It’s time to make use of the journal tool to advance my trading. Historically my trading has been elegantly brilliant and at other times so horrific and ugly that it should be encased in concrete and sent to the bottom of the Marianas Trench so that no human would ever have to lay their eyes upon it. This journal however, will focus on the present.
My long term trading goal is to take intelligent discretionary day trades consistent with my trading plan and chart set ups. Additionally the shorter term goal is to overcome exiting winners too quickly.
I trade one stock, US Steel, symbol X which has a daily volume of 11 million shares. The stock has good intraday range. Following the first few minutes of the trading day the bid ask spread is tight allowing the use of market orders. For regular trades I’ll position with 2 or 3 thousand shares. If I’m playing a gap within the first 5 minutes of the day I’ll enter with a limit order and 1 thousand shares as pricing can jump around without rhyme or reason the first couple of minutes. Tradestation is the broker and charting package.
Charts:
1. 89 tick with an 18 period and 89 period gapless moving average. A bar will paint if above an 8 period average. 1st hour high and low are also plotted. Chart is used to determine trade direction (up, down, or chop) and to measure pullbacks.
2. 55 tick with a 9 period and 30 period gapless moving average. A bar will paint if above an 8 period average. Chart used as a lead for the 89 tick and to fine tune entries/exits.
3. $Tick oscillator and advance decline line used to read market breadth and intra day broad market overbought/oversold conditions.
4. 60 minute chart with areas of support and resistance plotted with keltner channels, fib retracements, and pitchforks. Used to gauge possible longer term direction and target areas of support and resistance.
5. 5 minute charts of the broad market ETFs, SPY, DIA, QQQ, IWM. Just to see/know what’s going on.
Entry strategy 1: Buy or sellshort a pullback following the establishment of a new trend. Read a new trend from a moving average crossover on the 89 tick and position of price on a 60 min chart. Watch for a pullback to the 18 or 89 average. Looking to trade with the stocks trend. Always need to watch and decide if it's a trend or chop. Journal should help me to clarify my thinking more carefully about when this occurs.
Entry strategy 2: Buy or sellshort at a major area of support or resistance following a significant trend that also exhibits panic selling or buying capitulation. Important not to over use this strat and try to “pick bottoms or tops”. This pattern must also be confirmed with similar price action in the broad market as well as clear areas of congestion/support/resistance on the 60 min chart.
Entry strategy 3: Gap plays…determine if the direction is a fade or trade with the gap’s direction. Rules for this play will be specified after I figure them out…lol. Trades before 9:40 AM require some market ‘feel’ which I have not worked to quantify.
Exit strategy: Exit fully or scale out at a previous pivot high or low. Exits have been a more difficult part of trading for me. Looking to improve in this area and catch some bigger moves by allowing a longer term chart to set a target.
Stop loss: Tight..06 - .10. I’ve done some back testing which indicates that wider stop losses yields better results but I’m a novice programmer and don’t believe that I’ve been able to program the method well enough to account for the entries (ideally) being at a critical area of price action. My general observation is that if the trade doesn’t work quickly the probability of it working in my favor lessens. I can re enter if it sets up again although re entries can be dangerous as it invites revenge trades. Will always have a catastrophic hard stop loss above/below a previous swing high/low.
Psychological areas to improve:
1. Exiting winners too quickly. Ya…I can be on a hair trigger at the slightest pullback in price dismissing all of what the charts are telling me. Possible solutions: wait for some consolidation at a support area or an obvious capitulation. Scale out at that first impulse to close out and book a profit.
2. Be patient and wait for the set up to fully develop. Prone to ‘knowing’ what it will do before it does it.. ha ha. Believe that the public journal posting will help to mitigate this gawd awful tendency.
3. If I get ahead early in the day I’ll have a tendency to not take all the set ups that might occur later in the day. There really may be only 2-5 trades in a day. I can become too selective…a psychological issue that must be addressed. Conversely, if behind early in the day…I very well could start pushing trades. Well, at least I’m somewhat aware of the issues…this wasn’t always the case..lol.
Today’s trade shows a ‘too soon exit’, and I didn’t do this just so I would have an example to show. Not complaining about .14 in 3 minutes but my reasons for exiting were not based on good TA. Was thinking that the gap is just about closed and that it’s so nice to start the week with a winner… yada…yada.. Any explanation is a total rationalization. Lol… the low today came within .02 of a support/resistance line I plotted weeks ago as shown on the 60 min chart.
Hope to post everyday as trading is my daily focus but I do have other business interests which will take up much of my time this week and therefore limit this week’s trading and posting.
Thanks to Big Mike and all the contributors to this site…seems like a really fine place.
The following 2 users say Thank You to Future for this post:
Here's another chart I use but failed to post above.. it's a 5 min with 3, 8, and 34 ema's. This assists with filtering out some signals on the 89 tick chart. A possible buy signal is shown at the ellipse on the 89 tick. The 5 min however (at the ellipse) shows all price action and the shorter term moving averages under the 34 ema. The 5 min kept me from considering a buy signal at this point. You want some moving average crosses on the 5 min to confirm trade direction. This was at about 11:30 am today.
Good entry consistent with chart set up and rules. Got a quick .07 in my direction and then a pullback. Time of day should have suggested that this is the time for a quick exit or take ½ the position off particularly when this stock is not moving with the bullish market today. Then taking the tiny loss without a break of support at the 89 moving average = error 2. No clear exit signal…just some slight downward movement in the tick oscillator and it was not from an overbought level making the downturn less significant. Time of day issues say a little chop and slower movement should be expected and/or a little period of consolidation. Exits can surely be a thorn in one’s flesh.
An hour+ later and the stock has not broken out yet … may still be consolidating…may be rolling over…5 min chart shows nothing is happening worthy of a trade. Won't trade the last hour …made money today but clearly the potential was much greater.
Ha... X's low today so far is 28.16...my estimated target before the open (per above post) was 28.14 to 28.20.
Took the short trade and scaled out but staying with the trade a couple more minutes to
reach the target was the trade.... Will take some satisfaction in a winning trade
but need to hang in there a bit longer.
will need some mov avg crosses on the 5 min to start thinking long.
Then will take signals on the 89 tick.
Then away from the screens till Monday... :>(
hmmm...got the long signals along with everyone else in the market..
but no trade...if you're gonna trade put the phone on silence...that 'important'
phone call will come at the wrong time
Chart updates. If Wednesday's low proves to be a pivot then would expect to
have a bigger time frame bullish tail wind. Then would want to selectively have
longer hold times for long position day trades. If I was trading today would be
watching for some retrace of yesterdays move.
The following user says Thank You to Future for this post:
On Wednesday 02-15-12 US Steel had the 8th consecutive day of lower lows. Got me to thinking how often this happens. In the last 20 years, 8 or more consecutive daily lower lows has happened just 16 times for a total of .318% of the time. Kind of rare. Can it help my trading? Well I don't swing trade so can't use it for that. Can't say it will really help the intraday trades either as I'll trade if the signal is there...if not, no trade...unless I goof of course.
The numbers are interesting nonetheless and the closer you get to whatever ideas you have, whatever knowledge you can extract, the ratios you can determine, the feel you can develop....it just might add up to an increase in your edge.
The third attachment shows the % change on the next day, 5 days later, and 30 days later following the 8 or more consecutive daily lower lows. Can't say if there is a pattern that is worthy of a swing trade.
edit: in attachment 2, total days should be labelled occurrences
hmmm.. got caught in the chop early for 2 small losses and 1 b/e. Basically did not wait for the move/trend to develop. Now that we're moving.... no good pullback for entry...so will have to be patient. Patience from the get-go might have got me an entry into this move.
Errors exceeded positives today.. -.22
The fix...tomorrow's singular goal/objective...no iffy trades.
My charts will produce at least one clear, for sure A+ set up each day.
Following poor trade selection its tougher to take full advantage of the good trade.
For one day..wait, wait, wait for it. Hey, if it doesn't come tomorrow
I'll wait till Thursday.
Posting charts is the easy part...but here they are anyway...
