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

[BroadSword]

I'm pleased I caused no great offence!

With regard to:

Can you really think of one sensible argument not to answer to my request for drawing a couple of simple lines on a chart?

I can think of this reason: It doesn't matter what db or anyone else thinks - there are all manner of possible interpretations, but it yours that counts. I fully accept that a simple request to draw something quickly not being forthcoming might be seen as obtuse (and possibly it is), but I would guess that the reason might be that he was trying to make the point that there were no definitive right or wrong answers, only how you would interpret it within your strategy...but I stress I'm guessing, in an attempt to offer some reply to your question.

The other thing I'd like to say is that on many occasions you state that you want a fairly high frequency/rate of occurance of trades - I think the figure 3 to 5 trades a day was mentioned...Why? Whats wrong with 1 trade a week? This would allow you to focus on the very best setups only.

On a number of occasions you ask what to do with less than perfect or clear charts...? ...Simple - if the set up isn't sat there screaming at you, don't trade it. Let it go.
I trade S % R too (though in FX) and if the landscape doesn't look like it's going to offer me anything, I do nothing. I just wait until it does...

 

[firewalker99]

The other thing I'd like to say is that on many occasions you state that you want a fairly high frequency/rate of occurance of trades - I think the figure 3 to 5 trades a day was mentioned...Why? Whats wrong with 1 trade a week? This would allow you to focus on the very best setups only.

While we all have to find something that's suitable to our personality, making one trade a week isn't suited for mine. Suppose through backtesting you've concluded that your maximum string of successive losses is 4. That could make up for a month without one single profitable trade! Honestly, I couldn't bare that. I couldn't wait a month hoping for one profitable trade, producing a profit that might only be half as big as the losses you've made. I think it would be too hard to handle, psychologically. One trade a week is perhaps applicable when you're a swing trader, but it doesn't seem suitable to someone who trades intraday. At least not for me...

 

[trendie]

Would taking 4 consecutive losses in 1 day be more acceptable to you ?
If you believe the markets are fractal, then all you may be doing by following a set of rules is changing the "frequency" of signals, not their "quality". For that, you need a better set-up.

If 4 successive losses in a month is unbearable, with a profitable trade in week 5 being only half the losses;
would 4 consecutive losses in 1 day be acceptable to you, where the fifth trade profit being only half your losses?
would you be pyschologically able to pull the trigger on the fifth trade, after 4 losses in a row, on the same day?

Broadswords points are worthy of deep consideration. (esp, about his response to your question about taking risky / sub-optimal signals, or "wanting" 3-5 trades a day)

( I trade MA-Xs, even I am smart enough to know today is a "stay-away" whipsaw day cos of US holiday, and not try to force trades just to meet an artifical target. )

you take what the market gives you.

I hope you are still following the strategy of defining set-ups, and forward testing.
You should buddy-up with wasp for moral support, who is doing something similar on his journal.
But, most of all, you need to maintain your momentum of learning.

 

[firewalker99]

Would taking 4 consecutive losses in 1 day be more acceptable to you ?
If you believe the markets are fractal, then all you may be doing by following a set of rules is changing the "frequency" of signals, not their "quality". For that, you need a better set-up.

If 4 successive losses in a month is unbearable, with a profitable trade in week 5 being only half the losses;
would 4 consecutive losses in 1 day be acceptable to you, where the fifth trade profit being only half your losses?
would you be pyschologically able to pull the trigger on the fifth trade, after 4 losses in a row, on the same day?

Well actually, yes, 4 losses in 1 day would feel - comparatively - less uncomfortable than 4 consecutive losing weeks. Primarly, because two days later, I could be back in the black, while comparing that to being in the red for over a month... my point was mainly that "feeling" a losing streak for over a month would do me more harm than feeling it for over a day. Of course you're right, I shouldn't try and force trades artificially only to average a certain number of trades a day.

About being able to pull the trigger, that would depend on the backtesting. Suppose I'd have determined through backtesting that in 75% of the cases where I had 3 successive losses, a fourth would occur than I'd be safer not to pull the trigger logically. But in any other case, I wouldn't hesitate to pull the trigger when the setup crystalized, otherwise I wouldn't be following my system and leaving out possible profitable ones.

But anyway, if I understand correctly, you're saying that a setup that appears a couple of times a day, can never be a very good setup?

PS: I've been following wasp's journal from the moment he decided not to quit t2w after all. Seems he's not regretting it

 

[wasp]

About being able to pull the trigger, that would depend on the backtesting. Suppose I'd have determined through backtesting that in 75% of the cases where I had 3 successive losses, a fourth would occur than I'd be safer not to pull the trigger logically. But in any other case, I wouldn't hesitate to pull the trigger when the setup crystalized, otherwise I wouldn't be following my system and leaving out possible profitable ones.

This is one of the things that got to me when devising my plan. On the one hand you want to minimize losses and the other you want to stick to your plan.

I also had that nagging sods law feeling that if I didn't take the fourth I would miss the best of the day so I labourously went back over every single day trying each scenario in a day. From 3 in a row, don't take the fourth to take X in a day regardless and see what happened by Friday. the latter worked for me but its something you have to find out best for yourself.

As for one a week or 3/5 day, I'd agree with you, I'd much prefer the latter as the former would be harder to withstand IMO.

 

[firewalker99]

This is one of the things that got to me when devising my plan. On the one hand you want to minimize losses and the other you want to stick to your plan.

I also had that nagging sods law feeling that if I didn't take the fourth I would miss the best of the day so I labourously went back over every single day trying each scenario in a day. From 3 in a row, don't take the fourth to take X in a day regardless and see what happened by Friday. the latter worked for me but its something you have to find out best for yourself.

As for one a week or 3/5 day, I'd agree with you, I'd much prefer the latter as the former would be harder to withstand IMO.

You're absolutely right, that kind of analysis is something I can have a look at, at a later time, when I'm further, much further down the road... Were you able to devise some signals that indicate that the current day probably wasn't going to turn out as profitable which could help you conclude in realtime to stop trading? Like say, a certain predefined number of losing trades, a predefined number of lost pips,... or are you going whole the way, regardless of what happened before? To rephrase what you're saying in your signature, considering each trade (instead of each day) a new opportunity, not looking back at the previous one, so not relating any relevance to it?

I believe you have around that number of trades a day, perhaps a poll can be interesting to hear from others what their average number of trades/day is. Not that it would influence my opinion on the matter, I just know I could never feel comfortable with one trade a week. I just don't have the patience waiting days for a setup to occur.

 

[wasp]

My plan is to trade from 7am to 8pm if less than or up to 5 trades. If I have taken 5 trades I stop. Partly to limit losses ad partly if those 5 trades haven't come good, then I'm sure it'll be flat. Some may say thats too many but thats why the backtesting. In 3 years only thrice has the 6th trade been blinding and numerous the 4th and 5th have been spot on after a few losses. The last NFP was a good example just gone. 3 crap trades in the morning but then the NFP and following trades worked well. Each trade is considered seperately and I have yet to find a good reason to say no I won't take the next trade apart from when I have reached my daily limit.

 

[firewalker99]

I don't think this is the point being made, rather that if you are trying hard to achieve at least 3 trades a day, you may be tempted to take less than ideal setups to make you feel like you are 'doing something' or hitting the trade frequency figures, rather than concentrate purely on the grade 'A' setups.

I know that wasn't what you meant initially, put reading between the lines I thought perhaps your beliefs are that no system can provide a decent setup (let's assume 75% W/L) and at the same time occur five times a day. For being curious, what are your reasons for not daytrading, if I read correctly you prefer swing trading? Larger targets?

I would also question why you want to day trade rather than hold on the swing (not that it matters to me of course...) I assume you appreciate that in general intraday trading is tougher than longer term in terms of %cost...the odds are more in your favour (or perhaps better to say less against you) on the longer term trades. Patience and discipline...

Yes you're right patience has a lot to do with it. That's one of the reasons I'd prefer intraday trading. If I had to choose, then I'd prefer the shortest term. Swing trading looks to me like something in the middle of investing on a longer term basis and daytrading. Holding positions overnight doesn't make me feel comfortable let's put it that way. Of course that also is in direct relation with the past experiences and accumulated losses. For those reasons and others, I prefer having a trade run for minutes or hours, instead of days...

 

[firewalker99]

Although this thread has been relatively quiet the last couple of days, I'm by no means giving up on my quest to become a consistently profitable trader. The difference is, I won't be posting on a daily basis anymore.

I've let things "sink in" and I've detected several reasons which made me get frustrated in my (paper)trading but where on the other hand my trade would have worked out fine in the end.

The problems were mainly:
- unwillingness of letting go the "I want to understand why price moves this or that way"-attitude
- lack of patience when in a trade: if it's not going in the right direction straight away I get nervous
- lack of patience waiting for a clear setup to crystalize: this has improved as I've now commited myself to get out for a walk (not too long) when all I see is a choppy undirectional move

Then on a more technical side:
- my stops were triggered on too many occassions, setting my stops wider made me feel even more uncomfortable, so perhaps the DAX just isn't my instrument.... I was already considering ER2 for trading in the evenings but suddenly it came to me: let's look at NQ for a while.
- looking at NQ next to the DAX for the evening sessions made me comprehend much better the moves of the DAX

For the point of this journal, I'd like to thank everybody who has helped me in the past with comments, suggestions, advice. It's been a tough ride sometimes but I'm more committed than ever.

For the days to come, I'll put up some more information about what happened in the time I wasn't posting.

 

[firewalker99]

September 14 review

Today unfortunately started with a problem at the exchange, so trading at DTB wasn't available for a large part of this morning. Nevertheless, a good exercise and test of my patience. I actually didn't sit it out behind the screen and came back around 1200.

When it started to move again around 1100 price was up by 20 points and pushing against 5935. Although there was no resistance at that particular level I could find (going back several months), it seems that this was about as high as it was going to get. So I drew a line there that wasn't there when the DAX opened. The other S/R lines (5917, 5905, 5890) were there from previous months and also the previous day.

Standing on the sidelines and watching price drop down is what I did for the larger part of the day. I'm not used to drawing diagonal lines, but in this case I think it indicates where price bumped into a level where supply or demand was enough to make price turn away and head back further down.

5890 is an important support level, and I watched it form a W-bottom. Looking for an entry into a possible reversal, the first blue dot marks my entry point at the break of the supply line. The higher volume on that bar was another confirmation for the upwards movement. After that another possible entry at the second blue dot, in case I would have missed the first one at the retracement, definitely on lower volume (although European indices are now all closed apart from the DAX). I'm not using ATR anymore for a target. One of my targets is near the next S/R level although I'll get into details of my exit strategy on a later moment.

Those who were following this thread probably noticed my charts are in color now. That's because I've found it to be easier when up- and downbars are marked with different colors than b/w, just a personal opinion. I also added volume. Primarily to see if it supports my hypothesis. In the past I was paying for too many attention to volume, at the wrong points. Now I only look at volume at potential swing points, important S/R levels, etc...

 

[firewalker99]

S/R as zone instead of line

Consider R as a zone, not as a fixed price level.
Use short term potential R that moves around the intermediate term S/R to indicate possible S/R for the current day.

An example: resistance of last week formed at 5910 but PDH/PDC was around 5906. Today the 5905 level proves to be a point where price touches or crosses more than 5910. Look at the breakthrough around 1730, with a soft landing near 1900. Stop has to be wide enough however not to get whipped out in the next down bar that immediately reverses up.

 

[firewalker99]

NQ as indicator for DAX movement

Notice how 1643.75 is an excellent example of the principle of reciprocity.

Maybe I should look at NQ for trading opportunities as the last couple of weeks I've seen some very clean moves as opposed to the DAX which can be more of a hassle with the small stops.
As I said already, I'm sure the problem isn't the instrument I've chosen, but on the other hand seems like the DAX isn't the easiest one out there and can be quite volatile which has whipped me out of a potential good trade on more than one occasion...

In contrast, these NQ charts are I would think pretty clean examples of bases?

 

[firewalker99]

NQ: S/R zones

Makes a lot more sense than just drawing straight lines.
I feel also more comfortable when entering a trade in these areas because I use a scaling entry when the first one contract isn't as good as I would like it to be. Then the second can be better, I don't consider this averaging down, unless price moves away to far.

 

[firewalker99]

moving up

In #483 I wrote "In contrast, these NQ charts are I would think pretty clean examples of bases?"
The breakaway gap (overnight) confirmed my assumption price was accumulating for a run-up.As I'm trading the DAX also, this was quite nice to see it happen in real time and see the effect on another index later that day.

 

[firewalker99]

more thoughts

Some of the problems I've been having in the past, were confusing signals about whether price was moving up, down or sideways... I've abandoned all ways of drawing channels, bands, triangles,... and focused on horizontal lines. Using S/R on intermediate or long term to indicate possible "areas" that help me through the day as possible indicators. Before I used too hang on too strictly to these lines. Now that I've let go of this need to "prove" myself that there was something (or nothing) there, I am more focused on what price is doing. Price can find support at a slightly different level which doesn't mean that the level loses it's validity.

One other thing I've concluded of the papertrading: trading with one contract is much more difficult than with two. Unless you have a perfect entry, you'll have to put a wider stop which in turn makes the risk:reward ratio less interesting. Also, I'm more bound to taking profits too early, for the risk of losing out on the trade or letting price turn back again and erase all potential profit. Therefore, trading two contracts makes is much easier to 1) take profits at a slightly earlier exit and let the second contract go further 2) "fix" a compromised entry.

 

[firewalker99]

S/R zones on NQ

Today's and yesterday's.

 

[firewalker99]

S/R on DAX

Today's and yesterday's.

5890-5895 also pop-ups up again as this was previously important S/R and is where price found a landing on the way down in the evening session and later on even bumped off to head upwards again.

Important area to look for tomorrow: 5925-5937.50

 

[firewalker99]

Trying to be emotionally detached

Today I let emotions slip back into my trading which caused me to take a short on a low point, not according to plan, nor a good entry. This caused me to lose out on a potentially profitable day (actually it was going to profitable if we don't count this one particular losing trade). If this happens again, we will punish ourselves with papertrading the next day until all emotions are ruled out. What caused me to react this way, was the first trade going the wrong away because of the news. I was confident in my trade and it was going the right way, with the first target just nearly missed.

 

[firewalker99]

On a hinge...

The average daily range is almost half of what is was 3 months ago... price is moving towards an outbreak? All of this doesn't matter to me as it's no part of the system, but I still like to keep an eye on the bigger picture...

 

[Joey]

Looks like you are making much better progress with your own efforts.
Best to stay on one time frame although the main trend is more clearer on the 60min or 120min charts.
Are you trading both Nasdaq and Dax.
Where do you get the charts from.