Nowler's Trading Journal

[Kaeso]

Looking for your input:

Can someone give me a good reason why I shouldn't, when I find a high probability move, enter with 1-2% and then add .5-1% on every pullback on the 1-5min chart? Spread betting forex.

I always use stops and after each pullback, I would move the previous stops up to the next pullback level.
In the few times I tried it, I was risking more than I was making, but I was aware of this. I wouldn't use that strategy on just any trade. Only the highest probabilities I encounter.
Obviously having more risked than I intend to gain is going against one of my 2nd tier rules, but should something being outside of my core principles mean I shouldn't play with it, manipulate it, see if I can make something good of it?

I understand that slippage is something that will come to a few minds, but my broker doesn't show gaps for some reason, and takes the opposite side of my trades...so would that mean my stops will always take me out at the predetermined level? Disregard widening spreads for a moment.

hi N

leaving "high probability" and risk/reward aside for a minute, its fine in theory to pyramid in this way. I think it depends on the person. Most people can do the maths of why it would work but not everyone can be "arsed" to do it. Sorry to be simplistic but just do it if you want to - assuming you know your overall risk level

k

hope youre enjoying your friday night

 

[Brumby]

Looking for your input:

Can someone give me a good reason why I shouldn't, when I find a high probability move, enter with 1-2% and then add .5-1% on every pullback on the 1-5min chart? Spread betting forex.

What exactly is a high probability trade according to your definition? Is it based on statistically established facts or is merely your opinion? If it is such a high probability, why even pyramid? You should just load the maximum position size in your initial entry.

Pyramid entries by nature are tied to your trade strategy. it is not an after thought. Pyramid entries are typically used in trading trends. Trends by nature has a low win loss ratio but the pay off is in RR size. So the idea of high probability trades and pyramiding doesn't exist except in some kind of imagination. If you have found one, I would like to be proven wrong.

 

[Nowler]

What exactly is a high probability trade according to your definition? Is it based on statistically established facts or is merely your opinion? If it is such a high probability, why even pyramid? You should just load the maximum position size in your initial entry.

Pyramid entries by nature are tied to your trade strategy. it is not an after thought. Pyramid entries are typically used in trading trends. Trends by nature has a low win loss ratio but the pay off is in RR size. So the idea of high probability trades and pyramiding doesn't exist except in some kind of imagination. If you have found one, I would like to be proven wrong.

In this instance, when I said high probability, I was referring to my opinion/experience of H+S patterns, which was present to the upside on the EUR/USD on the daily.

I have attached 2 pics: Daily and 5min

On the daily you can see the H+S to the upside. In my opinion, price would likely test the highs of the H+S that preceded this one, the one everyone has been looking at for the last week or more.

I have good success with H+S patterns, so when I see them forming I start rubbing my hands. This H+S to the upside broke the neck level, and for me, that's go time!
I was watching it on the 1min/5min TF to find pullbacks or just a pause in increasing price. I have put a red line under these on the 5min chart.

All stops would be moved up to the point of the stop of the current re-entry to the trade.

Note: I got out of that trade early because of the time it was, and it being Friday.
It very well may go test the high, but price was acting funny...I assume this to be because of the time it on Friday.

 

[Brumby]

In this instance, when I said high probability, I was referring to my opinion/experience of H+S patterns, which was present to the upside on the EUR/USD on the daily.

I have attached 2 pics: Daily and 5min

On the daily you can see the H+S to the upside. In my opinion, price would likely test the highs of the H+S that preceded this one, the one everyone has been looking at for the last week or more.

I have good success with H+S patterns, so when I see them forming I start rubbing my hands. This H+S to the upside broke the neck level, and for me, that's go time!
I was watching it on the 1min/5min TF to find pullbacks or just a pause in increasing price. I have put a red line under these on the 5min chart.

All stops would be moved up to the point of the stop of the current re-entry to the trade.

Note: I got out of that trade early because of the time it was, and it being Friday.
It very well may go test the high, but price was acting funny...I assume this to be because of the time it on Friday.

I have asked you many times before the question, what is your trading time frame?
If you are trading a break of the neckline of a H & S pattern on a daily TF, you are effectively trading; (i) a daily TF; and (ii) a H & S pattern. This means your stop and measured move target is based on the daily TF and the H & S pattern. I can understand using a 5 min TF to enter to fine tune your entry but the former on stop and target doesn't change. You do not have clarity on your trading plan.

 

[Nowler]

I have asked you many times before the question, what is your trading time frame?
If you are trading a break of the neckline of a H & S pattern on a daily TF, you are effectively trading; (i) a daily TF; and (ii) a H & S pattern. This means your stop and measured move target is based on the daily TF and the H & S pattern. I can understand using a 5 min TF to enter to fine tune your entry but the former on stop and target doesn't change. You do not have clarity on your trading plan.

I do have clarity on my plan. The TF used to identify this trade is the daily and TF used to manage the trade is the 5 minute. They are both different views of the same coin. I could have just traded it with an initial entry, staying looking at it on the daily but I knew I wanted to add to it, so I looked for more finely tuned entry opportunities on the 1m-5m.

My stops were determined on the 1-5min TF. The first being back below the neckline (Not sure what TF I used for it, but below the neckline is below the neckline regardless of TF. As long as the width of the spread is taken into account). If that was hit, then I have no more trade. If it's not hit, then I re-enter on the next pullback. If that stop is hit, then no more trade, but if not, look for another entry. Each new entry sees previous stops being moved up to the level of this current re-entries stop...perhaps 1 level back from it (allowing for a complex pullback)

The target is chosen from the daily TF and all re-entries have the same target level.

 

[Brumby]

I do have clarity on my plan. The TF used to identify this trade is the daily and TF used to manage the trade is the 5 minute. They are both different views of the same coin. I could have just traded it with an initial entry, staying looking at it on the daily but I knew I wanted to add to it, so I looked for more finely tuned entry opportunities on the 1m-5m.

My stops were determined on the 1-5min TF. The first being back below the neckline (Not sure what TF I used for it, but below the neckline is below the neckline regardless of TF. As long as the width of the spread is taken into account). If that was hit, then I have no more trade. If it's not hit, then I re-enter on the next pullback. If that stop is hit, then no more trade, but if not, look for another entry. Each new entry sees previous stops being moved up to the level of this current re-entries stop...perhaps 1 level back from it (allowing for a complex pullback)

The target is chosen from the daily TF and all re-entries have the same target level.

Frankly I don't understand what is your trade plan. Based on what you have posted, you are currently flat. What is your re-entry trigger and stop criteria? Is it based on the 1 min or 5 min TF?

 

[Nowler]

Frankly I don't understand what is your trade plan. Based on what you have posted, you are currently flat. What is your re-entry trigger and stop criteria? Is it based on the 1 min or 5 min TF?

What part don't you understand?
I hope this doesn't sound patronising and it's most certainly not intended to be, but this is a very simple trade plan.

Find a move, enter, place stops behind the breakout level. Look for pullbacks to re-enter, placing each new stop below the pullback level (move all stops here). Basically continue until either price reaches the target, or I am stopped out of the trade. That's it! I used my discretion on Friday to pull out of the trade because price was stagnant for too long (6pm GMT Friday/ Market is quieting down).

I am not in the trade anymore and have not traded today, so I don't have a reentry plan to give you. I'll have a gander when I can look to see what I think is probable. On the EUR/USD I would reckon a pullback to the H+S breakout level could be likely. If that happened and it bounced then I would be even more enthusiastic than the initial breakout on Friday.

What does "you are currently flat" mean?

 

[timsk]

. . .What does "you are currently flat" mean?

Hi Nowler,
This list of trading terms is hidden away in the bowels of T2W and might be useful for you to have bookmarked somewhere in case you come across a term you're unfamiliar with. That said, irony of ironies, the term 'flat' isn't listed!
Tim.

 

[Nowler]

.... That said, irony of ironies, the term 'flat' isn't listed!
Tim.

Typical

Thanks for the link mate, should come in handy. I have bookmarked it now

 

[Nowler]

Quick note...

I changed my leverage from 50/1 to 10/1, to better understand its effects.
I will see how this changes my account statistics

 

[Nowler]

So decreasing the amount of leverage I use from my broker increases the amount of margin I need to offer up? Is this correct?

I also deposited a little bit more money onto the account but I can't see how that'd be the cause. It's the reduced leverage, right?

 

[Nowler]

December Challenge:

OK...
I noticed that on a number of occasions I blamed my first 3 months of learning how to trade for my lower than hoped for account statistics.

I have decided that for December I will limit myself to strategies/plans that I am best at, no trying out new things...markets...software...etc

The objective here is to actually prove what I can (or can't) do.
I have attached a screenshot of some account statistics and from this we can judge performance.

I'm not off too a good start this month (6 trades) but I think i'll come right

 

[Nowler]

Note to self:

Stop adding to positions that have not really moved in your favour.
Perhaps...MAYBE...Limit it to 1 re-entry under these conditions if I truly believe that the market is just offering me a chance to get in at better value.

The re-entries were very low percentages of my account, but when they get knocked out, it destroys my win/loss ratio

 

[David Knight]

Note to self:

Stop adding to positions that have not really moved in your favour.
Perhaps...MAYBE...Limit it to 1 re-entry under these conditions if I truly believe that the market is just offering me a chance to get in at better value.

The re-entries were very low percentages of my account, but when they get knocked out, it destroys my win/loss ratio

One thing that you might notice in your research which may relate to this post.

There are certain sentences that I have come up with over the years that are always in the back of my mind.

This is one of them:

The opportunity to get the very best price in the market is often very limited.

Now,what do I mean by that and how does it help us to trade better?

If you look at each trading day there is a high and a low. There has to be really doesn't there? But what you'll find is there are some statistics on where these prices tend to appear most often.

Once you determine where the H/L's most often appear during a trading session you'll be happy. You will have answered a couple of important questions.

Q- Is the market random?

A- Apparently not.

Q- How should I exploit this repeating pattern?

A- Fill in the blank.

The second thing you'll note is that, often price will hit the low/high of the day and never go there again for the rest of the day.

And, in fact, look at the S&P500 now (15:43 pm) A probable case in point. Then look at my journal post p294 updated at 3pm. That will give you an indication that it is possible to identify the H/L more often than the' voices of trading' say is possible.

So TIME is an important element.

Which brings us back quite nicely to your 'bad habit'

If you find yourself adding to a position at a similar price, you are almost certainly building a position that is not going to move quickly in your favour.( Because remember, the best prices reverse quickly and are rarely revisited during the same session)

So, to conclude. You are probably adding because it is human nature to believe that your goals are best achieved by being busily employed. So you're attempting to work hard to produce the results.

It's difficult to iron out the human weak points in trading. Takes time. I think it helps if you tell yourself (after verifying the stats yourself) that working hard in this way is counter productive.

I'll end on another one liner. This one is not of my own invention. It was something I read an another forum a few years ago. So I'm not able to link or give a credit. But it does tie in with the theme and sounds like a good ending:

'I only do trades that I would literally run down the road to my broker to put on'

 

[Nowler]

One thing that you might notice in your research which may relate to this post.

There are certain sentences that I have come up with over the years that are always in the back of my mind.

This is one of them:

The opportunity to get the very best price in the market is often very limited.

Now,what do I mean by that and how does it help us to trade better?

If you look at each trading day there is a high and a low. There has to be really doesn't there? But what you'll find is there are some statistics on where these prices tend to appear most often.

Once you determine where the H/L's most often appear during a trading session you'll be happy. You will have answered a couple of important questions.

Q- Is the market random?

A- Apparently not.

Q- How should I exploit this repeating pattern?

A- Fill in the blank.

The second thing you'll note is that, often price will hit the low/high of the day and never go there again for the rest of the day.

And, in fact, look at the S&P500 now (15:43 pm) A probable case in point. Then look at my journal post p294 updated at 3pm. That will give you an indication that it is possible to identify the H/L more often than the' voices of trading' say is possible.

So TIME is an important element.

Which brings us back quite nicely to your 'bad habit'

If you find yourself adding to a position at a similar price, you are almost certainly building a position that is not going to move quickly in your favour.( Because remember, the best prices reverse quickly and are rarely revisited during the same session)

So, to conclude. You are probably adding because it is human nature to believe that your goals are best achieved by being busily employed. So you're attempting to work hard to produce the results.

It's difficult to iron out the human weak points in trading. Takes time. I think it helps if you tell yourself (after verifying the stats yourself) that working hard in this way is counter productive.

I'll end on another one liner. This one is not of my own invention. It was something I read an another forum a few years ago. So I'm not able to link or give a credit. But it does tie in with the theme and sounds like a good ending:

'I only do trades that I would literally run down the road to my broker to put on'

Thanks for the input mate.
Helpful indeed and has provoked a thought or two.
I read it yesterday and am going to digest it for another few trading days.

I know that what I am doing is problematic, which at least is good that I'm aware.

That final line is a nice one. I get it's point and will keep it in mind the next time I think about adding to a position that's pretty much in the same place as my initial entry.