Monday, May 24, 2010

Still Alive...

Just dropping a quick note to say i'm still working at my trading, albeit in a slightly more kicked back sort of way. I needed a little mental va-cay and to get away from the screens for a bit. In fact i'm going on vacation for two weeks the first of June to spend some well deserved time away from everything to re-charge the batteries.

In the mean time i'm working on one simple trade using almost nothing on the charts. I still think less is more and am trying to capitalize on that. The other thing is on the management side of things, both on the individual trade targets and possibly some daily goal targets. If 8-9 ticks is an easy target then why not take it? Why try and manage for huge runners each time if they never quite work and that +9 turns into a par or worse?

Also on the daily profit target... I need to make just 200.00 a day on average each day to match a 40k/year salary. That's 8 ticks in the 6E/J/S on two contracts. When you put it like that, why the hell do we all try and walk in a nail 80 ticks each day? So basically i'm trying to revisit and reevaluate everything in my trade plan and see if there are changes that might need to be made. You don't know unless you question it!

Wednesday, May 12, 2010

Dear Range Bars - We're Over

I've been really getting back to basics... deconstructing my rule sets and allowing the idea of flexibility back into my trading. One of the things I have been focusing heavily on is risk reduction. Which brings me to range bars. I really like the logic behind them but i've found that the reality of trading with them can be less idealistic than the portrait usually portrayed. If you listen to providers like EOTPro (nothing against them!) range bars are going to usher in a new wave of consistency and reliability for retail traders because its "new technology". But I have a few complaints.

Straight up - my entries surround an engulfing pattern of some kind. I want to see price close higher or lower than the previous candle. At the most basic fundamental level I see this simple interaction as an indicator of buyers and sellers shifting power. Not perfect, but I dare you to find a shift from buyers to sellers or vice versa where this doesn't happen - not to spoil it for you, but you can't because this has to occur for price to reverse. This in no way means that the pit isn't going to try and f**k with you or that your just getting faked in too early, but this pattern HAS to occur so i've chosen to focus on it as a baseline.

Now the tricky part is getting a shift at a "good price" where you can have a reduced risk profile. By definition a range bar is almost always going to get you in later because your requiring the market to move X amount of bars in favor before you get a confirmed close and a new bar. My hypothesis is that by getting in at the range bar price you're already too late to the party. It typically occurs after the move is already well established and doesn't have a lot left in it before it stops and backfills either to reverse or continue on. Either way its much harder to hold for gold when a position is against you than when you've got a stop at par. Period. End of story.

One of the blogs I follow continually is The Deucalion Viewpoint. What always amazes me about Sandy's performance is that he can walk in and nail 20 ticks like its nothing. And when you deconstruct his entries a bit you can see one of the key reasons he can do this is because his entries aren't late - they aren't after the move is already established its always right around the tipping point. He has small risk, and thus he can take her +15-20 easily out of a swing. Moreover, when things look like they are going to get nasty for you by being in "earlier" you are taking a minimal loss of a tick or two bailing on a position rather than a -7 tick loss.

Again, this is only theory but today in practice it paid dividends. I only traded two markets *GASP* (I know right?) the 6E and the 6B, was in and out with less risk on every trade than 1 normal trade off my range bar charts and got almost 2:1 on every trade. Now its just sim, and this is like trader 101 stuff, divergences and not fighting the trend too much with crisp entries and I can already tell you I think i'm done with range bars for good.

So moving forward i'm going to try and keep everything BARE BONES SIMPLE. A little divergence, some simple patterns and some logical management combined with a much better chance of getting more than I risk sounds like a fairly good recipe for now.


Monday, May 10, 2010

Bread & Butter

Today was the start of re-focusing on the "Bread & Butter" trade. The one that's supposed to be there and perform throughout it all. In all of my testing and trading there has really only been one setup that I find to hold up through it all and that's what I was focused on executing today.

And our baseline was like this:

NQ: +0, -9
YM: +13, -9, +18
6S: +3
6J: N/A
6E: +16
6C: -9, +11, -1
6B: +3, -1
6A: -9

Net Ticks: +26

Ummm yea. I've never been so underwhelmed by +26 ticks before. I think it needs work. 4 Losers and 4 Wins in a day isn't exactly what i'm going for. But I will say this - the new relaxed management is the ONLY reason some of the winning trades are approaching 2:1.

In a sidenote - the long anticipated trading documentary "Floored" started getting released in 10 minute increment episodes today. Check it out at

Sunday, May 9, 2010

A Game Plan

Last night I had a long talk with Awais on all things trading... and came up with some "Ah Hah" moments during the conversation that spurred me onwards. Lets not forget that I had been legitimately making money on my live account until this past few weeks when I went off the deep end. I have one setup (my original pullback setup) that just works. So i'm going to just trade that and only that.

The "Ah Hah" moment was thanks to Awais who said he had changed his trade management. Awais never gets to par. At least not in the way most of us do. He will use a hard safety stop and then mentally observe price action and watch for ques that say it might be a good time to sacrifice the position. I get tons of pars, a lot of times on moves that tend to work and work well. But I don't participate because I remove myself from the signal after a measly 3-4 tick move in my favor. Frankly, that's noise in most markets.

I can't tell you how many times i've written in this very blog that I was "high ticked out" or "it kicked me out at par by a tick then went +20 in favor". So i'm going to be simming my one setup this coming week but relaxing the management HEAVILY. Not just on the pars, but on the exits as well. I need my setups to get greater than 2:1 and for that they have to be allowed to run big. My fear all along has been taking losses. Even the idea of -1 tick was revolting to me. But that has distracted me from getting wins, let along any big wins. I'll be much richer if I have a few 3-4 tick losses here and there rather than a bunch of pars if I can replace those pars with 15-30 tick winners.

So this week i'll be on sim trying to relax that management and see how it plays out. Depending on how it goes i'll go back to live next week.


Tuesday, May 4, 2010

An Update

Well I wish I could waltz in this week with stories of revised setups and success but i'm afraid i'm going to have to disappoint. I have never had such a quick reversal of fortune - from delusions of grandure Friday morning, to just delusions Friday evening, to desperatly scrambling for something - anything Saturday and Sunday, to outright failure Monday and today.

I have literally spent 14-18 hours in front of this screen for the past 4 days trying to come up with something - anything that looked like it might have a chance. What i've found has pretty much humbled me into submission. The setups I was using before all of this recent simulation shenanigans are still critically flawed with their risk : reward. If you shrink the risk you amp up the losses, and if you increase the reward you amp up the par efforts where +10-15 turns into naught.

I'm not giving up - if this blog is a testament to anything its that I keep taking the hits and finding something to spur me on my way. But I will say this - I haven't been this disalusioned with the past 5 years of this trading journey as much as I am right now. Typically when I fall I find something to latch onto that gives me renewed hope for profitability and consistency. This time? I'm still falling and haven't found anything to catch me just yet.

Sorry to have nothing to report to the influx of new followers to this blog just when things looked like they might be getting saucy but I just got laid out by reality and shes a cold hard bitch.

Saturday, May 1, 2010

On Pause

While basking in my apparent glory late Friday I decided to code up my idea and visually automate the entries. Worked like a charm, but oh wait it started showing areas on the chart that for all intents and purposes I should've been in, but I hadn't taken the trade. Worse was that many of these areas were losing trades. It was an odd mix of trades that I had seen in real time and taken and trades that I had just ignored and not looked at.

I THINK that my mind was playing games on myself with pattern recognition. Backtesting I would see a certain pattern that had worked and then I would apply my entry and management technique, but if the pattern didn't play out correctly my eyes would kind of skip over the entry as if it wasn't there. Needless to say its a dangerous game to be playing.

What is curious is that my live sim results were so out of this world good. It was reinforcing this misnomer. But having the computer "see" for me and really looking at what is there has forced me to reconsider things. Needless to say i'll be on sim until I can sort this a bit better and prove it in real time. I'm still CLOSE but i'm no where near what I thought I was. I guess the Lamborghini is on hold for now.