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


Michael said...

Matt, I'll definitely check out the ADX as a filter.


Anonymous said...

I know how frustrating this phase is. I've been there too. You can do it. It's like code-breaking. You've just got to stare at the charts until you work out the kinks. Next thing you know, you're on the other side of it.

stan said...

Yo. Why do you put up charts without the indicators that you use? C'mon man, there's no time for secrets. Let us see what you see and perhaps some ideas will come out of it - for your benefit. I've been able to benefit by other's ideas as they've looked at my charts so I don't mind sharing. Besides, everyone will interpret the same data differently so there's little risk in it, if any. Anyway, just my two cents, hate it if you want! :)