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Today I am going to detail my thought process a bit more in terms of what I was thinking and how the trades developed. Today was of course another day where the storm in NY affected CL trading. I assumed it would be a narrow type day with very low volume so didn't get to excited about big targets.
Trade sequence # 1.
Trade conditions. Price had just completed a pull back after a strong rally overnight. This is my least favorite set up in terms of the trade having runner potential. I assume the trade has really already run its course and this kind of pull back often leads to disappointment in terms of trend continuation. I got to the computer a few minutes after the lowest risk option had already happened. I am ok with taking the higher risk trade, I just need to acknowledge the extra risk and make sure its within my risk parameters. There were several possible entry locations available for both an initial entry and a scale in entry. Due to the storm and anticipated narrow range, I elected to stick with the initial entry.
This trade took a long time to mature. A normal day may have printed the same number of bars but it would have happened much faster. There was a lot of heat on this trade and I considered getting out at BE a couple of times. However, the premise of the trade was never violated and I left the trade alone. Eventually though, I lost patience and closed it at BE at one of the many times it gave me the opportunity.
I kicked myself for the exit and got back in, this trade also ended in BE after quite a while. I finally took the actual break out which ended in a full stop out.
That was how I handled the opportunity represented by #1
Trade sequence # 2.
This trade was more like what I like to see. A new high put in with an immediate failure to hold support. I also like shorts better as it seems like gravity makes the trade go faster most of the time. For me, this trade requires confirmation or you end up with an Al Brooks one tick wonder that ends in a stop out. So I wait for the confirmation and attempt to either take the break of the confirmation bar or perhaps once its broken, a better price while the next bar pulls back inside the confirmation bar. Mostly I just take the break of the confirmation bar. This trade did what trades are supposed to do, go quickly in your direction at least enough to get your first scale off and provide you with a risk free trade at that point.
In terms of targets, we were above the 50% level for the globex market which typically means bullish sentiment is in order. This translates into a target that is less than 4XR. I don't really care about the ultimate RR as long as I have a decent shot at getting my first scale off and then perhaps see if the support holds or collapses. In this case, support held as represented by the long narrow green box. I trailed my stop on the runner right behind the blue bar right at the bottom. I wanted to give the trade a little bit of room to perhaps break down more without giving to much back if I was right about support holding.
BIG PINK BOX SEQUENCE.
I got short in this area with the thought that perhaps I had misread the short price action and got out to soon. However, just as price got to the bottom and printed the blue bar, I recognized that the swing highs had been broken and a higher low looked imminent. I closed at BE on this trade.
Trade sequence # 3.
After the higher low was put in, I thought about getting long after the swing high had a close above it. Typically I would take the break of the confirmation bar just like the short in #2. However, I decided to wait a bit and see if there was a second mouse opportunity. Sure enough, a lower risk opportunity presented and I was able to get my first scale off pretty easily. However, my runner ended in BE after quite a while as my premise of a HOD target failed.
By this time, I needed to be somewhere so I quit trading at that point.
My net for the day was a full stop out, 2 break even trades, one full trade completed along with a 1st scale plus a BE. Net dollars was profitable within my "daily average" goal. A bit less to be sure but close enough.
Not the best day for trading I admit, but in terms of price action, it looked just like all the other days. This type of price action is very typical and can be repeated over and over again. I realize there are more than one way to trade this price action and my way is probably less than optimum in terms of risk but its what I can easily see and so I go with what I can see.
For the most part today, my emotions were in check. However at the very beginning of the day, I was more nervous than normal for some reason. This soon passed and I was able to process price action rationally.
Tomorrow, I am looking for a directional move away from this area. Either a full on collapse or a nice rally away from what I perceive as support on the daily chart. This is the 5th day in this area so it appears about time to make a move one direction or another. I suspect it will be a rally and create a pull back on the daily chart.
My chart is pretty messy but its the way it looks once I'm done trading. I add the circles and numbers post trading but the S/R and trend lines are real time.
I think from now on, I will present my journal as more of a teaching tool than a personal journey journal. Not that I am a great trader and every one should listen to me but more from the sense that the teacher always learns more than the student. This journal provides an opportunity to present my charts as a teaching tool knowing I will get more out of it than the "students". I've made hundreds if not thousands of presentations and most of those involved some element of teaching. This is the first time I've considered doing it in written form. We'll see how it goes. Of course teaching involves more than just an entry method, it involved money management, risk control and dealing with emotions. These might be beyond the scope of what I can do here but at least for now, I can work on showing price action and how I reacted to it.
Simplicity is the ultimate sophistication, Leonardo da Vinci
Most people chose unhappiness over uncertainty, Tim Ferris
I agree with your teaching assessment whole heartedly.
My son wanted help with his golf game, so last year he turned to me to help him, as I have a lot of golf experience. In the last few years, I have really backed away from the game, so I am out of practice.
IN the course of showing my son proper technigue, grip, alighnment, stance, posture, takeaway, followthrough etc, I reinforced the fundementals over a few weeks again and again, with him, and, in the process, with me.
The benefit...my game improved, rekindled those fundementals in me, and now, my game is better than it has been in years. Not as good as when I was competative, but at least I am not stinking up the course.
And, it was very enjoyable. I was able to show my son what I love about the game, and my enthusiasm rubbed off on him, and resulted in further encouragement for me...motivated me to help him more...or at least think of ways I could help him improve further.
I dont play much more...but now I play a lot better than I have been when I do play. And thats enough to keep me interested in playing more than I have in recent years.
From a teaching perspective some would say not to show the mistakes. But for me, I am looking for the mistakes to learn from. I made the same mistake twice although in the spirit of just following price action, it could be argued they were just legit trades that failed.
Today I was looking to be long if at all possible as early as possible. However, I woke up to the tail end of a rally that happened overnight and so was faced with either an early short or wait for the longs to set up.
Trades 1,2 and 3
I decided to go with the shorts for the time being, second guessed myself, got out at BE, took a long, got a full stop out and reversed at the stop position. This trade is the mirror image of the short from yesterday in that it happened after a nice rally and the short went to the 50% globex level and reversed. I took profit at my first scale out and then trailed behind the swings. I would have had more profit had I exited at the 50% level but as a trader, I am trying to learn how to simply stay in the trade until I would rather be out or rather be in the market opposite of current position. This netted me enough to be profitable on the day.
Trade 4
This was what I thought would be the long I was looking forward to as the directional move away from support. I took the trade, got my first scale, and waited to see if it would finally break and run. No dice as I got trailed out.
Trade 5
Same trade as trade 3. 1st scale off, trailed out at swing high break.
Trade 6
In the heat of battle, I made a mistake here. I assumed it was short and to be fair, it did look like a decent short but in light of the bounce once more at support and my overall long bias, I should have been looking for longs here. Nevertheless, I took the stop like a man.
Trade 7
Finally, the ONE. There were a couple of opportunities to get long here once the levels were broken. I got my first scale off with a large second target for the runner, set the stop to BE and took my daughter to school. When I returned, found I had a break even trade after price had went almost to the HOD and then reversed. My trail stop would have gotten me out with a decent profit on this but I accepted the possibility of a BE trade when I walked out the door.
Trade 8
Another mistake almost identical to trade 6 with the same results. However this time I recognized what I perceived as a stop run after the previous rally. There was a fake long signal, a fake short signal and a V turn from the support area.
Trade 9
This was the one. I did not get my trade set up the way I like to see it but it do what I thought it should do if it was going to be long, just looked different than what I thought it should look like. So I took the trade, got my first scale off and extended my target out past the HOD. At this point, I am starting to run short on time, all my previous shots at the directional runner had failed and so even though I thought it would perhaps really run this time, I went with the fixed RR target and got that.
This last trade put me into my acceptable range for profit each day and got me within 10% of my weekly goal. Of course price ran much further but mentally I was finished after 9 trade sequences. At the end of next week, I should be adding a third position to the strategy but I need to make enough money to justify adding the extra risk.
This would allow me to take off a position at the obvious areas of support/resistance or fixed RR and let a smaller portion run if it breaks like it did today.
Lessons from today.
As always, stick to the trading plan. Follow the signals, be ready to bail if the trade looks weak. You can always re-enter. Be patient with winners but understand the patience might result in a BE trade after having been up enough to satisfy your trading requirements for the day. Keep swinging the bat. I was certain price would rally today, especially after I saw yesterday's high broken and I kept taking the longs. The shorts I was watching really close for signs of failure because I knew at some point today, I wanted to be long for a runner. Keeping the losses small meant I could take each trade as they presented themselves.
Simplicity is the ultimate sophistication, Leonardo da Vinci
Most people chose unhappiness over uncertainty, Tim Ferris
I started the day prepared for more upside movement after yesterdays break above resistance. Instead, it was full on failure to the short side.
Trade 1
I have what I consider to be "inside" levels. These are intermediate levels that occur in a move. #1 is a demonstration of this. Its basically a failure to continue a trend after a pull back but a new full trend is not established yet. Many times these do lead to new trends being established but not always. In this case, I took the short, exited at 1XR +BE. The new short trend was not established and I wasn't really expecting one to develop either. So I wanted to be out quick if it went against me. Price had already pulled back to the 50% globex and I was not really sure about this so best to exit fast.
Trade 2
Trade 2 did what I thought it should do as possible trend continuation. It hit the trend line, broke the descending trendline, it cleared some congestion, above the MA, etc. All decent signs. This trade resulted in a full stop out.
Trade 3
Broken trend line to the down side, broken support with confirmation, failed long. All good signs. At this point, I reversed my bias from long to short and identified a potential target as the LOD. This area had already shown significant support over the last few days and I was pretty sure we'd go there again. However, do to my long bias on the higher time frame, I gave no thought to the idea it might break through there and continue to sell of the way it did. Therefore I was unprepared to extend my target zones out any further than the LOD. This trade went off as planned with the obvious exception that I exited way to early. However, I did exit this trade per my plan and I allowed the trade to play out fully instead of closing it when it stalled at various support levels.
At this point, I stepped away for a while to savor my victory.
Trade 4
Price found some support and created what should have been my short runner exit point. Basically a possible reversal to the upside with a swing high broken and a minor trend line created. Of course this ultimately failed but the set up was there and would have qualified as both an exit for the short and an entry for the longs. I did take this as a long, 1st scale achieved and second one at BE. That failed and at that point, I called it a day. Trading small size like I do, these two trades combined made for a decent day today. Of course there was a short signal right after that but I had to leave the office and so my trading day was over.
In hindsight, I suppose I should have allowed the runner unlimited room to run. When I can add another position, I think I will reserve that one as the home run option. I find I often get the 1st scale along with an intermediate one somewhere between 1XR and infinity. Mark Douglas recommended always trading with 3 positions that allow for an immediate reward of some kind, a bread and butter trade and then a home run option. On days like to day, that home run would make more than 3-5 regular trades. I am working toward that. Soon I think.
Simplicity is the ultimate sophistication, Leonardo da Vinci
Most people chose unhappiness over uncertainty, Tim Ferris
Amazing to me that we went through the EXACT same trading day today... both in analysis and in emotion. I had a few failed longs, was in drawdown for the day, then got a massive short winner. I changed my bias to short right when you did. I also took a break and walked around outside after the big short winner. My decision to take a break was more out of emotional necessity than your "savoring of the victory".
Just thought it was really interesting. I was reading this, and it may as well have been my own journal! Keep up the good work. The only thing that was different in our trading today is that you're more selective than me. I try and scalp a lot in between the major moves. Seeing your selectivity inspires me to keep improving my own trading.
The longer I trade the more I realize that letting the winners really run is the real key this game. It accomplishes several things.
1) It keeps your winners larger than your losers.
2) It provides a sense of emotional victory that you "caught the big one". If you do let it run, you have a sense of accomplishment.
3) Because you are in a trade for a longer period of time, there is less opportunity to make foolish mistakes by taking trades that may perhaps be less than optimum from a scalping standpoint but are just noise in the larger trend.
4) It can provide opportunities to scale into a move thereby increasing your win in terms of dollars but if done properly, does not increase your risk. (I'm still working on this one.)
I'm sure there are other benefits as well but these are the ones that occur to me right now. All this being said, I'm sure there are those that disagree with me regarding the scalping issue. I used to want to scalp and I do take the smaller targets in the form of 1XR for the first position. But thats just so I can get a risk free trade which allows me to manage it better as it develops. That first target is often but not always filled on the initial thrust so it usually happens quick. Its the longer runner that gives me emotional fits if there is risk involved.
Cheers
Simplicity is the ultimate sophistication, Leonardo da Vinci
Most people chose unhappiness over uncertainty, Tim Ferris
I had a loser day yesterday, never really got in sync with what the market was doing. I took my signals but never really got good follow through. 2-3 stops in a row is enough for me. Quit trading a good percentage before my daily stop.
Different story today.
Trade 1
This was a short that set up a few minutes before I got to the charts, there was an opportunity to get the same price as the original set up but I had a long bias and instead of taking the short and trailing out, I opted to wait for a long set up. This was still a good set up to have taken. Target zone would have been previous day's high. (purple dashed line)
Trade 2
Price made it to the support area, the previous HOD, the globex 50% level and just far enough to shake out weaker longs, then it failed to go down any further and the broke the small swing to the upside. I got lucky in that I was able to get a price several ticks better than my normal entry type which helped reduce the risk a bit. It also made it easier to get my first scale as well.
I scaled out twice with a runner for at least 100 ticks. After the final push up, many small bars were printing up there and I didn't like how small the bars were. So I trailed out using the two blue bars back method. This netted me 71 ticks on the final position.
I had planned on adding to the runner after it broke the wedge just before the opening, however, I completely forgot to add it. To bad as that would have added nicely to the totals.
Trade 3
I took a break after trade 2, took out the trash, etc. I got back after the short had set up and wasn't interested in chasing it so I let it go. It was still good for about 30 ticks from that point but I really dislike chasing trades.
As I write this, price is trying to break back to the upside. We will see what it does from here. Regardless, I will not be part of it.
Simplicity is the ultimate sophistication, Leonardo da Vinci
Most people chose unhappiness over uncertainty, Tim Ferris
