Thursday, April 30, 2009

Pretty Darn Good Day

And I even missed some midday ES profits as well and an easy +1 in the ES this afternoon (I took the same trade in the NQ but couldn't click both in at the same time). But no losses. Just a real solid day that went a long ways in proving the validity of this methodology.

Is it perfect? Nope. But there has been an undoubted shift in my equity curve this week and its not a factor of being on sim - its a factor of having higher probability entries and a method that really seems to perform consistently. Have I learned a lot of little things to help? Yes. Like when the ADX is really low for a prolonged period of time I don't take trades because I feel the market transitions from a place of reversals to a place of chop. But overall as much as I want to over-engineer this method I haven't. I've kept it the same, tried to keep it as simple as possible and I think I have.

Anyway, here's today's outcome. So far i'm 3/3 this week with my day to day profitability. I haven't made money back to back 3 days in a row since... well never I don't think. And that's missing a good deal of trades, taking some bad ones, and an overall mediocre performance. If I can make money performing like I have (which isn't perfect, but a realistic outcome of screwing up day to day) I think its does show a robust edge in the marketplace. And best thing yet was that I was very efficient in the trades. Only 5 trades today (all profitable). Not a lot of churn and burn in the commission department unlike past methods!

Trade Results:

ES: +150.00
NQ: +95.00

Wednesday, April 29, 2009

FOMC Day Off

If you traded it you are a better trader than I. One of the shittiest releases and initial reactions i've ever seen. First two hours were doable... beyond that it was a roll of the dice.

Back at it tomorrow!

Tuesday, April 28, 2009

Not an Easy Day

But I learned a lot. There were a lot of trades today, some good, others not so good. I took a decent amount of losses today and some were high ticked out of trades that worked, others were just failed trade setups from the get go. Overall i'm very pleased with how the day unfolded regardless. The one big thing I learned today was that I need to get out of trades once the momentum has left them. I took a very large -2.5 ES point loss today. Had I gotten out once the momentum left the setup, it would've been a -1 point or less trade and made the day much much more profitable.

The other thing I learned is that i'm going to have to be really quick with my orders. Some of these moves fire within seconds and get to par or profit targets just as quickly. Its completely doable but very necessary to be on top of things and ready to get the correct orders placed as soon as possible.

Overall though, it was a day filled with a lot of losses (some that could've been minimized significantly!) and yet I was still able to walk out with some coin. If I had exited that ES trade when logic (and the chart) dictated it would've been a nicely profitable day (+62.50 ES) in both markets. And that's with me quitting early to go mow the lawn before the storms hit this afternoon.

So far this week, so good! I think I could definitely make a living with this method!

Trade Results:

ES: -12.50
NQ: +85.00

Monday, April 27, 2009

Easy Trading - Good Results

Some fluke in the ES 1 min chart didn't print up any pivot highs/lows today so that chart was unusable which meant I only had half of my ES setups which resulted in only two trades today in the ES. One par (it went to my target but didn't give a fill) and one small win. The NQ offered up a lot of great entries and profits. Overall today I had 7 trades, 5 winners, 1 par, and 1 loss. Those are pretty damn consistent results. And this was all applied in a systematic fashion taking EVERY signal generated on my charts.

I'm very pleased to say the least but after testing this literally all weekend these results are right in line with what can be expected. My biggest challange was trying to find the optimum balance of risk when it came to stop loss placement to keep us in long enough to get to par or profit and not kick us out too soon. I'm using relativly lax stops with more "risk" but I calculate that this actually will increase profitability because the "larger" stops resulted in more pars or profit trades than realized losses with less risk. In many cases that one additional tick on the stop made a huge difference. Think of it this way. If an additional tick of risk avoids a -1.5 stop loss (a reasonably small loss yes?) then that tick has just paid for itself 6x's over.

Anyway, here are most of the trades including the one loser. The other winners look just like all of these... use your imagination! THIS ISN'T COMPLICATED FOLKS.

Trade Results:

ES: +50.00
NQ: +110.00

Sunday, April 26, 2009

ADX > 20 is a LIE

Recently i've made somewhat of a paradigm shift in how I trade (and simplified things about 10x's over) but I wanted to share a small observation I have made concerning "trending" markets and ADX readings.

First off, let me preface this by saying if you are a pure trend trader looking for MA cross overs or something into a bigger trend then this might not help you. For the rest of us going short and long based off S/R, trendlines, or Fibs then this will be relevant to you!

Ok, so we are all told from various software vendors, trading forums, trading websites, educational vendors that the GOOD trades are in trending environments correct? We are told to wait for the ADX to be > 20 to take a trade? Because then we know the market is trending right? I'm here to argue that this SIMPLY IS NOT TRUE. In fact - its the opposite.

I argue that the prime time to look for entries is in fact when the ADX <> 20 you are by definition jumping into a position after price has ALREADY MOVED A GOOD DISTANCE IN ONE DIRECTION. Thus, its probability of that trend stopping and a reversion to its mathematical mean is much much more likely which means a move against you is much much more likely as well.

Now on the other hand, by getting into a trade when the ADX <> 20. i.e. we only are looking for positions when there are green bars.

First thing to note - IF you trade like this it will be some of the easiest most carefree trading you've ever done. Why? Because ADX filters 70-90% of the price action on most days. And you sit and wait without a care in the world. I have the indicator set up to alert me when the ADX drops below 20 so I get a message saying pay attention and then we look for trades. This will DRASTICALLY reduce trade amounts, increase efficiency, reduce commissions, and eliminate the possibility of overtrading a market. Lets face it folks - most of us aren't good enough to be 100% on every swing 100% of the day. It gets us into trouble and we all know it. So why fight it? Especially if you can filter 70-90% of the day and only focus on tiny points on the chart where the probability for a trend developing is in your favor?

I apologize for the size of these charts but nothing peeve's me more than someone posting a chart example thats too small to see. You should have no issues here.

These examples will be nothing more than trendline breaks snapped to a Pivot High/Low reading on the charts. Entries on breaks of the trendlines with the ADX < 20. NOTHING ELSE. You decide the management and targets but it would be pretty hard to lose money here.

You are jumping in at the momentum shift BEFORE THE TREND OCCURS.

Now take a look at the entries where the ADX > 20 and the pundits would like to tell us its a GREAT TIME TO LOOK FOR TRADES. Almost everything loses.

Coincidence? That's for you to decide. I don't think it is coincidence. In fact this is exactly how I trade from here. ADX and trendlines. Call it a day and make money. Only we can complicate the hell out of it "looking for the trend". The truth is the trend is relative, and thus WE DEFINE IT. And if that's the case, everyone else has a difference definition and no one can be right or wrong. So why bother? Swing your middle finger up at the "trend" and forget about chasing it. Its a fruitless effort and a lie, and one that hasn't made too many of us rich.

Think its a fluke? Go look at it yourself. These examples were in Forex but the same technique applies directly to the emini's!

ADX and trendlines. The only tools you need to make yourself rich.


Back to Basics

I wanted to update on whats happened and where we go from here. Basically my "magic code" turned out to be a false holy grail and after some extensive backtesting I found it wasn't as consistent as I wanted and while it was almost fully automated (not that I intended to trade it that way) it just wasn't good enough. I wiped out the gains from the week and said f'it.

Awais got me back on track and focused on whats really important. Price action. Its the subject most of us know better than we would like to admit but we get too preoccupied looking at pretty squiggly lines to ACTUALLY SEE. The ADX phenom is real and valid as far as i'm concerned. That is the ONLY indicator on my charts. I will use nothing more than that as a qualifier for setups and trendlines for entries from here on out. Basics. I started doing this in sim on Thursday and was raking in money. On Friday I had one loss for -1.25 NQ points and more wins than I could count in the ES and NQ by 1PM. The consistency was through the roof along with the results and directly due to the SIMPLICITY of what I was doing. Trendlines are non-lagging price information and simply work if we let them AND if we use them in market conditions that are prime for momentum shifts.

I'd also like to thank Michael for sending me an indicator he coded up around the ADX (one I was working on but he saved me the time) to give a red light/green light indication of the ADX value. Really saves a lot of time visually backtesting things now. Thanks Michael!

I will be posting my full trade charts with my trendline entries here on out showing EXACTLY what i'm doing (No more hidden indicators Stan!). My following post will cover the ADX theory and chart examples of what i'm talking about when it comes to entries.

Wednesday, April 22, 2009

Rough Day

Not much to discuss. Took the signals, and they didn't really work out. Two pars in the NQ and three back to back losses in the ES. But the redeeming value is that the losses were all small (-.75 to -1.5) and they were on valid setups. Some of them worked a bit but reversed and that was just how they played out. I still have not lost any faith in the method though! One of the NQ trades I was in this morning went +70.00 in favor and reversed hard and fast. I couldn't get out of it and had no exit signal so I took a par on it.

Anyhow, that leaves myself about even on the week with one and a half days to go. I just have to keep after it!

Trade Results:

ES: -175.00
NQ: +0.00

Tuesday, April 21, 2009

Easy Trading

Not much to report today. Ended up with a par in the morning, a par and a loss in the afternoon. But overall i'm not at all disappointed with the outcomes thus far. I mean i'm hitting a 87% win rate so far this week. A loss on occasion is to be expected. But again, easy trading to report... just sit and wait for everything to line up and nail 'em when they do. Every trade I was in today went greater than 50.00/contract in the NQ and +75.00/per in the ES which means i'm not completely off my rocker. I just didn't get signals to get out of the trade and take profits and they reversed against me.

Perhaps I could be better at getting out of the failed trades with more than a par but I kind of feel like i'm doing just fine as it is. I don't want to be bailing on situations out of fear before they launch off in favor so i'll just keep doing what i'm doing.

Already this week i'm feeling more confident than ever in my methodology and entries and I think it will be more than apparent in the weekly results.

Trade Results:

ES: +0.00
NQ: -55.00

Monday, April 20, 2009

The ADX Filter Rocks My Socks Off

I took a major step forward in my trading by stumbling on this ADX phenomenon last week. So why do I love it so much? 1. I trade cyclical price action, not trending price action. In fact, I think most of us (Stan, Michael, Awais) all trade cyclical price action. We buy or sell into what we believe are tops and bottoms and want some kind of reversion to a mean out of them right? Well let me be the first to tell you the best way to get high odds setups isn't to put trades on in markets that are trending.

This one little thing has revolutionized my outcomes. Fair disclosure... it will filter 80-90% of price action on most days on smaller intraday charts. I actually like this for two reasons. 1. I don't have to pay attention 80% of the day looking at every little squiggle and wiggle. 2. I have less trades, less commission, less market risk, and HIGHER WIN RATES. All i'm saying gents is take a look at it.

A simple slow stochastic crossover can be a powerful ally IF its filtered with an ADX telling you the market isn't trending. Here's a little experiment for you all. Go back on a 1 minute chart of whatever your trading (NQ, ES, EURUSD, Whatever) and look at all the stochastic crosses that get overbought and oversold and then crossover. Pretend that the SlowK crossing the SlowD is the "trigger candle". Mediocre results right? Now go back and filter out every trade where the "trigger candle" has an ADX value higher than 20. Tell me what you see. Is there more to it that that? Sure. But what i'm saying is oscillators are so much more effective when we filter out trending environments. What we are saying by asking for the ADX to be less than 20 is that we want to get in at the beginning of the trend and let the trend develop with us already in the move.

I went ahead and modified my ADX indicator to alert me when the ADX crosses from > 20 to < 20 on close or basically when a non trending environment has started to form. Now all I have to do is play on the internet until Tradestation alerts me I may have a potential setup. Easiest damn trading i've done in years today.

So onto that. My first trade of the day wouldn't let me fill. Had the order staged buy didn't get filled. I "missed" out on 3 points but that's just shit that happens. I took 5 trades today, had 1 par, 4 winners, and a no loss day. Now it won't all be like this and some days I probably won't have any trades due to the ADX filter but whats left for me to take is going to be very high odds setups that are primed to work! Less trades and more money is fine by me.

Trade Results:

ES: +125.00
NQ: +60.00

Friday, April 17, 2009

Par, Par, and a Par

Three pars today... + 1 tick in the ES net. Got in good moves and they just didn't run like they should. That being said, I am liking the ADX filter more and more. So easy to filter trading environments that aren't kind to me at a glance and whats left seems to be pretty good and conducive to my entries. I think my biggest thing moving forward is going to be trying to get out of the trades that I know aren't working and minimize losses.

Its a fine line to walk because I don't want to become a jittery scared trader jumping out of a move for a tick because I saw the market wiggle the wrong way. But at the same time I recognize that most of my trades that I "feel" are going against me do in fact do just that. As of right now though, I sit back and take the loss rather than be proactive and try and minimize it. But its a slippery slope and I need to be careful.

I just keep thinking back to about a month ago when I started demoing my pullback method and I was just hitting things out of the park that week. A lot of that was because I was jumping out of the ones I didn't like the markets reaction to quickly for small losses or tiny gains and holding the ones that just took off with me and trying to squeeze every last bit of profit out of. When i'm in my trades they should already be working for me. If they aren't i'm going to take the tick or two of losses and wait for the better opportunity to come along. My strict exit and management have been a crutch for me to stick to my rules but now I feel they are hindering my performance.

Regardless, I think the ADX filter was a great change and should help weed out bad entries in the coming weeks.

Trade Results:

ES: +12.50
NQ: +0.00

Thursday, April 16, 2009

A bad day...

Just got stuck on the wrong side of the market today. And that got me thinking about my setups. By definition i'm looking for a non-trending environment for my most ideal setups to occur. If the market is in trend mode i'm going to get caught selling into advancing markets or buying falling ones. That's what happened on most of my losses yesterday and today. So I started looking back over my entries using a simple ADX filter and a qualifier of 20 to determine a trending environment.

Wouldn't you know it? 90% of my good entries that worked were where the ADX said the market wasn't in a trend. As with anything, it did filter a few winners as well but I really felt that the chunk of good trades that these entry methods were designed to hit were still left intact with the ADX filter. And the best part is on a afternoon like today, you don't even have to worry about getting caught selling into these markets. Michael - I know we look at similar things so if you're reading this take a look at it and see if it helps you!

So I applied the filter to the results from the past two days and was left with these outcomes in the ES:
  • Unfiltered ES:
  • Net P/L: +12.50
  • Win Rate: 50%
  • Filtered ES:
  • Net P/L: +0.00
  • Win Rate: 60%
Now at first glance the results are worse yes? But under closer examination I would expect to be more profitable filtered for two reasons. First, one of the filtered trades was my massive +150.00 winner yesterday. Which means that filtered there was still 150.00 worth of losses that I could avoid. Second, I had less trades and thus less commission cost.

And for the NQ:
  • Unfiltered NQ:
  • Net P/L: -65.00
  • Win Rate: 43%
  • Filtered NQ:
  • Net P/L: +40.00
  • Win Rate: 100%
Not only is the filtered results more profitable but it cut out 95% of the trades and left only one winner. This means that in the past two days it would've saved me 50.00 in commissions and still left me with more profit.

Now i'm not saying i'm impressed with these results. I'm not. But this week hasn't been ripe with opportunity and I haven't traded all that well, not to mention i've only had two days to trade. I'm leaning towards filtering these trades because from what I see its leaving me with the opportunities that the method was designed to spot and avoiding the dangerous conditions I don't want to be stepping in front of.

Here's what I know. The true cost of all of my trades this week including commissions is -127.50. The alternative isn't going to win me any trader of the year awards but it is undeniably better at a measly +10.00 after commissions. One thing is certain - I need to get this figured out and quick or I won't be around in a month.

Trade Results:

ES: -150.00
NQ: -80.00

Wednesday, April 15, 2009

Not a Great Day, but I'll Take it

Didn't trade perfectly today and I missed out on a 87.50 profit in the ES. That's really my only complaint. Things were CHOPPY like a mofo this morning and i'm ashamed to say I had to pay up some money in the doldrums as a result of it. But I got back in gear in the afternoon after the Beige Book cleared and got down to work.

Not a bad outcome I suppose but still lackluster compared to where I want to be. Had a nice +3 point winner in the ES and some solid NQ entries as well. I'll take what I can get and move on to tomorrow. What more can you do?!

Trade Results:

ES: +112.50
NQ: +15.00

Tuesday, April 14, 2009

TradeStation: FIFO can lick my balls

Just a side rant that I need to voice. The FIFO standard sucks monkey nuts and I hate it. Why not give us a choice to see how our trades are recorded? Some of us like knowing our net P/L on the day without having to open up a damn TradeManager window. Rat bastards.

Anyhow. Trading kinda sucked today. Didn't get any follow through on my ES trades but I did get 3 back to back losses. They were all small (1 pt) but it just sucked racking up losers and not having any winners to offset them. Only two pars for a tick each to rally back against my ES P/L.

The NQ traded well and I missed out on one trade due to simply not multitasking another position while I was already short in the ES. That's my fault and it cost me +3 points but I guess that shit happens. I took one further trade in the NQ for another +2.25 to end the day. Overall i'm very happy with the outcome considering I lost a decent bit of change on the ES but made almost all of that back on only three winning trades in the NQ (and a loss). Considering the $$/contract differences its not bad.

I traded correctly, I took tiny losses, executed well, and nailed some great trades. Outcome didn't fall my way but all I have to do is keep doing what I am and i'll be successful more often than not!

Trade Results:

ES: -137.50
NQ: +125.00

Monday, April 13, 2009

I'm Back Bitches!

The SPOO's better watch out because i'm back and i'm refreshed and ready to get paid. I spent the week in the backwoods of Missouri with family. I didn't trade at all because we didn't get the "high speed internet" hooked up correctly until Friday. It only offers about a 65kb/sec rate but TS seemed to be fine with it (TS actually isn't a bandwidth hog at all, maybe uses 2-5kb/sec for data) and the execution seemed fine on SIM in the currencies so I should be good to go for future visits.

I can't wait to sit out on the porch on a cool 75 degree day with a beer and my laptop and make money with that view in front of me!

Today I traveled home and was unable to trade but I still have 3 and 1/2 days to make some money this week and I intend to capitalize on it as much as possible.


Monday, April 6, 2009

The First (And Last?) Day of the Week

Uber frustrating day today. Took some losses on very good and valid setups in the morning in the NQ. Then the ES was up to bat in the afternoon. I took a win for +1.25 and then 4 back to back par trades. I'm not complaining, i'll take pars anytime of the day but it was SO frustrating to be in GREAT trades, trades that went greater than 2 points and to have been high ticked out of both positions before I could take profit. My management was spot on however, I was at par when and where I needed to be. It was just so frustrating to see these things go straight to my targets without me. The second trade which was the most painful to see smacked higher for all of a second before dropping 2 points in favor. The next trade was another textbook par and wasn't all that great so i'll take it. I traded correctly and that's the end of it. No regrets.

So overall I ended up marginally down on the day ($-2.50) plus a decent amount of commissions but it just sucked taking that outcome for the day when I was in some really great positions that paid good money, but did so without me. That's trading. All I know is that if I continue to put myself in these types of positions i'll be just fine because while they just missed today they will most certainly pay off more often than not. I'm leaving tomorrow morning at 5AM and who knows how the internet will work down where i'll be so the rest of the week is on hold for now. Hell I may not trade even if I can. I need (and deserve) a break from all of this.

Last thing to note was all of my setups were really working well today and especially the final setup I went live with for the first time today. Worked like a charm and did what it was supposed to do.

Trade Results:

ES: +62.50
NQ: -65.00

Friday, April 3, 2009

Friday Goes...

Didn't trade today. I went out last night and got piss-ass drunk somehow. Then managed to find myself at home intrigued with the show "Chuck" and watching the entire first season I borrowed from a friend all at once. I stumbled to bed around 4 AM and, well, lets just say I wasn't exactly in a prime mindset for trading this morning.

But a couple quick things to note. This week jump starts the first week I made money. I ended up with +167.50 on the week despite paltry performance and a true 4 day week. But I have a feeling many more weeks like this will follow. Second, the data on my final setup for this week is in. The NQ managed a fairly measly 90.00/contract in profits and a 66% win rate. But the ES fared much better bringing in 462.50 in profits and a 86% win rate! That should help boost profitability from now on!

As I said i'll be going live with it on Monday and then be out of town all next week and the first part of the following week. But we are getting internet hooked up at the house down in Missouri as we speak so hopefully i'll be able to trade from there as well.

Have a great weekend folks!

Trade Results:


Thursday, April 2, 2009

Thursday Goes...

B-to-the-ORING day. Two setups, two pars. Nothing going. Oh well. My mentor always said that professional traders should be bored out of their minds everyday. That's how you know your in the right mindset and you're truly a pro. When it isn't fun or exciting anymore. I'm there.

One thing that did piss me off today was I had a PERFECT NQ setup setting up. I saw it, I was ready for it... I was gonna pounce on it and make it my bitch. Literally two candles prior (less than 1 minute!) to it breaking my internet dropped out. Sprinting downstairs to the modem ensued and by the time I got my charts back up the perfect textbook entry had been offered, would've been taken, and a solid 2-3 points resulted. Shit happens I suppose but I couldn't help but feel a bit slighted by the man upstairs to kill my connection at EXACTLY that point. Any other time today, go for it, no complaints. But right then? At that exact moment? Its a low blow dude...

All in all though folks... Not a huge week by any means. But there is a distinct difference between this week and last week. I made money 4 out of 4 days. No huge drawdowns, solid execution, management throughout. I just may have hit the tipping point in my career. Also today my last setup i've been tracking offered about 100 bucks on two trades (1 loss, 1 win). I did some statistical backtesting on it and it certainly is profitable, and appears to be very efficient (low # of trades for the profit offered) and it comes in around 70% win rates. Not perfect, but good enough for me. I'll go live with the final setup on Monday.

Next week i'm out of town Tuesday through next Tuesday. I might be trading from Missouri and if so i'll let ya know how it goes!

Trade Results:

ES: +0.00
NQ: +0.00

Wednesday, April 1, 2009

Wednesday Goes...

Made one mistake today and it cost me a measly -2 ticks in the ES rather than a measly +2 ticks of profit. Not a big deal, but I did make a mistake thinking I had gotten into an invalid setup, exited my position, realized it was valid and it would've made two ticks. Not huge, but a mistake nonetheless.

The only other "mistake" that wasn't really a mistake was on an NQ setup that went to a temporary target I have the option of taking profit at. I didn't take profit because I didn't want to pre-stage the order and cap potential profit, it hit the level, rejected, I put in my order and never got filled and got stopped out for a tick. Not a mistake, more like bad luck, but it sucked either way.

Other than that, I didn't get any big trades today, not a lot of action (price was REALLY momentum based today) but I got what I got. I didn't screw up too badly. Basically a wash day with a whole +2.50 in net profits! ;)

The last thing to note is that i'm getting ready to roll out my last setup (of my three) to complete my method. I've been simming it for a couple weeks now and watching it and it seems to be working really well. It hits my required 80% win rates, is easy to watch for, enter, manage, and it gets profits i'm otherwise unable to capture. For example today it had 5 trades, 5 winners, and roughly +300.00 in profits between the ES and the NQ. I'd discount it if it wasn't so solid performing on multiple timeframes, markets, and historically. And if you're wondering what it is, i'm not going to tell you, but i'll give you a hint. Michael - your latest experiment bares shocking resemblance to the idea i'm going after. So keep at your testing because with some simple filters it can be very powerful!

So all good things happening here. Cheers!

Trade Results:

ES: +12.50
NQ: -10.00