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  • #601
  • Dec 24, 2014 8:14am Dec 24, 2014 8:14am
Quoting skenobi
{quote} I think you're not giving yourself a lot of credit. Perhaps you should be relieved that maybe what you already know is already enough. The keys to successful trading (that I think I have) is nothing fancy that only institutionals know about, and is about as basic as any traditional advice expounded on this Forum and elsewhere. Good luck, nevertheless. And feel free to put me on your Ignore list.
Thankyou and thankyou for your time, merry Christmas
Kieran
  • #602
  • Edited 10:06am Dec 24, 2014 9:49am | Edited 10:06am
Merry Christmas to all!

How you doing Skenobi? I've been on the Nymex CL contract for the past three months, after not trading it all for nearly a year. What a great run.

I am a long time (I retired at age 50) institutional trader and an infrequent contributor to this thread. You can take my word for it that being an institutional trader is not as glorious as portrayed by the media. It's a lot of hard work and you often labor under incompetent superiors and cut-throat co-workers. That being said, I am happy to be running a boutique sized trading firm and trading as I see fit.

What's the key to trading? For me, it's knowing how to trade. You can spend hours reading books, trading on sim, and all sorts of nonsense that is our there. But, more than anything, trading is a style of thinking which you develop through knowledge and experience. I am a dyed-in the wool order flow trader, a scalper, and have been most of my career. Order flow trading is not easy to master, and a great mentor is a real help. Of course, I have the transparency of futures markets where I can incorporate volume and other variables to get an edge.

Since I am now a retail trader, in essence, I have had to adjust to a different mentality. I am the hunted, not the hunter. However, if you can find a way to keep track of what the major players are doing you can certainly succeed. You just have to know what the institutions are doing, what the locals are doing, and understand why price action is moving in a certain pattern. That being said, here are some tips that make me successful:

1. Learn the mechanisms that cause price movement. (it's supply and demand, in a convoluted format)
2. I spent some time learning auction theory and game theory, which is a great help. (it can be a little esoteric, I admit)
3. Spend a good deal of time watching chart movement. If your platform has market replay, trade every night. Keep track of the characteristics of winning trades and losing trades, be meticulous.
4. Study reversion to the mean techniques, they have a tremendous record of success. I use polynomial regression channels, 225 SMA, sigma 2 and sigma 3 as the parameters. The market seldom strays beyond 3 sigma; that's when I take trades back to the mean. This is outside-in trading and it works.
5. Strive to understand the relationship between support and resistance and volume, especially as it relates to zero-sum games.
6. Ask questions about movement you don't understand. How come price sometimes moves down on positive economic news? There is usually a factor that has not entered into your trading equation. That's bad. Understand the outside factors that may effect your trade; factors you can't control.
7. The market always moves according to what the largest players want; they are in complete control. Trade with them, not the retail guys.
8. Don't chase price, please do not chase the price action.
9. The best and most reliable chart pattern, and the only one I use is range compression. When the price range compresses, you can expect a break-out or breakdown. This is the only breakout/breakdown pattern I trade. The other breakout/breakdown patterns have a 70% failure rate. Support and resistance breakouts usually fall into the classification of price chasing, but not always; learn to live with missing a good breakout.
10. Winners keep score. Assign a specific classification for every entry and keep track of which entries are successful and which are unsuccessful. Even tougher, learn to exit with an acceptable profit or loss. (hint: lacking order flow technology the Average True range can be very helpful.) Know the % of success for each classification of trade you enter.
11. Know your limitations and never risk more than 5% of your account on a trade. Once you can calculate your stops with some proficiency, calculate what getting stopped out will cost you; if that amount is greater than 5% of your account don't take the trade. I've made more money on trades I didn't take than trades I executed.
12. Don't trade on hope, hope always losses. Have a sound understanding of your expectations of a trade and monitor your trade to meet your expectations; if the trade isn't going as planned, get out. You do not have to let you trade hit your stop/loss. As an aside, when I see a trade moving aggressively against my position I often reverse with good results. Don't know if that is a good strategy in forex or not. Forgive my ignorance.
13. Don't give up, keep trading. Unless you just don't have an trading ability at all, this is a game of perseverance. The longer you trade, the better you get. There are no magic books and the market makes folly of logic, common sense, and other human frailties. Learn the trade set-ups you consistently win and keep trading them, learn the trade set-ups you consistently lose and avoid those trades. Find a mentor!
14. I didn't want to end on 13, all traders are superstitious, you know. Repeat these words as needed: my banker/broker is not my friend, my banker/broker is not my friend. His/her goals are completely different than yours. Again, my banker/broker is not my friend; repeat as needed.

As I said at the onset, trading is not so much about technique but the way you think. I hope some of the suggestions are helpful.
  • #603
  • Dec 24, 2014 10:11am Dec 24, 2014 10:11am
Quoting trader7757
Merry Christmas to all! How you doing Skenobi? I've been on the Nymex CL contract for the past three months, after not trading it all for nearly a year. What a great run. I am a long time (I retired at age 50) institutional trader and an infrequent contributor to this thread. You can take my word for it that being an institutional trader is not as glorious as portrayed by the media. It's a lot of hard work and you often labor under incompetent superiors and cut-throat co-workers. That being said, I am happy to be running a boutique sized trading...
Thanks for the great post. Nothing like seeing a post like yours, comparing it to what you're doing and see that you're on the same track. Merry Christmas and thanks again
Gp
Nobody ever went broke closing a trade in profit
  • #604
  • Dec 24, 2014 10:54am Dec 24, 2014 10:54am
brilliant
  • #605
  • Edited 9:09pm Dec 24, 2014 6:35pm | Edited 9:09pm
Quoting trader7757
What's the key to trading? For me, it's knowing how to trade. You can spend hours reading books, trading on sim, and all sorts of nonsense that is our there. But, more than anything, trading is a style of thinking which you develop through knowledge and experience. I am a dyed-in the wool order flow trader, a scalper, and have been most of my career. Order flow trading is not easy to master, and a great mentor is a real help.
I'm a price action trader and order flow "predictor" "surfer" (LOL), but still good advice and feedback all round!

Quoting trader7757
Of course, I have the transparency of futures markets where I can incorporate volume and other variables to get an edge.
Agreed if you can make that information work for you. For some, the information may not be that convenient to obtain or may even be overkill (as it is for me), but as I keep emphasizing every now and then in various ways: there is no right or wrong way; the individual trader will just have to use whatever "advantage" he has (e.g. volume and order flow info) and/or adapt to his circumstances as best he can.

Great post all the same... a lot of the suggestions I've already internalized over the years. But if I may make the following remarks...

Quoting trader7757
4. Study reversion to the mean techniques, they have a tremendous record of success. I use polynomial regression channels, 225 SMA, sigma 2 and sigma 3 as the parameters. The market seldom strays beyond 3 sigma; that's when I take trades back to the mean. This is outside-in trading and it works.
Good one! I might test this one.

Quoting trader7757
6. Ask questions about movement you don't understand. How come price sometimes moves down on positive economic news? There is usually a factor that has not entered into your trading equation. That's bad. Understand the outside factors that may effect your trade; factors you can't control.
Respectfully differing on this one. Agreed there are APPLICABLE outside factors that you can't control. Economic news is an outside factor, but from observation and inside knowledge, economic news is not an APPLICABLE outside factor. In almost all cases I've seen, when price is seemingly congruent to economic news, in actual fact it's what the bigger market players wanted to do all along, subject to orders already in place IN SPITE of the news.

Quoting trader7757
7. The market always moves according to what the largest players want; they are in complete control. Trade with them, not the retail guys.
This above advice you made pretty much summarizes my last para...

Quoting trader7757
10. Winners keep score. Assign a specific classification for every entry and keep track of which entries are successful and which are unsuccessful. Even tougher, learn to exit with an acceptable profit or loss. (hint: lacking order flow technology the Average True range can be very helpful.) Know the % of success for each classification of trade you enter.
Good advice, this. Also, a good outcome is when you can keep score without being overly focused and emotional about P/L.

Quoting trader7757
I've made more money on trades I didn't take than trades I executed.
I totally dig this one!

Quoting trader7757
As an aside, when I see a trade moving aggressively against my position I often reverse with good results. Don't know if that is a good strategy in forex or not. Forgive my ignorance.
I only ever do this when I'm scalping, which I hardly ever do anymore. Plus, the bid/offer spreads had better be tight enough for me to consider such a thing. Whether it's a good strategy or not, YMMV.

Quoting trader7757
There are no magic books and the market makes folly of logic, common sense, and other human frailties.
True that!. The market also makes folly of over-analysis of economic events. I found this out the hard way one month into my career, throwing my then-recently-acquired college education in economics out the window.

Quoting trader7757
Learn the trade set-ups you consistently win and keep trading them, learn the trade set-ups you consistently lose and avoid those trades. Find a mentor!
A mentor definitely helps!

Quoting trader7757
I hope some of the suggestions are helpful.


Merry Christmas everyone!
I'm not trying to convince anyone. I'm not in the "convincing" business.
  • #606
  • Dec 25, 2014 7:43am Dec 25, 2014 7:43am
Quoting trader7757
4. Study reversion to the mean techniques, they have a tremendous record of success. I use polynomial regression channels, 225 SMA, sigma 2 and sigma 3 as the parameters. The market seldom strays beyond 3 sigma; that's when I take trades back to the mean. This is outside-in trading and it works. 5. Strive to understand the relationship between support and resistance and volume, especially as it relates to zero-sum games.
hi trader7757, thank you for the post
could you share some example - charts !!! - about point 4 ?
thank you and have a nice holiday
  • #607
  • Dec 25, 2014 1:16pm Dec 25, 2014 1:16pm
Quoting trader7757
4. Study reversion to the mean techniques, they have a tremendous record of success. I use polynomial regression channels, 225 SMA, sigma 2 and sigma 3 as the parameters. The market seldom strays beyond 3 sigma; that's when I take trades back to the mean. This is outside-in trading and it works.
What markets do you trade with mean techniques?
  • #608
  • Dec 25, 2014 7:49pm Dec 25, 2014 7:49pm
Quoting skenobi
{quote} I'm a price action trader and order flow "predictor" "surfer" (LOL), but still good advice and feedback all round! {quote} Agreed if you can make that information work for you. For some, the information may not be that convenient to obtain or may even be overkill (as it is for me), but as I keep emphasizing every now and then in various ways: there is no right or wrong way; the individual trader will just have to use whatever "advantage" he has (e.g. volume and order flow info) and/or adapt to his circumstances as best he can....
When you guys say order flow trading, is this the supply and demand concept of trading a major imbalance in the buy or sell volume?

On another unrelated note, what is the difference between a trade desk and sales desk position? I'm not sure if these two words are used interchangeably or actually have different functionalities.
  • #609
  • Dec 25, 2014 8:11pm Dec 25, 2014 8:11pm
quote The best and most reliable chart pattern, and the only one I use is range compression. When the price range compresses, you can expect a break-out or breakdown. This is the only breakout/breakdown pattern I trade. The other breakout/breakdown patterns have a 70% failure rate. Support and resistance breakouts usually fall into the classification of price chasing, but not always; learn to live with missing a good breakout.

can anyone explain price range compresses more?

Thanks
  • #610
  • Dec 25, 2014 8:44pm Dec 25, 2014 8:44pm
Quoting jhehe
{quote} When you guys say order flow trading, is this the supply and demand concept of trading a major imbalance in the buy or sell volume?
My definition succinctly: Order flow trading takes into account own analysis of Other People's pending orders and how they affect markets going forward. (But don't just take my word for it. Google it!)


Quoting jhehe
On another unrelated note, what is the difference between a trade desk and sales desk position? I'm not sure if these two words are used interchangeably or actually have different functionalities.
A proprietary (or "prop") trading desk trades with other institutionals. A sales trading desk trades with non-institutionals (such as corporations, export/import companies, etc etc). "Non-institutionals" do not include individual retail traders.
I'm not trying to convince anyone. I'm not in the "convincing" business.
  • #611
  • Dec 25, 2014 9:08pm Dec 25, 2014 9:08pm
Quoting spieler
{quote} Hello This hedging strategy was only one of my system so i dont use it anymore on these pairs. As for oanda sentiment open position it is useful as well , note that everybody is long so i keep my short
.
.
.

I am wondering if any of the bank traders/pros see "oanda: stuff as tradable. The three I would speak of mostly would be "open position" "OANDA Forex Order Book" & "Historical Open Order " and if this information is useful how could a trader use it?
thank you
  • #612
  • Edited 7:52am Dec 26, 2014 6:39am | Edited 7:52am
Quote
When you guys say order flow trading, is this the supply and demand concept of trading a major imbalance in the buy or sell volume?

Attached Image (click to enlarge)
Click to Enlarge Name: orderflow.jpg Size: 143 KB


This is the order flow platform that I use. The first column on the right shows the traders hitting the big and the ask. Obviously, if more traders are hitting the ask the price will be moving up and visa versa. The prices with the highest volume are highlighted by a black box. Here again, rising volume in sequential 8 range bars will give you a clue as to market direction. As I said, the first bar on the right is bid/ask, but the rest of the bars are in Delta. I pay close attention to individual bar delta readings as positive delta will inevitably cause a rise in price. I do not put much stock in pending orders as there is a sizable amount of "spoofing" that goes on, which is to say that one of the big boys will stick a large order in and watch traders react to that order, then pull the order just before execution and take the market the other way. In short I don't care what people say they are going to do, I care about what they are going to do. If I am going to place a large order, it's probably better to hide the quantity buy using and iceberg order.

Of course, this is futures trading and there is a sizable amount of bot activity, dark pool money, institutional traders (who are usually hedging) and retail traders all competing to move the market in their favor. With the exception of bots and dark pool money, who are not required to report their volume when orders are executed, the order flow will reveal a great number variables at work. As for the bots, when you have a positive delta and the market is moving down you can bet they are working. They can be a real pain in the arce.

In the third row of the tabular data is the delta, and the dotted lines show the Market Profile point of control with two value areas above and below the POC. I just started trading this morning so the Market Profile lines are all bunched up. they will spread out over the course of the day. As you can quickly spot, this market is moving sideways at the current time.

Finally, the far right show me the range of the day. As you can see, there hasn't been much interest in taking the market lower than 56.10 or higher than 56.45, so I know that I am trading in a bracketed market at the current time. Of course, this can all change as new information hits the market and pushes prices around some.

At the bottom is the actual order flow in delta form, with red and green indicating who is temporarily in control of the market.

Remember, I am a futures trader, so everyone gets the same data. I have Tier 2 quotes on another screen so I can see pending orders and their size in detail. Most locals (local floor traders) and independent floor traders will attack a cluster of small traders parked at an identifiable price, running their stops and forcing them out of their trades, which moves the price in the direction the locals were already taking. Retail traders are the food the big boys love to consume. Hence my earlier point, don't get in bed with the little guys, they are the hunted. Run with the big boys, which the order flow program clearly delineates. Hope it helps.
  • #613
  • Edited 8:07am Dec 26, 2014 7:45am | Edited 8:07am
Quote
hi trader7757, thank you for the post
could you share some example - charts !!! - about point 4 ?
thank you and have a nice holiday


This is one of the charts I use to calculate reversion to the mean. It may seem a bit cluttered. but I am not a big fan of simpler is better. I like a lot of information and through experience seem to be able to assimilate it. In my trading world, every chart contains a story and my job is too discover the story being told. You will notice that I do not use any indicator or oscillator that lags, my world is all real-time. As a scalper, this is the only way to go and MA's, indicators, oscillators...etc lag too much to be an effective scalper.

Okay, on to reversion to the mean....
Attached Image (click to enlarge)
Click to Enlarge Name: main chart.jpg Size: 189 KB


The yellow bands are Polynomial Regression Channels. I like these bands quite a bit better than Bollinger Bands, which are non-linear, and Keltner Channels, which don't give me enough latitude to adjust. If you can't code my polynomial regression channel, I would prefer Keltner channels because they are linear.

The inside of every band in 2 sigma and the outside of the band is 3 sigma. You don't have to color the area between the sigma's but I just like the continuity the coloring provides. As you can quickly see, whenever the price action approaches the bands the price action tends to reverse. Each day is a bit different in that some days, especially in bracketed markets, the price tends to reverse at 2 sigma. On the other hand, very volatile trading action will see the price extend to 3 sigma. Either way, let the price begin to change direction before initiating a trade. I use the above described order flow program to show me a lower high volume price before taking a trade. As you will recall, higher volume prices are highlighted with a block box on the order flow program. Further, I am looking for higher volume to indicate a change in direction, which is the case in zero sum market. When the market changes direction traders (the smart ones, anyway) tend to exit their trade and new traders enter in the opposite direction, hence, a higher volume bar,as indicated in the second row of indicators. The first indicator below the main chart is another order flow program which tracks bot activity, you can see on the chart "buy programs waning" and "sell programs waning", and "HFC buy surge" and "HFC sell surge."

Oh, I forgot to mention that I trade reversion to the mean trades across the board...which is to say they are fractal in nature and can be used to trade any futures contract, any time frame, anytime. I suspect the same holds true for Forex as I tried a bit of backtesting and 2 and 3 sigma relationship stayed constant. Hope it helps.
  • #614
  • Dec 26, 2014 8:13am Dec 26, 2014 8:13am
This is the best thread I have ever seen pertaining to forex trading! Thank you so much to the experienced contributors.
  • #615
  • Dec 28, 2014 11:32pm Dec 28, 2014 11:32pm
Hi skenobi and all other institutional traders,

I was hoping to ask you how likely it is for an individual to work as a full time forex trader on his own (capital > 500K). I had some prior experience being in forex trading firm but it wasn't long. My expectations are not overly high and hope to generate eventually 80K which is what an average job pays per annum. There are simply too many myths perpetuated on the internet to estimate this with any confidence.
Moreover these days forex trading is increasingly dominated by computerized players which can analyze vast amounts of data so it seems that a lone trader's edge is increasingly being eroded. Just the other day, 2 sigma claimed to have picked the winning short oil trade using their AI systems so I believe that computers are also invading longer time frames as well.

Regards,
Wayne
  • #616
  • Edited 5:08am Dec 29, 2014 2:39am | Edited 5:08am
Quoting foobar
Hi skenobi and all other institutional traders, I was hoping to ask you how likely it is for an individual to work as a full time forex trader on his own (capital > 500K). I had some prior experience being in forex trading firm but it wasn't long. My expectations are not overly high and hope to generate eventually 80K which is what an average job pays per annum. There are simply too many myths perpetuated on the internet to estimate this with any confidence. Moreover these days forex trading is increasingly dominated by computerized players which...
1. With cap>500k, 80k target per annum is do-able. I'm assuming this lone trader is trading with his own funds and not with investors.

2. I disagree with the notion that a lone trader's edge is being eroded these days. He just has to adjust his mindset and not think he can trade like an institutional could.

3. The lone trader doesn't HAVE to trade like a hedge fund, a Bank, or any HFT outfit, especially BECAUSE he is not pressured by a shareholder/investor mandate.

4. Trading with Other People's Money is also another pressure the lone trader does not need.

5. With only an 80k target, time is on his side for as long as he concentrates on limiting his losses, and his "profits will take of itself".

6. All the above assumes this lone trader has a PROVEN edge and MM philosophy that allows him to trade only the setups he wants i.e. being a lone trader (his own boss) also means he doesn't need to always be plugged into the markets with a position.

7. The above also assumes that his PROVEN edge and MM method are both robustly forward-tested and makes sense to him (and ONLY him), and the haters be damned.

8. More advice (but it's really forum-related and not trading-related): This lone trader should be confident in his edge's ability to help him make money. He doesn't need other traders' "validation".

9. But if he insists on outlining his methods in his own forum thread (be it to seek "validation" or for vanity or whatever), he should be prepared to deal with the naysayers. Advisedly, he should not waste time justifying his method to trolls. The Ignore button is very, very handy to that end.

10. re: your point about Two Sigma, did they capture profits from being short oil? Evidently they did. Did they move the markets? I don't think so. From this "evidence" (which is anecdotal, at best) can I therefore assume the higher timeframes have been "invaded" by AI? I don't think I can justifiably assume that either.

11. In the meantime, the lone trader should exploit his edge for as long as he can.

12. On a less serious note, play lots of backgammon (especially with "cheating" AI). I noticed from the aforementioned Two Sigma's website just now that they also have "the winner of a major Japanese Backgammon Tournament" as an employee. Sorta justifies my own backgammon obsession towards helping me recalibrate my risk appetite every now and then.
I'm not trying to convince anyone. I'm not in the "convincing" business.
  • #617
  • Dec 31, 2014 2:45am Dec 31, 2014 2:45am
Quoting trader7757
{quote} This is one of the charts I use to calculate reversion to the mean. It may seem a bit cluttered. but I am not a big fan of simpler is better. I like a lot of information and through experience seem to be able to assimilate it. In my trading world, every chart contains a story and my job is too discover the story being told. You will notice that I do not use any indicator or oscillator that lags, my world is all real-time. As a scalper, this is the only way to go and MA's, indicators, oscillators...etc lag too much to be an effective scalper....
thank you for the detailed post and the charts ! hope to read more from you
Someone have a Polynomial Regression Channels indi for mt4 ? haven't find it
  • #618
  • Dec 31, 2014 3:38am Dec 31, 2014 3:38am
  •  Neio
  • Joined Oct 2012 | Status: Can't think outside?Enlarge the box | 688 Posts
Quoting quantrader1
{quote} thank you for the detailed post and the charts ! hope to read more from you Someone have a Polynomial Regression Channels indi for mt4 ? haven't find it

Here is a good one!

https://www.mql5.com/en/code/8417

Regards

Neio
An expert is a man who has made all the mistakes which can be made
  • #619
  • Dec 31, 2014 8:38pm Dec 31, 2014 8:38pm
Quoting skenobi
{quote} 1. With cap>500k, 80k target per annum is do-able. I'm assuming this lone trader is trading with his own funds and not with investors. 2. I disagree with the notion that a lone trader's edge is being eroded these days. He just has to adjust his mindset and not think he can trade like an institutional could. 3. The lone trader doesn't HAVE to trade like a hedge fund, a Bank, or any HFT outfit, especially BECAUSE he is not pressured by a shareholder/investor mandate. 4. Trading with Other People's Money is also another pressure the lone trader...
GREAT tips and advice!
Thanks and Happy New Year!
Simplicity is the ultimate sophistication - Leonardo da Vinci
  • #620
  • Jan 7, 2015 2:37am Jan 7, 2015 2:37am
Hi institutional traders,

any thoughts on how the changes below will affect FX markets going forward? Is it really that easy to automate a skilled dealer's work away? If the work was really so low value, they wouldn't be getting paid the millions in bonuses every year right?

Investment banks like UBS – which has been ordered by regulators to automate 95% of its FX trading – and Barclays are already making moves to minimise human intervention in FX trading. The huge fines levied against banks for allegedly manipulating currency markets will only accelerate this trend and FX and rates traders could suffer more.
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