How To Trade: Full Stop

[DionysusToast]

Now, back to trading matters, as this is a trading site is it not.

Recently we brought up the objective of $2,000 per day, and whether 1 trade or 6 trades are best to achieve this.

Let us look at some facts, and we will ignore commissions for now.

Scenario 1

$2K per day with 1 trade and an average target of $0.50 cent per trade = 4K shares

Maximum loss per trade is set at $0.20 = $800

R:R = 2000/800 = 2.5


Scenario 2

$2K per day with 6 trades and an average target of $0.50 cent per trade = 6 x 666 shares or 600 to round off

Maximum loss per trade is set at $0.20 = $120

R:R = 300/120 = 2.5

We need to change some of the variables to give us better odds, no!

Anyone got any sensible suggestions that will allow us to increase our odds of making our objective, yet reduce the risk associated with being in the market?

I am interested in this type of discussion. On the one hand, you have people that claim that you can take a RANDOM entry and make it profitable with good money management. Many people have claimed that but not a single one has been able to explain it and my presumption it that it is hogwash.

On the other hand, I have seen mathematicians do some things that I would not have thought of in a million years.

I know that if I enter randomly with a $1 target and a 50c stop, I will win 2 out of 3 trades over time. It's a bit like a coin toss. I won't make any money though.

So - in terms of changing the above parameters, I would say that the stop and target are things that cannot be changed as their impact on the probability of a win is offset by the impact on the win/loss size.

On the face of it, something like scaling in may resolve the issue. The theory being that if you go in half size, let the trade go into profit to give you more leeway as you add extra funds. The problem with that is that you would need your second 'half' to be bigger than a half to make up for the fact that some of your target has been eaten and therefore you are back to square one.

Ideally, the parameter you need to work with is the win ratio. I can't figure out any other way to increase the profits/win ratio without penalty.

Anyone ?

 

[DionysusToast]

On we go, as we have no time for useless words that just waste time, for time is money.

Adequate range is now sourced, and we have a basket of stocks to choose from.

So, how do we make the best choices, seeing that they all have adequate range and the chances of us capturing our target % of the range is very high.

How, and I will repeat, how do we differentiate between stock A,B or C?

It is very simple if you but stop and think about it.

That's the million dollar question. Shame that I have only a $5000 answer right now.

My opinion...

Once you have a basket of stocks you can work from, you need some sort of catalyst. The catalyst could be one or more factors that give you confidence that a specific stock is going to give you a high probability trade.

For instance, a catalyst could be - a gap up on the back of an announcement of a share buyback scheme in a company with an abnormally high short ratio.

This is what I am working on now to make my start of day selection process better. I do face the chance that I may be totally wasting my time on this and that simple rally scanners would do the job better. Saying that - if I waste a few hundred hours on the research, I am bound to learn something from it. Such is life.

 

[tss42]

Now, back to trading matters, as this is a trading site is it not.

Recently we brought up the objective of $2,000 per day, and whether 1 trade or 6 trades are best to achieve this.

Let us look at some facts, and we will ignore commissions for now.

Scenario 1

$2K per day with 1 trade and an average target of $0.50 cent per trade = 4K shares

Maximum loss per trade is set at $0.20 = $800

R:R = 2000/800 = 2.5


Scenario 2

$2K per day with 6 trades and an average target of $0.50 cent per trade = 6 x 666 shares or 600 to round off

Maximum loss per trade is set at $0.20 = $120

R:R = 300/120 = 2.5

We need to change some of the variables to give us better odds, no!

Anyone got any sensible suggestions that will allow us to increase our odds of making our objective, yet reduce the risk associated with being in the market?

Again, this may be a stupid answer, but we need to maximise our profit opportunity. We have set a maximum risk, which is fine. But why should we have a profit target as well? If the market gives us more, surely we should allow the stock to go where it wants to go as long as it is not allowed to take our profits back?

PS. BTW, I still haven't been able to figure out the password.

 

[tss42]

On we go, as we have no time for useless words that just waste time, for time is money.

Adequate range is now sourced, and we have a basket of stocks to choose from.

So, how do we make the best choices, seeing that they all have adequate range and the chances of us capturing our target % of the range is very high.

How, and I will repeat, how do we differentiate between stock A,B or C?

It is very simple if you but stop and think about it.

In no particular order:
1. Last day's range relative to average daily range.
2. I was going to say stocks that have seen a lot of recent activity, but then remembered you don't use volume.
3. Results anouncements, or other major news story
4. Large overnight gaps, whatever 'large' means.

 

[trendie]

I am interested in this type of discussion. On the one hand, you have people that claim that you can take a RANDOM entry and make it profitable with good money management. Many people have claimed that but not a single one has been able to explain it and my presumption it that it is hogwash.

........

Ideally, the parameter you need to work with is the win ratio. I can't figure out any other way to increase the profits/win ratio without penalty.

Anyone ?

Its difficult to know how to improve odds without first knowing the reason why you selected the stocks in the first place.
I thought of scaling in too, but that complicates your calcs, and you may need to automate part of the process.

Since this is not TA; how about stocks that are near their quarterly earnings period, when they may be more susceptible to news? (my understanding is, US stocks have to declare earnings, and investors my be more sensitive to poor/good news near these times)

Somebody has already suggested strong/weak sectors of the stocks you're trading.

The only other clue may be, that if you're trading multiple stocks, maybe you look at the relationship between the stocks themselves. eg, if its a department store, you short one and buy the other, so you're hedging yourself, in some part. (I am sure this was covered somewhere, maybe TraderTom. spreads trading??)

this thread is becoming onerous to read with the extraneous stuff.

have you worked out the password?
I have tried "self indulgent", "dan brown" and "montgolfier" to no avail.

 

[The Expert]

What you are saying then, is that you do not follow what I am saying!

Have a read of this and see if you can make any sense of it?

The unexpected is what creates confusion in your opponents mind and
causes them to slow down or stop to figure out what is wrong with their
paradigm. When you multiply reduced decision cycle time AND doing the
unexpected, you get tremendous payoffs. As a trader, you have to
recognize that if you do what everyone else does, you will get what
everyone else gets. And if your execution time is slow because of
equipment limitations you are unnecessarily harming your performance,
and if you are waiting to get too much redundant confirmation of your
signals, you may be missing the opportunity in your search for
certainty. Finally, this insight suggests that by looking at the market
in new and different ways, you have the possibility of uncovering unique
insights and fresh opportunities to get better than average results.

 

[A Dashing Blade]

What you are saying then, is that you do not follow what I am saying!

Have a read of this and see if you can make any sense of it?

The unexpected is what creates confusion in your opponents mind and
causes them to slow down or stop to figure out what is wrong with their
paradigm. When you multiply reduced decision cycle time AND doing the
unexpected, you get tremendous payoffs. As a trader, you have to
recognize that if you do what everyone else does, you will get what
everyone else gets. And if your execution time is slow because of
equipment limitations you are unnecessarily harming your performance,
and if you are waiting to get too much redundant confirmation of your
signals, you may be missing the opportunity in your search for
certainty. Finally, this insight suggests that by looking at the market
in new and different ways, you have the possibility of uncovering unique
insights and fresh opportunities to get better than average results.

It's considered polite to reference quoted material on this forum TE else peeps might think you wrote that yourself.

 

[The Expert]

I really don't care what people think.

As for the peeps, they really don't have a clue what they are looking at anyway, let alone what they need to look at!

http://www.freeimagehosting.net/uploads/b549ba243c.png

 

[The Expert]

I had some excellent excerpts to post, but now DB has gone and ruined it for everyone, so let that be a lesson to all, as The Expert will always post as he sees fit, like it or lump it.

 

[trendie]

I really don't care what people think.

As for the peeps, they really don't have a clue what they are looking at anyway, let alone what they need to look at!

http://www.freeimagehosting.net/uploads/b549ba243c.png

is that top picture a rabbit or a duck?

EDIT: just zoomed in and can just make out the text. sort of.

 

[BSD]

Lol don't worry Monsieur Le Expert I'm not gonna butt in here but honestly traders can't be be so thin skinned, even less so when posting on the web, besides DB was just pointing out what oughta be pretty standard referencing rules, ie if you cite someone you quote em.

Just plain netiquette no different to what I hope you did in school and at Uni too, is all.

I'm starting to find your musings and writing style quite entertaining, so don't go off in a huff.

 

[BSD]

Dropping by has paid for itself already, from your link that DB posted about that top fighter pilot and his insights as applied to trading :

"Construct your dashboard wisely:

Using an older simpler and performance- inferior aircraft, Boyd routinely out-flew hot
shot fighter jocks piloting the Air Force’s most sophisticated
fighters, because he was able to apply the advantage of
simplicity. He flew the aircraft as an extension of his own body
and will. He had internalized to an instinctive and personal
level the capabilities and limitations of his jet, and its simple,
barebones dashboard layout supported rapid observation. His
opponents struggled consciously to make sense of the
complicated instrument panels before them that flooded them
with too much information, which made them take their eyes
off of Boyd while they tried to figure out what was going on. It
was in that moment of sensory overload that they would
routinely discover Boyd on their tail in the dominant, decisive
position. We should remember the differences between need
to know and nice to know, and that newer isn’t better; better is
better. As a trader, I must give careful consideration to the
amount, the format and timing of my information feeds to
ensure they are supporting my decision making and not
getting in the way."

http://www.daytradingcourse.com/art...g_From_One_of_Our_Greatest_Fighter_Pilots.pdf

Well my-my I just couldn't agree more !

KISS at it's best, not sure where I've heard, ahem, similar sentiments being voiced recently.

 

[rags2riches]

I remember this gem from a while back that helped me a lot

Yes exactly, and what happens is that it may be very difficult to detect the fog while it is enveloping and for this reason absolute pragmatism is required to avoid this very real danger. The other thing is there are two additional dilemmas. The first is to have the will to resist entering a scenario that is not clear and the second is to recognise it is not necessary to be in the market all the time, but only when the odds are clearly in the favour of succeeding without question. Now, it is a natural reaction to feel bored or even guilty at self imposed inactivity, but it is just as important and relevant as being in the market at the right time and in the right direction.

 

[eddietheeagle]

You must learn patience in this game and that is what I will teach you. You might not thank me right now, but by the time we are finished you will be down on your knees begging me for more information, which I may or may not give, depending on how you act during the progress of this thread. I can see by the tone here that nearly all have been brainwashed by the usual rubbish that is used by so called "professional trading houses". I am telling you now, and it is up to you to take heed, that it is all bs and will not make you good money as a lone trader, which is the best way to operate. I am done trading for today and must now attend to other business. We will speak over the weekend.

Oh, the chart with the ATR was not what I meant. Please have some tables posted for when I return, as sometimes it can be better to look at numbers than to look at charts. The search will do you good and it should take no more than 30 minutes to compile the tables with all the relevant information.[/QUOTE

The majority of your posts are utter pap. You're leading a load of sheep to an untimely demise should they decide to follow your methods.

I look at my money as little soldiers. Each day I want my soldiers to go out and bring me lots more soldiers to swell my army. In military terms you're the equivalent of General Custer and quite obviously making your last stand here. You are looking for recognition on something that if it was printed and near a toilet I'd substitute it for my usual choice Andrex.

It's obvious it makes no money and you make no money. The reasons for this are simple. You would firstly not be sharing it on this website, secondly you wouldn't be living in Burkino Faso. You'd be hopping, skipping and a jumping investor visa in passport on your way to Europe or the USA.

Savvy

 

[The Expert]

BSD is right, I was out of order and apologize to DB.

From now on I will be more civil and courteous, so do not be afraid to correct me if I start to slip.

To make up, I have attached the next pdf, which the same password will open.

 

[The Expert]

Actually, this is why I live here.

 

[temporarilylight]

that graph is shockingly coherent for you! Its even got labels on it!! We dont even need DT to solve that one

 

[The Expert]

Dropping by has paid for itself already, from your link that DB posted about that top fighter pilot and his insights as applied to trading :

"Construct your dashboard wisely:

Using an older simpler and performance- inferior aircraft, Boyd routinely out-flew hot
shot fighter jocks piloting the Air Force’s most sophisticated
fighters, because he was able to apply the advantage of
simplicity. He flew the aircraft as an extension of his own body
and will. He had internalized to an instinctive and personal
level the capabilities and limitations of his jet, and its simple,
barebones dashboard layout supported rapid observation. His
opponents struggled consciously to make sense of the
complicated instrument panels before them that flooded them
with too much information, which made them take their eyes
off of Boyd while they tried to figure out what was going on. It
was in that moment of sensory overload that they would
routinely discover Boyd on their tail in the dominant, decisive
position. We should remember the differences between need
to know and nice to know, and that newer isn’t better; better is
better. As a trader, I must give careful consideration to the
amount, the format and timing of my information feeds to
ensure they are supporting my decision making and not
getting in the way."

http://www.daytradingcourse.com/art...g_From_One_of_Our_Greatest_Fighter_Pilots.pdf

Well my-my I just couldn't agree more !

KISS at it's best, not sure where I've heard, ahem, similar sentiments being voiced recently.

In order to become an Expert, you must learn to quickly distinguish between what is of value, and what is not.

The excerpt I posted was the value bit, the rest is not, and this is what every aspiring trader must learn, how to quickly stop wasting time and get straight to what matters most.

You may, recently, have heard me say that Barry Rudds' book has some value in it, and what a trader should do is quickly browse it and note the main points, then put it away for future reference if required, in relation to those points, nothing more.

I know my password files present a challenge to some, and an obstacle to others, but to be very honest it can be cracked by anyone in less than 60 sec if you have the right software, as I have tested it to this effect.

I shall continue as is for now, and maybe I will change my approach and just start posting direct, but I do not like doing that as it presents no challenge to anyone, and thus very few will learn anything from my postings.

Many here think that what I have to say is rubbish and of no value, well, beauty is always in the eye of the beholder!

 

[The Expert]

I am interested in this type of discussion. On the one hand, you have people that claim that you can take a RANDOM entry and make it profitable with good money management. Many people have claimed that but not a single one has been able to explain it and my presumption it that it is hogwash.

On the other hand, I have seen mathematicians do some things that I would not have thought of in a million years.

I know that if I enter randomly with a $1 target and a 50c stop, I will win 2 out of 3 trades over time. It's a bit like a coin toss. I won't make any money though.

So - in terms of changing the above parameters, I would say that the stop and target are things that cannot be changed as their impact on the probability of a win is offset by the impact on the win/loss size.

On the face of it, something like scaling in may resolve the issue. The theory being that if you go in half size, let the trade go into profit to give you more leeway as you add extra funds. The problem with that is that you would need your second 'half' to be bigger than a half to make up for the fact that some of your target has been eaten and therefore you are back to square one.

Ideally, the parameter you need to work with is the win ratio. I can't figure out any other way to increase the profits/win ratio without penalty.

Anyone ?

What is the main thing that you would like to be able to do as a daytrader, in relation to daily trading, and I do not mean just being able to make money. I mean in relation to trading activity.

 

[The Expert]

That's the million dollar question. Shame that I have only a $5000 answer right now.

My opinion...

Once you have a basket of stocks you can work from, you need some sort of catalyst. The catalyst could be one or more factors that give you confidence that a specific stock is going to give you a high probability trade.

For instance, a catalyst could be - a gap up on the back of an announcement of a share buyback scheme in a company with an abnormally high short ratio.

This is what I am working on now to make my start of day selection process better. I do face the chance that I may be totally wasting my time on this and that simple rally scanners would do the job better. Saying that - if I waste a few hundred hours on the research, I am bound to learn something from it. Such is life.

Ok then, time to cut all the crap and start talking serious.

There are many catalysts as you rightly point out, and many of these are beyond our control, no matter what we think or do.

However, you might have heard said that the price of a stock usually has all the important factors priced in, and I see no reason as to why this is not so.

Of course we will be wrong at times, for we are not able to tell the future, but, if we believe that the stock price has all the important factors priced in, then, we can form a plan that will allows us to trade accordingly.

Many traders make the big mistake of not seeing the big picture, and thus, end up not maximizing the profit potential on most trades.

If you are making money then fine, but if you are not, or not making enough, then you need to seriously look at the reasons and do something about it to change your circumstances.