Thursday, March 5, 2009

Massaging more Profits out of the Method

I'm not going to sit here and tell you i'm changing my method again - i'm not. But what I have been noticing is that some of my entries are a tad too aggressive and many times these aggressive entries (while yield a hypothetically lower risk value) offer more stop outs than if I were just a little more patient. So I tried relaxing my entries just a tad... maybe 7% and ya know what? It really did wonders for filtering some losing trades. Hell two of my losing trades today and my fakeout yesterday afternoon could've been filtered by just relaxing the entries a tiny bit. So I did make this change. In backtesting it shows the same thing over and over again. If with my old settings I got nailed on taking "end of trend" setups 10x's with the old entry criteria, I could cut out more than half of those by just being a bit more patient.

The downside? In some cases are going to be paying up a bit more for the position because you are getting in later. Other times your getting the same fill OR BETTER depending on how the swings play out. And once in a blue moon the position blows away from you. But more often than that scenario is the avoidance of bad trades and I much rather miss one winner if I can avoid five losers.

Trading is evolutionary. I'm still tweaking this method but frankly I like keeping it simple, bare bones how it is because I do believe it works. My biggest concern was catching all of these "end of trend" pullbacks. If relaxing my entries ever so slightly to confirm momentum in my favor can avoid just some of them it will do wonders for my profitability. This TINY change in entries from last Friday through today could've saved me -6 points on my 1min entries and -3.25 points off my tick chart entries... that's -487.50 in losses in FOUR DAYS! So I think this is a very valid and very good change to make and that's how I will be trading from now on.

Which takes us to today. I got creamed! First trade was a double bottom that didn't hold. But it was valid and that's fine. The next pullback faked me out on the tick chart (relaxed entries wouldn't have gotten in!) and then gave a valid sell on the time chart that I didn't take for reasons unknown to me. Actually I was kind of peeved with back to back losses so I walking around the house clearing my head and I came back and saw the setup and about chucked a monitor. Its one thing to take a loser, but to miss a winner - that's what really pisses me off. The next setup I took was also very valid and guess what? It was a fakeout end of trend again. Using the relaxed entries it would've been avoided. At this point i'm down -300 on the day. I took a signal using the relaxed entries around 1:15 and got a +1.5 out of it. Took another short at around 1:45 and had to wait through over 20 minutes of consolidation to get the move I needed to get to par and take profit but we held solid and made money. Today shoud've been a very profitable day (Around +3 roughly). But I didn't recognize the tweak I needed until lunch time, and ended up implementing mid day. But it was too little too late.

Later in the day around 2:10 there was perfect double bottom setup that was good for roughly about +2 that I pussied out on. So all in all I traded like crap today and didn't capitalize on the opportunities available to make money. I deserved what I got. To say i'm disappointed in my execution would be an understatement.

Trade Results:

ES: -112.50
NQ: +0.00


E-Mini Player said...

I was buying the 681s like no one's business anticipating the break-out on 1-min chart. $TICK got me in a little early (684s), but it definitely delivered. Unfortunately, I stopped out on par. I got back in again but couldn't really capitalize on the idea as I wanted to. Price acted exactly as I anticipated though.

I know I'm always chucking books at you. So, here's another one you have to check out: Enhancing Trader Performance by Dr.Brett Steenbarger. I'm half way into it, and it's a great read.

Michael said...

Don't beat yourself up too much, today was filled with erratic swings, you did good to keep your losses as low as they are.

Stan said...

Yo, why are you trying to fight the g.d. trend so much? Can your strategy work in the direction of the trend too? My definition of trend is where price is relative to the 200 period ma. If it is above, go long, below, go short.

As always, just keep after it and things will fall into place sooner or later.


Matt said...

I trade from the standpoint that trend (in terms of moving averages) is a false idea. Price action forming higher highs and higher lows is an uptrend to me... and i'll buy that until it stops and then as far as i'm concerned the uptrend is over until that pattern resumes regardless of what a moving average is telling me.

I don't know that I fight the trend all that much... as I throw a 200 EMA on my charts i'm pretty much with it more often than not.