chart that doesn't span more than one day and attached it in this post.

The task, however, is to look at ALL the charts posted, BEGINNING WITH the first chart of the trading day. There are, therefore, ten charts to examine.

Now as there are many S/R lines where I would one see about half of them, I'd only trade those I would draw and were already confirmed from previous days or weeks.

It doesn't matter what you would draw. The S/R lines are already drawn for you.

But as we're pretending to take every breakout, I would assume the probability of the trade going in the right direction is pretty high otherwise the breakout strategy itself would be of no use.

There's no need to assume anything. This has nothing to do with probability or with the viability of a breakout strategy.

For that matter, a very tight stop near your entry would be most useful. But as I don't know where the entry takes place, I'm not sure how to define the location of the stop. I'm assuming right at the breakout through R you go long, short if through S.

As stated in the task, the breakout is through every S/R level. If you want to define the entry as n ticks above R or n ticks below S, that's up to you. The task remains the same.

For taking into account any false outbreaks, one could set his stop at exactly the S/R line and if price were to continue in the right direction change it to a trailing stop, depending on what targets were feasible according to his setup. I would determine the maximum movement that price would go against my direction by the ATR, therefore closing my position.

This doesn't address the task. There are at least 18 breaks through S/R levels in these 10 charts. What is the tightest stop that will enable you to stay out of bad trades and the widest stop that will enable you to take full advantage of winning trades? "Very" tight is not sufficient. Targets are irrelevant as are maximum movement and ATR.

 

[firewalker99]

The task, however, is to look at ALL the charts posted, BEGINNING WITH the first chart of the trading day. There are, therefore, ten charts to examine.

Ok, I misinterpreted that apparently.

This doesn't address the task. There are at least 18 breaks through S/R levels in these 10 charts. What is the tightest stop that will enable you to stay out of bad trades and the widest stop that will enable you to take full advantage of winning trades? "Very" tight is not sufficient. Targets are irrelevant as are maximum movement and ATR.

So in essence, you want to see something in numbers right?

 

[dbphoenix]

So in essence, you want to see something in numbers right?

In numbers. Two of them. The tightest stop and the widest stop.

 

[firewalker99]

In numbers. Two of them. The tightest stop and the widest stop.

Ok then, 1 and 4.

 

[firewalker99]

numbers

4 because that's what seems to be about the amount price moves against the trend in a retracement after resuming it's original course

 

[firewalker99]

Are you saying that you don't know how to proceed?

No, I'm saying I'll do my best at replying to specific questions that can be answered by someone with as little knowledge as myself.

 

[dbphoenix]

Ok then, 1 and 4.

And how many ticks above R or below S are you entering the trade?

Each point is 4 ticks.

 

[firewalker99]

And how many ticks above R or below S are you entering the trade?

Each point is 4 ticks.

As I would be looking for the best possible entry, this would have to be less then 4 ticks.

*Edit: I would only take breakouts following the direction of the trend.