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2018 ES Volatility & Breaking Through to Profitability
a. I made a decision to 100% focus on NinjaTrader 8 with IB.
b. Next I decided that I needed more discipline to buy lows and sell highs. For me, Regression Channels seem to work pretty well for that. In NT8, the Regression Channels dynamically redraw during the day. I colored the upper and lower channels differently to remind me whether I should be going long or short. I am reasonably satisfied that regression channels are a useful tool for identifying balance and excess. During the day there are almost always times when the market becomes unbalanced and price travels far beyond your regression channels. Here's an example from EOD today.
c. I tinkered around with ES Targets and Stops to get different results with Profit Factor, % profitable, etc. Being an engineer and a perfectionist, I often though in terms of very high % profitable. But I never made much progress with that, where progress is defined as getting to somewhere comfortable that's also consistently profitable. So now I've moved to lower % profitable targets with a larger profit factor, and the drama is much less than before.
d. I reverted to paper-trading until I feel comfortable with item c. above. I'm going to give myself until early July and then go back to trading with real cash.
e. I learned that I was exposing myself to too much daily drama. It's not possible to think clearly while having so much drama.
I hope to hear from others who are on the same path.
I have less emotional variability when I trade based on a system, rather than discretionary trade entries and discretionary trade exits. If you can emotionally distance yourself from the higher volatility, each step in your ability to learn to endure reversals when appropriate, and to TRADE BETTER when market volatility increases, is a worthy milestone.
I started with simple steps, and each day try to further simplify. Feb 24, 2022 was the day of Max recent ES ATR: 188.25 points. We had already had multiple 100 point ATR days, so I quickly increased my stops and targets. Sticking with that and trading small size MES worked well for me in January, but not as well in February due to more chop. With the lower volatility of recent days, I re-tightened my stops and targets because the high vol ones were no longer realistic. That helped immediately. It's taking on more responsibility than necessary to assume frequent responsibility for discretionary trade exits. With higher volatility, losses come quickly, so you better have an appropriate stop. Perhaps getting stopped out quickly gives you a better trade entry to what may be a key reversal.
Verniman understands all this because he has decades of experience, including as a floor broker. He uses 3 minute bars for the earliest part of the day, so perhaps he looks at the ATRs and intuitively calculates whether his levels will hold and where and how he'd like to open a trade. It's a unique talent of his, definitely worth a follow on Twitter: @verniman . His writing is clear and unambiguous. If anyone out there is aware of Verniman, but trades a different system and does as well or better on certain metrics than Verniman, that would be interesting to learn more.
Trading smaller with realistic stops and targets is a huge relief when it works well. But there are also days where the chop is too high and you must not trade.
