Replies to This Discussion

Permalink Reply by Lisa on January 13, 2012 at 12:26pm

This comment was posted December 30th 2010 ? ~ interesting ~

I too trade without the aid of multiple indictors, successfully an efficiently.

Successful trading comes from your mind, not from indicators or the lack thereof.

Using the automobile analogy, ...

having a speedometer and gasoline gauge doesn’t make one a good driver.

Relying too much on indicators that are derived from past price ...

is like driving forward down the road but only looking out your rearview mirror.

When you refer to “naked trading” I’m assuming that means candlestick charts.

(which candlesticks are indicators, as well)

There’s some misinformation, here ...

you can make trades using “naked chart” analysis off any timeframe ...

with STOPs as small as you like and take profit whenever you like (?)

What makes successful trading is getting a substantial return on your risk.

Since trading is a minus sum game, ...

where winners make less than losers lose and the industry makes the difference ...

it’s prudent to use a strategy that pays the industry less ...

e.g. fewer entries with larger returns = less commissions.

Quoting Alexander Elder, ignoring the amount of commissions you pay ...

is like a peasant drinking from a communal pool during a cholera epidemic.

In the world of ideas, it’s like spiro said ...

we need a filter to determine which ideas make sense to us ...

and can be useful to our trade strategy.

I’ve always used the analogy of a buffet ~ take what you like and leave what you don’t.

Good Trading (& drain the banks ~ ha)

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Permalink Reply by Peter jcp on January 13, 2012 at 6:50pm

Hi Lisa - I did not notice this blog was so old and i had alreay posted to it last year - but it appeared in the current top content list early today - i dont know why?

Anyway - as you might guess i strongly disagree with your analogy's etc- ( lol)

You have got it wrong with the car one - You actually need a speedometer to be a sensible driver - because you would not know your speed to the nearest 10mph etc and would break the speed limit etc. But the main point is these indicators on the car - dont lie or lag normally but instead are fairly very accurate normally - and so aid and make you a better driver rather than an unsafe one - so that proves correct indicators are good.

However your analogy of driving looking through the rear view mirror is very similar to chart indicators on any frames - they show the past.But even candle patterns show the past - they might predict with a better accuracy - but so can so many more "non standard" chart indicators - . I honestly belief all indicators on standard settings are only 50-55% accurate. but when you tweet them - and change them and rewrite them you can make them a lot more accurate. Thats what most naked traders and probably 85% of traders dont realise - they have only ever used the standard stuff - which is entirely understandable.

Next point which actually just come up in the chat room tonight and is why i wanted to reply to your comments on RR trades and spreads

A trade suggestion came from reptutable forex source to buy the Eu at the low area of 2650 and target 310 pips . The stop was posted at 120 pips - so in effect not even a RR of 3 even if you wait 1-3 days - not that efficient really . Now lets blow Alexander Elders theory straight out the water shall we - because it might have been applicable 20-50 yrs ago but not today.

If you are prepared to use a 50-120 pip stop and i only use a say 10 pips stop - even with the spreads of 1 or 2 pips - I can still make 4 or 8 more trades that you - and still be better off financially. That means i have given my broker 4 or 8 time more more cuts of my profit - but still am better off than a trader with a larger stop - who gets taken out - like we all do at least 20-40% of the time. I really dont think most traders understand this part ?

In Alexander Elders day - different ballgame - sure we want to keep our cost low or reduce them - But if you pay your broker more with many more trades and end up with much better RR trades - you are in fact better off - example Trader A pays broker say 1k dollars and make say 30k  profit . Trader B pays broker say 3 k dollars and makes 46 k dollar sby the result of more trades at higher RR's.at same win ratio Whos better of trader A or trader B?

Answer Trader B - he as paid his broker 3 times as much as other trader A - but his net gain is still higher ie trader B makes 43k dollars net - trader A makes only 29k dollars net. 

Yet again i have never read anywhere this being explained - were are all the bean counters ??(lol) - Yes we all want the "hollywood" trade of say 100 pip stop and 3000 pips profit - but i also would like to win the lottery every year- ie these dont happen that ofter. - however small good RR trades happen every hour or so.

So stick that in your pip and smoke it Miss Buffett ( only joking ) - and remember half these old ideas are outdated in the world of HFT trading and 0.6 pip spreads .That reminds me must update my Windows 92 edition ( only joking again lol)- Have a great weekend

 

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Permalink Reply by Lisa on January 14, 2012 at 2:27pm

I empathically disagree.

I approach a pair holistically and look for the next move and enter once ...

pay the spread / commission once (ideally)

I don’t try to double-up or double-down ...

in an attempt to catch small fluctuations on tick charts.

I’m sure your broker likes you better than mine likes me.

I think Dr. Alexander Elder’s words are relevant.

People don’t change. (... the markets are people)

So you can stick that in your pip pipe, Mr. Peter

In reality, this has been said numerous times when this discussion gets going …

each individual has to approach the market in there own unique way.

I’m convinced no two people trade exactly the same way.

The only important thing is that a trader sticks to his method ...

& hones his skills on the strategy he has adopted.

Good Trading, Peter

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Permalink Reply by Peter jcp on January 14, 2012 at 3:41pm

 

I do have to agree with you that no two traders will trade exactly the same way and that we are all different as people normally are. In this discussion though we can actually solve it though be trading science rather than trading art.

I have been trying to think of a way to explain my reasoning - its not down to just skill - but more methods- so that you can see my side - because I know I am not doing a good job because you are missing my main point - ROI - and maximising you returns with efficiency and low risk.

I therefore need your help and without asking you confidential information please give me some pointers so i can explain what I mean in terms of dollars

Your trading style is excellent in terms of winning percentages. I need some approx figures to show you and average comparison of say a "advanced swing/ wrap trader " against a "good intraday short term trader" I would not want to discuss confidential trading info - but just approximates based on our styles

I will offer my style of averages for the example in advance - ie - 5-15 trades a day with a 74% success rate with a 40pip average daily target - with a good day being over 60 pips and an excellent day being over 100 pips. Bad day 10+ pips only Average stop size 8 - average win size 19 pips.RR from 1.5 to 6 most days

Now I have guessed your stats as approx - ie 3 average trades a day 80% success rate - average stop 50 pips average win 100 pips - good RR 4?Would you agree or if not change as you see suitable. Once I have your estimates - I will then show you what i mean in terms of dollars earned and given away- without averaging up or taking excessive risks etc- and its not what you are thinking and then we can get rid of another trading myth. You dont need the pip spray - you catch loads of them ( lol)

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Permalink Reply by Lisa on January 14, 2012 at 5:39pm

The positive thing is, Peter ...

that you believe that your strategy is the *best*.

This is required for success.

Averages change from trading cycle to cycle ...

Yearly - Monthly - Weekly - Daily

Some cycles my success rate of entries is 90% + ...

but I may break-even or make a very small profit (or lose)

at the beginning of a sideways period ...

where the market has quit trending.

Sometimes my success rate on entries is poorer, ...

but my winners are spectacular.

Richard Dennis’s lost 95% of his trade entries, ...

but his winners made him millions.

According to Mark Douglas, ...

his strategy was to probe the market with lots of entries ...

until he hit a big mover, apparently (?)

I take issue with not acknowledging that others strategies ...

aren’t quality or profitable and with statements such as ...

“inefficient & time consuming”

I love the fact that my strategy allows me to take care of family ...

& still trade.

I’m proud of the fact that I’ve trained myself ...

to be a able to walk away from the screen ...

go-out, go to sleep, while I have trades on without *fretting*.

One day, when my children are grown ...

I’d love to spend more time painting while continuing to trade  

(Lord willing)

I like to say that I let the market work for me ...

rather than me working at the market.

Pure price-action trading using "naked charts" is achievable.

It takes work, long hours of observing price movement ...

deliberate practice to cut losing entries sooner ...

and let winners run to the max.

Also, not cutting winners to soon ...

because of a re-trace ...

or having your STOP too close ...

and be taken-out while the pair continues to trend in your favor.

Or when you do get taken-out, ...

having the internal fortitude to reenter. etc. etc. etc. 

Trading is much more complicated that percent averages.

If I say my average of "rightness" on entries is 74% ...

that's 74% in the past.

“Past performance is not indicative of future results” ~ hehe

Entries mean much less to me than they did when I 1st started trading.

Being right on market entries is less important to me now ...

than trade management when I get on the right side of a trend.

It’s easy to enter the market, ...

but extracting a significant profit is not so easy.

As far as the Art / Science comment …

I actually posted something on that in this very thread ...

Aug. 16th, 2011 …

You may not agree with my approach to trading, ...

but the very reason I post my trades and progress here ...

is that I post what I want to see.

I want to see exact entries, trade management ...

and exits of other traders, indicators and all ~ lol

My philosophy is, ...

I can’t ask someone else to do what I’m not already doing myself.

I figure, if I go ahead and do it ~ other may follow suit (?)

Posting your trades is helpful not just to others, ...

but to your own performance as well.

My next goal is to work on *fancy* graphs with my excel spreadsheets

to post.

Not just trade performance, but pair performance etc.

I reply to these comments to show other aspiring traders ...

that trading the way I have chosen-to can be accomplished.

I mentioned before that I appreciated Woodie’s philosophy of ...

"traders helping traders."

Learning to trade can be very discouraging.

I believe that’s why the failure rate is as high as it is.

But when the going gets tough ~ the tough get going.

I actually enjoy trading ~ which blows my family away.

Who would’ve thought !?!

and the fact that I can money at is a bonus ! ~ lol

My husband has learned to cook and even take-up some cleaning !

to give me the time I need to work on my trading.

(he’s seeing $$$ signs ~ lol)

In conclusion, as traders ...

I believe, we should compete with ourselves and not with each other.

I think retail traders should encourage one another, ...

trading is hard enough without having a psychological debit ...

because of bickering.

We should concentrate on our method ...

& making a higher return than we did last cycle.

Increasing our lot size and owning it.

One of the things I really like about you, Peter ...

is that you report to chat daily and are active.

Routine & discipline ~ I admire that.

One of the reasons I chose to be active on FXStreet ...

is to have a place to consistently report to.

I know many folks say ~ successful traders aren’t in chat-rooms etc.

but I have found, for me, ...

it puts me in a mind set of routine ...

& having a place to consistently report to.

At first I wasn’t to sure about the fact ...

that everyone traded a different strategy

(and mostly scalpers in the chat ~ lol)

but I like that Forum is so open ...

anybody can post whatever they want ...

and they have the freedom to share their thoughts.

When I’m *badgered* ~ I figure, hey, that’s life …

we have to learn to get along with all sorts.

I do happen to think swing trading is *better*,

because that’s what has made me successful.

I’m truly not qualified to say it’s superior to scalp trading, ...

because I don’t scalp trade and have no desire to learn.

I want to master what I’m doing.

If a trader says he’d rather work-on scalping ...

who am I to say, “you shouldn’t do that” ?

That trader may not be psychologically able ...

to leave trades on when away from the screen (?)

I get that.

And the last thing I want anybody to do ...

is have a *freak-out* session and blow-up their account.

My point is always ...

choose what make sense to you ...

and go for it with all you heart, mind & soul

Good Trading ~ 2012 has just begun.

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Permalink Reply by Peter jcp on January 14, 2012 at 7:32pm

Since we have been doing our "chat discussions" Lisa over the last few months - my typing speed as like improved 3 fold. I cannot see me getting to 120 words a minute - but at least 3-4 fingers in use- impressive hey lol

Ok - how do I answer your last reply - I think I might have to do it over 2 or 3 blogs to to justice to it - but i will make a start on 2 or 3 of the questions you have raised or assumed.

1. No I dont think my trading style is the best. After 8 years i still think it can be improved and although i have been using some of my unusual indicators for over 4 years - I have also been trying other styles etc - such as "wrapping" only during the last year. There is no one "holy grail" style of trading and I think it is very much horses for couses -ie if we get a 200 pip drop over say 2 hrs - i would not want to take 5 trades in between - only maybe 1 or 2 - but if the 200 pip drop happened over 3 days - yes I might then take 4-10 inbetween simply because they would provide me with some excellent RR results.

So please - I do not want to convert all traders over to short term multiple day trading - because as you say - its not for everyone and why do it if you hit your daily target or goal with only one or 2 good trades?

Please remember as of today - I am still in a trade from the end of October with really good pips - so I acknowledge and use all 4 ways - scalp - short term intraday - swing - long term - but have never really got into positional trading. For all I know it might be the best way for me - and this time next year I might be trying it - because i have a total open mind on learning.

2.You mention - "inefficiency and time consuming" - this was a bit of a bug bear for me when i first came into trading after 25 years in business and industry. I was taught to micro manage and also my wife is always teaching me not to "double handle" - do it once and do it right.

So we have to break every job down in to small parts and work out the best way of achieving results in a time efficient manner. - as an example one salesman who was super efficient could achieve twice as much as another salesman - because he was so efficient on time management and cramming the most into his diary.

All of this information is based on the past and thats how we can then work what should happen normally in the future. However if a salesman has his car break down and is mobile stolen - hes not going to be so efficient for that one hr or day. So allow for the unexpected - but plan for the normal - as in trading

Thats why i want to know my efficiency when I am working hours at my computer trading during working hours. That daily effieciency can be broken down even if you only trade once a month - ie 1 trade on the third day of the month 100 pips stop - 600 pip profit 17 days later - equels in a trading month of 20 months - 30 pips a day - which to me is efficient.However if he has some months and he takes 3 trades and two loses and he only ends up net of 70 pips - you could say thats not efficient . Thats a whole month - inefficient - not just one day which is exceptable.

So I break every thing down - and Lisa as an housewife as well you know you need to be efficient in your working day. What you do on down time - is just a hobby etc - ie playing golf - going to the cinema - artist - writing  etc.

 

I will explain in the next part -why if you have all your own stats at your fingertips you will improve your efficiency. Since i became more active in the chat room - i have ended up taking more trades - trading can be boring and lonely at times and  my efficiency and money as increased - more to follow later

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