DarkPoolTrading 

From observing your trades you seem to give price very little room to move against you. You cut your losers extremely quickly if they dont behave as you want. Would you agree with that observation? Do you use any orderflow analysis to complement your price action observations? Or is it purely S/R based? Do you always trade All In All Out. What is your thinking for not trading All In Scale Out?

@ DarkPoolTrading, I set my stops based on the exponential moving average of VFC for the last 5 bars (15 minutes). If the ATR5 is >$0.20 then I set a 40-cent stop. If the ATR is < $0.20 then I set a 20-cent stop. If the ATR is > $0.40 then I think long and hard about taking on that kind of volatility. Somtimes if the ATR 5 is just a little above $0.20, and I like the context, I will try to squeeze in a 20-cent stop because I make twice as much. The 20-cent stops feel tight when I trade becuase the bid/ask spread averages around$0.10. So if I hit the bid for a short, and the next trader hits the offer, I am half way to my stop. But if I think back to my ES days, a 20-cent stop on VFC is about equivalent to a 1.75-point or 7-tick stop on ES, which is tight but not unreasonable (or on oil a $0.12 stop).

But none of this answers your question. On average I am in a losing trade for about 15 minutes, a scratch trade 30 minutes, a winning trade 1 hour. So relatively speaking, I do cut my losers sooner. Perhaps better said, my stops cut me short. But I do not have a time-out rule. I have been meaning to look at my individual trades to gain better insight into what to do about that, but nothing concrete right now. My longest time in a losing trade is 48 minutes, my longest scratch trade is over 2 hours. Is that too long to be in those trades? Probably, but I haven't taken time to hammer out what I should do yet.

I do use order flow to a certain extent. I will include an example in my day's write up later today. I don't watch T&S, I very rarely watch level 2, but I almost always have a 1-tick chart that plots the last 1000 bids, offers, or trades. I have started to pay more attention to it lately, and I unscientifically attribute improved results over the last two months to trying to read the tape. Mostly I use S/R to decide when to start looking at the ticks. But I have found that i can get sucked into watching the ticks too closely and take lots of false signals from them (same problem I have watching any lower-time-frame chart).

I trade all-in/all out. The reasons are varied, but I can't say that my decision is the result of a careful analysis. It's because

1) money management - I only trade 100 shares with a 40-cent stop or 200 shares with a 20-cent stop. No point really in scaling out of 100 shares.

2) psychology - If I catch a runner, I am almost ALWAYS surprised at how far it goes. Occasionally, yes, I get $0.50 into a trade and it trades back for a scratch and mope about the $100 I gave up. For me I have found the lost tail of a 2R trade that runs past my exit for another 4R weighs on me mentally more than a trade that runs 1.5R in my favor and then retraces for a scratch. This is one of those things that there is "no right or wrong working, just find what works for you, do it consistently". I am working on an MFE/MAE analysis that will help me assess how to optimize that.

3) profits - I hope to have the numbers to prove this soon, but my guess is most of my PNL comes from 200-lot trades. I need those to run as much as they can. We'll see.

4) liquidity on paper - because I am paper trading its really tough for me to guess what my fills would be. The level 2 stack on VFC does not look like any futures contract. I would guestimate that 90% of the day you have 100 bid 100 offered. And 90% of the trades happen in round lots of 100. Yes you have moments when you can see 10,000 shares cross in 5 seconds, but I can never see those coming on level 2. So if I wanted to up my size to 1000 shares It would be really tough and manually intensive to figure out what my fills would look like if I tried to exit a long on the offer side. For 1 or 2 lots, I know I can punch through at any time, for more than that, it's tough to tell until you submit a real order.

I have accumulated another 20 trading days of data. It has been a good month. Market gave me some higher vol days. Did better catching some reversals. Although I was suprised how well the month came out for what it felt like. Last week was extraordinary, but there was also that 8-trading-day (almost two calendar weeks) span where I pretty much just treading water - beats losing, but doesn't feel much better.



I was surprised to see a %win days of 60%. That was a mix of very small days, and very big days. Dollars lost crept up vs last month. That was in part driven by 5 full-stop days vs 3 last month, which accounts for $160 of the $130 difference. The average $ on a win day was the big driver. I had 5 days over $350 vs 0, 1, 2, 0 in months 1-4, respectively. So month 4 was my best month at that point and I had 0 days greater than $350 vs this month with 5 days. Month 4 "felt" better going through it - more consistent even though the days were smaller. This month was more a desert of confidence punctuated with oases of success.

Full stop days. Out of curiosity, I went back and looked at my five full-stop days:
10/26 - revenge trading nonsense, stopped out in 8 minutes.
10/18 - 4 trades in 1 hour, fighting the chop, broke my max daily loss of -$80.
10/17 - 2 trades in 1 hour, fighting the trend, but not irrationally so - the most legitimate full-stop day of the 5
10/10 - Not great trades, but fairly spaced.
10/04 - Stopped out on 2 trades in 15 minutes fighting a strong run up.

So two days were "acceptable" much to be improved, but there will be days like that. But the three days where I was either 1) trading rapid, consecutive counter-trend trades on 10/4 and 10/26 or 2) consecutive scratch trades followed by losing trades in a period of consolidation on 10/18. And what is worse 4 of those 5 days had great set ups later in the day. Ugh.

1 winner, 1 loser. Net $60.

Was tied up in meetings and training for most of today. Not a great day for my style of trading. Probably better that I missed most of it.

@DarkPoolTrading asked if I use order flow analysis in my trading. Sometimes I do. Trade 1 is an example.


The first 6 minutes saw a crazy $4 spike in price. I was not watching at the time, but came in around 9:00a. I saw the triangle forming from 7:45a following lower highs, and support around $159.60. I thought about getting long at around 9:18a, but figured I would rather be on the short side if I was going to try playing the channel.

The tick chart that I watch begins at 9:47:36am. On the 3-min bar chart, price breaks $159.60 support, possibly suggesting weakness in the level and continued strength from the sellers who have been pushing price lower since 7:45am. Then price retraces from 9:48am to 10:00am. It looked like a weak pullback - one I would want to short when it was done.


Here was my thinking:

1. The bounce began like they all do, with offers being lifted. Always tough for me to tell whether this is a trader buying the support to initiate a scalp, or a short closing out a trade, or a higher time frame doing something else. But we see about 1200 shares trade in two bursts at 9:50:30 and the second a few seconds later.

The next thing that happens is the offer "goes fishing" for stops. The bid holds its level for a minute or two, and then finally cedes and moves up with the offer - probably a short trying to get out at a more reasonable price. An offer gets lifted here and there, but when it happens it is a single lot (not more aggressive bursts) and as soon as the offer is lifted, the offer goes fishing higher. Meanwhile the bids that are getting hit are in more aggressive bursts and the bid holds for a while even drops a little in price like an algo is "sweeping" a penny lower to take out the thin stack below. This could suggest that this pullback is less driven by buyers pushing and more by weak shorts getting squeezed (which is often me) and the sellers reloading on the way up.

Back on the 3-minute bar chart, price has come back to $160, a resistance level from a prior-day high and close to a local high at 9:30a. I am interested to see how order flow behaves here. Again trades on the offer are light. Trades at the bid are larger. The offer is drifting lower, trades at the offer are happening at lower prices, and are followed by bursts of bids being hit.

I am short at $159.86 at 10:01:22. Another burst of shorts follow at $159.84, one last offer is lifted at $159.91. Then the offer drops to $159.84 followed by another burst of shorts on the bid. After 10:02:19, the bids dry up. Market makers are not interested in buying, but the offer (someone happy to sell) remained very active. I am feeling content with my short at this point, even though only 1 trade happens in two minutes.

Some offers start to get lifted around $159.60, but also followed by bids hit, and the offer is not running up. The bounce is 6 minutes brief, and price is headed down again, led by lower offers. I move my stop to $159.62.

I am not looking for a long trend on this trade, it was a channel bet and we are below that channel. I look left to see possible intraday support at $159.20, which is close at the purple line on the 3-minute chart. When I see the offer ticking up from $159.30 to $159.40 I wonder about exiting. When I see the 800 share trade on the offer I decide i want out at $153.36 for 2.5R. Some bids get hit at $159.33/5, and I assume I am out. I figure if the purple support line breaks I can get back in.

I got back in for Trade 2. I felt really smart for 60 seconds. It was a trap. Stopped out.

1 winner, 1 scratch, 1 loser. Net $154.

Trade 1 initiated on a pullback to a trend line. Only in for 3-4 bars. Stopped out.

Trade 2 was after a close below the EMA21. Dropped stop after taking heat. 1 more push down, and moved stop to break even. Stopped at BE.

Trade 3 was after a 3rd lower high. Got out around $158.50, which was near LOD and just below an inter-day trendline from earlier. Another 2.5R was available, but I would have likely been shaken out before getting there.

2 winners, 2 scratches, 1 loser. Net -$18. If I honor my stop losses for the rest of the week, I know I will end positive, which will be the 10th consecutive week of gains.

Lots of trading for running in place. First trade was looking for a trend down. But hit resistance a couple times. By the second trade I was more defensive and looking for a range bound day. Only wish I had been more attentive to a possible reversal/breakout at around 10:45a.

2 losers, net -$80.

Full stop day. Trade 1 put a little too much faith in a trend line from the previous day. I got long on a limit order, thinking I had caught the bounce. Was taken out pretty quickly.

Trade 2 was a little more valid set up, with a bounce off the EMA21.

If I still had powder left, I would have caught a nice runner at 8:09 where the purple box is.

2 winners, 1 loser. Net $133.

Trade 1 was a pullback, Trade 2 was a breakout/continuation of the previous trade. Would have been nice to catch one of those with a 2-lot, but the ATR5 was too high.

Frustrating part of today was that I had my bear claws on and refused to see the $2.50 trend up. I was looking for another short entry the whole day. What a waste. I had my downward channels drawn and was waiting for the correction or complex correction, but two channels broken and the EMA21, and I still refuse to see the trend up. Ugh.

No remarkable days this week, but a solid week with 1.25% gross return.

2 losers, -$80.

Nice easy trend down day with barely a $0.50 pull back. And all of my tape reading abilities get me is two lousy longs. Even though they were blatantly countertrend I could have at least been defensive.

I suspect the last few days I was looking for trend down and got a reversal. So I was looking for reversal and got a trend down. Sigh.

1 scratch, 2 losers. -$80 net.

Trades 1 and 2 had the makings of an upward trend. At least I was defensive on trade 1 when price hit resistance at $154.60. Trade2 never had the chance.

Trade 3 I tried to squeeze a 200 lot when the ATR5 suggested 100. Had I used the larger stop, I would have survived the pullback (show with the purple box). But probably would have broke even later.