Discuss Trading Mistakes & receive Feedback

[switesh]

Here's a snapshot of my trading screen. I often take screenshots of 'before' and 'after' and view them from time to time to see if there's anything I could do to improve my reading skills and Entry points. I think these two factors are my biggest hurdle at the moment.

I've picked out a recent example of a trade that I found baffling.

My thought process (a flawed one):
I don't often lay at top of range, but in this moment in time I saw the next 2 runners looked pretty strong backed in, and the short term trend on the fav was on drift (indicated by the red color in the trading volume column), so that gave me little reason to back the fav and join in the drift.

Without allowing my entry point/decision to affect your answers, the question I have for you is this:
First of all - is there enough information available in this screen for you to get involved in the trade at this point in time?
If yes, then:

• where do you think the price of the fav is headed (direction)?
  Why?
  and how Far (rough estimate)?

If no, then:

• what key information is missing (assuming you are waiting for a better piece of information to initiate your trade)?

I will post the 'after' screenshot of this trade a little later once we've had a good discussion based on this trade entry.

BTW, I agree with some that may want to say "you don't have to trade every race". That's perfectly good advice. But since I got involved in this trade I thought I'd open it for discussion.

[Iron]

I'm probably going to get shot down in flames for saying this, but IMHO the most important thing isn't at what point or in which direction you enter. It's how you manage your trades once you're in the market.

You've mentioned previously that your staking is such that taking a loss is painful to you. If you're like most people, you'll be instinctively drawn towards avoiding pain. That could result in you taking your profits prematurely (in case the market takes them away from you and puts you in the red), meaning that you're not adequately compensated for the times when the market moves against you.

Trading In The Zone author Mark Douglas says that many traders eat like birds and **** like elephants, and that may be the mistake you're making.

Jeff

[James1st]

Hi Switesh,

You do like asking awkward questions!

First of all a few observations. In a previous question I asked you why you were backing a sample horse by simply assuming that it "might" be about to undergo a reversal. You responded by saying that you frequently attempt to discern the top of a drift in order to back a horse. Nothing much wrong with that as a strategy, so long as you understand that you need to have a very clear edge when determining the exact entry point viz your trigger action must yield a greater profit than loss.

The question you pose is in respect of an O'Brien runner in a race at Listowel, which in case you are probably unaware, is a low grade field in the back end of a tiny market town in Kerry where the racecourse attendance often get as big as 20 people. The consequence of this is that markets there are frequently very volatile and easily distorted by moderate stakes. Nevertheless when an O'Brien runner is present, the market usually attracts a decent enough volume.

Now to the question. I am not sure exactly when you got to this market (I assume it may have been 10 minutes from the off) but your question specifically relates to an entry point at approx. 4 minutes out. The set up is of a short priced fav (the O'Brien runner) which traded as low as 1.5/1.6 but had drifted somewhat (expected at Listowel) to 2.2. Opposing the fav are 2 horses at 4's/5's, neither of whom are likely to ever become favourite over the O'Brien runner. In all circumstances the fav has (at 4 mins out) only 2 places to go; the first is that it continues to drift to 2.34 (2.54) or some large stable support will arrive and reverse the drift down to 2's (1.9). I don't need to get into guesswork as to which way it will move even though I know that locals are always keen to back an O'Brien runner; what I do need to do is to look for an indication that a move is imminent or taking place. There are certainly no visible signs on your screen shot that would allow me to make that decision.

I doubt, however you pose the question, that any trader will tell you what indicator to use or how they personally decide which direction the market is going to move in; everyone has an edge they have to protect. There are many traders who would tell you that you arrived too late at the market and missed the nice drift; and there are others that will tell you to trade a different horse, or not to trade at all in those circumstances but given that you are trying to ply a strategy of catching horses at the top end of a drift with a view to backing them for a few ticks, then your set up only needs to answer the question "can you make a profit in a 50-50 scenario without an edge". The answer is sadly not.

[redtra]

Maybe worth having the opinion of a newbie (me) aswell just to add to the mix!

As I am trying to get to grips with trends I would say to lay the favourite. The reason is all the others are coming in so there is lots of opposition to the favourite. As for the amount of the drift, looking at the graph and projecting it for a few minutes, I would say it will get to 2.4

[Iron]

"can you make a profit in a 50-50 scenario without an edge". The answer is sadly not.

But why not?

Let's say I enter the market at a random point in a random direction. For argument's sake, the market is at 1.5, and I've gone long. If the market goes down, I might lose a couple of ticks, depending on my exit criteria. If the market goes up to 1.8, I've made a nice profit. If I take this 'limited downside, large potential upside approach' often enough, won't I make a profit? Even with zero market reading skills, I'll be right about the long-term direction of the market (if applicable) 50% of the time!

Jeff

[barlorca]

This is one feed I love reading, regarding horseracing markets reversing points.

Physics anyone?

[OnGoldWires]

"can you make a profit in a 50-50 scenario without an edge". The answer is sadly not.

But why not?

Let's say I enter the market at a random point in a random direction. For argument's sake, the market is at 1.5, and I've gone long. If the market goes down, I might lose a couple of ticks, depending on my exit criteria. If the market goes up to 1.8, I've made a nice profit. If I take this 'limited downside, large potential upside approach' often enough, won't I make a profit? Even with zero market reading skills, I'll be right about the long-term direction of the market (if applicable) 50% of the time!

Jeff

I am speaking from my experience. It is just as difficult to stop your loss at 3 ticks as it is realise the optimum exit point when you are 30 clicks up. Many is the time that I have been 10 clicks down and held to see a profit or alternatively been 3 clicks up only to see the market reverse with a big loss.
Maybe you can win money by randomly guessing the market, but I think on average you will end up losing.
IMO, James1st is right - there is no substitute for an edge i.e. the ability predict the market more often than not.

[switesh]

You've mentioned previously that your staking is such that taking a loss is painful to you. If you're like most people, you'll be instinctively drawn towards avoiding pain. That could result in you taking your profits prematurely (in case the market takes them away from you and puts you in the red), meaning that you're not adequately compensated for the times when the market moves against you.

Yes, taking a loss is irritating, but that's ok (I can forget it like a small mosquito bite). The pain kicks in when it begins to pile up over multiple trades, sometime consecutively.

But, I assure you that I do not cut short on my profits. When I do manage to get a trade develop for around 7 ticks I simply place a stop loss at scratch and watch it. At this point I'm happy to close right at the off if it runs well or let it touch the SL for 0. Petty profits are just not worth it for me to undertake a swing trade.

[steven1976]

Whenever I see markets that have strong positions (relative to the time) with a gap in the middle of the market with very little money being matched as I imagine them front two horses were doing, I say to myself hmmmm! If you write down what will happen if you enter back or lay points at each of them 3 front points (lay, gap and back) based on your experiences you may find it useful. You might not like your initial answers but then it may get you thinking in a different way if you are wanting to scalp and I don't mean by just simply doing the opposite of whatever your doing.

[switesh]

You do like asking awkward questions!

I have no shame, nor ego in asking questions. Though I may have regrets.
But that's the only way I can learn from other people, and it is way better that talking to the wall behind my trading desk.

In a previous question I asked you why you were backing a sample horse by simply assuming that it "might" be about to undergo a reversal. You responded by saying that you frequently attempt to discern the top of a drift in order to back a horse. Nothing much wrong with that as a strategy, so long as you understand that you need to have a very clear edge when determining the exact entry point viz your trigger action must yield a greater profit than loss.

When something moves too fast in one direction, like a rapid drift without any identifiable reason then my reason to oppose it is simple: exploit market psychology. I think it's an edge (though I'm not 100% sure), but you can see that I posted an image earlier containing a series of BF charts depicting reversal points. I saw these patterns appear in the market, made notes, and thought it could be an edge and began playing it for what it's worth.

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I can identify general market characteristics by their volume, field size, price construction, and expected volatility, but beyond that I have no other knowledge of racing, jockeys, trainers, form, going, yards, stables, locations and what not's. So my trading is based purely on the numbers and charts I see in front of me (and of-course BF live video), everything else is oblivion.

The set up is of a short priced fav which traded as low as 1.5/1.6 but had drifted somewhat (expected at Listowel) to 2.2. Opposing the fav are 2 horses at 4's/5's, neither of whom are likely to ever become favourite.

Having studied average expected volatility, Yes I agree with your comment that none of the next two runners will ever become the fav. But, they don't have to. All they have to do is steam in just a little more (which is quite possible and within the range of expected volatility) and that would be enough to push the fav out to 2.4s. That was my thought when I opened the trade around 4 mins out.
Beyond this I couldn't tell if a bookmaker or locals had a trick up their sleeve to back it in past this point in time.

what I do need to do is to look for an indication that a move is imminent or taking place. There are certainly no visible signs on your screen shot that would allow me to make that decision.

Point well accepted.

I doubt, however you pose the question, that any trader will tell you what indicator to use or how they personally decide which direction the market is going to move in; everyone has an edge they have to protect.

Agree with your comment again and I can understand that sometimes it may be difficult for experienced traders to comment on the specifics of a trade without worrying about leaking some drop of secret.

It's just my personal thought, but I despise secrecy where learning is involved, after all learning only grows by sharing and being open. I've shared my notes, images, and thoughts openly on this forum. And though I'm not profitable I'd be more than happy to have 100's of people stare at my trading screen live to see how I'm trading without fear of losing edge.

Also, not many profitable traders would go out of their way to openly share their videos and narrate exactly why and what they're looking at in a trade (without any commercial incentive). Mugs has done just that. Many traders have learnt and bowed to his effort, yet I don't think he's lost his edge or profitability in any sense.

then your set up only needs to answer the question "can you make a profit in a 50-50 scenario without an edge". The answer is sadly not.

I would love to hear Peter's take on this.

[steven1976]

By the way, I'm expecting your next screen shot will be a nice green but my comments still stand.

[Iron]

Hi Switesh

Do you normally go with the trend or counter-trend?

Jeff

[switesh]

Do you normally go with the trend or counter-trend?

This is an easy one to answer Jeff. If I see a trend just about to get underway with some momentum I will join it early (within the first 5-6 ticks of the move). If I've missed it, then I usually wait on the other side waiting to catch a reversal if opportunity permits.

I have no personal preference for trend or counter-trend, however what I do have a strong liking for is to catch a move early. Sometimes I catch them pre-maturely in expectation/anticipation of what's about to unfold (but that is only known in hindsight if it was a bad idea/entry). Like in the earlier example where I backed right at the top anticipating a correction but the drift still caught me out.

Some of the charts I posted in 'BF chart of the day' will demonstrate a strong trend and a counter trend in the same chart, and my strategy is usually to catch the tops or bottoms, otherwise sit on the bench and watch what I missed.

Though sometimes it is not uncommon to see something headed only one way, like gambles and heavy backing (I've posted charts of what these patterns look like), or strong dislike causing a big one way steady drift. In these cases I will either join the herd or pass it up.

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Also, at this point I will be honest in saying that I get tricked often (some loses) by a very common pattern in the market (but I find it hard to tell if it's bluff or not).
The pattern is one where money looks strong for about 5 ticks in one direction and weak on the other. I jump in with the stronger side and get played for a sucker. I'm comfortable with this pattern catching me out when swinging because when I get it right I usually scale in and try to multiply the profits, but I get very uncomfortable and agitated when it happens during scalping some of the quality meetings on saturdays simply because I tend to user larger than normal stakes at these trades and if my upside is 1 tick then I simply cannot permit myself to be duped for 4 ticks by this pattern. This is one of the sources of my larger loses.

[Zenyatta]

My main mistake was getting into trading in the first place. Stopping trading has been the smartest thing I've done in 3 years, since now I'm saving money rather than throwing it away

[peterseal]

Great discussion, I can't wait to see the next screen shot.