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Learning to trade through self discovery

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  #1 (permalink)
Washington DC
 
Experience: Beginner
Platform: OEC
Trading: 6E
 
Posts: 40 since Sep 2010
Thanks: 42 given, 47 received

I traveled to California this week to attend the wedding of a college buddy. It's been some time since the old college days, and it was great to see friends whom I had not seen in over 10 years. We reminisced about stories, asked about present situations, and congratulated each other on current lives and family. Despite all the great news, I was struck by a somewhat veiled truth about most of my friends: they were not happy in their current occupations. Maybe it was boredom, maybe the growth of familial responsibility, but I could tell that people longed for a passion toward their job.

It didn't take me long to see that I was in the same boat. I happily go to work each day, thankful to have employment that pays the bills and feeds my family, but am I passionate about my occupation? I can't say that I am. Many of my friends are more willing to discuss a crazy business idea they've concocted before talking about the details of their current position. Some are developing their ideas, and some are close to taking the business risk. It got me to think - If I were to take a shot at a new occupation, one that would excite me, one that has the possibility of providing a comfortable lifestyle, what would it be?

I would love for it to be trading.

Do I have what it takes? Am I disciplined enough? Can I sustain not only the interest in the subject, but the habits necessary to be consistently successful?

This journal can help me find that answer. I sincerely thank the others who have put themselves out in the "public eye" by writing their own journals. Thanks to Big Mike for putting together such a great site and attracting the people who post honest, high quality material. I've read many of them through futures.io (formerly BMT) and have been inspired and encouraged to write my own.

In some later posts, I plan to detail my trading goals and entry/exit method. Then I'll start a trade by trade analysis.

The journey begins. . .

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  #3 (permalink)
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Good luck with your journey and your trading.

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  #4 (permalink)
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Congrats on starting the journal. Looking forward to it.

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  #5 (permalink)
Washington DC
 
Experience: Beginner
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I didn't execute any trades today. I'm still a little jet lagged from the trip out west, so I decided to put rest ahead of trading and sleep in. Believe it or not, I actually consider the decision a small win for me. In the past, I would have felt some guilt for the late wake-up, which would have led to an antsy feeling about missing some opportunities. It would have manifested itself as an anxious feeling, which could force me into some low-probability trades the next morning.

Since I don't have any trades to post, I'll go over my trading goals. . .

Short term (now): Trade well. Trade consistently.
Medium term (6-12 mos): Show consistent profit
Long term (years away): Financial independence, financial stability, comfortable lifestyle, ample time spent with family, a job in the trading industry.

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  #6 (permalink)
Washington DC
 
Experience: Beginner
Platform: OEC
Trading: 6E
 
Posts: 40 since Sep 2010
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Uggghh. Today was my second-worst trading day since I began trading the 6E in March. It was a bad day in terms of my bottom line, but it also wasn't good due to the mistakes I made. I took seven trades. Five losers and two winners. And the winners were small, while a few of the losers hit my maximum loss point.

Day's result: -63 ticks

In hindsight, I fought the trend from the start. That was my biggest mistake. I also entered a trade in the 5-6am (eastern time) timeframe, which is against my own rules. (My past results show poor performance in this time range, therefore I created a rule to avoid it altogether.) Too many of the trades today were based on hunches, without well-formed patterns or volume indication.

I'd like to post my chart, however, I can't get the Open E-Cry chart to display my filled orders. I'll work look online for the manuals.

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  #7 (permalink)
annapolis USA
 
Experience: Intermediate
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please tell me that was a sim loss and not real money?

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  #8 (permalink)
Washington DC
 
Experience: Beginner
Platform: OEC
Trading: 6E
 
Posts: 40 since Sep 2010
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Unfortunately, my trade from July 6th was indeed real money. I've sim traded in the past, but it never mimicked real trading enough for me. I found myself making unrealistic trades on sim; trades I wouldn't make in real life. It became a game, and built poor habits. I still sim trade when I'm testing a new method, then I pilot the method with a minimum number of contracts for a while to build confidence before I go live with real money. The July 6th trades were real money, and real losses.

Years ago, I had a little league coach who liked the quote, "The way you practice is the way you play." That saying helped me understand the importance of dress rehearsals, of preparing and practicing under an environment and conditions that are as real and game-like as possible.

As I did some post-trading analysis while on my commute this morning, I found that I'm still pulling the trigger too early on some trades. It's a form of impatience that could lead to some exciting and profitable trades, but in the long run probably leads to a slow (or not so slow) and consistent draw-down. Since I'm on the topic of sports, I remembered Steve Young, the superbowl quarterback from the San Francisco Forty Niners of the 1990s. When he filled in for the injured Joe Montana, he was still learning his craft. He didn't have confidence in his offensive line, and tended to take off running toward the end zone after taking the hike. It's was always exciting to watch him play, because he often ended up with a 15+ yard running gain, but at the same time, it was a high-risk, high-reward gamble.

Sports commentators would editorialize on Steve Young's impatience, saying that he needs to learn how to calm down and let the play develop. He needed to learn how to play quarterback, to increase his options, to wait for Jerry Rice to get open downfield and shoot for a 30-yard touchdown instead of gamble on a 15-yard quarterback scramble. It didn't take him long to learn that lesson, and he ended up having a great career with a championship ring of his own, earned as a starter.

I need to learn that lesson. Let the pattern develop, don't enter a trade too early, be patient, remove the fear of missing out on a possible big score. I need to take only the trades that I'd be happy to take again in hindsight.

Today's trading was better than yesterday's, but still an overall loser.

Day's result: -1 tick

Four trades. Two basically broke even, one was a full loser, and the last was good, although I didn't get the pullback I wanted and didn't get to scale-in with more contracts. I also left a lot of ticks on the table with that last trade. I needed to get to work, and feel most comfortable being completely flat when I leave the house. I might want to think about instituting a trailing stop on some trades, but right now I need to focus on the basics.

Don't fight the trend. Let patterns develop before entering a trade.

I don't trade on Fridays, so my account will have to sit on the sidelines until next week.

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  #9 (permalink)
New Zealand
 
 
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duncanhoo View Post
please tell me that was a sim loss and not real money?

I believe sim trading and practice real trading both have their place for different people with different mindsets and different circumstances.

I see sim trading as a 0 risk endeavour, so therefore personally, I often do not have the same emotional response when I am sim trading.

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  #10 (permalink)
Washington DC
 
Experience: Beginner
Platform: OEC
Trading: 6E
 
Posts: 40 since Sep 2010
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I did some good trading and bad trading today. The good trading was boring, as I've heard/read it should be when it's good. After about 45 minutes of good trading, I ate breakfast, checked email, packed my lunch for my workday, checked the weather. . . and got bored. Then came some bad trading. Again, I fought the trend and paid the price.

I'll add some things to my signature line to help me remember some things. I've also added these things-to-remember on my computer's desktop. But I need to examine some things:

1. I might be too interested in 'action', therefore I take low-percentage gambles even when I know the probability of success is low.
2. I think I have an interest/urge to being right on things that are unlikely.

To address the first point, I need to understand that my trading method only produces a few (maybe 3) good signals per week, and I shouldn't overtrade this system. The second point is interesting; something I need to contemplate. I like seeing the underdog win. Is this spilling over into my trading psychology and am I taking chances, hoping that a low probability pattern leads to a big score?

Things for me to ponder.

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  #11 (permalink)
Washington DC
 
Experience: Beginner
Platform: OEC
Trading: 6E
 
Posts: 40 since Sep 2010
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I felt like today's trading was executed fairly well. I took only two trades; one winner, one loser.

What I especially liked about my trading today was a certain calmness about it. I had less of that certain "urge to be in the action." My efforts to constantly ask myself, "Am I trading well?" certainly helped. It reminded me of my trading plan rules, and encouraged me to calm down. I'm going to do my best to remember how I felt during the good trading morning. Heart rate was steady, no tension in shoulders and neck, eyes not straining at the monitor. Emotionally, I wasn't expecting a big win, didn't feel like I had to be in the market, and was generally enjoying the moments of trading.

One of my many goals will be to replicate this sense of bliss during my trading day.

By the way, I plan to report on my wins/losses once or twice each month. I feel like the daily tally focuses me on the wrong things-- If I start thinking about how many ticks I've won or lost, I tend to overtrade as I dwell on my P/L.

I must constantly ask myself: Am I trading well? Am I following my rules?
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  #12 (permalink)
Washington DC
 
Experience: Beginner
Platform: OEC
Trading: 6E
 
Posts: 40 since Sep 2010
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Today, I may have executed the best trading since starting this journal. I was patient, exercised good risk management, and followed my trading rules. I spent almost two full hours at it, watching bar-by-bar for good setups. There were a couple of them, however, no trades were taken.

Zero trades. If I had entered trades, I would have had winners, but it would have come at a price. I'm practicing how to consistently execute my trades according to plan, therefore, an undisciplined entry, despite being a winner, is still an incorrect entry. I'll admit-- I was a little frustrated at seeing patterns play out favorably without being onboard to reap the benefits. But then again-- I must only take trades that I would be happy and proud to report.

I'm separating the concepts of having wins from adherence to my rules. It might require some psychological conditioning and fine-tuning, but I'm committed to making it happen.

I must constantly ask myself: Am I trading well? Am I following my rules?
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  #13 (permalink)
Washington DC
 
Experience: Beginner
Platform: OEC
Trading: 6E
 
Posts: 40 since Sep 2010
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After three weeks of journaling, here's the status report:

July 4-8: -64 ticks
July 11-15: -179 ticks
July 18-22: +35 ticks

Honestly, it's not a pretty sight to look back at the losses. However, I'm very encouraged by this last week. There was a major difference between the actions of the first two weeks versus the third week. I'm adhering to my rules much better, but I have also started to think of the market a little differently. It's difficult to explain, but I'm watching the price action of each candle and thinking about what is going on between the buyers and sellers.

A better explanation might be that I'm imagining the entire 6E futures market to be in a trading pit. This might help me to visualize the action-- to understand the dynamics of what is happening between the bulls and the bears. If this ends up helping me next week, I'll explain in more detail.

Looking forward to next week!

I must constantly ask myself: Am I trading well? Am I following my rules?
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  #14 (permalink)
Miami FL USA
 
Experience: Advanced
Platform: Ensign 10, NT7 DOM
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@dc618

I have many questions, I figure you may answer them in time but I thought I might post a few to provoke some thought. I'm assuming you're on the path to become a price action trader, that's great and I wish you well. In your last post you said, " I'm watching the price action of each candle and thinking about what is going on between the buyers and sellers." I'm not familiar with the OEC Platform and have no idea what data provider you're using, but I would caution you of believing what you're seeing (inside a bar) if your data is bundled or filtered. I also noticed the time of day you're trading and was wondering what (if any) news feeds or economic report alerts you may be using. Lastly (for now) I was hoping you could share your trading setup with us, do you use 1 computer, how many monitors and how many charts do you normally view (daily, 4hr, 5mn ..e.g.) when preparing to enter a position.

Learning to trade can get very expensive very fast. Sure we all want to make alot of money but while learning if simulated trading doesn't stir your emotions you may wish to take a look at the 6E mini or micro contracts.

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  #15 (permalink)
Washington DC
 
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Posts: 40 since Sep 2010
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@Cashish

Thanks for your post. I contacted my broker about the data provider. I was told that the data is provided by the clearing firm. So I asked the clearing firm about bundled/filtered data, and they told me that the data was "direct from exchange, no third party used." So... I'm not sure if that answered my question, but at the same time, I don't know if I phrased my question to them in a specific enough manner. Although I'm not concerned (yet) about my data provider, what type of questions should I be asking them about the data service? A quick google search on "unbundled" and "filtered" data describes of what goes on, but since I'm a newbie, I would like to know the impacts of this type of data and what I should do about it.

Here are some details about my trading setup:
I trade with one computer and a single monitor. I've thought about plugging into at least a dual monitor setup, since I'm only working with one trading instrument (6e), I like the simplicity of a single screen. When I'm trading during my preferred 3-5am (USA Eastern time) hours, the trading platform is running, and I enter my trades through a DOM window.

I'll play with risk/reward calculations in an Excel spreadsheet which I toggle back and forth to. On the excel sheet, I also log my trades. Some of the data I capture is the time of each entry and exit, the prices, notes and thoughts on each trade, etc. The trading platform would give me most of this data, but I like to log it into my excel sheet for some added analytic capability, such as looking at charts of my wins/losses, number of trades per day, etc, all while mapping against the notes of why I entered the trade in the first place.

As for news items and other news releases during my trading time, I try to avoid them. I don't like the extreme volatility that might come with a news release, and I do my best to avoid entering a position within 10-15 minutes of that news release. If I'm already in a position and scheduled news is imminent, I typically exit the position, or scale back the sizing.

My chart timeframe is the 5-min. I start off the morning by looking at the 15-min and the 1-hr, but I only look at them once to search for any obvious S/R lines. After I take note of those levels, I don't revisit the longer timeframes, focusing only on the 5-min chart.

I hope this answers some of the questions. Feel free to ask any more. As I continue to write in the journal, I'll further explain my trading method. It has now been a full trading month with a journal. It's been both educational and fun!

I must constantly ask myself: Am I trading well? Am I following my rules?
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  #16 (permalink)
Washington DC
 
Experience: Beginner
Platform: OEC
Trading: 6E
 
Posts: 40 since Sep 2010
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After a full month of the journal, here's a week-by-week look at the numbers:

July 4-8: -64 ticks
July 11-15: -179 ticks
July 18-22: +35 ticks
July 25-29: +76 ticks

The bad news is that I was down a rather large sum of ticks. The good news is that I'm trading a much better than the first two weeks of July. I still working on sticking to my rules-- I wouldn't have had a losing day today (Friday) if I had stuck to my rule of not trading on Friday! But still, if I managed to break the no-trading-Fridays rule, I would have been better off if I stuck to my no trades past 5:00 am rule.

I'm looking forward to August, encouraged by my calmer trading approach. For me, a relaxed approach is more effective. It allows me to stick to my rules better, and eases the itchy trigger finger.

I must constantly ask myself: Am I trading well? Am I following my rules?
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  #17 (permalink)
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Keep it up!



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  #18 (permalink)
Miami FL USA
 
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dc618

Nice job, two plus weeks in a row, well done.

"Rather large" sounds a bit scary, and you went against a couple rules. A funny thing about trading is, there's no one around to whack our knuckles with a ruler when we reach for the mouse with every intention to negate our best laid plans and through our rules out the window. Believe me, it will behoove you to stay focused on the rules you've set for yourself and respect them. Following a clearly defined set of rules is probably the most valuable skill you will ever learn in this business. Right now, at the beginning of your trading experience is the time to realize how important those rules will be to you and internalize them deep into your psyche.

My question about data came from your comment, ".... what is going on between the buyers and sellers" and the two charts you've posted. I noticed you had a volume study on both charts, you mentioned "ticks" a few times in your posts and your status report also referenced "ticks." Aggregated or bundled data is not tick by tick data. There are pros and cons to aggregation but it can never be, TRUE tick data. This data is suitable for some indicators and studies and not for others. Say I'm trying to see exactly how many trades occurred at the bid vs the offer in the last 5 minutes of trading the Sept, 6E, aggregated or bundled data is NOT effective. When ticks are bundled you'll never see true ticks down at the granular level. That said, minute charts work fine, it will make no difference in a time based chart of the same instrument.


Quoting 
dc618
As for news items and other news releases during my trading time, I try to avoid them.

Good, at this stage I think that's smart. It's kinda like a moth to flame, there is excellent opportunity but you have to be completely comfortable with the intense risk, even 10-15m can often times be to close.

Have a great weekend and again, Great job

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  #19 (permalink)
Washington DC
 
Experience: Beginner
Platform: OEC
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Posts: 40 since Sep 2010
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Today I witnessed a friend take a tremendous loss on an ES trade. It was painful for me to watch; I could only imagine how devastatingly sickening it was to him. I considered him and myself to be at similar points on the learning curve, however, after seeing his trade today, I will forcefully and intentionally move myself further along this curve. I must do this and do it now because there's no way I could ever afford to lose one-third of my account value on a single trade.

Here's my analysis of what went wrong with his trade:

1. Bias
My friend felt that the market at open would follow the upward trajectory as hinted by the pre-market. Congress had a deal on the debt ceiling, or so he thought.

2. Averaging down
I don't like doing this, but he did it. And he did it without knowing his final pain point, because he. . .

3. Moved, then removed his stops
By doing this, he allowed his losses to spiral out of control, to the point where his broker (or broker's software) reduced his position by half. My friend waited and hoped, but exited the other half with the same size loss.

I looked at my friend in stunned silence, not knowing what I could possibly say. It was if he lost a pet or even a family member. When he stated, "I'm glad these windows don't open", (he sits on the fifth floor of an office building), I could tell he was only half joking. At one point I couldn't look at him or the computer monitor, and just stared off at the Washington monument. The VP motorcade passed below us, on the way to the hill, where Joe would wrangle up the support needed to keep our nation from becoming the biggest deadbeat in recorded history.

The mood was surreal. At that moment, I decided something that I hope will become a major milestone in my trading journey. I will honor my rules.

Dreaming of the possibilities that a trading lifestyle might bring can be fun and entertaining. But the harsh realities of the risks are to be taken seriously. I once thought that trading could become my hobby. I now realize that trading should never be a hobby. Anything that involves this much risk is nothing to be trifled with. Several occupations involve levels of risk, but you don't hear of anyone being a "hobby firefighter, hobby hostage negotiator, or hobby missile silo operator. If a person is entrusted to do any of these jobs, he or she is a professional, someone who is trained to successfully execute a procedure in hostile conditions or environment.

One of my trading mantras: I execute my trades with flawless precision.

I must constantly ask myself: Am I trading well? Am I following my rules?
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  #20 (permalink)
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Has your friend never done this before?

I mean typically, this type of behavior is something that has occurred before and then if you are a good trader that learns from mistakes, you minimize its re-occurrence.

But in this case there are just too many mistakes all simultaneously going on, the bias, moving stops, averaging down... those are all mistakes made by rookies. We've all done them, but hopefully only in the very beginning of our trading careers.

I hope your friend has indeed learned his lesson. Time will tell.

Mike

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  #21 (permalink)
Washington DC
 
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My friend's trading was undisciplined and amateurish -- I had a talk with him about it this afternoon. It was more of an "intervention", and I told him that there were probably bigger problems at the root of it. He has managed to take what I believe was a large account and, through wild and undisciplined trading, shrink it by half or more.

Does anyone have suggestions on how to deal with a friend who displays this behavior? Gambler's Anonymous is not out of the question.

I must constantly ask myself: Am I trading well? Am I following my rules?
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  #22 (permalink)
desert CA
 
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Sorry to hear about your friend's loss. Fine comment about Biden's motorcade. Here's a similar situation from supposedly a veteran. I used to be subscribed to a private forum "traders-secret-library". There was this "member" who worked out his own method based totally on divergences and what he called "positive divergences" what others would call "hidden divergences". He used nothing but line charts with 4hr, 1hr, 15min, 5 min etc. all propped up. I paid a one time fee to enter his private club webinar which he invited fellow members to join, and which he does about 2-4 times a month for a "marathon" , straight 14 hour trading overnight as he's based in Australia. Trading mainly the GBP/USD.

Well, he would have some good trades. Then on a loser, which initially entering and when turning south, then turning south more, he would average up, then do it again, then do it again. so like ending up with 5 average up orders all the while cursing and huffing. He advised us "students" not to do what he was doing. Well the session was over. Then the next session the week after, he said he had waited 12 hours more but it finally got back in the black! He had this spreadsheet which showed he always gained winners and was "steadily" building up his account. And he claimed success after trading this way for about 6 months and reached his profit goal, which was something like 45k or so. But after having been to more than few sessions where he did this crazy averaging up multiple orders on a badly south going trade, I'm inclined to believe this was all bunk and maybe he was getting a salary at the paid forum site, just like all the instructors there who hosted live 2 hour webinars while they said they could make 60 pips/ticks a day. And since then, I never look at divergences alone for a trade, only in support with other reasons/indicators. I could be wrong and that member trader always made back to breakeven with that crazy averaging up strategy, but it's way too crazy for me to ever trade. Might as well trade on a daily position instead.

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  #23 (permalink)
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I would agree. I haven't seen a method where consistently averaging down was profitable in the long term. There might be some people who do it successfully, but those folks must be few and far between.

I must constantly ask myself: Am I trading well? Am I following my rules?
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dc618 View Post
"...... after seeing his trade today, I will forcefully and intentionally move myself further along this curve. I must do this and do it now because there's no way I could ever afford to lose one-third of my account value on a single trade."

At that moment, I decided something that I hope will become a major milestone in my trading journey. I will honor my rules.

Dreaming of the possibilities that a trading lifestyle might bring can be fun and entertaining. But the harsh realities of the risks are to be taken seriously. I once thought that trading could become my hobby. I now realize that trading should never be a hobby. Anything that involves this much risk is nothing to be trifled with. Several occupations involve levels of risk, but you don't hear of anyone being a "hobby firefighter, hobby hostage negotiator, or hobby missile silo operator. If a person is entrusted to do any of these jobs, he or she is a professional, someone who is trained to successfully execute a procedure in hostile conditions or environment.

Money is indeed a great motivator for changes in our trading, winning it and losing it. I think you've found a valuable gift in this experience. If your psychological makeup allows you to learn from another's mistakes then you are, IMO, further along this learning curve than you may give yourself credit for.

Honoring our rules is key. It's often said trading is a lonely business, I agree, just you and the price action,,,, no one else. If I can't trust myself to follow the rules I set forth, alone in the darkness of the early A.M., I'm doomed.

This last paragraph is probably the best paragraph I've ever read about trading, ever! If I wrote any more about it (your paragraph) I would fear minimizing the impact of your words.


dc618 View Post
I had a talk with him about it this afternoon. It was more of an "intervention", and I told him that there were probably bigger problems at the root of it.

A friend in need's a friend indeed. I believe your assessment of the "intervention" is absolutely correct, he is extremely fortunate to have you as a very close friend, and you him, as he displayed a willingness to honor your opinions. Having a trading buddy (or friend for that matter) bound by this level of trust and respect for each other is more valuable than any trading loss.


dc618 View Post
I haven't seen a method where consistently averaging down was profitable in the long term.

My intention is not to create a shit storm of controversy, so I'll try to choose my words wisely. As an example I'll use a long position, the reverse could be applied to a short position. I'm a technical trader, I trade a modest account which allows me to trade 4 6E contracts, rarely do I hold four positions, usually two. I have a system I've developed over the years and entries are based on the readings of several indicators. When my indicators signal a long position, it generates two numbers (price levels) where I place my limit orders to enter the market.

To keep this example simple, all my entries are dependent upon pullbacks into the range of the bar that when closed generated the signal to enter (signal bar). To clarify, assume a 15m bar with a range of 20 points (ticks) closes 5 pts off the high of the bar and generates a buy signal. At the open of the next 15m bar I have two entry points, the first entry point is at the Fibonacci 25% line of the signal bar, this would be 5 pts off the high of the signal bar. The second entry point is at the 50% Fibonacci retracement line or 10pts off the high of the signal bar.

This is an important note, and I hope it is unequivocally understood. When the entry signals are generated the price level for stop loss orders are also revealed, that price level is the low of the signal bar.

This is a simple explanation of a complicated subject, but three factors are addressed. One an entry signal, two a second entry signal (if adding to the position is desired) and three a hard stop if the trade fails. The hard stop, in relation to the entry/ies is the most important price level. In the example above if trading the 6E a trader would have 25pts of risk on this trade trading a two lot. As I said it's a complicated subject, an endless discussion of what ifs could arise, I'm not going there. I just wanted to walk the fine line between adding to a position at a more favorable price level, and averaging up/down. IMO, traders, all traders, must be absolutely comfortable with the total risk of every trade, no exceptions.

To close, I agree with your quote.

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Cashish -- Thanks for the post! Your comments give me the sense that I might be on the right track in my trading education.

It's funny you mention the "averaging down" piece-- When I discussed it with my friend, said that he realized that the strategy is risky, but then said to me, "But you do it (average up/down) with your method, don't you?". I thought about it, and yes, in a way, I do average down. However, I do it with a strict stop that I don't move.

I'll explain the details of my trading methods in future posts. I only have two-- a breakout method and a reversal method. As for now, I've posted my chart from today.

I must constantly ask myself: Am I trading well? Am I following my rules?
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  #26 (permalink)
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I looked over some trading statistics and I make a new realization: I'm overtrading.

I did a crude visual simulation using the last four weeks of charts and found that my system should provide about three trading setups per week. I've been taking closer to three per day, and most have been losers. I believe there might be correlation between the number of trades I take and the amount of ticks in the red.

I did better today writing down my trade setup rules, looking for setups, and passing on the ones that didn't fit my trade criteria.

I must constantly ask myself: Am I trading well? Am I following my rules?
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Over the first two weeks of August, I'm in the red:

8/1-8/4: +50 ticks
8/8-8/11: -68 ticks

30 trades, 12 winners, 18 losers


I really think I'm overtrading, because when I review older charts, hindsight tells me that I should have avoided many of the trades that I did. I never thought I was overtrading until this week, when I looked over some trade data to see an average of 4-5 trades per day. Given my trade plan and trading time window, I really should be taking about 1-2 trades per day.

A bar graph of the number of ticks per trade is attached.

I must constantly ask myself: Am I trading well? Am I following my rules?
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dc618 View Post
I really think I'm overtrading

Some advice on helping determine if you are overtrading:

1. How many times did you re-enter the market very shortly after getting out, or getting stopped?
2. Of those times where you re-entered the market soon, were you trading in the same direction as the prior trade, or did you reverse?

Good job on the journal.



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Big Mike View Post
1. How many times did you re-enter the market very shortly after getting out, or getting stopped?

I looked over some of my past trades and found that many times I indeed re-entered the market very shortly after getting stopped out. Is this a sign of revenge trading? I have observed that the days where I tend to re-enter soon after a stop-out tend to be larger losing days.


Big Mike View Post
2. Of those times where you re-entered the market soon, were you trading in the same direction as the prior trade, or did you reverse?

Almost always, I was trading in the same direction after re-entering. What does this typically indicate? Is this a flaw in my thinking? Is it some kind of hidden psychological need to be "right"?

I must constantly ask myself: Am I trading well? Am I following my rules?
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Sounds like you are not using stops properly, or you are just massively overtrading.

How do you calculate your stop? Why do you put your stop where you do?

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  #31 (permalink)
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To combat what might be overtrading, I've decided to write out some my trade entry/exit criteria. I look for two types of setups-- breakouts and reversals:


BREAKOUT TRADES
Major volume spike initiates this setup.
Volume must be well above Average Volume, AND above 5,000. (if this is not met, then a trade could still form (possibly) as a REVERSAL, upon a pullback)

Breakout bar must be relatively long, preferably >20 ticks and the day’s longest
• Do NOT use the 3:00am, 3:05am bar as a breakout bar.

Entry and exit:
Enter 2 lots with 9-tick stops upon close of the spike bar. Enter a third lot with 7-tick stop upon a retracement to 50% of breakout bar.
Profit point on first lot after 10 ticks. Second and third profit points via Fibonacci levels.


REVERSAL TRADES
Volume spike initiates this setup.
Look for volume accumulation.
Volume must be at least 50%, preferably at least 70% of highest spike. Volume must be at least as high as Average Volume.

• For the 3-bar (or 2-bar), the volume of the 3rd bar must be at least 80% of the previous bar.

Entry and exit:
Set entries for with 12, 9, 7, and 4 ticks from low point, less one tick. Exit first lot after 10 ticks, exit remaining lots on Fibonacci levels.



Today's volume was a little slow. . . I'll probably stay away from Mondays because of this. However, there was one trade (see today's chart) that almost met my entry criteria. But it didn't fit the rules, so no entry was triggered.

I must constantly ask myself: Am I trading well? Am I following my rules?
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  #32 (permalink)
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Now that I've defined my trade setups, I can take better advantage of my journal. Two screenshots below, one for Tuesday, August 16 (losing day), and the one for today (winning day), August 17. I'm working on adhering to my rules.

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  #33 (permalink)
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Thanks DC for the entry/exit criteria, it helps us "lurkers" understand what you're trading style is all about. I think finding that niche, style or method that comfortably fits our individual personalities can be an exhausting and sometimes frustrating experience. I was somewhat surprised about the, ".... new realization: I'm overtrading" statement. And then again not. I believe there are two ways to overtrade, (1) by the frequency of trades we make, and (2) by size of trades we make, relative to the equity in our trading account.

Big Mike offered wise counsel on helping determine if you are overtrading. You've only posted details to a few trades, I noticed and agree with your statement, "Almost always, I was trading in the same direction after re-entering." "What does this typically indicate?" You may be tempted to believe you position your stops to close to your entry, IMO, it indicates a trader has a problem with his/her entry technique as a whole. August 4, 10,& 17th all show re-entries in the same direction as the initial entry after being stopped out. I've also noticed you tend to increase the size of your trades as the session progresses. I have no problem with adding to a winning trade but as an example look at your August 4th trades. I may be totally wrong but it appears you loaded the boat with a 4 lot, quickly bailed on 3 of them, and held the 4th "to see what might happen." That last trade has the smell of a revenge trade, comming off a losing long, entering with more size and quickly reducing the size of the position as prices pause and rotate, only you know the answer. I believe Mike's comments on the use and placement of stops should provide you with direction for further analysis of your trades.

I assume you have hard statistics from countless back tested trades to confirm your entry strategies, if not I would caution you of being misled by the often occurring paradoxical events of the market. I'm also interested in how you calculate the average volume in real time, I see no study in your volume panel. You seem to place precedence on Fibonacci levels for your exits, I use them myself, but mostly to help bracket or define a range bound market. If I look at multiple market moves and notice confluence levels where multiple Fibonacci levels cluster together I consider these high probability objectives. During your August 16 session (3am to 5am est) the market bounced off the low 1.4360s (the 50% retracement line of Monday's 200 pt move) three times and offered two nice +/-30pt profit trades to anyone willing to buy the 50% level and sell above the .382 level, in a 40 point range bound market (I attached a chart with a crude description). Now, I understand this style of trading doesn't fit your criteria and in all reality if you were to adhere to your rules you would have to stand aside during the entire session. However, as a trader progresses he/she may wish to develop different tactics for different market conditions. I firmly believe if a new trader can identify one or two high probability trades, and develop the discipline to wait for the setups to materialize, enter without hesitation, exit the trades quickly if the analysis is flawed and stay in the winning trades to their fruition, he/she will hold the ability to become a consistently profitable trader.

What's up with the Y axis of your charts, sometimes the scale is 5,6,7 or 9 points, that would drive me crazy And how about moving the decimal point on prices over a couple of spaces And what about that blue line (ma ?), I can't dial that one in , what significance do place on it?

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  #34 (permalink)
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I've pondered my overtrading issue, taking the weekend to delve deeper into the "why" of this problem. In my analysis, my overtrading is due to a number of factors, to include a need to be "in the game", an ill-timed desire to fight back, and a short term focus. Let's look at each of these separately.

I've always been slightly impatient. In times of uncertainty, I tend to want to shoot first and ask questions later. My first job out of college was in sales-- subprime wholesale mortgage. I knew nothing about the business out of school, and before learning about the products, I wanted to be out in the field. I tried it-- just three months later, I felt that it wasn't for me and found a new job. Number of loans sold - zero. The same brash attitude during uncertainty manifests itself when playing a new board game for the first time. I'd rather start playing and learn the rules as I go. Luckily, I've either learned some valuable lessons about patience in the past few years, or I simply find the risk of trading too great to dive in quickly with large size. I spent a year on the forex market, all the while backtesting my entry/exit criteria over a two-year period.

Another observation of myself is a desire to fight back after taking a punch. As a young boy, my father instilled in me the idea of picking myself up after getting knocked down. In some parts of life, this is a great quality to have. It can keep someone from getting discouraged, helping them to try harder to succeed. However, in my trading, it's a sign of my lack of emotional control. Simply put, my quick trade re-entrys have been a sign of revenge trading. I actually like the part about me that doesn't give up easily, but I need to work on the timing of it. Being able to get back in the game after a trade stopout is important. One doesn't want to be gripped by fear after a financial loss. However, I must separate revenge from the desire to win.

Something that might help tie these lessons together and help me to grow as a trader is my focus on timeframe. In this sense, I'm not talking about 5-minute or 15-minute, but I'm talking about the long term focus of trading in general. I've caught myself thinking about my next winning trade, and how nice it would be to have that winner in the next few minutes. The daydreaming takes me away from my focus on my trading rules, the focus on execution. I can take a lesson from Stephen Covey and begin with the end in mind. My focus needs to be long term and wide in scope. One, two, or five years down the line, I want to look back and find out if I was doing the right thing. Whether I won on some trades or lost on some trades will not bring me satisfaction. In the longer term, I will want to know whether I traded well. The only part of trading within the scope of my control is whether I followed my rules or not.

Changing my personality traits is difficult, but it is possible. I'm not sure if I need to change them to be a successful trader, however, I'm sure they will evolve over time. For now, I'm going to put some efforts toward working with my current set of traits. To do this, I'll need to change some perspectives just a little bit. I've been working on sticking to my rules, primarily focusing on my trade entry rules. I must let that be my reward-- the consistent application of these rules over a long period should be my concept of winning right now.

I must constantly ask myself: Am I trading well? Am I following my rules?
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  #35 (permalink)
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DC if I bundle, "...... a need to be "in the game" and, an ill-timed desire to fight back" I can easily diagnose you with a very old and very common traders ailment not spoken of very often these days called, "tick fever." It's true, the term was coined many years ago when live quotes first started to become available. The tick, tick, tick of price changes has a seductive quality that calls traders in (I'd assume brokers like that .... maybe that's why we don't hear the term anymore). Keep this statement in mind, "......I'll need to change some perspectives just a little bit." The cure consists of shifting your actions from searching for opportunity (a need to be "in the game") to learning how to recognize identifiable trade-able opportunities (e.g. true entry signals) as they present themselves. Secondly, if you do incur a loss don't look for a quick fix, there are no quick and easy profits, stay on the sidelines and re-access the market.

"My focus needs to be long term and wide in scope," agreed, this is a fast paced arena and it's easy to get caught up in the urgency of the moment. IMO, by focusing on developing good disciplined trading techniques along with money management, the profits take care of themselves and your efforts will pay off longer term. Trading could be the most psychologically demanding vocation a person will ever willingly pursue. I signed up to make money, but in return I got a life of perpetual self-evaluation. I, like many traders have read dozens of trading books, many on the subject of trading psychology. In one of the first books I read (strangely not on the subject of psychology) there was a line that basically said, you cannot understand what I'm talking about, until, you understand what I'm talking about. Of course it took several years and several re-reads before I understood what the author was actually talking about.

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  #36 (permalink)
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To answer a few questions about my trading screen:

The platform is set to auto-scale, so the y-axis is dependent on the range. The decimal point thing bothered me for a while, too. But I guess the platform just does that (e.g. instead of showing the 6E price as "1.4452", it shows it as "144.52". The blue line is the 200-period EMA. I like to look for cases where it coincides with a Fibonacci level and might see the confluence as a possible support/resistance level. My "average volume" is a not a real indicator-- just a quick mental determination of the average over the chart's timeframe.

As for "tick fever"-- yeah I must have it. When I'm in a trade or after a stop out, my focus tends to shift from a calm, longer term view to a micro, "wanna get it back" view. Yes, it is revenge mentality.

I've written down a short trading mantra/prayer that I read every morning. So far it has helped, and I need to be consistent with it to build a long term habit of sticking to my trade plan. There is an excellent new thread about a very similar topic here:



I traded well this week by following my rules. And the tick count was well in the green. The east coast earthquake left me without my trading spreadsheet/diary due to a building closure, but I hope to post my charts from Wednesday and Thursday soon.

I must constantly ask myself: Am I trading well? Am I following my rules?
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I've traded well for the week. Here are the markups from 8/24 and 8/25.

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DC
I hope all is well with you and those you care for. Situations like this massive storm have a way of getting our attention quickly and reminding us what's really important in life, our families, our safety and our fellow man.

We hope to hear from you soon.

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  #39 (permalink)
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These recent events do indeed show us what is important in life. The Washington DC area was lucky—no reports of major damage from the earthquake or hurricane. Other areas did incur some damage or flooding. My heart goes out to those who dealt with or are continuing to deal with any disaster-related tragedy.

After the earthquake, I enjoyed a day off with my family while building inspectors verified the safety of the structures around the Capital. Those moments with the wife and kids remind us of what we’re ultimately doing work for—to support our families, to contribute to our work community, to serve in whatever capacity our skills and motivation allow us.

The natural disasters of last week coincided with my son’s third birthday. The timing made for some hectic planning, as the number of available hours was eaten up by disaster reaction/prevention. The busy schedule led me to wonder—Is there a lesson in this? I’ve been pondering this for the last few days and I believe I’ve found what these events have been trying to teach me.

Let’s do a flashback on the week for context:
Tuesday- earthquake. In the middle of a contentious meeting. I was one of two people in the room of about 15 who had lived in California and had quake experience. The room starts shaking, and I revert to my kindergarten training of “duck-and-cover”. Shaking stops, I tell everyone to evacuate, take the stairs, watch for burst pipes/gas lines, report to their evac area. People calmly walk the seven flights down and out the building.

Saturday – Hurricane. Stocked up on water, baby food, other groceries two days before the storm. Moved in all patio furniture and other things that could be “projectiles” in high wind. Gassed up the car to be used as a generator (with the power inverter we have). Storm rolls in, rolls out. No damage. But was prepared for much worse.

Sunday—Birthday party. Night before, we ran through the planned activities, timing of pizza delivery, cake cutting, etc. Did walk-through rehearsal to catch possible planning snafus.
The end result of each of these things turned out well. The people I know are safe, and my son had “the best birthday party, ever”.

What are the commonalities in these events? After some thought, it’s simple—preparation and practice.

I don’t consider myself a genius. My whole life, I’ve always been able to spot smarter people, whose innate talent put them a cut above the rest. They’ve been athletes, computer programmers, math whizzes, etc. Those folks have the ability to excel in their field with little to no practice and zero preparation, yet they are experts. I’m not that guy.

But I’m no slouch, either. My game is completely dependent on practice and rehearsal. And with some experience, I can excel. I’ve had this trade journal for two months now, and so far, the thread has been living up to its name. I’ve made a tremendous number of self discoveries in the past 60 days due to the stresses of the trading education and the vicissitudes of my account. I’ve found that creating a rule-based trade plan is actually the easy part—adhering to them is the challenge. The good news is that I’m down less than 5% from the start of this journal. Not too much damage. But if I strip out the days where I didn’t adhere to my rules, my account would reflect a positive delta.

In my next post, I’ll do a more structured analysis. I’m excited – I think I’m onto something about myself, and how I can practice being a better trader.

I must constantly ask myself: Am I trading well? Am I following my rules?
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The people I know are safe, and my son had “the best birthday party, ever”.

That's great DC, well done, it's good to hear from you. I urge you to maintain your perspective and priorities, keep trading a part of your life, don't let it become your life. Here's a book that doesn't get much "forum air time," it's an easy read and I believe most any trader will find something of value within its text to augment the perspectives and priorities we as individuals bring to the trading experience.

Amazon.com: Trade With Passion and Purpose: Spiritual, Psychological and Philosophical Keys to Becoming a Top Trader (Wiley Trading) (9780470039083): Mark Whistler: Books

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Cashish,

Thanks for the book recommendation. I'm a fairly frugal guy, but there are two things I'm not afraid to spend money on: 1. Healthy foods, 2. Books.

I'm in the middle of "Mastery" by George Leonard right now. It's a short read, under 200 pages, and in my current stage of learning, it is extremely powerful. The book is teaching me to slow down, to enjoy the journey, to allow the act of practice to be its own reward.


Here's my month-end August week-by-week tick count:
8/1 - 8/5: +50
8/8 - 8/12: -68
8/15 - 8/19: +19
8/22 - 8/26: +132
8/29 - 8/31: -99

On paper, it doesn't look so bad. These numbers don't take into account commissions, so overall for the month I actually ended in the red. Looking deeper, 8 winning days and 6 losing days. Three of those losing days totalled -169 ticks. I believe it is those types of days which I need to analyze in depth. I hypothesize that there a small number of days per month where I have fallen into an undisciplined, tick-fever driven frenzy which end up killing my monthly profit, or in some cases, put me into the red for the month.

I am developing some mechanisms to determine and pinpoint these stages in the moment, and snap myself out of such mental states. Today was the first day of implementation. I traded well today, but ended up with a small loss.

I must constantly ask myself: Am I trading well? Am I following my rules?
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I haven't posted in my journal lately, however, I've still been actively trading. In the month of September, I have started to look at why I consistently break my trading rules. Looking through my trade logs has been a humbling experience, and although I knew that psychology played a big factor in trading, I still underestimated it's impact.

I'm comfortable with my trading rules, they were developed in a logical way, backtested, and forward tested in the forex environment. Over the longer term, they work. But when I took the method to the futures currency market, things did not perform as well. I figured that the month of July was an anomaly. But when August didn't work out so well, I forced myself to take a hard look at the data.

Then a problem surfaced. The data could not be trusted because I had broken my rules too often. There was no way to determine the efficacy of the system when the system itself wasn't followed. Why couldn't I follow the trade rules?
This led me to narrow my focus. In September, I've put great emphasis in measuring my ability to follow the rules, and decreased my focus on my P/L.Two tools I developed were my emotion log and green/red calendar.

Emotion Log
I made an assumption that I do not trade well (don't follow my rules) in an anxious emotional state. I decided to start noting my emotion every 5 minutes during my trade hours. The first week of data was eye opening. There were periods of "anxious", "anxious to get in the game", "don't want to be left out", "antsy", etc. These periods outnumbered the times I was "calm", or "observant."

Green/Red Calendar
For this month, I've narrowed my view of trading success. It's simple-- if I follow my rules, then I mark the day as Green. If not, then it's Red. Please note, this is not a measure of how many ticks I've captured, it is simply a determination of rule-following. So far, for September, I've broken my rules three times. The rest of the month, I've done a good job of following them.

Tracking this data in this manner has already produced some better results. I've taken 18 trades so far this month. In July and August, I took 56 and 59 trades, respectively. My overtrading problem could possibly be managed with the above tools.

Again, three weeks is a small sample size when it comes to the implementation and testing of these tools, but I'm liking what I'm seeing. And it has tremendously reduced my stress levels.

I must constantly ask myself: Am I trading well? Am I following my rules?
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dc618 View Post
I have started to look at why I consistently break my trading rules.

I'm comfortable with my trading rules, they were developed in a logical way,
Over the longer term, they work.


The data could not be trusted because I had broken my rules too often.
There was no way to determine the efficacy of the system when the system itself wasn't followed.
Why couldn't I follow the trade rules?

Two tools I developed were my emotion log and green/red calendar.

It's great to have you back DC, sure seems like you have your finger directly on the pulse of your trading. I like the emotion log and green/red calendar, especially the 50+ trades to -20 trades, this is huge, good job. I like the thought of starving brokers . Also the fact you have "tremendously" reduced your stress levels, this alone should pay big dividends going forward.

You seem to be a smart guy, so you've probably already figured out everything I'm about to say, so consider the following a simple reminder.

Why couldn't I follow the trade rules?
The fact is you could, but for some reason you chose not to.

I'm comfortable with my trading rules, they were developed in a logical way, Over the longer term, they work.
You know this, you've done the work of trading and developed a system that has proven to you over the long run you will be profitable. So why is it so easy to break the rules and throw the plan out the window? Don't feel like an orphan my friend you are not alone, click any journal on any forum and I'll bet within a page or two you'll be saying to yourself, "that sounds like Me." The market has many quirks to it, it often rewards us for NOT following our plans and then penalizes us when we DO follow the plan, go figure. I hope you know of what I speak. I believe the answer lies in an uncompromising commitment to the discipline needed to "stay on the reservation" and stay within the boundaries of our trading plans, win, lose or draw. My definition of discipline is, the ability to absorb pain, whether it's the pain of not getting a trading signal prior to a nice breakout and having to sit by and watch the "could have been" profits add up or the pain of taking 3 or 4 nice trading signals in a row and watching them trigger your full stop. But IF we're committed to following our PROVEN trading plan this is exactly what we must do. If not, then as you stated, "There was no way to determine the efficacy of the system when the system itself wasn't followed."

Truth is DC you can follow your trading rules, the HOW is the WHY.

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Here's how my September ended up. . .

9/1 - 9/2: +20 ticks
9/5 - 9/9: -66 ticks
9/12 - 9/16: +88 ticks
9/19 - 9/23: +63 ticks
9/26 - 9/30: -18 ticks

September total: +87 ticks

The tick-count wasn't high, but September felt different, in a positive way. My learning efforts focused on psychology-- my failure to follow my own trading. The analysis led to the development two major tools, both psyche-related (see one of the previous posts).

The major positives on the psychology front were:
1) Clearer idea of when to execute
2) Reduced stress level
3) I didn't lose money

I'm looking forward to October, with a goal to execute better, trade effortlessly, and still NOT worry about the tick-count.

I must constantly ask myself: Am I trading well? Am I following my rules?
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It was a frustrating month. The most frustrating since I started this journal. The reason? I'm still dealing with instances of total breakdown in discipline. It happened once in October, where I was consistently wrong on the market's direction, but kept trying to go against it. The result was a one-day, total loss of 76 ticks.

The rest of the month wasn't as bad, but I didn't have any "extra-base hits". Definitely no homers this month.

Here's the week-by-week:
October 3-7: +38 ticks
October 10-14: -72 ticks
October 17-21: +17 ticks
October 24-28: -6 ticks

October total: -23 ticks
42 trades

Too many trades, a loss of discipline on one really bad day. It's not my worst performance, but as I learn more about trading, I'm starting to clearly see my errors.

Next month, I'm going to try and run through a pre-game mental preparation routine before each trading session. I've found that I'm too easily hypnotized by the movement of the market. It seems to draw me in, to lull me into a state of greed, which in-turn forces me to take trades with a low percentage of success. I'd like to be at a stage where I can unconsciously execute my plan, but I guess I need to start with a conscious routine.

I must constantly ask myself: Am I trading well? Am I following my rules?
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@dc618

How about a half-time report this month, are you still trading between 3-5am for the most part, how'd you do with the "global" time change, OK I hope. I know you're trading around family/job obligations but I've found if I take my seat for a 2am (East Coast) start instead of 3am I usually have an extra opportunity or two, you may benefit from that, and then catch a cat nap before your normal day begins (if you regulate your caffeine intake ).

A chart would be nice, anything new there, and are you still throwing around those 3&4 lots, you may be able to reduce your stress a bit by sticking with 1 or 2 for awhile. I have days with good opportunities (good days) and days with poor/questionable opportunities. If I stay focused in reality when trade-able opportunities are scarce I can realize, "this opportunity is questionable" then, by applying strict money management rules, I can accept my loss and come back tomorrow. My trading is limited to a few hours each day (2-6am), and if I hit a profit of +/- $X I quit, so sometimes I'm done by 4am. Sure, I know every trade I "left behind" I would have initiated with a perfect entry and closed with maximum profit with a perfect exit, but what the hell.

You may enjoy this, if you haven't seen it.

Video: Mind Over Money | Watch NOVA Online | PBS Video

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I didn't trade last week, and I haven't had time to even look at the data behind the first week of November. Here's what I'm grappling with. . . I want to find ways to go with the trend. My current methods are breakouts (happens very rarely in the 3-5am time frame per my rules) and reversals (which are prone to being wrong often).

Here's the other thing, I have felt that need to be "in the market". The emotion has often led me to jump into ill-conceived trades. This is something I have spent some time contemplating, for I believe that if I could find just a few more trade opportunities, then I might satisfy this need. I don't think I'm asking for much-- if I could take one or two good trades per day (instead of just one or two good trades per week), then I believe I'd be much happier.

So here's the problem: How do I increase my trade opportunities?

Well, I could increase my risk. But I don't really want to do that. I could watch more instruments. Possible, but I'd like to look for other ways first. I could start researching bar-by-bar analysis or Edwards-and-Magee patterns. This is something I could try. I'm trying to see if inside bars and engulfing bars could give me additional signals to enter trades. At the same time, I'm trying to observe how breakouts from consolidation patterns can help me find my method of going-with-the-trend.

@Cashish
Funny you mentioned it, but I will be reducing my lot size as I start looking for different entry methods.

And I'll be posting more charts. I looked over some of my past trades from August, and remembered how useful the chart mark up could be. By the way, thanks for the link to the piece on Behavioral Economics. I've read a couple books on the subject, and it has always fascinated me how some application of basic mathematics and statistics can prove that our human "hunches" are often wrong. I guess that's why backtesting and small-scale forward testing is so important.

I must constantly ask myself: Am I trading well? Am I following my rules?
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  #48 (permalink)
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Thanks for the post DC, I'm enjoying keeping an eye on your journey.

"So here's the problem: How do I increase my trade opportunities?"

There's a lot of buckshot in your post, and I have some free time this morning so I'm going to take this opportunity to pick it out. You and I share a similar/limited time slot for our trading and I can understand your "problem" (for lack of a better term). But first, let's get on the same page with one important definition, "good trades." A good trade to me is any trade that doesn't cost me any money. From following your thread I get the idea you have a different definition, one that implies a certain dollar value. True, if it wasn't for the money most of us (I for sure) wouldn't bother with all this "trading crap" in the first place. So for simplicity let's agree that a good trade is a 50 point move. WOW, catch a couple of those each day and your brother-in-law will be throwing money at you screaming, trade, trade, trade! But let's work with 50 points.

OK, so now all we have to do is take one 50 point move out of the market during the two hours you're sitting at your desk and not concern ourselves with the other twenty one hours of the trading day. Now I'm going to change the rules. Why, because I'm a statistical trader and I can share some facts with you. In my last post on your thread I mentioned I start my trading at 2am instead of 3am and I usually have an extra opportunity or two and thought you might benefit from that. But even if you don't rise at 2 the information may help.

At last count I have over 70 trading books on my shelf and I have nothing by Dr.Brooks or Edwards-and-Magee. My methods are about as old school as you can get. I use a lot of adding machine tape and reams of paper to find what my computer can tell me in a second. I find (for myself) it keeps me involved with the market on a more personal level, e.g. what was the high between 3 and 5am this morning (hint, lower than 2 and 5am). Not everyone likes the worksheets of Arms, Wilder or Grandmill but that's what I cut my teeth on. To me the markets are a numbers game and probabilities can be gleaned from the mountains of data the market churns out real time each day. Your first post on your thread was July, can you tell me the average range of your market between 3 and 5am? If you can't how do you know the trading opportunities you seek even exist? I'll help, they do. The average range of the Euro future between 2 and 6am is 84 points. The average range of the 2am (1) hour bar is 47 points. So if more than half the (ave) move happens before you take your seat, what "trend" are you trying to "go with?" I suggest you hone your skill at looking at the bigger picture, calculate your risk ahead of time and enter at the first opportunity and hang-on.

This is turning into more than I intended, forgive me. Although I have notes and figures on every piece of paper on my desk don't get the idea I'm living in the stone age. I know my competition, and I understand electronic trading. When you wrote, "My current methods are breakouts (happens very rarely in the 3-5am time frame per my rules) and reversals (which are prone to being wrong often)" I had to wonder if you're seeing what's lurking "under those bars." If you're poised for a breakout, anticipating a nice twenty point run, and are unaware of the German open, low or high, or yesterday's highest volume level (POC/PVP) or intraday shifts of the same, that run can stop dead. Selling the high of an opening bar at 3am (like this morning) feels a lot like picking a top, but if you have a waste basket full of adding machine tape to backup your statistical theory and a hard stop sitting above the market at a level you are absolutely comfortable with, that's what wins the game.

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  #49 (permalink)
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Two trades today. The second one faked me out. I guess it was a bull trap, and I got trapped. Overall, though, I felt I traded decently.

I must constantly ask myself: Am I trading well? Am I following my rules?
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DC
So you missed a couple nice long entries this morning, oh well Do you know why they're called bulls?











Because they have BALLS


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I started to look at the histogram on my DOM today. Also, had a lengthy conversation with one of the futures.io (formerly BMT) members and I'm now looking at other things to give me a "big picture" view of the market, as I try to form hypotheses into what drives market action.

The messages, discussions, and feedback I've received has been valuable and is much appreciated! I started this month looking for ways to recognize more trade setups, and right now I have a number of things to research. It's going to take me some time to read and absorb the material, but I'm sure it will help tremendously.

I must constantly ask myself: Am I trading well? Am I following my rules?
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In my current quest to find more than 2 trading opportunities per week, I'm continuing to look at a volume histogram as well as bollinger bands. I like looking for and trading within channels, while also waiting for a channel break to signify a possible trend reversal. Today's action showed a broken channel, however, the price action didn't break downward immediately. On the 5-min chart, it seemed a new, lower channel formed in the same direction (bullish) as the first.

Overall, I might have overtraded a little bit, but I felt comfortable the whole way through. Most entries were for two lots. I've been tending to pick a stop-out point, and enter a limit order for the first lot 7 ticks from that stop, and another limit order 4 ticks from the stop. This gives me some comfort in being able to set my total risk for each trade, although I face the risk of a death-by-a-thousand-cuts type of day.

I must constantly ask myself: Am I trading well? Am I following my rules?
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Hey, DC, there are 2 techniques that may be of use to you. The first would be to have a written trading plan, outlining the specifics of your business (what are your operating hours, what market, what will you do if the power goes out in the middle of the trade) and the specifics of your setup. What are the exact conditions necessary to generate an entry into the market, what are the exact conditions necessary to get you out?

One technique that I've seen a bunch of students use with success involves printing out successful trades, or setups that have worked with statistical significance in the past. As human beings, we are prone to "emotional myopia", meaning we deal with what we are looking at NOW and forgetting what has happened in the past with relative success. A simple 1" 3 ring binder filled with the successful setups (20-30 examples) reviewed as part of your pre-flight checklist each morning will go a long way to retraining your mind to SEE what it is you're looking for, which will allow it to ignore what you are not looking for.

My 2 cents. Hope it helps...

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Today's chart shows the Bollinger Bands on it. I took entries on three setups, all based on a possible reversion to the mean while inside a wedge/channel. I was hesitant around 5:00am when news was imminent, and decided not to make an entry at all, even if price were to touch the top of the channel.

The addition of mean reversion setups to my trade plan seems like its on the right track to giving me more trading opportunities. My original two setups of volume breakouts and volume-based reversals was giving me few opportunities. The result was an increased stress level, leading to feelings of unproductiveness and general "antsy-ness". Those feelings manifested themselves as overtrading.

If the mean reversion setup can give me 2-3 setups per day, then it might go far in addressing negative feelings, thus significantly reducing the overtrading mistake. So far, the last two days show that it might be extremely beneficial.

I must constantly ask myself: Am I trading well? Am I following my rules?
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Nov 22, 2011

dc618 View Post
Overall, I might have overtraded a little bit, but I felt comfortable the whole way through.
..........., although I face the risk of a death-by-a-thousand-cuts type of day.

Nov 23, 2011

dc618 View Post
Today's chart shows the Bollinger Bands on it. I took entries on three setups, all based on a possible reversion to the mean while inside a wedge/channel.

The addition of mean reversion setups to my trade plan seems like its on the right track to giving me more trading opportunities.

If the mean reversion setup can give me 2-3 setups per day, then it might go far in addressing negative feelings, thus significantly reducing the overtrading mistake.

The last thing I intend to do is tell someone how to trade. But after dialing in your indicators and comments over the last few days I thought I may offer a different point of view of the charts you posted. In doing so, and only after you apply your own due diligence, maybe the "risk of a death-by-a-thousand-cuts" can be reduced significantly.

A HISTORY LESSON

A couple decades ago Asian traders wanted to remain aware of the value of the market they were trading after they left their trading desks for the day prior to the European and US traders moving the markets to new levels. Traders in Tokyo are credited with the first attempts and refinement of the Volume Weighted Average Price study. With this new (at the time) calculation of a markets value during the time when these Asian traders were not in the market, when they did return to their trading desks they now had a benchmark for that market's value. This study is widely used today and its value is considered the mean. End of lesson.

With your help (thank you) I was able to replicate your chart posted on Nov 23.

My thought was, you were using something other than the VWAP as your mean in what you were describing as "reversion to the mean" trades. Of course you can use the mean of whatever Bollinger Band average you chose, and trade to your hearts content. But two of your comments jumped out at me, (1) "I might have overtraded a little bit" & (2) "death-by-a-thousand-cuts." Also, since you mentioned the VH study in your resent posts I wanted to wave a flag of caution if you are tempted to use the POC value as your mean. Taking trades around MOST POCs is usually very risky. Furthermore, to quote Jim Dalton, "It (MP) doesn't tell you to buy or sell or anything else. It is just a way to organize data."

I wanted to remind you of this statement before I continue, "The messages, discussions, and feedback I've received has been valuable and is much appreciated!" If at any time you feel I've discredited or disrespected your thread, just say STOP!


This first chart is my attempt to replicate the lines/values that I BELIEVE, you were using to base your Nov 23 trades on. I removed the VH from the chart but the BROWN line is the POC and its shifts during the 3am to 5am session. We can change the start time of the VH and change the value of the POCs significantly, but based on your comments I'm assuming your using 3am as a start time. Buying and selling the bands and taking profits at the greater of the BB ave or the POC could keep a trader very busy during this 2 hour session. And if a trader makes money all the better, but I'm here to offer a different point of view, nothing more.



This chart shows a vwap which also begins calculating its values at 3am. The fuzzy red line is the ave price, the thin green line is the 1st standard deviation and the fuzzy blue line is the 2nd standard deviation. The vwap is a great indicator of volatility, a quick glance at the spread between the SD lines will reveal the instruments volatility from the time the vwap study began its calculations. Since all but the BB study started calculating at 3am they're all pretty much confined within the expanding/contracting SDs of the BB.



Even if I intend to trade only a few hours or a single trading session each day I believe looking at the bigger picture increases my perception of the market and my understanding of the positions of the "other time frame traders." In this chart I'll begin changing the start times of the indicators. First, the Volume Histogram. When the VH is changed to begin it's calculations at the start of the Globex session you can see the effect the POC has on price action on the first several bars on your chart. And the high of the move after the second penetration of the lower BB. Also note the high of the bar after the 5am news.



On this chart both, the vwap and the VH studies begin their respective calculations at the open of the Globex session. I hope your beginning to see, less but more profitable trades. But more importantly less chances of, "death-by-a-thousand-cuts." Is all this coincidence, that's for you to figure out, I just changed the settings on your indicators.


Sorry about that, I'm not sure what I did wrong while posting the charts but I think they're showing now, that's the reason for the edits.

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  #56 (permalink)
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I've been consistent with a certain approach for years now. I thought it was working, but results didn't seem to show. I thought, "just give it more time, be consistent, it'll work out." Yesterday, I was given a sign that it was actually not working.

The situation was not related to trading. Yesterday, my wife got a call from my 3-year-old son's school, saying that she needed to pick him up immediately. It was a behavior problem. His return to preschool after the long holiday weekend was filled with kicking, biting, and a general disregard for the teachers' instructions. Of course, the teachers asked my wife about our techniques with discipline. We use the same techniques found in several of the parenting books -- timeouts, immediately and consistently, followed by a discussion about the offense, all toward developing the understanding of what was done, and why it was a bad thing.

My wife discussed it over the phone with a developmental specialist. So far, the symptoms don't point toward ADHD, but we were told that whatever we were doing was NOT WORKING. After a getting a series of new tips and methods, we'll be hard at work in undoing our own behavior and implementing the new disciplining technique.

This will be difficult. I know it. And at the same time, it's exciting. There's a certain pressure applied to getting this right. We have a 3-year-old who needs guidance. If we get it right, then we could create a well-adjusted, thoughtful, and curious young man who can then grow up to learn, experiment, teach, and provide value to society.

I can parallel this with my trading. Some of my original posts talked about my trade setups-- volume breakouts and price reversals. The data over several months have now shown that these setups are rare, given my trading timeframe. And they're prone to wide stop-outs. I'll admit that they might not work well for me. And now, with the help of others, I've been shown how a different thought process could improve my trading. Seek out the answer to "why". Why do prices move the way they do? What drives price action? How does the time profile of your instrument behave on certain days or after certain news?

I'll need to adapt, to continue studying, and to solidify methods that work, toss out the ones that don't work. The road to mastery is long, in fact it never ends. I guess I'll keep taking the steps. But isn't it really about the journey, anyway?

I must constantly ask myself: Am I trading well? Am I following my rules?
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"When does one admit that the method is wrong?"

I think it is excellent you are asking the question. Many never get that far. They are in an endless loop of looking for some sort of external influence that is to blame for their trading. New indicators, new charts, new chart types, new methods for entry, new platforms, new brokers, new instruments....

Rarely does one stop and say, "I am accountable for every trade decision and the result of every trade".

As for determining when a method is wrong, I think unfortunately a lot of people that do get this far will immediately try to remove themselves from the trading. They will say "OK, I am to blame. Clearly I do not follow my own rules. So, lets write an automated strategy instead". Then they go down that long dark road, and probably never return.

I think the answer can be more simple than you think. Do you agree that you can make money on sim, for days, weeks, months on end? If yes, then you could simply use your simulated trades as a measure for your cash trades, to grade them and rate them and ultimately decide where to go next.

While methodology on choosing where to enter a trade is important, it is not 99% important, which is roughly how most traders treat it. All the emphasis, focus, time, energy is spent on where to enter. Very little is spent on where to exit, and almost zero is spent on the psychological differences that occur that cause you to literally change your behavior and ultimately your execution of trades when going from sim to cash.

Mike

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dc618 View Post
The situation was not related to trading. Yesterday, my wife got a call from my 3-year-old son's school, saying that she needed to pick him up immediately. It was a behavior problem. His return to preschool after the long holiday weekend was filled with kicking, biting, and a general disregard for the teachers' instructions. Of course, the teachers asked my wife about our techniques with discipline. We use the same techniques found in several of the parenting books -- timeouts, immediately and consistently, followed by a discussion about the offense, all toward developing the understanding of what was done, and why it was a bad thing.

My wife discussed it over the phone with a developmental specialist. So far, the symptoms don't point toward ADHD, but we were told that whatever we were doing was NOT WORKING. After a getting a series of new tips and methods, we'll be hard at work in undoing our own behavior and implementing the new disciplining technique.

Please watch who you listen to.....

Think back 100 years and wonder what all the ADHD kids did without the drugs? Were they all serial killers by the time they were 10? hmmm....

All kids are different, some don't like authority (BRAVO!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!)...

All a matter of perspective, patience....

I 'get on' my kids for not minding, but you know what, I believe I am wrong for doing so... Kids assert their authority and from that they gain confidence and indenpendence/interdependence etc.. It all depends on your perspective...

As I type this my kid is busy grabbing all my business cards and throwing them on the ground so I can pick them up again. I need the exercise...

(P.S. I just lost my nephew who was on Ridlin since he was 10...)

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Please watch who you listen to.....
.
.
.

(P.S. I just lost my nephew who was on Ridlin since he was 10...)

First, blue very sorry for your loss. Words are not enough for such a thing.

I do not have kids, but I will admit that I believe too many parents (and doctors) are far, far too quick to write a prescription to solve a problem instead of actually using parenting to solve a problem.

I often think back to how I was raised, how my mom was raised, and how my grandma were raised. Then just take a look at the world during each of those generations, and how things have changed. I am specifically talking about change in the family itself, which of course then spills out as change in the world we live in as those families are raised.

If I did have kids today, I would:

- Place emphasis on spending as much direct time with them as possible
- Place emphasis on limiting television time as much as possible, and not as some sort of punishment tool but instead try to educate the child as to how deceptive most things can be on TV yet they come across as facts
- Place emphasis on the best possible education and tutors that I could find anywhere in the world

Easier said than done, naturally. But I look at parents who let their kids watch hours of TV every day or parents who constantly have baby sitters or constantly use day care or school as a way to "take a break" from their child... and well, it is easy to see why we have such an enormous generational gap between today's children and my grandmother's time. Most of it comes from how families have changed, in my opinion.

Mike

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Blue-- I'm sorry to hear about your nephew. I could not even imagine how to deal with the loss of a younger family member.

The teachers at my son's school seemed to hint toward ADHD, although they admitted they were not at all qualified to make any diagnoses. I personally feel that attention deficit disorder is used as a catch-all excuse by ma, ny physicians it provides a simple reason for why there might be any behavior issues at all. I believe that there is a wide range of "normal", and although there are cases where medication is justified, it is often used as an easy way out. Kids learn in different ways. They progress at different rates. They blossom with different skill sets. And this is all normal, in my opinion.

I must constantly ask myself: Am I trading well? Am I following my rules?
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First, blue very sorry for your loss. Words are not enough for such a thing.

Easier said than done, naturally. But I look at parents who let their kids watch hours of TV every day or parents who constantly have baby sitters or constantly use day care or school as a way to "take a break" from their child... and well, it is easy to see why we have such an enormous generational gap between today's children and my grandmother's time. Most of it comes from how families have changed, in my opinion.

Mike

Thanks, we all die, just some way too soon. I feel I would give up my life for any young person for a longer seat on the bus.

You are spot on about TV, advertising, etc.. It is disgusting. Now with Disney movies you can't fast forward with some media players to the movie and they make the kids watch about 10 minutes of 'Ads'. Unreal.... Do you know how impatient a kid can be when you pop in a cool new Disney flick? More impatient than my trading style!!! haha...

Families have crumbled. Woman are looked down upon to be homemakers and Men are looked down upon for wanting a woman to be a homemaker for their kids! haha...

All of our 'friends' stick their kids in daycare and they all look 'down' upon us as "Why don't your kids go to daycare..."

I explain, "Why would they?" They just look shocked and reply, "To get an education, to socialize and be normal" etc..

I explain back, "You mean to bring home germs from the other snot-nosed kids?", "You mean we can't teach a kid the alphabet or animals, or sing songs or all the other stuff?". What about taking the kids to the Zoo, Aquarium, Discovery Center (Kids Play place for education), Ocean, Mountains for hiking to learn about plants and tree's and the beauty..."

They retort, "Well, some of us HAVE TO WORK".....

haha...

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dc618 View Post
Blue-- I'm sorry to hear about your nephew. I could not even imagine how to deal with the loss of a younger family member.

The teachers at my son's school seemed to hint toward ADHD, although they admitted they were not at all qualified to make any diagnoses. I personally feel that attention deficit disorder is used as a catch-all excuse by ma, ny physicians it provides a simple reason for why there might be any behavior issues at all. I believe that there is a wide range of "normal", and although there are cases where medication is justified, it is often used as an easy way out. Kids learn in different ways. They progress at different rates. They blossom with different skill sets. And this is all normal, in my opinion.

Thanks.

I agree, just like traders, we all have strengths, personalities and weaknesses... haha...

I personally tend to be someone who has to fail double or triple the amount of the average joe and the I master it. Through the process it looks like I am f-in a football, and an ugliness comes out, but that is all part of metamorphosis... haha..

Teachers (Ok, I will go with most Americans...) think Pills are the answer...

You ever read about Joe Kennedy and his daughter that he had 'treated'.... I realize that is an extreme, but why not do a "One Flew over the Kookoo's Nest" on every kid.... Very few are perfect little angels... Kids don't change, it is the parents perception of what is 'normal'. Read Oliver Twist or some of the older 1800 books about kids and we will all find that kids were just as terrible then as today, but our perspective and patience has just changed...

Just please don't feed your kid drugs even if some punk from a 'medical school' tells you to.... Done preaching....

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Played some channel breakout trades this morning. I would have liked to overlay the VWAP, calculated from at least the start of the Globex session, but alas, no VWAP comes standard with OEC Trader. I guess I can either 1) find a different broker, or 2) code in a VWAP. I don't have coding skills, so #1 seems more attractive, but I'm also hoping that coding in EasyLanguage is, well, easy.

I must constantly ask myself: Am I trading well? Am I following my rules?
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There are a few EL VWAP's floating around, check here for example:


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dc618 View Post
I would have liked to overlay the VWAP, calculated from at least the start of the Globex session


I can put it in your "rear view mirror" for what it's worth.

blue line is your 20ema
red is vwap, I added the 3rd Std Dev line (gold)
black is the VH POC
Looks like a train wreck to me Taking that long at 4;25 was a nice trade, but you had to sell them at even all morning.


But that is the past and today is a new opportunity. The big move on Wednesday left a POC at 1.3463 right where it's trading now as I write this. This is also the HLC/3 # My buy number (BN) for Fri is 3408 my sell number (SN) is 3515. Of course there's "nothing but net" under 3421, 19, 14 and buying down there at even (3400) on a first drop may be more than my old ticker could take. On the other hand I've been trying to sell 3626 for two weeks and would jump on that during any news release. I think Friday will be exciting around the news, but the early sessions usually offer an opportunity to position yourself,,,,,, if your quick.

This is a hourly chart from Nov 6th

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