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

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dbphoenix

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It wasn't luck. You had a plan and you followed it. Don't shortchange yourself (you'll have plenty of opportunities to beat yourself up when you fail to follow your plan . . . ).

To avoid drawing this out too long, I'll assume you sold the second car at 2xATR. Now what did you do about the stop and why?
 

firewalker99

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6,655 599
dbphoenix said:
It is extremely difficult to get anywhere trading one contract. On the other hand, learning how to trade an instrument that trades by contract can be treacherous if one trades too many contracts too quickly.

Therefore, I suggest you work out your strategy using at least two. Backtest and forwardtest using two. Paper-trade real-time using two. But when you take the step into trading real money, trade only one contract for real and paper-trade the other. Using your example, "enter" with two, but enter for real with only one. That way, if you don't yet have your entries down, you haven't begun with a big-time loss right out of the gate. Then take your real profit at your first target and continue to paper-trade the second contract according to your plan.

Db
I agree, a while ago I papertraded with only one contract but I was getting nowhere. For the moment however, I haven't seen enough positive signals to pick up real trading but I'll continue papertrading with 2 or more contracts. When I eventually get back, I think your suggestion will come in handy as I'm not willing to put a great deal of money at risk straight away.


dbphoenix said:
One way of determining whether a recoil is just noise or big trouble is to look at how far back price will travel before resuming its original direction (some call this the MAE, or Maximum Adverse Excursion), the idea being that if price moves past this, it's gone too far and you need to get out (and possibly reverse your position, but wait on that for now).

As for the ATR, I use the ADR instead (average daily range) since this is so predictable for the NQ and ES. However, it may not be so predictable for what you're trading. The ATR might have much more value for you. So, again, what you use depends on the results of your own testing.

Db
Don't know about NQ (if that's still what you trade?) but FDAX can be quite volatile at moments and have periods where bars are 3 to 5 points large, but sometimes bars 10 to 20 and I've seen exceptionally wide spread bars up to 50 points...

If using MAE (and MFE?) do you mean the amount the price goes in the wrong direction after it went right? Eg I'd place a stop at 3 points and have a MAE of 5 points. Although I don't have a fixed MAE, I usually move my stop up to the low of the previous bar when it's a clear outbreak (not in a ranging area, otherwise that would stop me out far too soon). The short position I took this morning would I not be liquidated with zero profit based on MAE (say 5 or even 7 points).

Reversing your position sounds actually a more impulsive move? If you were sure of your trade and took it, reversing your position after all would make me doubt myself more. My plan also stipulates that I don't take a second trade after one has gone wrong in the next half hour. This helped me getting rid of some very stupid situations where I reversed, and reversed again, to have it go 3 times in a row against me... Hence the way I feel about reversal, but I guess that's personal.
 

firewalker99

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6,655 599
dbphoenix said:
It wasn't luck. You had a plan and you followed it. Don't shortchange yourself (you'll have plenty of opportunities to beat yourself up when you fail to follow your plan . . . ).

To avoid drawing this out too long, I'll assume you sold the second car at 2xATR. Now what did you do about the stop and why?
Well I place my stop at 1 time ATR, a first target at 2 times ATR, a second at 3 times ATR.
In this ATR was 5-6. After my first target was reached, I placed my stop to breakeven. After second target was hit, all my positions were closed.

I'm not sure if I'm answering your question though. I move my stop to BE to protect the profit from the first exit... otherwise if I were to leave it, that would suggest that I still thought there was a possibility price would go up higher than my entry point. Although I know anything can happen at any time, it's my hypothesis that price will go down (otherwise I would not enter), and after it hit my first target, a reversal of the price would mean I was wrong after all... if that should be the case I could always re-enter at a later point.

Is this the answer you were expecting?
:|
 

firewalker99

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6,655 599
dbphoenix said:
It wasn't luck. You had a plan and you followed it. Don't shortchange yourself (you'll have plenty of opportunities to beat yourself up when you fail to follow your plan . . . ).
You're right saying it wasn't pure luck. But I meant that I can give you enough examples were I did exactly the same (or I believe it to be the same) and it went in the wrong direction. I'm trying to find any confidence again but if five out of ten do as I expect, five others don't than i tend to call it luck although it isn't luck but i suppose it can't be defined as a significant statistical advantage and isn't that what an edge should give you?
 

dbphoenix

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firewalker99 said:
Well I place my stop at 1 time ATR, a first target at 2 times ATR, a second at 3 times ATR.
In this ATR was 5-6. After my first target was reached, I placed my stop to breakeven. After second target was hit, all my positions were closed.

I'm not sure if I'm answering your question though. I move my stop to BE to protect the profit from the first exit... otherwise if I were to leave it, that would suggest that I still thought there was a possibility price would go up higher than my entry point. Although I know anything can happen at any time, it's my hypothesis that price will go down (otherwise I would not enter), and after it hit my first target, a reversal of the price would mean I was wrong after all... if that should be the case I could always re-enter at a later point.

Is this the answer you were expecting?
:|
I messed up. I had it in my mind that you were trading three contracts. But you were trading two. So, never mind :)

Db
 

dbphoenix

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6,952 1,244
firewalker99 said:
If using MAE (and MFE?) do you mean the amount the price goes in the wrong direction after it went right?
Right, although it can turn on you in a tick.

Reversing your position sounds actually a more impulsive move? If you were sure of your trade and took it, reversing your position after all would make me doubt myself more. My plan also stipulates that I don't take a second trade after one has gone wrong in the next half hour. This helped me getting rid of some very stupid situations where I reversed, and reversed again, to have it go 3 times in a row against me... Hence the way I feel about reversal, but I guess that's personal.
It shouldn't be an impulsive move. You should have a very clear and definite protocol for it. If you don't, then you wind up doing just what you've said, reversing the reversal of a reversal.

First, if you're in the position of reversing a reversal, you're more than likely entering chop, or a state of trendlessness, and this isn't a place that you want to be unless you have chosen to do so ahead of time and have some sort of plan for trading it. Otherwise, just get away from it and go make a sandwich.

But, second, this isn't something you should be thinking about at all at this point. I mention it only because it may be an option later. You can get yourself into a real bind unless you know exactly what you're doing and what you're getting into.

Db
 

dbphoenix

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firewalker99 said:
You're right saying it wasn't pure luck. But I meant that I can give you enough examples were I did exactly the same (or I believe it to be the same) and it went in the wrong direction. I'm trying to find any confidence again but if five out of ten do as I expect, five others don't than i tend to call it luck although it isn't luck but i suppose it can't be defined as a significant statistical advantage and isn't that what an edge should give you?
Why not post some of these?

As for your earlier question regarding why there's a BO at 1300, price is rising because sellers are done, which is why trading activity (or volume) is on the low side (if sellers weren't done, but buying pressure was greater than selling pressure, price would still rise but volume would be higher). Think of holding a beach ball underwater. When you let up the pressure of your hands, the ball rises.

As for the trend being broken, not exactly, but that depends on how you define trend break and trend reversal. For me (and for a number of classicists), the trend is broken when the trendline is broken, not just tested. But there's no reversal until the last swing point has been decisively exceeded (not just tested). In this case, your trend is broken, but not reversed. Therefore, price could easily drift sideways for a while. Whether this is something you want to wait out or not is up to you. Again, this depends on what you've observed in similar situations on other charts.

Db
 

firewalker99

Legendary member
6,655 599
dbphoenix said:
Why not post some of these?

Db
Will do but have to adjust colors first because they are all screenshots in black/green/red.

dbphoenix said:
As for your earlier question regarding why there's a BO at 1300, price is rising because sellers are done, which is why trading activity (or volume) is on the low side (if sellers weren't done, but buying pressure was greater than selling pressure, price would still rise but volume would be higher). Think of holding a beach ball underwater. When you let up the pressure of your hands, the ball rises.


Db
Your comparison to a beach ball is strikingly similar to what I had in mind. I was thinking of a helium balloon that goes up from the moment you lift everything that was there before to put it down. it doesn't "shoot up" but moves up steadily and slowly. Anyhow, I thought this was a sign of strength, as you are saying sellers are done... but then sellers come back in and are able to push price below 5700 and back 20 points... On more than one occasion I had trouble analyzing/understanding the reasons why. So I'm with you as far as saying sellers are done, but what happens next makes no sense to me.

My plan doesn't include trading on breakouts of a trend range, so I would not act around 13:00, just wait what happens. Then I'd see it tick previous resistance at 5720. If price were to move above it, and then retrace slightly to the line, that's where I'd go long. In short, that's one part of my strategy (of course it depends on the situation and I'm always tyring to place it in a context). In this case price stays below the line however, so I stay out.

Staying out however made me miss a big up move on small volume, and around 15:00 a fast down move... This is exactly what seems to happen: I'm unable to get the "big moves" where the profit lies...
 

firewalker99

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6,655 599
dbphoenix said:
Second, cutting losses short is only part of it. There are many traders out there who die the death of a thousand cuts because they maintain tight stops and cut their "losses" too short. But this issue has to be addressed in the work, not in general posts about what the average individual should or shouldn't do.

Therefore, you have at least two tasks in front of you. Achieve such a high profit:loss ratio that your win rate isn't critical to your success, or achieve a higher win rate so that your profit:loss ratio needn't be so high.

At this point you may be tempted to ask how you go about accomplishing all of that, but I don't want to short-circuit your thinking process. Mull over this for a while and we'll come back to it.

Db
I've actually had a week where I ran into losing streaks where as much as 30-40 trades all made me lose out on my account. I guess I should have quit earlier but at that time I was too emotional and couldn't believe what was happening. Now I'm aware that my stops were too tight and in hindsight I actually had a dozen good entries which could have turned out profitable.

I agree I have several tasks in front of me, but I don't want to aim at a goal to high as I've run into more than one disappointment along this path and I'm trying to build some confidence here by placing realistic goals. I've done two things to elevate the possibility for profits: my trades run much longer than before (instead of 3-5 minutes they're up to 30-50 minutes), and I've been trying to stick to "the 5 best trades of the day".

But as you say, I won't ask now how to accomplish the highest possible profit:loss ratio's as I'm probably not ready for that.
 

firewalker99

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1 August 2006

August, the start of a new month and for me the start of what I'd like to be a stage of "enlightment" where much becomes clear. It's also the continuation of a learning phase that I'm going through. Unfortunately it has been a rough learning phase that wiped out a large aomunt of my account. I have come to terms with this however, and I'm focusing on getting a better understanding of what drives the market up/down, what puts it into a accumulation/distribution phase and so on.

I understand I've got much to learn, but I have never felt more willing to do than now. Therefore I'll continue my journal with three charts. An hour chart of the last month, one of the last week, and one of yesterday and today's opening.

This is what I see. If others could let me know their views, I'd welcome it very much.
I appreciate the effort dbphoenix already put in to respond to my charts, and hope others will follow.

--- 20060801-a ---: I drew what I believe to be support lines.
A middle term support line at 5675 and a short term of the last week @ 5687.50 where resistance lay as you can see on 20060801-b. Perhaps I'd better call it a support zone?

--- 20060802-b ---: The trend has been up and after an outbreak price has returned to around 5700.
-> Now this is where I'm having trouble. I'll try to be as pragmatic as I can be.
+ = reasons why I think it would go up and why I would go long @ 5687.50
- = reasons why I think it would go down (but then I would not short here)

+ price has been in this zone a lot throughout the 1st & 2nd week of June => strenghtens support
+ price has broken through the line with a high volume up bozo
+ after the airpocket it's slowly moving back but isn't successful at breaking 5700

- trend has been up for quite some time now
- buyers that have bought at lower levels (5600-5700 range) will be happy with their profits and as they see price returning they close their positions
- yesterday it already touched 5695

--- 20060801-c ---: yesterday's chart (coil) makes me think a outbreak on the downside is probably (and indeed that is what happens, but just for the reference I don't trade FDAX after 17:30, volume is too low and moves are mostly too erratic)

This is were I'm going in the wrong direction TWICE:

* As it spikes down to 5687.50 and moves up again, I take an entry the second time it forms a zone around 5687.50 and I go long just before 10 o' clock. Price drops to almost 5675 so I'm stopped out. I followed my plan, the weekly trend was upwards, I took a long entry. No where did I misinterpret all the data?

* Around 10:30 it touches 5687.50 again. As I'm waiting for a retest of 5675 so if I see three or more bars ranging a bit around 5687.50 I short. But as chart 20060803-d shows this is another losing trade.
 

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firewalker99

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difficult interpreting lines

Looking back at my mistakes, I often find that there down to drawing wrong lines...

This morning I'm having similar issues, let me give you an example.
Perhaps someone can draw his/her lines on it BEFORE looking where I draw them. The chart is a 5 min bar of yesterday's evening session and this morning up till around 12h00.

I added a chart without any lines for clarity up to 14h00.
Could really use some clues here.

Just mentioning that I'm not actually drawing all those lines on my chart. That would be quite confusing at blur the chart's visibility. But I'm wondering which of the lines would be a "correct" one?
 

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dbphoenix

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firewalker99 said:
but then sellers come back in and are able to push price below 5700 and back 20 points... On more than one occasion I had trouble analyzing/understanding the reasons why. So I'm with you as far as saying sellers are done, but what happens next makes no sense to me.
Price rises to a point where it is of interest to sellers. They then act. Just as price had fallen to a point where it was of interest to buyers. Your task -- if you want it to be your task -- is to determine at what points or levels the dynamic between buying pressure and selling pressure will change to such an extent that it will provide you with a profitable trade. If itty-bitty fluctutations are enough for you and you can figure out how to trade them profitably, that's fine. If you prefer to wait for the conditions which your testing has shown yield larger and, to you, more profitable moves, that's also fine. But you have to decide what it is you want, then determine how to go about getting it.

Staying out however made me miss a big up move on small volume, and around 15:00 a fast down move... This is exactly what seems to happen: I'm unable to get the "big moves" where the profit lies...
If your goal is to catch every move that in hindsight turned out to be profitable, then you have your work cut out for you.

If the big up move and the fast down move should have been taken if you'd followed your plan but you didn't, then that gives you one job to do. If they weren't part of your plan and you wish they had been, that's a different job. If they weren't part of your plan and you can't figure out how you could have known in advance how to play it or even if you should and you're perfectly happy with the profits you're making as it is, then to hell with it.

Part of trading is knowing when you're at your best. For some that means a couple of hours. Others can trade all day. If you become good enough at entries so that you can do size and be done in an hour or so then quit for the day, is that a bad life? Think about it.

Db
 
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firewalker99

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The framework of my trading

I've decided to add this to my journal, in case I ever need reminding myself of why I want to be a trader:

1. Why?
I want to make a living of trading, I don't want to become a millionnaire or anything of the kind, but I want it to be similar to a full time career. Instead of working for someone else or being the slave of the corporate machinery, I'm willing to choose the path less travelled.

2. How?
Daytrading is what I prefer the most. I'll be spending 8-12 hours a day looking and analyzing charts. My time frame for a trade should be about 15 to 45 minutes at most. I'm looking for about 5 trades a day, as I've experienced the less I trade the less trades are based on weak signals or impulsive reactions.

3. What?
FDAX futures starting at 8:00 till about 17:30. Around 15:30 I also start looking at ER2 till around 22:00. At lunchtimes I prefer to stay out of the market and look what happened. I'm not trading news events. I won't be trading throughout the whole day, but want to be available to the market from around 9 to 21hr. Before and after I don't follow realtime.

4. When?
The charts are 3 minutes candlestick charts, which I crossover with a 15 minute chart, and at the start of the day I take a look at the previous day and week.

5. I will not trade countertrend nor retracements itself. I will look to pick up a trend and try to place an entry before a runup or rundown phase. Within a ranging period, I'll be looking to pick up some points by buying/selling with the trend. Breakouts of S/R zones can be interesting, but I won't react on a breakout through a trendline.
 

firewalker99

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6,655 599
dbphoenix said:
If your goal is to catch every move that in hindsight turned out to be profitable, then you have your work cut out for you.

If the big up move and the fast down move should have been taken if you'd followed your plan but you didn't, then that gives you one job to do. If they weren't part of your plan and you wish they had been, that's a different job. If they weren't part of your plan and you can't figure out how you could have known in advance how to play it or even if you should and you're perfectly happy with the profits you're making as it is, then to hell with it.

Part of trading is knowing when you're at your best. For some that means a couple of hours. Others can trade all day. If you become good enough at entries so that you can do size and be done in an hour or so then quit for the day, is that a bad life? Think about it.

Db
For me it's not about catching all the moves, if I'd have let's say 3 good trades per day that would be fine. If they happened during the first part of the day than I'd probably papertrade or analyze some more, read some stuff or check forums. For the moment however, I'm miles away from that target. Personally, it's not about the hours I spent on the charts, I'm willing to sit all day before my pc and watch price move around. I guess this is partly due to the fact that I want to be learning as much as possible...
 

dbphoenix

Legendary member
6,952 1,244
firewalker99 said:
I agree I have several tasks in front of me, but I don't want to aim at a goal to high as I've run into more than one disappointment along this path and I'm trying to build some confidence here by placing realistic goals. I've done two things to elevate the possibility for profits: my trades run much longer than before (instead of 3-5 minutes they're up to 30-50 minutes), and I've been trying to stick to "the 5 best trades of the day".
Remember that a plan is not just a good idea or collection of good ideas that you hope will work out for the best. It's more than just "I trade hammers". Your setup has to be clearly defined, something you can recognize with no hesitation. It has to be something that you can test, i.e., something that you can find in old charts in order to determine the most probable outcomes of it, then test going forward, again using old charts, then test again going forward in real time. Letting your trades run longer may not be of much value if you're using a setup or setups that don't provide you with the high-probability outcome that you're looking for.

I'll withhold comment on the charts you've posted until the end of the day in the hope that others will chime in. But I will suggest that you have too much on your plate. Go back to the buffet and scrape off some of it, starting with volume and channels and trendlines. If S/R is your trigger, focus on that. If it isn't, then determine just what your trigger is and focus on that. But if it is, my S/R thread (below) may provide you with some help on drawing lines. If you investigate it, note that the charts were posted in real time beginning with the open. Note how the preliminary lines are drawn then modified and adjusted as traders begin to trade. In other words, don't start at the end and work your way back but rather begin at the beginning and work your way through to the end. If you have any questions about them, ask there. It's easier to keep track of what's what that way.

Db
 
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