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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

  #2701 (permalink)
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As weird as it must seem to anyone reading this, the issues I am spouting out here are helping me. I said I knocked off all of the surface issues already, and am going for deeper ones. Writing this stuff down, as I think of it, keeps the less obvious but more important issues from sinking back down into hiding again.

Surface issues; Risk versus reward, position size, winners larger than losers, patience, learning your market, learning your indicators, learning chart analysis.... That stuff takes time, and it is very hard to get to the point where it all starts coming together, but eventually it does. And it feels empowering.

But then, with all of us having access to basically the same information, studying alone, just learning the rules by themselves, does not guarantee success. We have all of the right software, but what about the right hardware?

I would be bold enough to bet that I could make money 80% of the trading days over the course of a year. I may only have a win rate of 65%, but there is always at least more than one opportunity in a 24 hour period, and sometimes even playing with "swapping positions", grabbing tiny moves, etc, I turn red days into green so often that I just believe it will happen. Forget the statistics, I just believe it.

Why in the world would that not be enough to make me happy? I would only make that bet with the caveat that 1 contract was my primary position size. In and out of a second, but only as a tool, not a position.


I almost have cold chills when I start to type, "what is the difference?" I am one mean spreadsheet operator, but only need one hand to calculate a 5x increase in profits. When the number starts at "1", a 5-year old could do the obvious math. I wish it were related to math. I wish it were related to anything other than what it is.

I said I lost my "mojo" on a trade on Friday. Really, I just lost it years ago and have not ever really gotten it back.

Fear is a learned behaviour. I never really learned it until I was in my late 30s. I did not realize I hadn't, did not think about it. I had nothing to be afraid of. I set a goal, I went after it, I accomplished it. I set another, ditto. I would write down my goals in December of each year, and keep my eye on the target, almost with blinders on to any other possibility except for what I believed.

And with one contract, I have nearly unstoppable belief.

So what, if the outcome is "ponderous". The worst that will happen is I am down a hundred or two. Trading is not a sudden-death match, and one score against me means nothing. The clock still has plenty of time on it. I just realize I need to be more patient for my spot, and it typically works. With one contract.

I see the dollar amount as being in the realm of the believable, or not. It changes the perception from easy to difficult.

The $1,000 a day goal (after having sworn off daily goals not that long ago) seemed like a good compromise with my limits of the believable. I have had 1 contract days at that number, and as a percentage of my total equity it kept my fear contained. Not as much as $400.00, but a semi-comfortable stretch.

I had been trying not to see the dollars, and looked at contracts versus equity, but may have discovered that does not work in my believable repitoire today. So I looked at $1000, divided by up to 10 contracts in a simple spreadsheet where each contract number told me how many net ticks per day, and saw that the sweet spot for me to believe in, was 2-6 contracts. I am more comfortable on the lower end, but it gives me a slightly larger toolbox to make it happen.

And to my surprise, it almost works better for me to think in dollars, and only see the contracts needed as the tool.




The longer hold time issue is similar, but different. The calculation of swing lengths where I found the bell curve of a 6-range chart caused me to see a certain profit distance as the point where profits start to melt. For me to go for larger swings, I would need to do a similar study, but maybe on a 12-range chart. Support and resistance calculation only gives me areas to watch, structure to compare to, but does nothing for my belief in probablility.

Let's say I know 20 ticks in CL has a lot of meat in it on a probability curve. And price hits an SR level, and responds. While in hindsight it may seem obvious that I was in at the turn (as @researcher247 inquired about recently), that was not the belief that I held. The belief was, 20 ticks is highly probable, and the zone helps me pick the direction. The scalp trades are the trees, the swing trades the forest. I see that after the fact. So, my risk to reward suffers in comparison to what could be, had I anticipated the run to be "real".

But my beliefs do not really require the turn to be real. If it just looks real to enough to other traders, I can get my shot at probability. I have lerned to read volume bars and order flow, and even "jerkiness" of price action, to often find my entry with laser precision. But my exit occurs when my belief starts to fade, and I never know in advance where that will occur. Some days it might even be how well I slept the night before.

I held for longer moves when I started this thread than I do today. My beliefs are constantly shifting. Belief in probabiltiy has started to win out over pure mathematics. That ratio may swing back and forth over the next 12 months, but I really support myself just going with it as long as it is working. I am going to create a few new ATM spreads today that will separate my profit targets and stop losses a little more, planning for multiple contract entries and exits, and giving me something visual rather than something to completely rely on feeling.





The ongoing influx of outside commentary here is a great stimulus for keeping my mind stirred up, causing different things to rise to the surface, keeping my thoughts from getting caught in a rut of my own habit.

@researcher247 has been incredibly instrumental in jarring me out of my comfort groove lately. He added an element I needed that I can't really describe here, but has been liberating. @zt379 always posts things that make me take a step back and see trading as anything but trading. @PandaWarrior and I share a very similar past experience and very similar path to find our way from this juncture. Twin ships almost, with thousands of possible outcomes from here. @Surly gave the post of the Matrix movie fight scene, which might seem odd as a trading reference to those who believe in hard rule-based trading and/or robotic systems. But to me, the quote I pulled from that fit where I am today. To paraphrase, my improvisation and adaptability are pretty good, but I can't really hit the mark I am going for without knowing I can. @Big Mike with the reference to a leg shaking from adrenaline (and a memory of the worst fire ant attack in history)... and on and on....

They become the agitators, and I mean that in a good way, a necessary component. Stirring and churning and turning my thoughts upside down, helping me see what really is in that mix that lies within.

The past few weeks have contained possibly my strangest and most emotional posts to date, triggered some really intense moments for me. I often hate the process, and Hedvig's reference to puking was so on target. Not literally, but emotionally.

The post I made from my blackberry recently, I had been lost in my own thought for an hour at least, walking the streets of historic Fredericksburg, up and down, passing places that I might have been interested in, but I was not walking to get anywhere, just walking. In the rain. And I found a vegetarian menu, saw they sold my favorite beer, and went to the bar. 30 seconds on the menu was long enough, food was food.

I sat there looking at the mirror that lined the backside of the bar. To my left several stools down was a guy who looked like a regular, and one who had gone through probably harder times than me. To my right, nothing but empty barstools. Back to the guy in the mirror. Who is that, really? A guy who works his ass off, a guy who was been beat down and has fought his way back up, a guy who is pushing so hard to force yet another major push out of where he is to get to where he wants to be. A guy who is tired...

A few weak tears started down my face, just as the bartender brought my food. She just asked if I wanted another beer. "Absolutely".

There are times I have gotten emotional when I was sad, that was not it. There are times I get emotional from being happy, that was not it. I really still have no idea what the trigger was. Other than, I am determined to make my way through to a place that I have really not yet defined. Maybe it was more seeing my story from the start to where I was, and just needed to take a deep breath, release some energy. I have NEVER given up, but there were times when that seemed like insanity, and staying focused through that has required a lot of preserverance and courage, that I never would have seen I had if things had not turned badly for me several years ago. A lot of intentional and sometimes painful review of who I am and what I need to do.

It is not money, it is not really even about trading. That is just the vehicle that I have chosen, something tangible to measure my progress.

I want to remove some psychological limitations that have formed around me, like barnacles on a boat. They create resistance. For anyone who has ever seen the work required on a bottom paint job, it is hard work. To do it correctly, anyway. A part of me believes in the next step of my trading, but a part does not. Barnacles. My task recently has been to scrub them off.

The events and posts of the past few weeks, possibly the entire journal, have brought my focus to revolve once again around a single word, one that I have posted before, but each time I bring it back it seems to have just a little more magic left in it;

BELIEVE


Last edited by GaryD; June 3rd, 2012 at 11:39 AM. Reason: re-reading, incorrect mention, typos, sorry so many
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  #2702 (permalink)
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PandaWarrior View Post
Oh man, I feel your pain...I have thought those same thoughts over and over again....I will say this though, I thought it wasn't about the money, but it is in some respect....to be completely honest, we look ourselves in the eye every morning and we are defined by our success or failure as much as we strive not to be. And like it or not, success is very much measured by money.....its a way of keeping score.

I know this much after two hard years of struggle....I will never be the same person every again....in fact, I don't want to be that person again. I am less arrogant, more patient, more thankful, more generous than before I lost so much money in the real estate business. I thought I deserved the success I was having...and the truth is, no one deserves anything, its a result of choices and timing, just like in trading. Do it right and make money, do it wrong and lose it.....

You and I will never win trading not to lose. Trading scared means trading defeated before you even start. In this business as in any, you need a winning attitude before you win. You can't depend on winning to develop the winning mindset. However, small wins early develop confidence or can rebuild confidence if its been lost and confidence leads to better and bigger wins. You know how to win with smaller size. In the beginning of this thread, you were killing it....then you started experimenting, trying to be something you weren't. Sure recipe for failure. You are trading conflicted and that will always self destruct.

Take some time and become comfortable with who you are as a trader. If you are a scalper, scalp the hell out of it....then scale up size. Its totally doable. I promise you, if you can trade 1 and 2 lots successfully as a scalper or at least looking for 30-60 ticks a trade, you can do it with 5-10 lots and even more......If a swing trader, stop thinking like a scalper and be a swing trader....but for the sake of your sanity and your financial future, decide....then attack.

I remember a post where you had done a study on the average size of swings and the probability of a certain number of ticks being obtained on any given trade. Seems like the sweet spot was 30-45 ticks....this is something you can nail day in and day out....10 ticks sounds nice in terms of taking home some money every day, but you know you can find enough good trades to average 30-45 ticks every single day.....and with 5-10 lots, you're making some nice money...its not F*&K you money, but's its still really nice....I mean 30 ticks x 5 lots is $1500 a day...200 trading days is $300K...10 lots, 600K....a nice living to be sure....and if you scale it up from there, the skys the limit....

Keep it simple, keep it consistent, don't let others influence who you are and what you know you can do....and scale up in measured, methodical steps.....

Cheers.....

This post sums up exactly what has recently occurred in my trading . I found a setup a while ago that worked consistently for me. It basically involved waiting for momentum around certain times when the market is moving with directional volatility. I would patiently wait for those brief seconds in a session where the market would definitely tip it's hand ..and jump in.. grab anywhere from 5 to 20 ticks or more. I was averaging at least 10 ticks a day . Then I decided I should try to trade longer timeframes and I took bigger stops. Instead of waiting for my predictable 'Power scalp" setup, I started trading off of price levels and holding trades longer.. only to see my profits get wiped by fast retracements. A few weeks back, after taking some big stops, I tried to win my money back with some huge leveraged scalps. I won a few trades , but then took some bad entries from my New system and the results were disasterous.
I almost threw in the towel once and for all. Then I regrouped and went back to my momentum scalps and rediscovered that I could easily make 10 ticks a day again. In another month or so, I will go to 5 contracts. I will be satisfied with making $2500.00 a week. After 4 to 6 months of this, I will go to 10 contracts which will be $5000.00 a week...and eventually much more.
I am confident I can pull an average of 10 ticks a day from the market and instead of looking for ways I can make 50 ticks a day, I will stick to this game plan. To me, there is nothing "Noble" or "heroic" about trying to make more ticks. It's the bottom line results and whatever edge a person has that works consistently, then that's how they should trade.

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The CL charts suggest some possible confluence going back the a long forgotten LSP, and pulling forward to a possible minor 5WM. There is also a potential nearing time cycle, from the past major downmove.




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Last edited by GaryD; June 3rd, 2012 at 08:24 PM.
 
  #2704 (permalink)
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lancelottrader View Post
A few weeks back, after taking some big stops, I tried to win my money back with some huge leveraged scalps. I won a few trades , but then took some bad entries from my New system and the results were disasterous.
I almost threw in the towel once and for all.


The problem with dramatic leverage is once you start playing that game, you have to keep playing it to get the benefit of wins versus losses. But, when the "hit" comes, and it always will, the shock can send you down a path you would not explore if you were calmer.

That is one reason I am very respectful of sizing up. The broker may think 50 contracts is double-ok, but if the account is $100k, the equity ride can give whiplash. I took a 6 contract hit that made me re-think my plan, and I would not go back in for the win with the same size. I backed off to smaller size to get my head back on, and slow the bleed if I was wrong several trades in a row. I was disappointed in my lack of courage, but not as much as in my lack of entry skills that day.

Big hits = losing calm = who knows what. Better to stay safe. Risk of Ruin is not even in my trading plan, it does not exist at the size I trade. I am not willing to play that game.

But I have, and I know it sucks. And the temptation to size up may resurface in a week or two or month or year, after you have played nicely and clawed back "long enough". If you are right, it could be a great experience. And the sinister part is, sometimes you might be right. But I promise you, sometimes you will be wrong. Before hitting that contract button, accept the loss. That keeps me smaller than I wish I traded. And, that sucks too, in a different way. But not as much.

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I started to post chart of ES, but I had a really weird feeling about it and deleted it. That is a first, no idea what that was. I am starting over with a weekly chart.

Of course, it could be the bottle of yerba mate I drank earlier. Rode wave runners, cleaned my room, worked out, ran up and down the stairs several times...


Last edited by GaryD; June 3rd, 2012 at 08:27 PM.
 
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I missed the fact the ES sold off hard late Friday and again tonight. I don't trade it so just looked at the chart and not the time of day. Have not looked at a chart since around noon Friday...

I am not calculating ES support right now.


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ES should have found support around 1275-1278, and didn't.


Last edited by GaryD; June 3rd, 2012 at 09:05 PM.
 
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PandaWarrior View Post
You and I will never win trading not to lose. Trading scared means trading defeated before you even start. In this business as in any, you need a winning attitude before you win. You can't depend on winning to develop the winning mindset. However, small wins early develop confidence or can rebuild confidence if its been lost and confidence leads to better and bigger wins. You know how to win with smaller size. In the beginning of this thread, you were killing it....then you started experimenting, trying to be something you weren't. Sure recipe for failure. You are trading conflicted and that will always self destruct.

Well, I will not let myself self destruct, I am far too wimpy for that anymore, the pendulum has taken a wild swing to the opposite side. But, I understand what you are saying.

I can still trade 1 contract well, but I have grown tired of it. I have found impatience. I have decided to try to push thorugh it and have hit roadblocks in several directions. I go back to one, everything is ok again. If I went back to one and still had problems, it would not be so tormenting to me.

That is what started me down the road to experimenting. At some point I need to break free from believing there is any big difference between 1 , 2, 3, 4... And I have not figured out exactly how. I went up to 6 for a few trades, seeing if backing down would make 2 seem like less, and it does somewhat. I messed with longer hold times, shorter hold times, different markets, larger targets, smaller targets.

I have become fixed on moving to full time, that is really how the seed was planted. And to go full time, I will need to step up the income a bit.

The year is not over, my account is not running dry, and I am being cautious if nothing else. I am not making as much trading 2-4 as I might with 1-2. That is irritating, embarrassing even. But I am content to stay with this for some time. I do not necessarily need the income today, so that removes a lot of pressure about it. It is a good place to be for me right now, and I feel strong enough to handle pushing my own buttons for the time being. Comparable to sticking a finger down my throat somtimes.

Thanks brother. I do go back and read and re-read the comments that I feel I should, and this was one of them.

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I shorted the euro for a few ticks, but dropped it. I am not feeling like trading tonight. Whatever sent the euro skyward on Friday has me spooked of that trade. Most other markets that have been euro dance partners lately closed down, but 6E closed off it's lows.

And I am seeing support zones in CL, but not going to try to find the bottom now that it has come this far. Not in night volume anyway.


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Up has become down and down up, is what I started thinking on Friday, but this is not Wonderland, and I am confused with the departure. The euro is showing more signs of support than the other markets, and I am lost with that thought right now.

I have seen enough market pairings and divorces to get that it happens, but this one just seems weird. Is the euro being propped up? Will other markets follow?

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Last edited by GaryD; June 3rd, 2012 at 10:15 PM.
 
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That's not entirely true. I would actually consider buying CL in this area, it's just that it feels insane to think that.

I can't recall when, but I think it was summer two years ago? I was chatting wiht another trader on Skype and thought CL had just completed a 5WM, at an Xfib, and had some other confluence going for ot. I said I was going to buy, and he responded, "I would not touch that, as hard as it came down over the past few days". So I passed.

It ran straight up from there...

 
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It was roughly summer 2 years ago


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