Friday, 28 May 2010

Trading Too Often

Not all trades are created equal. Some trades are "surer" than others. Some trades have a higher profit potential than others. If this is the case and it is, why isn't it better to in the beginning, or always, only trade these types of trades?

Well, it is better. In fact, it's probably the only way to get to CP from minus. Until and unless you can qualify a trade into these classifications, CP will probably be elusive.

This attempt at classification brings it's own problems. More uncertainty. The more uncertainty the more probable it is that you will take large losses and small profits which, even with a more than 50% win rate will make it hard to be CP.

Now getting back to my trading plan, I have said that my main requirement in putting on a trade is that it will hit it's first logical scale out point, which of course, being logical, will be large enough. Now if that first logical scale out point is right against, say a resistance, then I will not only scale out but exit the whole position. Again, to trader like this and have my drop dead stop well out of the way, I need a high win rate. How do I get a high win rate? By taking "surer" trades, trades that I have defined in my trading plan, not by rigid mechanical requirements but in terms of order flow.

These are the things we will spend time on in the training. The most valuable part of the training will be what comes after the end of July. The 90 days when I will help the attendees to nail down their road map and initial trading plan that, if followed exactly, will lead to CP. I am sure that each attendee's trading plan will be different. There will be a basic commonality but the aim of the whole training is to help each trader find his way along the road to the goal. Putting square pegs into round holes has been proven not to work.

Great volatility today in the ES. I was expecting a sell off due to the long week-end but the downgrading of Spanish debt just added to the fun. Strange that I'll be in Spain for the week-end.

BTW, I have four 24 inch monitors and trade a number of markets. Just because I didn't take a trade you saw doesn't mean it was not valid. I may have been on something else and missed it.


  1. Using NinjaTrader with ZenFire, today my chart didn't match yours!

    Yes, it's the ES and the 06-10 contract.
    It's the first time this ever happened. What can be wrong?

  2. Tom

    Numerous times you have mentioned "Fear of Loss"

    I know this fear!

    this idea helped me:

    ""If I practice, I will get better."
    Our motto, then, is,
    "We are getting better - sometimes that means we win, but it always means we are getting better."
    These are both very, very healthy. Studies have shown that learners who learn for the sake of getting better continue to learn and progress but that when a learner focuses on winning, they become fragile, eventually reaching a place where they stop improving because they are afraid of losing.""


  3. Thanks again for an amazing blog; I have a question about how you can put in the trade fast enough; once the candlestick closes and you make your decision often it is onto the next two to three ticks within seconds if there is any momentum at all; do you miss many trades with the limit orders?

  4. Hi El,

    i see that you added ON and RTH value areas and vpoc to your charts.
    How do you use this in your trading?


  5. Braulio, don't know but I know you can't load historical data into Ninja and get correct VB and CVD.
    O66, I've always used this. Its MP. I just have it on my range bar chart so I can see it without having to look over to my MP chart. It also is better when I'm posting and mention VAs and POCs.
    Gary, read the posts on how I use the range bars and anticipate their closes.
    pip, great quote.

  6. hello,

    the charts do not match, because the chart posted, is the chart from the day before.

    Great Post as always Tom

    Thanks again for your work!

  7. Sorry guys, wrong click as I was posting I guess, rushing to the airport. I'm in Barcelona and I'll re-post the chart when I get back to my posting PC on Tuesday.

  8. Anon: Thank you! Missed that SMALL detail :)

  9. Hello Boss,

    I have a couple of questions if you don’t mind.

    1. If you could only pick one to use, Volume profile or TPO profile which would it be?
    (You only get one)

    2. In level value, what would you say is most significant (Generally), day before RTH followed by overnight, followed by composite (if trading out of value from either or)?

    3. Why do you have the levels marked (recent charts posted) on current session and not previous RTH or even Globx? I know you said so you do not have to look over at the MP, but the answer to question 2 will be current day? Lol (God, some times you make me think to much). K.I.S.S.

    Muchas gracias,


  10. Rino, good comments as usual.
    1. Volume, 2. for ES its definitely RTH and as you said. 3. I trade the DVA, firstly within the Initial Balance and then in the direction of the range extension and finally, I love to get a neutral day as I trade the move back to the middle after the second range extension.