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Strategies & Market Trends : DAYTRADING Fundamentals -- Ignore unavailable to you. Want to Upgrade?

To: Matthew L. Jones who wrote (5446)	11/16/1999 5:41:00 PM
From: Robert Graham	Read Replies (1) \| Respond to of 18137

Trading price action with indicators, this is interesting. Must use the indicators as a filter for what you refer to as the trend. But many days on the SPOOs are trendless and show up more as a trading range. But then trend is dependant on time frame traded. So what time frame do you trade off of? 1-min or 2-min like many scalpers do? Or the 5-min or a longer time frame? I think this must be the 5-min time frame or shorter since this is what you base trend on. I have been working with the simulator by AUDITRACK which is programmed to fck your orders up in terms of delay and slippage, then it tacks on an unrealistic commission. Good training for trading the big SPOO contract, but not the e-mini. Then the system is down at times, and many times is not up before the open of the market. I have been told if I can make money this way, I must be good. Well, let me just say that the current market has also not provided me with much to go on except a couple instances per day that I miss of good setups because I find myself concentrating on the little stuff which in this market simply do not pay off, except for scalping which is not the way I trade. And this AUDITRACK system emulating trades on the big contract, not the e-mini. The current market together with AUDITRACK has been forcing me to focus on the better setups that I trade. Its large commission fee it adds to orders is what has been hurting me. Will not have these problems trading the e-mini. But this is good feedback for me since I tend to overtrade. I do not know how long you have been trading the e-mini, but I have been paper trading it for several months. And these types of markets that you have been seeing are not that uncommon, even though they have been more difficult than usual to trade. The best way I find to handle this type of trading is to first determine the type of market I am trading in, and then trade the setups that work well in the given market. But also never to let the market take away my discipline, an essential part of my approach to the market. For I have a way I operate in trades that needs to stay basically intact from market to market. This approach keeps me away from small scalps which do not work for me as a consequence, but the longer intraday "positional" trades work for me. If I do not keep this discipline in changing markets, I will find myself all over the place trading anything that "looks good" and trading strictly price action which does not work for me. I am finding developing a discipline under these circumstances to be the challenge. Finding an approach or system that works is more secondary in the effort that it takes to find something that works. And this is more difficult to do when unorthodox setups occur that I normally do not trade but happen in such a way where they look like they will pay off, and DO pay off. I am thinking of eventually developing a money management plan that will make some allowance for such trades, but still help me keep my focus on what I consider the setups that I primarily trade in a give market. But first comes the development of my discipline on my primary trades. The release of the FOMC minutes had its fairly predictable effect on the market, a sell off followed by a reversal into the rally that closed the day. There have been tip offs before this time on the very significant bullish sentiment that exists in the market. So I anticipated even with negative news an initial reaction sell off with then sentiment rallying the market. I have learned to respect current market sentiment. Those that do not except for carefully calculated times fading market sentiment end up getting their asses burnt. The problems for me today was that much of what transpired on the e-mini was more in the line of breakout plays. I do not trade breakouts except for a trending market, and one that I have diagnosed as such from the beginning of the day. Also, I certainly do not make plays just before or right after a news report. I stay out of the market and watch what the response is by the market, which many times is different than its initial reaction. I find that those who play primarily by price action have to be very, very good to survive over the longer term. This approach to the market has many disadvantages, some of which feed directly into some common, self-destructive, normal psychological habits of many traders. This approach IMO requires rock solid discipline and constant skillful focus on the market. This approach can be the most wearing on the trader. And the very few indeed that I find successful at this approach to the SPOOs use a filter on their analysis of price action like you appear to do. Even many of the promising ones who start out this way with demonstrated market analysis skill and intuition in the market end up not making it after a long period of trying. Some just manage to stay float long enough to say "when shall I call it quits and admit that this may not be for me". The problem may not actually be with them as much as it is their approach to the markets and in particular how they incorporate price action into their assessment of possible trades. Because of these difficulties, that is why my approach does not rely on price action. But for those who can end up surviving this learning curve and last through many different changes in the market end up doing well. While an understanding and appreciation for price action is essential t one success in the market, in the end I find the ones who do make it long term in the market have at least on some level a very* good understanding of the underlying structure of the market and how it operates. For the market is constantly changing, and its takes this type of understanding of the market to alter ones approach to this changing market. I find that this comes about from a long and careful study of the charts and its price action, and not by the indicators on the chart. I find indicators more like training wheels toward this objective. And the experienced traders who trade on this orientation to the markets tend to use the indicators differently from the way many aspiring technicians would suspect, if they use indicators at all in their trading. I trade strictly what is on the charts with a couple key MAs on the chart and an depending on the type of market the occasional use of an MACD or Stochs or DMA more as a guideline during a trade than a tool to base rules on. And under these circumstances, a type of curve fitting is permitted. I do understand that you as more of a system oriented trader would need to rely more heavily on indicators as a primary tool, for that is how systems are put together using the newer computerized approach to TA. And I want to make clear that FWIW I am not saying that there is anything wrong with this approach to the market. I do understand that it comes down to what works for you, and you as a system oriented trader will base his approch on TA indicators. It is just that for my style of trading, I find that the indicators tend to get in the way of what is actually there to be seen on the charts. Good luck! :-) Bob Graham