Day trading today's market

[Aviator33]

Is it just me or do others find a choppy market like today very, very hard to trade? Continually got whipsawed in and out of trades for plus/minus miniscule amounts. Anyone got any secrets they'd like to share on how to handle it as the only position I can find that works is no position at all!

Cheers

 

[Trembling Hand]

Is it just me or do others find a choppy market like today very, very hard to trade? Continually got whipsawed in and out of trades for plus/minus miniscule amounts. Anyone got any secrets they'd like to share on how to handle it as the only position I can find that works is no position at all!

Cheers

Intraday volatility is huge at the moment as everyone has seen.

What can help is a reduction in order size so you can increase your stops a bit, it should work well as the winners that you are able to stay in will run further than what your normal target would be.

 

[roland]

Intraday volatility is huge at the moment as everyone has seen.

What can help is a reduction in order size so you can increase your stops a bit, it should work well as the winners that you are able to stay in will run further than what your normal target would be.

Good advice, that's what I would do too, if I had any $$'s left. I'm sitting here with all my holdings in the red and too damn stubborn to record a loss.

 

[Aviator33]

Yeah I was thinking my stops are a bit close for this mad market so may try downsizing for a bit to widen them out. Hasn't been a real problem up until today, just couldn't get a good run on anything! Thanks TH.

(just wish I had of shorted a couple of the big retailers at open )

Cheers

 

[nioka]

Is it just me or do others find a choppy market like today very, very hard to trade? Continually got whipsawed in and out of trades for plus/minus miniscule amounts. Anyone got any secrets they'd like to share on how to handle it as the only position I can find that works is no position at all!

Cheers

I find it OK but there is more risk. Not a good time to have stop losses in my opinion. You have to do a lot of research and check the fundamentals. Trading sideways between two stocks helps me. You hope one goes up and the other down then pounce.

 

[Trembling Hand]

Oh another thing. Not only is it hard to keep your edge when it gets nutty like now its hard not to trade lots because of all the movement.

So it can lead to really crappy trading,

Lost trading edge + more trading = weeks of profit gone in a day or two.

 

[Aviator33]

Trading sideways between two stocks helps me. You hope one goes up and the other down then pounce.

Hmmm, interesting approach. Could you elaborate on that one at all Nioka?


And TH, know exactly what you mean about over trading at the moment. I only pay 0.02% brokerage each way but it's eating up my profits on a day like today

 

[>Apocalypto<]

Lost trading edge + more trading = weeks of profit gone in a day or two.

God that bring back painful memories TH!!! Readers that's the damed truth that statment is a warning sign you're on the road to blow out. what also builds up after getting into that negitive zone is anger and frustration which leads to a diaster!

 

[nioka]

Hmmm, interesting approach. Could you elaborate on that one at all Nioka?

Pick two stocks that have similar interests and values. the SP should move in unison and the relationship should be constant but that doesn't happen. One I have crossed back and forth is ADI and AUT. Lately there hasn't been enough volume to get in decent trades. ( today I could only trade 10000 AUT for 12000 ADI) ADI then didn't rise so no resale. I'll have to wait to get a profit and in this case it will not be worth while. In the past with larger volume I have been able to trade back and forth in the day and end the day with a profit and more of the share I started the day with. AGM and SMY have been another two that were good to cross over earlier on. BHP and some of the smaller iron ore hopefuls can be a proposition at times as ther is a delay in reaction to market fluctuations.
You have to "fly by the seat of your pants" a lot and that is not what the trading purists would accept. I just like the challenge. I only trade in a stock that I am prepared to hold as a long term spec or a long term investment though.

 

[Nyden]

Good advice, that's what I would do too, if I had any $$'s left. I'm sitting here with all my holdings in the red and too damn stubborn to record a loss.

Don't feel bad Roland, I wish I hadn't sold when I did! I would have sold now, instead :

I basically sold off my remaining positions pretty darn close to the bottom ... I couldn't remain solvent I guess; I made a mistake as common as they come - being emotionally invested! Part of the to-be home deposit you see ... took a royal beating too.

At least I'm now wiser, & getting sleep again!

 

[cordelia]

Hmmm, interesting approach. Could you elaborate on that one at all Nioka?


And TH, know exactly what you mean about over trading at the moment. I only pay 0.02% brokerage each way but it's eating up my profits on a day like today

That's better than I pay..who are you with

 

[roland]

Don't feel bad Roland, I wish I hadn't sold when I did! I would have sold now, instead :

I basically sold off my remaining positions pretty darn close to the bottom ... I couldn't remain solvent I guess; I made a mistake as common as they come - being emotionally invested! Part of the to-be home deposit you see ... took a royal beating too.

At least I'm now wiser, & getting sleep again!

A house??? Wow, what a dream,,, I'm well overdue for having done something about that. The downturn in the market has put me back a few years now with that dream

One consolation is that my restructuring of the portfolio will mean 1 years worth of dividends will cover this years losses completely - and if the SP increases then I will be fully in the black again. ....and in much better shape for next year

 

[Trader Paul]

Is it just me or do others find a choppy market like today very, very hard to trade? Continually got whipsawed in and out of trades for plus/minus miniscule amounts. Anyone got any secrets they'd like to share on how to handle it as the only position I can find that works is no position at
all !

Cheers

Hi Aviator,

.... a check of the charts and the price action on the couple of days,
before an expected big announcement (like interest rates today) and
it will often result in a doji ... and by nature a doji is formed by
whipsawing prices .....

..... so, just before anticipated news many traders take the day off,
to avoid the whipsaws (that's why volumes are often down, too) .....
... but, some traders will try to catch the largest of a possible 3 trades,
on such a day ..... it has to be one very astute trader to catch
all of them.

happy days

paul



=====

 

[Porper]

Yeah I was thinking my stops are a bit close for this mad market so may try downsizing for a bit to widen them out. Hasn't been a real problem up until today, just couldn't get a good run on anything! Thanks TH.

(just wish I had of shorted a couple of the big retailers at open )

Cheers

Why not try the opposite, with such big swings you can afford to have a 20% success rate and still make a profit.

Very tight stops are a must.Also, letting your winners run is a must, once you start taking profits early the strategy falls over.

I can't conceive how anybody can make a profit while not using a stop loss.

Nokia, not sure I understand your strategy still.

Also, if you are day trading what do fundamentals have to do with it, and how can you trade without a stop loss ?

 

[Trembling Hand]

Also, if you are day trading what do fundamentals have to do with it, and how can you trade without a stop loss ?

Yes I would like to see how that is done too.

 

[cuttlefish]

I've been doing some short positions via eto's which has been going ok. The eto valuations benefit not just from underlying price movement but also increased volatility. I think volatility and short sharp moves is a feature of down trends, particularly in the early phase. Probably the most important thing is to expect and trade the swings and adjust the entries/exits to account for increased volatility. I don't trade to a plan so the eto positions are really just optimistic gambling though.

 

[nioka]

Nokia, not sure I understand your strategy still.

Also, if you are day trading what do fundamentals have to do with it, and how can you trade without a stop loss ?

I only trade a stock where I am happy with having to accept the stock as an investment if the trading goes against me. eg. I traded AOE a few times in the last week or so, not in a big way but I ended up with 3000 "free" AOE shares after buying and selling a few times. As soon as I bought I put them back on the market at a premium and they sold. I put the order in again for the same value but a larger number at a lower price and bought them again. Yesterday I sold again but the price has not come back yet. Not wanting to push my luck I retained 3000 as the profit for the week.
By using two associated stocks you trade the lag in one catching up to the other. The example I gave is my switching between ADI and AUT where they have a similar interest in the same oil prospect. Another is EDE and TAS where good news for EDE can be followed later with an increase in TAS where TAS is a major holder in EDE. I invest in both. I trade between the two.
I use the fundamentals to chose most of my investments then trade them.
I don't use stop loss as it would often drop me out of an investment. I just make regular assessments of the situation. I rely on the stock to recover. If it falls I say to myself "would I buy at that price". If the answer is yes then I hold. I am not always right and I have a dog from time to time.
My insurance is to take a little profit from time to time. Seems to work for me.

 

[Aviator33]

Thanks for all the feedback guys and gals, some really good points there.

Nioka, your strategy sounds interesting and obviously works for you but I don't ever really look at fundamentals for day trades and trading without a stop loss....well it's something I could never bring myself to do (or turning a day trade into an investment for that matter). But thanks alot for taking the time to explain your strategy, really appreciate it.

Cordelia - I use Marketech for majority of my trades, $0 commish but 0.02% day trader levy.

Trader Paul - I was trying to ignore all of the Doji as I was "in the mood" to trade (stupid I know!!!!!). But I guess it's only a mistake if I don't learn from it right. Wish I had of been one of the smart ones to take the day off hehehehehe

Thanks again to all that have offered their wisdom. Muchas GrassyAss

Cheers

 

[treefrog]

By Larry Williams
Over 20 years ago, I uncovered an amazing little secret that I have been trying to disprove ever since and so have subscribers.
The ”secret” is that effective commodity systems do better without a protective stop loss, than with one if they are not reversal systems. It is strange, but true. If you have a system that is always in the market…and does a decent job of it…you cannot improve its performance by tinkering around with tighter money management stops!
I will re-iterate the point. If you have a decent system forget about ”improving” it with a protective dollar risk stop loss. The reason I have repeated this point is that I find myself, 20 years later, still trying to twist and improve systems with protective stops. They continue not making much difference and usually hurt system performance.
Many subscribers have written, called or cancelled their subscriptions, because our stops ”are so big”. About that, they are correct. Our stop and reverse points are a good distance away from the market … but... it works better that way.
As strange as it seems…for 20 years, I have kept trying to improve good systems by using money management stops. They have yet to make much difference. What you gain in protections, you lose in accuracy and profit per trade. Typically a $ stop will cut your % on winning trades by 10% to 15% and top your average profit-per-trade up by 1/3. What you get, for what you lose, is not worth it.
Here’s the proof: results of a system I have been working on this past week for short term trading in Coffee. Notice that as the stop gets larger, the accuracy net profits and total dollars won all increase!! At the same time, drawdown on the $1,000 stop of $12,553 gets bumped up to $14,855, with a $4,500 stop, but you make almost $30,000 more!
Net Profits % Wins Avg. Profit Worst Loss D Down Stop
63,391 71 196 3987 12,553 1000
71,250 74 188 3987 13,875 1250
69,356 77 228 3987 12,792 1500
69,407 80 226 3987 11,802 1750
73,761 81 232 3987 12,755 2000
82,091 83 252 3987 14,202 2250
76,042 85 288 3987 15,751 2500
80,417 85 266 4175 19,651 2750
78,345 87 287 4175 14,752 3000
77,536 88 283 4700 16,217 3250
81,506 89 308 6987 21,997 3750
90,931 90 345 6987 17,330 4000
83,721 90 333 6987 17,858 4250
91,775 91 352 6987 14,855 4500
THE SECOND SECRET
This one is even wilder…you cannot improve, appreciably, a good system by using targets.
Go ahead, re-read what I just wrote just for you. The knack of a trend following system’s ability to make money is that it catches some really big trend moves. Those large wins pay off all the little losses.
We all know the rule - let your profits run - and it is proven when you try to add targets (cutting your profits short) with objectives. This also bothers new traders. They want to take profits or get out once price hits some magic number, a Gann line, Cyclical window, support/resistance or the like.
For 20 years, my studies keep coming back with the same answer…you dampen the efficiency of a system by using fixed targets. I am certain that few, if any, subscribers will be able to ride our big winners all the way. The recent bases-loaded home run we scored in the currencies is a good case in point.
You would think our phones would be ringing off the hook with people talking about their profits. That, Red Ryder, is not the case. People are calling up wanting to know ”where to get back in”.
There have been more changes in the market places in the last 18 months, than the last 18 years combined. The advent of the Internet and online trading has taken the industry and traders by storm. The results are three fold. Brokerage firms have changed, the exchanges have changed and today’s traders are an entirely new ”breed-of-cat”.
Yet, one thing remains consistent. The way markets gyrate about is pretty much unchanged. I suspect this is due to two over-riding considerations; market movement is a combination of trend, which is a function of fundamental values and considerations and the gut-raw human emotions. Simply put, fundamentals are the father-of-trends and emotions are the mother-of-daily fluctuations.
This is, perhaps, no more apparent in any market, more so than the Japanese Yen, now trading on the Chicago Mercantile Exchange (CME). The exchange has created an ideal situation for traders with the new contract as the margin, currently less than $1,500. It is low enough for almost anyone to enter the speculative arena and now online entry and exits significantly increase buy and sell confirmations, while giving us an equally significant decrease in commissions, our cost of doing business.
Since trading of this specific contact is new to the CME, the results and numbers used in this article are from the day session data only, (no night session data has been used, no buys or sells in any session, but the day one) from 1976 to 1999.
IN TUNE WITH THE TREND
Many things have happened to the Yen in the last 23 years, just as surely as they will in the next 23. Yet, a very simple and easy to follow trend system has maneuvered well for most market movements. One of the oldest of all technical concepts is to buy at the highest high of the last X number of trading sessions. A sell would be to sell at the lowest low of the last X or Y number of trading sessions.
The following results are, of course, hypothetical, but show the record of the past, buying at the highest high of the last 46 days, selling at the lowest low of the last 46 days. This means, to start, you would have a buy order at that highest high and a sell at that lowest low. Once the market moves to this value, the opposite high/low becomes your stop and reverse point. Please note this 46-day high/low is flexible, after every trading session is over, you count that and the last 45 days to determine the high/low figures. This creates a moving envelope or channel that represent breakout or breakdowns for the Japanese Yen.
.

 

[treefrog]

As you can see the ”system” or technique is not highly accurate, just highly profitable. There have been 74 such trades in the last 23 years, with only 32 or 43% of them making a profit. Yet, the approach shows a net return of $201,332, because when wins come, they average $8,063, losses $1,350. This is the result of two things; first the ability to reverse a position at the opposite 46 day side of the channel and, more importantly, the use of a $1,400 absolute protective stop loss.
Data : JAPANESE YEN 67/99
Calc Dates : 11/17/76 - 10/29/99
Num. Conv. P. Value Comm Slippage Margin Format Drive:\Path\Filename
65 4 $ 12.500 $45 $ 0 $ 3,000 CSI C:\GD\BACK67\F030.DTA

//////// ALL TRADES - Test 1 /////////////////////////////////
Total net profit $201,332.50
Gross profit $258,047.50 Gross loss $-56,715.00
Total # of trades 74 Percent profitable 43%
Number winning trades 32 Number losing trades 42
Largest winning trade $50,430.00 Largest losing trade $-2,345.00
Average winning trade $8,063.98 Averaging losing trade $-1,350.36
Ratio avg win/avg loss 5.97 Avg trade (win & loss) $2,720.71
Max Consecutive winners 4 Max consecutive losers 7
Avg # bars in winners 139 Avg # bars in losers 18
Max closed-out drawdown $-11,100.00 Max intra-day drawdown $-12,052.50
Profit factor 4.54 Max # of contracts held 1
Account size required $15,052.50 Return on account 1,337%


As you see, this channel breakout approach can make money, but we can make it even better, with just one simple rule. Here’s the rule. Whenever the trade shows a profit of $1,100, we will raise our stop to whichever is higher, the 46 day value or our entry cost. Thus, if we are in a big winning trade, up by $1,100 or more and the market collapses, all we can loose is slippage and commission.
Does this help? Yes, in spades. While it makes less money, as the next clip shows, only $181,322, it trades a bit more, 92 times vs. 74 in the original model. But, the big difference comes from figures vital to a trader’s well being, draw-down and risk-reward.
The original model shows an $11,100 draw-down vs. $9,360 on the new one. Granted this is not much, but it is better. The bigger improvement comes from whittling the average losing trade from $1,350 almost in half to $758. When you get tagged, on average, it’s not for nearly as much.
For most every improvement we create in life or system, we pay for it in another place. This is simple Ocams Razor rule - alive, well and working into the 21st century. In this case, with the protective stop being raised, all we give up is a dip in accuracy from 43% to 31%. The best news is the money-making part of the approach is left intact, that is the average winning trade was $8,063 and barely dips to $7,900, while the largest winning trade remains similar. This is what produces a risk reward ratio of 10.41 against 5.97 in the original version.
Data : JAPANESE YEN 67/99
Calc Dates : 11/17/76 - 10/29/99
Num. Conv. P. Value Comm Slippage Margin Format Drive:\Path\Filename
65 4 $ 12.500 $45 $ 0 $ 3,000 CSI C:\GD\BACK67\F030.DTA


/////////////////// ALL TRADES - Test 1 /////////////////////////////////
Total net profit $181,332.50
Gross profit $229,120.00 Gross loss $-47,797.50
Total # of trades 92 Percent profitable 31%
Number winning trades 29 Number losing trades 63
Largest winning trade $45,480.00 Largest losing trade $-2,445.00
Average winning trade $7,900.69 Averaging losing trade $-758.69
Ratio avg win/avg loss 10.41 Avg trade (win & loss) $1,970.90
Max Consecutive winners 4 Max consecutive losers 12
Avg # bars in winners 137 Avg # bars in losers 12
Max closed-out drawdown $-9,360.00 Max intra-day drawdown $-9,802.50
Profit factor 4.79 Max # of contracts held 1
Account size required $12,802.50 Return on account 1,416%

Obviously, there are many factors that can cause this market to move or enter a trend mode at any given time. Trends can be detected by pure technical analysis as illustrated above, but that’s just numbers catching numbers. As a real trader, I am much more concerned in knowing what creates these moves. In other words, can we get to the truth of what usually creates or is the cause of important market trends and trend changes?
In 1974 I wrote the first book ever about seasonal patterns in commodity markets. Unfortunately, back then, the Yen was not yet trading on our exchanges, as it began trading in August of 1976. Nonetheless, we can apply the techniques of that book to decipher what, if any, seasonal pattern might be at work in this market. The following chart, courtesy of Genesis Financial Data Services, reveals the seasonal tendency of this market.
While not a perfect tool, one thing is perfectly clear; the Yen usually begins to rally in August and tops out in late October. That has been the strongest, most dominant long term seasonal pattern for this market. Hence, traders can use this time to focus their trading in harmony with the pattern.

Another pattern also exists in this market that few traders are aware of. For whatever reason, the Yen usually rallies from around the first of the month until the 12th to 13th trading day. Then a decline sets in from the 12th to 13th trading day until the end of the month. Note, I said trading day of the month, not calendar day. The next chart is one I presented to traders in 1993 reflecting data from 1977 to that point. This monthly pattern has continued over the last 6 years, as well.

One possible trading strategy you might consider is to simply buy the Yen around the 3rd trading day and exit 8 trading days later. The following clip shows the results of such a strategy and incorporates a stop loss of $1,100. While the results do confirm this seasonal pattern with $59,222 of profits, the drawdown of $17,042 an average profit-per-trade tells us it’s not tradable.
Data : JAPANESE YEN 67/99
Calc Dates : 11/17/76 - 11/10/99
Num. Conv. P. Value Comm Slippage Margin Format Drive:\Path\Filename
65 4 $ 12.500 $45 $ 0 $ 3,000 CSI C:\GD\BACK67\F030.DTA


/////////////////////////////// ALL TRADES - Test 1 /////////////////////////////////
Total net profit $ 59,222.50
Gross profit $204,492.50 Gross loss $-145,270.00
Total # of trades 277 Percent profitable 43%
Number winning trades 121 Number losing trades 156
Largest winning trade $14,780.00 Largest losing trade $-3,120.00
Average winning trade $1,690.02 Averaging losing trade $-931.22
Ratio avg win/avg loss 1.81 Avg trade (win & loss) $213,80
Max Consecutive winners 6 Max consecutive losers 12
Avg # bars in winners 8 Avg # bars in losers 5
Max closed-out drawdown $-17,042.50 Max intra-day drawdown $-17,042.50
Profit factor 1.40 Max # of contracts held 1
Account size required $20,042.50 Return on accoun 295%
All we have is a suggestion that something is going on at this time of the month, a condition that usually creates a rally in the Yen.
There is another condition that also causes the Yen to rally. My studies show there is a strong relationship between Gold and the Yen. When Gold is strong, the Yen is much more apt to have bigger and better rallies. Here’s some proof to make my point; the next clip only takes this trade each month if, and only if, gold has closed greater than 6 or 11 days ago.
What a difference! While the profits drop to $52,640, the number of trade is drastically reduced from 277 to 88, giving us an average profit-per-trade of $598 and a mere $5,142 drawdown, compared to the initial versions $17,042.
Data : JAPANESE YEN 67/99
Calc Dates : 11/17/76 - 11/10/99
Num. Conv. P. Value Comm Slippage Margin Format Drive:\Path\Filename
65 4 $ 12.500 $45 $ 0 $ 3,000 CSI C:\GD\BACK67\F030.DTA

/////////////////////////////// ALL TRADES - Test 1 /////////////////////////////////
Total net profit $52,640.00
Gross profit $89,047.50 Gross loss $-36,407.50
Total # of trades 88 Percent profitable 53%
Number winning trades 47 Number losing trades 41
Largest winning trade $14,780.00 Largest losing trade $-1,582.50
Average winning trade $1,894.63 Averaging losing trade $-887.99
Ratio avg win/avg loss 2.13 Avg trade (win & loss) $598.18
Max Consecutive winners 4 Max consecutive losers 4
Avg # bars in winners 8 Avg # bars in losers 5
Max closed-out drawdown $-5,142.50 Max intra-day drawdown $-5,142.50
Profit factor 2.44 Max # of contracts held 1
Account size required $8,142.50 Return on account 646%
Here’s my point: gold in an upturn will improve all technical buy signals, in a downtrend will dampen buy signal results and improve your short sale profits. Thus, the thinking trader will rely on a combination of technical and fundamental tools to increase our chances for trading success