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Catching Big Waves - a trader's journal of surfing the the markets


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Catching Big Waves - a trader's journal of surfing the the markets

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  #1971 (permalink)
 GaryD 
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GaryD View Post
Pay attention to yourself, you know this market well, and that is sometimes the only edge you are going to get.



There is no "Thanks" button for myself. But this is what I need to understand.

My recent problems with position size cause me to go from a very confident trader to something else, I am not sure how to define it. I know it has to do with the rate at which price moves. The best answer I have been able to define, is that sizing up turns up the VOLATILITY. Forget about equity for a moment. It changes the perceived volatility relavant to what I am conditioned to be comfortable with. Not in tick movement, in dollars. And yes, I get that it should be the same, that nothing really changes regarding the trading itself. But when I take my max drawdown and double it, and then realize it, it reaches for something I do not like.

The problem that I realized; Sure I can set my charts up to only show "ticks" instead of dollars. That should be a way to trick the mind. But I determine my max loss, max drawdown, weekly progress..by looking at dollars, and there is no way around it. And that makes me less of a trader. Not less of a 1-to-2 contract trader, no that I am still very comfortable with. But add a simple 2x, and I have something I am fighting with.

But really, back to what just came out of me this morning and I felt the need to document here, if I would get over the dollars and think in ticks, if I would internalize that I know how to trade and should just trust myself...

Frustrating. I had a "good" day, but am going into the weekend very disappointed in myself. What is the way to break through this? I am going to post some graphs eventually that showsome very distressing observations.

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  #1972 (permalink)
 Big Mike 
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One disadvantage for futures, no question. The first few lots of scaling are not at all gradual, but huge.

This is where ETFs and spot forex have major advantages. Since you like oil, you might at least consider trading USO (ETF of oil), so you can very granually control position size. You will need 25k in your account to avoid Pattern Day Trader rules, so there is that. There are also some tax disadvantages, but I think it could all be very worth it.

Mike

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  #1973 (permalink)
 GaryD 
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Hedvig, I hope you don't mind me going a little further with this. I keep coming back to your question to me, and it keeps brining up more questions, and possibly answers. Drilling down into some specific comments;




researcher247 View Post
When I trade my 'core methods' I trade size.

When I traded small size, Friday was more like a 'normal' day to me.



The "core methods" comment suggests you have your own list of setups that you believe are the best opportunities for you. Do you trade outside of your core methods? Are your core methods designed around theability to make a trade decision in 60 minutes or less?




researcher247 View Post
My Friday is about

a) trading a bit more conservatively (I wait like a perverted stalker for a high reward:risk setup)
b) '1 & done' (1 win & done) in each market I follow (if it happens).
c) No trading 1.5 hours after any market (pit) has opened.


On point "a", I completely understand the stalking part. but to me, that means I have watched for hours sometimes. Can you elaborate on the thought process of stalking within a limited time window? Does that mean on Monday through Thursday you are very fast to pull the trigger, and so you "stalking" is just relavant to your norm?

On point "c", just simply, why



researcher247 View Post
I have done this for 23 years now. If I make 1-1.5% net profit on margin for a Friday I am always pleased.


You have so many years experience at this, and I am one who believes you cannot replace experience. No matter what answers come from this, you will most likely understand them differently than I do.




researcher247 View Post
My trading partner believes Fridays should be like the corporate world. 90 minutes of 'office time' and then you are 'out of the zone.'

p.s. I am done by 10:30am est trading on Friday's. 6E from 7am up to 8:50am est CL from 9am up to 10am est NQ from 10am up to 10:30am est on Friday

Do you open and CLOSE all trades within those time windows, and if so, do you do the same on Monday through Thursday?



researcher247 View Post
If price action is a bit slow for the 1st 90 minutes (conservatively speaking); would you consider trading CL up to 11:30 or 12 noon? Just wondering.

I missed this question before. I will consider trading CL until 2:30pm on Friday, it just depends on what is happening. If the morning was productive for me, I try to get away from my computer on Fridays. I have proven to myself that it is the best thing I can do. But let's say nothing really happened all morning, I picked up and dropped a few trades, up or down 5-10 ticks as of noon. I may wait until AFTER 1pm EST to look for an opportunity.

A lot depends on what the market has done all week prior, and where in that chart pattern the market is trading on Friday. As fictitious examples, let's say the week made some good moves in both directions and is trading in the middle of that range. Not interested.

But, let's say the week was all up, then on Friday was down and came back and kept trying to penetrate a core support area, but couldn't, despite multiple attempts. I might take a long around 1:30pm-2:00pm if volume was showing shorts were abandoning their positions for the weekend. I am not sure it is "high probability" my review of what is in my NT history shows maybe 50/50 odds, but I have picked up several good moves in the 1:30 - 2:00pm window, and that time period has been a healthy part of my trading overall.

But also, since you first mentioned time windows weeks back, I have seen that my trades in the 2:00 - 2:30pm window are basically a wash and a waste of time for the most part.



Here is one final thought about time in general, Monday through Friday.

You may have a more rigid method than I do, and possibly if I get another 10 years behind me I may as well. But for now, my success or failure seems to be more tied to my emotions for some reason, and feel I might have never figured out how to trade succesfully had I not started to look at myself and how my mind processes everything as being far more important than chart patterns and indicators.

Day of week and hour of day come into that. When the day starts, I am fresh and feeling optimistic. There are hours of opportunity in front of me. But, as the day winds down (not being a trader who will hold through the close) my window of opportunity closes. If I take a loss first thing in the morning, a red balance does not even seem to phase me, plenty of time left in the day. But a more impatient trader appears if I am down in the afternoon, I am running out of time to get turned around, and have learned that I am better off accepting the down day and waiting until the next full day to trade again, than I am to try to force a P/L turnaround in a short amount of time before the close.


Thanks Hedvig, great topic for the weekend.

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  #1974 (permalink)
 GaryD 
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Big Mike View Post
One disadvantage for futures, no question. The first few lots of scaling are not at all gradual, but huge.

This is where ETFs and spot forex have major advantages. Since you like oil, you might at least consider trading USO (ETF of oil), so you can very granually control position size. You will need 25k in your account to avoid Pattern Day Trader rules, so there is that. There are also some tax disadvantages, but I think it could all be very worth it.

Mike


I have thought about it. I guess I am so familiar with CL now that I feel I am losing an advantge just by changing instruments. I have watched CL and traded QM, but even that is just not the same for a guy who works for as little as 15 ticks. Smaller moves to me require really understanding the volume patterns. I may make my money on moves that don't even show up on a 30 minute chart. So while I could switch to ETFs, there would be a learning curve.

I may just need to let it sit for awhile. I could trade 1 contract for roughly $20k - $50k a year. It is maybe decent trading for the size, but not enough to be willing to quit my business for. I would burn that up quick in living expenses, especially after taxes. My account would never be able to grow.

I keep thinking I will just go up to 4x my current size and be full-time as of next week, it seems logically like that would be the case. But something changes dramatically on my confidence factor when the dollars only double, forget quadruple right now, and I have not figured out how to "backtest" that for optimization yet. I am trying to do that by acknowledging my feelings, reviewing my performance between 1-2 versus 2-4, but can't really pin it down to one sentence yet.

Starting April 1, I went 2-4, and traded no better than back and forth for over a week. Then went back to 1-2, and my performance greatly increased again. It makes no sense from a strictly numbers viewpoint, and has me very perplexed, disappointed in myself, feeling weak or scared, let down to have put so many hours, years of my life into learning to trade, and can't get past the money of picking up a part time job. And the risk and intensity is just not worth it for the amount I can make in a direct comparison between trading and another hourly paycheck.

I wonder if it has to do with having lost so much in the past in my other career, maybe had I gone into trading in my 20's I would not have some of the scars that I carry today. I don't seem to be willing to take a $2k risk anymore (which is what 4x would require in my mind), when I have taken ridiculous multiples of that in the past and thought nothing of it.

I relate it to my mountain biking or skiing sometimes. I got a mountain bike when I was 20-something, lived in WV where the terrain is intense. For years, I did not feel I was really "riding" if I did not go over my handlebars at least once. lol! But, I became a very competent mountain biker and could ride expert trails after several years of pushing myself to get back on and try it again. But today, at 43, have no interest whatsoever in trying to ride hard enough to even fall over.

Skiing was the same; the black diamonds of my 20s and 30s that were such an adrenaline rush, are now just a part of my history. I have not fallen while skiing for years now, the reason I don't fall is; I gave up black diamonds. I don't find falling down fun anymore. I have lost the desire to push my limits to the point where I might get injured.

So in 1-2 contract trading, I feel safe, I am within my comfort zone and feel I could do that forever with the same results as I typically get, most likely improve as I go forward in my risk/reward. But how to push myself to take a risk that is a requirement to be a full-time trader, when I seem to have become so risk averse as have gotten older, is really bothering me.

I wonder if I should just do it on the side, as I do now. An extra $20k a year or more is useful. It could fund vacations, make car payments, etc. Or just let it ride.

I am not sure why I do not want to just allow trading to be an investment vehicle, why I am so compelled to do it and nothing else. The ridiculous upside potential offered by leverage is an obvious draw, the personal freedom of just me and a computer. The "reward" of having put so many years of my life into it.

Maybe it is the "spark" it seems to ignite in me, similar to the reason some guys get sports cars or younger girlfriends... The past "visceral and Darwinian" discussion maybe plays into it. Trading makes me feel alive in a way I don't feel doing other things.

I also think sometimes I just need a little more time, or maybe trade certain days 2-4 and others 1-2 similar to Hedvig's schedule but with a size variation. I wish someone would mirror my account, allow me to trade 4x but I was not aware of it, then one day let me in on the secret.

I think sometimes my desire to get back to having "plenty" of money hurts me. I know I built money a little bit at a time the first round, and that took me 10 years to finally get to a great position. But I read somewhere it is better to have never had money than to have had it and lost it, I now have the taste of having been "there". I can see that a bold step up in my trading would put me back on top overnight, and I do not trust that part of myself. I know not to trust that part. That is the "demon" that @iqgod wrestled with. I know that demon well, still neighbors. I have walled him off, but maybe feel he is the one trying to up my size.

Trading correctly is so full of personal issues. If only we could let go of ourselves...

I believe I will get there and am just working through yet another problem. My comments here may seem I am insane sometimes, back and forth, correcting myself, complementing myself. But I know there have been many problems before this one, and they were all solved in a similar fashion; Step one is to define it. At least today I know the general area I am trying to work on.

Go back to my first year I was like a blindfolded kid trying to hit a pinata, but was not even given the benefit of being faced in the right direction. Spun 360 degrees and my object could be anywhere. Today it is more like catching the fly with chopsticks; I see the target, but it does not help much. But I have at least touched that fly over and over and over, and his days are numbered.

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  #1975 (permalink)
 Big Mike 
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GaryD View Post
I have thought about it. I guess I am so familiar with CL now that I feel I am losing an advantge just by changing instruments. I have watched CL and traded QM, but even that is just not the same for a guy who works for as little as 15 ticks. Smaller moves to me require really understanding the volume patterns. I may make my money on moves that don't even show up on a 30 minute chart. So while I could switch to ETFs, there would be a learning curve.

It has been a long time since I looked, but CL and USO are virtually tick for tick copies. Just like ES and SPY. If you are looking at QM, you should be charting CL but executing QM. This is harder than trading USO because QM's tick size is not equal to CL. USO's tick size is.

Just a thought.

Mike

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  #1976 (permalink)
 GaryD 
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Big Mike View Post
It has been a long time since I looked, but CL and USO are virtually tick for tick copies. Just like ES and SPY. If you are looking at QM, you should be charting CL but executing QM. This is harder than trading USO because QM's tick size is not equal to CL. USO's tick size is.

Just a thought.

Mike

Never looked at it, but I will. Thanks Mike.

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  #1977 (permalink)
 Private Banker 
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Hi Gary,

Have you ever thought of trading like "being paid to trade" in lieu of "trading to make X amount?" My point is, if you do your job and "trade/work" well and efficient you get paid for it. It seems you're heavily focused on how much you can make/lose, maybe I'm a bit off on this but that's my impression.

Moving up in size shouldn't be any different than what you're doing now IF you think of it as being paid to trade. Your "job" requires that you handle (trade) more business as your account grows. You should do the exact same process and have the exact same mind set as you do currently. The nice thing about adding size is you're potentially giving yourself a nice raise for your efforts and success. But if you have in your head that you are trading more contracts to try and make more money, of course you're going to psych yourself out.

Hopefully that's helpful. That's the way I was able to consistently add position size while not letting the psychological aspects of it take over. Just think of it as handling more business. If business tapers off (have a few bad trading days), you take on less business.

Best,
PB

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  #1978 (permalink)
 Big Mike 
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Last point, here is a chart of USO



Mike

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 PandaWarrior 
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GaryD View Post
I have thought about it. I guess I am so familiar with CL now that I feel I am losing an advantge just by changing instruments. I have watched CL and traded QM, but even that is just not the same for a guy who works for as little as 15 ticks. Smaller moves to me require really understanding the volume patterns. I may make my money on moves that don't even show up on a 30 minute chart. So while I could switch to ETFs, there would be a learning curve.

I may just need to let it sit for awhile. I could trade 1 contract for roughly $20k - $50k a year. It is maybe decent trading for the size, but not enough to be willing to quit my business for. I would burn that up quick in living expenses, especially after taxes. My account would never be able to grow.

I keep thinking I will just go up to 4x my current size and be full-time as of next week, it seems logically like that would be the case. But something changes dramatically on my confidence factor when the dollars only double, forget quadruple right now, and I have not figured out how to "backtest" that for optimization yet. I am trying to do that by acknowledging my feelings, reviewing my performance between 1-2 versus 2-4, but can't really pin it down to one sentence yet.

Starting April 1, I went 2-4, and traded no better than back and forth for over a week. Then went back to 1-2, and my performance greatly increased again. It makes no sense from a strictly numbers viewpoint, and has me very perplexed, disappointed in myself, feeling weak or scared, let down to have put so many hours, years of my life into learning to trade, and can't get past the money of picking up a part time job. And the risk and intensity is just not worth it for the amount I can make in a direct comparison between trading and another hourly paycheck.

I wonder if it has to do with having lost so much in the past in my other career, maybe had I gone into trading in my 20's I would not have some of the scars that I carry today. I don't seem to be willing to take a $2k risk anymore (which is what 4x would require in my mind), when I have taken ridiculous multiples of that in the past and thought nothing of it.

I relate it to my mountain biking or skiing sometimes. I got a mountain bike when I was 20-something, lived in WV where the terrain is intense. For years, I did not feel I was really "riding" if I did not go over my handlebars at least once. lol! But, I became a very competent mountain biker and could ride expert trails after several years of pushing myself to get back on and try it again. But today, at 43, have no interest whatsoever in trying to ride hard enough to even fall over.

Skiing was the same; the black diamonds of my 20s and 30s that were such an adrenaline rush, are now just a part of my history. I have not fallen while skiing for years now, the reason I don't fall is; I gave up black diamonds. I don't find falling down fun anymore. I have lost the desire to push my limits to the point where I might get injured.

So in 1-2 contract trading, I feel safe, I am within my comfort zone and feel I could do that forever with the same results as I typically get, most likely improve as I go forward in my risk/reward. But how to push myself to take a risk that is a requirement to be a full-time trader, when I seem to have become so risk averse as have gotten older, is really bothering me.

I wonder if I should just do it on the side, as I do now. An extra $20k a year or more is useful. It could fund vacations, make car payments, etc. Or just let it ride.

I am not sure why I do not want to just allow trading to be an investment vehicle, why I am so compelled to do it and nothing else. The ridiculous upside potential offered by leverage is an obvious draw, the personal freedom of just me and a computer. The "reward" of having put so many years of my life into it.

Maybe it is the "spark" it seems to ignite in me, similar to the reason some guys get sports cars or younger girlfriends... The past "visceral and Darwinian" discussion maybe plays into it. Trading makes me feel alive in a way I don't feel doing other things.

I also think sometimes I just need a little more time, or maybe trade certain days 2-4 and others 1-2 similar to Hedvig's schedule but with a size variation. I wish someone would mirror my account, allow me to trade 4x but I was not aware of it, then one day let me in on the secret.

I think sometimes my desire to get back to having "plenty" of money hurts me. I know I built money a little bit at a time the first round, and that took me 10 years to finally get to a great position. But I read somewhere it is better to have never had money than to have had it and lost it, I now have the taste of having been "there". I can see that a bold step up in my trading would put me back on top overnight, and I do not trust that part of myself. I know not to trust that part. That is the "demon" that @iqgod wrestled with. I know that demon well, still neighbors. I have walled him off, but maybe feel he is the one trying to up my size.

Trading correctly is so full of personal issues. If only we could let go of ourselves...

I believe I will get there and am just working through yet another problem. My comments here may seem I am insane sometimes, back and forth, correcting myself, complementing myself. But I know there have been many problems before this one, and they were all solved in a similar fashion; Step one is to define it. At least today I know the general area I am trying to work on.

Go back to my first year I was like a blindfolded kid trying to hit a pinata, but was not even given the benefit of being faced in the right direction. Spun 360 degrees and my object could be anywhere. Today it is more like catching the fly with chopsticks; I see the target, but it does not help much. But I have at least touched that fly over and over and over, and his days are numbered.


oh man, do i ever feel your pain.....

Simplicity is the ultimate sophistication, Leonardo da Vinci


Most people chose unhappiness over uncertainty, Tim Ferris
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  #1980 (permalink)
 optionzen 
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