my journal

[Yamato]

The cook and the ingredients...

You know what?

The more I get ahead in trading and in my understanding of the markets, the less secretive I feel.

Trend, stoploss, S/R, hours of the day, overbought/oversold, pivots... are all ingredients known to everyone. All the ingredients you need to be profitable are out there in the open.

You're like a cook, who has to dose the ingredients and use them at the right time, and if you don't know how to be a good cook, all the ingredients in the world won't do you any good.

Being a good trader means knowing what ingredients to use and when.

Yeah, it sounds as stupid as saying "it means knowing when to buy and when to sell".

The truth is that I'll tell you the ingredients I need to be profitable and you'll have heard of them before... I am not just telling you "buy and sell at the right time and you'll be profitable", because that'd be stupid.

The ingredients are (and at the same time I am speaking to myself, even more than to the readers), in order of importance:
1) stoploss (most important one)
2) support and resistance
3) time of the day
4) overbought/oversold
5) trend

Use them with the right dosage and mix them properly, and you'll have the recipe for profitability. I am not giving a lecture: I am just writing things down for the future.

 

[j2a_aj]

Hey Tr,

About ur JPY, isnt JPY on a larger uptrend ? In which case, according to your 33% rule & to Seiden, shouldnt you be entering the rebound on support and not the sell @ resistance ? Cuz if I remember right, Seiden says resistance on an overbought zone in an uptrend means NOTHING. Let me know.

 

[Yamato]

You're right about everything you said. But yesterday I was in my gambling mode. I made about 5 trades instead of just 1. I told you in advance that I was gambling.

 

[j2a_aj]

Hey T,

Coupla things :

1. What is your usual stop loss %. Since I've started experimenting with futures, I'm still struggling to understand the portion of my investment that should be my stop loss. For eg. If your stop loss is 30 pips, how do you manage to pick your S/R point to perfection ? Wont your stop loss be taken out because of your <SUPPORT ZONE> ?

2. I'm not sure if this will help but this is how i'm looking at it now. I look at every trade as a gamble. Only difference is if I follow my rules, there is a chance I MIGHT win my LOTTERY. If I dont, its just pain suicide. Kinda helps me steer clear. But then again, I'm just doing paper trades.

 

[Yamato]

1. Absolutely. If you enter at support, stoploss is below support. Viceversa, if you enter at resistance stoploss is above resistance.

2. Good point. Trading properly is "gambling" WITH a stoploss. Otherwise your lottery ticket has an infinite cost. Your stoploss defines the cost of your lottery ticket. Without stoploss, your lottery ticket's cost is your whole capital (or whatever you have left when they close your position for margin requirements, which is the reason it doesn't have an infinite cost: because someone else will close that trade for you).

By the way, keep reminding me when I am gambling because it's not good and sooner or later if I gamble, I will incur that huge loss of 2000, which always happens when I gamble.

 

[j2a_aj]

Sure Thing. Keep putting up your detailed analysis on your 9 futures!

I'm consistently getting stopped out. Even if profitable, I'm not able to reach my target prices. Any words of advice on this ?

 

[Yamato]

Yes, as I posted in my profile:

overstretched price is very likely to bounce off s/r levels at certain times of the day and to reach the opposite level in the next few hours.

Remember time and overstretchedness. I wrote many posts about both. To really have an edge all things have to be there. Yesterday it was gambling because, as you stressed out, the JPY was against the trend, and the time wasn't right.

Trend is less important, as I wrote somewhere about 10 posts ago.

http://www.trade2win.com/boards/trading-journals/72598-my-journal-227.html#post1030518

 

[j2a_aj]

Would you happen to have a list of "CRITICAL TIME ZONES for EACH FUTURE"?

 

[Yamato]

As i said before, the important times of reversal, for all of them, are:
10 CET
22 CET

They statistically tend to reverse every 12 hours. Of course try to adapt those times by a few hours when necessary.

 

[j2a_aj]

the zn position still open?

 

[Yamato]

Yes, LONG 2 contracts:
http://www.trade2win.com/boards/trading-journals/72598-my-journal-226.html#post1030510

 

[Yamato]

I would take my previous explanation even further and say that at 10 CET you make the trade (off s/r) WITH the (higher timeframe) trend and at 22 CET you make the trade AGAINST the trend, in general. But there could be exceptions.

For example, today at 10 CET I would have gone LONG on the ZN or GBL (similar futures). Whereas last night I would have gone short on the same two futures. The hypothetical trade at 10 CET today is likely to make more money than yesterday's trade, exactly because it has the trend in favor, and therefore it won't just reach resistance but it will break through it. Whereas yesterday's SHORT at 22 CET was likely to reach support (and it did) but not break through it.

There... I formulated the whole thing perfectly and wrote it in my profile: "in an uptrend, price bounces off support at 10 CET, reaches resistance during the day, breaks through it, reverses at 22 CET, then, in the next 12 hours, goes back down to the resistance it broke, that has now become support and starts all over again. Viceversa for a downtrend".

Thanks for asking me and making me reason it out. Let's keep on working together on our daily overnight trade. I can't make the 10 CET trade, because beginning today I am at work.

 

[j2a_aj]

interesting. what time frames do you use to select your s/r levels?

 

[Yamato]

I'd take three months of daily candles, and two weeks of hourly candles for details. Of course, the closer you get, the cheaper is your stoploss. You could even go as far as using the 1 minute candles for a perfect entry. But it would drive me crazy. I'd stick to the two charts I mentioned.

The rationale for this is that you cannot look for a previous trend and s/r levels (the two go together, as in my drawing of about 40 posts ago) smaller than the trade you will make. It has to be necessarily from a bigger period. Say your trade is going to last 12 hours as is our case. We want to look for a trend that will be at least 100 times that much. So we can spot s/r levels and trend. For a 12 hours trade we want to have at least 3 months.

 

[j2a_aj]

makes sense. im toying around with the stop loss for now. Have you seen the 10p Gold journal ? they guy practices spanish stop losses!

 

[Yamato]

No, what are those? Please tell me. I am so focused on what I do that I rarely look at what others are doing, and that's how I miss important stuff. But usually I find it best to focus on my own stuff. On the other hand that's how I never gave s/r a chance for 12 years and I was totally wrong.

 

[j2a_aj]

It is this twisted concept of never using a stop loss. IF for example you short the dow @ 10650 and dow goes up to 10750, you open a second short @ 10750 . You keep doing this to eventually win every single trade of yours(even if it takes a few years!). The only deal is that your trades will have to be small and your portfolio will have to be comparatively large to accommodate the one single draw down.

On a different note, what stop losses do you intend to standardize for your trades?

 

[Yamato]

I can't standardize my stops, because as i said i place them behind s/r levels. But they are all about 250 dollars.

Regarding that method, I think it's either the martingale approach or similar. I don't think it's a method that makes sense. It could make sense if your purpose was to not lose money on your next trade. Then of course you use that method to make sure you win. But if you have a big capital such a martingale method does not maximize your returns, and if you have a small capital it blows out your account. It happened to me many times already and precisely using that method (in other words, doubling up on losers).

 

[mb325]

It happened to me many times already and precisely using that method (in other words, doubling up on losers).

The only distinction being, that is his PLAN and he is trading it with money he can afford to lose, whereas very often you deviate from the plan and let this happen with money you can't.

 

[Yamato]

The only distinction being, that is his PLAN and he is trading it with money he can afford to lose, whereas very often you deviate from the plan and let this happen with money you can't.

Yes, all correct. However, what I think is that it's not convenient for long term returns, even if he does it in a way to always win and never blow out his account (like I did).