Tuesday, 14 June 2011

Great Expectations

Charles Dickens wrote about it. Traders ponder about it. What profitability should I expect from my trading?

One of the first times I met Pete Steidlmayer, the inventor of Market Profile, he spoke about the three main stages of a trader's development:
  1. Losing Trader - Buying the Highs and Selling the Lows
  2. Break Even Trader - Buying High and Selling High, Buying Low and Selling Low
  3. Profitable Trader - Buying the Lows and Selling the Highs
It's then a matter of how long it takes to progress from stage #1 to stage #3 and whether the trader has the financial juice to get through the non profitable period.

I have students who are progressing along this same path in SIM. They still have a job and spend all their non working time trading SIM, very seriously, in order to get to CP (consistent profitability) so they can then solve the only remaining issue - the transition from SIM to risking real money, all while they have a steady income stream from a job.

This requires a huge amount of dedication and effort and sacrifice, but they have decided that the end is worth it - CP without major financial risk.

I recommend this approach to everyone.

Today the ES was already up in orbit when I woke up 6am London time. I had to be very patient to find good entry points. It was really trade #2 that I loaded up on and at trade #3 I was still long, but bought back what I had scaled out.


  1. Tom-

    I am a bit confused. In my opinion the first trade was the gap trade short after the 8.30am EST news. The entry would have been around 1280.00.

    Why were you looking to get long and not fill the gap short? I thought this was a trade you took every day?

    Can you please explain.

    Andrew B

  2. AndrewB, The Gap trade is not a mechanical trade that I take robotically. I start trading about 8 hours before RTH. Getting long a trend day up was the trade when I woke up. If the trend is still up, selling the gap is not the trade to make as the order flow will just run over you as there is nothing to lean on.