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Four Months -- ZN Trading


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Four Months -- ZN Trading

  #31 (permalink)
 
lax99's Avatar
 lax99 
Denver
 
Experience: Intermediate
Platform: Bookmap and Jigsaw DOM
Broker: Stage 5 Trading
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I had one trade today that was poorly executed. I got long as sellers were hitting the bid and the market was ticking down. My idea was that the day's action was overall a range, and that I was fading the range extreme. I was long 265 and stopped out at 255. The trade that I should have taken, however, was a sell around 280 as sellers absorbed prices in that range.



I saw the absorption afterwards in my trade review. In the moment, however, I didn't piece it together. Part of my issue was that I had written off the day's action as "range trade BS, I'm not getting involved today" and I wasn't watching for an opportunity to exploit my edge.

That won't happen again. In reviewing my trading notes over the last couple of weeks I'm seeing a clear pattern stand out.

1) I see something happen.
2) I trade that something.
3) That something IS NOT ABSORPTION. My strike rate reflects this, and I typically stop out.
4) I explain away my losses to some BS along the lines of "well, next time I'll see it better".

What Should Happen:

1) I see something happen. It is not clear absorption. I don't trade.
2) I see absorption. I execute as perfectly as I can with as little risk as I can.
3) I stop out if I'm wrong and unlucky.
4) If I'm right, I exit when the order flow suggests that the move is over.

________________________________________________________________________________________________

For tomorrow, Thursday 1/18/2018:

Order flow was again bearish today. Absorption by sellers at the highs, with a stop run through the middle of the day. I'm expecting more downside tomorrow.

Thesis 1: ZN opens below 122-200. Sellers wait for buyers to bid it up briefly, before sellers step in and begin to whack the market.
Thesis 2: ZN opens around 122-240. Shorts from today's late day breakdown get nervous and stop themselves out. We recover today's 295 high and close near highs.

IMO, ZN is going to take short cues from ZB. We've seen a curve flattening for a while now, and if ZB sells, ZN will be a tick or two ahead of it.

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  #32 (permalink)
 
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 lax99 
Denver
 
Experience: Intermediate
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News at 6:30 MST; Building Permits & Unemployment Claims.

It seems like lower remains the course for the time being. I like the potential for a run down through 122-125, as well as the volatility that we'll see with economic numbers out soon.

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  #33 (permalink)
 
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 lax99 
Denver
 
Experience: Intermediate
Platform: Bookmap and Jigsaw DOM
Broker: Stage 5 Trading
Trading: ZN
Posts: 434 since Jun 2015
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I had two trades on Thursday and intentionally didn't trade Friday because I went for drinks with coworkers on Thursday night.

Trade 1: Long 122-130. This was one of the worst decisions I'd made all week. Not even fifteen minutes before making this trade, I wrote "I like the potential for a run down to 122-125". I bought 130 with a two tick stop. This was so insanely stupid that it honestly hurts to write about. The stop run came and I puked the day's low. The trade of the day was buying that location--especially because we saw 2113 absorbed into 120 and then almost 4000 lift the 125 bid.

Trade 2: Short 122-125. Again, this was a terrible decision. After the stop run came, I decided that it had to continue lower. Instead of seeing the auction for what it was (tremendous battle near the lows instead of strong seller momentum), I took another two tick loss.
________________________________________________________________________________________________________________________________________________________________________________________

Week 2 in Review:

I did well by creating a plan before trading each session. I had levels that I was looking at, an idea of what the action should/shouldn't do, and I created a thesis based on this. I also did well by respecting my risk limits and not continuing to bash my P&L when I wasn't seeing the market well.

I did poorly by not executing my plans well. Kellys pointed it out to me last week, and it's something that I intend to deliberately work on. My trading is plagued by arbitrary execution based on what I think I see "in the moment", instead of deliberate execution based on a plan. I'm cutting my size back to a 1 lot to rein back in the risk that I put on this week. I'll have many years of trading ahead of me, as well as many large trades to worry about in my future. There's no need to put on extra size and risk at this point when I am still a newbie at reading order flow and really taking things seriously.

As an interesting aside--On Thursday, as I knocked back drinks with my coworkers, I spoke with a friend who was a collegiate athlete. We talked about performance and competition, forcing oneself to run to the verge of puking, playing the mental game against your close rivals, and many other things. The one thing that really stuck with me was a very simple concept.

"When you're training", he said, "you think that if you take a single goddamn day off that your competition is going to be 8 weeks ahead of you. You think that you have to push every morning and every minute to make sure that you stay on top. But resting your body is as big of a mental thing as it is physical. The body and mind are basically the same, and you have to rest to stay competitive in the long term. Taking a day off makes you think you're a pussy, but it keeps you in the game longer."

______________________________________________________________________________________________________________________________________________________________

Last week's Line in the Sand was 122-220. This week we dropped lower and ended Friday on new lows. This week's Line in the Sand for a trend change is going to be 122-165. If we recover that price and make it back into the volume at 122-260, I'll consider the intermediate trend to be upwards.

However, I consider the short side to be the higher probability side at this point. Momentum is downward. We just broke 2013's 122-070 lows this week. Momentum is downward. The stock market is ripping upwards. Momentum is downward.

For Monday: If we open higher and push upwards, I'll look for sellers to absorb 075 and then 120. ZN pretty much refused to trade above 120 after we traded under 075. This is going to be important for this week. I'll be revisiting 120 each day to see what the auction did around that point. If we open lower and break lower I'll be looking for seller absorption on the upwards rotations. IMO, there's really no reason to be buying right now. I'll revisit that theory as the week progresses as well.

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  #34 (permalink)
 
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 lax99 
Denver
 
Experience: Intermediate
Platform: Bookmap and Jigsaw DOM
Broker: Stage 5 Trading
Trading: ZN
Posts: 434 since Jun 2015
Thanks Given: 623
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ON action saw new lows made at 122-015, with a POC of 055 and an upwards test of 085. We're opening lower and I'm expecting a push downwards. I've seen in recent action that stop runs don't occur exactly at the low or high of the day. What'll happen is the market gets jittery two or three ticks above the lows, and then somebody drops five or six thousand contracts on the bid and the market pushes to new lows. This is the action I'm looking to see this morning. Good trading everybody!

___________________________________________

Looks to be a sort of opening drive. I have no trades as of yet. I'm anticipating a gap fill into 065/070, and then I'll be watching for super super bearish seller absorption to join on that side. If it's not there, no trade. I'm sure that the government shutdown will throw a wrench into some stuff, but my concern is with finding a spot to execute my edge. Legislation is for legislators.

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  #35 (permalink)
 
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 lax99 
Denver
 
Experience: Intermediate
Platform: Bookmap and Jigsaw DOM
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I had no trades today. My absorption idea played out perfectly at 122-090 / 095. Something like 12,000 absorbed at those prices and then the market ticked down to what would have been my exit point. Unfortunately, I was away from the computer preparing for my day job at that point.

It was an absolutely beautiful little bit of order flow. Even though I didn't put on the trade, I've included it below as a guideline for anybody who might be reading this journal.


________________________________________________________________________________________________

Today's action was pretty neutral. Buyers couldn't hold highs and sellers couldn't push ON lows. We're slightly higher overnight and I'll be keeping a close eye on both the ON 015 low and today's 025 low going forward.

Thesis: Sellers are patient. They know that the overall trend favors the shorts and they are fine with waiting for a better price to put a position on. Buyers are impatient. Buyers are countertrend traders, buyers know that they need to be nimble for ticks, and buyers are more likely to liquidate quickly into higher favorable prices.

I'm expecting higher trade tomorrow to be met with selling before we hit today's highs. I'd look for the 085 to 090 region to cap the market tomorrow, before we turn lower to go stop hunting.

Otherwise, I'd look for a range day as the market pauses and players wait for news later this week. If I think it's a range day I will not be trading.

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  #36 (permalink)
 
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 lax99 
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ONH = 122-135
ONL = 122-035

The prevailing winds are blowing upwards. Monday's afterhours session has already passed Monday's highs.

Thesis: Follow the bulls. Recall this week's line in the sand at 122-165. We're almost there, so be patient, watch for absorption at the highs and lows, and execute. We're in an overall HVN centered around 110. It seems increasingly likely to see back and forth rotation trade without any distinct direction.

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  #37 (permalink)
 
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 lax99 
Denver
 
Experience: Intermediate
Platform: Bookmap and Jigsaw DOM
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Trading: ZN
Posts: 434 since Jun 2015
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I had one trade today which stopped out. I sold along with absorption at 122-140 and was promptly stopped out a fraction of a second later at 150 for a two tick loss. Good thing ZN is liquid! More than ten thousand bought the market at 140, but I experienced zero slippage. If that sort of nonsense happened in CL or GC, you can bet your ass that my stop would have triggered twice as far away, if not worse.

In reviewing the trade I realized something. I would have taken the same trade again in a heartbeat. I was a bit jittery with the execution, but the price action is exactly what I look for in absorption plays. The flaw that showed up today was, again, not trading my goddamn plan. I had planned for absorption around 165. We were at 140 when I saw it. However, I also wrote "Thesis: Follow the Bulls", and I completely turned a blind eye to the straight-on-up bullish trade which had dominated the morning's trade.

In the future: Context is absolutely everything. Entries are derived from context, exits are fluid, stops are fixed. Context drives everything.

________________________________________________________________________________________________

For Tomorrow, 1/24/2018:

The name of the game is aggression. We had plenty of two-sided trade today, as sellers defended 155 and buyers defended 110. Afterhours trade is slightly higher; there's a significant LVN at 122-195 that I anticipate will break tomorrow. The Existing Home Sales number comes out tomorrow, but I don't expect it to be a huge market mover.

Thesis 1: Market opens above 195 tomorrow. We see an aggressive buyer drive the market up (~2000 lifting the offer without much backticking) and the name of the game is long into old value around 122-260.

Thesis 2: Market opens above 195 tomorrow. We see an aggressive seller drive down (similar action) and targets look like the 130 zone.

Thesis 3: Market opens below 195 tomorrow. Buyers drive the market into that price, buyers exhaust themselves, and sellers absorb and begin to whack it down hard.

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  #38 (permalink)
 
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 lax99 
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I've no clue what happened to the 195s I was anticipating. Time for a change in thesis.

Sellers are in control. Sells are the trades to make. I'm expecting the open to push past the ONL at 060, and then a stop run down through 030 to new lows.

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  #39 (permalink)
 
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 lax99 
Denver
 
Experience: Intermediate
Platform: Bookmap and Jigsaw DOM
Broker: Stage 5 Trading
Trading: ZN
Posts: 434 since Jun 2015
Thanks Given: 623
Thanks Received: 818

I had three trades today. One was solid and part of my overall thesis lower. I was short 060 and targeting 045 before basically scratching at 055. The others were both shorts; I stopped out the first and took a -1 on the second because I didn't like the price action as I entered.

I'm getting better at realizing what I don't want to see when I am in a trade. Now I just need to be more active in entering the trades that I want to enter.

A few things I scribbled down today, transcribed:

"The 075s did the lure today in preparation for the short. That should have been my entry spot. There were like a couple thousand absorbed and then it ticked down, paused, and then the offer refreshed. Important to see and execute alongside that. I was really really late to the short and lucky that it paid at all. I honestly should have been stopped out on it."

"The key on the move back up is when they weren't selling anything into 050. We were at new lows but absolutely dead in the water. Final 050 lows came on a big sell hitting market but the bid stayed, refreshed, and pushed back against the shorts. Immediately after that, the offer completely vanished and buyers lifted it another tick. That should have been my key to stop taking shorts, get out of any short positions, and start getting long."

"How to improve? Focus. Too many pivotal points today which I completely spaced on."

_____________________________________________________________________________________________

For Tomorrow, 1/25/2018:

If we open around 122-130 it's going to be a tough trade. That's our HVN for this consolidation area and we're probably going to see plenty of rotation and game-playing around that area. I still like 195 on the upside as a stop run/pivotal zone to watch. If I pop an upward sloping channel on these recent lows, I can see that the channel high comes right smack into 195.

If we open within 5 ticks of today's low, I will be watching for nothing but stop runs. This downward trend is not my battle to fight and I will gladly hop alongside the sellers to make a few ticks on a stop run past 045, 020, and ultimately 000.

Today's volume profile was "b shaped", suggesting that most transactions took place at the lows of the day's range, suggesting that sellers liquidated into buyer absorption. Continuing on, it is likely that we see higher prices tomorrow on the legs of aggressive buyers. I don't have statistics on this volume profile formation; it's moreso a rule of thumb.

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  #40 (permalink)
 
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 lax99 
Denver
 
Experience: Intermediate
Platform: Bookmap and Jigsaw DOM
Broker: Stage 5 Trading
Trading: ZN
Posts: 434 since Jun 2015
Thanks Given: 623
Thanks Received: 818


I honestly think my trading is improving. I didn't blow out this week. I'm slowly getting better at reading order flow and knowing what I want to see in a trade, and being able to scratch out of a trade that isn't giving me that.

My expectancy is still negative but it is slowly improving. I've included a screenshot of my current expectancy as calculated by the S5 trader.

My trade distribution and running P&L follow below:

I'm doing well by fixing my stops and not letting a loser run against me for what would become a tremendous loss. My stop is two ticks; the reason that the histogram shows so many 4 tick and 2 tick losses is because it correlates with size. I was trading a 2 lot a couple of weeks ago and had quite a few losses.


_________________________________________________________________________________________________

Again, this outlines the importance of executing well according to whatever plan you've set out. I'm slowly getting better about being more deliberate in my execution and planning. It's a long process. It's an arduous process. But it is necessary.
________________________________________________________________________________________________

I'm anticipating more downside this week. Last week saw plenty of trade in the 140 to 040 range. I'm expecting a similarly sized range to cap this week's trade. Based on the size of the volume profile, I expect roughly a 40 tick range for the next profile to form. In the shorter time frame, I'm interested in seeing the market's behavior if we see a push back up into 122-015 around the last swing lows.
____________________________________________________________________________________________

For tomorrow, 1/29/2018:

If the market opens below this LVN at 122-000, I'm interested in shorts and an aggressive order flow to the downside.

If the market recovers the ON drop into the 121 handle and can open around yesterday's close of 122-020, I'll be looking for passive sellers to absorb into the higher volume area at 122-070.

I'll be updating this upon tomorrow's open.

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Last Updated on June 30, 2019


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