The loser's thread

Hello guys.

The purpose of this thread is to address my “testing the market” views I’ve been asked many times. But first, in order to avoid misunderstandings, let me lay down some ground rules, with all respect.

1) This is my own , personal, individualistic, biased view about the market. If anybody disagrees or is outraged with my “crazy views”..as anything negative in my life, I don’t give a fuck…thanks.
2) I am not here to discuss or argue my views with anyone, nor proving accepting or rejecting any new stuff.
3) I am not teaching your how to trade, nor showing you any new “system” , “strategy” or “method”.
4) You need to know at least some basic stuff about trading, This thread is not for newbies. I apologize in advance but I believe, with all respect, there’s plenty information everywhere about basic stuff.
5) I am an old school dog. I use not common words like ”load”, “bets” bankroll” etc. It’s just the way I’ve been raised by other dogs , older than me of course LOL!.
6) Don’t be shy to ask. Don’t apologize or refrain yourself if you have problem with English. Just shoot the question, In my world, everyone is equal – have 1 nose two ears, one mouth, etc. I welcome everyone even if you’re an alien writing from x planet( who knows? Right?)

The system II post #495 reads:

“I am a hyper-scalper by nature. Although I am not a scalper in terms of looking for short profits, I follow the same guidelines. In my lil book on futures, which is my bread and butter, I give no quarters. I use very tight stops. I really don't care if a miss a move. But that's me. It takes probably a lot of practice. You don't have to do that.

But...just try it to see if it works.


The main thing about exits is that you must reduce your risk immediately as soon as the market moves in your favor.

Remember that my hit ratio is low....less than 50%... I traded my (hit)<corrected word was misspelled> ratio for consistency many moons ago”


It was kinda off record commentary, which has sparked a lot of curiosity. Simply put, is based on the all so venerable ” Keep your losers short and let your profit run” comment. Although is very true, people don’t have a clue what the hell is all that about. Easier said than done. Like many stuff here on this game.

I “test” the market many times because I place small bets every time I am out on a trade. I am not looking for any amount of fixed dollar/pips/ticks to win every day, but to squeeze out of the market, whatever I can get from that “small bet”

My bets are not necessarily based on % of risk but in how much I am willing to lose. How much is too much???

The shorts profits I mentioned on that post are not short in the sense of “quick” but based on a small bet. Just for clarification.

The scalping part, which is a generic word by the way, comes from how many “small bets” I am willing to put in order to catch a big wave. At least a profitable one.
Once I’m ridding on a wave, I begin to cover my ass, giving the trade a reasonable time AKA expectancy, before moving my stop. How much time? How far/distant the stop will be trailed? I can’t tell you that. Maybe a tight stop for me is too tight for you. How much time? I don’t’ know…maybe 5 minutes is an eternity for me… … and hour is too short for you.

My favorite trades ever are the one’s that can be surfed all the way to the end of the session. If I’m trading mini’s or stocks and I catch the wave at 10:00 AM will be sweet if I can ride that fucker all the way to 4:30PM. On Forex, if I catch the wave between 9:00 AM and 10:00 AM , will be nice to surf it up to 00:00 (eastern time).

I won’t get the chance to ride the baby into the closing all the time. I should say that occurs less than often. But I MUST bet there just in case opportunity knocks. If I can’t ride the wave all the way, then I just play along with the market.

As I place small bets during the day, I can “afford” to lose several times in order to get on the bus. Here’s why I disagree with this “you must risk x % of your equity per trade” if I do that, I will be broke by now. Of course, there’s a limit on my testing. There will be days when I simply close my platform and go do something else…period.

Expectancy

This is pretty much the backbone of my trading. Expectancy is to me kinda abstract, cause there’s no fixed rules on it. The point is that, after I place a trade, I have no control over the outcome of that trade….But you can use this as an advantage to some extend….

Here’s how I balance things out. Let’s assume I am putting myself a limit of 4 trades in a day or $100.00 daily loss limit (this is an example ok, don’t take it by heart). I will probably give more leeway to my first trade than my last. As I lose my first bet, time and lack of volatility are running against me so I need to speed things up from my side. Or, I can opt not to trade if I feel I gave my first bet way too much room…..discretion plays a big role on this.

If I am on a losing streak, common sense dictates that I have no reason to be there.

The nature of the markets.

They’re a mess. I am not gonna go to this “randomness or chaos” utterly horseshit is around. I really don’t care a rat ass and you shouldn’t too. As messy as the markets are, they provide with plenty of opportunities for the taking. Trying to buy “x” when it cross “y and z” simply doesn’t cut it for me. Markets runs on cycles and every one of them has a different behavior. EUR/USD is jackyl on 1:30 and Hyde on 1.35. There’s another level and quality of participants I should say and every price level at any market so why bother building up and indicator like a stop light “buy when the green is lit and sell when the red is lit” The market will take care of whipping this out.

Equity

“In accounting terms, after all liabilities are paid, ownership equity is the remaining interest in assets. If valuations placed on assets do not exceed liabilities, negative equity exists.”

As simple as It might see, I see many people falling flat in their asses with equity comes down in place.

Positive equity can only be built over time. There’s no quick-fix to this. It won’t matter if you’re a hyper super scalper or a position trader. Positive equity is all that matters. I chose to be a high- frequency trader because it’s the way more comfortable for me to build positive equity over time. Period. Actually I do place bets long term, don’t get me wrong. But that’s another story.

Here’s a typical scenario:

“I have this system, backtested, forward tested, Under-tested, Over tested. Oven-tested and I am SURE that at least I’ll make 500 bucks a day….just 10 pips a day is all I need…ah baby I can do thaaaat(with inflection on the voice).” After all’ I’ve been hatching this system under my ass for 5 years already…on demo…(oh brother!)

Allrigth, it’s all good. But there’s a lil’ problem.

As I said before, when market change cycles , it shifts, like a tremor. I mean, like the land shifts after an earthquake. Then you realize “gee, this 10 pips a days are getting harder and harder to get” In the process, you get a lil’ impatience and here’s when all hell breaks lose. Here’s when negative equity starts to pile up.

What will be the exact timing when the market will tremor? Ahh if we all knew…

Consistency

Correspondence among related aspects; compatibility

Sounds like big words but the definition is true to it’s matter. I like the “related aspects” because they’re not necessary in sequence, just simply related and compatible.

My own view on consistency is based on the realization that in this game, losing is just a way to be closer to positive equity more and more. So consistency is not wining every time but to keep a quality of trade up to a certain level. I must know what to look for when I trade, my goal and expectancy for that trade if I want to be consistent in the long run. Here’s why consistency and equity are married.

I need to know my load if either will be adjusted based on risk or fixed……all beforehand of course. Managing the load goes hand in hand with consistency, In this age in which you can trade on micro-lost that shouldn’t be a problem. Hope Obama doesn’t go crazy and create another “rule” like he did with hedging. Yeah something like” for now, only full-lots can be used for trading” ahh who knows?

I think this is all. I will post some charts with some stuff, just to give you an idea how I do it.

Also I would like to say that I am a tape reader (I don’t use charts) and will be real hard to express here the mechanics of my trading. But I’ll do my best on the charts.

Please be aware that the charts are for illustration purpose only. I am taking some random swings based on hindsight This is not a “buy Y sell Z” stuff.

I’ll be checking this thread quite often.

Thanks for the time.

Good Karma.

ah forgot the charts LOL!


Again, this is plain hindsight. Be aware!

Hi Feb,

It is great to see you back on FF. I have been a scalper for some time. I use a 1 Tick chart for trading and a Five Minute chart for support and resistance areas (based on swing high and swing low). Oh, a couple of other things I pay a lot of attention to on my charts is range and series of higher lows and lower highs. I've never truly grasped how to trade like you do minus the charts.

After reading your previous thread, one of the things I found most inspiring was the wisdom you shared. In fact, by the time I was done reading the thread, I had 25 pages of notes! I believe there is never a time when I can say I know it all. It seems there is something to be learned every day.

Once again it is great to see you back. I so appreciate the time you take to post on FF. Best wishes to you for health and prosperity.

Coach

Hey feb,

I am interested in what exactly you look at when you read the tape. Do you use Times&Sales, DOM, or simply a quote panel??

Do you use brackets when you watch it and what role plays volume (i read in another post from you that you are trading currency futures) and speed of the tape?

thanks

You're welcome!

Thanks for your good wishes!

Oh yeah brackets all the time!!

I used to read T&S but the DOM is easier on my eyes. Plus I get more data.

The bracket takes preference over the speed of the tape.

Hi Feb,
Apperciate you opening a new thread, I enjoyed reading the first post and love the name.
I have been keeping the system II setups as a bread and butter of my trading style, at the same time I have been trying to add new ways of testing the market as my read on the 5min charts is improving I see more entery opportunities.
I got a question in regards to your chart,
I love the entery and I have been taking postion such as that, but what i want to know is about riding the wave, I would not have any problem riding it excapt not knowing how to deal with that bullish possible reversal that has occured hour later from entery (shade), I would not hold on to the postion when i see such moves against my position, how do you deal with that if you are holding on to the position to fully ride the wave? are you not using tight stops on these type of enteries? no more trailing stops?

Thank you.
http://www.forexfactory.com/images/attach/gif.gif

I spoted a simillar opportunity earlier, I took the first entery then exited on the first sign of weakness, just wanted to get your opinion on how I played it. what did I do wrong/right or can improve?

Thank you.

http://www.forexfactory.com/images/attach/gif.gif

This new thread is just laying on the line how I trade based on tape reading. The system II is another animal. Some people asked me about how do I test the market and here's pretty much how I do it. That charts are only in hindsight meaning that I am just throwing it there like I have all the ducks lined up to make a trade.

If you have a big ass candle coming against your position , and you get either stopped or you just bail off, simply put, look for another entry. If you spread the load across the day, you won't mind a re-entry.


It's a trade off. In reality none knows the outcome. You just have one of these days that the market is completely wacked off. Seems like that market was coming back to the long side and then reversed back to the short side. Just let it show it's intentions to go long and dance it's song. In this case, it fool ya!...no worries, we're smarter .

Trailing stops is how I do it. Like I said, it's a trade off. If you opt to let it go all the way, it's also valid. There's no right or wrong. You could tell that both has it's pluses and minuses. On the long run, what works for me is the trailing stop.

If you use a fix bracket, it might be more relaxed. But that will cost ya some profits along the way. You could also manage your trail, giving a pause while your trade develops. I've been thinking lately that this is a better option. I do that on longer time frames and I am implementing this on my scalping.

FYI i just collected some coins today on the futures. I should say, I broke-even. So, markets were kinda nasty today across the board.

Hope it helps buddy!

Oh I am sorry I didn't reply to this one!!

I don't think there's nothing to improve. Just that the market is not delivering the goods.

I'll take the first trade, for sure. That's a breakout south and as long as I get lower highs, I am good.

Remember that all of this is based on scalping. You can apply anything here, just I want to be clear so you don't get confused. Anyway, I am going to post some charts and I will expand what I do. Then you decide what's applicable and what's not.

Do you always start your brackets at specific levels of s&r or do you randomly start them whenever you open your DOM window and dont look at the overall picture for them?

thanks for your help

A picture says a thousand words.

A long trade today 5-11-2009.

Short trade - not good

so here's the same charts - no notes.

What would you do? Remember you get stopped short.

What is the market telling you? Can you see it's hands?

I consider levels. Against popular belief, I consider overnight trading. This is when big institutions are placing orders. Sometimes they comeback on trading time and defend their turf. Trust me, you don't want to fight them!

I prefer they kill themselves on the first hour, then I pick up the pieces .

Hey Feb your threads are really helpful thank you so much
It really helps me when you post a chart and ask what we would do and then tell us later if we cant figure it out... really good style of teaching

What is the market telling you? Can you see it's hands?
Attached Thumbnails
HI feb really happy to hear you again, regarding to your last question, i am mo inclined to look entries to go long as the market is not able to go lower after we see such big red candle, if that was big boys selling the market should be much lower already, and after that candle the market tested 3 the 1,36xx and currently is going down but i seems weak to the downside so for my newbie view if a see a little strength migth try a shot if my risk tolerance allow me ... take this with lots of salt...
cheers...

I would suggest plotting your tick volume so you can actually view the movements of the professionals within the market, you can't tell how long or to what degree a trend will occur is you don't know the volume or strength of a move.

This movement was destined to happen b/c professional buying dried up about several hours prior to this movement, so that would have been an excellent trade for you!

Hi Feb,
Thank you verymuch for your replies to my posts, super helpfull.
looking forward to learn more from you.

Thanks again.