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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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I missed the entire short move today. I have a project in Denver that has a conference call scheduled for 9:30am on Wednesdays. The time of the call is not my decision, but it almost never fails that when I have these types of calls they occur during the major move of the day.


Net 63 long, very cautious about it. Even though I can justify the reversal today, it was a beautiful move and I was not ready for something that spectacular today. I closed a long at a possible WC up, left at least 70 ticks on the table.

 
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GaryD View Post
It was pre-open I think, where I noticed ES loves 1404... What is that all about?

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I have decided to expose my secret strategy for trading ES... If it leaves 1404, enter the trade and then set your target as 1404. It just keeps coming back, every time.

 
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Any thoughts from POC gurus?

 
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"How is it that we've gotten into the state that we're proud of our knowledge, but ashamed of our ignorance. Wisdom dawns when this tendency becomes reversed."

- Peter Ragnar

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David_R View Post
Gary,

Since you trade CL a lot I was wondering if you can shed some light on what is taking place on a bar like the one I've pointed out? It has high volume and looks very negative, but then price retraces 100% of the down move.

David




One more post if you are interested in trading crude. Confluence.



We had;

1) Major support zone
2) Confirmed support zone
3) Possible volume Exhaustion
4) Major LSP with good time distance
5) Momentum shift (see chart below) Least important of all, but still important.

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That highlighting shows the "higher low" I mentioned previously. I bought in the 94.60 something area, maybe 94.64?

I have set up my indicators on this one chart specifically to show when the balance is shifting. It does not produce "signals" as much as it creates "rules". Once that rolled over, up was the direction, because it was in major support.

How far, I'll probably never know. I obviously did not know today, I exitted around 94.90.


Last edited by GaryD; September 5th, 2012 at 07:52 PM.
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Gary,

Thanks for your comments. I really appreciate it.

The 30 minute chart with the fib projection makes that move today look like business as usual, but in real time it would be hard to go long in the face of a bar like that. Understanding the context would make a difference though. Higher TF support, uptrend, dipped below the prior days low and closed back up above. I've read that Richard Wyckoff used to say the large operators would drive the price below support like that to accumulate and then take the equity higher. The action fits that theory.

I've asked you this before, but LSP=Last significant pivot? Would the LSP be the pivot that was even lower?

Since the Inventory report is tomorrow instead of today I'm curious what is setting up. It wouldn't surprise me to see a continuation higher. It may dip first, but then up. We will see.

Thanks again.

D

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PandaWarrior View Post
Scalping vs holding for a big run.....they both accomplish the same thing. They make money. You can make $500 with one lot and a 50 tick win or you can make $500 from a ten tick win with 5 lots. Its the same money. Yes the risk is smaller with the one lot. But if your expectancy is good, (yours is) then in the long run, you could theoretically make the same money in half the time.

For me, the big runs are a source of pride....."look at me, I held a trade for X ticks". No lie, its an ego booster for me for some reason. But I trade to make a living. My need to earn a living supersedes the need for my ego to be stroked. My need to earn a living even supersedes my need to have my peers think highly of me. Believe it or not, I've let what people on the forum might think prejudice my thinking about things. How stupid is that?

In the end, its the $500 you earned, not how it was earned. My wife doesn't care one bit if its 50 ticks or ten. Just that it happened. I suspect most of our spouses feel the same.

What is a scalp? I read a professional recently that said it was something less than 6 ticks. This guy was a prop shop trader where that's all they did. In and out. 2-3 ticks at a time all day long. For us CL traders, what is a scalp? Is it 6 ticks, 20, 30 or is it anything less than the 240 ticks price moved today. How much of the move is enough to make us feel better about ourselves.

Here's my two cents....keep in mind my journey is different than yours, but I think a well thought out plan based on what you think price is gonna do with entry and exit zones executed as well as possible given the circumstances of the trade is what matters. If you plan a trade thinking it will run 76 ticks to an exit zone and you exit there only to see it blast through for another 100 ticks, does that make you a bad trader or did you execute your plan poorly? Of course not. You executed perfectly, and the trade exceeded your initial projections. Just like a losing trade, you don't control where price ends up, all you can do is have a reasonable plan, execute it as best you can and take what the market gives.

I don't want to sound arrogant or disrespectful here nor do I want to minimize the struggle you're having with this issue because I've struggled with it as well, but it does seem like a vicious circle. Damned if you do, damned if you don't. To me the result is whats important, not the means. So if you are a good scalper, become an expert and add size. There is something real nice about being out of a trade at 18 ticks with 5 lots instead of having to hold a single lot for 90 ticks which might never come or worse, be in profit for some nice number of ticks only to have it come back on you for no gain. All that hard work out the window. Yes, I know that's the price you pay for larger moves, but is it a price that's even needed? Only you can answer that but for me, a conservative exit with size is better for my psyche than a shoot for the moon with one lot. It also takes a hell of lot less time. Another thing I like about it is this, its a heck of lot easier to duplicate the 18 tick winner than it is to duplicate the big winner. And repeat-ability is important. Outliers are important to the bottom line to be sure but do you want to depend on them for your living?

My one exception here is this: If I have had a nice successful trade in the "normal" manner, meaning I've executed a trade and have some "house" money to play with and I get another trade signal that meets all my requirements, I will put the trade on with less size than before so that if I get stopped out, I am still up more than what I want to earn daily. At that point, I am willing to give the trade plenty of room to run. I had a couple of nice trades last week this way. But my daily nut had already been made and the trade was a no risk proposition from an income standpoint. This is gravy money for me. Nice when it happens but not counted on for income purposes. And in my world, income is the holy grail. The gravy simply buys me more breathing room for the next trade.

In the end, this is your journey, however, every once in a while, everyone needs an outside opinion to think about, even if it eventually is disregarded completely.

You're a good trader. I think you think to much. You know your plan and how your set ups develop. Execute your plan. If you scalp, be a great scalper, if you swing trade, be an expert at it, but somewhere along the way, a bridge needs to be burned. Of course, you could just scalp out your risk and let the remainder ride....no harm in that.

I remember you once did a study on the probabilities of a swing going 20,30,40,50,60,70,80,90 and 100 ticks. You had done an extensive study based on your set ups off the 6 range chart. I appreciated that study because it led me to do a similar one based on my entry style and to determine for me what the optimum exit is. If I remember correctly, you determined that something like 40 ticks was the optimum number to look for in terms of probabilities over the longer term off the 6 range chart. To me, trading inside that window seems like a terribly smart thing to do.

Ok I'm rambling now.....I've written a quarter's worth but its still probably only worth 2 cents...

Good luck.....


Ego. Yes, a part of it. But also, if nothing else, a "goal".

The scalps I was taking I might have considered very high probability, but thwy were below what I consider high value. A lot were at the edge where price was showing hard momentum. I had over 30 one day, with 90%+ wins. But they were 4-12 ticks each? Maybe the 12s were decent, but 4,5,6... I don't know.

I get what you are saying about money is money. But get lazy as a trader, and you are toast. I felt the size of the scalps fell outside of what is worth the trade for some reason. Even though, I might be able to hit 90% wins with a stop larger than a target, some days. It just seems like there are so many other opportunities out there, why go for something so weak? And I believe the answer to that is, I made money a higher priority than I did trading "correctly". If there is actually such a thing.

I want the odds in my favor, on as many levels as I can get. Yes, I have done extensive study on the probabilities for a 6-range chart. Scalping for 12-15 ticks, or making that a target #1, increases the odds on a 6-range. Exitting around 30-40, also an odd increaser. Holding beyond 50, odds greatly diminish, like fall off a cliff diminish. But sometimes I want the market to turn before I get in, and the 30-40 tick range is top to bottom. Same with the 12-15. And when I see 10 ticks up and pounding for more, I grab some that I think feel "easy". Sometimes with a 6 tick target and a 12 tick stop. Because I had already seen what seems to lie in the way of my stop. Or, so I believed at that particular moment.

I read about scalpers, 20-30 lots, making 7 figures. But I have not met one, at least that I know of. To date, I am the best trader I know personally. I just laughed at myself. Hard. Tears almost... Still trying to compose myself... But it is true.

There are far better traders on this website than me, I believe that completely. I read some now, I didn't for a long time, but there are some very interesting guys on here.

But, face to face, I am alone in my crowd. And I have learned to look at myself from the inside and the outside, and try to be the best teacher I can for myself, try to lead by example, try to step back and judge. And I feel the actions I was taking were getting off the correct path, and the market was rewarding me to do so. And decided to back off. I got lucky is how I leave it.

I don't mean to reference someone with a negative inflection, but I posted a question about scalping being ok, and got a thanks from "Devil Man". Nothing wrong with that, I appreciate the thank you, and I don't mean anything against whoever that is. But the symbolism for me was pointed. Or maybe I just choose to see it that way. But either way, if that is my interpretation, I will trust myself.

Part of what I see as the process of becoming a trader, I mentioned to @greenr a few days back, it's almost functioning on a similar concept as how boot camp is designed to break you down so it can build you back up. We eventually make so many mistakes that we are scared to do anything. And then, slowly but with great hesitation, we might venture back out into areas where we dared not go again, but this time as a different person. I think that is where I am regarding scalping; what is it? why do it? is it worth it? is it "ok"? It would have eaten me alive at one point, but not as likely to do so today. That does not mean it is a good practice to keep. It may not mean it isn't.

Some day, maybe I will know with certainty who I am as a trader. Or, I will just accept that never really knowing anything is as good as it gets. I think I keep my scalping tools sharp because I may never know whether I need them or not.

I swear that staying sharp there allows me to get some great runs as well. Nothing makes the awareness sharper than trying to feel every tiny flutter. As practice, anyway. Then at some point you need to turn off the noise though. And maybe I saw that my attention was more on the noise than on the big picture. That is the true fault in the scalping mentality.

Thanks for the conversation. You offer good input. Don't take my debate as not listening.


Last edited by GaryD; September 5th, 2012 at 09:09 PM.
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Big Mike View Post
There is a fine line, like with most things in trading. Nothing black/white.

Scalping has high overhead. 1 tick slippage on market orders plus commission cost can easily be 20-25% of your entire profit. If you are a scalper, you should be trading thousands of turns a month and should be leasing a seat, or own one, so your transaction costs will be reduced in half, or less.

Longer term trades, which can still be considered day trades, will minimize the transactional overhead.

You do not need to risk more $$ to trade longer time frames. Just trade a more appropriate instrument or decrease position size. Trade the ETF if you need to.

With scalping, you cannot have a big stop, because you also have a small target. This means noise is a major concern. With longer term day trades, your stop and target is wider, so noise is less of a concern, but there is increased probability your trade will move 50% in your favor then reverse. While this happens with scalpers too, it is less noticeable because it is only 2-3 ticks.

Personally, I swing traded and day traded for years before ever trading futures. With futures I was always scalping, I guess because of the leverage and thus the risk / reward. It took me a long time to realize I could be trading smarter instead of bigger. Over the last few years on futures.io (formerly BMT) you can see me slowly transitioning away from scalping and back to day trading or swing trading. For me, it works.

There are plenty of people who prefer scalping. I am not sure how many of them are truly any good at it however.

Mike


Yes, trading smarter instead of bigger. That is where scalping fails. It is easier, and the setups come far more frequently. It feels like an endless stream of opportunities. And I guess it can be. But to me the pursuit of becoming a trader is to gain a higher understanding, at which point you can see the larger perspective and take advantage of it with more authority.

Much of the time I do go for longer moves. My "longer" is 20-40 ticks today, but I study the major moves 24/7. But last month I was way off. I got out of synch Mike, and profitable or not, it was not the direction I am wanting to go in. Who knows what happened. I am human, I got caught up in feeling good.

The good thing is that as I questioned it, I also went back and studied it. Spent hours looking at how I traded last month. And decided, I was a slacker.

This site is a lot of fun for me. Keeps me communicating about what is going on. And then, because it is always a running conversation causes me to get so much out of it compared to if I were just keeping a diary. I have others to answer to.


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David_R View Post
Gary,

Thanks for your comments. I really appreciate it.

The 30 minute chart with the fib projection makes that move today look like business as usual, but in real time it would be hard to go long in the face of a bar like that. Understanding the context would make a difference though. Higher TF support, uptrend, dipped below the prior days low and closed back up above. I've read that Richard Wyckoff used to say the large operators would drive the price below support like that to accumulate and then take the equity higher. The action fits that theory.

I've asked you this before, but LSP=Last significant pivot? Would the LSP be the pivot that was even lower?

Since the Inventory report is tomorrow instead of today I'm curious what is setting up. It wouldn't surprise me to see a continuation higher. It may dip first, but then up. We will see.

Thanks again.

D

In real time, it IS hard to do. But, that is where the indicators come in. As much as I was aware of most of what I posted for you, while it was occuring, as familiar with it as I feel I am sometimes... I did not buy 94.40 on the 6-range (the pullback to the T3 crossover). Some days I might take something like that, but it is tough to do, and I missed the morning and was not feeling up to speed quite yet.

I don't know about how much manipulation there is. Naive maybe, but to me, I think of it as the washouts might not be as controlled as they might be anticipated. Not that they don't get a good push here and there.

There are traders who actually use crude oil. Sounds bizarre, I know . But, there is a price where buying makes sense.

LSP is Left Shoulder Pivot. Classic context is in a Head & Shoulders pattern, in the example I showed you it could be a H&S (inside a larger corrective pattern), but I use it to define a major pivot on that side that is not the absolute low. Often the "Head" is nowhere to be found, but between prior lows/highs there is this other point. When they are that obscure, the response is not as good most of the time. When they line up with time, like the one today, they sem to function better. More traders see them is my belief.

As far as the EIA tomorrow, crude is trying hard to make it's case for a base in the 94 area, and this may be the leg that does it. But right now I am just as interested in the ECB and later Draghi comments. There's the potential for a lot of news, and a lot of interpretation. To me, tonight, the chart is bullish, CL is aiming to take out 97.40. That could mean nothing tomorrow.

 
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The next 6 days could make or break markets - Michael Casey's FX Horizons - MarketWatch

Wednesday September 12th... and, it is EIA day. That could be something to see.


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