First the mandatory I have no relation or affiliation with the following products. This is just to answer the question before someone asks.
Charting
I use Investor/RT from Linnsoft.com as my charting package. I started with a different software package and just got too frustrated with limitations. IRT is very powerful and efficient package. Before I switched I felt I needed to upgrade my PC. Now I have more charts with more complex indicators and I use less CPU than my old package.
The main reason I switched was to get the Volume Breakdown capabilities and the Market Profile features. I have not got into writing systems for back testing. If I can code enough of my entries, I look forward to being able to utilize that capability too.
Order Entry
I quickly realized that I was lazy. (like I did not already know that) I need my order entry software to place and help manage my stops. I decided that Ninja Trader was a good platform for my tastes. I have upgraded to the new version 6, but I don't think I'm going to get into their charts any time soon. It is an add-on to get the Market Profile capabilities. I'd love to trade from the Chart, but that will have to wait for now.
Ninja also has a great simulation capability. I needed this to help me work through my over trading and refinement of my trade filtering. Before Ninja, I could only "Burn and Learn" as I worked on different trade entry setups. Things "look different" in real time. You get to see candles and indicators forming, but things can change by the time a candle closes. So even after reviewing many historical charts, a trader should start in simulation.
I know of people that will sim trade at least a day when they get back from a vacation to make sure they are back in synch with the markets before putting real money on the line.
Trade Wise, Trade Well
John
Showing posts with label How I Trade. Show all posts
Showing posts with label How I Trade. Show all posts
Wednesday, May 2, 2007
My Trade Setup
Intro
As I feel my "style" is a work in progress. I not ready to share specific trading rules of how I trade. I will give hints and reasoning on why I took trades (good and bad) and why I might have had a signal, but passed on the trade. If what I'm saying makes sense, I'm sure the details will work their way out in my posts.
In my trading journey, I have looked through most of the indicators commonly available in most trading packages. I have even developed my own indicators and modified existing ones wanting to reduce lag and eliminate false positives. Well I can say for me, all those indicators were not the "Holly Grail" of trading.
How I started
Early on, my preferred indicator was the Stochastic. It just "felt" the best to me for the signals it provided. Then I stumbled into the True Strength indicator (TSI). It gave signals very similar to the Stoch, but deals with prolonged trends better and did not have me wanting to counter trend trade as much as the Stoch did.
As I evaluated my trades, I discovered that I was not using these oscillators as much as I originally intended. My preferred entries were often before the indicator turned. (up for a long or down for a short at an extreme level) So I was either waiting for the indicator to turn and getting into the trade late or I took the trade and ignored the indicator had yet to turn. I'm at the point where I feel I'm no longer using the oscillator and have even removed it from some of my charts.
From my first post you may know that I have no trouble pulling the trigger to enter a trade. I actually pull it too often. (no comments please) I would have no problem taking 100 trades a day if the Risk reward would work out right. I have come to realize that I should filter trades down and expect to average around 10 - 16 trades per day and keep the profits from those trades and not try to give it back with a lot more trades.
Chart Periodicities - I like everything fast. Fast cars, fast... oops. back to trading. I fell in love with Tick based charts over time charts. For the ES and ER I like the speed provided by a 233 Tick chart (trades per candle) Recently I started playing with Volume based Charts. Looks like my love is going to change.
I find the volume charts very similar to the Tick charts. Both Tick and Volume based charts condense the "slow periods" into fewer candles than a time based chart displays. I feel they provide a far superior look at the market action, especially when using an all session chart to view the overnight trading action.
I like to know what happened overnight (when there is good movement) and be able to see where the highs, lows, and any support or resistance my have occurred. I'm starting to believe that the Tick charts "hide" or "delay" the signal when there is a start to a high volume move. My 233 Tick chart looks for 233 trades to display a candle. It does not matter if those are all 1-lot trades or all 100 lots. Every 233 consecutive trades make a candle.
While the volume chart breaks down the candles by number of contracts traded. When a 1000 lot trade comes through - that makes one candle on my 1000 Volume chart. So if the candles start flying onto the chart, I know size is coming into the market. Hopefully right after I enter my trade. :-) In the slow periods, it can take 1000 one-lot trades to make a single candle on the volume chart. The Tick chart would display 4 candles for the same scenario.
Still I find I can not completely get away from Time based charts. A 3-minute charts helps to "slow things down" and get me back on track again, but I have gravitated back to a 1-minute chart again. I also use a 5 minute chart throughout the day for the "big picture"
Volume - I look for volume increasing as price trends in a direction. Then I want to see reduced volume on the pull backs to feel the trend will continue. This is best seen on the 5 minute chart. I need to watch this closer throughout the day. I find myself keeping a close eye on the volume brake down. I watch the Delta between the "Up Tick" and "Down Tick" volume as a measure of buying and selling pressures. The delta (or difference) can help me filter out some trades as there is usually a big spike or swing in the delta into the direction of the trade before the trend continues or turns.
I have also compared the Delta of volume traded at the Bid compared to the Ask. Both provide a similar indicator, but my preference is to use Up Tick and Down Tick volume break down as I feel there is a better "turn" indication provided. That is when one is compelled to take that counter trend trade.
In additional to the Volume Delta, I also look at the accumulated volume break down and like to see this track with the current price trend. Meaning I want the accumulated volume break down to make a higher high if the price is making a higher high.
Floor Trader Pivots - I like to make sure I know where the floor trader pivots are for the day. While I do not just trade or fade the pivots, I do watch for bounces at these levels. I'll either take some of all profits and look to re-enter the trade if the trend continues. I plot 7 levels. R3, R2, R1, Pivot, S1, S2, and S3
Market Profile - I'm very new to Market Profile. This is an area I want and need to work on getting more experience. Currently, I use the "Value Area" and "Point of Control" like additional pivots. I expect to get at least a small bounce when these areas are reached. Frequently these are the turning points for a major high or low. I'm amazed how often the main floor pivot is close to the Market Profile Point of Control.
Market Sentiment - I like to use the NYSE Tick as measure of the market. I'm sure many other traders do too. Making sure I only take a long in the area of what I feel is a Tick low. Likewise, Only taking a short at what I feel is a Tick high.
Yes I used that word "feel" hmmm.. Does that make me a discretionary trader. Maybe to an extent. There are just some things that are difficult to put a hard and fast rule to.
Misc Sentiment - I'm also watching the NYSE Advancing Issues ($ADV), Declining Issues ($DECL), Advance Decline Difference, NYSE Up Down Volume ($VOLD), and I added TRIN back for some reason. I may not keep it.
I also like to watch the DOW, Russell, Nasdaq, and SOX to see if things are trading "in-synch" as far as trends go. I ask myself, are other sectors and indexes also making a higher highs or lower low.
I have a few other things I'm working on, but I'll save that for latter and give credit where credit is due.
Trade Wise, Trade Well
John
As I feel my "style" is a work in progress. I not ready to share specific trading rules of how I trade. I will give hints and reasoning on why I took trades (good and bad) and why I might have had a signal, but passed on the trade. If what I'm saying makes sense, I'm sure the details will work their way out in my posts.
In my trading journey, I have looked through most of the indicators commonly available in most trading packages. I have even developed my own indicators and modified existing ones wanting to reduce lag and eliminate false positives. Well I can say for me, all those indicators were not the "Holly Grail" of trading.
How I started
Early on, my preferred indicator was the Stochastic. It just "felt" the best to me for the signals it provided. Then I stumbled into the True Strength indicator (TSI). It gave signals very similar to the Stoch, but deals with prolonged trends better and did not have me wanting to counter trend trade as much as the Stoch did.
As I evaluated my trades, I discovered that I was not using these oscillators as much as I originally intended. My preferred entries were often before the indicator turned. (up for a long or down for a short at an extreme level) So I was either waiting for the indicator to turn and getting into the trade late or I took the trade and ignored the indicator had yet to turn. I'm at the point where I feel I'm no longer using the oscillator and have even removed it from some of my charts.
From my first post you may know that I have no trouble pulling the trigger to enter a trade. I actually pull it too often. (no comments please) I would have no problem taking 100 trades a day if the Risk reward would work out right. I have come to realize that I should filter trades down and expect to average around 10 - 16 trades per day and keep the profits from those trades and not try to give it back with a lot more trades.
What I like now
Chart Periodicities - I like everything fast. Fast cars, fast... oops. back to trading. I fell in love with Tick based charts over time charts. For the ES and ER I like the speed provided by a 233 Tick chart (trades per candle) Recently I started playing with Volume based Charts. Looks like my love is going to change.
I find the volume charts very similar to the Tick charts. Both Tick and Volume based charts condense the "slow periods" into fewer candles than a time based chart displays. I feel they provide a far superior look at the market action, especially when using an all session chart to view the overnight trading action.
I like to know what happened overnight (when there is good movement) and be able to see where the highs, lows, and any support or resistance my have occurred. I'm starting to believe that the Tick charts "hide" or "delay" the signal when there is a start to a high volume move. My 233 Tick chart looks for 233 trades to display a candle. It does not matter if those are all 1-lot trades or all 100 lots. Every 233 consecutive trades make a candle.
While the volume chart breaks down the candles by number of contracts traded. When a 1000 lot trade comes through - that makes one candle on my 1000 Volume chart. So if the candles start flying onto the chart, I know size is coming into the market. Hopefully right after I enter my trade. :-) In the slow periods, it can take 1000 one-lot trades to make a single candle on the volume chart. The Tick chart would display 4 candles for the same scenario.
Still I find I can not completely get away from Time based charts. A 3-minute charts helps to "slow things down" and get me back on track again, but I have gravitated back to a 1-minute chart again. I also use a 5 minute chart throughout the day for the "big picture"
Volume - I look for volume increasing as price trends in a direction. Then I want to see reduced volume on the pull backs to feel the trend will continue. This is best seen on the 5 minute chart. I need to watch this closer throughout the day. I find myself keeping a close eye on the volume brake down. I watch the Delta between the "Up Tick" and "Down Tick" volume as a measure of buying and selling pressures. The delta (or difference) can help me filter out some trades as there is usually a big spike or swing in the delta into the direction of the trade before the trend continues or turns.
I have also compared the Delta of volume traded at the Bid compared to the Ask. Both provide a similar indicator, but my preference is to use Up Tick and Down Tick volume break down as I feel there is a better "turn" indication provided. That is when one is compelled to take that counter trend trade.
In additional to the Volume Delta, I also look at the accumulated volume break down and like to see this track with the current price trend. Meaning I want the accumulated volume break down to make a higher high if the price is making a higher high.
Support and Resistance Measures
Floor Trader Pivots - I like to make sure I know where the floor trader pivots are for the day. While I do not just trade or fade the pivots, I do watch for bounces at these levels. I'll either take some of all profits and look to re-enter the trade if the trend continues. I plot 7 levels. R3, R2, R1, Pivot, S1, S2, and S3
Market Profile - I'm very new to Market Profile. This is an area I want and need to work on getting more experience. Currently, I use the "Value Area" and "Point of Control" like additional pivots. I expect to get at least a small bounce when these areas are reached. Frequently these are the turning points for a major high or low. I'm amazed how often the main floor pivot is close to the Market Profile Point of Control.
Market Sentiment - I like to use the NYSE Tick as measure of the market. I'm sure many other traders do too. Making sure I only take a long in the area of what I feel is a Tick low. Likewise, Only taking a short at what I feel is a Tick high.
Yes I used that word "feel" hmmm.. Does that make me a discretionary trader. Maybe to an extent. There are just some things that are difficult to put a hard and fast rule to.
Misc Sentiment - I'm also watching the NYSE Advancing Issues ($ADV), Declining Issues ($DECL), Advance Decline Difference, NYSE Up Down Volume ($VOLD), and I added TRIN back for some reason. I may not keep it.
I also like to watch the DOW, Russell, Nasdaq, and SOX to see if things are trading "in-synch" as far as trends go. I ask myself, are other sectors and indexes also making a higher highs or lower low.
I have a few other things I'm working on, but I'll save that for latter and give credit where credit is due.
Trade Wise, Trade Well
John
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