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

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firewalker99

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First of all, let me state that the main purpose of opening my own journal is to learn stuff. Learn by reading and understanding what others think or would have done in the situations I will present. I have been studying quite a lot and trying hard and although I have been at times successful, I'm not at all able to produce consistently profitable results.

My trading has improved because I'm sticking to the plan and left out the impulsive trades... but perhaps the plan just isn't good enough. I'm not expecting to have a 70% ratio of good trades, but something has gone wrong and I'm in need of someone who will guide me back to the right path.

I hope the members of this forum can help me back on track.
I don't expect anyone to write fully detailed analysis of every chart I post, but if they're willing to, please do.

Please let me know if I need to improve my "journalistic qualities" or if you have any feedback whatsoever.
 
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I won't be doing this each day, but let me begin be describing what I do first.
Apart from checking out the news releases, I try to get a picture of what happened last month, last week, last day... Then I visualize what could happen today and try to establish where I'd like to be and what could be the "right" side of the market.

i'm trading futures on the DAX (papertrading for the moment).
 

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Attached two charts:

The first one without notations, the second with my comments.

Although this one is a profitable trade, I'm not happy as I'm not really understanding the principles that make the price go up from 5700 on modest volume...
 

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not clear at all

this one for example has me totally screwed up...

it breaks the down move, goes up - although on modest volume (12:30-13:15) - than volume drops off until about 14:00. In my eyes, a small retracement could happen but no lower than perhaps around 5710... Instead just minutes before 1500 it breaks down fast and (remains to be seen) a selling climax? I'm not sure where the sudden move came from, no news was released...
 

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firewalker99 said:
Attached two charts:

The first one without notations, the second with my comments.

Although this one is a profitable trade, I'm not happy as I'm not really understanding the principles that make the price go up from 5700 on modest volume...

Re the first column on your chart, were these the extent of the tests of 5722.50? Or were there additional tests prior to the left edge?
 
dbphoenix said:
Re the first column on your chart, were these the extent of the tests of 5722.50? Or were there additional tests prior to the left edge?

no, at 8 o' clock the DAX opened... at 9 volume pumps up because other European exchanges open...but I like the DAX becaused you can get "a glimpse" of what's about to happen (sometimes)
 
success ratio

Do you find 50-60% low? I'm not aiming at specific target, but personally I'd be happy with a 60% win rate, because for the moment it's nowhere near that.

I do think that the % matters less if you take in account the risk:reward ratio. Somebody who uses a risk:reward of 1:5 can be happy with 30% good trades in my opinion, if and if losses are cut short. Correct me if I'm wrong, I'm only hear to learn. And learning is still what I have to do a lot.
 
fixed targets?

I try to enter a trade with three contracts. Of course it depends on the volatility of the moment and the probability of my entry. Then I place one fixed target at 2 times the ATR, another at 3 times and the last one I only exit when I see signs indicating the end of the move. From the moment my first one reaches it's target, I change the remainder stop at breakeven.

Does this seem too conservative?

I've experienced I've often lost a trade because my stop was too tight. How do you guys place a stop? A mental stop? A fixed stop? I use the average true range and depending on how high it is, I buy less contracts. If ATR is low, I buy more. Lately I've not been buying a lot because I've experienced quite a bit of losses so it's back to papertrading for me
 
firewalker99 said:
no, at 8 o' clock the DAX opened... at 9 volume pumps up because other European exchanges open...but I like the DAX becaused you can get "a glimpse" of what's about to happen (sometimes)

By "previous tests" I didn't necessarily mean that day. Would it be too much trouble to post a chart of the previous day or zoom out to show the previous week?

Db
 
firewalker99 said:
Do you find 50-60% low? I'm not aiming at specific target, but personally I'd be happy with a 60% win rate, because for the moment it's nowhere near that.

I do think that the % matters less if you take in account the risk:reward ratio. Somebody who uses a risk:reward of 1:5 can be happy with 30% good trades in my opinion, if and if losses are cut short. Correct me if I'm wrong, I'm only hear to learn. And learning is still what I have to do a lot.

Whether or not this win rate is low depends on the profit:loss ratio.

First, the risk:reward ratio is irrelevant since you have no idea what the reward is going to be. I know there are various ways of calculating targets, but I haven't found that any of them pan out. You may find differently in your work, and that's fine. But don't rely on opinion. Rely on the results of your own work.

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
 
firewalker99 said:
I try to enter a trade with three contracts. Of course it depends on the volatility of the moment and the probability of my entry. Then I place one fixed target at 2 times the ATR, another at 3 times and the last one I only exit when I see signs indicating the end of the move. From the moment my first one reaches it's target, I change the remainder stop at breakeven.

Does this seem too conservative?

That's up to you (you're going to hear me say that a lot). What matters is how much you milk out of what the market is making available to you. If this is how you do it and you're happy, then do it that way and be happy.

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.

Next, when you have your entries nailed and are confident in them (and are also confident about what you will do if they recoil on you and bite you in the ass), trade the two contracts for real and paper-trade a third. Follow this process until you're not only confident in your plan but confident in your ability to handle the unexpected.


I've experienced I've often lost a trade because my stop was too tight. How do you guys place a stop? A mental stop? A fixed stop? I use the average true range and depending on how high it is, I buy less contracts. If ATR is low, I buy more. Lately I've not been buying a lot because I've experienced quite a bit of losses so it's back to papertrading for me

Even though this is directed toward everyone, I'll chime in here. Where you place your stop depends on whatever it is you're trading and how you're trading it. For example, given what you're trading, if you're trading S/R and if you're trading BOs through S/R, then you have every reason to expect price to move in the anticipated direction IF you plotted S/R correctly. If you DIDN'T plot it correctly (which may be no fault of your own) and price snaps back at you, you don't want to sit there like a deer in headlights with a wide stop.

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). For the NQ, which is what I trade, this is about four points, so I look at something around five for a stop. Whatever number you use, however, will depend on the results of your analysis of what you trade. (I should also point out that this changes over time, so you can't take any of this for granted. The MAE can change, just as the ADR can change. The ADR for the NQ, for example, used to be twice what it is now, and that means considerable adaptation. If any of this changes, you have to make changes as well.)

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.

But, as I've said, there's no big rush. Get it right, then you'll be able to make more progress faster. Otherwise, you'll be spinning your wheels much longer than necessary.

Db
 
dbphoenix said:
By "previous tests" I didn't necessarily mean that day. Would it be too much trouble to post a chart of the previous day or zoom out to show the previous week?

Db

No problem at all.
Attached you'll find a 30min chart of the last week and a 5 min of today+previous day.
 

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firewalker99 said:
No problem at all.
Attached you'll find a 30min chart of the last week and a 5 min of today+previous day.

Glad I asked, since this provides a good example of a high-probability short.

Note on your 30m chart of the previous week that long bozo just past the halfway point that reaches to about 5737. This provides you with an "air pocket". Price then futzes around more or less above 3725 for the remainder of the day. The fact that price opens way up there the next day is pretty much a go for a short given that there's zip support within that air pocket.

So, yes, good short. But why the exit on the first contract at that particular point?

Db

Incidentally, thanks for the white background. I'm sure anybody who wants to print these out will appreciate it as well.
 
db, I still had to post these

thx already
btw: are you always that active on t2w?
must be if you've already piled up so many posts...
 

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dbphoenix said:
Glad I asked, since this provides a good example of a high-probability short.

Note on your 30m chart of the previous week that long bozo just past the halfway point that reaches to about 5737. This provides you with an "air pocket". Price then futzes around more or less above 3725 for the remainder of the day. The fact that price opens way up there the next day is pretty much a go for a short given that there's zip support within that air pocket.

So, yes, good short. But why the exit on the first contract at that particular point?

Well mainly because at that point my target (x times ATR) was reached... then I moved my stop to breakeven (entry @ 5720) but I almost got stopped out when price reached back to my entry point 5720. This time I was lucky, but in many occassions I'm unable to let my profits run very far...
 
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?
 
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.
 
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?
:|
 
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?
 
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
 
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