Trading Naked - Part 2

[foredog]

Yes i agree. I'm sure either would work out but probably seeing profits turn into losses sometimes would be more emotianlly sapping than missing the runners...not sure, guess it depends how you're wired.

 

[Bloodhound]

Yes i agree. I'm sure either would work out but probably seeing profits turn into losses sometimes would be more emotianlly sapping than missing the runners...not sure, guess it depends how you're wired.

I think something that made a major difference for me was introducing 2 positions to the equation and having TP levels. In an ideal world (and I'm looking at the cable ORB this morning as an example), price might reverse when it hits the next support or resistance level. Looking at cable this morning (and obviously depends on what timeframe) but there were plenty of levels where one could have thought a reversal possible so could have set a TP at these levels - even if price did reverse back at one, at least some profit has been gleaned from the trade.

 

[foredog]

Quietish morning, mostly back and forth before a quick gap down.

 

[neil]

Yo guys had fun on Cable ?

 

[foredog]

Just a bit of thinking out loud here.....

If price is randon and we have no way of knowing what it will do then if we are buying a break-out of a level if price rallies 10-15 points away from our entry should you then be looking to move a stop to breakeven?

How do you know if the price is pulling back slightly with profit taking or is it the end of the trend/fakeout? Or do you not know? Is it worth leaving your stop where it is to discover thereby effectively giving back two times risk (15 profit + 15 stop) or do you get out for nothing and wait and see what the market does next?

Or would it make no difference overall so long as we do one or the other consistently as for every -15 you save another trade will deliver +15?

Just scanning through the original "NAKED" thread and came across this quote....I think it may explain what i was thinking/implying above:

BUT what keeps me in the game is the acceptance that when cable wants to pay out she simply pays out - most of the time stops become irrelevant becuase she just flies off in my direction. In other words, if I'm trading a level and it breaks but then price comes back at me, that's an early warning signal that maybe the impetus isn't there for a more sustained move - in other words, the chances of this trade working they way I 'want' it to diminish rapidly. As I can't afford to lose too much of my day's cash messing around with these dicey looking moves, logic dictates that I should bail out and wait for the next level / set-up. It's all about staying in the game long enough each day to at least be there when she takes off.


And this one

They know that losing is part of being successful, and as long as they do the right things, they are okay with losing; they won't try to make it all back on the next hand. They know that if they stick to their rules, they will make it back in the future by being consistent. [...]

Successful gamblers also know they don't have to be in every hand. A good poker player is disciplined enough to fold hand after hand until the right one comes along.

 

[Bloodhound]

Just to add something to your musings Foredog. This is definitely a product of reading the TL thread, and, as a result, even more hours of watching price, I am becoming much more observant of the levels that price is trading into. By that I mean, if I enter long, and there is resistance 20 pips above, I will have clocked that and will be prepared for a reaction. The trades that 'spook' me and have me running for cover are the ones that suddenly stall in the middle of nowhere (maybe 5 or 10 pips up from entry). I have found the way he describes support and resistance as having 'magnetic' qualities very illuminating in that, if I entered long, I am 'expecting' price to be drawn to resistance like a magnet. A reversal against me before this level is hit may indicate that either my levels are wrong or that the market has another agenda?

 

[HawkTrader]

Just scanning through the original "NAKED" thread and came across this quote....I think it may explain what i was thinking/implying above:

BUT what keeps me in the game is the acceptance that when cable wants to pay out she simply pays out - most of the time stops become irrelevant becuase she just flies off in my direction. In other words, if I'm trading a level and it breaks but then price comes back at me, that's an early warning signal that maybe the impetus isn't there for a more sustained move - in other words, the chances of this trade working they way I 'want' it to diminish rapidly. As I can't afford to lose too much of my day's cash messing around with these dicey looking moves, logic dictates that I should bail out and wait for the next level / set-up. It's all about staying in the game long enough each day to at least be there when she takes off.


And this one

They know that losing is part of being successful, and as long as they do the right things, they are okay with losing; they won't try to make it all back on the next hand. They know that if they stick to their rules, they will make it back in the future by being consistent. [...]

Successful gamblers also know they don't have to be in every hand. A good poker player is disciplined enough to fold hand after hand until the right one comes along.

Good post Foredog,

"A good poker player is disciplined enough to fold hand after hand until the right one comes along".

Some can see this two ways in trading, by

A) "folding your hand" -- closing trades that are not working or for me,

B) simply not entering trades that don't as Rob says; scream "TRADE ME!!". Unfortunately my ears are still pretty good. I often pass on a lot of setups. Interestingly my best trades are the ones where I enter, almost like a robot without thinking, worrying. I just somehow "know" it's going to win, even though it may not. I can't explain how I know, the setups look the same, it's just a feeling I get. Of course it can't be that good because I often pass on some amazing setups, but that is probably because I need more experience. Here is something I wrote on another thread regarding 'gut feeling';

"Apparently the stomach cells make the same chemical cords that the brain makes when it thinks. In fact, they may be more accurate than your brain since your gut cells haven't gotten to that state of self doubt yet!"

 

[Shakone]

On the poker analogy. A good poker player, even when he doesn't have the hand doesn't always fold and can often make a small profit.

I think this fits with trading too. Sometimes I have known the trade was wrong, and still come out with a profit. That might sound crazy. Someone might think that was a right trade if I made a profit. But no, if you realise early enough that you are wrong, i.e. you are expecting it to reverse at a level almost to the pip, and it blows through by 10 pips, you can look to get out, and often get out at break even, minus a few pips or even in profit when you're wrong. IF you can do that when you're wrong, then you're a long way there in my humble opinion. Because the ones that are right will just fly off in your direction.

It is just a case of recognising early, what should happen. I think we've all been there when price has just done something unexpected, we wait we wait, and at some point the pain gets too much and we end up getting out at the worst possible point. I think you should have two modes, when you're right and when you're wrong. When you're wrong, you shoudl just be looking to get out at a place that causes minimum damage to your account. It might be as simple as waiting for a 3-4 pip bounce back, but in the long wrong that is worth it.

Just because you're wrong doesn't mean you should just exit immediately. Often it means you should look for a good exit. Every pip counts.

 

[HawkTrader]

On the poker analogy. A good poker player, even when he doesn't have the hand doesn't always fold and can often make a small profit.

I think this fits with trading too. Sometimes I have known the trade was wrong, and still come out with a profit. That might sound crazy. Someone might think that was a right trade if I made a profit. But no, if you realise early enough that you are wrong, i.e. you are expecting it to reverse at a level almost to the pip, and it blows through by 10 pips, you can look to get out, and often get out at break even, minus a few pips or even in profit when you're wrong. IF you can do that when you're wrong, then you're a long way there in my humble opinion. Because the ones that are right will just fly off in your direction.

It is just a case of recognising early, what should happen. I think we've all been there when price has just done something unexpected, we wait we wait, and at some point the pain gets too much and we end up getting out at the worst possible point. I think you should have two modes, when you're right and when you're wrong. When you're wrong, you shoudl just be looking to get out at a place that causes minimum damage to your account. It might be as simple as waiting for a 3-4 pip bounce back, but in the long wrong that is worth it.

Just because you're wrong doesn't mean you should just exit immediately. Often it means you should look for a good exit. Every pip counts.

Good point however it's a big catch-22.

"I think we've all been there when price has just done something unexpected, we wait we wait, and at some point the pain gets too much and we end up getting out at the worst possible point."

"It might be as simple as waiting for a 3-4 pip bounce back, but in the long wrong that is worth it."

What if we are waiting for price to bounce back 3-4 pips, we wait we wait... and then we get out at the worst possible point?

 

[Shakone]

True. But you have your hard stop. That should never move. If it gets hit so be it. But I'm talking about realising you're wrong before your hard stop gets it. You've already accepted that as a possible loss. You realise you're wrong early because price isn't doing what it should. You'll be amazed at how often price will give you a nice 'out' if you recognise you're wrong early.

How often have you been in a trade and you realised it was wrong, then thought as it went your way 'ok I'll hang in now, it's gonna work' only to see that a bunch of people got out, and you're now regretting not getting out too. Maybe it is just me...but I've experienced that a LOT. Price is actually kind. It more often than not will let you get out at close to breakeven if you're willing to just accept you were wrong and take that out.

 

[HawkTrader]

Hah. I must be the freak of trading because my main problem is actually HOLDING onto trades. For example, these last 8 trading days I've made 10 trades and one of them was a loss. It was a -6 point loss that I took after doubting whether my setup was any good. However good it sounds, only 3 of those wins were decent of about an average 3:1, the rest were just breakevens +1-2-3 points. That one -6 pip loss would have been okay if I just held onto it, but price was 'acting weird' on the lower timeframes... or so I thought. I also move my stops to breakeven too quickly and end up with all these small wins. If I had just traded the setup, trailed my stop loss behind the swing high/lows and stopped thinking that price was reversing just because it made a HrH on the 5m chart when I was short I would have made substantially more profit. However the catch with this one is I would have probably not have had a large winning percentage... just more £££s!

 

[Bloodhound]

As luck would have it!

Regardless of whether anyone likes the set-up, and I did as I took it (albiet at very small stakes), here is one from this morning. The irony of this has been twofold:

1. As it may offer a real time example of what's being chatted about above
2. I was on msn talking this through with someone and patting myself on the back for following my rules and setting my TP's to b/e when I realised things were going wrong. How little did I know what was coming!!

Here's the set-up and the entry being triggered. Blue for entry, red for stop and green for TP


Suddenly price reversed on me. Big mistake on my part as I had a couple of chances to get my stop to b/e but got caught in between the headlights


When things start going pear-shaped I go into protection mode and tighten my stop as much as possible and also move my TP's to b/e. I think I've explained why before....


All good and stopped out at b/e. Pat on the back for following my rules, time for a cup of coffee and....


Hope everyone has a great weekend. We move (finally) on Monday so will probably be off the air for a bit.

Rob

 

[HawkTrader]

Hi Rob,

I enjoyed this weeks trading comic release. I think you did well to get out at B/E but as I said in my last post about my moving stops too quickly, I would have probably gotten out at B/E with a stop above the second breakout candle that was closing upwards. Are you sure you would have traded like this if you were trading your normal stake though?

Good luck with the move,
I hope you're moving to the east coast, probably easier to trade London session there?

 

[Bloodhound]

Hi Rob,

I enjoyed this weeks trading comic release. I think you did well to get out at B/E but as I said in my last post about my moving stops too quickly, I would have probably gotten out at B/E with a stop above the second breakout candle that was closing upwards. Are you sure you would have traded like this if you were trading your normal stake though?

Good question. The answer is that I broke my rules early doors by taking a countertrend trade (in my books) and not trailing my stop aggressively. Whenever I get things wrong I tend to go into a period of self-recrimination, hence letting the problem go from bad to worse but this is why I set my TP to b/e to take me out of the equation. Good trading? I have no idea, but I know it stops me making a bad situation worse!!

 

[HawkTrader]

Good question. The answer is that I broke my rules early doors by taking a countertrend trade (in my books) and not trailing my stop aggressively. Whenever I get things wrong I tend to go into a period of self-recrimination, hence letting the problem go from bad to worse but this is why I set my TP to b/e to take me out of the equation. Good trading? I have no idea, but I know it stops me making a bad situation worse!!

Are you sure? I see a LrH there so I assume this is with the trend.

Well, to be honest Rob, any trade that is played to your rules is a good trade. It could have been a lot worse, and we've just been discussing about limiting risk and you've done it.

 

[Bloodhound]

Are you sure? I see a LrH there so I assume this is with the trend.

Sorry - I should have elaborated on that. Cable M5 aside for a moment, with this M15 stuff I am tending to look for a certain degree of context before entering trades and, in this case, USDCAD had bottomed out at around 1.04 on Wednesday and starting to trend up. With this in mind I was looking for 2 types of entry to present themselves:

a) A continuation long, or
b) A counter-trend move



Option b lined up this morning and, in my head, was the view that I would shoot for that TP level, but with a very tight rein on my trade management. As ever, what was going on in my head and what I ended up doing where slightly different. Wasn't the first time and I'm sure won't be the last!!

BTW - I completely agree with you that LrH's were printing on M15, just that H4 painted a slightly different picture.

 

[HawkTrader]

Sorry - I should have elaborated on that. Cable M5 aside for a moment, with this M15 stuff I am tending to look for a certain degree of context before entering trades and, in this case, USDCAD had bottomed out at around 1.04 on Wednesday and starting to trend up. With this in mind I was looking for 2 types of entry to present themselves:

a) A continuation long, or
b) A counter-trend move

View attachment 70302

Option b lined up this morning and, in my head, was the view that I would shoot for that TP level, but with a very tight rein on my trade management. As ever, what was going on in my head and what I ended up doing where slightly different. Wasn't the first time and I'm sure won't be the last!!

BTW - I completely agree with you that LrH's were printing on M15, just that H4 painted a slightly different picture.

Ah yes, the 4H. I don't think I have a preference of trend on the 4H for when I'm entering a 15m setup. I do however have a preference on the hourly. I think I may stop trading continuations on the 15m and just stick to those stop-and-reverse setups.

If you were to trade the Asian OBR looking to grab a quick 20 pips (I've been reading Claudia's thread!) and then watch for a SaR setup, esspecially around S/R zones. On the hourly it creates a 'hammer' or 'pin bar'. One could take these two setups per day, first one grabbing 20 pips and the second one running for 20 - 40 pips? That's a nice 100 pips per week even if you don't get the SaR setup everday and/or experience some losses.

 

[Bloodhound]

Completey agree Owain. TBH I think an extremely effective weekly trading strategy would be to just sit and wait at obvious levels (H1 / H4 etc.) on a few pairs waiting for those 1-2-3 reversal patterns on M5 or M15 and then run with them.

:idea:

 

[HawkTrader]

Absolutely, I just love the potentiality of catching the beginning of a new trend even on the hourly/4H. If one wasn't to ever close the trade, just trail behind H/L wick of the H1 candle (15m is really correlated to the hourly), one could end up catching a trend that lasts a few days ending perhaps with an exit on another obvious H4 S/R level?

 

[Bloodhound]

And if it doesn't reverse it might always continue....