Monday, 29 March 2010

Roll Up, Roll Up, Every Trade is a Winner

Trading is a funny business. You can take two setups that look the same yet have two different results. By the time I have written my trading plan, I have a number of high probability setups that I trade with a high win rate. When they don't work, all that has happened is that one or more traders with larger size has taken an opposite position. That's all that has happened. Nothing has broken. The setup was never 100% nor could it be.

Once you have a high win rate setup, it's very important not to fiddle with it. You have done your job of designing it, now trade it. Losing trade? Big deal. As soon as you start second guessing or "fine tuning" a good setup, you are on a very slippery slope to losses.

And why try and avoid losing trades if you have kept to your trading plan? You know you can expect, say, a 68% win rate, average win more than 1.5 times average loss etc., etc. That's enough to get you into the big league of earners if you can stand increasing your size. That's what you should focus on. Once you have a solid trade plan and have achieved CP on small size, the next step is gradually adding size as your capital grows, not to try and achieve 100% winning trades which is impossible.

The chart below for the ES on Friday shows 2 trades. The first one is straightforward. The second one is a deliberate "late" entry. I almost entered 7 bars before but it looked like it would bounce. The bar where I entered was one bar late. I couldn't enter on the bar before because I had rejected the trade 7 bars before and the 2 entries were very similar. In this case the entry 1 bar later gave certainty at the price of the late entry.

Click to enlarge


  1. Had you entered the Short Setup shown on the early bar (7 bars prior) and either exited or been stopped, would you have ReEntered on the bar that you did? If so, How many times are you willing to try to get into the move? Thanks.

  2. The Volume Breakdown file you provided for TradeStation does not produce the bar set up that appears in your charts? Have you heard similar feedback and can you provide any addl. details on it's setup. Thanks for all

  3. Tom, when you put up a chart, I rush to verify my trades/exits snd compare or validate them agains EL technique.(one of very few I use).

    I am sure on Friday there were more trades/exits. Especially would be interesting how you managed the stalemate at the end of the trading day.

    Can you pleae show all of your trades and exits for the Friday?

  4. EL while sim trading on Friday I chose not to take entry #1 because the 33 was below the 99.

    Is this a good or bad idea in general, or doesnt matter?

  5. thought i'd share a crosshair tool. very clean program and helps when viewing someone elses charts. (traverse from traderslab)

  6. bakrob99, I would not have been stopped out. Had I been, yes, I definitely would have re-entered where I did.
    Paul, the TS version is upticks and downticks not realvolume so it will differ from my MarketDelta charts.
    drivem, I didn't trade later. I'll be back in London at the end of next week and it will be back to business as usual.
    jr, it depends on what your trading plan is. Have you back tested the idea?

  7. Paul,

    I have been a long time TS user myself, and I can tell you that in comparing Tom's setups off his Mkt Delta Charts, to ours in TS, there are far too many instances when they don't come close. This has to do with the way that TS captures activity at the Bid and Ask, and if you do a search out on the Forums, you will find many a post from users, complaining about the bogus data that TS is representing to us.

    I myself have come to the realization that I must leave TS, and it's not just about this issue, there have been many other reasons in the past that had tempted me to leave, and this more recent issue, is sort of the straw that broke the camels back for me.

    I am not sure which way to go yet myself, as I want to have the genuine data like Tom's shows us via Mkt Delta myself. If anyone else has gone through this evaluation, I would appreciate hearing about your thought process on how you made your choice as to who to move too.

    For me, I need to have "at least" two things. One the ability to have enough historical data to do the Sim work that Tom promotes, something else that TS does not allow, and two, some degree of cost awareness, both in terms of the actual costs of the charting package, and commissions of course. I suppose the most complete solution, will be to move to Market Delta, but I have not yet got my head around paying anywhere from $160-$200 a month, "just" for the charting package, but maybe that will just have to be a "Cost of doing Business".

    Thank you in advance for any insights you all can share as you have evaluated the different options available to us to have the proper solution here.


  8. Richard, there are two separate issues here: the data and the software.

    Firstly, to get volume delta, the data supplier must transmit the information that allows the software to capture the ask minus the bid volume. The quality of data is important.

    Secondly, the software must have the capability to capture and display the information.

    The most complete solution I have found is MarketDelta. It captures the volume delta and in addition allows you to look inside the bar. This is the BEST solution and of course you pay more for this functionality. If you don't need the inside the bar information, IRT from will also chart volume breakdown at a cheaper price. I recently saw that also has functionality that cptures volume at the bid and ask but have not seen it in action. This is cheaper still. Sierra charts I am told also have the ability to capture volume breakdown.

  9. I use TS and at this point comparing it to other packages and to Tom's charts did not find much of the difference for entries/exits.

    Here it is in Tom's words:

    However, I consistently used the MultiCharts version for a long time and it worked for me. Often both types show the same thing. Its only when the upticks and downticks don't approximate volume that there is a difference and often the upticks and downticks can give a better result. I think it all balances out if you are consistent.

    Tom, unless your opinion differes at this time, please let me know.

  10. Richard
    I use Investor RT with a zenfire feed(free through broker) and subscribe to the DTN market access through IRT for $15/mo, this is necessary for data backfill as zenfire does not back fill tick data which is needed for volume breakdown.

  11. driven, I have not changed my opinion but have not done a detailed comparison. I can tell you that my testing in MutliCharts has giev me over 65% win rate on my main setups at the first scale out target. I get higher using MarketDelta with actual data.It tells me that when you have made money, changing to real volume should be considered.

  12. Hello Boss,

    Here is a MarketDelta Dawn TS VB


  13. Thanks Rino. Looks pretty similar, especially once you smooth it.

  14. As A Sierra Chart user I was able to reproduce Toms chart setup. Even MDs volume profile is possible.

    I never tested Market Delta, but would expect that Market Profile is a bit more handy in comparison to Sierra, but they are working on it.

    I use Sierra with OEC data and for $41 per month I'm very happy with it.

    In general Sierra offers a very complete charting application including chart trading, but as always, you have to get used to it.

  15. Richard,

    I also use OEC and Sierra charts, but separately. I use data ($12) with Sierra charts for market internals and Market Profile ($41).

    I uses OEC's FREE charting package for execution (its quick). You can write Easy Language code just like TS. It even has an old (and FREE) 2007 Market Delta Footprint chart. It does not come close to the new Footprint chart but beggars can't be choosers.
    The "APPL Trader" is just OEC.

    Hope it helps,