Need Guidance - TA/Momentum Based Strategy

[tech/a]

Tools?

 

[CanOz]

Yep. Funnily I use a DOM but don't like the new price action tools. Partly cuz i trade thinner order books and can see what I want to see without any extra bells and flashing lights.

You only need to know what you need to know. But as you have said that is the journey.

Yeah I agree that a bookmap has less advantage on thinner markets as participants will accumulate a position over a wider range of prices than in a thicker market. The dom shows the liquidity over the ten or twenty levels adequately enough.

 

[CanOz]

Tools?

The newer tools are the bookmap style heat maps I referred to....I believe.

On an interesting note, I have a mate that was trading prop in Europe, mostly spreads...I asked him if any of the outright directional traders in Europe were using bookmap, his reply was that almost all of them had started using it immediately as it became available on TT.

 

[tech/a]

Ok I see.

I find your comment that lots of people in Europe jump on the latest tools interesting.

My view from buying lots of "tools"
Is that as an edge in trading Buying/Managing/Exiting most are pretty well average.
I have however found that they have added to my learning of market movement but as they cannot be tweeked for personal observations are poor for direct implementation.

They have helped in mapping structure and pointing to areas which should be observed but fall short in proctical application.

We as traders are far better at it.

 

[tech/a]

proctical application

Proctology --- No ordinary duck!

 

[Trembling Hand]

The newer tools are the bookmap style heat maps I referred to....I believe.

Yep

On an interesting note, I have a mate that was trading prop in Europe, mostly spreads...I asked him if any of the outright directional traders in Europe were using bookmap, his reply was that almost all of them had started using it immediately as it became available on TT.

Probably thick markets and a short time frame?

 

[Rypieee]

We all have - trading books. They rarely offer much practical help with trading. And sometimes they actually make reading a market and trading harder if you believe the nonsense. If someone with unknown trading ability writes a book and 1000s of other unknown punters purchase it and give the thumbs up you can fall into the trap of actually going looking for the rubbish you see printed without having a clue if the patterns offered an edge ever let alone in your time frame and market.

What are you doing each day to test and learn stuff about the market? Are you trading now? Live or Sim? Have you a reliable system for collecting what you actually are doing stats, thoughts, successes and failures?

Its better to spend 1 month testing real application than 1 month planning and talking about basics. Cuz if you are going to trade in a discretionary fashion getting your head around the basic stuff is years off from profitability.

IMO of course.

Hey TH,

Yeah I can see that some of the books that I have already come across offers little to me in terms of being able to scan for an opportunity or differentiating between a good opportunity and a bad one. Example - most trading books will talk about breakout trading and how to apply it to a chart (you want volume to be high, B/O has to be above 3% of the resistance, RSI to be this and your MMAs to be crossed etc) which makes sense when you are reading it and the chart they provide helps to support their thesis but rarely does the perfect scenario happen in the real world and every trade will come with differing background information. I am and will have to work hard on improving my "scanning" ability and being able to read a chart better and understand more if I want to become better and that would be done through experience and reviewing my trade book every month

The one thing that trading books have given me so far though, is how to manage my risk, how to position size, how to manage losses and how to capture profits - Trade management! Even so, the concepts covered in the books in at most - basic. I took whatever knowledge I have learnt from the book and coupled it up with information provided on this forum (ASF has been a great tool for me to build on my basic understanding so thank you all) to grow and develop my trading plan further to my own characteristics. Since following Peter2's thread, I feel more advanced in my trading methodology and abilities and there is many nuggets to be found across the entire forum!

To sum it all up, trading books may not provide the advanced knowledge for me to be incredibly successful at trading but it gives me a good foundation to start.

What are you doing each day to test and learn stuff about the market? Are you trading now? Live or Sim? Have you a reliable system for collecting what you actually are doing stats, thoughts, successes and failures?

I am trading Live and have been for about 9 months, I have set up my trading plan in December 2016 and am trading off the rules of that TP. I also have a Trade Diary, Portfolio management Tool (created by myself on excel) and Trade notes (handwritten into a book) to record my actions and thoughts in that moment. As the TP was only properly developed in December 16 and has been live for about 2 months alone, it is still early days to tell whether my TP is profitable or not - I have allocated a monthly review on the Portfolio and associated notes to see if there is any area of weakness in my TP and try to improve on that. [Wish I started developing my TP earlier when I started rather than just trade without proper guidance , lesson learnt ]

I am comfortable now to take the basic knowledge that I have acquired from books and start to really develop on advanced strategies going forward to optimize my Trading Plan. I still read trading book however, because there is always something that I have not come across before or thought about - lifelong journey

Still a long way off from saying my TP is profitable or my strategies work but in time, I shall find out.

 

[Rypieee]

Ryan, you've received a lot of interesting info in this thread but don't let it distract you from your goal. I agree with TH in that you should continue trading your plan and see if you've are able to apply it in real time. You'll probably need six months before you'll have enough completed trades to start making some informed decisions.

As you're starting you must restrict your losses to small amounts and keep your portfolio heat at comfortable levels. A lot of small losses add up. That's why I use a market filter and don't start as many trades when the market is going down.

Your first task is to see if you can keep your losses small. If you can't do this, abandon trading.

Once you can keep your losses at comfortable levels then you can review the effectiveness of your chart selections, entries, position sizing and of course your exits. You may find that a basic understanding of EW or VSA may help in some of these secondary but important aspects. They may help you discover "your" trading style.

As tech/a as mentioned, "enjoy the journey".

Hey Peter,

I have indeed received an abundance of information from this thread and forum, huge appreciation to everyone who has contributed to this for me.

Yeah I will have to stick to my TP and test it out before deciding whether it is profitable or not and to have enough information (historical info on my actions) to determine what I am doing wrong to jeopardize my profits or what I am doing right to make my profits bigger. I might run the TP for 6 months and then come back to the thread with my results

Surprising, risk management/cutting losers have been the easier part of my trading journey - unlike what the books says, maybe the statement that I read over and over again "Cut your losers and let your profits run" is etched into my brain after all that reading!

Then again, I do have the occasional slip in not adhering to my stop loss BUT the slippage is minimal (maybe 5% at most below my target stop loss was the worst case scenario).

There are many techniques out there that would be handy for my portfolio, such as adopting your method to managing risk exposure or Tech/a's 5 golden rules of entering a stock [mentioned above] that I will seek out while managing my current TP in order to improve the results. Well... how would I know if adopting your technique works? Because I didn't have any of those techniques in the portfolio in the first place and luckily, I managed to catch on and apply it before it is too late (thank god).

Looking forward to this journey of mine eagerly!

 

[CanOz]

Yep



Probably thick markets and a short time frame?

Yeah intraday stuff on the bund, eurostoxx, oil etc....

 

[peter2]

I am trading with the trend and I am buying on break-outs for both existing trends and trend reversal set ups - buying on the pullback makes me feel uneasy as it does not provide that level of confidence in comparison to a breakout.

Found GXY on the weekend (and last weekend too) when it peaked at $0.68. Last weekend I told myself to let the pullback happen to see if it test the previous resistance and jump in on the bounce off previous resistance if it does occur. Sure enough
Put a buy order in today @ .62 with a stop loss of .52

You've asked for guidance. Here's my first bit of advice. Stick to your trading plan.

Opportunity for an important review: Ask yourself why didn't you follow your TP?

 

[Rypieee]

You've asked for guidance. Here's my first bit of advice. Stick to your trading plan.

Opportunity for an important review: Ask yourself why didn't you follow your TP?

I had a gut feeling when typing that message on Tech/a's thread that someone will point that out against my statements on this thread Thanks for looking out for me on that one Peter!

Should have clarified that up with the correct wording of the statement, on my thread when I said "buying on pullback makes me uncomfortable", it was directed at stocks that have pulled back to below previous resistance levels. I wouldn't buy a trending stock at the point of it's highest low.

GXY is different to me because the pullback (when I saw it) was still occurring above the previous high point $0.54. If GXY was to go below $0.54 but rebounded before it touched $0.30 - I consider that buying on the pull back of a trend because our entry is at the higher low of the trend.

 

[peter2]

It's not personal Ryan. You know that. A TP is not like a pair of skinny jeans that you feel you must squeeze yourself into them to show off your assets.

I think you should clarify your TP so that you can follow it.

ps: Every trader reading this has tried to fit/justify a "gut feel" impulse trade to their TP. We all did it when we started out. I have separate stats on my "gut feel" trades and they're not pretty.

 

[ThingyMajiggy]

ps: Every trader reading this has tried to fit/justify a "gut feel" impulse trade to their TP. We all did it when we started out.

What if that's the only thing that works?

 

[peter2]

If your gut feel trades are overall profitable, then I'd suggest two equally probable options. Either you don't keep records and only remember your winners or your intuition has spotted a pattern that you have not consciously identified yet.

 

[tech/a]

Reversion to me is NOT trading a corrective move.

Shallow tight range lower volume pullbacks are my fav.

There are many trades every day.
You don't have to trade every trade.

There is more to a trade than
Stop
Enter
Exit.

 

[ThingyMajiggy]

If your gut feel trades are overall profitable, then I'd suggest two equally probable options. Either you don't keep records and only remember your winners or your intuition has spotted a pattern that you have not consciously identified yet.

Ah I wouldn't know how to write down a record when it's based on gut feeling as no two days are the same. I don't understand how you guys have set defined setups. But then again you guys are the profitable ones and I'm the utterly hopeless non-responder with an IQ of 7 so I'll just shut up

 

[Triathlete]

Trading Plans....

While you cannot guarantee if you use a trading plan you will be successful, as you need to fine tune each one to suit your personal style, you can be sure that by using a trading plan you will be far more successful in the market than most.

If you change your trading plan you will change the effectiveness,which may not always be for the better.Therefore,each time you change a trading plan,you need to back test it to ensure it works for you.

This is probably the greatest downfall of most traders. They get hold of a trading plan and attempt to implement it, and before long they change it and wonder why it does not work. If you are not willing to back test the effectiveness of the changes you make to your trading plan, you are gambling with your money which means there is a much higher probability you will lose.

By not proving that your rules or your trading plan actually work is, why so many traders are ineffective and over the long term actually fail.

Successful traders back test everything.

Would you not think that the first person who sky dived from a plane with a parachute tested that what they were about to do actually worked..!!

No difference for a trader or anyone else who wants to be successful.

 

[Trembling Hand]

Trading Plans....


If you change your trading plan you will change the effectiveness,which may not always be for the better.Therefore,each time you change a trading plan,you need to back test it to ensure it works for you.

You cannot back test a discretionary trading plan??

 

[tech/a]

You can back test certain aspects.

You can back test a lot

 

[Trembling Hand]

You can back test certain aspects.

You can back test a lot

Yeah sure you can test ideas but you are kidding yourself if you think a trading plan thats discretionary can be anything but forward tested in real time.