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Et tu NQ: Trading the Nasdaq e-mini
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Et tu NQ: Trading the Nasdaq e-mini

  #31 (permalink)
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thanks a lot for your response tigertrader. This has given me a lot to think about and I will have to reevaluate some of my trading practices.

tigertrader View Post
Personally, I don't hold much significance to attendant volume anymore; it seems anachronistic in current markets. Algos and HFTs have rendered the metric significantly less important. I have seen way too many low volume rallies keep going and going and going. Had I dismissed them , I would have missed out on some very important moves, and had I faded them, I would have gotten badly hurt.

Hmmmm. I do agree about volume being an outdated (in the Time of Sales aspect anyways) because the big boys can chop up their order size and go undetected. However, if there are big prints on the ToS, it would lead me to believe that it is because a) They are trying to head-fake people watching the ToS or b) The situation got to the point where the trader/system said "Fuck headgames right now, I need to get in/out of this market ASAP"

A lot of my theories at the moment are based around volume and so I don't see myself jumping into any rallies that are on low volume for now but I will watch closely for these times when sim-trading and create a gameplan. I think a tick chart also helps to separate the signal from the noise when it comes to volume as well.


Quoting 
The same goes for liquidity; there's a price to be paid for trading a liquid and diverse market. The premium you will pay for the reduced risk, will be a market that follows through less and backs and fills more. Trading an illiquid market or a liquid market, where the liquidity has been pulled, will offer moves with greater volatility and velocity, because it is thinner, and there is less diversity among it's participants, so they are more likely to be the same way.

This is such a powerful paragraph.

I agree that the more liquid a market, the less likely a rally will follow through in any direction. Also though, I believe that above average volume causes an increase in liquidity but is followed by a sharp move in one direction which causes market makers and regular participants to yank their orders and liquidity dries up.

My trading strategy is to enter a position when the market starts to turn from liquid -> illiquid. At this point, the large players will have already entered/exited their positions and so the markets move higher/lower based on the smaller participants who realize they are stuck holding the bag. Because the market is moving in one direction, the market turns illiquid and the spread begins to widen as people get out for whatever price they can. Volume drops off here in comparison to when the smart money was just duking it out, and the market can drift higher/low on extremely light volume. It is like a micro-bubble that has burst and drifts lower before bottoming out.

Your paragraph regarding illiquidity also made me think about illiquid markets potentially having the least intelligent participants (or a larger amount of like-minded individuals) and therefore the easiest way to make money... although if we are being perfectly honest, you can just get whipsawed around a lot too. Penny stocks comes to mind specifically (as does PM/AH trading to a lesser extent).

There are people that make their living solely off of taking advantage of the most illiquid markets or during the most illiquid time periods. The average penny stocks is possibly the purest form of a Bubble in the financial markets: for the most part, they do nothing for weeks/months and then explode into growth for a few days of weeks and then burst.

The majority of Penny stocks are pump and dumps, but they are illiquid, the majority of the participants are likely overcome by greed. This combination of illiquidity and groupthink leads to an excellent chance to make money. Leveraged Futures markets on the other hand, involve larger amounts of money, the inclusion of hedgers in the mix and also an audience that is more formidable than other arenas and so they are less likely to result in easy money...


Last edited by Bermudan Option; November 23rd, 2011 at 01:52 AM.
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  #32 (permalink)
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Recently I have restarted paper traded with minimal profits (read: I am in the red). I have what I believe is a solid viewpoint of the markets already, so now I need to figure out how to turn the resulting perception into profit. Aka the hard part. The quickest way to turn things around is to document everything to see patterns and open everything up for discussion, so here I am and here it is.



Trading Mission Statement:
Simply wanting something is not enough: You cannot will change to come about. You have to define, refine and focus on a plan in order for change to come about. Goals can and will change over time but if I haven't defined them to begin with, I sure as hell won't be able to figure out what I want midway through the process. Mission statements guide decision making in businesses and work in journaling as well:

Quoting 
I am going to focus on trading for a living so that I have more time to reflect on my personal life and I am always aware of my freedom and free will. Trading for a living will allow me to always stay employed and work from wherever I want. Furthermore, there is no cap on my potential earnings. Trading is a skill that I can teach others once I become successful. Every day that I put off developing my trading skill is another day I will have to conform to a 9-5 or a life of uncertainty and the limited freedom that weekends bring.

Goals
Recent reading has shown me that structuring goals makes the road to success much more tangible, and also makes setbacks easier to identify and eradicate. Every goal I complete brings me a step closer to trading for a living and every step I ignore adds another step in my quest. In this way, self-discipline and trading go hand in hand: the short run eventually turns into the long run. All that I can do is address mistakes/reinforce success, and stay positive and patient while waiting for the results to skew in my favor. Here are my Dec Goals

Trading Goals for Dec 2011
- Continue to use the 15 or 60 charts for set ups. Use the tick chart only for entries
- Use the market's perception of value as a reason to enter a trade as opposed to merely volatility
- Remember that the opening range is a good indicator of potential volatility intraday


Miscellaneous Trading Goals
- Study how traders you respect size up a trading chart: JLC, Ichi, timmyb, FatTails, etc
- Reread notes you have taken on trading books you've previously read
- Be in the green after 5 sim-traded days
- Read/Take notes from The Daily Trading Coach


Journal Goals
- Accurate assessment of reasoning for entry/exit ASAP before bias sets in. Also, make it concise and structured or else I will not want to reread it later
- Have a bias/expectation every trading day. Each day is unique but it is also related to the recent chart history as well. Create a plan and a back-up in case it is incorrect.

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  #33 (permalink)
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Random Thought
Which goes first: The smart money trade or the retail trade?

11/18/11 is the first sim day I will complete for the journal. I resumed trading in early November and this is as far as I've gotten in the sim. Please refrain from saying anything related to present time trading btw.

(Trade matrix located in the Quick Summary)


EXPECTATIONS

My sentiments going into this day are bullish because although the market sold off heavily the previous day, there was what appeared to accumulation at the end of the day. 2260 is key support level and 2274 is the key resistance level. Will enter a trade based on how the market interacts with these two areas

5m Chart Overview
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60m Chart Overview
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NOTES
9:00am:
The opening price was the high in the first 30m of trading. Bearish but support is currently holding at the same spot as yesterday's sell off. 20 pt range in 1st 20 mins. 0/2 so far in trades. Both were ideal counter trend trades off of existing support but but the Opening 30mins' volatility was too much for my stop. I am going to try it a bit more before sitting on the sidelines for the 1st/last 30 mins


Midday:
Not doing well with the trades but not focused on the P/L so it doesn't matter. Just throwing on everything I see and writing down notes to work out the kinks.


EOD Analysis:
Felt a lot more confident towards the end. Got whipped around a lot. Towards the end of the day, my trades felt much cleaner and I wasn't getting automatically stopped out. Ended the day down $180 before commission. With a mandatory $30 stop loss, that is quite a few trades that didn't go my way lol. Right now I haven't honed in on the most efficient method so I am keeping score of what setups make money vs lose money and I'll cut the fat as I go along.


Last edited by Bermudan Option; December 7th, 2011 at 08:49 PM.
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  #34 (permalink)
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/NQ @ EOD

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Reviewing Premarket Prediction:
- Key Support and Resistance was correct. The market turned @ 2273 though and I didn't want to chase so I didn't make what could've been a great short.
- Did not remember to use the opening range for the majority of the day, but in hindsight it provided decent price action cues so I will pay more attention to it in the next day of trading
- Had bullish expectations going in but completely forgot about them when I started trading. Perhaps just looking @ the 15m and occasionally 60m is all that's needed to managed intraday expectations on the longer term.

Trading Reminders
- Have an exit in mind before you enter.
- Entry is about finding a place where your theory can be proven wrong with the least amount of money at stake. Remember to set up shop close to Support/Resistance or else your theory can still be correct but you can get stopped out
- Always expect price to retrace to where you want it to. Visualize this and let the market come to you
- Patience is paramount: - Wait for retests of S/R when possible
- Pick your prices, don't let the market pick them for you
- Get confirmations of moves through closes above/below key price points. Do not jump the gun
- Visualize all the potential possibilities, not just the ones you want when you are entering, or the ones you don't want when you are exiting.

Lessons Learned
- The 5min chart is more effective for me in terms of determining overall volume as it pertains to the daily trend. For me, the tick chart is useful in determining whether volume spikes on the 5m chart are bullish/bearish and also getting ideal entries. I was using the Tick chart and trying to look for hints in the volume but the way that volume is packaged with Tick-charts, they are all relatively the same size except at the beginning/end of moves. 5min chart volume gives me clues prior to that
- Unless extreme trends, the first and last 30m are too volatile for my 6 tick stop. It doesn't feel like it fits into my trading strategy so I will attempt it a few more times before writing off these times as too volatile for trend following with a minimum stop-loss.
- Fibonacci Retracement/Opening Range proved to be useful again. Of course they are just Random Lines but self fulfilling prophecies so I might as well hold my nose and pay attention to them
- If you are unsure whether a specific candlestick on the Tick Chart was predominantly bullish or bearish, break it down to a smaller tick size so that the volume will be attributed to the bulls/bears easier.
- The first trades you should think about are key support/resistance levels. These have the best Risk:Reward. Leave the nickeling and diming for the scalpers.


Things I got right
- Steered away from the 512k as the main chart for setups and used the 15m chart for a few setups
- Ignored P/L. Viewed trading results as a means to compile data on ways to be more efficient and make money
- A shitload of work on that damn Trading Decision Matrix. My Excel skills aren't what they used to be and I had to port the damn thing to three different spreadsheet programs before I could drop a link to share with the class
- Structure structure structure. After compiling enough data, I will quickly be able to see what works and what doesn't. My old Trading Journal felt more like a diary smh. Discussing feelings is fine and all but I aim to detach myself and trade

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  #35 (permalink)
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EXPECTATIONS
Selloff on increased volume @ EOD but it was not very high volume. This could have been due to it being a Friday though. New range of trading is 2225 – 2250 or 2200 – 2250 if volatility increases based on Aug-Oct's range

Prediction before the Open
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NOTES
9:00am:
Simulated through the first 30 mins. The markets opened on Monday by gapping lower and continued selling on heavy volume. Bearish signal. The 15m chart has become useless almost because previous price action @ this area was too long ago. Will have to rely on the Opening Range and the 60m to intraday analysis for now. Looking like it may have found a bottom @ 2200 but nothing concrete so I will sit and wait.
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Midday:
Better day of trading say far. Need to figure out how to manage profits AFTER my target has been reached. The market showed strength and ran through the 2200 level but I am uncertain on a continuation. 15M showing that the volume is low.


EOD Analysis:
Went into gunslinger mode and for the majority of the rest of the day, traded recklessly. Took a break and realized that it is day two of papertrading and things won't be sorted out overnight. The day felt so much more productive reading the tape but the p/l for the single day was in the hole $265. Finished reading Tape Reading and Market Tactics again and I will start doing some damage on The Daily Trading Coach.
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  #36 (permalink)
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Reviewing Pre-market/9am Prediction:
- For the pre-market prediction, the market opened directly underneath is channel and ran to the 2200 level which it broke as well. Was not prepared for that kind of volatility.
- Again, did not use the Opening Range/Fibonacci Retracement. I feel like it clutters my entry chart but I can put it on a secondary chart.
- Was ill-prepared for the volatility

Trading Reminders
- My trading involves low risk:high reward so do not take losses personally
- Price Action does not mean there is value at current levels.... volume entering the market shows perceived value
- Even the 5m chart can be noisy. Make sure you are always cherrypicking the best trades and entries.
- Always visualize both sides of the coin before you enter or exit a position
- Read all 'Trading Reminders' once you enter a trade as a review and to take the anxiety out of the position.
- Do not jump between scalping and day trading.


Lessons Learned
- Everything looks immediate and urgent on a 512tk chart. ONLY look at it when determining entries/tops/bottoms. Other than that, stick to the 5m and occasionally 15m.
- On retests of highs/lows, check out the VXN or the TICK/Q for divergences/tells. I used to watch these internals too much and did away with them but they can be advantageous at key points
- Watch out for tunnel vision: Sometimes I am so focused on the reversal that I watch the markets go higher 10-15pts on heavy volume and/or keep bucking the trend and getting stopped out. If I looked objectively, I might have alternatively went with the market.
- Time of Sales tips the market's momentum but it is not instantaneous so do not act as soon as you see the trades hit the tape. Instead, wait for the market to react and then join in.

Things I got right
- For half the day, I traded like I wanted to trade. A few hours of good trading is better than none at all, just need to work on my discipline intraday
- For half the trades of the day, I chose my entries and felt indifferent to getting stopped out because my theories were proven wrong. It was/is a great feeling.
- I can see the markets ebb and flow. It is not all noise anymore.

Thinking about
How to manage a profitable position once the target has been reached:
- Has the 5m or 15m trend changed?
- What % should I lock in as profit?
- Should I use the intraday volatility/range as a contributing factor?
- How heavy was the volume that started the current price action? Does it stand a chance of following through?
- Is upcoming Support/Resistance strong?

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  #37 (permalink)
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Spent Christmas back in Bermuda and the internet connection was weak so I didn't do any trading. Back in Chicago now so no excuses. Over the holiday break a few things were running through my mind:

  1. Is my urge to trade making me take less than optimal trades? Should I move away from the 5m completely and stick to the 15m? It is less trades/excitement but the goal is to make money, not to have fun
  2. Options as a Strategic Investment? Right now my trading strategy consists of picking tops/bottoms through volume/size. This is an art rather than a science, and even when I am right, the market can go against me before it reverses. Options would allow me to stay in the trades longer as long as I trade a holding with a tight spread.
  3. Price Action: I did a bit of reading in the Elite Circle thread and I am intrigued. I just want the bare essentials when it comes to trades and this can't hurt at all. Just don't want to get boggled doing too much either though. Currently still working on tape reading and volume analysis and not sure if adding price action studies would be advantageous now, or whether I should get a better grip on Tape Reading/Volume analysis first.

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  #38 (permalink)
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Goals Review for Dec 2011

Quoting 
Continue to use the 15 or 60 charts for set ups. Use the tick chart only for entries

Used the 5m mostly but I did manage to stay away from the 512 eventually

Quoting 
Use the market's perception of value as a reason to enter a trade as opposed to merely volatility

Still working on this

Quoting 
Remember that the opening range is a good indicator of potential volatility intraday

I have been creating theses based on the opening range but haven't been trading the theories. Also, I have not been using the Opening Range + Fibonacci Retracement study like I want to

Review of Miscellaneous Trading Goals
Quoting 
Study how traders you respect size up a trading chart: JLC, Ichi, timmyb, FatTails, etc

Currently reading the Price Action thread. Finished JLC's journal and timmyb's older journals on a diff. website

Quoting 
Reread notes you have taken on trading books you've previously read

Reread and rewrote my notes on Tape Reading and Market Tactics by Humphrey Bancroft Neill

Quoting 
Be in the green after 5 sim-traded days

Wasn't green for a day

Quoting 
Read/Take notes from The Daily Trading Coach

Have done it and still doing it

Review of Journal Goals
Quoting 
Accurate assessment of reasoning for entry/exit ASAP before bias sets in. Also, make it concise and structured or else I will not want to reread it later

I think I can stand to streamline my trading matrix

Quoting 
Have a bias/expectation every trading day. Each day is unique but it is also related to the recent chart history as well. Create a plan and a back-up in case it is incorrect.

Need to work on this for sure as well

New January 2012 Goals
  • Use the Opening Range + Fibonacci Retracements as Support/Resistance
  • Drill down on the 15m more but do not give up on the 5m just yet
  • Try to get ONE day in the green (lol)
  • Read Trading Reminders daily
  • Contemplated adding an additional criteria for entries because current method appears prone to fakeouts
  • Practice more
  • Give respect to market internals during key price levels to see if the market is tipping its hand

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  #39 (permalink)
Hyde Park,
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Posts: 468 since May 2011
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EXPECTATIONS
Market gapped lower on the open again. However it has been in an uptrend since 10:30 am the previous day.
Prediction @ the Open
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NOTES
9:00am:
Opening: Gap lower. Resistance @ 2200. Range of 18pts
Day Trend: Rangebound
+2day Trend: Bullish
VIX: sold off but just had a big pop
$TICK: Having trouble closing above 0 after a strong open

Mentally I was overwhelmed after a few weeks break from trading as well as trying to pay attention to internals + Opening Range. Pausing the simulator to make sense of all the new information and refocus.
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Midday:
Feeling much more confident. Using the $TICK chart with a little moving average on it shows the market sentiment nicely although I am still getting the hang of it. Why in the *expletive* was I not using market internals before smh.

EOD Analysis:
Sat out the last 30 minutes after a good day of trading. Cleared the Trading Matrix towards the end of the day because I made some changes to the layout which rendered a the previous data useless. I was beating myself up midday and then remember how far I have come and how long it took for my breakthrough with stock.

I was down $200 on the day and then I got a 6pt trade I think. It was over 3R. First winning trade in forever even if I ended the day in the red. Woot.

Trading Reminders
- Remember to use 512t to confirm trends on 5m, and not vice versa
- Wait for price to confirm $TICK divergences before entry
- At key levels, price may need to consolidate before continuing with its momentum

Lessons Learned
- Don't short when $TICK is in positive territory or go long when it is in negative (unless there is a clear divergence)

Things I got right
- Market Internals ftw! Was much more in tune with the intraday ebb and flow as a result
- Traded less and less sporadically

Thinking about
- What is another good internal I can use. VXN is great but it illustrates what is going on in the war. During trading hours, I only really care about what's going on in the battle. For example, the VXN can run higher from 9:30 - 4 and the markets can head higher all day along with it.

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  #40 (permalink)
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If the efforts you put in are the same as 90% of the traders, why do you respect your results to be different than 90% of traders

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