Aug 18, 2007

Some thoughts

I mentioned in the comments section that I still have room for improvement with my system. Particularly, I need to do a better job of entering trades that give me a signal according to my rules/style. Right now, I'm entering anywhere between 55-65% of the trades that present themselves to me. I'd like to get that up to 90% and that is a number I believe is achievable. Why don't I enter all the trades I see? Well, can't sum it up with one answer but I believe the following factors come into play:

-fear of losing more money if I'm wrong on an entry (especially if I'm already down for the day)
-fear of messing up my current profit (especially if I'm doing well on the day)
-fear of being flat out wrong

This past week was a good example. Overall, I did ok and ok will pay the bills. I like my system right now and I plan on increasing my risk per trade very soon in order to truly reap the benefits. However, this week I only entered 66% of the trades that presented themselves to me. Of the trades I decided not to enter for one reason or another, that represented and additional 4R in profit. That may not sound like much... but for me, it's money that should be in my pocket. The difference between paying the bills and living well. These are the things that grind in my mind every single day. Of course, I do realize that - in the end - I am profitable and that does mean a lot. Daytrading is not an easy career and, except for Thursday (thank God for Thursday), this week proved it.

So, there's a couple of other things I'm going to do to improve my system. The first is to exit off the 5-min timeframe (when price crosses above the 5ema). This may change, but I have found this exit method to be more profitable in the long run than exiting off the :15. I WILL stick to this. Secondly, I will also pay more attention to NR7 bars that form near the 61.8 or 38.2 levels (especially if they're inside bars), regardless of whether there's increased volume from the previous bar. I think this will add a few more candidates every week that should really pay off.

Finally, it's so encouraging to see traders become successful. In particular, Prospectus over at movethemarkets.com have had some really good days lately along with TraderBubs. I've followed these guys for the past year and have been there when they haven't been doing well and it's great to see them doing so well. I know that this week has probably meant the world to them... a sign of possible things to come and a potential career that will certainly reward the time they've put into the research and chart analysis. I mean, Prospectus made like 20R in one day... incredible. For me... it's steady as we go. My goal is to constantly make 6.3R per week, for 46 weeks. If I can get into 90% of the trades that present themselves in my system... I can easily surpass that every week.

9 comments:

Anonymous said...

OONR7: I like your thoughts and I like see you review your trade from time to time, that makes you a successful trader eventually. One thing I want to point out is, as you are entering more and more trade, position sizing and risk management is the key. X always mentioned that he do one to 2 rounds of trade a day, that's something I always think of, whenever I got more than 5 trades a day, I'm down for that day for sure.
Using price cross ema5 is a good move, I had realize that also in the past weeks.
Keep it up!!!

-DT

OONR7 said...

dt... not sure I understand what you're saying. Are you saying that if you enter more than 5 trades a day that you are usually down at the end of it all? I don't imagine I will make more than 5-6 roundtrip trades per day... on a very active day. I just don't see how I can manage more than that and, frankly, my system typically doesn't produce that many winners. Also, no matter if it's one trade or 20... I will always calculate position size based on my risk per trade.

Jerry said...

I am sure you will get the R you want.

bl said...

nr7,
A few things: you're consistent in your direction of achieving 6.3R by analizing and tweeking your system,,,I understand the fears,,,I don't understand the 5ema exit, examples?,,,do you ever trade the first 1-15 minutes, or fade like Friday's gap with esp the financials-CFC? Guess that would be a counter gap trade method you've been thinking about. How is that going?,,,it seems to me that when stocks retrace alot, then reverse(X's b&b type) and you're looking to get back in at the .38 level it might run out of steam just after that level,,,Briefing had some good nr7 fib stocks: adsk wfmi mpel kss,,,Thanks for your help and method.

OONR7 said...

bl... my exit method now is essentially the same as before, but off the 5-min chart. For shorts, when the high or close of a candle is above the 5ema, I will sell my shares on a break of that high or close. Of course, if the price shoots down and has either reached the fib. ext or beyond... I will consider exiting at any time. Hope the makes sense... if not, stay tuned next week for some real examples.
No, I don't trade the first 15 minutes and I'm usually not finished with my watchlist till about 10:15 or so (sometimes a little earlier). As for countergap trades... I've just taken a break during the summer as they are a bit more risky, but I did see some nice ones setting up this week.
And yes, I agree that when price retraces a lot, you have to be careful of false signals. That's why I wait for increased volume and typically for the prior bar to my entry to be in the direction I want to trade (up for long, down for short). The Rise or Fall chart from 7/28 is a good example of this:
http://oonr7.blogspot.com/2007/07/rise-or-fall-72807.html

bl said...

ok,
how about EWH 5 min trade...would you have gotten in at 10:20-25 and exited 12:00-:05. Love the 9:50 hammer which retraced to the 68 fib level(prev close-open low),,,my AMP chart is totally different thayours 7/27

OONR7 said...

bl... yes, that's a perfect countergap entry with increased volume. Now, remember my new exit strategy? Well, looking at that chart I would've definitely exited off a break of the 10:50 high with pretty much a breakeven trade. Of course, knowing me, I probably would've sold half as it pulled away from the fib. ext. :)

Rudy said...

ooNR7, how about another fear factor: fear of fear itself? Example: $100,000 open position in a fast moving market with the prospect of a measly $500 gain? lol. Great post that sums up the dilemma faced by all traders.

Some suggestions on more risky set-ups (15 min chart):

Long Entry:
(1) Wide open range bar
(2) Vol > prior bar
(3) Triangle formation = higher lows + nr7

Break-out Bar:
(1) close near high (best when solid green bar, i.e. no tails)
(2) vol > prior bar
(3) vol swell as stock rallies (not wedging up)

Some Other Considerations
(1) Trade in the direction of the gap
(2) Proximity to open range high and 5ema
(3) General direction of the nasdaq: overall bullish or bearish? Is it breakout of trading ranges? Is it marking higher lows and highs?

My 2 cents, Rudy

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