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  • #2,661
  • Jul 4, 2009 4:02pm Jul 4, 2009 4:02pm
Quoting clockwork71
This is why I tend to write options, not buy them.
Hi CW.
I have been trading a little bit with futures and options, but still consider myself a total newbie.
I 've been feeling much more confortable trading futures instead of options, as volatility is much lower and in most cases you are about to know how your future price will move when the underlying moves.
I also learned that you can loose the premium price if you buy calls or puts, but was also tought not to sell puts or calls except when hedging positions. The reason is that when you sell calls your potential loses are infinite. Obviously you can set SL, but as you are holding positions overnight and weekends, you never know.
And here comes my question: ¿why don't you simply sell futures or buy puts(*)?
Thanks!

(*) Indeed, options prices trend to zero with exponential speed as times gets closer to expiry, but who is holding them so long?
Trading: the skill of avoiding trades
  • #2,662
  • Jul 4, 2009 7:23pm Jul 4, 2009 7:23pm
Quoting hel13rock

My point is about leverage. There are a few newer traders read this thread so if you want to know about leverage here's my take...

Forget it... completely... No really....
This is an excellent post, my stated leverage is 50 to 1, but according to my risk tolerance I am almost always 1 to 1. So there is leverage, but who needs it when its way outside the limits of good MM.
  • #2,663
  • Jul 4, 2009 9:07pm Jul 4, 2009 9:07pm
As a new trader my self I realize there is a lot to learn. Making that learning curve easier is a good thing:
I have tried to put together some important Price Action Bars in one place for easy reference.

These are six price action bars CW has reference to on several back pages.

To fully understand how these formations can point you in the right direction
a review of his chart formations on the pages listed below is Important.

Pg: 9-11-12-17-19-29-31-39-45-52-62-70-72
Attached Image
  • #2,664
  • Jul 4, 2009 10:46pm Jul 4, 2009 10:46pm
Quoting SaepeExertus
As a new trader my self I realize there is a lot to learn. Making that learning curve easier is a good thing:
I have tried to put together some important Price Action Bars in one place for easy reference.

These are six price action bars CW has reference to on several back pages.

To fully understand how these formations can point you in the right direction
a review of his chart formations on the pages listed below is Important.

Pg: 9-11-12-17-19-29-31-39-45-52-62-70-72
Now that's good!
  • #2,665
  • Jul 4, 2009 11:17pm Jul 4, 2009 11:17pm
CW, I am glad to see one more guy is completing the same learning curve ias me. I traded a lot following the same idea about S/R on big time frames. Indeed it worked, but eventually a strike of losses happened and my draw down was 36% which is too much for me.

When I tried to calculate the odds of that unfortunate event, it was very small but it happened. Think about it: you may have a very good strategy (like S/R) with 55% prob to win N pips and 45% to lose the same N pips.

The strike of 9 losses (each one is at 4% risked ) will come at prob of 0.00075. Do you think it is small? I am not sure now ...

Then I researched a lot about S/R method (including pinbar reactions on S/R s) using ideas of those brilliant guys - Hanover, BRV, James trying to improve the odds of winning. One day I decided to plot daily bar graph for outside temperature. Guess what I found?

I found all that S/Rs, pinbars, etc on temperature chart but you agree there is no trading behind it. Of cause, this chart can be perfectly traded :-) using just 2 S/Rs - highest temperature on summer and lowest on winter making you awfully rich but that knowledge comes from physics and not past trading.

So guys, my proposal is: plot charts for outside temperature, number of people on the subway platform during the day, etc - just name it and you will see S/Rs abd pinbars.

Question: are you willing to trade them?
  • #2,666
  • Jul 4, 2009 11:21pm Jul 4, 2009 11:21pm
Quoting eswap0
Hi CW.
I have been trading a little bit with futures and options, but still consider myself a total newbie.
I 've been feeling much more confortable trading futures instead of options, as volatility is much lower and in most cases you are about to know how your future price will move when the underlying moves.
I also learned that you can loose the premium price if you buy calls or puts, but was also tought not to sell puts or calls except when hedging positions. The reason is that when you sell calls your potential loses are infinite. Obviously...
It really comes down to the fact that 80% of options expire worthless. As far as infinite losses, that basically comes down to using liquid options. Stocks like IBM, etc.....will always have buyers and sellers.

As for who is holding that long, there are many reasons why people get into positions, or get out of....which requires reversing your original position. As far as a complete answer to that question - it would be really, really, hard to answer that in a post.

CW
  • #2,667
  • Jul 4, 2009 11:21pm Jul 4, 2009 11:21pm
Quoting Low
This is an excellent post, my stated leverage is 50 to 1, but according to my risk tolerance I am almost always 1 to 1. So there is leverage, but who needs it when its way outside the limits of good MM.

I agree, she makes some really great points in that post.
  • #2,668
  • Jul 4, 2009 11:26pm Jul 4, 2009 11:26pm
Quoting observer2000
CW, I am glad to see one more guy is completing the same learning curve ias me. I traded a lot following the same idea about S/R on big time frames. Indeed it worked, but eventually a strike of losses happened and my draw down was 36% which is too much for me.

When I tried to calculate the odds of that unfortunate event, it was very small but it happened. Think about it: you may have a very good strategy (like S/R) with 55% prob to win N pips and 45% to lose the same N pips.

The strike of 9 losses (each one is at 4% risked ) will come at prob...

There are such things as weather derivatives, and yes - I would trade them based on chart patterns as well. However, that is a really, really, really specialized field and I don't know that this thread can cover something as advanced as that.

Unless that's not you were talking about? The only other thing I can think is that you are saying charts don't work? If that's the case....fine. They work for me, and I make money with 'em. Which at the end of the day - is the only proof I need.

CW
  • #2,669
  • Edited Jul 5, 2009 7:12pm Jul 4, 2009 11:36pm | Edited Jul 5, 2009 7:12pm
Quoting clockwork71
Unless that's not you were talking about? The only other thing I can think is that you are saying charts don't work? If that's the case....fine. They work for me, and I make money with 'em. Which at the end of the day - is the only proof I need.
CW
No, I am not talkng about weather derivatives. I was talking about weather charts themselves.
The point is that S/Rs are just illusion. Eventually, you wiil be breakeven (in best case scenario) depending on your luck. You even can be so lucky not to face it at all during your life. But if you live centuries it will happen eventually.

So it is just a matter of luck and your success at the end of the day /year/decade is not a proof of your edge unless you can provide the understanding of why your are successful. This is opposite to what you are saying: "why is not important"

Good luck
  • #2,670
  • Jul 4, 2009 11:49pm Jul 4, 2009 11:49pm
Quoting observer2000
No, I am not talkng about weather derivatives. I was talking about weather charts themselves.
The point is that S/Rs are just illusion. Eventually, you wiil be breakeven (in best case scenario) depending on your luck. You even can be so lucky not to face it at all during your life. But if you live centuries it will happen eventually.

So it is just a matter of luck and your success at the end of the day /year/decade is not a proof of your edge unless you can provide the understanding of why your are successful. This is opposite to what you are...

Ok, well you can sit and wonder about it....or keep making profits. That is kind of my point. WHO CARES WHY? And actually, these areas exist vor several reasons. (Not the least of which comes down to order flow and hedging by large institutions....)

The point is this: Trading is incredibly simple if you let it be.

And we make our own luck.

"The Edge" plays guitar for U2, I can never understand why he keeps getting brought up in trading conversations.

CW
  • #2,671
  • Jul 5, 2009 12:30am Jul 5, 2009 12:30am
Quoting clockwork71
"The Edge" plays guitar for U2, I can never understand why he keeps getting brought up in trading conversations.
I thought it was something to do with Anthony Robbins
Grabbing the bull by the horns!
  • #2,672
  • Jul 5, 2009 3:24am Jul 5, 2009 3:24am
Quoting hel13rock
My point is about leverage. There are a few newer traders read this thread so if you want to know about leverage here's my take...

Forget it... completely... No really...
You are right, the leverage is only dangerous because it offers the possibility that the positions are way oversized regarding to the account balance. I define the position size same you. I take the distance to the planned SL, calculate the total loss for 1 Lot, convert it back to my account currency and take the proportional volume to 2% risk. If SL is hit, these 2% are gone, regardless if my broker required 2€ or 2ct. to keep the position open.

stefx.
10 x 100 = 100 x 10, stefx, retired scalper.
  • #2,673
  • Edited 3:57am Jul 5, 2009 3:46am | Edited 3:57am
Wow, I always luv reading these posts for humor about how it's just luck if you are one of the lucky ones to make money, and how s/r is just a illusion, amazing posts, always great humor.

I've back tested simple daily pinbars on pound for example way back, and the longer it goes on, the higher % of wins grows, anyway, just wanted to chime in on the great subject of making money in the market is fluke, the take on it how eventually if u trade long enough you'll end up at b/e if your lucky, that is gold, Ive never heard that one before, great comedic relief.

THe simple reason I can laugh at these posts is this fact, if you play good bars at good areas like cw is teaching here,
you will never have a long run of losers, it just doesn't happen.

Great thread btw clock, I follow it often.

EA for this stuff will never ever happen for many reasons.
  • #2,674
  • Jul 5, 2009 4:13am Jul 5, 2009 4:13am
Hi!

Here's my take about options. They have a lot of possibillities. You can combine them in many ways to suit you. If you believe the market is going up you can buy a call and write another call at a higher strike price in the same month or another. Then you know your profit if the underlying stock goes up to the level of your written call and you get it at a lower price because you get some money back from the written call.

It's also very important to watch the implied volatility and wait until it's high before you write options and try to buy when the implied volatility is low. Easier said than done...

If you buy a call with a very long time before expiration (a leap I think) you can write calls with a higher strike price every month to get back the cost for your call.

I use to write naked puts with short time left to expiration when the underlying stock is at a low price and I believe it's going up because when the market has been going down the volatility is usually high and it decreases very fast the last weeks before expiration. A lot of risk, yes because the stock CAN go to zero over night and I should buy a put at a lower strike price as a hedge but as CW says 80% of them expires worthless and I try to write them as low as possible. (I'm greedy....) And if I should get the stock into my account I can start writing calls to get rid of it and get out with a profit anyway.

You can combine options with futures too but I don't know much about those strategies.

Quoting eswap0
Hi CW.
I have been trading a little bit with futures and options,

The reason is that when you sell calls your potential loses are infinite. Obviously...
I usually don't sell naked calls unless I have the stock in my account...

Quote

(*) Indeed, options prices trend to zero with exponential speed as times gets closer to expiry, but who is holding them so long?

It's those options you should write instead of buy and choose those with short time left to expiration....

I recommend you some further reading. It's fun and a lot to learn.
  • #2,675
  • Jul 5, 2009 5:30am Jul 5, 2009 5:30am
Quoting observer2000
No, I am not talkng about weather derivatives. I was talking about weather charts themselves.
The point is that S/Rs are just illusion. Eventually, you wiil be breakeven (in best case scenario) depending on your luck. You even can be so lucky not to face it at all during your life. But if you live centuries it will happen eventually.

So it is just a matter of luck and your success at the end of the day /year/decade is not a proof of your edge unless you can provide the understanding of why your are successful. This is opposite to what you are...
Why do have a link to No brainer trades which is a system build on S/R? On higher TF's S/R is no illusion it can bee seen easily on any chart.
Economists have forecast 9 out of the last 5 recessions
  • #2,676
  • Jul 5, 2009 7:49am Jul 5, 2009 7:49am
Quoting Yahoomt4
Is there an EA out or still nothing?

Regards

An EA for what?
  • #2,677
  • Jul 5, 2009 7:51am Jul 5, 2009 7:51am
Quoting Mr Smith
Wow, I always luv reading these posts for humor about how it's just luck if you are one of the lucky ones to make money, and how s/r is just a illusion, amazing posts, always great humor.

I've back tested simple daily pinbars on pound for example way back, and the longer it goes on, the higher % of wins grows, anyway, just wanted to chime in on the great subject of making money in the market is fluke, the take on it how eventually if u trade long enough you'll end up at b/e if your lucky, that is gold, Ive never heard that one before, great comedic...
Truth be known, I haven't had a string of losers in ages. I think 2 in a row is about as bad as it's been for a good year and a half.
  • #2,678
  • Jul 5, 2009 8:07am Jul 5, 2009 8:07am
Quoting clockwork71

"The Edge" plays guitar for U2, I can never understand why he keeps getting brought up in trading conversations.

CW


I do understand why people talk about "edge". It's a fancy way of telling people that you will have losses but over time if your winners outweigh your losers you're going to be okay. But I think people take that simple concept and run very very far with it and frankly, go nuts. Expectancy, monte carlo analysis, it's all useful to a point. But when people tell me they have a system that gives them 0.46c for every dollar risked or that they have a 0.0005674 chance of blowing out after 10,000 trades I always think they've drunk the koolaid a little too much with that stuff. It's only based on past data, so don't get too certain about those figures. Just play what works.

The genius of this thread (IMO) is the central core of Chris' message:

1) Don't overthink this

2) There are more important things than trading.

That's pretty much it. And for some reason those two things are a bit of a fight to get into most of our heads. I have seen traders blow up (some of them trading my money) from just overcomplicating. I see it all the time on these forums. They have something that is simple and works, and rather than wait for compounding and time to get them where they want to be, they jump onto some new holy grail the minute it appears. Experienced traders too. All looking for the logarithmic and mystical algorithms in the market. One experienced trader nearly made me spit my soup when he told me he used the Chinese calendar to predict price movements.

Keep it simple.

Whilst it is statistically possible that you will blow out over hundreds of years of trades, it's also a statistic possibility that you'll get hit by a truck tomorrow, that you'll die in a plane crash, that an asteroid will hit the earth. Why worry? Trade what makes you money. Rinse. Repeat.

And usually, when I see an "SR is an illusion, it doesn't work post", I can smell the slow burning smell of a few blown accounts not too far away.
  • #2,679
  • Edited 12:23pm Jul 5, 2009 8:23am | Edited 12:23pm
Quoting TiaForex


I do understand why people talk about "edge". It's a fancy way of telling people that you will have losses but over time if your winners outweigh your losers you're going to be okay. But I think people take that simple concept and run very very far with it and frankly, go nuts. Expectancy, monte carlo analysis, it's all useful to a point. But when people tell me they have a system that gives them 0.46c for every dollar risked or that they have a 0.0005674 chance of blowing out after 10,000 trades I always think they've drunk the koolaid...
Spot on, let everybody trade the way they want to trade. They will either be successful, or more likely, lose their account and be forced to rethink their approach and then be successful. Or even more likely quit and tell everyone they know that forex is a scam and that the broker stole their money or worse bitch on forums like this about it.

At the end of the day you can lead a horse to water but you can't make it drink.
  • #2,680
  • Edited 12:24pm Jul 5, 2009 8:36am | Edited 12:24pm
Quoting stefx
You are right, the leverage is only dangerous because it offers the possibility that the positions are way oversized regarding to the account balance. I define the position size same you. I take the distance to the planned SL, calculate the total loss for 1 Lot, convert it back to my account currency and take the proportional volume to 2% risk. If SL is hit, these 2% are gone, regardless if my broker required 2€ or 2ct. to keep the position open.

stefx.
Thanks for your comments. I want to clarify one point though. My account is only 200 pounds or so at the moment. What I intend to do is to increase my position size by 0.01 for each 1000 pounds in my account.

2000= 0.02 3000= 0.03 and so on. This will keep my risk per trade to around the 1% mark assuming a 200 pip stop loss. If I lose money and the balance goes below the level, I reduce back down on the next trade.

It will take me a while to get to my first level of 2000 from 200 (in fact I may deposit some soon to speed things up) but when I get there 2 to 3000 will be a lot quicker and 3 to 4000 even quicker (with any luck).

The main reason I am trading with a small amount at the moment is because I don't want to lose too much money if I mess it up.

I recommend this approach to anyone. If you think about it it makes sense, start with a small account which allows you to get your feet wet and build up as you start to walk on water . But really, why risk your $10000 risk capital in one go before you've proven to yourself that you can be successful?
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