Thank you for writing back to my earlier post. My trend trading strategy has been not working too well since the market has been somewhat choppy, so I shorted my EMA to 5 and 8 instead and looking for more compelling bullish/bearish crosses, so there is a quicker response time. As basic as it sounds, I have not done a win/loss analysis and breakeven as you described earlier and have begun to start that as well.

My charting software does not have Keltner channels so I am not exactly sure how they work. How are they different from a Bollinger Band 2 standard deviation and 20 period EMA ?

Thanks again for your help/time and best of luck to you in the new year.

-Mike

I’ll begin posting blog entries shortly – infact I’m planning a couple now, one of which will address yet more of my findings on the psychological aspects of trading – A particularly poignant post given the last couple of weeks.

AtticManTrader

Cheers

Tim
http://www.eminifuturesblog.com/

Being a day trader like yourself I find the trading mindset a tricky subject to master

Bhavesh
http://www.tradefxlive.co.uk/blog

How do you define the overall longer term trend of the market? Personally I use the weekly FTSE100 index. If the market is above the 8 and 21EMA then I predominantly look for long trades. If the market is below the 8 and 21EMA then I’m looking at shorting opportunities. If the market is chopping, then I’ll look to increase my stops (still a max of 2%, but I’ll buy less stock) and trade in exactly the same way.

It appears to me as though you trading strategy is a Trend following system. Most trend following systems have less than 50% winning trades. The key to their success is that the winners are far superior to the losers. If your system has been back-tested against all market conditions, then you will have a fair idea as to what these ratios are (W/L, Av Winner/Av loser). A combination of those ratios is used to calculate a really useful ratio called ‘expectancy’. ([% winners * Av win size] – [% Losers * Av loss size]). If this ratio is greater than 1, then over the long run, you should expect your system to perform in all market conditions. If that is the case, then you simply need to keep following the signals and trusting in your methodology. This sounds MUCH easier than it actually is!

You could also consider developing a different trading strategy that works on choppy markets. You might like to reduce the time frame (1-2 days?) and consider a system that looks at making smaller gains. For example there are theories to suggest that during periods of chop, markets oscillate above and below what is called ‘fair value’. If you were able to draw a Keltner Channel either side of a choppy stock, you would see that the stock would invariably reach the upper channel and then reverse until it hit the lower channel, before bouncing back up to the upper channel.

Thanks for the post and please drop me a line if any of the above requires more explanation.

Cheers
AtticManTrader

I saw your video on the moneyshow and have been following your blog. I’ve been in the same boat as you throughout my progression of trading. I started this Feb 2009 (coicidently) towards the bottom of the market. The last 10 months have been great, but of course the monster rally attributed a lot to that.

I likewise have a fulltime day job as well, so day trading is not an option for me, plus day trading typically deals with razor thin margins often times, so I feel like I have to take more risk with larger doses of cash to make gains. Also I don’t have the biggest account out there either ($30k USD), but I don’t use margin at all.

Anyways, I’ve also been struggling with a swing trade that I can let run for 2-5 days which is my ideal trading time, long enough to manage part-time with work, but still enough to make profits to trade.

My trading software does not have the Keltner channels, but has most basic other trading options though.

Is there something by chance you could recommend me to try that might make sense ? I saw that you were doing the 8 EMA vs. 28 EMA crossovers then taking positions accordingly, then putting a preliminary 2% stop-loss. I think I am putting my stops @ 0.5% way too tight. Now that the market is for real and not just a non-stop train upwards, I really have to adjust accordingly.

Anyways, just thought I’d ask b/c I am in the same boat as you and I love trading, but I am having a hard time figuring out what to do now that the dynamics are much different, esp going into the new year.

-Mike

The new year will signal the re-birth of an invigorated AtticManTrader

The book is going to be a trading diary – similar to the blog, focused on my experiences trading a 10K account. It will include chapters on strategy design, money management and of course, my favorite topic – trading discipline.

I have interest from publisher, so now I need to get my head down and start writing!