Friday, 18 February 2011

The Turn

There are some similarities between trading and poker, although there are important differences too. As a trader, I decide which hands I want to play without putting up an ante and I have a stop loss. What may be a commonality between Hold'Em and trading is The Turn.

If I can identify change in the trend - and I'm talking about the only trend that matters, the trend in the chart I am trading - then I can often get a long ride. The question then becomes one of style: trying to catch the whole move until another trend change or just trading the peak to trough or trough to peak of the moves along the trend. There may be more than one attempt to catch the Turn but positioning myself is important because I can start scaling out in case there is no follow through, and I can capitalise on it if I have indeed caught the Turn.

In the Euro futures chart below, you can see the Turn that I have marked. After that there are arrows where Flo and I have identified entry pictures. She's gotten pretty good on the entries and our exit algos are not bad, but my trade management is better manually. Catching that last move up on the Turn was awesome, pure Flo.

In one way trading the way I do, catching peaks and troughs, is more difficult as I have to be right more often than if I can identify the Turns. But for me, it's a matter of what suits me or is in my trader's DNA. I was always very short term and my experience on the floor reinforced that preference. However, it's not the same for everyone. There is a choice and the TP should reflect that.


  1. EL, thanks for the post, very rewarding for me to have marked my RED arrows nearly perfectly w\ your chart. Trading the E7 Mini Euro because of capital constraints, but nonetheless....working!

  2. On your Feb 17 post you used the example of risking 1 point to make 1 point and having a 70% win rate however that win rate with those stats does not seem realistic. If you risk 2 to make 1 and have a 70% win rate it is basically break-even after commissions. At 70%, risking anything more than 2 to make 1 has a losing expectancy.

    Can you please go into greater detail in explaining how this math would work? What multiple of your first scale out should your risk be?

  3. Anon 04:31, Risk/reward is kind of a myth. There is no way I know how far a market will move after I am in a trade. That's why I scale out. If you trade all in, all out then you need to create a trading plan that fits. I want the market to tell me when to exit and I start with a logical first scale out point. Sometimes, that's an all out exit because the order flow looks like it's stopping. So I know what my risk is when I enter and I know that my win rate is > 70%. It's then up to me to maximise profitability with trade management.

  4. Hello Tom,

    A short while back you mentioned that you were
    considering making a Dvd on scalping available. Are you still considering that?

    It would be great for those of us that are not
    considering trading Full time but trade the futures.

    I definitely would be interested if
    you made it available.



  5. Frank, there is some new stuff in the works that will be very interesting.