Finally, what I’ve known for a long time, games are good for you!

Men’s Health Lists : MensHealth.com

. . . grab your joystick.

Not that joystick, but the one attached to your kid’s Xbox. British researchers found that the longer people play video games, the higher their levels of concentration, sometimes equaling a trained athlete’s ability to focus. “Playing video games requires a high level of concentration to be successful, and that seems to transfer to the real world,” says Jo Bryce, Ph.D., the study coauthor.

P.S. The Men’s Health lists breakdown by 1 paragraph per page to make people click their site more is just terrible, absolutely terrible!

I remember I bumped into Phantom of the Pits mini book document (110 pages) a couple of years ago. I don’t even remember when or where exactly. Anyway I thought it was kind of cheesy and with a weird mystery created just for the hype. Over the last 2 days two individuals mentioned it to me again, both of whom are not the noobs falling for hype type of people. So I thought I’d check it out again, and there are indeed some interesting ideas in there that made me look at some aspects of trading in a slightly different way. For example this paragraph:

What criteria in your day-trading plan says you are right? Most say what determines you are wrong. Not us! We only want to know the criteria for being right. Okay, for us our program says, “If in the first half hour the market opens lower than yesterday and moves higher, expect a move above the prior day’s high within the first half day of trading.” Our program also says the position is only correct if the market stays in the prior day’s top half in the first half hour. Our last criteria for the trade is that it must show a 3-point profit by the close. Now, I ask you, what is your next step?

If you haven’t read it before I would recommend going over it if only to get some new perspectives on things. It’s very easy to find the file PDF online, it’s free and widely available so just google it.

So I’m using NinjaTrader daily and really like the application, it’s got some performance issues when you load up too many charts and squiggly lines (which I’m trying to limit to the minimum) but other than that it’s a great trading platform. The ability to connect to various data sources, the chart trader, performance metrics and data playback are awesome.

One thing I hate though about NT is the sounds, not only are they terse and boring but the volume level is really high, so if you’ve got any other alerts or sounds you need you have these choices:

1. Keep the volume at normal level and cringe every time NT notifies about something.
2. Keep the volume way down and barely hear the other sounds.
3. Turn off sounds in NT.

I like getting alerted, so I decided to go with option 4. Change the sounds. You can’t do it from within NT but it’s quite simple to just go to the folder where the sound wavs sit, on my machine it’s here: C:\Program Files\NinjaTrader 6.5\sounds and then replace the sound files with your own while keeping the naming the same.

After searching online a bit I found a few files to replace the original alerts. Here’s what I’ve set for my NinjaTrader sound alerts.

P.S. I forgot to mention, I doubt anyone who will ever read this post is likely to botch such a simple operation as changing sound files but juuuust in case: if you don’t know what you’re doing, ignore everything I said above, don’t make any changes to your files. You are fully responsible for any screw ups.

I’ve been spending some time online researching various trading strategies and methods. Many traders, I believe, tend to go into a bricklaying routine when they become profitable and just put those bricks one on top of the other again, and again and again. Nothing wrong with that but expanding trading horizons can be useful in both enhancing and augmenting your current “bricklaying” activities.

Anyways, a couple of resources I use are Elitetrader.com and Inotv.com. On ET I found an interesting thread called Something very simplistic. It’s 146 pages long so I’m sitll reading it but it showcases an unusual approach which I think can help in looking at things from different angles.

• Linda Raschke: A Little Keltner, a Little Wyckoff, and a Lot of Street Smarts

• Glen Ring: Building a Better Trader - Volume 1 to 3

• Tom Cronin: How to Use Spreads to Construct a Trading Roadmap

Yikes, the British Pound is getting crushed for the last few days, it’s now at a level not seen for over 10 years. I guess the world is expecting lots of bad news to come from British banks which will then influence the economy and the currency. Once the 1.45 to the USD gave way it’s been a real free-fall.

There’s probably a ton of money to be made there. Too bad I’m not trading currencies, maybe I should check out some longer term strategy ideas for FX. I already have enough on my plate in terms of short term trading.

I’m getting fairly comfortable with my DAX trading style, particularly with timeframe, risk, entries and expectancy profile. One thing I am ’struggling’ with, i.e. tinkering and not really happy with much is exits. Which just reminded of something I wrote 3 years ago almost to the day. It was valid back then for stocks and is still valid now for futures. That’s because it’s just a sign of a developing trading style, one where there’s not enough experience and data yet to conclusively convince the trader to have faith and confidence in the rules. Many traders obssess with their entries, coming up with a gazillion indicators that will give them the ‘best’ entry. I have 4 short lines of rules written in a notepad text file. Exits though are tough, both to design and execute diligently.

Stops and Exits : Trader Eyal

The more I trade the more I find myself obsessed with stops and exits, it is an endless guesswork of what makes a better exit strategy, particularily for trailing once your initial stop is safe. One of the most annoying things as mentioned in an earlier post is to see a position reverese immediately after your stop was hit. But then instead of just getting upset about it the real value is in figuring out that if this is a repeated pattern then something is wrong with the stop strategy.

Have I become wiser since that post and is it easier now? Well yes and no. I have no problems at all taking a loss, you get used to that :-) especially with a 40% hit rate. A hard stop is always in place, position size is accordingly, stop is never widened, if it’s hit I’m out and that’s it. If it sets up again, I may re-enter. End of story. But exiting with a profit, now that’s a tough cookie especially on small intraday timeframes where end-of-day, end-of-week etc. are irrelevant. So, what are my general guidelines for designing my exits? I try to follow these rules:

1. Keep it as short and simple as possible (but without sarcificing quality)
2. Make it unambiguous, straight forward and easy to follow
3. No one can predict future prices, so let the market price tell you when to get out instead of guess when it’s “extended”
4. It’s never going to be perfect and you’ll almost never get out at the best place so (try to) stop fussing about it
5. You don’t need to get out at the top/bottom to make good money
6. Execute it consistently

Quite basic and simple, but oh-so-hard to do sometimes. I try to remind myself and keep in mind that if I followed my rule and got out too early, it’s a bummer but I accept it as part of the game/rules I set. But if I didn’t follow my rules and got out too early/late then that’s seriously disturbing for me, definitely something to avoid.

I’ve just watched a talk by Russell Sands on his experience as a turtle trader and what it means to be a trend follower. It was quite an interesting talk. When that finished I watched another one by Chuck Le Beau about exit strategies. This is a topic I’m very interested in recently as I’m working on the futures methodology. One of the interesting concepts he covered there was varying exit strategies based on what the market is doing. He’s a very strong supporter of using ATR so he was talking about things like activating a different trailing method once you have let’s say 5 ATR of open profit. But this idea can be applied in other ways. For example, you could be counting bars, either all or particular type (long range, NRBs, etc.) or you could be watching for volume patterns and use that as a trigger to activate a new type of trail/exit. They key is looking at your data and then finding a meaningful pattern. There are quite a few good lectures on INO TV, worth checking it out if you haven’t already.