Daytrading Strategy...Successful.

[Luc1Grunt]

Re-Post.....

5/15/2007 7:38:26 PM


Designing a Profitable System
Monday, 13 March 2006
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I believe anyone can design a profitable system, as long as one understands market principles, what goes up, must come down faster. Twice as long to go up and half as much time to come down. I believe that if I am short the market, I need to trail my stops tighter to lock in profit than when I am in a long position. As for as my original stop, all my systems risk the same amount -- small. I use to believe that the 3% rule was nonsense with a $10k account. But in the S&P and currencies, I day-trade with less than 2%. I simply cannot get wiped out that way and my profits are at least twice as much the risk in the S&P when trading one contract. Same holds true with equities.

How much am I going to make? I am asked that repeatedly. I can always tell how much experience a trader has by that question. It is not what you make that is important, but what one does not lose. After I have a profit of so many points in a day-trade, the most important ingredient to my trading takes place, the break-even stop. I have not read any books giving much attention to this concept. What a stress-less (for the most part), feeling it is after I am at break-even.

The best way to trade is to find something simple, that works most everywhere and then become very consistent in your approach. Develop your own system, test it, then stick with it. Other people's systems may work well for them, but probably will not be compatible with your psychological make-up."

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From Successful Anonymous Trader:

You simply cannot have any confidence if you do not have a method or way of identifying trades along with money management guidelines. You're lost in the woods, so to speak. I was there for many years. What did I do? This may help a lot of you:

I threw out 99% of all the crap I learned about oscillators, divergences, Elliott Wave, cycles, timing, seasonals, Gann, pitchforks, volume, Fractals, RSI, stochastics, overbought/oversold (this is a good one--the stock indexes, currencies and cotton for example everyone said were overbought and topping in February and March this year). Look at what they did. Needless to say, I don't pay any attention to this anymore either, etc., etc. The list goes on to infinity almost. I went back to the basics. I went back to simple chart patterns, (a simple moving average and trendline now and then for a visual aid.)

I came up with a low risk money management plan and put it together with trading with the trend and, presto, an effective and time tested trading plan. The plan is simple and has worked since trading began and will last me a lifetime. What a relief not to have to spend countless hours every night trying to find a new way to trade. I am sick and tired of that after 7-years.

I believe at becoming an expert at one stock or market and its behavior and then putting all your skills and energy to work in a concen(traded) manner. Get good at that market and trade the heck out of it. Increase your size over time and you'll make more money with less effort. There are lots of professionals that do this. Look at some floor traders or locals that stay in the pit for many years trading one market exclusively.

One thing that I have learned this year, is that I am trying to cut back on the number of trades I take and be more selective and not trade in congestion as much as I did before. I miss some good trades out of congestion, but I save myself a lot of mental energy, buy myself some more free time during the day, and get better and more profitable trades.

My attitude is changing now to one or two good trades, and that is all I need to make my week ( a triple or a home run, so to speak). There are plenty of them during any given week.

Trading is fun. Once you have a method and money management in place, it allows you to concentrate on trading and not on searching and researching. That gets old and frustrating. Make it your goal to find a simple method for next year. One thing that you can hang your hat on will last you a lifetime. Trading is simple. Remember that it's the Execution or Implementation of your trading plan that is the bigger challenge.

Most people make finding the method a big challenge. That is because there is so much junk thrown at traders. They feel like a child in a candy store and have to try every doodad in the place. When they are done, they are sick and never want to see another candy store (trading gizmo) again. They could have had the plain piece of milk chocolate at the front of the store (simple method price patterns) which would have done everything they desired and fulfilled all their needs.

I wish to all a great new year. I hope some will be able to end their journey in search of the holy grail or indicator that will turn their life around. Search for simplicity. You will be surprised what has been right under your nose all the time, right there in front of you on the chart or price bars. Pay attention to what they say...they will tell you everything. You need to listen and get to know them. It can be that simple.

[TonyM]

Good post, I like the specializing in one stock or sector approach. Maybe that's why I'm an XOM, CVX and oil lover.

[netwrangler]

Originally Posted by TonyM

Good post, I like the specializing in one stock or sector approach. Maybe that's why I'm an XOM, CVX and oil lover.

Concur there.

When I was a creative writing major at Leland Stanford Junior's farm, they told me, "Write about what you know."
I figure that applies to investing as well.

So, have I written the Great American Novel yet?
Hey, ya wanna cut me some slack here? That was only 50 years ago! Gimme time.

[Rambis]

Originally Posted by Luc1Grunt

I believe anyone can design a profitable system, as long as one understands market principles, what goes up, must come down faster. Twice as long to go up and half as much time to come down.

prove this

I believe that if I am short the market, I need to trail my stops tighter to lock in profit than when I am in a long position.

probably just as good of chances betting the other way, no? seems like a coin toss

How much am I going to make? I am asked that repeatedly. I can always tell how much experience a trader has by that question. It is not what you make that is important, but what one does not lose.

Not losing money is probably a good idea.

After I have a profit of so many points in a day-trade, the most important ingredient to my trading takes place, the break-even stop. I have not read any books giving much attention to this concept. What a stress-less (for the most part), feeling it is after I am at break-even.

Yeah. Its probably much better to end up flat than to make profit. Please explain this...maybe there is something to learn here but I'm not exactly sure what??

[netwrangler]

I believe that if I am short the market, I need to trail my stops tighter to lock in profit than when I am in a long position.

probably just as good of chances betting the other way, no? seems like a coin toss

Well, no actually.

Over the past few years we have enjoyed a bull market. A bull market, by definition, has an upside bias. If you are going to short in a bull market, you need to keep those trailing stops tighter than you would if you were betting the other way.

=====
In another thread, I have already welcomed you to this forum and heaped praise on your persona and avatar.

In this thread, let me suggest that you would do well to treat Luc1Grunt's posts with more respect than you show here.

"Grunt" has a wealth of trading knowledge based upon years of experience.

• The good news is that, in my experience, he is willing to share that knowledge with folks who sincerely want to understand his posts.
• The bad news is that he has an acid tongue that he reserves for spammers, poseurs, and wise asses. If you, as a newbie, call him out, you may learn what it is like to be in a battle of wits and have your opponent disarm you.

It is in my own self-interest to keep "Grunt" sharing knowledge and not excoriated idiots [or folks who make, in his opinion, idiotic posts.] I learn much more that way.

[aiki14]

Originally Posted by Rambis

Not losing money is probably a good idea.



Yeah. Its probably much better to end up flat than to make profit. Please explain this...maybe there is something to learn here but I'm not exactly sure what??

What grunt meant is that when a profit is made of x percent, a trailing stop is set at the break even point so as to assure a position will not reverse for a loss while at the same time shooting for additional profit.
Example, you have a 10% target, at 5% you set the trail to 5% and let the position run, if it goes to 9.5% and reverses you have locked in 4.5%, if it reverses right at 5% you eliminate the possibility of a losing position.
This strategy may seem odd for a new trader, but it is a sensible approach, which I use all the time as well. The new trader would be advised to consider more carefully this approach, or risk winning positions turning to losing positions.