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I'd like to see you lay out a plan that covers the next two weeks of trading. The plan does not need to talk about methodology, but simply how you will approach every day, how you will analyze results, how you will take action or not. What is your goal each day? What will you do at the end of the day to review and find out if you accomplished the goal?
Hint: this has nothing to do with net profit. This should be about following simple rules. If you cannot, then you cannot trade.
Identify a goal, work on that goal, post about that goal, grade yourself on the goal. Then move on to the next goal. Do one thing at a time, and forget about net profit.
Do not change your charts for two weeks. Not a single change of any kind.
Will do, Mike! I just trade for part-time, so it may not be possible to present the trading plan tomorrow. However don´t you think my trading plan is not a...trading plan?
Sorry, but are you refering not to change DJI or Crude Oil trading? Or to stay with the same time frame?
Sorry to hear about your recent drawdowns. I have the same problems re-occur all too often. You've gotten great responses and advice from the best on futures.io (formerly BMT).
"Vader", ; Palpatine(Ian McDiarmid)/Sidious was my favorite part of the prequels too. I saw this CNBC segment on Friday. https://video.cnbc.com/gallery/?video=3000089789 Funny how Carl the CNBC guy, was trying to get from Lucas news about any new ep.7,8,9 or further SW development. Lucas was talking about how making movies seemed like an "unexpected" , "changing from hour to hour" , random market, haha. Maybe he's a closet trader too.
As Big Mike suggested before, I´ve made my trading plan. It ended to be longer that I thought, so sugestions and opinions would be welcomed!
Here it is, Mike, my Trading plan for the following two weeks:
Trading Plan
Since I need to improve my trading strategies, to test my tactits/setup/strategy/behavior and mostly evaluate the following tranding plan, I will trade using only 1 contract, as Fat Tails suggested. In fact, trading 1 contract (€1 per point) will have the advantage of paying only €2 spread per each trade, as the pressure of losing will reduce greatly.
If I hit the daily stop loss, I´ll stop trading for that day.
Here´s my trading plan for the following two weeks. I´ll stick to hit for that period of time and then evalute the results.
Further information:
Trading Instrument: Dow Jones Index Contracts: 1 (€1 per point)
Objectives:
Trades: 3 per day;
First week:
- Per trade: 8 ticks;
- Per day: 24 ticks;
- Total 1st week: 120 ticks;
Second week:
- Per trade: 12 ticks;
- Per day: 36 ticks;
- Total 2nd week: 180 ticks;
Total of two weeks: 300 ticks
Stop loss:
- Per trade: 8 ticks;
- Per day: 24 ticks;
- Per week: 120 ticks;
- Total: 240 ticks
- Loss Per Trade: 0.15%
Possible Loss:
- Per week: €120 (about 2%)
- Total: €240 (about 4% loss)
Strategies:
Entries:
- I will enter trades after identify if the day is trending or ranging. Trade range days will be prefered.
- As soon as my daily objective is achieved, I won´t trade more for that day. The same applies if the stop loss is hit.
- Trade time period: Beetween 9:30am to 12am (2:30 pm and 5pm local time) or beetween 1:30pm and 4:00pm (6:30pm and 9:00pm);
- Will look for:
-> Scalp for 8 points;
-> Pullbacks.
- Trade with good momentum, avoiding choppy price action;
Exits: Limits or stop hits.
Filters:
-Long:
a) - 5 period SMA points up or the slope points up;
b) - Stochastics are close or in the oversold area;
c) - MACD lines and MACD histogram show signals of reversal in the side of the trade.
-Short:
a) - 5 period SMA points up or the slope points up;
b) - Stochastics are close or in the oversold area;
c) - MACD lines and MACD histogram show signals of reversal in the side of the trade.
I´ll post the analysis of my trades after each trading day!
Hi Fat Tails. I was reading your comment on Lord Sidious's Trading journal and you talked about the need for a "Trading Edge" but you didn't explain how one would go about finding or researching that edge. Have you posted about this somewhere else that I could read about your thoughts on that? I don't want you to have to write out something I am sure you have written about somewhere (Or someone else for that matter).
You had mentioned that a rising MACD below the zero line is no edge which I believe I understand. So my thoughts on finding an edge with the MACDs would be locating some pattern (Say... a large acceleration on the MACD line indicating a strong move as an example) and then backtesting that pattern to see if it statistically results in a high probability setup or not. This is just what I am reading into it... please correct me if I am wrong.
I could only do the analysis of my first trading day (15th May) now.
Like it was written, the main objective is not net profit, but to see if my strategies/rules/tactics/filters work. That´s why I have an expected profit smaller than a possible loss. In any normal trading situation I´d never do that! However, I´ll post profits and losses.
I follow all my rules/tactics defined in my trading plan, except I did only 2 trades and not 3.
I could only start my trading day 3 candlesticks before the doji near the 61.8% fibonacci retracement (followed by the downtrend). The entry was due to the fact that the market appear to be starting a pullback. Plus, 5 period SMA was clearly pointing up, Stochs and RSI were close to the oversold are. The only thing was the MACDHist and MACD lines. Altought they were beneath 0 line, MACDHist bars were getting smaller and MACD lines were close of being flat. I assumed this as a possible reversal signal. Plus at the time I enter, price didn´t fell below the 21.3% fibonacci retracement.
I put my stop 8 points below. The market fell 13 points and then went up, returning to the direction of my trading position. Rose for 21 more points. Although I was correct entering long, the trade turned out as a loser one.
Trade 2
Position opening: 12642 (Long)
Limit: 12650
Stop: 12636
Spread: 2 points (€2 in this case)
Expected profit: €6
Loss in case of stop hit: €8
Profit: €6
Chart (5 min):
Analysis
After a big downtrend, the market penetrate and passed the Support 1 line. However, there was and imediate opposite movement following the candlestick of the day´s low. There was one hits in the Resistance (S1 line) and the second following candlestick penetrate it. However, the third candle penetrate the Resistance line again. Judging for the price action thrust, 5 period SMA slope up, Stochs and RSI being in the oversold zone, MACDHist was getting closer to the zero line and MACD lines were close to cross-over, I decided to go long after a 4 point penetration of the Resistance Line. The result was a winning trade.
Overall, 1 trading loss and 1 trading win! I like to think, however, that my entries were both correct regarding market direction. I feel, however, that my filters are bit "rigid", as they do several mixed entry signs. It was not easy to follow my rules, as I wished to enter other times, when my rules/filters were not being followed.
That is why I´d like to you know other situation that occured during my trading day. To make things clear, I wish to say that this is not an excuse not to improve or to ignore my trading plan. I followed the market all the time and the following chart shows 4 situations I was tempted to enter the market, altough I didn´t, simply because some (or most) of my filter rules were not being met. The fact is that ALL of this 4 entry possibilities were correct!! I´ll refer to the entries as "Not allowed entries" - "NAE".
Here it is:
NAE 1:
- After the last uptrend, candlesticks got in most of them lower highs. 5 period SMA was starting to point down. The Doji formation was a sign that I could have enter in the following candlestick. However, Stochs and RSI were not in the overbough zone. However, MACDHist were getting smaller and coming to closer to 0 line, and MACD lines were closer to cross-over. Nevertheless, because it would not follow my filter/rules, I didn´t enter;
NAE 2:
- Two candlesticks before my first trade, there was a hammer formation, at the end of a downtrend. Stochs and RSI were in the oversold zone, but 5 period SMA was still point down and MACDHist and MACDlines were clearly bearish. Therefore, I didn´t enter;
NAE 3:
- After a pullback, the highs the group of 4 candlesticks at the top, reached the same area (represented as a resistance line drawn). More, near the zone of the 38.2% fibonacci retracement. 5 period SMA and Stochs were according to sell rules, although RSI was not in the overbought zone. MACDHist was above 0, but MACD lines were getting closer to the cross-over. Rules/filters weren´t according to those I defined. Didn´t enter.
NAE 4:
- After the market penetrate and pass the Support 1 line, there was a doji formation. 5 SMA and MACDHist and MACDlines were according to the possible entry, although Stochs and RSI were clearly not. Didn´t enter.
Don´t get me wrong, guys, by writing this. Like I wrote it isn´t my intention to ignore my own rules. I´ll follow them for 10 trading days (equivalente for two weeks). However, I must be honest, as I felt a bit frustated for feeling drawn to enter, and simply couldn´t because I was trading new rules. Worse of all, I was correct regarding every one of these "Not allowed entries".
I have stressed in bold your passage about the MACD and your reference to testing some patterns. I would bet most people interested in trading the markets think along these lines, ie, finding a recurring pattern by using some mathematical indicators and try to profit from the signals they provide. If the markets were just that, i think it would be an easy proposition but is it really just that?
Markets are not price movement. They are traders making trading decisions.
To find an edge and profit on a consistent basis, you'll probably need to re-examine your conception of what makes the markets tick so to speak. If the markets are not price movement then you need to ask yourself why are so many traders focusing all their efforts on this aspect! To be sure, just look at how many indicators there are in Ninja and/or are constantly developed. Most of these indicators are centered around the notion that markets are just price movement. Sure you can test a pattern and see if it is profitable but in my opinion it is not the fastest and safest way to find a long lasting edge that does not depend on backtesting to become manifest in your attempt to profit from the markets.
In my opinion, you need to form an understanding of the nature of the markets. The way to profit is through finding opportunities where there is a higher probability of a sufficient number of traders making trading decisions, which will lead to net order flow in a particular direction, and then acting to trade with this orderflow.
Find the areas on a chart where other traders will make trading decisions and you've got yourself an edge.