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The Good, The Bad and The Ugly - A Real Trading Record

  • #461
  • Feb 7, 2022 3:14am Feb 7, 2022 3:14am
Hi all,
A comfortable start to the week, and a lesson in consistency:

Attached Image (click to enlarge)
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I want you to compare this chart with that of Friday last in the above post #460. They are remarkably similar: a failed nudge upwards at the open and then falling into a sustained downtrend. The charts are essentially the same and so is my trading, a direct repeat of Friday's effort. We wait for the market to crack and begin obviously falling and then await a first minor consolidation. We can't expect too much of a rigorous rebound if we are considering conditions to be a firm downtrend, so a minor consolidation will have to do for the setup. We duly get a small amount of gyrations in the 48-64 area around 8.20am, and once the market tests and fails above 60 a couple of times I am happy to try a short at 61. The stop is nicely above the rebound high and the target is more easily reachable at the bottom of the consolidation. It all works as Friday and we quickly get our +1R plus a bounus extra point at 48, again not wanting to test the range bottom. Again this was unduly cautious as the market went down another 60pts to the 90 level, leaving a potential 5R extra on the table, but that's just me and braver traders could and probably should have creamed off rather more than I did.

Please note the value of consistency in your trading here. The market shaped up much the same so I traded much the same, and always in disciplined accordance with my basic methodology and risk control requirements. If you don't stay consistent you will soon find yourself shooting away randomly on successive whims rather than following your method diligently, and you are unlikely to do well over the long haul acting like that. Discipline, consistency and solid risk control are at the very heart of profitable trading.
  • #462
  • Edited 3:35am Feb 8, 2022 3:24am | Edited 3:35am
Hi all,
I didn't manage a trade this morning but events demonstrated an interesting tale of two methods:

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After an opening flirtation with the 15200 level the market broke into a solid uptrend and so I awaited a first consolidation to look to go long. This duly came about 8.20am in the 72-90 range but never featured a second test of the box bottom that I look for before racing on up again so I was left just watching on the sidelines. A different entry trigger of taking a new box high breakout at 91 would have worked lovely for a 12pt +1R profit at 03.

We then duly get a second consolidation box higher up in the 04-18 area. This time we do get a clear second test of the 04 low down to 00 and a chance to enter on the rebound around 06 for a nice 1R profit to the box high at 18. I actually didn't take this trade as I never really like messing around at the 00 big figure but my wariness costs me with a missed winner. But that's not the point I'm trying to make this morning, consider instead if we had taken a trade at the box high breakout at 19. This time it would have failed as it never clears 24 before falling back to hit a -1R stop at 07.

So, two methods - in a uptrend (vice-versa for downtrend), entering at the box low on a failed second breakdown vs. entering at the box high on a fresh breakout. It was a 1-1 draw this morning on the two highlighted setups. Same consolidation boxes, same stops and targets, just a different entry trigger. Which you pick is up to you, I prefer the box low entry as it gives me the whole box to be a profitable area for me whilst the box high breakout requires a push on to new high ground. That said, the breakout entry does have the benefit of confirmation of uptrend, the box low entry is taking a bit of a leap of faith on that. One is not necessarily better than the other, just different and equally valid (or invalid!) approaches for the market action seen.

Point is, there are lots of perfectly reasonable ways to trade and each will give you a different pattern of individual trade outcomes with a similar overall long term result. So don't get too hung up on trying to find a "magic" method - there really isn't one otherwise all traders would be doing the same one thing - just work out a sensible method that suits you and the way you think about the market, and then trade it consistently, with discipline and good risk control.
  • #463
  • Feb 8, 2022 8:43am Feb 8, 2022 8:43am
Hi again Oldtraderman! As always your posts are of great value. I have a question if you don't mind regarding the trade management. As it seems that in many cases your entries turn out to be decent runners what is your view on letting a part of the position run for potential more profits? It's something that I'm constantly struggling with (where to set the profit target and when to move my stop to break even) but as I'm a 1 (futures) lot trader I can't divide my position. I'd love to hear your thoughts on this.

Kind Regards

Alex
  • #464
  • Feb 8, 2022 2:32pm Feb 8, 2022 2:32pm
Quoting siju
Hi again Oldtraderman! As always your posts are of great value. I have a question if you don't mind regarding the trade management. As it seems that in many cases your entries turn out to be decent runners what is your view on letting a part of the position run for potential more profits? It's something that I'm constantly struggling with (where to set the profit target and when to move my stop to break even) but as I'm a 1 (futures) lot trader I can't divide my position. I'd love to hear your thoughts on this. Kind Regards Alex

Hi Alex,
You raise a very worthwhile point. Short answer is, yes, you could certainly take profits in stages so as to let a reducing position run on for bigger and bigger profits, it's a perfectly reasonable tactic. I don't do this, however, for two main reasons:

1) The combination that I like to keep things simple and I am really bad at running profits. Running profits causes me stress so I tend to cash in at 1R or a little more and be happy with that. This works for my methodology as my base aim is a few more net winners than losers of roughly the same average size (after excluding scratches). If you are a major trend follower this simply wouldn't work for you as you'd need a few huge profits to pay for the inevitable many small losers, but that's not what I do.

2) I always feel the maths is against me in running a reducing balance principle. I have a -1R stop on the entire position. If I take, say, half off at +1R to run the balance I am +0.5R banked but with the other 0.5R at risk of not running on and going back to the entry point where I would scratch to leave me net +0.5R overall. This makes my winners half the size of my losers and I'm not OK with that. Of course, I should net off all the "extra" profit I bank when it does run on but my problem - as per 1) above - is that I'm very bad at running profits, I always want to ring the register, so I find my "extra" profits never really make up enough to compensate for those positions that slip back. As you have seen from this thread, many of my trades are pretty temporary affairs and do fall back after I've exited so overall I'm happy to take the +1R on the whole position and be content.

As I hope is obvious from the above, my trade management is more a function of my psyche than anything else, it just suits me the way I do it. But as you point out there are many other valid and indeed mathematically better ways of taking profits, you just have to settle on something that is both sensible and suits the nature of your method and your psyche.

I do understand your struggle in knowing what exactly to do with exits, it's something I wrestled with for many years before settling on what you see me do now. The problem is that there is usually no obvious sign that flags up "Take profits NOW", you have to feel your way in a very imperfect way, but that is the nature of trading for you when it comes to exit management. Try different tactics, see what looks and feels best to you and be happy with that. I no longer worry much about profits I leave on the table - I used to - I'm just happy to book a decent profit and move on to the next trade. Each trader needs to get to their equivalent happy place when it comes to exits, whatever works for you!

Hope some of that rambling might be of use, thanks for the excellent question.
  • #465
  • Feb 8, 2022 3:29pm Feb 8, 2022 3:29pm
Quoting Oldtraderman
{quote} Hi Alex, You raise a very worthwhile point. Short answer is, yes, you could certainly take profits in stages so as to let a reducing position run on for bigger and bigger profits, it's a perfectly reasonable tactic. I don't do this, however, for two main reasons: 1) The combination that I like to keep things simple and I am really bad at running profits. Running profits causes me stress so I tend to cash in at 1R or a little more and be happy with that. This works for my methodology as my base aim is a few more net winners than losers of...

I think the unspoken reality here is that many traders trade a very small pot where a point equals pennies. The trader with a larger pot may risk something in the order of £50 per point or more and , accordingly, would be in worthwhile profit with a gain of ten pips/points on a daily basis.But the person who risks pennies per point move would need a very large move to make even £20 in a trade. Small pots thus often give rise to overly ambitious tick/point profits accompanied by increasing risk of ruin. In simple terms one is likely to make more profitable 10 point winning trades than a fifty or more pointer per trade.
every Saint has a past. Every Sinner has a Future
  • #466
  • Feb 8, 2022 5:42pm Feb 8, 2022 5:42pm
Thank you for your reply. It was useful as always. I totally understand the "personal" thing about where to take profits and also the maths working against if half of the position turns back to the entry point. I think I'm maybe getting a bit ahead of myself in this question though. As I do the first steps in trading full lots (as opposed to micros) I think I should be more focused in a similar to yours approach i.e. fixed tagret (in my case 10ticks) and very strict risk management (again in my case 6-7ticks) before starting to worry about letting profits on the table. Right now the biggest hinderance is me (stretching my SLs from time to time and being eager to close winners earlier) so the progress must be done in this field to be more consistent. I'd regard maximizing profits as a bit of fine tuning.

Kind Regards

Alex
  • #467
  • Feb 9, 2022 2:08am Feb 9, 2022 2:08am
Quoting siju
Thank you for your reply. It was useful as always. I totally understand the "personal" thing about where to take profits and also the maths working against if half of the position turns back to the entry point. I think I'm maybe getting a bit ahead of myself in this question though. As I do the first steps in trading full lots (as opposed to micros) I think I should be more focused in a similar to yours approach i.e. fixed tagret (in my case 10ticks) and very strict risk management (again in my case 6-7ticks) before starting to worry about letting...
Hi Alex,
Absolutely, you don't have to get great at everything in one fell swoop, break it into logical steps and tackle one at a time, moving on and up as you get proficient with the basics. And the basics are vital, can't build safely on weak foundations.

So, stick for now in tiny size and just focus on trying and refining your basic method with experience and practice, concentrate on consistency and risk control (no stretching those stops!!). Take the profits where you intend to and resist the temptation to take smaller ones, you'll only end up snatching at tinier and tinier profits; move the stop up closer or to breakeven if you get uncomfortable but let the trade play out best you can. Good luck!
  • #468
  • Feb 9, 2022 2:14am Feb 9, 2022 2:14am
Quoting turnip15
{quote} I think the unspoken reality here is that many traders trade a very small pot where a point equals pennies. The trader with a larger pot may risk something in the order of £50 per point or more and , accordingly, would be in worthwhile profit with a gain of ten pips/points on a daily basis.But the person who risks pennies per point move would need a very large move to make even £20 in a trade. Small pots thus often give rise to overly ambitious tick/point profits accompanied by increasing risk of ruin. In simple terms one is likely to make...

Hi turnip15,
All very true. You can't expect to get rich from a tiny account, it just doesn't work like that. If you try to generate too much from a small account it just means you are taking too much risk and bringing in a very real possibility for risk of ruin, aka blowing your account on a trade way too large for you that goes wrong. Accept your cash returns are a function of your account size as well as your skill and don't try to get a quart out of a pint pot, it won't end well.
  • #469
  • Feb 9, 2022 3:23am Feb 9, 2022 3:23am
Hi all,
Want to show you an illustration this morning of how your price action analysis naturally throws up opportunities once you are clear on what you are trying to do:

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We see the market open at 8am and move immediately into a solid uptrend. This means I am looking for modest failed retracements out of a consolidation back down against the trend, entering when the retracement is believed to have failed and the uptrend resuming. That's my core method and my eye has become accustomed to picking out these setups from the price action. I have highlighted three of them on the chart, they are all similar in that there is a pause in the uptrend (the orange consolidation boxes), a second dip down to below the prior box low followed by an immediate rebound back up. My entry is on the rebound as price re-enters the box in each case, i.e. at around the 52, 73 & 41 levels for each successive setup. In each case a -1R 12pt stop is below the failed break low and the +1R target is more easily reachable within or near the top of the box. If these conditions didn't exist then they would not constitute a valid setup and I'll keep on looking.

These setups spring out at me from the overall price action simply because I am very accustomed now to be looking for them. It's a matter of experience and knowing clearly what I am looking for. It really doesn't matter what your setup is as long as you are clear about it and then happy to trade them without question as they validly appear. Of course, they can't and won't all work - that's why you have a firm stop each trade! - but as you get more experienced and practised you naturally become more selective and have the patience to wait for the better setups for your method to appear before entering a trade. I don't have a lot of patience, which is a major reason why I trade 1min charts that frequently give me setups rather than keep me sitting there. You must find a methodology that suits you and then keep practising and refining with experience until it becomes something of a routine exercise for you.
  • #470
  • Feb 10, 2022 11:48pm Feb 10, 2022 11:48pm
hello

what do you -1R 12pt and +1Rtarget ?
What software do you use for trading ?
do you avoid CFDs and stick to futures for indices ?
  • #471
  • Feb 11, 2022 2:48am Feb 11, 2022 2:48am
Hi Ieis5,
Welcome to the thread. To answer your queries in turn:

1) I use a hard -1R stop of 12pts ordinarily on the DAX40, this being 10x the all-in round trip cost on my platform, 1.2pts. I use a 10x multiple as a balance between having a tight stop whilst giving the trade enough room for my method, and not having the cost hurdle to be too high a burden to overcome. If I traded, say a 6pt stop on a 1.2pt spread that means a loser has 4.8pts of room whilst a winner must gain 7.2pts, the gap between these numbers is just too big in % terms. If I traded a 24pt stop then it's 22.8pts of room and 25.2pts required for a win, much more manageable but the stop gives too much room and potential loss to the market for me. So 10x spread = 12pts here, works for me. I use the same basic formula in all markets I trade, the main adjustment being for periods of extreme volatility when I widen things out a bit but correspondingly reduce the position size so as to keep % of account at risk constant.

On the profit taking I use an initial +1R +12pt soft target as I do not want my risk:reward ratio to be worse than 1:1, that puts too much of a strain on the required success rate for me. But it is a soft target (unlike the hard stop) and if I feel there is more to go for once +1R is achieved, I reserve the right to let it run and move the stop to breakeven. I would then look to take profits at the first pause in price movement. I am not a long term trend follower, happy to take a fair profit out of a trade.

2) & 3) I am UK based so am able to use a spread betting platform. I am dealing with the provider being the counterparty, not the market, but I check carefully that the prices quoted are in line with the market, and the round trip costs & execution efficiency are good, at least in my experience. I also get UK tax advantages from a spread betting platform compared to futures or CFD but I have no conceptual problem with using either of those routes for any or all markets if they made sense for me. The important things are a reputable counterparty, low costs and decent execution.

Please note the above parameters are things that suit me and my method, there is no absolute right or wrong in any of this, you have to sort out your stops and targets so they make sense for your method and for the way you approach your trading. My numbers are unlikely to suit you.
Hope some of that at least answers your queries.
  • #472
  • Edited 4:30am Feb 11, 2022 4:20am | Edited 4:30am
Hi all,
Will finish the week today with an illustration that not all setups will work and you do have to act accordingly:

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The market is in a downtrend off a opening move up to 15450 (not shown on chart), falls all the way to 15324 before rallying up to the 70 level and then rolling over once more. I am interested in a short giving the primary downtrend and look at a consolidation in the 30-50 area, shown in orange. The market fails three times to break 50 at the top of the box and so I am eventually persuaded to try at short at 48. The -1R stop is well above the box high, the +12pts 1R target is within the box and there is the prior 24 low there for the market to have a run at, so it all looks OK enough. We do get a +10pt move down to 38 and things are looking promising but a sharp rebound off the 40 level takes me out for a scratch back at 48, having moved the stop to breakeven as a precaution for just such an eventuality once the market had reached the 40 level. Had we not scratched, a full -1R loss would have been taken.

The moral, I hope, is reasonably clear here: all setups, however solid they look, can and will fail and you have to be prepared for this. The hard stop is your principal line of defence and you must respect that 100%. If all else fails, you'll be taken out at the stop for a manageable (assuming you are not trading too large for your account size!) -1R loss and live to fight another day. You must have this, who knows how far it will go when it goes wrong and you simply cannot and must not expose yourself to open-ended losses. Everyone who does this is carried out dead (at least their account is!) eventually.

You can further mitigate potential mishap by moving the stop closer to entry when warranted, as here. Sure, I was hoping for a break down to test the prior low at 24 but there was clearly a potential for a bounce off the 40 level and with a +10pt open profit on a 12pt initial target, you cannot let a situation like that result in a loss, it's just a little too painful. So move the stop up to breakeven and protect yourself, the worst outcome is now a scratch, irritating but not terminal. Your powder remains dry to have another go, as I eventually did later on, shorting at 28 on a similar setup to get my +1R for the day at 16, as shown.

PS Note if this second trade had not quite reached my 1R target and reversed as it did - all the way up to 70 for an open loss moving towards -4R and who knows where it can go? You can be sure I moved the stop to breakeven at 20 on that trade!

Have a good weekend all!
  • #473
  • Mar 8, 2022 3:35am Mar 8, 2022 3:35am
Hi all,
The seriously wild market this morning I think is worth showing as a good illustration of both how you must adjust your trading to the circumstances; and the value of stops.

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The market opens at 8am around 12,600 after having shown a solid triple low at 12,560 in pre-market trading and immediately bursts upwards. The first pause is around the big figure 12,700 and the combination of the pre-market base plus the opening explosion upwards is enough for me to try a long at 12,698 after a pause low at 91. I operate with a wider-than-usual 20pt stop given the increased volatility, below the pause low, plus set no soft initial target as there is potential for major gains if we happen to be right on the trade. I do, though, quickly move the stop to breakeven once the market again makes the pre-pause high at 12,735 and hold on to the trade this time in hope of an explosive new upleg. This duly arrives and I hold my breath for the next five minutes as the market races all the way up to test 12,900 where my nerve finally gives out and I close at 12,890 for a +190pt, +9.5R gain.

Please note how I traded differently from usual to accommodate the circumstances: the same trading strategy but a wider stop and forcing myself (quite literally so in my case, I had to fight all my natural instincts not to close much, much sooner) to let the trade play out.

This time it all worked and a rather excellent windfall gain that I'll donate to the Ukraine humanitarian appeal, but consider if you had gone short at 12,698 rather than long. Somebody did because they took the other side of my trade. If they did not use a stop, the below same chart but on a larger vertical axis shows the final outcome: a run all the way up to 13,100. A modest 400pt or -20R loss at my trade size in just 20 minutes. Ouch! Your account can't handle that, you simply must trade with a stop and respect it, just in case something like this happens.

Attached Image (click to enlarge)
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Wild times bring huge opportunity but also huge risk, risk and return are equal bedfellows so always trade appropriately to the circumstances and with extreme care rather than extreme greed in fast markets. Missing a huge profit won't destroy your account but taking a huge loss will.
  • #474
  • Mar 8, 2022 6:05am Mar 8, 2022 6:05am
Excellent trading but more importantly deep respect for the use of the profit. Very kind of you.

Regards
Alex
  • #475
  • Mar 8, 2022 12:41pm Mar 8, 2022 12:41pm
Quoting siju
Excellent trading but more importantly deep respect for the use of the profit. Very kind of you. Regards Alex
Hi Alex,
Thank you for your kind words. Despite an entire working life spent dealing in financial markets for commercial and personal gain, I have reached an age and life experience that allows me to truly understand there are more important things in life than turning a profit. It is only through pure luck of birth that I am comfortable in London whilst those poor people are caught up in something horrible, not their fault, and beyond their control.
  • #476
  • Edited 3:21am Mar 10, 2022 3:07am | Edited 3:21am
Hi all,
Emboldened by yesterday's nice trade, some more trading in the current wild conditions, this time useful to show you that patience and discipline to wait for your setup to indeed properly setup is important; and that it is rarely too late to enter a strong trend:

Attached Image (click to enlarge)
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The market opens at 8am 13,840 well off the top of the chart shown, at an obvious double top with a prior premarket high (the DAX starts premarket trading at 7am) and immediately falls into a strong downtrend. The top of the chart picks up the first pause in the fall in the 720-760 area, shown as the highest orange box.

My core setup wants to see a double test of the top of a consolidation box in a downtrend (vice-versa for an uptrend) and then enter with the trend after the second test is seen to fail. This first box actually satisfies this criteria with a clear double test of the 760 level but I pass on this setup - incorrectly as it turns out - because the box occurs at a prior low support from which it could easily bounce sharply. Remember, the market has already fallen 120pts in just 6 minutes at this point and so I am too wary of a bounce to take this setup.

Naturally, I am wrong and the market continues to plunge. We then see two more minor pauses at 660-700 and 610-640, the next two orange boxes. Both of these, though, only have a single spike top and so do not setup for me properly and are ignored. Both are excellent winners, of course.

The downtrend continues and we see a fourth consolidation box at 560-620 which does feature a failed double test of the 620 level. The setup is now fully there and so I am short at 612. The wider 20pt stop is above the box high at 32 but the +1R target of 92 is below the big figure 600 level from which a sharp bounce is again very possible. Thus I take the trade but immediately move the stop to breakeven as it approaches 600. Price must collapse through or I am scratched out here, I will not give the market a chance to bounce me out for a loss off the 00 level. Happliy, the strength of the downtrend prevails and I take my +1R at 92, I do not press for more today, still too worried about support and a bounce off the 00 big figure, even despite the fact the box low is way down at 560. Braver traders than me could have held on for at least a test of that level for a 2.5R profit.

Please note how I passed on three consolidation boxes on the way down before eventually taking a trade on the fourth, and even here I was very wary given the circumstances. You must have the patience to wait for your setup to fully form, no firing off early simply because you want to get a trade on. You will not succeed in trading without discipline, and sticking resolutely to your method is a part of this discipline. Also note that I eventually took a short at 13,612 some 230pts off the opening level just 30 minutes earlier. If the setup is valid you have to take it, regardless of what has been happening before (unless those events have good reason to invalidate your method, of course).
  • #477
  • Edited 3:29am Mar 11, 2022 3:12am | Edited 3:29am
Hi all,
Having expounded at length yesterday about the importance of waiting for good setups, we finish the week with a dual lesson that not all good setups work but perserverence and consistency do tend to win out in the end:

Attached Image (click to enlarge)
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The market opens at 8am around the 13,460 mark and immediately rushes into an uptrend to test 550 before settling into the first marked orange consolidation that has a clear double tested bottom at the 20 level. The trend is up so I am looking for a long and when a third test of the 20 level occurs and rebounds I am long at 21. The 20pt stop is well below the box low, the 1R target is below the box high, I am going with the trend, this looks a solid setup. Except of course that it immediately fails and I am taken out at 01 for -1R inside of 90 seconds! Still, it was a valid setup and I don't second guess them, I just take them all and accept the consequences. As an aside, do also note the value of respecting the stop here: the market fell another 95pts or -5R from the stop loss and you don't need any of that pain. The first loss is the smallest so take it and accept your modest losers with good grace.

The sharp turnaround in the market suggests a change in trend so now I start looking for a short. The vertical collapse turns into the second consolidation box in the 05-45 area, and I am quick to take the second failed test of the 45 high as a short at 36, imagining a run to test the 00 level now. The market doesn't quite get there but as my 1R target was well above at 16 I made my profit comfortably enough and didn't wait around to see if 00 would be breached.

As it happens, a sound call this time as we see a sharp market bounce off 05 leading to the third marked consolidation in the 60-09 range. Now, you could argue a trade off of this box in either direction, the market either taking a second run up or making a partial rebound before collapsing again. Really, both are reasonable scenarios and in such cicumstances I generally go with the most immediate flow, in this case going up. Thus, on the second failed test of the 60 box low I am happy to try a long at 65 and duly get rewarded with a 1R winner at 85. There is every justification to hold on for a test of at least the 00 level if not the 09 box high, but being a Friday and having turned a starting -1R to a net +1R on the day I am more than happy to call it quits at 85.

Please note how the same trading method is consistently applied, that I am following the market's lead rather than making predictions or sticking to just one directional bias, and that all valid setups are taken but I do wait for the setups to form before trading. This is trading with consistency, patience and discipline of perserverence. I accept not all trades will work out, it's the nature of the game, but I don't let such "natural" losses affect my trading. If you get annoyed, discouraged with your method because of the inevitable losses along the way, or start revenge trading, you will be in trouble.

Have a good weekend all!
  • #478
  • Mar 14, 2022 4:43am Mar 14, 2022 4:43am
Hi all,
A new week, the market remains Ukraine volatile, and an example today of how I adapt my trading method sometimes to get it to work in a fast trending market.

As regular readers will know by now, my core method in essence is to wait for a consolidation box to form, look for a failed double test against the prevailing flow, and then enter with the flow. This method is not ideally suited to fast trending markets as rapid moves tend not to make nice clean double tests against the flow, they just keep going, maybe with one quick spike back every now and then. I don't mind because very fast markets are a rarity and my method allows me to trade comfortably the rest of the time. With the current volatile conditions, however, we are seeing a lot of fast moves so the method has to adjust somewhat (in addition to widening the stop/target & correspondingly reducing the position size so as to equalise out the effect of the higher volatility on my account in cash terms):

Attached Image (click to enlarge)
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We see the market open at 8am and have a big fake jump up, only to roll over and start sliding back again. You can't be clear whether the slide back is a pause before another upleg or a true reversal, so I sit on the sidelines until the gyrations in the 80-30 area below the opening highs resolves itself with a decisive break below the 80 retracement low. Price dips quickly to 60 and then jumps back up to the 80 breakdown point, this action being the highlighted consolidation box on the chart. Note it's not really a consolidation area, more just a rebound from the breakdown but it does show a double test of the 80 level of sorts - first the break down from 80 and then the quick retest of that level.

In a fast market that will have do so I am happy to try a short trade at 75 as it slips back, my confidence based on the observation that the break of the 80 level suggests the market is reversing rather than pausing before attempting a new upleg, and there is every reason to look for a test of the opening lows around 20. That said, I know the setup is less than perfect so I am quick to take my +1R win at 55 and not wait for a test of the 20 low. For once my caution is justified as I do not leave a huge amount of unclaimed profit on the table, the market only getting down to the 40 level before moving up again (and did go on to make new highs for the morning).

So, not ideal conditions for my method but some modest interpretation adjustments and not being greedy is enough to eke out a winner. Whatever your method, do take the trouble to understand its strengths and weaknesses, no method will ideally suit all market conditions. Either sit out of unfriendly market conditions or make suitable adjustments if your method allows this, but not so much as to change the basic principles of your method, you will start losing your way if you do that.
  • #479
  • Edited 12:17pm Mar 14, 2022 11:53am | Edited 12:17pm
Quoting Oldtraderman
Hi all, A new week, the market remains Ukraine volatile, and an example today of how I adapt my trading method sometimes to get it to work in a fast trending market. As regular readers will know by now, my core method in essence is to wait for a consolidation box to form, look for a failed double test against the prevailing flow, and then enter with the flow. This method is not ideally suited to fast trending markets as rapid moves tend not to make nice clean double tests against the flow, they just keep going, maybe with one quick spike back every...
Hi Oldtraderman,
I have some questions to ask:
- Regarding the option to make suitable adjustments of a method, how do you manage to avoid being sloppy and inconsistent? How do traders know that he hasn't crossed the line, because it might happen that he is just a little off the track and slowly goes further until it's too late?
Do you think trading a discretionary method can be profitable if the trader never makes any adjustments and chooses to sit out every time there are unfavorable market conditions?
- If each day of trading is like a working day, how do you evaluate your work at the end of the day, so that after market closed you can say to yourself that you've got the job done/not got the job done? It seems that traders only feel proud when they have winners, they talk about them, show them around proudly, but maybe it can not be further from the truth because traders can not win all the trades, all the time.
- Trading result is uncertain - at least in the short term - therefore traders usually have doubts every now and then, what do you do when you have doubts about yourself, your result, your ability, your method...? how do you manage to overcome doubts?

Thank you.
  • #480
  • Edited Mar 15, 2022 3:04am Mar 14, 2022 4:19pm | Edited Mar 15, 2022 3:04am
Quoting diamond1011
{quote} Hi Oldtraderman, I have some questions to ask: - Regarding the option to make suitable adjustments of a method, how do you manage to avoid being sloppy and inconsistent? How do traders know that he hasn't crossed the line, because it might happen that he is just a little off the track and slowly goes further until it's too late? Do you think trading a discretionary method can be profitable if the trader never makes any adjustments and chooses to sit out every time there are unfavorable market conditions? - If each day of trading is like...

Hi diamond1011,
Several good questions there, I'll try to deal with them succintly one at a time.

Suitable Adjustments: Being sloppy and inconsistent is quite separate from making adjustments to your method to suit the market conditions of the moment. Any adjustments you make should be objectively justifiable in making your method more appropriate to the conditions, e.g. widening the stop & target plus reducing position size correspondingly in more volatile times. They should not actually change the core working of your method, your method is still your same method, just tweaked appropriately in a modest way. As for sloppy and inconsistent, that is not following properly the current iteration of your method. You decide in advance how you are going to trade today, sloppiness is not then doing that properly.

Not Making Adjustments: All the above said, I think it is very sensible in your early years of trading not to make adjustments. If the market conditions don't suit your method, sit on the sidelines and wait until they do. It is a good lesson in patience and discipline if nothing else. Should you find you are forever sitting on the sidelines then it is time to question your method. Not much use having a fabulous method if a trade opportunity only comes up four times a decade! Clearly, part of the viability of a method is that it gives you sufficient trades for whatever timeframe and level of action you want to trade at. As a short duration intra-day trader with little natural patience, I want a method that generates lots of trades daily for me, hence you see how my method operates in this thread, it is a deliberate choice on my part.

Evaluating Results: In the professional investment business, this task is an entire industry in its own right and the level of analysis can be stupefying. However, as a private trader, my evaluation is much simpler: Am I controlling risk well? Am I content in my trading (as opposed to suffering heart-attack inducing stress)? Am I making net money over time? How much money I am making is largely irrelevant, that's mostly just a function of position size. I honestly don't care if I finish any given day with a net win, loss or scratch; what I do care about is that I have traded well, this defined by the first two questions I just posed. If I am controlling risk well and happy in what I am doing in my trading then it is very likely I will make net money over time and so answer the third question.

Dealing with Doubt: Trading is inherently a game of uncertainty. And uncertainty naturally gives rise to doubt, hence your question. The short answer is that I don't worry about it. I have taken the trouble to watch and trade the markets for a long time. I have tried to learn from that experience and develop a method that I believe both has a durable edge in my favour, and suits my psyche, i.e. a solid method that I can live with. I then trade that method with discipline, consistency and sound risk control. It will either make money over time in an acceptable fashion for me or it won't. I don't have to doubt anything, the results will tell me what I need to know. If it works OK and I make money in an OK way then I just stick with it and be content within myself that I will do fine if I just continue to trade properly. If it doesn't work, well, then it's either time to develop a better method and/or improve myself as a trader; or the results are telling me that trading really isn't for me and it's time to move on. You'll know inside yourself what the truth is if you can just be honest with yourself.

Hope some of that may help!
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