“Not every long is going to the moon or every short down the drain”.
I was looking over the charts and saw the types of opportunities my system produces which match my style. They do not occur many times a day or even in a week. I want to keep working on patience to not over-trade or over-leverage. I am thinking in terms of % gain and % loss and am looking at stuff like measuring outcomes in terms of R.
• What is “R”?
“R”, as I define it, is a value that reflects the profit factor of a fixed risk Forex money management strategy. Now, for those of you who don’t know what “profit factor” is, it is simply a value that reflects the profit of winning trades divided by the losses from losing trades. For example, if you gained $100,000 in one year of trading, but lost $50,000, your profit factor or “R” would be 2 or simply “2R”. (100,000 / 50,000 =2)
Thus, R is a measure of your overall risk to reward across all your trades, by knowing what our R value is for a series of trades we get a very quick and relevant view of our effectiveness as a trader. Think of it like this, if you have a 2R track record over a large series of trades, you can expect to make $2.00 for every $1.00 you lose in the market, a 3R track record would mean you can expect to make $3.00 for every $1.00 lost, etc. This is clearly the most useful and relevant way to track your progress as a trader, anyone who is considering funding you will want to see a long track record that shows a solid R value; the higher the R value the better.
I am working on determining what is a good outcome on a trade, what is the expected daily range on average volume etc. I am looking to see what are the key volume points on the chart. I am working on better determining when an edge is present. I am trying to stick with my rules of exiting at the pre-determined place. In other words trading correctly. Poker players are also obsessed with this.
“often the trades you are least comfortable with turn out to be the best”.
Some of the volume, trend and range stuff I did picked key turning points in the market. Many times entry with conviction also depends on instinct and a feel for the market – learning to keep score and know who came off best at key psychological moments. To deter this I am using some signals which I am learning to trust before and during a trade.
I was looking for a quote, something like “it is worse to be right at the wrong time than wrong at the right time”
I found a really nice article about Poker and Trading on mercenarytrader.com. I hope they dont mind me copying what they wrote as a lot of the things I learned playing poker continue to be useful today.
~ How many would be traders are sloppy, inconsistent, or otherwise lax in their trade selection and execution process?
~ How many traders focus more on “being right” than making money — putting P&L in service to ego rather than the other way round?
~ How many traders and investors are, quite frankly, half-assed and sporadic when it comes to doing their homework?
~ How many traders truly scrutinize and analyze their key decisions, on a rigorous habitual basis, with an eye for plugging “leaks” and sussing out incremental improvements?
~ How many traders are both brutally honest and metronomically consistent in terms of tracking and evaluating performance?
~ How many traders truly understand the impact of volatility, the necessity of adequate capitalization, and the vital importance of position sizing?
~ How many traders truly understand the “commitment of the journey,” and do not shy away from the hard transformative learning experiences such a journey naturally entails?
I know poker players who have databases of stats on themselves and other playes. They overlay them on the screen to track you and profile you as you play.
I found a nice page at an interesting site: forexdarkside.com.
Enter the market in the right time, or don’t enter at all! But when you take the risk, make sure you exit before it gets expensive for you to exit.
What to do if you are on the winning side? Hold onto your trade and allow it to deliver the highest profits possible. How to achieve that? Forget about finding an easy answer. The time you spend looking for it could be spent to learn tricks and master techniques by yourself. I’m also not going to tell you the solution, I’m sorry no charity here. Yes, I know I’m a tough teacher. The financial world is tough and so are people involved in it… I see someone leaving the class… Good luck, really, I warned you about my lessons, which could be difficult to take psychologically. Everybody else, let’s continue.
So, how to allow your profits run? You should learn about Fibonacci trading, definitely study trend lines and learn about market support/resistance. That’s the core of the big trading, believe me, I’ve named you 3 most important studies.
Something else I came across are a series of articles on futuresmag.com:
When you take a leveraged position, you are not simply speculating on the direction of the market, you also are making a market timing decision and a position on volatility. You limit how far the market can go against you before you must bail.
I was in the wrong place at the wrong time
For the wrong reason and the wrong rhyme
On the wrong day of the wrong week
I used the wrong method with the wrong technique
Depeche Mode – Wrong