Systems, Strategies & Resources for Trading Futures

[3kidsplus1]

The market crash of 2008, 7 years later.

[MechanicalMethod]

This thread was a good idea. It's dead now. I'm partly responsible in that I wanted to take but wanted to protect proprietary thoughts.

Maybe it can be revived.

I think my trading methods are different than the direction the thread was taking. I'd like to see code. Preferably EL easy language for TS tradestation.

If anyone wants to post some pseudo-system code or even some real stuff, this is one place it could be done.

Someone sent me a system last week that they described as "really" profitable. Their quotation marks not mine. I read through it and it made sense but being in system format I knew I'd need to convert it to the matching indicators to make sense of the signal arrows. I never even plotted it. Supposedly he wrote it 3 hrs earlier and was based on the theme of his main system which is even more profitable. I believe the idea was I'm supposed to offer him some input on system1 which doesn't give away all his proprietary stuff in system2 and then he'd use my input to improve system2 because it's so similar to system1.

Someone else sent an incredible ammount of input and put some really hard work into duplicating a parallel model of a new system I'm working on. I think he actually put more effort and time into his model of my model than I spent on it this past week.

Meanwhile I've determined that a project I decided to write long ago was going to be assigned a project number a few weeks ago and finally got started on it. Although I certainly don't need to be going in that direction right now, nor can I spare the time but I just love brainstorming theoretical system stuff and can't help myself from wandering off onto interesting paths when the actual code I'm writing for something else becomes tedious or boring.

Then someone sent me a project that needs my programming help and dovetails nicely with what I'm already doing and my skills in a certain area would help tremendously. I offered to write the parts he was having difficulty with but said I'd leave some comment blocks where he could fill in the details that I would describe ... in other words, I said I'd help but he'd have to write the main module.

I really didn't have time to get involved with that one and don't have confidence in the methodology but I'd do it anyway, to help him, and for what I'd learn, if I could find the time.

I did accomplish quite a bit of exception rule modeling for the 1 project I should be spending all my time on. It's a takeoff of Dunnigan's One Way Formula and I've strayed far from the original but it's still swing... Swing like nobody understands anymore, my pet peave is people who think a swing trade is longer than some given length of time. Well that's the way everyone abuses the word but Swing is actually a method that uses swinglines.

I'm a bit pissed at myself for the amount of time I spend on the net. I'm also very pleased with some of the friendships I've made and the help I receive developing system rules. It's a quandry finding the time to implement all the ideas I have because I keep looking for new stuff. Something challenging there that I don't understand or I'd have it under control by now.

Just need to close IE and open my code editor and pickup where I left off... and I need to do it now, but I want to go read some messages first ; )

I need to unsubscribe from all these message boards but that will never happen.

MM

[SE]

In terms of trading, I have been at this for about three years, seriously. During that three years I have had a range of emotions from elation to wanting to quit. It always seemed that the pot of gold was right around the corner and I never quite was able to grasp it.

About a year ago I figured my difficulties must be psychological and started to try and figure out what was the problem. I mean, I could see setups, I could trade setups, and yet, my success was always a shot in the dark really. Yet, everytime I paper traded I kicked assets.

Recently, I took a course from Don Spinks at patterntrading.com. It can be found here:

http://www.patterntrading.com/

http://www.patterntrading.com/signal.htm

This course alone helped me with my trading by doing the MBTI test and determining what signal system would best fit my psychological profile.

I am currently taking a course in controling anxiety and determining the root causes of the anxiety. There is a degree of self sabotage that can occur in traders and from time to time I would partake in that self sabotage. This is a reference to the course work I am now pursuing.

http://www.patterntrading.com/tradingpsychology.htm

Let me say that these discussions with Don have changed my trading behavior for the better and I am extremely impressed by what he is doing for me. My success is now a consistent thing. In order to be extremely successful at trading you do not need to get 20 points a day. All you need is something that is reproducable and consistent day in and day out. Heck 2 points a day net on 10 S&P minis is $1,000 per trading day. Given the range of the S&P being much larger than 2 points, it is easy to see that that is not hard to achieve, given the right tools for you individually.

I do not receive any compensation for this post. That is not what I am about. Don does not even know I am posting it. The reason I am posting it is that Don has helped me and I think he can help others as well that might be struggling a bit. His rates are extremely reasonable. I would strongly encourage anyone that trades to give him a call and see if he can help you. Perhaps as you talk to him you decide he cannot and that is fine as well. There is no charge to give him a call and find out what he can offer.

As always, my only wish is that everyone achieves their own individual goals through trading. If I can provide a little help along the way, I will be happy.

My Best.
-SE

[SE]

Most curious. Three deleted messages. I never saw them so don't know what they were, but thank Bob for stopping by our little corner of the world here.

My personal view of what will be tolerated on this thread is quite broad. I don't care what direction it goes in really. This is about trading. The aspects of what affects trading are very broad in my opinion. I don't even mind off topic discussion as I believe there needs to be an outlet for the pressures of trading and off topic can provide that.

Somehow this thread seems an unusual place for spam. For the most part we are talking trading tactics here, and more likely than not most of us are trading the futures markets...so penny stock pushers stopping by won't yield any real tangible results so it seems odd that they are bothering, assuming that that was the direction of the deleted posts.

So even though I don't plan on being very active in exercising my authority over this thread, I am glad to know that Bob is there on a daily basis to oversee and ensure that we at least remain civil on this board.

My best.

-SE

[Poet]

Your spam has been reported.

[SE]

Feel free to add some brilliance of your own here.

I am certain you have it in you.

-SE

[I_Know_Nada]

That was really deep, man. Cool.

Pontificate some more, dig? I just can't get enough of this stuff.

Thanks.

[SE]

Hi MM,

Tom had a system he developed many moons ago that he trades. He is very much the system trader. If his system told him when to go to the bathroom, I believe he would follow it! His system can be traded across many markets and works very well for him. He is quite hush hush about the mechanics of it, and reasonably so I suppose. I have not talked with him in quite a while.

I created a system a couple years ago that backtests well, but it is not my trading style, so I did not stick with it. If anyone is interested it is a simple moving average crossover system. 10 minute charts, 14 period and 150 period moving average. Profit goal of 3.15% and stop at 1.05%. The profit goal and stop are converted to points every 100 spoo points or so and that is the target used until the next 100 point marker is crossed. It seems to work well. Check it out if you wish.

Anyway, just passing through tonight. Will offer more thoughts in the near future.

-SE

[MechanicalMethod]

Alex: I like your thoughts on scaling profits and would add a mirror image can be used for entries but maybe that was implied and I'm being redundant. I'm interested in conditions, patterns, and areas that signal changes.

SE: if you or anyone else is familiar with techniques Tom Trader used it could be a starting point for discussion.

Best Regards, MM

[SE]

Could it be possible you are trading when a trading signal is not generated?

Absolutely. On many of my trades that don't work, when I study the chart later to see what I missed or why that trade did not work I can honestly state, "what on earth was I thinking?" I don't think there is a contradiction in my statements. The problem is one of perception, ideas vs facts. The signals are the facts. The belief that one must be actually trading to be "working" helps to create a set of beliefs about the market direction. The market is about to go higher, or go lower...that kind of inner talk. After a while of that, especially if you do it enough times and are correct, but did not take the trade, you can literally be blinded to the facts (signals) in front of you, or choose the facts that support your idea while neglecting to see those that would suggest otherwise. Then you take a trade and lose. You forced one. Pushed it. The belief became the reality for you for that moment in time and you act on it. Later when the pressure is off, frequently it is easy to look at it and say "what was I thinking?"

So yes, I am fully guilty of overtrading from time to time. I am working on getting beyond that, recognizing fully that solid discipline is critically important. That however, does not mean that the mind does not override the facts from time to time. It is limiting those times that is important, and eventually elimination of trading like that. I hope some day to be able to trade off the facts only and leave my emotional makeup on the sidelines while engaged in trading.

You have to put stops immediately behind you and get ready for the next trading signal, or you will not have a chance in this market.

I agree 100% and am improving in this area. Thanks for mentioning it though as it is important for all of us to keep in mind.

Your thoughts on profit exits are good ones as well and I appreciate you bringing them to this board. I hope you will offer other tidbits and thoughts from time to time as we all try to improve our success at this endeavor.

Best Wishes
-SE

[aldrums]

Hi SE,

I've read all your posts and enjoyed them. I seem to have found a contradiction in your thought contained in this post. First you say:

"Currently I have an entry system that works for me. It is tailored to my needs and it speaks to me. I can see in a glance if the market is long, short or undecided."

Then you say:

"First, I believe that if I am not sitting at the computer watching charts and trading that I am not working. It doesn’t feel like work. This act of watching and not doing anything. I need to be working. This is not a good perspective and causes me to force trades"

Let me ask, if you truly have a system that works for you how can you be forcing trades? If the system generates a trading signal, take it, if it doesn't generate a trading signal, don't take it. Could it be possible you are trading when a trading signal is not generated?
Theoretically, whether this system generates a 100 trading signals a day or only one trading signal a week, you are not overtrading as long as you only trade when given a signal.

Here are my thoughts on taking profits:

Let the market tell you when to take your profit. There are a number of clues to when any particular move will end. They are:

1. Euphoric buying. (Increasing volume and pace of trades)
2. Panic Selling. (Increasing volume and pace of trades)
3. Slowing pace of buying or selling. (Decreasing volume and slowing pace of trades)
4. A move into a previously defined support or resistance area.

Of course, you may sell after any one of these events occurs and the trade will keep going in your direction. A way to minimize your regret is to scale out trading two or more contracts and sell the first contract when the first exit signal occurs, then move your stop to break even. Now you have a free ride and your profit is locked in. You cannot lose, you can only increase your gain or sell your remaining contract at break even.

Try not to beat yourself up about taking profits. This really is the most difficult aspect of trading. Mechanically, stops are easier to take than profits because you know exactly where to get out, assuming you have pre-defined your risk.
The other day I was watching "Who wants to be a Millionaire" and I saw a guy win 250K and he was so bummed out. What could possibly be bad about winning 250 thousand dollars? When you know you could have one 500K if you had just followed your instinct, gut feeling, or "Intuition" if you will. This guy KNEW the answer to the next question, and if he got it right he would have won 500K. He kept saying "Its gotta be this" over and over. But instead he went the safe route and didn't answer the question, automatically guaranteeing him 250K. When Regis said, "What would have been your answer?" and it turned out he was right, you never saw anyone get so depressed. The guy looked like his dog had gotten hit by a car, and he had just won 250 thousand dollars.
What I'm trying to say is, you have to listen to that little voice inside you that says "Sell Now", even if it is wrong. You have to go with your gut. Scaling out of trades allows you to go with your gut and get a free ride for any additional profits. With experience your gut feeling or intuition will become more correct, and you will be able to determine the difference between wanting to take a profit because the market is showing you one, and exiting your trade because the market is giving you a signal to exit.
If you can't trust yourself who can you trust? I don't think that guy on millionaire will ever get over what happened to him because he didn't listen to that voice inside. Fortunately, we as traders always get another chance to improve ourselves every market day as long as we keep our losses small. We always get another chance to listen to our intuition.
One more point, you said in one of your earlier posts:

"Very few traders have the mental makeup and discipline to immediately re-evaluate the market and re-enter a position after being stopped."

You also made a reference to taking a stop as "Psychological Damage". If you really think of stops in this way you will have problems with your trading. You have to put stops immediately behind you and get ready for the next trading signal, or you will not have a chance in this market. Trading is a game of probablilites, not certainties. There is a random distribution of wins and losses for every trading signal you get. You need to think like a casino, sure you will take some losses in the short run, but in the long run you will be a winner because your system gives you an edge in the market.

Great Prosperity,

Alex

[SE]

The Art of the Deposit, While Learning.

Currently I have an entry system that works for me. It is tailored to my needs and it speaks to me. I can see in a glance if the market is long, short or undecided. This is what each of us needs. A system that when we look at it, we can tell, almost instantly, whether the market is long, short or undecided.

Once that is achieved the entries become a matter of following the system.

However, I have a very real problem with exits. I want to discuss a couple of things in this piece. Things I am fairly certain are correct, well, at least correct for me, but things I need to incorporate into my being a little better.

My history is that I tend to work hard when I undertake a task. I now believe that has harmed my trading in two ways.

First, I believe that if I am not sitting at the computer watching charts and trading that I am not working. It doesn’t feel like work. This act of watching and not doing anything. I need to be working. This is not a good perspective and causes me to force trades. It does so by creating an underlying feeling of guilt that I am not “doing” anything. If this venture is going to provide for my family and me, it seems to me it should be hard work. Either physical or time spent. However, trading does not have to be that way and is one of the reasons I am attracted to trading. Heck, you could “work” for two hours in the morning and call it a day! That has got to be appealing to everyone. This underlying notion that I have learned over time that work has to be long hours or strong physical exertion must be removed from my mindset.

In fact, it is now becoming apparent to me that although this is hard and study must be had continuously, once you bank a lot of time in the venture, that bank of experience comes back to you one hundred fold. This venture no longer needs to be a massive consumer of time and energy. I am not saying once you get it, you can give up study and hours in front of a computer screen, but it is possible to back off and trade only for an hour or two a day and still meet your goals.

Second, when working on this the last few years I have spent hours trying to find the holy grail. Part of that search was that if I found one thing that worked a fair amount of the time, but not always, I would add to it to eliminate the times it did not work. Then I would add something else and another indicator or chart to look at. Eventually my workspaces were a jumble of things that I had to check and cross check on each trade. I made trading into what I believed it should be: hard work. Now what I have is two charts, a 3 min and a 5 min. They tell me whether or not the market is long, short or undecided. They also tell me when to enter. I do check three other charts in a 5, 10 and 30 minute time frame. Those charts are simply a quick glance. They tell me whether or not the primary 3 and 5 minute chart has a good chance to run, or if the move is about extended or perhaps if I should pass on the current signal and await the reversing signal that will come in a bit. It is simple, elegant and “easy.”

This brings me back to my original point of this post, exits. How many times have I studied the compounding of capital in this trading venture, especially with the ramping up of contracts. I mean if you can trade each day for 2 points, consistently and you trade 10 eminis at a crack, one trade for +2.00 is worth $1,000. Considering 250 trading days a year, you are pulling down over $200,000 per year.

As of today I have set a short term goal for myself. It is not great guns, however, if I consistently do it, day in and day out, all my goals will be met. I keep falling into the trap of watching the trade AFTER I exit the trade and saying “what if?” That is terribly detrimental. What is causes is blinds spots. The next treade instead of taking 2 or 4 or 5 or whatever the market gives you, you want 10 or 15 or 20. All of a sudden instead of taking small consistent bites, the market is slowly and consistently taking small bites of your capital.

Until I become better attuned to exits and stop thinking about 10 pointers and 20 pointers, I am going to set my limit exit when I enter the trade and if it gets there I am going to be happy that my current daily goal has been met. I will continue to study the art of the exit and hope to improve, but until I know I have it down I will allow the market to fill my account with my small consistent daily goals. Perhaps over time I will become less interested in the 10 and 20 pointers and realize fully that achieving small consistent daily gains is in the end what this game is about. I realize it mentally, but my trading actions have been saying that I have not integrated that thought process into my trading.

After all, isn’t it backwards to set a stop, say 4 points, and tell the market, “Mr. Market, you may take 4 points out of my account, but no more” and yet not tell the market, “Mr. Market, I would like you to deposit 4 points into my account?” It is the act of the deposit that grows the account, not the act of the withdrawal, but most of us are conditioned to only set stop losses and profit limits.

For now, I am going to let the market deposit to me and I will work on improving exits.

Thoughts?

SE

[SE]

Some interesting comments found on a Packers newsgroup.

Amazing how it can be applied to trading as well.

Are you looking at too much stuff? Time to cut through the maze and get down to just a few trusty indicators or patterns. Much more than three things when making fast decisions tends to muck up the works anyway, at least it seems that way to me.

-SE

-------------------------------
> >"I'm not a big phone guy," Wolf said. "I trust what we're doing. Our
> >staff knows what our coaches are looking for. If we don't, we're up
> >to our butts in alligators. Half the time, after I pick a guy, I get
> >some information I didn't know. Had I known it, I wouldn't have
> >done what I did, and it wouldn't have been beneficial. That's why I
> >don't like to have a lot of information. But other teams love it."
>
> Wow. So I guess Wolf relies on luck more than anything else.


Not quite. Let me break it down for you. Wolf subscribes to the notion
that more is not always better. Those of us in decision making posts
(especially those who have to make decisions under pressure, without
unlimited time) know that having too much information can be just as bad as
not enough. Remember those story problems in math that tell you all kinds
of stuff, but you only need a little of it to solve the problem? I think
its like that. Put too much information on the table, and you just have to
sort the wheat from the chaff. Wolf seems to be saying that he just keeps
the useless information off the table in the first place. Easier to see the
clearly that way.

[SE]

Thanks. Not sure how active this will be, but I will from time to time post thoughts I have on trading. I hope others will as well and people will challenge my thinking if it needs to be challenged. We all can learn from that.

-SE

[Mike_Nvrsettle]

SE, I am new to your message board, but you have some great ideas to share and I will definately be checking this
board regularly. Thanks for sharing your thoughts.
Mike

[SE]

Another set of thoughts....

In thinking about trading, you need to be correct a number of times when making a trade. If you are not correct at any of the first three, you will lose on the individual trade.

1. Market Direction.
2. Market Timing. Entry.
3. Stop Positioning.
4. Market Timing. Exit and/or Stop Movement.

1. If you are wrong about direction, you lose.

2. If you are right about direction, but mistaken about timing, you lose.

3. If you are right about direction, but incorrect about positioning (by as little as one tick) you lose. This is why tight stops are problematic at best. We have already discussed this (see prior post).

4. You can be right about timing, direction and stop placement and still come out with little to show for it.

Answers:

1. Good entry system that you know and trust. You must find indicators or patterns that speak to you and develop and use them.

2. Again, a good entry system is necessary to guard against bad timing. Problem is even a good entry system will not protect against the occassionaly spike type move that happens. If that happens after your entry, you have bad timing....or rather bad luck on that trade.

3. This is probably the most problmatic area for traders I think. The deal is you need to set stops that are market relational and also just beyond the zone of price that would cause a change in signal. In other words, if you are working off a moving average and a STO for a signal system and the price moves 6 points against you, the question is did that price movement change the signal system from long to short or from short to long? If the answer is yes, you need to be out and you are in the stop zone. If the answer is no, you need to stick with the trade as the signal system has not told you the market has reversed.

4. The exit is also problematic. I think a lot of times it comes down to wishes and hopes. I always want to let it run. I don't want to take +4 when I can get +10 and so on.

However, leave a lot of +4s on the table and you won't seem to end up with a lot to show for correct trades. However, it seems that invariably when you do exit and take the profit, the counter-trade moves fails and you are left at the station.

-SE

[SE]

Welcome aboard. I guess I will get this slow ball rolling with some ideas I have on stops. I was thinking this through the other day and wrote up a few lines.....


"I sit here and contemplate the possible perpetuation of a fraudulent idea.

It is the idea that you must trade with stops. Well, not that completely, because I do believe stops are very important, but it is the proper use of stops that I believe is not taught. In fact, most of the time the use of stops is taught as a risk reward type of analysis. If you are willing to risk 4 points, to gain at least 4 points you must be correct more than 50% of the time to breakeven. Well, that all sounds good….but consider that many of the times you are wrong, by 4 points, the market stops you out and continues in the direction you thought it would go. Of course, the answer always is you can get back in.

However, you have two things working against you now. Number one you just lost four points. This is psychological damage. Will you get back in? What will have to occur for you to get back in? Most of the time a move back through your original entry price. Very few traders have the mental makeup and discipline to immediately re-evaluate the market and re-enter a position after being stopped. This creates problem number 2. You are down four points on a trade that is going the way you thought it would and now you re-enter it. Even if you gain four points, you are now only breakeven on the day.

How many times does the market chop around? Take a look sometime. How often do you call the exact top or bottom of a move? Rarely. In fact, I am willing to bet, without study that at least 75% of the trades one makes, sees their entry price again after going against them. Most of us are smart enough to know direction, but might not get the exact entry timing down.

So what does this tell us. We cannot use dollar based stops. We must use larger market based stops and have the discipline to exit a trade prior to them being hit if we see that we are mistaken in our read.

Too many traders, I believe are being eaten alive by small 2 to 5 points stops, when they could simply go to a market relational stop (usually 8 to 10 points) and improve their performance just by changing their stops.

Using a 10 point stop that has a 20% chance of being hit is like using a 2 point stop on each trade. However, using a 4 point stop that history shows has a 60% chance of being hit is really using a 2.4 point stop on every trade. That is a considerable difference over the course of a couple of hundred trades. In fact, the difference is 40 points. In the course of a year this could easily cost 100 points to the account. For a small account, that is simply unacceptable.

Each trader must evaluate their stops against their record to determine if they are being set to tight. My belief is that when that analysis is done, the answer to winning in this game is not setting tighter stops, but larger stops. Tighter stops simply ensure more losses."

-SE

[Poet]

Hi SE,

I'm glad to see you've set up a futures thread here. I'll be lurking (and asking hideously elementary questions) when the discussion gets going.

I've set up an Options Box thread here too, but have been waiting for Sheriff Bob to ride into town before I activate it.

Anyway, good luck.

Poet