Ideas on profit and post-trade analysis

As I have been trading more and more, I have been doing less general research and now only really focus on the bits that I think I really need to work on (busy schedule has led me to not do much of that either though..). I spend most of my think time on random posts/topics that have stuck to my mind, as well as strategies and ideas that I think work and don’t work, and why. I try to juggle the thoughts of traders that have seem to have made it, ideologies that retail traders were taught to be true, as well as my constantly developing thoughts, and make sense of the whole thing and create a picture of how the market functions in a way that ‘upsets’ the fewest thoughts. One of these thoughts that I have spent more time thinking about lately is the idea of “cutting losses and letting winners run”.

There are actually so many ways to think about this idea. Cutting losses is one thing, getting big winners is another, and often traders face the issue of an expected or average yield of win/loss. Anytime you allow a “winner” (predefined by the system) to run, you risk it becoming a breakeven trade. Not bad, but when you rely on the winners to make the system a winning system, you really just need to win. Its tough analysis a lot of times to continue to section off winners into trades that may become big winners, because it may make the system worse, turning more winners into nulled (breakeven) or even small loss trades. After all, if the process to become a successful trader is losing trader->break even trader->winning trader, you’re really looking at the function of growing winning trades to further your equity growth.

One idea that I’ve enjoyed thinking about a lot lately is something I think TheRealThing from FF has said: that the breakdown of his trades is basically a lot of small winners, a lot of small losers, and a few, just a few, HUGE wins. It makes the grinding and focused aspect of trading more realistic, and it does make sense. In my study of transient bars, this is quite akin to catching a long right in the middle of a mid-transient bar. It’s not so much that you try to identify them as they occur, but you just kind of “luck out” (although I do think there may be something to be done in this area..). It also coincides with the Tsunami thread (now junked) that the goal is to move the stop to BE in a good place, and just wait for the black swan events to not be the things we fear and try to control as the risk factor of our trading, but rather accept and look forward to them, as they are the events that really make our account grow. In other words, if you can manage to get into a trade that just takes off, if you don’t “need” the trade, try to just sit on it stubbornly and not take 2, 4, or even 8% growth. Rather, sit and wait on it to grow into a 15 or 20% trade. I know I would be fine with catching one or two of these a month.

Of course, how do we really do this?

Currently I’m thinking about:

-Further analyzing price movement post break
-Analyzing the time component for a trade to exhaust
-Average/middle leg lengths for 5M-H4 breakout waves
-Classic (my version) ABC waves in 1Hr-W1 swings (1 mo scale)
-Taking a look at mid-transient bars and return probability (BE) for 15m-1hr bars
-Possible “Speed” of breakout waves on 5m-1hr waves

Lots to think about, many ways to design them…


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