Daytrading What IS

Hello Folks,

I've been lurking on these forums for over a year now and I've read some interesting stuff and there are a few really bright people in here.

However a lot of the stuff I've read is just so far off base from reality that I felt it was time to contribute some solid facts about the reality of trading to the forums.

A short bio about me I'm 47 and have made my living as a professional prop trader (stocks) for many years but after a really messy divorce I took a year off to refresh my mind. I started a small hedge fund and I also taught a few of my poker buddies how to trade.

I enjoyed the process of teaching people and found it to be very cathartic.

This time around I thought I would trade the fx markets because I want to travel and have a more balanced life and not burn myself out again and the fx markets allow me the flexibility to trade the NY or London open times.


Lets get down to some FACTS.

My trading rules are simple and these are words to live by and should be memorized.

1. The market (any financial market) is a LIVE AUCTION anything can and will happen at any time.

- This is where most people make the biggest mistake when it comes to this business.

- Almost all systems try and put the markets into some type of structure or box. When ABC happens I do ABC.

- IF the markets can change at any moment then how can anything that doesn't adapt to the CONTEXT of the moment and situation ever possibly be accurate or correct.


2. When the market is going UP I want to be a BUYER. When the market is going DOWN I want to be a SELLER.

- This is an interesting statement because it can mean so many things to so many different people.

- I keep this simple. If I'm trading off a 5m chart I follow the flow of the last 1 hr price action.

- I take the CONTEXT of the last hour into consideration when I'm planning out my trades.

For Example:

The last hour this am the GBP was ranging in a downtrend with a spread between the high and lows of the range of about 12 pips.

In this context I shorted the range high and covered at the range low.

I will provide lots of chart examples of this later.

3. When I get the price reaction I was expecting, I hold my trades till they are completed. When I do not see the reaction I was expecting then I cover my trades fast.

- This rule is all about CONTEXT as well. If I'm trading a range then hold till range lows if I'm trading a break out then hold till buyers or sellers show up.

I know this might sound very ambiguous to a lot of you because you are all looking for RULES and I understand that BUT the truth is the only RULES that work in trading are the big picture context rules and the rules you place upon yourself.

I do have rules but they govern WHAT IS happening in this CONTEXT not what happened before.

History does repeat itself but it never repeats itself exactly the same way it is always slightly different.

I will be posting some charts and making some live videos on you tube for your review.

I hope you enjoy the thread and I hope it helps you dispel a lot of the myths of this business.

thank your generious share with us about your trading strategy, i am waiting your chart . thanks

Always great to have a professional's POV.
I'm all ears.

Although I am not a Prop Trader such as yourself it is very refreshing to see someone with the same simple, adaptable, trading ideas. Looking at the market for what it is. I also do tend to look back as you stated ( looking back over the last 60 min ) and look left. My views will be both macro and micro. I believe one of the many and " major problems " that short term traders experience, is they get so focused in on the short term they fail to see the larger move taking place.. ( With in the contex as you stated " big picture context" ) They fail to see the wind at their back ...I believe this causes traders to enter in the wrong direction..

I made some statements about trading range vs. trading trend on another thread the other day. Trying to help someone who was having trouble with their current method.

Simply stated

If price is ranging, I trade range
If price is trending , I trade trend

I will add that I am a big advicate of S/R levels, especially when price moves around the OHLC of the larger time frames. I also look at minor S/R's once I am the trade. The concept is were will price tend to stall, if price stalls what "is" price doing .. volitility, holding, spiking.. whatever.

Yes history does repeat itself but you are right not always in the same way. When I look at price around an S/R levels.. It's an area not an exact number per say. Price will tend to committ to that area in some way.."not always the same way"..Recognition of this action will help determine which direction one should trade. Is it 100% ?...nope !

Your thoughts

TSD

I would agree when your trading the 5m chart the context of the recent 1hr and last session history is very important and we should assume that it will continue to do what recent history is showing us till it proves us wrong.

There is an old floor trader saying "lean against Support and Resistance for as long as you can and until proven wrong".

Trading is filled with contradictions though because when things CHANGE well then you have to change with them and the real question becomes when are things changing and at what price level can I consider it valid.

When I read a chart I'm looking at it like a live trading floor.

IF I was on that floor and watching and listening to the order flow what would I be seeing and hearing?

Strong Buying Pressure that is frantic one directional.
Strong Buying Pressure that is uncertain with wipes and pull backs.
Average Buying Pressure that is constant and steady.
Average Buying Pressure that is pulls back slowly but thrusts back up.
Weak Buying pressure that is churning higher.
Weak Buying pressure that is met with Selling pressure.

and Vice Versa.

I will try and dhow pics of the examples above soon

After years of frustration I've finally learned what you are saying. You can only daytrade the "now" and adapt accordingly. On his thread, Technical Analysis Fallacy, Fti did a great effort trying to teach traders how to do it.

Would be very interested to see the similarities / discrepancies between your methods and his.

Oh no.
Let Pokerfxtrade explain his approach without interferences from another thread. We have the opportunity of hearing some coherent and logical stuff.

Didn't mean to interfere and really want to hear his approach.

I'm all for coherent and logical stuff!

No nonsense price action. Bring it on

Lets do this by example:

Tell me what do you see.

1. Average selling pressure with formed pull backs
2. Strong selling pressure one directional
3. Weak selling pressure with equal demand.

The Correct answer would be 1.

Average selling pressure with formed pull backs.

So now I will highlight the entries I would look to exploit ASSUMING that nothing changes.

Up till this time Nothing has CHANGED so we can continue to trust the read.

We continue to trust the read and we are able to exploit the Auction AS IT unfolds until we see something different.

Once this last candle finishes printing we now see a CHANGE and we can now STOP assuming the market is in a 1. State.

Now its time to wait and watch and see what kind of Auction we will now enter into and see if we can identify and exploit it.

The above example is Simple and one of my favorite Auctions to exploit because its so obvious.

I will do some more charts tomorrow of other auction conditions that I believe are just as obvious and exploitable.

Most people will see whats termed a descending channel and thats faulty thinking in my opinion because it forces your mind to look into the future rather then just trading what is.

I see Average selling pressure with formed pullbacks and I will continue to watch bar by bar till the Auction changes then I can wait till I see another auction dynamic that I can exploit.

Very simple and to the point. Hope to see more discussion, thanks.

I'm really enjoying this! Thanks Pokerfxtrade, I look forward to seeing more. I've been thinking about how important it is to read the market as it changes lately so this is really interesting to me.

Thanks,

Cory

Looking forward to learn more from your approach. Thanks

Looking forward to this. This just might join the ranks of J16 and TAF.
Keep up the good work.

Good Trading
Mike

makes sense , subscribed and thanks

Example number 2

What do you see?

1. Strong frantic selling pressure.
2. Average steady selling pressure.
3. Weak selling pressure followed with equal demand.

The correct answer is number 2. Average steady selling pressure.

So moving forward we should look for a opportunity to exploit WHAT IS happening and in this context we should hold our trades for a bigger move OR until something changes that negates our read.

Here is how it played out.

In this Context a good trader could have added to his position very easily and held for a very long time right up until things CHANGED on the final bar in the picture because that was the first time buyers started to gain some control and the Average steady selling pressure context was no longer valid.