Trade journals are of much help as we can easily record and review our trades to make better performances in future.
What looks like an exploitation of ideas.A simple solution is to follow the charts and draw the inference. Sometimes keeping it simple helps.
There are market dynamics, then there are edges
As a technical trader who does research âin the labâ, I take certain kinds of market behavior as the natural order. Anything that breaks that mold with a degree of certainty is either a an edge or a holy grail (or somewhere in between). As a result, I donât spend time trying to directly solve for one of these variables - I consider it a highly unlikely outcome. Instead what I try to do is to build knowledge and an edge in a smaller dimension that will give insight into the higher dimension. Hereâs one example:
Trading (with a tp/sl) is fundamentally about answering one question: will price reach your stop before it reaches your profit level? We can take as a base assumption for that for given price p and distance d, the probability that price will reach p-d before/after p+d is 50%. Thatâs just a law of trading, and anytime it isnât, you have an edge. The same is true with the probability that the next candle on the chart is red or green. It doesnât make sense to try to directly solve for one of these. Instead, these are the end goals.IF you can accurately know that the next candle will be green or red, you have an edge. Using the current candles presented to predict the next candle, in my opinion, is futile. âA problem cannot be solved at the level it was createdâ. If you think about, generally traders try to do something like using the support/resistance level to predict not the next bar, but the next wave. This âwaveâ is a series of candles, which can also be thought of as a single candle in some higher dimension.
So, I sometimes see people trying to figure out the answer to a question like âhow do I tell the difference between a false breakout and a trend continuation?â or âhow do I know when a trend is endingâ? These are great questions that every good trader will have thought to themselves at some point or another. However, these are also very hard questions, and ones which knowing the answer will instantly create an edge that can be exploited. In otherwords, these are not supplemental questions that people have answers laying around for. These are end game questions, ones that cannot be solved at the level at the level at which they were created. The definition of a pin bar is easy. The most common fib ratios are easy. I know I am asking the right questions when there are no easy answers.
I was reading it all fine until I reached the point of no sl, isnât it a bit too risky. I know for a stop loss to trigger there are some seconds loss and in scalping that can be critical, but as I have never traded without sl I find this approach a bit risky.
In my experience so far there are two ways to trade without a stoploss. The first is via martingale, the second is via extreme precision. The first is doomed to fail, the second is a holy grail. So while I consider it theoretically possible, it is highly unadvised unless you really know what youâre doing, and even then you need to uncover a real gem of an edge. Still, I would consider trading without a stop a good idea for demo accounts purely from market study and experience point of view. If you have a strategy and youâre testing then I absolutely donât recommend it. But if you want a simulation of understanding the ebb and flow of price movement and you donât have the tools to do so outside of live trading environments, most people can learn a thing or two.
Trading is a game of tiny margin for error. 15m frame for context
Letâs say that it was currently a couple of bars before the bar labeled 1, and we had reason to believe that price was entering an action zone; It might go up, it might go down, but no chop. Also given the situation and higher time frame or what ever, we prefer short here.
Bar 1 - we see strength (bad), but not a close above the high (good)
Bar 2/3 - Stalling
Bar 4 - Some downward action. A semi-experienced trader will end up with a price ~the close of bar 4 (and not that this is still far from what could and is achievable). The worst case is entering on the low of this bar.
Bar 5/6 - Still seeing downward action, but not closing below bar 1.
Bar 7/8 - Not great, but not terrible either.
Bar 9-11 - Indecisiveness
Bar 12 - blown open
Fast forward:
Observations: Even with a poor entry on bar 4 (not to be confused with all the possibilities of entering on bar 4), there are still bars 7-11 to exit the trade with a stretch (0 or tiny loss). No one is exiting on bars 5 or 6. However, failure to exit before bar 12 and âwaiting to seeâ is the difference between a null trade and a stop loss trade. Thatâs anywhere from .25% to 2% in a snap. I think itâs fully fair to expect a micro retrace after entry. If I entered on bar 4, I would not exit anywhere on bar 8 unless the close went above bar 4. But after bar 9, I would be out on bar 11, or set to BE on the principle that bar 10 didnât look great, and bar 11 didnât close below bar 9/10.
When I set up a trade, I want to be validated quick. This is only possible once one can accurately identify action areas.