The Cyclical Nature of Trading.

Hi Everybody,

My discussion of keeping the losses small over the last few days has been very timely because yesterday we had a hard day on the US e-minis. However, this should have been expected after the run of good trade recently, this is what I call the “Cyclical Nature of Trading”.

If we look at the 3min YM, we had a -1R loss early in the day, but it is the second sell (TS3) at 10:48EST that I want to take a closer look at. This is where common sense come it, and this is something that comes with experience, something that a purely “mechanical” trading system will never have and is why I am so against mechanical systems, because they can never have the “intuition” of a good Human Trader.

So here you are, on just over +2R Profit and you know that you have had a good run of good trades over the last few days, so you know you are “overdue” for some losses. So the “sensible” thing to do is protect this trade quicker so it is at least break-even. This is common sense trading.

The result is that the losses would been have kept to a minimum yesterday. And remember this comes only a day after a nice +5R day on the ES the day before...................... Small losses and Big Profits – are you starting to see how this is the key to a successful long term treading approach :)

Thanks, Steve

Small losses and Big Profits

Hi Everybody.

I hope you all read, and then took on board my post yesterday on why most amateur traders lose ? Well, yesterday carried on nicely, where we had 3 short trades on the 3min ES, 1 loss and 2 winners. But that is not important, what was important was that the Profits were much much larger than the losses. So even if tomorrow we have a few losses, these Big Profits will more than make up for a few losses. And this is the key to successful trading, small losses and Big Profits.

Yesterday the STF on the 3min ES was red, so Standard Traders would have avoided the buys and only taken the sell. The result was two good profitable trades and 1 loss. Please see the Chart. So a good day overall yesterday.

Thanks, Steve

Why most traders lose

Hi Everybody,

It is said that up to 97% of amateur traders fail in this business, so why is that ? Well, after over 20 years in this business, the reason is simple (as I see it all the time). It is because amateurs want to be “right” more than they want to make money.

In other words, most amateurs just look for a high winning % of trades and have no understanding that this is not possible over time. And (this is the bit they never get) is that to make money over time you actually don’t need to have a high % of winners. The attached chart on the 3min ES form Friday is a great example, 2 winners and two loses, but good Profit “overall”.

I see this again and again, day after day, and I feel sad that most amateurs simply are unwilling to listen to experience and “think” they know better. So it is a sad fact that 97% of amateurs will just go on losing, because they are unwilling to listen and accept that the key to successful trading is keeping the losses small and Profits larger and NOT simply having a high % of winners......

This is where MTPredictor will help as it provides discipline to keep the losses small, and techniques to maximise the winners...... The rest (as they say) is now up to you.

Thanks, Steve

Always look at all 4 e-minis

Hi Everybody,

Yesterday was a great example of why I always suggest to look at all 4 of the US e-minis. As I suspected the trades were quiet yesterday (after a good few days), but there was a nice TS2 buy (that was “in line with” a blue STF) on the 3min Russell Index.

As you can see, this resulted in a nice +3R Profit (ignoring slippage and commission). But the point is that would have missed this nice trade if you only follow the ES of just one of the other e-minis. This is why I always suggest following all 4 of them.

We are going into a long holiday weekend here in the UK, so may I wish you all a good holiday and I will be back next Tuesday.

Thanks

Steve

YM as well

The 5min YM got in on the act as well, with a small Profit towards the end of the day. Making yesterday another good day overall

OK, we have had two very good days now, and I never like giving bad news, but after a period of good trades we should always keep in mind the “Cyclical Nature of Trading”. And just after a quiet period or some small loss we would expect some good trades to come though (which just have), likewise, after a period of good trades, we should be preparing for the hard part of the cycle to come round again............

This is just the Natural way markets unfold, but because so few vendors are Traders themselves, you well very rarely hear about this because most vendors simple do not know or understand how markets unfold in the Real World.

So we should, be thankful for the good Profits, but now is not the time to get complacent........

Thanks, Steve

Another good day

Hi Everybody,

Well, the Profits continue to come in, with a lovely +4.7R Profit (ignoring slippage and commission) on the 5min ES yesterday. Yes, this followed buy a -1R loss, but this loss was a lot smaller than the profit, and as you all should know by now, this is the key to long term trading success – keeping the losses small and Profits large.

That was not all, the YM came in on the act later in the day as well, next post

Thanks, Steve

What an Amazing Day !

Hi Everybody,

Well, I hope you all caught this one.................... As you can see, the 5min ES gave a TS1 sell, that not only nailed the high of the day for you, but also had you short as a sharp collapse unfolded. After the discussions on different signals yesterday, I have include the NinjaTrader 7 add-ons here to show how this TS1 sell was found using the RT add-ons.

The ES declined sharply, without exceeded the prior Bars high’s. As the decline continued, Standard Traders could have used the ATRStop for trade management. The result was a massive +6.9R Profit (ignoring slippage and commission).

What a brilliant trade !

Steve