Monday, August 31, 2009

A followup to the 3 R's

After my last post, E-Mini Player asked a question about the stats I'm currently keeping. The answer turned out to be sort of long, so I'll just answer it as a blog post. Remember though, the actual stats and results are meaningless to others. We all have our own plans. The best trading plan out there is the one you created for yourself. The point though is that I do keep stats that I think are relevant to my plan and success in executing it. Call me conservative, but there are just some things I need to prove to myself and not just assume, or hope works.

I am currently keeping manual statistics on:
1) MACD confirmation. 8-17-9 MACD is the only "below the chart" indicator I use. I use the same setting MACD on both my 42 and 133 tick charts. For LONGS I have 4 possible readings; and 4 for shorts. Thus far I have recorded a little over 1,800 readings. The result so far: 1) I know what the most common reading for winning trades is, 2) I know that ultimately MACD has not proven to be that important. Thus I am not going to pass on a trade just because I don't get the ideal MACD reading.

2) What side of the zero line is MACD on (on my 42 tick chart) at the time of a winning setup? Just short of 900 readngs so far. The result: nothing definitive for either longs or shorts. After reading #1 and 2 you may wonder why I even use MACD then. Well, it does have tendencies to show "most likely" readings for winners. And, it teaches me to LOOK and see what's happening
under the price chart (a weak point for me).

3) The amount of drawdown (YM points) experienced past an "ideal" stop point (which can be figured). This stat tells me how much of a default stop-loss I should use to start with and what is likely needed to keep me from getting stopped out needlessly. A little over 600 readings so far.

4) Won-Loss record of setups (and "close enough" setups) whether I took the trade or not. The purpose is to help me make that KEY mental paradigm shift from "avoiding loss" to "seeking gain". This is actually a fairly new stat for me. The result gets updated on a whiteboard everyday next to my desk. I want it staring me down.

5) Based on the timeframes I watch, and the type of setups I look for, was today a EXCELLENT, GOOD, OK, or TOUGH day for the type of trades I look for? I review the day and give each day one of those 4 ratings and write a few sentences explaining why. Why? I want to know if certain news days, trading calendar days, or just days of the week, have any tendency to NOT fit my plan. I don't want to create a needless bias toward any day though. I just want to know how the expectations of my plan play out over every type of trading day. This is a fairly new stat I'm keeping too.

Completed stats: (I'll list one)
1) 34/89 crossover study. The biggest stat I've ever logged (and is now completed) is: "Does the first pullback after a 34/89 crossover (both ema's on my trading timeframe 42 tick chart) result in a positive move? It doesn't have to be a setup that meets the rules, just the move that occurs on the first pullback after that ema crossover. And of course "positive move" is a discretionary thing. So nothing scientific here. No real filtering of the crossovers either. That means it includes all the meaningless crossovers you get when the market just goes sideways in a fairly tight band. 3,279 readings for this one.


  1. This post alone should show newer traders that (successful) trading is A LOT OF WORK.

    Thanks for the detailed answer!

  2. Oh Yeah! There are lots of pieces to the puzzle to put together. So it's not for people who need instant gratification. Its a business, plain and simple. No banker will give you the time of day without a business plan, and the market won't give you a profit (at least consistently) unless you have a business plan to follow. But do you want to be listed in the yellow pages (business owners) or the white pages (people who work for the business owners)?

    BTW E-Mini...good job on those grades. It still freaks me out how much it costs to go to school these days.

  3. Thanks :-)

    Yea, the tuition is pretty crazy at some of these schools. My tuition (around $25K per year; not including summer sessions) is actually reasonable compared to the local ivy league schools which are all around $38-45K per year!

  4. Nice post YM-trader. Learning a lot from your site, though I trade purely stocks, but the depth of your covers gives me a lot of learning. Regards.


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