P/L Outcomes ≠ Good Trading

Today I wanted to talk about one major thing before we dive into how the day unfolded. Most new traders (and some seasoned) seem to assume that the profit or loss at the end of the day is somehow related to THEIR performance that day. The reality of the matter is nothing could be further from the truth. Profits are NOT related to if you traded "good" or "bad" on any given day.

As traders we need to understand that our methods have a probability of outcome and to achieve that probability we as traders need to execute our plans correctly throughout the day. If we do that the method succeeds. If we don't, the method fails. As long as you took the signals and followed your rules you traded perfectly regardless if that nets you a losing day or losing week. Systems have drawdowns, trades stop out. The point is successful traders separate the outcomes of profit from the outcomes of their performance.

As for today. I traded my nuts off. The most trades i've ever taken in one day is 4. I had taken 8 by 12:30 in the afternoon. Too many to go through individually but lets just say the trading gods didn't favor me in the am. I start trading at 9AM CST - by 9:04 I was down -225.00 on two back to back losers and by 9:22 up +25.00 net on one winner. This back and forth P/L whipsaw continued throughout the day. All I know is that I traded like a champ. I missed one signal that went for big gains but that's just going to happen. I was bidding for it but I got greedy by a tick and missed my fill on a trade that went the better part of 6 points. DON'T GET GREEDY. As I type this I hit exactly 50% "winners" today, two of which were par, one of which I got slipped on the exit for a tick and i'm still net profitable. Another trade that was a loser literally tagged me out on the tick low before going immediately to my profit target - but it happens! GOOD TRADING IS TAKING THE SIGNAL.

Now I did do something a bit unorthodox for myself today, and that was to quit early. I stopped trading at 1:30 rather than 2:30. Now this *IS* against my rules but I did this for two reasons. Today I took 2x's the trades I normally take on a day and frankly, i'm emotionally and psychologically drained. My focus is lacking as I write this post and I have no want to sit at the screens anymore. Secondly, the market has just gone ape shit in the last hour and shot up 20 points in a straight line. While there could be opportunity here, this puts price action into an "outlier" category which diminished my edge somewhat. So maybe i'll miss out on nice profits, but i'm willing to accept that outcome right now. I'm just not in the mindset to put on more trades anymore today.

Because I am so tired I will merely give you my two charts I traded and the arrows that indicated the trades... A lot of the trades are Double Tops or Double Bottoms so take a look and see what I did.




*Update 6:32 PM* Turns out there was one more valid signal that worst case would've been par (+1 tick) but it came up to my target level exactly but I can't guarantee that I would've gotten filled (or that I would've gave up a tick to get out) so we'll call it even. Worst case I missed one trade.

Trade Results:

+112.50

Day 1 of a 2 1/2 day work week.

Things started off nicely for us with a tidy double topping pattern that went straight to target. I had to pay up a tick to get an exit (turns out I wouldn't have had to) but walked away with 3.75 in profits. Then I got a second signal to get short off another double top but this thing just EXPLODED away. I had my order in but didn't get filled as it ran down for what would've been another 4 points in profits. Oh well.


Then came an interesting scenario. I got a signal to get long (and I did). However that signal then turned into yet another double top pattern that was textbook and confirmed. So I reversed out of my position for a loss and then got short. The short obviously didn't work and I took a second loss. It was kind of a tough thing to take two back to back losses inside of two minutes, but the losses were relatively small and most importantly... under pressure of a live position I made the right call on reversing out and getting short. Yes, it didn't work this time, but i've seen it happen before and i'm sure i'll see it happen hundreds more times this year. I traded the method and the signals correctly under pressure. That's all I can do.



The next thing I wanted to mention briefly is the importance of understanding news releases and their importance when it comes to trading. First off... be AWARE of them. I specifically don't put on trades until 10AM EST everyday because of the news releases that are out almost every morning. Furthermore, there are almost every week fairly important news releases that come out intraday. Its important to keep track of the KEY releases that are going to move the market because you don't want to be in a trade ahead of them. Consider today - housing numbers were due out at 1PM EST. What do you think the pit is going to be doing 30 minutes prior to a news release they are all strategically positioned around? Think they are initiating new positions? NOPE. They are all sitting around the pit waiting for the release. Which means what to you and I? It means the market lacks direction and conviction in its moves and chop, fakeouts, and stop runs are the name of the game 9 times out of 10. As a rule of thumb I try and stay out 30 minutes prior to a release and 15 minutes after. Then its fair game. A great free resource I use is Econoday. Make note of the news events identified with a star, those are the ones you need to be aware of. The only others ones that might not be starred but are important are Beige Book and the FOMC Minutes.


I took one more trade on yet another double top setup and this one cost me 3 points. It was valid on both my 1 minute chart and my 620T, and I took it. It stopped out but that's just part of the game. I think the reason this one really lost was because the down bar that signaled me to get in was just such a big move... most of the move down that would've allowed me to get to par already had been already covered by the initial reversal candle. Oh well, this is just one trade out of the thousand I plan on taking this year.

Should be interesting to see if we can turn a profit on this essentially 2 day work week. I had today and I have tomorrow. What i'm NOT going to do is whine about "if I had just traded yesterday I would be up 300.00 and i'd be profitable this week". BULL! You take the results as they come and accept the outcomes of your actions. Friday I'm taking a half day as usual from now on and going to the Auto Show with the 'Pops as we do every year.

Trade Results:

-125.00

Passing on today...

Turns out it may have been a bad call (There have been 4 signals since i packed up shop around 10:30, 2 pars, 2 winners for +5.75 thus far) to not trade today but it is what it is. Inauguration day is an outlier news event and i'd rather play it safe than sorry. I tried to get into to moves this morning without filling (both would've par'ed out) got a bit fed up and then I decided I rather go watch history in the TV than trade through it and catch the highlights on the internet.

Either way, whats done is done, the methods are performing beautifully even though i'm not executing them.

Its going to be a 3 day week for us so we'll be up against it but I have no doubt we'll perform!

Trade Results:

No Trades

Trading ends early today!

Option X + 3 Day weekend = Probable chop. Yea, i'm sure they will slam them around back and forth in 10 point moves but it won't be fluid movement, it will be program slams that come out of nowhere. Not a lot of opportunity considering the amount of time required. So i'm choosing to start my 3 day weekend early today. In fact, i'm probably only going to be trading the first hour or two on Fridays from here on out.

Most Fridays are indeed crap to begin with but mostly I spend 6 and a half hours a day literally at the screens 4 days a week. No lunch breaks, no breaks of any kind. Its hard, intensive work and on a Friday quite frankly I think I deserve a break. If it hasn't happened in the morning most likely it isn't going to happen so why spend the time? I'm choosing to use Friday afternoons as a nice break from the action and a reward for the solid focus from rest of the week.

I took one trade this morning... looked like I was screwed for sure, but I stuck with it and the outcome was a par trade. No big deal. That's means I took another trade that my system protected me on. And starting next week another trade that would've gave me 12.50 in profits.


So a couple other things to mention. Statistically I have something close to a 50% chance of taking par on a trade. As you can see from my results on my spreadsheet that also equates to a total of over 120.00 in commissions thus far. In all of the cases where i've taken a par a tick would not make a difference in keeping me in the move or getting me out so i'm going to start next week by getting to par +1 tick. This will give me a bit of extra profit (137.50 so far had I been using it!) that will cover all of my commissions. Commission is a VERY REAL part of trading profitability as I proved with my backtest on my "Method 2". I found that by reducing the number of trades I literally was making more money by overcoming the commission fees. Speaking of "Method 2" I thought I would post up its equity curve so you can see how its doing so far. Banner week for it this week setting new equity highs and over 1900.00 in profits thus far during this two week period. The equity curve also looks identical to the one in the backtest but I think you'll agree the drawdowns are relatively minimal and the growth remains constant.


The other big news is that I finalized my newest trade setup last night. Its something i've been following for awhile after watching price action interact at various points on the chart that I was already watching. Using my same tools I was able to create a rule set that captured high odds (We're talking close to 90+%!!!) low risk setups that yielded a 1 Risk : 2 Reward setup. Yesterday alone there were two signals that went par (+1 tick) and winner (+3 points). They are simple, they work, and while they don't happen everyday (or every week sometimes!) when they do occur they perform.

I call them "You're Screwed" setups because i'm stepping in at a point in the market where the pit is robbing people of their stops and I just get on board to allow the pit to push the market for me as stops stampede into the market. Most importantly i've found this pattern on every currency, in every timeframe, all the indexes, they work everywhere! So i'm very confident in this additional entry and will be trading it live next week. I hope that this can supplement the loss of my other setup earlier in the week which needs tweaking to say the least.

And the last point. I hit my first goal this week of closing profits on the end of the week since we started of over 500.00. This means I can finally (after two months) get a haircut! Next goal is 1000.00 at the end of trading on a Friday and then I get to go to Buffalo Wild Wings for some scrumdiliocious hot wings. Small goals - but effective ones that I look forward to and work towards everyday. Furthermore this has been the most profitable week of trading thus far. We ended up grossing 412.50 in profits!!! Just think of how many signals I botched, that par trade mistake that cost money, the profits from all the par trades I didn't take and the five "You're Screwed" setups I didn't take this week. Next week is going to be every better for sure!!!

Enjoy the long weekend! I intend to!

Trade Results:

+0.00

Trading your system is PARAMOUNT!!!

Today was an interesting day. I took a couple trades that went for par but the price action was all over. We had a HUGE V-Reversal mid-day and volume was through the roof. So much so that on one of my trades I had a tick of profit locked in and I was actually slipped a tick on 1 contract when price came back. Things were MOVING.

But today demonstrated the KEY to success in the market and I wanted to share it with you. My buddy Awais sat through it with me. I had taken a loss on a trade around 1 PM that left me down -187.50 in the hole. The thing is, it was a valid setup, I took the trade and it was a full loss. IT HAPPENS. Any loss sucks and it takes the wind out of your sails no matter what you do. I got up, walked around, knew I had done what was necessary, made the right decision and got refocused. Ten minutes later a second trade around the same area signaled and I pulled the trigger again. It looked like I was going to get nailed twice in a row, it reversed and shot up to where I could get to par. It stopped out for par - no big deal. I executed correctly and without flaw.


An hour passes. Its now approaching 2:20 in the afternoon and I have a potential setup occurring on one of my charts. I'm already at a point where i'm going to end the day with the largest loss i've yet to see live. Bad day right? At 2:24 I get a signal to get short (I take trade signals until 2:29 each day) and I pulled the trigger. Now during this time I was chatting with my buddy. It went a little something like:

Me: Sh*t, damn, I don't want to be in this f****'n thing but it signaled.
Me: I'm short. Damn this thing.
Awais: So you're short?
Me: Yup - damn thing gave a valid signal.

2 Minutes later...

Me: Stop to par +1 tick.

2 Minutes later...

Me: Stop to 39.50, targeting 34.50

1 Minute Later...

Me: I had to pay up 1 tick on the exit but i'm out and net +50.00 on the day!

The lesson to be learned? YOU TRADE YOUR SYSTEM WITHOUT FAULT, FEAR, EMOTION AND YOU'LL BE FINE.


Today I turned the worst potential loss of my career into a winning day by simply following my own rules. The day isn't over UNTIL ITS ACTUALLY OVER. Don't quit, stick with it. Probability and outcomes in the markets are INDEPENDENT OF ONE ANOTHER. The market doesn't care if you're up or down from trade to trade, so take your trades and let the results be what they are.

Trade Results:

+50.00

New Equity Highs!

I set off today knowing that the Beige Book report was going to be out at 1PM CST. Historically the market tends to wait for this release and consolidate prior to it so I said I was going to trade for the first hour of the day and then walk until after the release. I had 1 trade that went for par, and then a second that was after the first hour, but it was such a pretty setup I said lets go for it and I got paid nicely for the position. Sat out until the news release (and i'm glad I did as nothing happened except chop and blast moves), and then nothing developed in the P.M. as all the potential setups blew away from my entries.


But the silver lining? I hit a new equity high today. That's a good thing - a really good thing. It means what I'm doing is working and it means i'm moving in the right direction. So good work, but we've got to keep it up! Another thing that's really nice is seeing my win rate gradually increase as my trades progress. We're now hitting roughly 80% (including par's)!!!


The last thing to discuss is that i've cut out a setup from my trading. Its something that was responsible for 3k of profits during the last month out of the total 7k. So its a big chunk but the system works on getting BIG winners but hits low win rates. It also currently has no way to get a position to par. Over the past couple days i've not liked what i've seen and I've decided to pull it out from my live trades until we can refine it to a point where the entries are refined further and I have a way to get a position to par safely at some point during the trade. So without that my expected during that month of HIGH volatility was around 3k. So my goal for this month is going to be 2k. We'll see how it goes!

I tried to do a video tonight covering how to play double bottom/top setups but after reinstalling Vista my built-in Microphones on my laptop seem to have gone missing in some type of driver debacle so I can't do any videos! Sorry!

Trade Results:

+162.50

A bad day?

First off, lets just say, today was pure unaltered crap. Literally sideways for 80% of the day. A perfect day to get chopped to pieces. We didn't so I pat myself on the back. What we did do was take a trade that hit our "par" profit level but you know how we were waiting for stop moves on close these days after Friday's debacle? Well we did wait, and it reversed HARD and I had to take a 1 pt loss instead of a par. Frustrating to say the least. But that's just trading, the really annoying part was that my trade was on a 620T chart, meanwhile the 1min was firing off a valid double top trade that I could've got into if it weren't for me having to scramble to get out of my prior long for that 1 point loss. And the double top trade went to its target for +3 without me. All in all a 200.00 profit swing from what could've been to what was. But that's just trading. Ending up -1 pt on a day like this isn't bad at all. I'm sure thousands of traders got annihilated today. Anyway, took 2 other trades that all par'ed out, and I didn't get a fill on the 3rd trade that would've been a winner so all in all a disappointing day.


Trade Results:

-50.00