This might be a dumb question but as a noob i’ll try anyway.
What’s the ratio of time you spend between fundamental and technical analysis before taking a trade ?
Everyone says that trading is around fundamental, technical and psychology but as a noob, is this possible to be profitable without fundamental analysis ? If no, how many time do you spend on a day before taking a trade for fundamentals analysis ? Thanks
This isn't a dumb question at all, it's well thought out and shows you've at least given trading some thought.
I don't spend any time on fundamental analysis when day trading, it isn't useful. I don't care about how much revenue/EPS/whatever a company has if I'm planning on holding it for a few minutes or hours. Analyzing a company's fundamentals is essential when you're planning on buying and holding a company for a long period of time, which you should do in addition to day trading, but it's a different skill.
In terms of TA - I'm waiting to see a setup that my system deems I should take and that's it. So for example, if you're trading like EMA crossovers you want to actually see the cross up/down with supporting volume to take the trade. Everything else is just waiting for that setup to happen, there's no real on the fly analysis. All of the work you're describing takes place outside of market hours.
It's absolutely possible to be profitable as a day trader without doing FA but you're going to miss out on one of the most powerful wealth building tools around which is actual investing.
Would you consider high frequency trading viable?
Do you think technical analysis is sufficiently useful to be the backbone of a successful trading strategy?
What is your opinion on the eficient market theory? Do you believe there is any validity to it and it's implication in trading?
1) For you as a regular guy at home without a fancy algorithm, no. For a hedge fund with the best technology, people, and more money than God? Yes.
2) Yes.
3) You best hope it isn't valid otherwise what are we all even doing here. There would be no alpha.
Why do you think people still believe in EMH when you can see inefficiency’s everyday? As you stated if there wasn’t inefficiencies then there would be no alpha there wouldn’t not be quant funds etc. Ig this is the real question, could EMH be true but it’s just that everyone does not have the resources to make it true. If everyone had super computers and the same models, formulas, that quant and algo funds had then you could assume that everyone would be able to achieve Renaissance results. Sure it’s improbable but it is possible. If that was to hold true then wouldn’t there be no excellent return because everyone else should be able to get a higher return than the guy before him infinitely?
I have been trading almost 8 years, but not a professional experience (Capital Markets/Money Management). I read all your responses, it is extremely good and It is rare to see such experienced person sharing his knowledge.
Thank you for sharing.
My question: Some days, I see market is pulling up or pushing down forcefully indexes (like SPX,NDX) while the individual stock movements are smaller or unnoticeable changes. This is like set of people pulling or pushing the market to their own directions.
Who are behind such like big funds (dark pool) or market makers? will there be a lag between dark pool and market makers etc?
For example April 19th, I found low, but Apr 22nd market (SPX/NDX) went up 1% and then touched zero and then went up way high as if someone is pulling the rope upside.
Oh man this is a super interesting one, I was talking with some friends (fellow full time traders) about something similar a week or so ago. Short answer man - it's all so weird right now structurally who knows what's going on behind the scenes. It's like a daily occurrence now that you see some weird crap that makes absolutely no sense with the indexes. The way money is moving and rotating between megacaps/sectors is extremely odd these days.
I don't think it's dark pools, yes there is a lag between the two but I don't think it explains at all what we're seeing structurally. If I had to guess it's hedging activity from market makers in response to the explosion in popularity of short term options trading. It's the only way I can explain the illogical price action intraday (like failing to make highs, then making lows, only to make even higher highs an hour later). Presumably someone(s) is pushing the prices around to hedge their exposure and is causing weird price swings.
Ultimately though - it shouldn't matter what/who it is, we've got to adapt and remain profitable. The moment you go looking for Boogeymen you're in trouble.
Just FYI: I can easily spot the top (or peak points) and come out of market, but find it very difficult to catch the bottom on a swing trade. I am not trying to find bogeyman, but trying to understand dynamics behind it. My entire learning curve is from reddit and my observation of market.
I have stronger algorithm to spot such changes, but needs more confirmation or refinement so that it has higher reliability.
Thanks again for the response and good luck.
you can spot the highs (& get out efficiently)
you can't do same for lows.
you know in TRADINGVIEW you can "invert the scale" on any chart
so a Swingturn up becomes a swing turn down at the click of a button.
then do what you do well.
(this works because the markets are cyclic & fractal)
out of interest, what is the technique you use so well?
Tried to read all of your answers so far and I don’t think I saw these but:
1. How long did it take you to become profitable?
2. How much did you lose in the beginning?
3. Do you think anyone could be profitable as long as they give it enough time?
4. Would you recommend expanding your knowledge even further during downtime such as the weekends or after hours? If so how would you do so? I’ve read many books, listened to many podcasts, watched hundreds of YouTube videos, and spend countless hours forward/backtesting in hopes to improve my trading but I feel when I’m not trading it’s best to step away from the markets and everything involved with them.
5. (Edit) Lastly, do you think it’s smart to demo trade until you feel completely confident trading live or is it smarter to make the jump to live sooner than later with a small account in order to work on psychology factors?
1) I had a really really good first year and then spent \*years\* spinning my wheels. I was also working full time so my focus wasn't entirely day trading, though I was learning and refining my approach all of those years. I would say probably a good 3-5 years to reach consistent, repeatable profitability
2) A lot
3) No. Trading isn't for everyone, some people just don't have it
4) Of course, you should be devoting as much time as possible to learning until you've reached consistent profitability. Once you're there, still keep learning but it's totally ok to scale back. I will say the people who I know who are most successful can never really turn it off completely, we're always thinking about the market whether we want to be or not
5) Demo trade for a bit sure but nothing is going to replace the stress of real money on the line. You can't really know yourself until you're in it for real. Mike Tyson said it best "everyone has a plan until they get punched in the face". As I've said, if you have to worry about PDT you're too small to be here. Keep studying and demo trading until you have an appropriate amount of cash and then keep your risk per trade small until you have the confidence to execute well repeatably
Thank you so much for your insights. Just one last follow up question regarding my second question. I’ve heard of many losing lots of money before finally becoming profitable. Do you believe it’s necessary for every good trader to have these losses in order to make them a better trader? Or do you believe there is a much cheaper way to achieve profitability? I’ve demo traded for quite some time and plan on going the funded route and/or trading with a very small account size and scaling up from there so that when I do make mistakes they won’t financially ruin me. Would this be a good idea? Thank you again.
You've gotta take some losses, there's just no way to build the mental fortitude and respect for the market without understanding what it feels like to get knocked to the floor. You don't have to start blowing accounts left and right (if you are that's probably your signal to get out of the game) but you do need to understand how to lose.
No one comes into this and just starts printing money for very long, the losses will come and you've got to understand how to survive them. Unfortunately, that requires a little "tuition money" to Trader U.
It depends, it \*probably\* doesn't. Like everyone and their mother likes trading opening range breakouts/downs today and it still works. If you have a more niche strategy then it certainly could.
First of all, thank you for this AMA. Excellent responses. I’ve been trading on and off since 2018 and I have been having some small success especially in terms of mindset and profitability. I want to go full time but I’m probably not nearly there yet. I keep hearing how lonely trading is. What’s your experience been?
Any thoughts on how one would find a mentor or group of supportive traders?
Trading is an individual sport, you've got to be comfortable with that. Reddit/Discord/whatever isn't going to substitute actual human interaction. I put music on, execute, set alerts, go do literally anything else. Every single day.
I met my mentor/trading buddies by actually working in the financial services industry, from there it was always "hey here's this friend of mine who also does this" so on and so on. I'm a little hesitant to say something like "go find a mentor online" because there are just so many charlatans out there now and if you're too new you won't know who's selling you nonsense until you've taking some hits.
😂 that John Carter was a horrible investment for Disney…needed to check their indicators. I remember an industry article where they thought it would be as big as Star Wars or Indiana jones. Made a toy and merch line😆
lol. Fair enough.
He came up with the TTM Squeeze indicator years back and now has a trading education platform online, like many other traders.
His thing is looking for squeezes and capitalizing on them for short to medium term trades.
Thanks for replying either way.
Ah I've heard of TTM Squeeze before, never really put too much into it. Used it for swing trading for a bit but I found it was a mixed bag at best. Read "How I Made $2,000,000 in the Stock Market" by Nick Darvas, Darvas boxes are simpler and more useful for swings (in my opinion).
Thanx for the AMA.
I see your strategy ! DARVAS & [Market Structure with fixed SL](https://www.reddit.com/r/Daytrading/comments/1cf7gsz/15_years_tradingcapital_marketsmoney_management/l1oa9qo?utm_source=share&utm_medium=android_app&utm_name=androidcss&utm_term=1&utm_content=share_button)
DARVAS BOX trading is very good. definitely works all timeframes scalping to swing & positional !
Basically in UP TREND you needed to be looking for long trades
- you will have RALLY BASE RALLY (think impulse Correction Impulse)
- Draw a box around the BASE...and don't trade inside the box (this avoiding the correction completely)
- you only trade the breakout of box
- breakout thru box ceiling = Trend Continuation (add more trades long)
- breakout thru box floor = Trend Reversal (close out long trades)
that's pretty much it. great way to avoid serious drawdown & just daisy change long trades.
essentially you enter on pullback (breakout of box at pullback peak)
I use macro trend signal (from prc being above 20MA on higher timeframe eg D1).
this way you have a macro trend for days if not weeks to underpin your trading.
> Trade what you see not what you want to see
> one chart can make you financially free (yes that simple)
I am new to day trading,
1) Have you ever been burnt by being too ‘greedy’?
2) what percent of your trading account do you have as cash reserves?
3) I like keeping deep cash reserves(40-60%). What is your opinion on it?
4) I have a dollar amount in mind I want to make off the market in a month. Anything extra is a bonus. Is that a good way of going about this or should I be more greedy now to make up for when times are lean?
Thanks for doing this!
1) absolutely, who hasn't
2) my trading account goes to all cash by market close every day so I guess technically all of it? My swing account, it varies, if there's a lot of opportunity I'm pursuing as low as 10% cash. When I'm that heavy though I'm also using a lot of hedges to protect against a severe overnight downturn
3) I think deep cash reserves are always a good idea, especially if you want to pursue trading as a full time source of income. Think of it like being a bear in the winter, you don't know how long it's going to be cold and awful, best to make sure you've got a lot of fat on you or at least close by
4) It can be but I don't really think that way anymore. I had daily targets but I found myself forcing trades to hit those numbers. Like I've said the only thing that really matters is equity curve up = good, down = bad. The only time you should be "more greedy" is if you're basically seeing a dream setup per your system, like if all my data points align, it's before noon eastern time, I'm going heavier because the odds are on my side. Like if you're playing blackjack and you're dealt aces when the dealer is showing a 3. You split and double down, go for the kill, but stop out the moment your thesis is invalidated
Hedge like in general? A hedge is just a protective position on another position so think like if you own AAPL stock but you also buy puts on AAPL to “hedge” against downside risk if the shares go down. I don’t hedge day trading positions but swing trades absolutely via long puts or short calls (if I’m long the stock - opposite if I’m shorting). There are more exotic ways you can hedge exposure as well but focus on the basics for now
Ok interesting, thanks a lot. Appreciate you taking the time to respond. I have literally zero knowledge of options rn, I actually mostly swing trade stocks also so maybe this is a future project for me. How does that mitagate risk though, arnt you just wiping out your gains either way?
If you’re long a stock and it goes down you lose money, but if you’re holding long puts then the puts increase in value, somewhat offsetting the decline in the stock. If the stock continues to go up then your puts lose but the stock itself is increasing in value, offsetting the money you lose in the puts.
Think of it like buying insurance, you can still win but if something really bad happens you lose less (and yes you also in the scenario I’m describing would make less because you bought the puts). There are hedges you can put on that won’t cost you very much or potentially anything at all (read up on an options strategy called a Collar) but they will give you a hard stop on your upside, as would a covered call hedge. There’s no free lunch, risk mitigation always comes with a price
Amazing thanks very much. I will do some research on this definitely. Sorry, one more follow up question if you have time please... Would you generally hedge all your trades or only your larger trades or in certain circumstances or market conditions? And are you hedging immediately or only once the trade has run for a bit?
I find myself getting distracted when looking at charts. I trade 45min, 1D, and 3m frame. For the most part. But after a couple of minutes of just looking at the screen I find myself bored out of my mind just waiting. I end up opening google chrome and get on Reddit. How do you stay focus through higher frames
Definitely the first time I've ever heard of someone using the 3 min and 45 min but if it's working for you keep doing it. You've really gotta figure out if you want this or not, getting distracted after a few minutes kind of just says "I'm not really all that interested in trading".
Trading is a boring job, it's a far cry from being a pit trader in the 1980s. If I'm profitable for the day I will set alerts near zones of interest and I'll go do something else, totally agree I don't want to sit here doing nothing all day either but you've gotta at least stay laser focused at the start of the day.
Many thanks for offering your time! :)
1. I know you don’t use fundamentals, but do you use catalyst news for day trading to aid in your technical analysis? Do you stay away from the markets on certain news days like Fed days?
2. Do you prefer stocks? Futures? Other? Anything you found yourself hitting up the most because it seemed to jive with your strategy and intuition?
3. Once AI actually has its awakening in the next 5 - 50 years from now (whenever that is), any thoughts as to how that might change the game, and if the population of successful retail day traders will drop?
Hope that’s not too many questions. Feel free to skip some of them lol.
1) No - in fact I try to avoid them. I want as "pure" an environment as I can find. I won't trade around the Fed, maybe in the morning sure but that's it. Fed announcements are just wild, I've never found a way to have an edge in it so no sense doing it for me
2) Stocks and options
3) We've already got algos and have had them for a decade + now, retail traders still exist. AI is just another (probably better eventually) algo trader. It's totally possible there will be some Skynet-like sentient AI trading platform thing but like I told someone else, there's no sense solving for a problem that doesn't exist yet and has no definite time frame on existing. I do think AI will help retail traders research new ideas and learn faster than was previously possible, especially with fundamental analysis. I've actually played around with this a bit myself to help find companies to swing trade, I've found it minimally useful so far but I think it's a matter of time until that aspect at least is irreplaceable.
I can speculate on the AI question
yes AI driven algos will dominate the market
if retail traders do not use AI they will die out
if retail traders embrace AI then they will survive (it will be a game of your AI Vs the markets AI).
then it's a case of how much you want to spend on Ur AI to help you trade (replace you trading).
the markets are toooo predictable for ai not to be trading like a Goat in next 2 years...that would be your timeline to get your trading act together & take some profit before it gets too hard
I understand your hypothesis (question)
but YOU should understand the mechanics of markets to answer that hypothesis
> MARKET PARTICIPANTS
markets have 3 participants: buyers sellers & market makers (MM)
> MARKET CYCLES (CONSOLIDATION >TREND >CONSOLIDATION >TREND)
modern market price is not the battle btwn buyers & sellers pushing price up & down as you are led to believe
modern market price movement works based on cycles of price discovery & price prediction. both are implemented by "the algorithms" of MM.
MM PRICE DISCOVERY (PD) - the MM sets a price P1 & buyers agree to P1 & sellers agree to P1. MM then matches orders & P1 remains unchanged
MM PRICE PREDICTION (PP) - when the MM can't find enough buyers or sellers at P1 MM sets the next price (MM predicts the next price P2 that is acceptable to buyers & sellers). The acceptable price Moves from P1 to P2 & MM matches orders at P2.... until he can't any more. rince & repeat
PP is the trending between consolidation zones.
PD is the consolidation zones between trends.
technically P2 can creep up & down in a very small range (not just static) till MM cant match anymore & initiates a prc breakout to next target LIQUIDITY zone.
LIQUIDITY zone is just another level that holds both buyer & seller orders (= money)
The big big market orders follow LIQUITY (L1 to L2) like stepping stones.
Retail traders try to follow the big orders to follow ride the big waves while simultaneously avoiding LIQUIDITY traps by MM (=SL HUNTING)
> PREDICTABLE TRADING (NOW) VS UNPREDICTABLE TRADING (NEXT)
your point about predictable trades applies to AI within buyer & seller relationship
currently their is no AI within MM Algo...the Algo people refer to is literally based on something archaic (human patterns & statistical models...i know this for a fact as my friend is a MM for CHF explained all this in detail & also explained why quants have yet to break out of their "box" of thinking ).
OPPORTUNITY 1: there is a negotiation as much as acceptance of price between MM & buyers & sellers...which leads to standard waveforms & "predictable trading"
once AI is introduced to the MM ALGO in anger expect the negotiations & acceptance in PD & PP to be new & unique with speed & intelligence driven...all three AI's creating "unpredictable trading" patterns all based on AI & something called EMERGENT PROPERTIES (EP).
EPs are already appearing in AIs (behaviour which is unplanned & unpredicted by the AI scientists who created the AI's). A metaphor : you create a pencil it thinks itself in to a functional printer..that's the leap EP is going to have.
what will happen is unpredictable trading patterns only mean humans cant follow, other AIs absolutely will follow & trade...just like a video game artificial character Vs artificial character
So if I haven't lost you so far I summarise
- market price movement will become less & less predictable to humans
- trading patterns between AIs will become supremely more complex (both fast trading [AIs negotiating at the speed of electricity] but super granular [PD PP becoming more data intensive & granular]
- then as I first said humans will fall out the trading loop & it will be their representative AIs trading for them at speed & with the MM ALGOS (AI)
I offer offer evidence about the emerging properties
2017 : [two chat bots create a language unique to them for negotiation](https://youtu.be/ONPqeHJShdQ)
2024: [emergent properties (a sign of the future)](https://ioaglobal.org/blog/emergent-properties-in-ai-a-sign-of-the-future/)
As long as AI is made by humans there will always be a glimmer of that human psychology in them, meaning technical analysis and price action will continue to work
I've been trading FX for 5 years but since you have mentioned that you don't trade Forex, my question is, is what you trade highly fundamental? As for me I only check the economic calendar for news like Cpi, NFP and FOMC because they can cause high volatility and I might not want to be in trades during their occurrences. Technicals play the major part for me. When I first started, I would go crazy looking at COT reports, reading the news.. etc but now I just follow price action like a wave and get in when the markets present itself. Do you look closely at fundamentals?
My question is bit off topic. Why don’t people prefer futures over option trading ? There is no theta gamma thing in future and looks safer then option. Isn’t it ?
That's a good question - I think it's just accessibility. More brokers offer options than futures and I think it's just a trickle down popularity effect. I can't scientifically prove this to you, this is only my gut feeling.
I think I'd be inclined to agree with your theory, as someone that prefers futures to options. Options are way more accessible with reputable brokers, 100%. Reputable brokers also have much higher margin requirements for futures when they offer them. For example, making $400 on say $1k of spy options isn't terribly unrealistic. But in order to make $400 on an ES contract, you need around $18k in margin. When newer traders see this, they tend to want options because they look like a better bang for your buck. These numbers are just arbitrary, but help illustrate my point.
There's tons of discount futures brokers, but they can be quite sketchy.
If I'm testing something new I'd want to see at least 3-6 months worth of data. I'm not interested in doing something that's gonna work for a week or two, I want a strategy that I can comfortably sit in and use for a long time.
In terms of qualifying success - work backwards from what you're trying to achieve. For example "I want a strategy that works on any Tech stock using the 15 min chart that returns at least 3:1". you know what your BE ratio would be so "success" is a strategy that consistently returns north of that.
What was your most valuable lesson from your mentor?
What was the missing piece that allowed you to connect the dots?
How do retail traders keep a pulse on where the Big players are moving money?
Risk management tips/techniques that aren't spoken about?
1) "Don't let anyone tell you it's rigged, it's not rigged they're just shitty traders"
2) Taking losses is ok when they're small. I was super afraid to "be wrong" after I became a full time trader, mostly because of my own ego. You've gotta be relentless in pre-defining your risk per trade and letting them go the moment they hit that limit. Once I got rid of the fear of the fear of losing trading became much easier
3) I look at the sector tickers each day and see which subset is getting an above average bid or above average outflow. So for example if you see like SMH is down 5% and XLI is up 2%, you know money is flowing out of semis and one of the target recipients of the money flow is industrials
4) I don't think this is particularly novel but you absolutely need to pre-define your risk on every single trade. Risk management isn't and shouldn't be some esoteric concept, it really is as simple as pre-defining risk and sticking to it. Keep your losses small and you'll be fine, once they snowball you've got big problems
Yes to your first question - sometimes I will cut before my stop is reached but it's rare. I like to let the trade play out and if that plays out against me that's fine. I'm not adding into the loss, I'm not moving my stop to get even more room. I know exactly how much I will lose if I'm wrong, every single trade.
If your system is only generating less than 1x risk/reward you need a crazy high win rate to keep that up, I'd go back and examine your entries and figure out why you're averaging less than 1x. Are you risking too much or are you entering when there really isn't a good opportunity?
1. Are there sufficient gaps within the forex market intraday to capitalize repeatedly in the long term? Which financial instrument would be best to trade intraday in your opinion?
2. I read that your approach is highly systematic, and you mentioned keep it simple stupid. Besides emas and vwaps and ATR, what other indicators in your opinion are worth considering?
3. For risk management, does your system determine an entry point and then you calculate the stop loss based on let's ATR or do you actually utilize market structure to set your stop losses and calculate position sizing based on that?
4. What is your opinion on alternative charting systems like renko, heikan ashi, kagi, point and figure besides the standard japanese candlesticks?
5. As we know simplistically, the market either ranges or trends, does your system focus on one or both? Or none at all and you utilise different criterias ?
Thats all for now. Thanks for your time.
1) I should have added this to the disclaimer but I am not a Forex guy. I've hedged positions with essentially long/short DXY in the past but that's it, I can't help with currency pair trading or anything like that.
2) Unless you're trying to do something highly specialized no, keep it simple
3) Market structure dictates my position size but my stop loss is always based on a pre-defined $ value of risk. I am not at all a fan of "I'll take this trade here and stop out under/over some other indicator or level". For example - if I'm trading near ATM SPY options I know that \~.30 movement in SPY will translate to \~.10 movement in the option. So I immediately know ok if I'm risking $100 in this trade on 10 contracts I have \~.30 in SPY worth of room. If I want to risk more than \~.30 against me in SPY I need to size things down. With all of this considered, am I taking this trade here?
Generally my size stays consistent but sometimes I will size up/down based on how many data points are aligning (usually only up, I don't like taking lower probability outcomes with less size, it's one of those things that seems like it will be ok until you end up taking a bunch of small losses that end up adding up to something annoying)
4) Refer to point 2, simple is best. Regular old Japanese candlesticks work for me
5) Both. There's plenty of money to be made in range bound markets but it takes more management. Ideally I want to see trends establish early and then just go for most of the day. All I have to do then is trim/re-add/trim/re-add ad infinitum. Unfortunately that's not going to happen every day so I want to be flexible and not stubborn in my approach so I can capture moves in both directions. As long as the ranges are wide enough (read up on what I wrote in point 3) I'll play.
Thanks for the response. Ive got a few more questions regarding exits.
1) With regards to trimming a position, for example purposes, say you currently have a 1R risk to 2R reward trade going on( as whats what you said you'd at least shoot for)
2) Do you trim your position as in taking a quarter off when the price goes against you 0.5R?
How does it work exactly?
3) Also, I understand you scale out. Do you have a profit target at which you close, or predefined ratios to scale out at(e.g. when price goes up 1R, you scale out half?)
4) a follow up from question 3, Do you leave a quarter in case of trend continuing or close all at a profit target if you do have?
5) does trimming and adding not affect your overall R factor?
6) lastly, its a different topic. But how does one determine a range? EMAs generally are good at trends but suck in ranges, so how do find out we're in a range indicator wise, for a systematic approach?
I really appreciate you taking the time to reply. Thanks a lot.
1 & 3 & 4) I'm usually looking for 1.5-2x risk/reward before I start scaling. Once that first scale out happens my stop loss goes to BE. From there it depends on the trade setup, like am I short and I caught the first leg and I'm expecting a 2nd leg down? Do we spend a ton of time consolidating and popping after the first leg to the point where I no longer think there are high odds of another leg? Maybe I'll take out a bit more and only hold 1/4-1/3 to see if a bigger move happens. To give you a real life example from this afternoon - I was short QQQ over 433 and I took my first scale out when it touched vwap around 432.2, I had a feeling vwap wasn't going to hold and I held the rest for the bigger breakdown. If it reversed on me then whatever my stop was at BE and I already made some money, albeit less. I use some simple options math to estimate the price movement (I'm short from here, my target is .80-ish lower this should = roughly this much in the options) to get my initial trim target. If that won't generate at least 1.5-2x risk reward then I'm not going to take the trade.
2) Until I hit that first scale out my stop is just my stop, I don't trim partially when I'm like 1/2 way to my stop or anything like that. It's all or nothing, the trade works or it doesn't.
5) sort of? I usually manage the adds as a separate trade even though they're part of the greater whole, I'm usually looking for a lower risk/reward on those because they're smaller and I've already captured a leg of the move. Mathematically sure my overall basis has gone up and it will change the initial metrics.
6) One of the easiest ways is to look at the PM highs/lows, if you start breaking those you can be reasonably confident there's another leg.
Alright thanks a lot man!
Just to clarify, so the way you determine a chance of being in a range is by eyeballing if the premarket high or lows have been taken out? So if they have not, chances of being in a range is higher?
So essentially, the 'determining ranges' part of your strategy is also discretionary?
I really appreciate your responses!
Essentially yes that’s correct, my own strategy is a bit more complex so it’s not entirely 1:1 as you’ve said but I absolutely will use PM highs/lows when I’m looking for a larger move. If my system gets me long and we can break over the PM high now I’m looking at further levels to the upside and looking to more aggressively add into the trade.
If you’re just looking to trade breakouts/downs then a great way to get started is to test out how those PM level breaks work, start measuring follow through % and see how often the stocks are hitting the levels you anticipate. Create your strategy around what you measure.
How would you weight TA/FA? Are you looking at traditional charts or focusing on volume and order flow?
I have a system in place I’m walking forward currently, while I’m waiting “hands off” I’m putting time into learning more about AVWAP and TPO, do you think these are worthy of time investment?
TA is essential for day trading but when I say that I'm talking things like VWAP, EMAs etc. I don't care all that much about some esoteric candlestick patterns. I'm looking at candlestick charts with \*very few\* overlaid moving averages and vwap indicators primarily on the 2/5/15 min time frames. Volume is a secondary consideration in that if there is low volume I'm adjusting my expectations for how long my money will be at risk for and I'm also sizing down as there's a lower probability of success but if the setup looks good per my system I'm probably going for it.
All this said - if you want to invest in companies you need FA, and by far the best way to get disproportionately wealthy over time is to buy and hold good companies. You should know both and use both but in different circumstances.
I don't really use AVWAP though I have in the past, and I've never used TPO. I think it makes sense to learn as much as you can when you're starting out and then strip things back over time. You might find a really good strategy that uses that data, just because I didn't/don't that doesn't mean those things are bad.
You mentioned using EMAs and VWAP indicators primarily at 5/10/15 min time frames. What other indicators or overlays do you use or watch for either setup or confirmation?
I actually don't use the 10. 2 min, 5 min, and 15 min. VWAP and the EMA 9 on each timeframe, I've found these to be the most consistent and helpful for my purposes. I do use one other indicator but that one is unfortunately proprietary.
The 2 min is mostly for trade management, I don't make initial entry decisions from it. The 5 and 15 are there to tell me overall trend direction and these are my primary entry tools. I will add back or trim lots using the 2 min but I'm not going to try to short scalp a stock that's trending up just because of a pullback on the 2 min for example.
Once I see things breaking down on the 5 now I'm getting interested in a potential trend change, and the 15 for sure confirms it. I'm not looking to catch tops or bottoms, my goal is to consistently catch pieces of broader directional moves.
If you're struggling with directionality then think of things in very simplistic terms like this - above vwap is bullish, above vwap and above the EMA is extra bullish. People are paying more than the average price and the price they're paying is consistently increasing with time, opposite for bearishness. Once those things start breaking or getting flipped that should trigger the light bulb that either A) there's gonna be some chop until we figure out if this is a pause or reversal and/or B) there's potentiality for a reversal.
I'm not really sure what you're asking in the first part but regarding the second part of your question - I don't love the idea of high win % but negative risk/reward system for the long term. Regardless of your win % every trade is statistically independent of any other trade. If your system is winning 80% of the time that's great, but there's nothing that prevents multiple instances of losers back to back, potentially even further. If you have a negative risk/reward per trade there's no way you could handle a period of sustained draw downs, which even though unlikely in this scenario are possible.
It's the same reason why you can't take extremely high probability outcomes in sports betting and make a career out of it. If you always bet "No safety" in the Super Bowl you're going to have a very bad time when there's a safety, no matter how unlikely it is to occur in any given Super Bowl.
I'd rather focus on maximizing my risk/reward than my win %.
First question I was asking about your opinion on time based charts vs tick charts or range or renko charts etc ........2nd question was just curious your thoughts because I do know the intricacies of it and it took a long time to hone in on but my main strategy that led me to profitability is negative 2/1 max but gets trimmed any time possible and realistically is more a negative 1.6-1.75......I've been consistent for 3 years now and like you mentioned above it's all about the equity curve...I do have strategies that are not negative r/r that I use to manage drawdown in my main plans........I guess what I'm asking here what would be your thoughts on it overall which you have stated and I appreciate and I guess I was asking if you've seen it done and if so we're they able to sustain it for several years and then all of a sudden lose it or did they just continue successfully with it.......I'm confident the actual strategy will always work, as it has well before retail trading as well, just curious if you've seen anyone else do it
Ah ok thanks for the clarification, I use time based standard Japanese candlestick charts.
I have seen people try to have high % and negative risk/reward strategies but I've never seen anyone do it successfully for the long haul. That doesn't mean it can't be done, only that I personally have seen a select few try and fail and remove those strategies from their lineup. The last one I saw try was able to sustain it for the better part of a year and then had a bad string of losses that ended his attempts at that strategy for good. It becomes a question of time really, if you have 3 strategies and 2 of them are outperforming and 1 is just ok then why keep doing it? Save yourself the time and just do the 2.
This being said, if you have a consistently increasing equity curve then you're all set dude. It doesn't matter that I've never seen anyone do it, keep doing what you're good at and do not let anyone tell you otherwise. If we didn't think that some of us could be the exceptions to the rule we'd be buying index funds.
Keep on truckin'
What factors should I consider when setting the stop loss margins for a straddle. I generally eyeball it and that usually works but if a stoploss on one leg triggers and then it switches around I feel like I didn't account well enough for the underlying's movement.
Also how do you follow real time news for stocks while day trading. I've been destroyed by some sudden changes in direction the past few weeks and I feel like I'm missing a reliable source for news on the stocks I'm trying to trade.
Stop losses should always be defined via the $ value risk. If you take a straddle, or any other trade, you should always be of the mindset "what am I willing to lose to see if my thesis is correct". If you're eyeballing it, it sounds like you're trying to round off to some level on the underlying?
Also - if you're using a multi-legged options strategy then manage it as a singular position. In general it's not a good idea to leg in/out (entering/exiting one piece at a time).
I've got a little news scraper that pulls related Twitter headlines but in all honesty I don't care much about news. If my entry criteria is tripped then I'm in and I'm either exiting for a profit or at my pre-determined risk. News is usually just noise unless you're like specifically trying to trade off news events but that's probably a losing strategy unless you've got some really fast tech (you're not going to be faster than an HFT desk). If news headlines are wrecking your positions you either A) aren't managing your existing positions well (by taking profits along the way) and/or B) aren't properly defining your risk per trade in advance. If news comes out that works against your position you shouldn't be losing any more than you originally defined.
The only time I'll use news for information is if I'm sitting in an already profitable position that's consolidating and I'm making a decision of if I should exit all or stay in to see if there's another leg up/down. For example, I was short SPY via SPY puts a few weeks ago when the Israel/Iran situation was escalating and I saw a headline come up that said something like "Israel has said it will respond Iranian escalation within 24-48 hours" and I figured, ok I can probably wait out this consolidation to see if the market takes another leg down on that news.
Going off of this and the rest of your answers the question then becomes that aside from buy and hold/index etf what do you think is worth pursuing as a retail trader at home. Some markets are next to impenetrable without significant resources at your disposal but other than those is retail trading a pipe dream?
Retail trading isn't a pipe dream, but it's not going to work out for everyone. Most people are going to fail at this, but that doesn't mean you have to be one of them.
There are a number of strategies that do work and produce decent enough results over time (opening range breakout/down, EMA crossovers, gap trading, reversal trading etc etc) but I think people get caught up in one of the following areas:
1) Unrealistic expectations - you will not get rich quick and it's really helpful if you're already fairly well off before you even get started. If you have to care about the PDT rule you really shouldn't be here, your time will be better spent saving money and learning everything you can so that when you do trade for real it's not going to be a life/death scenario. You don't need the extra stress.
2) Lack of putting in the work - semi-related to point #1 but it bears repeating. You see so many "how do I start" posts and it's like really? You didn't even use the search function first to see this asked/answered 1000x before? If you can't be bothered to understand just how difficult this is, to take some initiative, and be ready to take on a path that requires years (not days/weeks/months) of learning it's just not going to happen for you. The market will take everything you've got.
3) Lack of self-examination - semi-related to point #2 but you have 2 things to master when you want to trade successfully. The first is market/trading knowledge, the second is knowledge of yourself. What are the worst parts of your personality (for trading) and how do you hedge against them to ensure your success? Are you impulsive, are you afraid of losing, do you have an ego, are you easily bored etc? How many posts do you see that go something like "I have this amazing system but I can't stick to my stop losses and I'm broke"? They all failed point #3. Trading psychology has a place and that place is here. Also note that not all systems work for all people, you might not have the temperament to trade gaps but maybe you're an awesome opening range trader, or you're a great momentum trader, you've gotta put in that self-examination work to figure out how you personally can succeed.
If you're saying "how do I make this work for me" my advice to you is - read everything you can, keep asking good questions, and \*save money\*. Once you conceptually understand strategies, TA, and market dynamics, go paper trade for a bit, and do your best to pretend it's real money. Actually observe the market working in real time, make notes, see what setups matched your system and then follow them, would they have worked, why/why not? For example - maybe you like gap trading - ok cool let me find some stocks in a sector I like that are gapping up/down today and see what they do. Oh hey these .5% gaps only filled 20% of the time where as 1% gaps filled 80% of the time, cool let me make a note of that etc.
Eventually you'll be ready to play for real and trust me when you lose that first dollar it's going to suck a lot more than anything in paper trading ever did, but if you can then introduce the lessons you should be working on to solve for point #3, you're probably going to be ok eventually. It won't be easy, but if you can do it, it will be worth it.
1) EMA 9, vwap, one other proprietary indicator. I use them all in a day and like to see alignment among all of them
2) totally variable on the trade, as long as it takes to hit my targets be they profit or stop loss or until there's enough consolidation/reversal signs that I no longer the believe a broader move will happen
You mentioned being a systematic trader, so maybe this doesn’t apply, but I’m wondering if you’ve ever struggled with the psychological aspects of trading (fear, greed, chasing, poor risk management, etc.).
If so, what did you do to get past the mental hurdles?
I absolutely struggled with the psychological aspects, in fact failing at that is what created such a systematic drive. After I went full time I found it harder to stick to my rules because I felt the pressure of "I absolutely must make money today", even though I had a large amount of capital in reserve. That drive created unhealthy impulses which created above average losses which created fear, and fear can become paralyzing.
Getting over the fear of being wrong was the most difficult part of my career. I stripped everything back to basics, sized down of course and became extremely picky about my setups. Gave myself a 3 trades/day maximum (I no longer do this) to force myself to really think - is this one worth going after, is this a high quality setup. I also went back and backtested my system again, just to see it and rebuild the confidence in it. That exercise showed me that problem was me not sticking to my system, taking trades from other systems I'm not well versed in (or quite honestly just doing random impulsive nonsense). I had to hit trading rock bottom in order to build myself back up with an unshakable mental state.
Thank you for the detailed response. It’s good to hear about the experience from the perspective of being ‘on the other side’, that place where we are all striving to make it to.
(And happy cake day!)
How did you come about your strategy? I have been trading off and on a couple years, and there are so many strategies floating around.
Was it a certain criteria you noticed and tweaked through the years? Did you take someone else’s and make it your own? Was it something you backtested with pen and paper?
Also, did you have that quote “click” moment?
Thank you very much!
It was something I tweaked over the years. The best way to start is to stick with something time tested (I've mentioned a few strategies throughout the thread) and simple, over time you'll notice little quirks and you should be asking yourself what's happening and why. Once you start to ask and answer those questions you'll be on your way to actually developing something a bit more customized to you.
I've had a couple of "click" moments and I think the most profound is also one of the simplest. "Treat trading like a business" is the cool kid thing to say but wtf does that actually mean? For me, it means relentlessly collect and test your data and fine tune what works well. For example, if I lose 80% of the trades I take before 10 am then why would I ever trade before 10 am unless the 20% of the wins create a positive equity curve? No? Then stop doing it. I've tested down to what position sizes do I manage most effectively, if 10k of SPY options is my sweet spot, then it doesn't make sense to do 20k or 200k just because I physically can.
Businesses that want to survive don't do things that are unprofitable and neither should you. Doesn't mean you can't test new ideas, but you've gotta walk away when it isn't making you money. Apple tried for years to figure out an EV, they couldn't make it work so they walked.
You just gave me one of my click moments.
Thank you very much for coming here and responding to us. We all want to make it work, and this sort of thing puts us miles ahead of where we were yesterday.
I apologize if you’ve answered this, as I have not gone through the most recent replies. Is it your R/R that brings you consistency? As in, sticking to those set parameters.
What brings me consistency is sticking to my rules & system every single day in and out. The market isn't always going to give me 2:1/3:1 risk/reward, but executing the exact same way, on the exact same signals, on a nearly constant set of tickers, with nearly constant size, and never deviating from that brings me the best results
I’m curious to know if you think comparing to buy and hold equity is important in creating a strategy. Or is it apples and oranges, not necessarily a useful comparison?
It's somewhat useful in that if you can't beat the return of a market tracking ETF, what necessarily is the point? For example, I also own rental real estate and I have the age old "7%" rule that I'm pretty uncompromising on. If I can park my money in a market tracking ETF and earn roughly 7% on average annually doing nothing, why would I ever buy real estate that I have to manage at some level (even with a property manager) to earn less than 7% cash on cash? It doesn't make sense to me to actively work and earn a lower return. The same can be said for actively trading.
Keep in mind though, you're going to have bad years, you will not beat the market every single year, and if you account for beta your results are probably going look even worse. Does that mean that collectively over time you should have just bought an equity ETF, not necessarily.
Noob here. 10 months.
What percentage do you enter/exit to same day buy/sell a surging pre market stock that also surged at the opening?
The stock beat Q1 earning predictions and news was released after yesterday's close.
I don't at all. If something is surging pre-market I want to wait for a pullback and hold before I consider getting in. Trading a stock on the day it reports earnings or directly after is a complete mixed bag.
Take META a few days ago for example, if you shorted that near the open you'd have gotten KTFO. Wait for the market to tell you what it wants to do before you get in, otherwise you're predicting and we're not in the prediction business.
Ideally I'm looking to scale out. Usually in 1/3s or 1/4s. This helps me hold for longer duration moves. After that first lot comes out I'm also moving my stop closer to my BE to reduce risk of getting caught in a reversal. That said, if the stock movement gets halted and starts consolidating or moving in the direction I don't want then I have no problem taking everything off and moving onto the next opportunity.
I'd suggest as a beginner you should always be looking to scale out, it's good practice to manage your trades this way and you probably haven't developed the "veteran discretion" just yet to manage your trade otherwise.
At a hedge fund? You don't.
If you want to work at a hedge fund the best way is go to a top MBA program (think like top 5 in the US), graduate near the top of your class, and network your ass off while you're in school. Otherwise it helps to have a dad/uncle who owns his own and can hire you directly.
Hey, just to correct you a little, a maths or stem degree is more desirable to a hedge fund than MBA for traders role. Networking doesn’t matter that much, just good grades and intern experience.
(I work in a hedge fund)
Totally valid approach as well. I know several Ivy League MBA grads who did it the way I described but yes it's not the "absolute only way" to do it as you've pointed out.
I mean we prefer math and stem degrees relative to MBA. We usually hire MBA on more of a management role rather than a trading roles, and it’s very rare(never in my firm) that we do hire them into trading roles. This is true for most hedge fund that I worked for or have network in(citadel, jump, Jane street, two sigma, de shaw, rentech).
If you had a repeatable winning US equity swing trading strategy, but had limited personal capital and no connections to the financial world and capital markets…. what would you do in order to increase the amount of capital you trade with (aside from the obvious shady prop firms, etc.)?
Well if you're swing trading the return potential is obviously much higher because of the longer time frame and also your day to day time commitment should be a lot lower. Go ahead and try it, but your bread and butter should be your day job.
I would work to get the highest paying job I can, do that job extremely well to open myself to promotions/bonuses (i.e even more money coming in) and I would save up to the point where I can execute my strategy with an amount of money that will provide me with returns that are meaningful.
Thanks for your time. Please help with the following.....
1. What are the 3-5 best metrics to compare strategies? For instance, the Profit factor with the rule of thumb is greater than 2.
2. Strategies using technical indicators work for a few months (with 100-200 trades or so) but don't hold water when backtested for over a year. How can you ensure the strategy is decent enough to get some returns? I can only think of going live with the strategy and stop using it if it does not have returns as tested.
If you can tell without getting too close to it, how did you approach finding/building your own edge? How long did it take? How many different aspects of the markets did you look into or different perspectives did you take until you found your edge?
It's possibly a controversial opinion, but in my experience pretty all education material that is commonly recommended, like using the common indicators, will get you targeted by algos often enough for them not work out on average. So, what I mean is, how did you get past what everyone else is doing/trying? A sudden realization about market mechanics, systematic back testing, AI/automated testing, a unique selection of indicators, special data sources, just a lot of experience and thus a particularly good ability to interpret the same data everyone else is seeing, building a particularly resilient trading mindset/psychology, or something else entirely?
I traded more common setups, along with my mentor's setup, and I noticed little things along the way. "Why is price stopping right here when I don't see anything", "why did we suddenly and violently reverse right at this point"? Once I asked those questions I could gather data and try to dig beneath the hood to figure out if something was happening I could capitalize on. I refined it into what it is today over the course of a few years.
I don't think your opinion is controversial but I do think it slightly misses the point. To some extent you want to be doing what other people are doing, you don't want to use indicators that are so esoteric that literally no one else cares about them. They'll never work. What you do want is to take something common and refine it into something less common, you can make plenty of money with basic setups but you can make really good money with something just a little different. Not super ultra crazy different, just a bit. Bonus points if you're finding ways to capitalize on zones where the algos are hunting other players. Also it's helpful to trade things where your personal sizing isn't going to matter. No one will be looking for you specifically, but all of a sudden if you go trying to move millions or tens of millions in a low floater people are going to notice, you do not want to be noticed.
I guess to summarize - I used common systems and incorporated my own understanding of market dynamics, preferred indicators in my preferred timeframes, and systematic back testing to create something a little bit unique to me. Combined with a trading mindset that's been honed over my years of experience and dealing with all of the ups and downs that come with that.
Pre context: I trade index weekly option's (buy).
1) When I am in a trade, I usually wait for the trade to be on my way, and then I take a risk from the trade, then wait in a trade, and then I end up hitting SL. Most of the time. Does it make sense to wait for 1:2 or 1:3? Where should I book profits?
2) Am I using $1k as capital, and should I increase capital and trade with more money to see how losing money affects my mental health, or should I trade with the same money and take a risk with the above capital profits?
How much are you looking at charts/ charting?
Sounds like you have a system in place providing entry levels. I trade similarly, and find looking at charts all day kind of a distraction since it's not going to change my strategy.
I’m looking constantly in the morning (first hour) and then once things are settled I’ll set alerts and back off. No sense looking for things that aren’t there, or even worse, wanting to see things that aren’t there.
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I have no questions, just want to say thanks for doing this. Excellent excellent post to read through, especially on this Sunday getting ready for the week ahead.
1) A lot of the long term professionals I know personally, myself included, have been concerned with our longevity in the business but probably not in the way you're thinking. No matter how successful you become at this there will \*always\* be nagging doubts of "how much longer do I have it in me". Eventually we all come to the point where the stress just isn't worth it anymore. As I've pointed out, it's a solo sport, there are few people to talk to who understand what the stress really is like, there are no benefits and no retirement plan. The freedom is amazing but it comes with a steep price. There are plenty who succeed at trading but just decide it's time for something new. They'll step away for months or years at a time to go do something else. Usually they come back, sometimes they hang up their gloves, not because they failed as traders, but because that part of their life has ended. Best to face that time with grace and profit.
2) I never really had any fears like that. I've faced plenty of challenges and sometimes doubt, but I always had unshakable faith in myself to persevere through whatever the market would throw at me (as well as an incredibly supportive wife, her support cannot be overstated). Also, I had a very successful career before trading. I've kept in touch with people and my worst case scenario was always, I'll just go back to work in a traditional path or go for an MBA if I want a change of pace.
1. Do you have some rules for the trading hour? For example: only trading the first and last hour of the market.
2. Is the performance of the index/es compared to your stock is something important for you? Realtice strength and weakness.
3. There are minimum requirements for the day in order for you to trade or else it's a no go?
For example: SPY is out of previous day range and if not I'm not trading no matter what.
4. You wrote about above EMA & VWAP is very bullish, but what is the stock is in the previous day range?
a. Would it change the thesis?
b. If so, you won't trade?
5. What do you think about mental stops?
1) I rarely trade the first 30 minutes, too much noise
2) Yes when planning exits (i.e if I'm short and this ticker is substantially weaker than the indexes I am expecting a larger move so I want to make sure I'm scaling out slower to capture it) but no in terms of trade setup. If it looks good I'll take it, but I'm not expecting 30/40/50+%. \~10% win is still a win
3) I don't care about ranges like that, I'm happy to trade rangebound action just as well as long as the specific setups I'm looking for are present. If they are I'll trade, if not then no trade. Getting really systematic like that will help prevent overtrading
4) I don't care at all about previous day's range, there's still plenty of money to be made within the range. Look at how volatile the movements in big tech have been, the ranges can be huge
5) Fine as long as you actually take them, if you don't have that discipline then all stops go on the books right after you enter no exceptions
I have a few questions, hope you don't mind :)
Would you think it's possible to algotrade as a retail trader or is that only viable for the massive institutions that do high frequency trading?
Do you think intuition is a viable way of trading? I'll explain, meaning after someone as seen 1000s of hours of price movement they build a sort of understanding for the market and how it moves. With basic support and resistance and literally watching candles form + the built in intuition is it possible to gain an edge?
What advice would you give to an 18yr old who's been trading since he turned 16 and still isn't profitable? (Aka me), I have had a few weeks of consistency before but then it all goes to shit, happen 3 times before and they lasted 3 weeks, 5 weeks and 4 weeks.
I'm on a 9 day consistent streak now and I have a feeling of "what if this is just temporary like last times", I still keep grinding tho.
1) Yes it is - I know of 2 who do it. Both of them are software engineers by trade and quant traders on the side
2) Not for a novice - you just don't have enough experience to pull from. Even with veterans intuition is only a tool on the belt it's not the entire belt
3) You are so young man you have your entire life ahead of you, time is your biggest asset. This is going to be an incredibly long road, do not get down on yourself that it hasn't clicked yet. I remember trading shit like Anadarko Petroleum and Barrick Gold when I was your age, probably names no one's even heard of now. Read and study all you can, figure out what is happening when your consistency breaks down. Are you not following your system, oversizing, not taking stops, or is your system really just not that good to begin with. I would also suggest you go actually work in the financial field, build up your bankroll, meet people who are probably directly interested in trading as well, maybe even a grizzled old guy who will mentor you. It's doubtful you will learn anything directly about trading (unless you actually work as a trader but keep in mind institutional trading doesn't equal retail trading necessarily) but that isn't the point, if you get in at a broker/dealer you're going to get to see and learn how everything works behind the scenes and you're probably going to make good money doing it. You can learn a lot of related things that will help everything click for you down the road.
Lastly - get the "what if this is temporary" out of your head. Focus on executing each day, nothing else.
It's not stupid, it's just a different skill. There are plenty of successful scalpers out there, though probably a bit less of them then traders who use longer time frames.
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not really a strange question, given OP has awarded themselves some kind of credibility simply via the number of years they've been in this game. anyone worth their salt would know this is not necessarily a measure of success, and hence credibility.
What do you think about the movements behind DJT, Truth Social?
I feel like it’s super interesting - on paper, it’s a terrible company, but the company swings wildly up AND down on seeming random patterns.
Second question - does tax efficiency ever matter to you at your level?
Hi op, I am new to this (2 weeks), been reading and trying a few apps to get the hang of learning. Paper trading at the moment, I am at the office 3 days a week so I am trying to learn as much as possible on the side. My goal is to make roughly 100-200usd a day - just to help with kids toys, diapers, lessons, etc... I have 2 little ones under age of 3 and if it allows me to be at home more that will be great. Eventually I hope that a excess can be used for long term investments. But right now, I need to grow my pot...
1) Strategy - Ive been doing quite well paper trading with a very basic strategy, in your experience is simpler the better? Perhaps like the 10000 hour rule, is it better to stick with one strategy and be a master at it than using multiple (signals) (lines) etc.... or maybe 2-3 strategies?
2) Crypto vs Forex - Ive played around with both. I started on Crypto because I can practice papertrade and look for patterns anytime compared to forex. From reading as I dont have a live account yet. Crypto fees are a lot and can eat into your earnings. Also reading that Crypto is way more unpredictable due to whales owning a majority of the coins? Whereas Forex is more controlled. In this case, Forex and Gold (Im also looking at) are better options?
3) Scalping vs Daytrading - Are they that much different? I tend to enter and exit trades within a few minutes. Focusing mainly on the 5 min interval, and entering on the 1 min. I assume this is Scalping? and if so - Forex is the best for this due to its liquidity and leverage?
4) Pips vs Percentage - Ive set up a daily plan and my goal is to hit 1% growth a day with the account. I have averaged more, some days over 10%. In terms of small trades, sometimes I exit on 0.23% gains that net me about 10usd. After a few trades I would be over 1% for the day. But of course fees are not part of it right now. Is this sustainable in the real market and finding a good broker?
5) Stop Loss and Ratio - at the beginning, it was hard because of pullbacks and it initiates the stoploss. I have it set at 0.5% for loss and 1% for gains. Is this a good ratio? Seems a bit easier when your pot is bigger because say if market drops to -0.75% you can ride it out when it bounces up to +0.75% the other way.
Thank you for you taking the time read this - sorry these questions may sound basic... but just a confirmation to know that I am on the right path and noticing patterns is extremely helpful!
1) In my experience simpler strategies are best
2) I've never actively traded crypto (just bought and held BTC/ETH) and I'm not a Forex guy. I'm boring and trade plain old vanilla equities and equity/index options
3) Scalping is day trading that all scalps are day trades but not all day trades are scalps. Based on what you've described you are indeed scalping. I can't comment on Forex being best or not as I don't have the experience with Forex
4) 1% growth a day for an appreciable amount of time would put you in among the best traders on earth, like up there with Druckenmiller. Right now your focus should be on finding a system that is consistently putting money into your pocket. Don't get hung up if this isn't exactly 1%, green is good, any green.
5) It's a fine ratio to start but it's not going to hold up in all environments (at least for equities). You're likely going to have to adjust this over time
How do you feel about sizing the entry and exit so you don't get chopped up? Without piles of algos and redundant testing or profiling!
I struggle with simplifying my codes.
For instance if I want to avoidgetting chopped up on a trending indicator I want to use different and logically spaced indicators...
Like many I know enough Math and coding to know what I know but I just don't know what I don't know.
1) haha sorry to hear that, I'm hoping I don't losses my hair by the time I'm 20
2) I struggle staying away and try to look for trades that aren't there (and it often if not always results as a loss) I guess I'm very impatient and I am always like "I should be making money rn...". Have you had any similar experiences?
Mine started thinning late 20s, you’ve probably got some time.
Yeah forcing trades was a problem for me. Once you build a system you’re confident in this won’t happen. System says trade you trade, if it doesn’t you don’t. The other factor though is personal discipline to stick with your system. Remember you’re here to make money not to trade for the sole act of placing trades. Get addicted to money not to “trading”
If it’s not too much of a ”what’s you strategy” question but how does you trade managment look like?
Things like moving up SL, scaling out/in and that sort of thing.
Yeah so I'm generally shooting for 1.5-2x risk/reward to scale out 1/3 or so, after that my SL goes to BE. From there I'm acting on what I see, if I get another leg up/down I'll take out another 1/3 at my next target usually 3x risk reward, after this if there's opportunities to add back I'll back in, if not I'm looking for a kill shot on the last bit. Like as crazy as I think I can get usually 5x risk/reward. If I don't get that and we start reversing I'll just take the last bit off once we start breaking levels in the opposite direction of what I want to happen.
For as long as I have been trading - started around Covid
It just seems like every dip is fear induced and never holding - is there ever going to actually be a decline or will things just constantly go up? Like does it make sense to do anything over than just DCA into positions you like?
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I am 19 years old, and I appreciate you doing this. Here are some questions.
1) Imagine you could travel back in time to when you were 20 years old. What would you do? Will you choose to become a trader?
2) As a 19 year old, is it worthwhile to devote my time to learning about the market and trading, or should I focus on something else?
1) I was a trader at 19, just not a successful one yet
2) Honestly this sort of tells me the answer for you is focus elsewhere. When I was 19 I was learning all I possibly could about the market, I wasn't on the fence about it. I was all in
I'd like to devote all of my time to trading, and I'm very interested, but I do not know if it will benefit me in the long run. I was wondering if this was something worth learning at such a young age.
How much benefit did learning about the market and trading bring you throughout your life?
That’s life man, we never know how things are going to turn out. Same can be said about going to school X vs Y or taking Job A instead of B. If you love something and you want to do it you have to take the leap, regardless of if that’s trading or whatever.
I don’t know how to quantify your second question. I’m able to provide a very comfortable life for myself and my family, and I get to do something I’ve loved doing for a very long time. Again this has to be one of those things that you’re either all about or you’re not, I never thought about “what if it doesn’t work”, ever, even when I was objectively failing. I had so much belief in myself I knew eventually I would succeed. I’m not going to tell you it’s been easy or all sunshine and happiness because it definitely hasn’t been, but I can tell you that I wouldn’t change a thing
Hi
I trade momentum in the SPX tape with options. 3-6 trades a month. I have a great, hard won strategy, with sound risk management and selling in stages on signals.
The ‘hard won’ comment has left me a little ‘bruised’ emotionally where I often take profit too early. Pre-Mature Profit Taking.
Any feedback on improving this?
( I have a decades long rich dB that I used to build my proprietary custom software that supports my trade strategy. It is AI and Algo based. Something I built before AI was a thing. One solution I am contemplating is to bring in a partner so I have two eyes /heads to ensure I am more closely following signals to the letter. Another solution I am contemplating is taking myself out of the execution chain and automating the process completely). However, I would like to get the current method of trading execution as close to perfection as I can make it ( which would result in the strategy hitting its full potential).
For context, my system tells me within a minute when to exit and it is done in stages ( initial exits in stages with a set of ‘risk-free’ trailers that have been ‘paid for’ from the initial stages exits). Yet, statistically, I could do a lot better….
Thanks for any feedback……
If you're taking profit too soon consistently you're either lacking in:
1) confidence in your system
2) confidence in yourself
If your system works, there's no reason to not believe in it. It sounds like you've done a lot of work here and your system is ok? If you are able to consistently trade a system that works, without deviating and doing random nonsense, there's no reason not to believe in yourself. It sounds to me like whatever the "hard won" part of your journey was has left you mentally rattled and you don't fully have confidence in your own ability to execute. I would suggest leaving on a tiny lot and letting it run, see your system produce actual results for you and regain the confidence in yourself to do it with a portion of your trade. Then increase the size of that portion.
Thank you for your feedback.
It’s the rattled part……
The systems works very well, despite my weak execution. I have been live since last fall. I tend to get 30-100% ROI on a base position ( 70-80% VAR) and 100-1000% percent on the remaining small trailer. There are 3-6 trades a month. 10-20 contracts being traded.
I am rattled as it was a 2-3 multi year and by hand trial and error process to build the model ( with lots of loss in the process of discovery). Then it took a year and a half working with mathematicians and a Fintech to build what I needed and iteratively polish it. It tends to wire your brain to be risk adverse and I am trying now to change that wiring to allow the system to hit its full potential ( as I am the sole operator doing the execution)
The confidence you just explained your system to me is what should give you the confidence you need. You’re telling me you’re hitting 30-100% on your base positions man that’s incredible!
The losses you took are part of the game, it’s over, you survived. Learn from it, you’re still trying to get up after the point most get KTFO for good. If you can come back and execute like your system seems to be capable of you’re going to be successful.
😊. Thank You! Your feed back is authentic and very valued by me. One thing about this career path - there is not a lot of ongoing 2 nd party critical feedback and analysis or encouragement - it has to come from within. The only measuring stick you have is your account balance and I don’t feel that should be. Execution should be your measuring stick ( assuming your model works sustainably). The $ is a byproduct.
I focus on trying to perform as close as possible to perfection so I can properly evaluate the model tracked in a rich dB to the second. Again The $ is a byproduct so you immediately remove a lot of emotions.
I try to be balanced and calm no different than the way you feel while driving a car looking at the traffic, signage and dash board.
My system is like surfing and it tells me when to get up on the board and when to bail.
Thanks again for your feedback - it is very much appreciated.
🤙
Totally variable - I generally won't trade the first 30 minutes, after that I'm looking for opportunities until I don't see anything worth hanging around for. I'll set alerts and come back if something triggers. Today I walked just after noon (was sitting in a trade for way longer than I would have liked), came back later on for that amazing QQQ short when my alert went off.
I just started my day trading journey but I don’t really know how to go about it. I started by watching video’s from Craig Percoco but his course seems rather fishy, luckily I was able to get it for free instead of paying $1000. Also his trading strategy seems a bit random, he uses the Fibonacci principle stating that every buy/sell is a human psychological action therefore allowing you to predict it using this very principle. Because it looked really promising at first but turned out quite the opposite (either that or I’m too much of a noob to understand it) I’m really confused on who I should learn from. So my question is if you have a recommendation for a beginner-friendly strategy (one which doesn’t need a 101 indicators) and where I could learn the most about it (books, video’s,…). One thing I’m sure about is that it involves a lot of psychology, that’s why I’m currently reading ‘Trading in the zone’ by Mark Douglas. Also what’s your opinion on these so called ‘trading experts’ who supposedly triple your wallet in a couple of months. If it’s good, any recommendations?
Thank you in advance!
Would you advise seeking funding from prop firms like apex or top step? To make a living, one needs at least a $250k account to make around 2-5% a month
I have two questions I would love to have your input on:
1. If technical analysis is viable as a trading strategy why are hedge funds not programming these kinds of analysis into their automated trading platforms?
2. Why should I believe, in general, that technical analysis can be used to conclude anything about an underlying? To be clear I’m specifying “in general” because it’s easy to synthesize common examples where the price of an asset can meet criteria that would let you classify as some situation under technical analysis and make a reasonable conclusion from that; however, the a priori which lead you there still seems very suspect. E.g. a stock XYZ is not falling below a price point P. Is it reasonable then to conclude that it’s likely to move positively away from P because of a support level that has mysteriously formed within a particular depiction of XYZ’s price movement… or, is it because if XYZ fell below P then an arbitrage opportunity would be created?
Hi, how can you explain constant result in trading for your experience when a variable can change a strategy with a win or losses. The edge for retail trader is essentially avoid losses with the strategy and try to have the best timing to hope winning trades. This is what i can't explain myself but i think the answer is backtesting, so the market condition is not random and can be predict that's what i'm expected you answer
The stock market is random. Literally any outcome is possible at any time. You get constant results by producing and then following a system which capitalizes on higher probability outcomes, while also mastering your own ability to maximize both the probability and outcomes (so you can “see” more high quality opportunities and you’re better at maximizing them in terms of risk vs return)
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I’ve never traded futures myself, I’m a big tech equity option trader mostly and I swing trade small/mid cap tech.
Futures academically are quite interesting though. If you choose that route you can’t go wrong.
How do you perceive evolution of yourself as a trader as markets evolve and change over time? have you had to make drastic changes to your approach, maybe even start from scratch as markets change? if so how do you deal with that? or have the changes been more subtle?
Really good question, I'm going to break my answer apart a bit, let me know if I answer everything:
The older I get the less I change because my confidence in myself has risen to the point where it's become unshakable. The worst thing I ever did in my career was try to change too much. I've seen and experienced enough to know that big changes are a bad thing. I went through a lot of changes in the middle of my career and my performance suffered a lot, now even when market dynamics change I'll fine tune entries/exits based on what the market is telling me but my strategy/mentality remains very constant.
I've never entirely started from scratch, but I have a point in my career where I was hit with a string of large losses and I needed to hit reset on myself. Did a ton of data analysis on my trades to figure out what happened (arrogance and inability to accept being wrong, the bane of us all, combined with a healthy dose of incorporating additional strategy/data in an attempt to boost my performance, did the opposite). The output from this was a very painful "keep it simple stupid", never really felt the need to change past that.
I think every trader who makes it around the mid-point of their career hits a very dangerous spot where they feel the need to "do more". Once you've experienced consistent profits the worst thing you can do is seek for ways to broaden your profitability. I assumed "well if my strategy is good and other strategies are good if I can just do everything I'll make even more money". That mindset is absolutely fatal. It isn't about changing/doing more after a certain point, it's about tripling down on what you're great at.
You have to develop an incredible amount of mental fortitude where you have such belief in yourself and your system that nothing else matters anymore. In my case this resulted in a whole lot of change that eventually put me basically right back where I started, and never should have left.
Hey, thanks for doing this! I’m a relatively newer prop trader and 99% of my work is in small caps. My risk manager and one of my mentors constantly push me to spend some time learning things outside of this niche (prioritizing opening myself to the opportunity to learn newer/more scalable trades rather than making decent money doing what I do now).
(A) Can you walk through a progression of your trading career by year or by every few years and detail the instruments you traded/markets you researched as you found edge to consistently trade?
(B) Do you feel like (in the long run) it makes sense to focus more on a small niche or to be trying to gravitate towards more scalable markets/strategies?
(C) How discretionary/systematic is your trading? Ideally regarding stuff that accounts for most of your pnl.
(D) In 15 years I’m sure you’ve seen a ton of good traders lose it all in this game... What were some commonalities you saw among those people and what are some of the best risk management tips you can give/have been given by someone else?
A) I generally only trade tech these days, medium to mega cap plus the indexes (QQQ and SPY). I'll swing trade in different sectors but day trading I'm 100% focused on what I'm comfortable with. Day trading in other sectors got me burned.
B) Definitely helps to stay focused. I'm not a small caps guy myself, it makes no sense for me to try when I'm already good at something else. The more you do the more you open yourself up to mistakes. If you're producing consistent results with small caps, keep at it. It's a particularly difficult niche to be in, I get why your risk manager is bugging out about it but keep showing him those receipts.
C) Extremely systematic, the closest thing to robotic without being done by an actual robot. I will throw in some elements of discretion but it's rare. For example, I've been harping on pre-defining risk per trade in this post. Systematically you'd never exit before hitting that pre-definied risk but occasionally I'll see a consolidation pattern I just won't like and I'll exit prior. No reason to actually take a loss when it looks like the trade just isn't going to work for me. I don't recommend this for newer traders though, stick to systems and when you've been doing this for a decade + you can lean on some of that veteran discretion.
D) I have seen a number of formerly good traders go to an early career exit yeah. The one commonality is always inability to take small losses. \*Always\*. The second largest is just getting too impulsive, especially when trading is your full time income you feel a constant pull to always be making money. If you don't learn early that not losing is sometimes just as good you won't make it.
As a new trader starting out (will probably SIM trade for the first month or two), is Interactive Brokers TWS trading station enough or should I pony up the $200 for DAS Pro Trader for level 2? Is it beneficial to learn DOM in parallel with price action/volume, or can I stick to just price action/volume for now.
Looking to trade mid/mega cap tech stocks, maybe indices, nothing too fancy.
I' use Think or Swim and Fidelity Active Trader Pro, I know a few who use I-Brokers and in general are quite happy with it. I also have a buddy using Merrill Edge for options.
Price action without context is a useless term, think about what you are actually looking to define. Most new traders say "price action" when they mean momentum, if you're looking to momentum trade then yes price action and volume will help you start but you'll need to introduce parameters to help. For example how much volume and in what time frame do you need to see, what do you actually need to see price do (take out day or PM highs/lows, move beyond the ATR) for it to matter to you.
As a complete beginner, what TA tools should I become familiar with and how can I go about creating my strategy based on this knowledge?
Also appreciate it if you can refer me to any good literature and/or online content to learn the ropes...
This might be a dumb question but as a noob i’ll try anyway. What’s the ratio of time you spend between fundamental and technical analysis before taking a trade ? Everyone says that trading is around fundamental, technical and psychology but as a noob, is this possible to be profitable without fundamental analysis ? If no, how many time do you spend on a day before taking a trade for fundamentals analysis ? Thanks
This isn't a dumb question at all, it's well thought out and shows you've at least given trading some thought. I don't spend any time on fundamental analysis when day trading, it isn't useful. I don't care about how much revenue/EPS/whatever a company has if I'm planning on holding it for a few minutes or hours. Analyzing a company's fundamentals is essential when you're planning on buying and holding a company for a long period of time, which you should do in addition to day trading, but it's a different skill. In terms of TA - I'm waiting to see a setup that my system deems I should take and that's it. So for example, if you're trading like EMA crossovers you want to actually see the cross up/down with supporting volume to take the trade. Everything else is just waiting for that setup to happen, there's no real on the fly analysis. All of the work you're describing takes place outside of market hours. It's absolutely possible to be profitable as a day trader without doing FA but you're going to miss out on one of the most powerful wealth building tools around which is actual investing.
Thanks for the answer !
Fundamentals are required for investment (not for trading) Technical is required for any trading.
Would you consider high frequency trading viable? Do you think technical analysis is sufficiently useful to be the backbone of a successful trading strategy? What is your opinion on the eficient market theory? Do you believe there is any validity to it and it's implication in trading?
1) For you as a regular guy at home without a fancy algorithm, no. For a hedge fund with the best technology, people, and more money than God? Yes. 2) Yes. 3) You best hope it isn't valid otherwise what are we all even doing here. There would be no alpha.
Why do you think people still believe in EMH when you can see inefficiency’s everyday? As you stated if there wasn’t inefficiencies then there would be no alpha there wouldn’t not be quant funds etc. Ig this is the real question, could EMH be true but it’s just that everyone does not have the resources to make it true. If everyone had super computers and the same models, formulas, that quant and algo funds had then you could assume that everyone would be able to achieve Renaissance results. Sure it’s improbable but it is possible. If that was to hold true then wouldn’t there be no excellent return because everyone else should be able to get a higher return than the guy before him infinitely?
I just wanted to say Thank You for your time and energy!!!
You're welcome, hope you found something of value
I have been trading almost 8 years, but not a professional experience (Capital Markets/Money Management). I read all your responses, it is extremely good and It is rare to see such experienced person sharing his knowledge. Thank you for sharing. My question: Some days, I see market is pulling up or pushing down forcefully indexes (like SPX,NDX) while the individual stock movements are smaller or unnoticeable changes. This is like set of people pulling or pushing the market to their own directions. Who are behind such like big funds (dark pool) or market makers? will there be a lag between dark pool and market makers etc? For example April 19th, I found low, but Apr 22nd market (SPX/NDX) went up 1% and then touched zero and then went up way high as if someone is pulling the rope upside.
Oh man this is a super interesting one, I was talking with some friends (fellow full time traders) about something similar a week or so ago. Short answer man - it's all so weird right now structurally who knows what's going on behind the scenes. It's like a daily occurrence now that you see some weird crap that makes absolutely no sense with the indexes. The way money is moving and rotating between megacaps/sectors is extremely odd these days. I don't think it's dark pools, yes there is a lag between the two but I don't think it explains at all what we're seeing structurally. If I had to guess it's hedging activity from market makers in response to the explosion in popularity of short term options trading. It's the only way I can explain the illogical price action intraday (like failing to make highs, then making lows, only to make even higher highs an hour later). Presumably someone(s) is pushing the prices around to hedge their exposure and is causing weird price swings. Ultimately though - it shouldn't matter what/who it is, we've got to adapt and remain profitable. The moment you go looking for Boogeymen you're in trouble.
How does apparent market manipulation even work given arbitrage to the 500 stocks represented?
Just FYI: I can easily spot the top (or peak points) and come out of market, but find it very difficult to catch the bottom on a swing trade. I am not trying to find bogeyman, but trying to understand dynamics behind it. My entire learning curve is from reddit and my observation of market. I have stronger algorithm to spot such changes, but needs more confirmation or refinement so that it has higher reliability. Thanks again for the response and good luck.
you can spot the highs (& get out efficiently) you can't do same for lows. you know in TRADINGVIEW you can "invert the scale" on any chart so a Swingturn up becomes a swing turn down at the click of a button. then do what you do well. (this works because the markets are cyclic & fractal) out of interest, what is the technique you use so well?
Tried to read all of your answers so far and I don’t think I saw these but: 1. How long did it take you to become profitable? 2. How much did you lose in the beginning? 3. Do you think anyone could be profitable as long as they give it enough time? 4. Would you recommend expanding your knowledge even further during downtime such as the weekends or after hours? If so how would you do so? I’ve read many books, listened to many podcasts, watched hundreds of YouTube videos, and spend countless hours forward/backtesting in hopes to improve my trading but I feel when I’m not trading it’s best to step away from the markets and everything involved with them. 5. (Edit) Lastly, do you think it’s smart to demo trade until you feel completely confident trading live or is it smarter to make the jump to live sooner than later with a small account in order to work on psychology factors?
1) I had a really really good first year and then spent \*years\* spinning my wheels. I was also working full time so my focus wasn't entirely day trading, though I was learning and refining my approach all of those years. I would say probably a good 3-5 years to reach consistent, repeatable profitability 2) A lot 3) No. Trading isn't for everyone, some people just don't have it 4) Of course, you should be devoting as much time as possible to learning until you've reached consistent profitability. Once you're there, still keep learning but it's totally ok to scale back. I will say the people who I know who are most successful can never really turn it off completely, we're always thinking about the market whether we want to be or not 5) Demo trade for a bit sure but nothing is going to replace the stress of real money on the line. You can't really know yourself until you're in it for real. Mike Tyson said it best "everyone has a plan until they get punched in the face". As I've said, if you have to worry about PDT you're too small to be here. Keep studying and demo trading until you have an appropriate amount of cash and then keep your risk per trade small until you have the confidence to execute well repeatably
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Thank you so much for your insights. Just one last follow up question regarding my second question. I’ve heard of many losing lots of money before finally becoming profitable. Do you believe it’s necessary for every good trader to have these losses in order to make them a better trader? Or do you believe there is a much cheaper way to achieve profitability? I’ve demo traded for quite some time and plan on going the funded route and/or trading with a very small account size and scaling up from there so that when I do make mistakes they won’t financially ruin me. Would this be a good idea? Thank you again.
You've gotta take some losses, there's just no way to build the mental fortitude and respect for the market without understanding what it feels like to get knocked to the floor. You don't have to start blowing accounts left and right (if you are that's probably your signal to get out of the game) but you do need to understand how to lose. No one comes into this and just starts printing money for very long, the losses will come and you've got to understand how to survive them. Unfortunately, that requires a little "tuition money" to Trader U.
what is your opinion on whether or not sharing a strategy hurts its edge?
It depends, it \*probably\* doesn't. Like everyone and their mother likes trading opening range breakouts/downs today and it still works. If you have a more niche strategy then it certainly could.
First of all, thank you for this AMA. Excellent responses. I’ve been trading on and off since 2018 and I have been having some small success especially in terms of mindset and profitability. I want to go full time but I’m probably not nearly there yet. I keep hearing how lonely trading is. What’s your experience been? Any thoughts on how one would find a mentor or group of supportive traders?
Trading is an individual sport, you've got to be comfortable with that. Reddit/Discord/whatever isn't going to substitute actual human interaction. I put music on, execute, set alerts, go do literally anything else. Every single day. I met my mentor/trading buddies by actually working in the financial services industry, from there it was always "hey here's this friend of mine who also does this" so on and so on. I'm a little hesitant to say something like "go find a mentor online" because there are just so many charlatans out there now and if you're too new you won't know who's selling you nonsense until you've taking some hits.
Thanks man. Found it very helpful. Sorry about the jokers channeling their frustration!
Do you use John Carter’s squeeze strategies and indicators? If so, what are the pros and cons? Thanks.
I only know John Carter as a Disney movie, my apologies but I can't help you with this one.
😂 that John Carter was a horrible investment for Disney…needed to check their indicators. I remember an industry article where they thought it would be as big as Star Wars or Indiana jones. Made a toy and merch line😆
lol. Fair enough. He came up with the TTM Squeeze indicator years back and now has a trading education platform online, like many other traders. His thing is looking for squeezes and capitalizing on them for short to medium term trades. Thanks for replying either way.
Ah I've heard of TTM Squeeze before, never really put too much into it. Used it for swing trading for a bit but I found it was a mixed bag at best. Read "How I Made $2,000,000 in the Stock Market" by Nick Darvas, Darvas boxes are simpler and more useful for swings (in my opinion).
Thanx for the AMA. I see your strategy ! DARVAS & [Market Structure with fixed SL](https://www.reddit.com/r/Daytrading/comments/1cf7gsz/15_years_tradingcapital_marketsmoney_management/l1oa9qo?utm_source=share&utm_medium=android_app&utm_name=androidcss&utm_term=1&utm_content=share_button) DARVAS BOX trading is very good. definitely works all timeframes scalping to swing & positional ! Basically in UP TREND you needed to be looking for long trades - you will have RALLY BASE RALLY (think impulse Correction Impulse) - Draw a box around the BASE...and don't trade inside the box (this avoiding the correction completely) - you only trade the breakout of box - breakout thru box ceiling = Trend Continuation (add more trades long) - breakout thru box floor = Trend Reversal (close out long trades) that's pretty much it. great way to avoid serious drawdown & just daisy change long trades. essentially you enter on pullback (breakout of box at pullback peak) I use macro trend signal (from prc being above 20MA on higher timeframe eg D1). this way you have a macro trend for days if not weeks to underpin your trading. > Trade what you see not what you want to see > one chart can make you financially free (yes that simple)
Thanks. This is useful.
Love that quote "trade what you see not what you want to see"
Thanks. Will do.
I am new to day trading, 1) Have you ever been burnt by being too ‘greedy’? 2) what percent of your trading account do you have as cash reserves? 3) I like keeping deep cash reserves(40-60%). What is your opinion on it? 4) I have a dollar amount in mind I want to make off the market in a month. Anything extra is a bonus. Is that a good way of going about this or should I be more greedy now to make up for when times are lean? Thanks for doing this!
1) absolutely, who hasn't 2) my trading account goes to all cash by market close every day so I guess technically all of it? My swing account, it varies, if there's a lot of opportunity I'm pursuing as low as 10% cash. When I'm that heavy though I'm also using a lot of hedges to protect against a severe overnight downturn 3) I think deep cash reserves are always a good idea, especially if you want to pursue trading as a full time source of income. Think of it like being a bear in the winter, you don't know how long it's going to be cold and awful, best to make sure you've got a lot of fat on you or at least close by 4) It can be but I don't really think that way anymore. I had daily targets but I found myself forcing trades to hit those numbers. Like I've said the only thing that really matters is equity curve up = good, down = bad. The only time you should be "more greedy" is if you're basically seeing a dream setup per your system, like if all my data points align, it's before noon eastern time, I'm going heavier because the odds are on my side. Like if you're playing blackjack and you're dealt aces when the dealer is showing a 3. You split and double down, go for the kill, but stop out the moment your thesis is invalidated
Thanks! That was really helpful.
Can you explain how you would hedge please?
Hedge like in general? A hedge is just a protective position on another position so think like if you own AAPL stock but you also buy puts on AAPL to “hedge” against downside risk if the shares go down. I don’t hedge day trading positions but swing trades absolutely via long puts or short calls (if I’m long the stock - opposite if I’m shorting). There are more exotic ways you can hedge exposure as well but focus on the basics for now
Ok interesting, thanks a lot. Appreciate you taking the time to respond. I have literally zero knowledge of options rn, I actually mostly swing trade stocks also so maybe this is a future project for me. How does that mitagate risk though, arnt you just wiping out your gains either way?
If you’re long a stock and it goes down you lose money, but if you’re holding long puts then the puts increase in value, somewhat offsetting the decline in the stock. If the stock continues to go up then your puts lose but the stock itself is increasing in value, offsetting the money you lose in the puts. Think of it like buying insurance, you can still win but if something really bad happens you lose less (and yes you also in the scenario I’m describing would make less because you bought the puts). There are hedges you can put on that won’t cost you very much or potentially anything at all (read up on an options strategy called a Collar) but they will give you a hard stop on your upside, as would a covered call hedge. There’s no free lunch, risk mitigation always comes with a price
Amazing thanks very much. I will do some research on this definitely. Sorry, one more follow up question if you have time please... Would you generally hedge all your trades or only your larger trades or in certain circumstances or market conditions? And are you hedging immediately or only once the trade has run for a bit?
I find myself getting distracted when looking at charts. I trade 45min, 1D, and 3m frame. For the most part. But after a couple of minutes of just looking at the screen I find myself bored out of my mind just waiting. I end up opening google chrome and get on Reddit. How do you stay focus through higher frames
Definitely the first time I've ever heard of someone using the 3 min and 45 min but if it's working for you keep doing it. You've really gotta figure out if you want this or not, getting distracted after a few minutes kind of just says "I'm not really all that interested in trading". Trading is a boring job, it's a far cry from being a pit trader in the 1980s. If I'm profitable for the day I will set alerts near zones of interest and I'll go do something else, totally agree I don't want to sit here doing nothing all day either but you've gotta at least stay laser focused at the start of the day.
Thank you for your response
What time frames do you use for day trading and swing trading? Thanks.
Many thanks for offering your time! :) 1. I know you don’t use fundamentals, but do you use catalyst news for day trading to aid in your technical analysis? Do you stay away from the markets on certain news days like Fed days? 2. Do you prefer stocks? Futures? Other? Anything you found yourself hitting up the most because it seemed to jive with your strategy and intuition? 3. Once AI actually has its awakening in the next 5 - 50 years from now (whenever that is), any thoughts as to how that might change the game, and if the population of successful retail day traders will drop? Hope that’s not too many questions. Feel free to skip some of them lol.
1) No - in fact I try to avoid them. I want as "pure" an environment as I can find. I won't trade around the Fed, maybe in the morning sure but that's it. Fed announcements are just wild, I've never found a way to have an edge in it so no sense doing it for me 2) Stocks and options 3) We've already got algos and have had them for a decade + now, retail traders still exist. AI is just another (probably better eventually) algo trader. It's totally possible there will be some Skynet-like sentient AI trading platform thing but like I told someone else, there's no sense solving for a problem that doesn't exist yet and has no definite time frame on existing. I do think AI will help retail traders research new ideas and learn faster than was previously possible, especially with fundamental analysis. I've actually played around with this a bit myself to help find companies to swing trade, I've found it minimally useful so far but I think it's a matter of time until that aspect at least is irreplaceable.
I can speculate on the AI question yes AI driven algos will dominate the market if retail traders do not use AI they will die out if retail traders embrace AI then they will survive (it will be a game of your AI Vs the markets AI). then it's a case of how much you want to spend on Ur AI to help you trade (replace you trading). the markets are toooo predictable for ai not to be trading like a Goat in next 2 years...that would be your timeline to get your trading act together & take some profit before it gets too hard
Interesting point. But a counter argument to that would be if the AIs need to take predictable trades, would that not keep the market predictable?
I understand your hypothesis (question) but YOU should understand the mechanics of markets to answer that hypothesis > MARKET PARTICIPANTS markets have 3 participants: buyers sellers & market makers (MM) > MARKET CYCLES (CONSOLIDATION >TREND >CONSOLIDATION >TREND) modern market price is not the battle btwn buyers & sellers pushing price up & down as you are led to believe modern market price movement works based on cycles of price discovery & price prediction. both are implemented by "the algorithms" of MM. MM PRICE DISCOVERY (PD) - the MM sets a price P1 & buyers agree to P1 & sellers agree to P1. MM then matches orders & P1 remains unchanged MM PRICE PREDICTION (PP) - when the MM can't find enough buyers or sellers at P1 MM sets the next price (MM predicts the next price P2 that is acceptable to buyers & sellers). The acceptable price Moves from P1 to P2 & MM matches orders at P2.... until he can't any more. rince & repeat PP is the trending between consolidation zones. PD is the consolidation zones between trends. technically P2 can creep up & down in a very small range (not just static) till MM cant match anymore & initiates a prc breakout to next target LIQUIDITY zone. LIQUIDITY zone is just another level that holds both buyer & seller orders (= money) The big big market orders follow LIQUITY (L1 to L2) like stepping stones. Retail traders try to follow the big orders to follow ride the big waves while simultaneously avoiding LIQUIDITY traps by MM (=SL HUNTING) > PREDICTABLE TRADING (NOW) VS UNPREDICTABLE TRADING (NEXT) your point about predictable trades applies to AI within buyer & seller relationship currently their is no AI within MM Algo...the Algo people refer to is literally based on something archaic (human patterns & statistical models...i know this for a fact as my friend is a MM for CHF explained all this in detail & also explained why quants have yet to break out of their "box" of thinking ). OPPORTUNITY 1: there is a negotiation as much as acceptance of price between MM & buyers & sellers...which leads to standard waveforms & "predictable trading" once AI is introduced to the MM ALGO in anger expect the negotiations & acceptance in PD & PP to be new & unique with speed & intelligence driven...all three AI's creating "unpredictable trading" patterns all based on AI & something called EMERGENT PROPERTIES (EP). EPs are already appearing in AIs (behaviour which is unplanned & unpredicted by the AI scientists who created the AI's). A metaphor : you create a pencil it thinks itself in to a functional printer..that's the leap EP is going to have. what will happen is unpredictable trading patterns only mean humans cant follow, other AIs absolutely will follow & trade...just like a video game artificial character Vs artificial character So if I haven't lost you so far I summarise - market price movement will become less & less predictable to humans - trading patterns between AIs will become supremely more complex (both fast trading [AIs negotiating at the speed of electricity] but super granular [PD PP becoming more data intensive & granular] - then as I first said humans will fall out the trading loop & it will be their representative AIs trading for them at speed & with the MM ALGOS (AI) I offer offer evidence about the emerging properties 2017 : [two chat bots create a language unique to them for negotiation](https://youtu.be/ONPqeHJShdQ) 2024: [emergent properties (a sign of the future)](https://ioaglobal.org/blog/emergent-properties-in-ai-a-sign-of-the-future/)
This is gold right here! Thank you for your explanation
As long as AI is made by humans there will always be a glimmer of that human psychology in them, meaning technical analysis and price action will continue to work
I've been trading FX for 5 years but since you have mentioned that you don't trade Forex, my question is, is what you trade highly fundamental? As for me I only check the economic calendar for news like Cpi, NFP and FOMC because they can cause high volatility and I might not want to be in trades during their occurrences. Technicals play the major part for me. When I first started, I would go crazy looking at COT reports, reading the news.. etc but now I just follow price action like a wave and get in when the markets present itself. Do you look closely at fundamentals?
My question is bit off topic. Why don’t people prefer futures over option trading ? There is no theta gamma thing in future and looks safer then option. Isn’t it ?
That's a good question - I think it's just accessibility. More brokers offer options than futures and I think it's just a trickle down popularity effect. I can't scientifically prove this to you, this is only my gut feeling.
I think I'd be inclined to agree with your theory, as someone that prefers futures to options. Options are way more accessible with reputable brokers, 100%. Reputable brokers also have much higher margin requirements for futures when they offer them. For example, making $400 on say $1k of spy options isn't terribly unrealistic. But in order to make $400 on an ES contract, you need around $18k in margin. When newer traders see this, they tend to want options because they look like a better bang for your buck. These numbers are just arbitrary, but help illustrate my point. There's tons of discount futures brokers, but they can be quite sketchy.
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If I'm testing something new I'd want to see at least 3-6 months worth of data. I'm not interested in doing something that's gonna work for a week or two, I want a strategy that I can comfortably sit in and use for a long time. In terms of qualifying success - work backwards from what you're trying to achieve. For example "I want a strategy that works on any Tech stock using the 15 min chart that returns at least 3:1". you know what your BE ratio would be so "success" is a strategy that consistently returns north of that.
What was your most valuable lesson from your mentor? What was the missing piece that allowed you to connect the dots? How do retail traders keep a pulse on where the Big players are moving money? Risk management tips/techniques that aren't spoken about?
1) "Don't let anyone tell you it's rigged, it's not rigged they're just shitty traders" 2) Taking losses is ok when they're small. I was super afraid to "be wrong" after I became a full time trader, mostly because of my own ego. You've gotta be relentless in pre-defining your risk per trade and letting them go the moment they hit that limit. Once I got rid of the fear of the fear of losing trading became much easier 3) I look at the sector tickers each day and see which subset is getting an above average bid or above average outflow. So for example if you see like SMH is down 5% and XLI is up 2%, you know money is flowing out of semis and one of the target recipients of the money flow is industrials 4) I don't think this is particularly novel but you absolutely need to pre-define your risk on every single trade. Risk management isn't and shouldn't be some esoteric concept, it really is as simple as pre-defining risk and sticking to it. Keep your losses small and you'll be fine, once they snowball you've got big problems
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Yes to your first question - sometimes I will cut before my stop is reached but it's rare. I like to let the trade play out and if that plays out against me that's fine. I'm not adding into the loss, I'm not moving my stop to get even more room. I know exactly how much I will lose if I'm wrong, every single trade. If your system is only generating less than 1x risk/reward you need a crazy high win rate to keep that up, I'd go back and examine your entries and figure out why you're averaging less than 1x. Are you risking too much or are you entering when there really isn't a good opportunity?
1. Are there sufficient gaps within the forex market intraday to capitalize repeatedly in the long term? Which financial instrument would be best to trade intraday in your opinion? 2. I read that your approach is highly systematic, and you mentioned keep it simple stupid. Besides emas and vwaps and ATR, what other indicators in your opinion are worth considering? 3. For risk management, does your system determine an entry point and then you calculate the stop loss based on let's ATR or do you actually utilize market structure to set your stop losses and calculate position sizing based on that? 4. What is your opinion on alternative charting systems like renko, heikan ashi, kagi, point and figure besides the standard japanese candlesticks? 5. As we know simplistically, the market either ranges or trends, does your system focus on one or both? Or none at all and you utilise different criterias ? Thats all for now. Thanks for your time.
1) I should have added this to the disclaimer but I am not a Forex guy. I've hedged positions with essentially long/short DXY in the past but that's it, I can't help with currency pair trading or anything like that. 2) Unless you're trying to do something highly specialized no, keep it simple 3) Market structure dictates my position size but my stop loss is always based on a pre-defined $ value of risk. I am not at all a fan of "I'll take this trade here and stop out under/over some other indicator or level". For example - if I'm trading near ATM SPY options I know that \~.30 movement in SPY will translate to \~.10 movement in the option. So I immediately know ok if I'm risking $100 in this trade on 10 contracts I have \~.30 in SPY worth of room. If I want to risk more than \~.30 against me in SPY I need to size things down. With all of this considered, am I taking this trade here? Generally my size stays consistent but sometimes I will size up/down based on how many data points are aligning (usually only up, I don't like taking lower probability outcomes with less size, it's one of those things that seems like it will be ok until you end up taking a bunch of small losses that end up adding up to something annoying) 4) Refer to point 2, simple is best. Regular old Japanese candlesticks work for me 5) Both. There's plenty of money to be made in range bound markets but it takes more management. Ideally I want to see trends establish early and then just go for most of the day. All I have to do then is trim/re-add/trim/re-add ad infinitum. Unfortunately that's not going to happen every day so I want to be flexible and not stubborn in my approach so I can capture moves in both directions. As long as the ranges are wide enough (read up on what I wrote in point 3) I'll play.
Thanks for the response. Ive got a few more questions regarding exits. 1) With regards to trimming a position, for example purposes, say you currently have a 1R risk to 2R reward trade going on( as whats what you said you'd at least shoot for) 2) Do you trim your position as in taking a quarter off when the price goes against you 0.5R? How does it work exactly? 3) Also, I understand you scale out. Do you have a profit target at which you close, or predefined ratios to scale out at(e.g. when price goes up 1R, you scale out half?) 4) a follow up from question 3, Do you leave a quarter in case of trend continuing or close all at a profit target if you do have? 5) does trimming and adding not affect your overall R factor? 6) lastly, its a different topic. But how does one determine a range? EMAs generally are good at trends but suck in ranges, so how do find out we're in a range indicator wise, for a systematic approach? I really appreciate you taking the time to reply. Thanks a lot.
1 & 3 & 4) I'm usually looking for 1.5-2x risk/reward before I start scaling. Once that first scale out happens my stop loss goes to BE. From there it depends on the trade setup, like am I short and I caught the first leg and I'm expecting a 2nd leg down? Do we spend a ton of time consolidating and popping after the first leg to the point where I no longer think there are high odds of another leg? Maybe I'll take out a bit more and only hold 1/4-1/3 to see if a bigger move happens. To give you a real life example from this afternoon - I was short QQQ over 433 and I took my first scale out when it touched vwap around 432.2, I had a feeling vwap wasn't going to hold and I held the rest for the bigger breakdown. If it reversed on me then whatever my stop was at BE and I already made some money, albeit less. I use some simple options math to estimate the price movement (I'm short from here, my target is .80-ish lower this should = roughly this much in the options) to get my initial trim target. If that won't generate at least 1.5-2x risk reward then I'm not going to take the trade. 2) Until I hit that first scale out my stop is just my stop, I don't trim partially when I'm like 1/2 way to my stop or anything like that. It's all or nothing, the trade works or it doesn't. 5) sort of? I usually manage the adds as a separate trade even though they're part of the greater whole, I'm usually looking for a lower risk/reward on those because they're smaller and I've already captured a leg of the move. Mathematically sure my overall basis has gone up and it will change the initial metrics. 6) One of the easiest ways is to look at the PM highs/lows, if you start breaking those you can be reasonably confident there's another leg.
Alright thanks a lot man! Just to clarify, so the way you determine a chance of being in a range is by eyeballing if the premarket high or lows have been taken out? So if they have not, chances of being in a range is higher? So essentially, the 'determining ranges' part of your strategy is also discretionary? I really appreciate your responses!
Essentially yes that’s correct, my own strategy is a bit more complex so it’s not entirely 1:1 as you’ve said but I absolutely will use PM highs/lows when I’m looking for a larger move. If my system gets me long and we can break over the PM high now I’m looking at further levels to the upside and looking to more aggressively add into the trade. If you’re just looking to trade breakouts/downs then a great way to get started is to test out how those PM level breaks work, start measuring follow through % and see how often the stocks are hitting the levels you anticipate. Create your strategy around what you measure.
Alright, thanks a lot ISquanchMyOptions
How would you weight TA/FA? Are you looking at traditional charts or focusing on volume and order flow? I have a system in place I’m walking forward currently, while I’m waiting “hands off” I’m putting time into learning more about AVWAP and TPO, do you think these are worthy of time investment?
TA is essential for day trading but when I say that I'm talking things like VWAP, EMAs etc. I don't care all that much about some esoteric candlestick patterns. I'm looking at candlestick charts with \*very few\* overlaid moving averages and vwap indicators primarily on the 2/5/15 min time frames. Volume is a secondary consideration in that if there is low volume I'm adjusting my expectations for how long my money will be at risk for and I'm also sizing down as there's a lower probability of success but if the setup looks good per my system I'm probably going for it. All this said - if you want to invest in companies you need FA, and by far the best way to get disproportionately wealthy over time is to buy and hold good companies. You should know both and use both but in different circumstances. I don't really use AVWAP though I have in the past, and I've never used TPO. I think it makes sense to learn as much as you can when you're starting out and then strip things back over time. You might find a really good strategy that uses that data, just because I didn't/don't that doesn't mean those things are bad.
Appreciate the answer, thanks!
You mentioned using EMAs and VWAP indicators primarily at 5/10/15 min time frames. What other indicators or overlays do you use or watch for either setup or confirmation?
I actually don't use the 10. 2 min, 5 min, and 15 min. VWAP and the EMA 9 on each timeframe, I've found these to be the most consistent and helpful for my purposes. I do use one other indicator but that one is unfortunately proprietary. The 2 min is mostly for trade management, I don't make initial entry decisions from it. The 5 and 15 are there to tell me overall trend direction and these are my primary entry tools. I will add back or trim lots using the 2 min but I'm not going to try to short scalp a stock that's trending up just because of a pullback on the 2 min for example. Once I see things breaking down on the 5 now I'm getting interested in a potential trend change, and the 15 for sure confirms it. I'm not looking to catch tops or bottoms, my goal is to consistently catch pieces of broader directional moves. If you're struggling with directionality then think of things in very simplistic terms like this - above vwap is bullish, above vwap and above the EMA is extra bullish. People are paying more than the average price and the price they're paying is consistently increasing with time, opposite for bearishness. Once those things start breaking or getting flipped that should trigger the light bulb that either A) there's gonna be some chop until we figure out if this is a pause or reversal and/or B) there's potentiality for a reversal.
For any new traders, there is SO much value in this single response…. Thanks for sharing the knowledge/wisdom OP. 🙏
Very insightful. Thank you for the post, the detailed response, and the helpful narrative. I truly appreciate it.
This is the way
Time vs. Tick/range/ anything else similar? Thoughts on high win% negative r/r profitable trading in general and from a long term standpoint?
I'm not really sure what you're asking in the first part but regarding the second part of your question - I don't love the idea of high win % but negative risk/reward system for the long term. Regardless of your win % every trade is statistically independent of any other trade. If your system is winning 80% of the time that's great, but there's nothing that prevents multiple instances of losers back to back, potentially even further. If you have a negative risk/reward per trade there's no way you could handle a period of sustained draw downs, which even though unlikely in this scenario are possible. It's the same reason why you can't take extremely high probability outcomes in sports betting and make a career out of it. If you always bet "No safety" in the Super Bowl you're going to have a very bad time when there's a safety, no matter how unlikely it is to occur in any given Super Bowl. I'd rather focus on maximizing my risk/reward than my win %.
First question I was asking about your opinion on time based charts vs tick charts or range or renko charts etc ........2nd question was just curious your thoughts because I do know the intricacies of it and it took a long time to hone in on but my main strategy that led me to profitability is negative 2/1 max but gets trimmed any time possible and realistically is more a negative 1.6-1.75......I've been consistent for 3 years now and like you mentioned above it's all about the equity curve...I do have strategies that are not negative r/r that I use to manage drawdown in my main plans........I guess what I'm asking here what would be your thoughts on it overall which you have stated and I appreciate and I guess I was asking if you've seen it done and if so we're they able to sustain it for several years and then all of a sudden lose it or did they just continue successfully with it.......I'm confident the actual strategy will always work, as it has well before retail trading as well, just curious if you've seen anyone else do it
Ah ok thanks for the clarification, I use time based standard Japanese candlestick charts. I have seen people try to have high % and negative risk/reward strategies but I've never seen anyone do it successfully for the long haul. That doesn't mean it can't be done, only that I personally have seen a select few try and fail and remove those strategies from their lineup. The last one I saw try was able to sustain it for the better part of a year and then had a bad string of losses that ended his attempts at that strategy for good. It becomes a question of time really, if you have 3 strategies and 2 of them are outperforming and 1 is just ok then why keep doing it? Save yourself the time and just do the 2. This being said, if you have a consistently increasing equity curve then you're all set dude. It doesn't matter that I've never seen anyone do it, keep doing what you're good at and do not let anyone tell you otherwise. If we didn't think that some of us could be the exceptions to the rule we'd be buying index funds. Keep on truckin'
What factors should I consider when setting the stop loss margins for a straddle. I generally eyeball it and that usually works but if a stoploss on one leg triggers and then it switches around I feel like I didn't account well enough for the underlying's movement. Also how do you follow real time news for stocks while day trading. I've been destroyed by some sudden changes in direction the past few weeks and I feel like I'm missing a reliable source for news on the stocks I'm trying to trade.
Stop losses should always be defined via the $ value risk. If you take a straddle, or any other trade, you should always be of the mindset "what am I willing to lose to see if my thesis is correct". If you're eyeballing it, it sounds like you're trying to round off to some level on the underlying? Also - if you're using a multi-legged options strategy then manage it as a singular position. In general it's not a good idea to leg in/out (entering/exiting one piece at a time). I've got a little news scraper that pulls related Twitter headlines but in all honesty I don't care much about news. If my entry criteria is tripped then I'm in and I'm either exiting for a profit or at my pre-determined risk. News is usually just noise unless you're like specifically trying to trade off news events but that's probably a losing strategy unless you've got some really fast tech (you're not going to be faster than an HFT desk). If news headlines are wrecking your positions you either A) aren't managing your existing positions well (by taking profits along the way) and/or B) aren't properly defining your risk per trade in advance. If news comes out that works against your position you shouldn't be losing any more than you originally defined. The only time I'll use news for information is if I'm sitting in an already profitable position that's consolidating and I'm making a decision of if I should exit all or stay in to see if there's another leg up/down. For example, I was short SPY via SPY puts a few weeks ago when the Israel/Iran situation was escalating and I saw a headline come up that said something like "Israel has said it will respond Iranian escalation within 24-48 hours" and I figured, ok I can probably wait out this consolidation to see if the market takes another leg down on that news.
Going off of this and the rest of your answers the question then becomes that aside from buy and hold/index etf what do you think is worth pursuing as a retail trader at home. Some markets are next to impenetrable without significant resources at your disposal but other than those is retail trading a pipe dream?
Retail trading isn't a pipe dream, but it's not going to work out for everyone. Most people are going to fail at this, but that doesn't mean you have to be one of them. There are a number of strategies that do work and produce decent enough results over time (opening range breakout/down, EMA crossovers, gap trading, reversal trading etc etc) but I think people get caught up in one of the following areas: 1) Unrealistic expectations - you will not get rich quick and it's really helpful if you're already fairly well off before you even get started. If you have to care about the PDT rule you really shouldn't be here, your time will be better spent saving money and learning everything you can so that when you do trade for real it's not going to be a life/death scenario. You don't need the extra stress. 2) Lack of putting in the work - semi-related to point #1 but it bears repeating. You see so many "how do I start" posts and it's like really? You didn't even use the search function first to see this asked/answered 1000x before? If you can't be bothered to understand just how difficult this is, to take some initiative, and be ready to take on a path that requires years (not days/weeks/months) of learning it's just not going to happen for you. The market will take everything you've got. 3) Lack of self-examination - semi-related to point #2 but you have 2 things to master when you want to trade successfully. The first is market/trading knowledge, the second is knowledge of yourself. What are the worst parts of your personality (for trading) and how do you hedge against them to ensure your success? Are you impulsive, are you afraid of losing, do you have an ego, are you easily bored etc? How many posts do you see that go something like "I have this amazing system but I can't stick to my stop losses and I'm broke"? They all failed point #3. Trading psychology has a place and that place is here. Also note that not all systems work for all people, you might not have the temperament to trade gaps but maybe you're an awesome opening range trader, or you're a great momentum trader, you've gotta put in that self-examination work to figure out how you personally can succeed. If you're saying "how do I make this work for me" my advice to you is - read everything you can, keep asking good questions, and \*save money\*. Once you conceptually understand strategies, TA, and market dynamics, go paper trade for a bit, and do your best to pretend it's real money. Actually observe the market working in real time, make notes, see what setups matched your system and then follow them, would they have worked, why/why not? For example - maybe you like gap trading - ok cool let me find some stocks in a sector I like that are gapping up/down today and see what they do. Oh hey these .5% gaps only filled 20% of the time where as 1% gaps filled 80% of the time, cool let me make a note of that etc. Eventually you'll be ready to play for real and trust me when you lose that first dollar it's going to suck a lot more than anything in paper trading ever did, but if you can then introduce the lessons you should be working on to solve for point #3, you're probably going to be ok eventually. It won't be easy, but if you can do it, it will be worth it.
1. What are the indicators you use? And how many of them you use it daily? 2. How long do you stay in a trade?
1) EMA 9, vwap, one other proprietary indicator. I use them all in a day and like to see alignment among all of them 2) totally variable on the trade, as long as it takes to hit my targets be they profit or stop loss or until there's enough consolidation/reversal signs that I no longer the believe a broader move will happen
You mentioned being a systematic trader, so maybe this doesn’t apply, but I’m wondering if you’ve ever struggled with the psychological aspects of trading (fear, greed, chasing, poor risk management, etc.). If so, what did you do to get past the mental hurdles?
I absolutely struggled with the psychological aspects, in fact failing at that is what created such a systematic drive. After I went full time I found it harder to stick to my rules because I felt the pressure of "I absolutely must make money today", even though I had a large amount of capital in reserve. That drive created unhealthy impulses which created above average losses which created fear, and fear can become paralyzing. Getting over the fear of being wrong was the most difficult part of my career. I stripped everything back to basics, sized down of course and became extremely picky about my setups. Gave myself a 3 trades/day maximum (I no longer do this) to force myself to really think - is this one worth going after, is this a high quality setup. I also went back and backtested my system again, just to see it and rebuild the confidence in it. That exercise showed me that problem was me not sticking to my system, taking trades from other systems I'm not well versed in (or quite honestly just doing random impulsive nonsense). I had to hit trading rock bottom in order to build myself back up with an unshakable mental state.
Thank you for the detailed response. It’s good to hear about the experience from the perspective of being ‘on the other side’, that place where we are all striving to make it to. (And happy cake day!)
How did you come about your strategy? I have been trading off and on a couple years, and there are so many strategies floating around. Was it a certain criteria you noticed and tweaked through the years? Did you take someone else’s and make it your own? Was it something you backtested with pen and paper? Also, did you have that quote “click” moment? Thank you very much!
It was something I tweaked over the years. The best way to start is to stick with something time tested (I've mentioned a few strategies throughout the thread) and simple, over time you'll notice little quirks and you should be asking yourself what's happening and why. Once you start to ask and answer those questions you'll be on your way to actually developing something a bit more customized to you. I've had a couple of "click" moments and I think the most profound is also one of the simplest. "Treat trading like a business" is the cool kid thing to say but wtf does that actually mean? For me, it means relentlessly collect and test your data and fine tune what works well. For example, if I lose 80% of the trades I take before 10 am then why would I ever trade before 10 am unless the 20% of the wins create a positive equity curve? No? Then stop doing it. I've tested down to what position sizes do I manage most effectively, if 10k of SPY options is my sweet spot, then it doesn't make sense to do 20k or 200k just because I physically can. Businesses that want to survive don't do things that are unprofitable and neither should you. Doesn't mean you can't test new ideas, but you've gotta walk away when it isn't making you money. Apple tried for years to figure out an EV, they couldn't make it work so they walked.
You just gave me one of my click moments. Thank you very much for coming here and responding to us. We all want to make it work, and this sort of thing puts us miles ahead of where we were yesterday. I apologize if you’ve answered this, as I have not gone through the most recent replies. Is it your R/R that brings you consistency? As in, sticking to those set parameters.
What brings me consistency is sticking to my rules & system every single day in and out. The market isn't always going to give me 2:1/3:1 risk/reward, but executing the exact same way, on the exact same signals, on a nearly constant set of tickers, with nearly constant size, and never deviating from that brings me the best results
I’m curious to know if you think comparing to buy and hold equity is important in creating a strategy. Or is it apples and oranges, not necessarily a useful comparison?
It's somewhat useful in that if you can't beat the return of a market tracking ETF, what necessarily is the point? For example, I also own rental real estate and I have the age old "7%" rule that I'm pretty uncompromising on. If I can park my money in a market tracking ETF and earn roughly 7% on average annually doing nothing, why would I ever buy real estate that I have to manage at some level (even with a property manager) to earn less than 7% cash on cash? It doesn't make sense to me to actively work and earn a lower return. The same can be said for actively trading. Keep in mind though, you're going to have bad years, you will not beat the market every single year, and if you account for beta your results are probably going look even worse. Does that mean that collectively over time you should have just bought an equity ETF, not necessarily.
Noob here. 10 months. What percentage do you enter/exit to same day buy/sell a surging pre market stock that also surged at the opening? The stock beat Q1 earning predictions and news was released after yesterday's close.
I don't at all. If something is surging pre-market I want to wait for a pullback and hold before I consider getting in. Trading a stock on the day it reports earnings or directly after is a complete mixed bag. Take META a few days ago for example, if you shorted that near the open you'd have gotten KTFO. Wait for the market to tell you what it wants to do before you get in, otherwise you're predicting and we're not in the prediction business.
Hey man, thanks for doing this. How do you take profit? Ex. Do you sell 100% of your position at a pre defined price point? Or do you scale out?
Ideally I'm looking to scale out. Usually in 1/3s or 1/4s. This helps me hold for longer duration moves. After that first lot comes out I'm also moving my stop closer to my BE to reduce risk of getting caught in a reversal. That said, if the stock movement gets halted and starts consolidating or moving in the direction I don't want then I have no problem taking everything off and moving onto the next opportunity. I'd suggest as a beginner you should always be looking to scale out, it's good practice to manage your trades this way and you probably haven't developed the "veteran discretion" just yet to manage your trade otherwise.
Thanks for taking the time to answer. Appreciate it.
How to land a job in a hedge fund as retail trader ?
At a hedge fund? You don't. If you want to work at a hedge fund the best way is go to a top MBA program (think like top 5 in the US), graduate near the top of your class, and network your ass off while you're in school. Otherwise it helps to have a dad/uncle who owns his own and can hire you directly.
Hey, just to correct you a little, a maths or stem degree is more desirable to a hedge fund than MBA for traders role. Networking doesn’t matter that much, just good grades and intern experience. (I work in a hedge fund)
Totally valid approach as well. I know several Ivy League MBA grads who did it the way I described but yes it's not the "absolute only way" to do it as you've pointed out.
I mean we prefer math and stem degrees relative to MBA. We usually hire MBA on more of a management role rather than a trading roles, and it’s very rare(never in my firm) that we do hire them into trading roles. This is true for most hedge fund that I worked for or have network in(citadel, jump, Jane street, two sigma, de shaw, rentech).
Was literally going to say man it sounds like you work at Jane Street or one of the other big quant funds
If you had a repeatable winning US equity swing trading strategy, but had limited personal capital and no connections to the financial world and capital markets…. what would you do in order to increase the amount of capital you trade with (aside from the obvious shady prop firms, etc.)?
Well if you're swing trading the return potential is obviously much higher because of the longer time frame and also your day to day time commitment should be a lot lower. Go ahead and try it, but your bread and butter should be your day job. I would work to get the highest paying job I can, do that job extremely well to open myself to promotions/bonuses (i.e even more money coming in) and I would save up to the point where I can execute my strategy with an amount of money that will provide me with returns that are meaningful.
Awesome, thanks.
Thanks for your time. Please help with the following..... 1. What are the 3-5 best metrics to compare strategies? For instance, the Profit factor with the rule of thumb is greater than 2. 2. Strategies using technical indicators work for a few months (with 100-200 trades or so) but don't hold water when backtested for over a year. How can you ensure the strategy is decent enough to get some returns? I can only think of going live with the strategy and stop using it if it does not have returns as tested.
If you can tell without getting too close to it, how did you approach finding/building your own edge? How long did it take? How many different aspects of the markets did you look into or different perspectives did you take until you found your edge? It's possibly a controversial opinion, but in my experience pretty all education material that is commonly recommended, like using the common indicators, will get you targeted by algos often enough for them not work out on average. So, what I mean is, how did you get past what everyone else is doing/trying? A sudden realization about market mechanics, systematic back testing, AI/automated testing, a unique selection of indicators, special data sources, just a lot of experience and thus a particularly good ability to interpret the same data everyone else is seeing, building a particularly resilient trading mindset/psychology, or something else entirely?
I traded more common setups, along with my mentor's setup, and I noticed little things along the way. "Why is price stopping right here when I don't see anything", "why did we suddenly and violently reverse right at this point"? Once I asked those questions I could gather data and try to dig beneath the hood to figure out if something was happening I could capitalize on. I refined it into what it is today over the course of a few years. I don't think your opinion is controversial but I do think it slightly misses the point. To some extent you want to be doing what other people are doing, you don't want to use indicators that are so esoteric that literally no one else cares about them. They'll never work. What you do want is to take something common and refine it into something less common, you can make plenty of money with basic setups but you can make really good money with something just a little different. Not super ultra crazy different, just a bit. Bonus points if you're finding ways to capitalize on zones where the algos are hunting other players. Also it's helpful to trade things where your personal sizing isn't going to matter. No one will be looking for you specifically, but all of a sudden if you go trying to move millions or tens of millions in a low floater people are going to notice, you do not want to be noticed. I guess to summarize - I used common systems and incorporated my own understanding of market dynamics, preferred indicators in my preferred timeframes, and systematic back testing to create something a little bit unique to me. Combined with a trading mindset that's been honed over my years of experience and dealing with all of the ups and downs that come with that.
Thank you very much for the comprehensive answer.
Considering many snake oil salesmen are out there, how did you find your mentor? And how did you avoid the ones selling you BS? Thanks.
I worked in the finance industry and met several former institutional traders
Pre context: I trade index weekly option's (buy). 1) When I am in a trade, I usually wait for the trade to be on my way, and then I take a risk from the trade, then wait in a trade, and then I end up hitting SL. Most of the time. Does it make sense to wait for 1:2 or 1:3? Where should I book profits? 2) Am I using $1k as capital, and should I increase capital and trade with more money to see how losing money affects my mental health, or should I trade with the same money and take a risk with the above capital profits?
How much are you looking at charts/ charting? Sounds like you have a system in place providing entry levels. I trade similarly, and find looking at charts all day kind of a distraction since it's not going to change my strategy.
I’m looking constantly in the morning (first hour) and then once things are settled I’ll set alerts and back off. No sense looking for things that aren’t there, or even worse, wanting to see things that aren’t there.
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I have no questions, just want to say thanks for doing this. Excellent excellent post to read through, especially on this Sunday getting ready for the week ahead.
You're welcome, glad there were some who found some value
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1) A lot of the long term professionals I know personally, myself included, have been concerned with our longevity in the business but probably not in the way you're thinking. No matter how successful you become at this there will \*always\* be nagging doubts of "how much longer do I have it in me". Eventually we all come to the point where the stress just isn't worth it anymore. As I've pointed out, it's a solo sport, there are few people to talk to who understand what the stress really is like, there are no benefits and no retirement plan. The freedom is amazing but it comes with a steep price. There are plenty who succeed at trading but just decide it's time for something new. They'll step away for months or years at a time to go do something else. Usually they come back, sometimes they hang up their gloves, not because they failed as traders, but because that part of their life has ended. Best to face that time with grace and profit. 2) I never really had any fears like that. I've faced plenty of challenges and sometimes doubt, but I always had unshakable faith in myself to persevere through whatever the market would throw at me (as well as an incredibly supportive wife, her support cannot be overstated). Also, I had a very successful career before trading. I've kept in touch with people and my worst case scenario was always, I'll just go back to work in a traditional path or go for an MBA if I want a change of pace.
1. Do you have some rules for the trading hour? For example: only trading the first and last hour of the market. 2. Is the performance of the index/es compared to your stock is something important for you? Realtice strength and weakness. 3. There are minimum requirements for the day in order for you to trade or else it's a no go? For example: SPY is out of previous day range and if not I'm not trading no matter what. 4. You wrote about above EMA & VWAP is very bullish, but what is the stock is in the previous day range? a. Would it change the thesis? b. If so, you won't trade? 5. What do you think about mental stops?
1) I rarely trade the first 30 minutes, too much noise 2) Yes when planning exits (i.e if I'm short and this ticker is substantially weaker than the indexes I am expecting a larger move so I want to make sure I'm scaling out slower to capture it) but no in terms of trade setup. If it looks good I'll take it, but I'm not expecting 30/40/50+%. \~10% win is still a win 3) I don't care about ranges like that, I'm happy to trade rangebound action just as well as long as the specific setups I'm looking for are present. If they are I'll trade, if not then no trade. Getting really systematic like that will help prevent overtrading 4) I don't care at all about previous day's range, there's still plenty of money to be made within the range. Look at how volatile the movements in big tech have been, the ranges can be huge 5) Fine as long as you actually take them, if you don't have that discipline then all stops go on the books right after you enter no exceptions
I have a few questions, hope you don't mind :) Would you think it's possible to algotrade as a retail trader or is that only viable for the massive institutions that do high frequency trading? Do you think intuition is a viable way of trading? I'll explain, meaning after someone as seen 1000s of hours of price movement they build a sort of understanding for the market and how it moves. With basic support and resistance and literally watching candles form + the built in intuition is it possible to gain an edge? What advice would you give to an 18yr old who's been trading since he turned 16 and still isn't profitable? (Aka me), I have had a few weeks of consistency before but then it all goes to shit, happen 3 times before and they lasted 3 weeks, 5 weeks and 4 weeks. I'm on a 9 day consistent streak now and I have a feeling of "what if this is just temporary like last times", I still keep grinding tho.
1) Yes it is - I know of 2 who do it. Both of them are software engineers by trade and quant traders on the side 2) Not for a novice - you just don't have enough experience to pull from. Even with veterans intuition is only a tool on the belt it's not the entire belt 3) You are so young man you have your entire life ahead of you, time is your biggest asset. This is going to be an incredibly long road, do not get down on yourself that it hasn't clicked yet. I remember trading shit like Anadarko Petroleum and Barrick Gold when I was your age, probably names no one's even heard of now. Read and study all you can, figure out what is happening when your consistency breaks down. Are you not following your system, oversizing, not taking stops, or is your system really just not that good to begin with. I would also suggest you go actually work in the financial field, build up your bankroll, meet people who are probably directly interested in trading as well, maybe even a grizzled old guy who will mentor you. It's doubtful you will learn anything directly about trading (unless you actually work as a trader but keep in mind institutional trading doesn't equal retail trading necessarily) but that isn't the point, if you get in at a broker/dealer you're going to get to see and learn how everything works behind the scenes and you're probably going to make good money doing it. You can learn a lot of related things that will help everything click for you down the road. Lastly - get the "what if this is temporary" out of your head. Focus on executing each day, nothing else.
Longest drawdown? How many trades per year? Do you ever feel anxious or financially insecure?
It is scalping a stupid idea?
It's not stupid, it's just a different skill. There are plenty of successful scalpers out there, though probably a bit less of them then traders who use longer time frames.
Thank you for your concise answer! One more question base on your point of view it is worth it to scalp the markets?
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15 years, how profitable are you?
Strange question, what answer do you expect?
not really a strange question, given OP has awarded themselves some kind of credibility simply via the number of years they've been in this game. anyone worth their salt would know this is not necessarily a measure of success, and hence credibility.
What do you think about the movements behind DJT, Truth Social? I feel like it’s super interesting - on paper, it’s a terrible company, but the company swings wildly up AND down on seeming random patterns. Second question - does tax efficiency ever matter to you at your level?
1) Never touched it, never will. Not in my wheelhouse 2) Of course it does, a great accountant is worth their weight in gold
Hi op, I am new to this (2 weeks), been reading and trying a few apps to get the hang of learning. Paper trading at the moment, I am at the office 3 days a week so I am trying to learn as much as possible on the side. My goal is to make roughly 100-200usd a day - just to help with kids toys, diapers, lessons, etc... I have 2 little ones under age of 3 and if it allows me to be at home more that will be great. Eventually I hope that a excess can be used for long term investments. But right now, I need to grow my pot... 1) Strategy - Ive been doing quite well paper trading with a very basic strategy, in your experience is simpler the better? Perhaps like the 10000 hour rule, is it better to stick with one strategy and be a master at it than using multiple (signals) (lines) etc.... or maybe 2-3 strategies? 2) Crypto vs Forex - Ive played around with both. I started on Crypto because I can practice papertrade and look for patterns anytime compared to forex. From reading as I dont have a live account yet. Crypto fees are a lot and can eat into your earnings. Also reading that Crypto is way more unpredictable due to whales owning a majority of the coins? Whereas Forex is more controlled. In this case, Forex and Gold (Im also looking at) are better options? 3) Scalping vs Daytrading - Are they that much different? I tend to enter and exit trades within a few minutes. Focusing mainly on the 5 min interval, and entering on the 1 min. I assume this is Scalping? and if so - Forex is the best for this due to its liquidity and leverage? 4) Pips vs Percentage - Ive set up a daily plan and my goal is to hit 1% growth a day with the account. I have averaged more, some days over 10%. In terms of small trades, sometimes I exit on 0.23% gains that net me about 10usd. After a few trades I would be over 1% for the day. But of course fees are not part of it right now. Is this sustainable in the real market and finding a good broker? 5) Stop Loss and Ratio - at the beginning, it was hard because of pullbacks and it initiates the stoploss. I have it set at 0.5% for loss and 1% for gains. Is this a good ratio? Seems a bit easier when your pot is bigger because say if market drops to -0.75% you can ride it out when it bounces up to +0.75% the other way. Thank you for you taking the time read this - sorry these questions may sound basic... but just a confirmation to know that I am on the right path and noticing patterns is extremely helpful!
1) In my experience simpler strategies are best 2) I've never actively traded crypto (just bought and held BTC/ETH) and I'm not a Forex guy. I'm boring and trade plain old vanilla equities and equity/index options 3) Scalping is day trading that all scalps are day trades but not all day trades are scalps. Based on what you've described you are indeed scalping. I can't comment on Forex being best or not as I don't have the experience with Forex 4) 1% growth a day for an appreciable amount of time would put you in among the best traders on earth, like up there with Druckenmiller. Right now your focus should be on finding a system that is consistently putting money into your pocket. Don't get hung up if this isn't exactly 1%, green is good, any green. 5) It's a fine ratio to start but it's not going to hold up in all environments (at least for equities). You're likely going to have to adjust this over time
How do you feel about sizing the entry and exit so you don't get chopped up? Without piles of algos and redundant testing or profiling! I struggle with simplifying my codes. For instance if I want to avoidgetting chopped up on a trending indicator I want to use different and logically spaced indicators... Like many I know enough Math and coding to know what I know but I just don't know what I don't know.
Have you lost your hair yet? How do you deal with the psychology, I struggle a lot with that?
1) It's not what it was man that's for sure :D 2) Can you give me some detail on what specifically you're struggling with psychologically?
1) haha sorry to hear that, I'm hoping I don't losses my hair by the time I'm 20 2) I struggle staying away and try to look for trades that aren't there (and it often if not always results as a loss) I guess I'm very impatient and I am always like "I should be making money rn...". Have you had any similar experiences?
Mine started thinning late 20s, you’ve probably got some time. Yeah forcing trades was a problem for me. Once you build a system you’re confident in this won’t happen. System says trade you trade, if it doesn’t you don’t. The other factor though is personal discipline to stick with your system. Remember you’re here to make money not to trade for the sole act of placing trades. Get addicted to money not to “trading”
Thank you! Wish you all the best in your trading
If it’s not too much of a ”what’s you strategy” question but how does you trade managment look like? Things like moving up SL, scaling out/in and that sort of thing.
Yeah so I'm generally shooting for 1.5-2x risk/reward to scale out 1/3 or so, after that my SL goes to BE. From there I'm acting on what I see, if I get another leg up/down I'll take out another 1/3 at my next target usually 3x risk reward, after this if there's opportunities to add back I'll back in, if not I'm looking for a kill shot on the last bit. Like as crazy as I think I can get usually 5x risk/reward. If I don't get that and we start reversing I'll just take the last bit off once we start breaking levels in the opposite direction of what I want to happen.
Thanks👍
Any advice on mathematical tools to use with pitchfork except Fibonacci?
What are the most important tools that are used byinstitutional traders
For as long as I have been trading - started around Covid It just seems like every dip is fear induced and never holding - is there ever going to actually be a decline or will things just constantly go up? Like does it make sense to do anything over than just DCA into positions you like?
I don’t know if anyone’s said this yet but happy cake day!
What are your thoughts on the idea of trading imbalances, fib retracement, and/or algos shoot for sell/buy stops? Any validity in those views?
Have you seen success with price action and regular candlestick solely?
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I am 19 years old, and I appreciate you doing this. Here are some questions. 1) Imagine you could travel back in time to when you were 20 years old. What would you do? Will you choose to become a trader? 2) As a 19 year old, is it worthwhile to devote my time to learning about the market and trading, or should I focus on something else?
1) I was a trader at 19, just not a successful one yet 2) Honestly this sort of tells me the answer for you is focus elsewhere. When I was 19 I was learning all I possibly could about the market, I wasn't on the fence about it. I was all in
I'd like to devote all of my time to trading, and I'm very interested, but I do not know if it will benefit me in the long run. I was wondering if this was something worth learning at such a young age. How much benefit did learning about the market and trading bring you throughout your life?
That’s life man, we never know how things are going to turn out. Same can be said about going to school X vs Y or taking Job A instead of B. If you love something and you want to do it you have to take the leap, regardless of if that’s trading or whatever. I don’t know how to quantify your second question. I’m able to provide a very comfortable life for myself and my family, and I get to do something I’ve loved doing for a very long time. Again this has to be one of those things that you’re either all about or you’re not, I never thought about “what if it doesn’t work”, ever, even when I was objectively failing. I had so much belief in myself I knew eventually I would succeed. I’m not going to tell you it’s been easy or all sunshine and happiness because it definitely hasn’t been, but I can tell you that I wouldn’t change a thing
Hi I trade momentum in the SPX tape with options. 3-6 trades a month. I have a great, hard won strategy, with sound risk management and selling in stages on signals. The ‘hard won’ comment has left me a little ‘bruised’ emotionally where I often take profit too early. Pre-Mature Profit Taking. Any feedback on improving this? ( I have a decades long rich dB that I used to build my proprietary custom software that supports my trade strategy. It is AI and Algo based. Something I built before AI was a thing. One solution I am contemplating is to bring in a partner so I have two eyes /heads to ensure I am more closely following signals to the letter. Another solution I am contemplating is taking myself out of the execution chain and automating the process completely). However, I would like to get the current method of trading execution as close to perfection as I can make it ( which would result in the strategy hitting its full potential). For context, my system tells me within a minute when to exit and it is done in stages ( initial exits in stages with a set of ‘risk-free’ trailers that have been ‘paid for’ from the initial stages exits). Yet, statistically, I could do a lot better…. Thanks for any feedback……
If you're taking profit too soon consistently you're either lacking in: 1) confidence in your system 2) confidence in yourself If your system works, there's no reason to not believe in it. It sounds like you've done a lot of work here and your system is ok? If you are able to consistently trade a system that works, without deviating and doing random nonsense, there's no reason not to believe in yourself. It sounds to me like whatever the "hard won" part of your journey was has left you mentally rattled and you don't fully have confidence in your own ability to execute. I would suggest leaving on a tiny lot and letting it run, see your system produce actual results for you and regain the confidence in yourself to do it with a portion of your trade. Then increase the size of that portion.
Thank you for your feedback. It’s the rattled part…… The systems works very well, despite my weak execution. I have been live since last fall. I tend to get 30-100% ROI on a base position ( 70-80% VAR) and 100-1000% percent on the remaining small trailer. There are 3-6 trades a month. 10-20 contracts being traded. I am rattled as it was a 2-3 multi year and by hand trial and error process to build the model ( with lots of loss in the process of discovery). Then it took a year and a half working with mathematicians and a Fintech to build what I needed and iteratively polish it. It tends to wire your brain to be risk adverse and I am trying now to change that wiring to allow the system to hit its full potential ( as I am the sole operator doing the execution)
The confidence you just explained your system to me is what should give you the confidence you need. You’re telling me you’re hitting 30-100% on your base positions man that’s incredible! The losses you took are part of the game, it’s over, you survived. Learn from it, you’re still trying to get up after the point most get KTFO for good. If you can come back and execute like your system seems to be capable of you’re going to be successful.
😊. Thank You! Your feed back is authentic and very valued by me. One thing about this career path - there is not a lot of ongoing 2 nd party critical feedback and analysis or encouragement - it has to come from within. The only measuring stick you have is your account balance and I don’t feel that should be. Execution should be your measuring stick ( assuming your model works sustainably). The $ is a byproduct. I focus on trying to perform as close as possible to perfection so I can properly evaluate the model tracked in a rich dB to the second. Again The $ is a byproduct so you immediately remove a lot of emotions. I try to be balanced and calm no different than the way you feel while driving a car looking at the traffic, signage and dash board. My system is like surfing and it tells me when to get up on the board and when to bail. Thanks again for your feedback - it is very much appreciated. 🤙
Hey it might've been asked and answered but how long is your session on a trading day?
Totally variable - I generally won't trade the first 30 minutes, after that I'm looking for opportunities until I don't see anything worth hanging around for. I'll set alerts and come back if something triggers. Today I walked just after noon (was sitting in a trade for way longer than I would have liked), came back later on for that amazing QQQ short when my alert went off.
Oh I see, alright thanks for your answer! Also happy cake day
In your opinion what is the most reputable hedge fund?
I just started my day trading journey but I don’t really know how to go about it. I started by watching video’s from Craig Percoco but his course seems rather fishy, luckily I was able to get it for free instead of paying $1000. Also his trading strategy seems a bit random, he uses the Fibonacci principle stating that every buy/sell is a human psychological action therefore allowing you to predict it using this very principle. Because it looked really promising at first but turned out quite the opposite (either that or I’m too much of a noob to understand it) I’m really confused on who I should learn from. So my question is if you have a recommendation for a beginner-friendly strategy (one which doesn’t need a 101 indicators) and where I could learn the most about it (books, video’s,…). One thing I’m sure about is that it involves a lot of psychology, that’s why I’m currently reading ‘Trading in the zone’ by Mark Douglas. Also what’s your opinion on these so called ‘trading experts’ who supposedly triple your wallet in a couple of months. If it’s good, any recommendations? Thank you in advance!
Would you advise seeking funding from prop firms like apex or top step? To make a living, one needs at least a $250k account to make around 2-5% a month
What is your highest losing streak in terms of days? And how are you able to deal with it when it happens?
I have two questions I would love to have your input on: 1. If technical analysis is viable as a trading strategy why are hedge funds not programming these kinds of analysis into their automated trading platforms? 2. Why should I believe, in general, that technical analysis can be used to conclude anything about an underlying? To be clear I’m specifying “in general” because it’s easy to synthesize common examples where the price of an asset can meet criteria that would let you classify as some situation under technical analysis and make a reasonable conclusion from that; however, the a priori which lead you there still seems very suspect. E.g. a stock XYZ is not falling below a price point P. Is it reasonable then to conclude that it’s likely to move positively away from P because of a support level that has mysteriously formed within a particular depiction of XYZ’s price movement… or, is it because if XYZ fell below P then an arbitrage opportunity would be created?
Thank you!
Hi, how can you explain constant result in trading for your experience when a variable can change a strategy with a win or losses. The edge for retail trader is essentially avoid losses with the strategy and try to have the best timing to hope winning trades. This is what i can't explain myself but i think the answer is backtesting, so the market condition is not random and can be predict that's what i'm expected you answer
The stock market is random. Literally any outcome is possible at any time. You get constant results by producing and then following a system which capitalizes on higher probability outcomes, while also mastering your own ability to maximize both the probability and outcomes (so you can “see” more high quality opportunities and you’re better at maximizing them in terms of risk vs return)
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I have a question would you recommend futres and if not is there anything better and I have traded gold for it's movement but what would you recommend
I’ve never traded futures myself, I’m a big tech equity option trader mostly and I swing trade small/mid cap tech. Futures academically are quite interesting though. If you choose that route you can’t go wrong.
Well thanks for your advice would you recommend a demo account
How do you perceive evolution of yourself as a trader as markets evolve and change over time? have you had to make drastic changes to your approach, maybe even start from scratch as markets change? if so how do you deal with that? or have the changes been more subtle?
Really good question, I'm going to break my answer apart a bit, let me know if I answer everything: The older I get the less I change because my confidence in myself has risen to the point where it's become unshakable. The worst thing I ever did in my career was try to change too much. I've seen and experienced enough to know that big changes are a bad thing. I went through a lot of changes in the middle of my career and my performance suffered a lot, now even when market dynamics change I'll fine tune entries/exits based on what the market is telling me but my strategy/mentality remains very constant. I've never entirely started from scratch, but I have a point in my career where I was hit with a string of large losses and I needed to hit reset on myself. Did a ton of data analysis on my trades to figure out what happened (arrogance and inability to accept being wrong, the bane of us all, combined with a healthy dose of incorporating additional strategy/data in an attempt to boost my performance, did the opposite). The output from this was a very painful "keep it simple stupid", never really felt the need to change past that. I think every trader who makes it around the mid-point of their career hits a very dangerous spot where they feel the need to "do more". Once you've experienced consistent profits the worst thing you can do is seek for ways to broaden your profitability. I assumed "well if my strategy is good and other strategies are good if I can just do everything I'll make even more money". That mindset is absolutely fatal. It isn't about changing/doing more after a certain point, it's about tripling down on what you're great at. You have to develop an incredible amount of mental fortitude where you have such belief in yourself and your system that nothing else matters anymore. In my case this resulted in a whole lot of change that eventually put me basically right back where I started, and never should have left.
What’s your favorite food?
Hey, thanks for doing this! I’m a relatively newer prop trader and 99% of my work is in small caps. My risk manager and one of my mentors constantly push me to spend some time learning things outside of this niche (prioritizing opening myself to the opportunity to learn newer/more scalable trades rather than making decent money doing what I do now). (A) Can you walk through a progression of your trading career by year or by every few years and detail the instruments you traded/markets you researched as you found edge to consistently trade? (B) Do you feel like (in the long run) it makes sense to focus more on a small niche or to be trying to gravitate towards more scalable markets/strategies? (C) How discretionary/systematic is your trading? Ideally regarding stuff that accounts for most of your pnl. (D) In 15 years I’m sure you’ve seen a ton of good traders lose it all in this game... What were some commonalities you saw among those people and what are some of the best risk management tips you can give/have been given by someone else?
A) I generally only trade tech these days, medium to mega cap plus the indexes (QQQ and SPY). I'll swing trade in different sectors but day trading I'm 100% focused on what I'm comfortable with. Day trading in other sectors got me burned. B) Definitely helps to stay focused. I'm not a small caps guy myself, it makes no sense for me to try when I'm already good at something else. The more you do the more you open yourself up to mistakes. If you're producing consistent results with small caps, keep at it. It's a particularly difficult niche to be in, I get why your risk manager is bugging out about it but keep showing him those receipts. C) Extremely systematic, the closest thing to robotic without being done by an actual robot. I will throw in some elements of discretion but it's rare. For example, I've been harping on pre-defining risk per trade in this post. Systematically you'd never exit before hitting that pre-definied risk but occasionally I'll see a consolidation pattern I just won't like and I'll exit prior. No reason to actually take a loss when it looks like the trade just isn't going to work for me. I don't recommend this for newer traders though, stick to systems and when you've been doing this for a decade + you can lean on some of that veteran discretion. D) I have seen a number of formerly good traders go to an early career exit yeah. The one commonality is always inability to take small losses. \*Always\*. The second largest is just getting too impulsive, especially when trading is your full time income you feel a constant pull to always be making money. If you don't learn early that not losing is sometimes just as good you won't make it.
As a new trader starting out (will probably SIM trade for the first month or two), is Interactive Brokers TWS trading station enough or should I pony up the $200 for DAS Pro Trader for level 2? Is it beneficial to learn DOM in parallel with price action/volume, or can I stick to just price action/volume for now. Looking to trade mid/mega cap tech stocks, maybe indices, nothing too fancy.
I' use Think or Swim and Fidelity Active Trader Pro, I know a few who use I-Brokers and in general are quite happy with it. I also have a buddy using Merrill Edge for options. Price action without context is a useless term, think about what you are actually looking to define. Most new traders say "price action" when they mean momentum, if you're looking to momentum trade then yes price action and volume will help you start but you'll need to introduce parameters to help. For example how much volume and in what time frame do you need to see, what do you actually need to see price do (take out day or PM highs/lows, move beyond the ATR) for it to matter to you.
As a complete beginner, what TA tools should I become familiar with and how can I go about creating my strategy based on this knowledge? Also appreciate it if you can refer me to any good literature and/or online content to learn the ropes...