Friday, April 30, 2010

All those Losses Catch Up

Its not as bad as it sounds, in fact I fared pretty well considering I couldn't do anything right this morning. Took two full stop outs in the YM and NQ and a bunch of pars in the other markets as I tried to gain some profitable traction to no avail. One loss I deserved as I was flat out wrong about price direction but the other actually was a low tick out which kind of seems to always sting a bit.

It just didn't come together as smoothly as the other days this week but this is all part of the game and is to be expected. The good news is that I really just need a few partials or a solid winner and i'm back up on the day. Unfortunately I only got one partial winner and it was in the NQ as well so I only netted +110 off the trade rather than +325 or something in some of the bigger pairs. But for the first time its nice to have a positive risk : reward trade potential so that even when things go wrong its not so difficult making it all better again.

As i'm writing this i'm short in the 6J and just peeled off my first contract at +9, and went to +3 on the second, so maybe this losing story might not turn out so bad after all. And oh wait it just filled at the secondary target for +14... so that's +325.00 in the bag and we are back up on the day!

Looking back over this FOUR DAY trading week (I was experimenting and refining Monday) the results are ASTOUNDING. They aren't just a bit better than anything i've traded before they are out of this world better than anything i've done before. On a per contract basis they absolutely blow out every single one of my results (sim and live) over the past two years in this blog.

Next week i'm pushing live with 2 lots on the smaller markets (NQ/YM/6B) and trading 1 lots in the larger markets to keep my $ risk 100.00 or less per trade. Wish me luck and check back to see how it goes in for real!

Trade Results (SIMULATION):
6 Trades, 2 Losses, 2 Wins, 2 Pars
Gross P/L: $265.00 or $132.50/per contract

Weekly Results (SIMULATION):
Gross P/L: $2123.75 or $1061.88/per contract

Thursday, April 29, 2010

A Decent Day

We'll keep this short and sweet. Took a loss in the 6B, had 3 pars, and 3 winners. I have to say i'm really starting to gain confidence in these entries and the management. The entries are just soooo much more consistent than anything i've been using probably ever. I mean the Win/Loss rate forward testing so far is 80% for gods sake. If you include pars the trades this week are hitting 93%!

Now i'm not going to suggest that I know what the hell i'm doing or that I will make money using this when I go live (what a crazy notion eh?) but it does look promising. Today was a nice standard day that did not have the volatility we've seen the past few days this week. Most of my wins were in the NQ or the 6B but I still walked out with a decent profit. And its worth noting that i'm still walking out with a dollar per contract win much greater than anything i've been able to post up using my "old method".

Trade Results:
7 Trades, 1 Loss, 3 Wins, 3 Pars
Gross P/L: $375.00 or $187.50/per contract

Wednesday, April 28, 2010

Another Good Day?

Well... things continue to look promising here on my end. I had three winners today and a whole gwop of pars (7). Now as frustrating as it is to hit 5 pars in a row, that 6th trade was a +337.50 winner, another par, and then a +425.00 winner and then a par and a smaller winner at 5.00/tick in the YM for +115.00. Ummm... yea. Now I hate churning and burning commissions as much as the next guy but if when the trades do go your way you can cover yourself and then some off of ONE winning trade it becomes acceptable for myself.

As far as the actual entries are going the filtering process i'm trying to run the trades through probably won't ever keep. The raw format of taking all of these trades is kind of what makes it work. I don't know which one is going to break favorably, and none of the basic analysis seems to point to any definable correlation. Ideally i'd love to cut out half the pars and a loss here or there but that just may not be possible. For now, things look fairly good. In fact i'm pretty safe in saying that even on a per contract basis today's performance was about 2x's my best weekly result.

Trade Results:
10 Trades, 0 Losses, 3 Wins, 8 Pars
Gross P/L: $877.50 or $438.75/per contract

Tuesday, April 27, 2010

Progress Report: Refinement Needed

Didn't post yesterday as I was really trying things out more than actively trading. Today I took what I learned yesterday and went to work. I still have some work to do! Most of my time has been spent refining management, stops, and targets to find the best balance for the first target, getting to par, and ratcheting up stops on the positions.

The good news is I think i'm safe in saying i'm developing something worth while here. My results today had their fair share of losses (2), pars (5), and partial wins (5) and full wins (2). I think the entries are pretty damn salty and the management is getting close to being acceptable. And while I understand that these results are at 2x's the size, they still work out to be much better than my single contract results the past few weeks. So onto the results:

Trade Results:
14 Trades, 2 Losses, 7 Wins, 5 Pars
Gross P/L: $606.25 or $303.13/per contract

Now that's not too shabby right? But lets get a little more detail on this. First i'm going to be churning more contracts and more commissions than ever before. So i'd damn well better be able to offset it right? Today I would've accumulated $76.30 in commissions. Now there isn't really any way around this, but what I want to make sure is that i'm not spending $5.45 on a trade to get back $6.25 each time. There has to be some efficiency to the trades as well. Today on average each trade was worth $21.65, which offsets the commissions by nearly 3:1. Not great, but i've done much worse!

Lets not forget that today's results (while on Sim, and thus fairly useless for all purposes) is about 3x's the per contract winning days I have been posting up for weeks now. Which tells me one thing: this new revision is much more efficient!

I'm going to keep working and keep trading on sim the rest of the week and see where we end up!

Friday, April 23, 2010

Simplicity Defined

Today I stopped trading live and started a period of demo trading. While I find this frustrating I believe its necessary. Over the past few weeks we have eked out a profit here and there but a few things have become VERY apparent.

1. I'm carrying huge amounts of risk (9 Ticks Initial) considering my account size.
2. My winners are not larger than my losers.
3. I have a large percentage of par trades that are inefficient.
4. My entries are not precise enough (if they were I could use smaller stops).

New or old setups make no difference, the point being that there have been cracks in the armor and that sooner or later Mr. Market was going to crack. That's why starting today i'm going to start forward testing an idea based on the "How to Build a Trading Method" post from last night. I'm going to be looking to exploit areas on the charts where the novice money is reversing and having their stops blown out, or where stops are being trailed tightly and a reversal occurs to blow through them.

I'm also going to be trading under the assumption of a two contract setup with a fixed tick target for one contract, and a variable trailing stop contract for runners. I've discussed the issue with my broker and it should be no problem to go live trading the smaller markets (YM/NQ/6B) initially with 2 contracts as this is still less risk than 1 contract on the larger markets. But for the purposes of this forward testing i'll be trading all 8 markets for the experience and to test the validity of the setups.

This should allow me to do a couple things. On about half of the trades that don't exhibit large explosive moves I can lock in a take profits on half the position. Then on the other trades that do show the potential for runners I can get in and out with a profit quickly and use that profit to offset the potential losing outcome of the second runner contract in while still allowing me to catch the runners when they occur. The setups also requires a significantly smaller stop (6 ticks) which makes things MUCH more comfortable for me emotionally.

The hypothetical benefits of all of this are:

1. Less Risk (6 Ticks)
2. Statistically consistent initial profit (4 ticks)
3. The ability to catch big winners > 6 ticks

Here are a few of the signals from today.

Unfortunately the best signal didn't give me a fill but there was still money to be had. There were 6 trades today, all of which were either pars (2), partial winners (2), and runner winners (2). And all of this was achieved with less risk, more precision, more reward. And to be honest the signals are MUCH MORE SIMPLE. Not a complex rule sheet that's 8 pages long, just some good common sense rules that exploit the areas on the charts when the newbies are losing money.

Have a Great Weekend!

Thursday, April 22, 2010

How to Build a Trading Method

The following illustrations were provided by edabreu on Traders Laboratory and serves as a source of great inspiration and logic when designing a trading methodology. I always find myself coming back to it time and time again because it just makes sense. Its a good thing to reference when things aren't going your way in the markets and has made me re-think a lot of my trading rules that have gotten me to where I am, and will force them to change more to advance my skills further.

Right now i'm trying to construct a much more simple method, one that rely's on two things: 1. The statistical probability of reaching a predefined profit target on 80%+ of signals. 2. The ability to allow for large runners with a second contract on the same signals.

What i'm really drawing off of for inspiration is the two contract part of all of this... if you follow Ed's blog ( at all he constantly posts up blotters that look like this:

Ed's trades always are taking quick profits out of the market, and still letting half of his position "ride" for big wins. But what it equates to is that most of the time hes taking something out of the market each time, protecting capital and locking in gains, while still letting the possibility of large runners occurring.

One of Ed's best quotes is this: "Once you accept the fact that intraday trading is about statistical probability of the immediate future, and accept the fact that the immediate is often just the next price bar, then all trading becomes a focus on making money. If you can concentrate on just making money each time you enter a trade, and make your decisions focused on capitol preservation, then all decisions become easy." -Ed Abreu

So here are the actual "How to Build a Trading Method" slides Ed posted late last year.


Rough Day

Caught another couple of losses today. One was an outright loser, the other low ticked me out before working. I did re-enter and get the winner but it didn't do much to help the bottom line. The new setup hasn't really been panning out like I expected. Had I traded my normal "Bread & Butter" setups i'd be up on the week, but not by much.

One of the frustrating things is that i'm trading off the OEC Demo feed, and I built all of my rules trading off a true Range Bar chart. Well a couple weeks ago they started testing a Momentum Bar on the Demo feed, which means i'm now trading off Momentum Bars, rather than Range Bars these past few weeks. I have no recourse other than opening up a funded futures account with them which I don't want to do.

Here's the illustrated version to see what i'm on about if you're curious:

They told me today that they would be changing this on their next release which was coming "soon". It just kind of sucks because as traders we try and keep everything in our setups and approaches consistent, and then you have some outside force beyond your control waltz in and f*** it all up.

Trade Results:
3 Trades, 2 Losses, 1 Win
Gross P/L: $-82.50/per

Wednesday, April 21, 2010

Can't Catch a Break

Took another loss today on one of my reversal setups... just a NASTY head-fake folks. It happens, its the danger associated with these setups and there isn't much you can do about it. I did have one of my new pullback setups today that was a winner, however it was in the 6B so it didn't do much to stem the bleeding in my account.

This week is shaping up to be ugly - but its not over yet.

Trade Results:
2 Trades, 1 Loss, 1 Win
Gross P/L: $-40.00/per

Tuesday, April 20, 2010

Not Going as Planned

I was supposed to be rolling in cash this week remember? That new setup that was going to get me out to the strip clubs to make it rain? Yea, had another loss today. Certainly not the outcome I thought I would be getting but i'm committed to give it at least a week and let it do what I think it can do. If after that time i've seen no evidence of this performance i'll reevaluate things.

Trade Results:
3 Trades, 1 Loss, 2 Pars
Gross P/L: $-112.50/per

Monday, April 19, 2010

Pushing to Production Forces a Loss

So I pushed the final pullback signal to production today and what happens on the first trade you take with a new setup live? It looses of course! Seriously... I think i'm right in saying this little phenom has happened to me EVERY time I go live with a setup for the first time. Oh well, at least its out of the way? And honestly, I missed the par level by a tick... shit happens.

Took two more trades that ended up going for pars and threw in the towel. Its only day one and we've got a lot more trading to do this week!

Trade Results:
3 Trades, 1 Loss, 2 Pars
Gross P/L: $-120.00/per

Friday, April 16, 2010

Down But Not Out

First things first, I had a rough week, and i'm still only ending down 7 bucks gross. So we aren't talking disaster here folks. This issue was simply due to my double bottom / double top entries in my trade plan that cost me money this week. They have been removed and won't come back to haunt my profitability from this point forward. Today I had a couple pars and caught this (frankly scary) reversal pattern to the short side for +7. It came within 1 tick of stopping me out so I was more than just a bit relived when it finally dropped.

Here is one more interesting fact I was looking at today - since my trade plan revision 4 weeks ago, i've had only 4 losing days. Yup, out of roughly 20 trading days i've walked away a loser only 4 times. I'm sorry, but i'm astounded by that. It almost has an air of consistency about it doesn't it?

However today I did screw up and I passed on a winner in the 6E out of fear. I had just had that bumpy ride in the 6S and was feeling a bit sheepish. So there's the 87.50 I needed to bump me up into positive territory for the week gone - due to fear. Apparently i'm not perfect just yet.

The other thing I wanted to quickly mention was a little progress report on that pullback trade I talked about briefly yesterday. Today that one setup netted a bare minimum of +21 ticks in the 6J alone. And that's taking profit at +7/trade. As you can see each one of these signals ran at least +11 in favor. Could I use the extra 300-400.00 in my pocket? You bet. These kind of results have been coming in fairly consistently. In fact this week its given only 1 losing signal!

Honestly the only thing i'm really working on before pushing this to production is the trade management side of things and trying to gauge the best compromise between getting something out of the trade with a smaller target (+7) and letting them run further (>11) but hitting lower win rates. If you guys have any ideas i'm all ears!

Trade Results:
3 Trades, 1 Winner, 2 Pars
Gross P/L: $100.00/per

Weekly Results:
Gross P/L: $-7.50/per
Net P/L After Commissions: $-67.45/per
Win/Loss: 40%
Win+Par/Loss: 67%
Profit Factor: 1.05

A Slight Rebound

Caught a winner and a par both in the 6B today. I can't complain, money is money and the trade worked perfectly even if it was only at 6.25 a tick. I've had to re-evaluate one of my trade setups and remove it from my trade plan. Its one of the core reasons for my losses yesterday and that gentleman, is the Double Bottom/Double Top formation.

Now i'm well aware that when I set out to re-vamp this blog and my trade plan a few months back I talked endlessly about the uselessness and futility of these setups and their high failure rate. I said that I would be relying primarily on pullback trades only. The truth is I lied a bit and thought I could still eek out some profit off of them. The results show the truth. Both my pullback and reversal setups have netted close to 300.00/contract each over the past few weeks. What do you think the DB/DT setups gave me? $-243.75. That's a pretty stark contrast. Not one winner, a few pars, and a bunch of losses. It fly's in the face of logic to continue on with them so they are gone as of today.

In other news I've been forward testing the past couple of weeks on another iteration of a pullback trade and its shown GREAT promise. Its outperformed my other pullback signal almost 2:1 in terms of net profit. But i'm not going to rush forward with it just yet. Too many times and too much money has been lost rushing things into my trade plan prematurely. But it is nice to know that yet another idea for a setup just might have merit.

Trade Results:
2 Trades, 1 Winner, 1 Par
Gross P/L: $68.75/per

Wednesday, April 14, 2010

Its Hammer Time

For my account... I had to shut down early today for the first time. Took 3 back to back losers. Luckily two of those losers were in the NQ/YM so the $ damage was minimal but after racking up close to 200.00 in losses I called it a day. I took the trades that were there, just none of them worked. So in the interest of self preservation I threw in the towel around 9:45 this morning. Frustrating, but I can dig myself out of a 200.00 hole. To keep trading with a slightly jaded mindset and potentially digging myself deeper wasn't something that sounded like a good plan.

No one day should make or break your account!

Trade Results:
3 Trades, 3 Losses
Gross P/L: $-192.50/per

Tuesday, April 13, 2010

Just a bunch of Pars

Took some good trades today, but all backfilled just enough to slap me out before continuing on. Ended up getting a few ticks here and there but nothing to write home about.

Trade Results:
3 Trades, 3 Pars
Gross P/L: $16.25/per

Monday, April 12, 2010

No Trades - This Time for Real

Just nothing came down the pike for me today. Some markets were running, but a lot of them were making some funky big wedges and basically not giving me much to go off of. But today's lack of trades was not due to being scared like it was on Friday. Bring 'em on... i'm gonna nail each one of them this week.

Trade Results:
No Trades
Gross P/L: $-.--/per

Friday, April 9, 2010

No Trades

To be honest I wasn't seeing much I liked in the first 45 minutes and I had some stuff to do so I skipped out early this morning. I missed a profitable short setup in the 6E for an tough and heat-filled +7. Its weird, when your doing crappy there is no pressure to perform, but the more up days I have the more I fear the inevitable losses that will come. I was actually worried about trading today because in the back of my mind I was thinking that I could screw up my good week with a couple of losses. Its certainly a new kind of fear that I haven't really had to deal with yet but am already taking steps to reign in before it costs me money.

Results this week weren't fantastic. I made a few costly mistakes and only added the additional markets after 3 days into the week but I still think I am on the right track. That's 3/3 profitable weeks back to back which is pretty amazing for myself. Now I just need to work on getting a bit more actual profit. Less than 200 bucks after commissions isn't a whole hell of a lot to work with - BUT i'm profitable. Frankly if I could average $200.00/week in a consistent fashion (which I think i'm certainly capable of) I can add size fairly soon. I'm starting to realize that this profession is not about getting +900 one day, and -800 the next, but coming in like a brick layer and laying just a little bit of profitable brick each day. I'd say my equity curve looks fairly healthy even though its not as upward sloping as I might like.

One of the things i've mentioned many times before on this blog is to not get caught up in the $/contract amount of money your making. Its much easier to make a consistent 50.00/contract each day and add 10 lots than it is to make 500.00/contract on 1 lot. I want to be trading 10 lots within the year and if I kept my performance exactly as it is right now I would be living the kind of life I have been dreaming about for so long.

Trade Results:
No Trades
Gross P/L: $-.--/per

Weekly Results:
Gross P/L: $223.75/per
Net P/L After Commissions: $171.20/per
Win/Loss: 60%
Win+Par/Loss: 80%
Profit Factor: 3.06

Thursday, April 8, 2010

Rattled Neves

Had a good par and a nice winner today. Problem was on the winner I entered, then preceded to miss my par target by a tick, then a HH close occurred, then it came two ticks from stopping me out. But none of this information is in my rule set for bailing on a trade, so I stuck with it... taking heat for over 45 minutes. Then she caved, and I saw profit at +9, thought ya know i'm not gonna walk out with a tick or two on this damn thing after all the time and I bailed... right before my target at +11 was hit.

So yay for holding and sticking to my guns and not being afraid, but nay for me bailing outside of my rule set. I'd give myself a solid B- on execution today. Close, but no cigar.

Trade Results:
2 Trades, 1 Winner, 1 Par
Gross P/L: $112.50/per

Wednesday, April 7, 2010

Welcoming more markets!

Today went pretty well. Couple winners and a couple pars - can't complain even if I wanted to. Ok, I did get slipped a tick on one of my winners but hey... we'll let it slide this time. I decided to add the YM & NQ to my workspace as its really pretty easy to monitor 8 things at once when you have most things either automated to alert potential trades or the setups are so blindingly obvious they are hard to miss to begin with.

I had been considering adding the ES/NQ/YM/TF/EMD or Crude. I've been hearing horror stories about fills especially in the TF, even on 1 lots, and frankly I don't need that. The ES still sucks long phallic objects as far as i'm concerned and even though I could be more profitable in it with the higher $/tick, I still hate the way it moves and backfills. The EMD isn't going to be liquid enough moving forward with more size so its kind of a futile effort, and then there is crude.

Crude is awesome because it moves so fast and directional, but its also so quick sometimes it can catch me off guard. Trading relatively small range charts on a market like that can be dangerous because sometimes the moves happen so quickly I physically can't click in the right orders fast enough. So i'm sticking with the NQ/YM for now as a nice middle of the road compromise.

It sucks that both of those markets are 5.00/tick but here's the honest to god truth... a 7 or 11 tick winner at 5.00/tick is still money I didn't have before, its growth I didn't have before, and i'm not going to scoff at that. I just want opportunity in liquid markets and they qualify. When the time comes to start chucking a couple lots into the market they will allow me to do so with risk that is still less than my 1 lot trades in the 6E/J/S. Works for me!

So even though one of my winners was in the NQ and only equated to 35 bucks... that 35 bucks made this day a triple digit winner rather than a double digit winner and that's something I want to see more of!

Trade Results:
4 Trades, 2 Winners, 2 Pars
Gross P/L: $110.00/per

Tuesday, April 6, 2010

Sometimes you're just wrong.

Today was a frustrating day for me... took an outright loss this morning, just sold into something that had no intention of selling off. It happens. It has happened before, it will happen again, and that is the danger of these LH/HL patterns, occasionally they aren't going to cave and they will burst back in your face. Today was one of those occasions. Textbook trade? Yup, so there is nothing more to say and its time to move on.

Earlier in the day I saw a 6B trade that triggered prior to 9AM so in my rules its a null setup, but it was trading 3 ticks away from my hypothetical stop level so I figured for less than 20 bucks a contract I can give this a go. I gave it a go, and it gave my stop a go for a 3 tick loss. Again, not a huge deal.

I took what I thought was an awesome setup later in the day that went +9 in favor before V-Reversing in my face (my target was +11). Nothing I could do other than take a tick as per my rules.

The good? I executed my trade plan well today and stuck to my rules, and my losses weren't horrendous. The bad? One of my trades was a loss and my other wasn't a winner. Bring on tomorrow!

Trade Results:
3 Trades, 2 Losses, 1 Par
Gross P/L: $-86.25/per

Monday, April 5, 2010

A 1 Trade Day & A Quick Observation

Half of the currencies were chopping and bobbing today, the other half all made pretty much the same sell off but did so in very different ways. I took a textbook reversal setup in the Swissy and held.... and held.... and then about 30 minutes later if finally caved to my target. This trade reaffirmed the need to truly stick to your management.

The Swiss was moving step for step with the 6E and 6B this morning and those markets put in double bottoms and reversal patterns. Meanwhile my position was taking heat and I was convinced it was all over. Then the 6B/6E fell over on their face and I got the push I needed. The point is - I could've bailed a 100x's over, I was so sure I was finished up until the point where I won. YOU DON'T KNOW WHAT THE MARKET WILL DO - SO ALL YOU CAN DO IS TRADE YOUR RULES!!!

The other thing I wanted to mention quickly was an observation about my profitability over the past two weeks since I changed my trade plan adding the reversal setup, requiring LH/HL patterns on every setup, relaxing my management somewhat and sticking 110% to my rules. I think the graph below pretty much sums up the transformation don't you?

Trade Results:
1 Trade, 1 Winner
Gross P/L: $87.50/per

Thursday, April 1, 2010

End of a Short Week

Well I had my A game going this morning but the markets didn't want to play. I had 3 awesome setups and 3 pars. The markets in each case rallied 7-9 ticks in favor each time but my targets were at +11 for these trades and they stopped and reversed for par's each time.

Now on these setups (all were pullbacks) I manage them a bit differently and their par management is already relaxed so I did take a couple ticks here and there on the efforts. In every case my par stops were in no way affecting the outcome of the trade that I could make a reasonable change in a management technique to eek more profit out of these moves.

Anyway, it was a short week and I had my share of mistakes. But I still managed to walk out with more than I walked in with and two back to back weeks of profit is something I don't think I've achieved in the better part of a year. Progress may actually be taking place here!

Trade Results:
3 Trades, 3 Pars
Gross P/L: $47.50/per

Weekly Results:
Gross P/L: $142.50/per
Net P/L After Commissions: $93.45/per
Win/Loss: 66%
Win+Par/Loss: 89%
Profit Factor: 2.16