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The 22 Days: A Price Action Trader shares his Journey
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The 22 Days: A Price Action Trader shares his Journey

  #21 (permalink)
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Day 7: Forever a student of the markets, the importance of HUMILITY

Humility is the solid foundation of all the other virtues.

– Confucius

It was what saved me today from erring for a straight fourth time.

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ABB 2-min chart: The 2-min chart works better than the 5-min during the first hour

09:16 The first bar was a climactic reversal bar, hence placed an order to go short below its high i.e. at 836.70 and was filled on the next bar where I also entered a stop loss order at 837.20 (i.e. 0.5 above the fill – a money stop).

09:18 This was an imperfect inverse pinbar and hence stayed in the short trade.

09:52 Huge bear bar closed at 830.30. Since it was a bear with a shaved bottom more follow through was expected by I took profits on half the position at 831 and left the stop order as is for the other half.

10:18 Second leg of the bear with a wedge shape, hence took profits of the other half of the position.

For the next three hours the market spent time in a grueling trading range that was getting tighter hence could feel a coiled market about to spring, but could not fathom in which direction. It looked like a triangle formation which would drop down off a sheer cliff and hence was preparing myself to go short. Also due to the huge pinbar on the daily whose extreme was at 842, it seemed plausible to assume that the market was headed for a fall.

12:56 – 13:04 - I had gone short at the iii at 829 thinking the coil would break downwards and was getting more and more confident – till……

NEVER STOP LEARNING… NEVER EVER STOP LEARNING

I had pulled up Peter Brandt’s website http://peterlbrandt.com/ and was reading the post “Shucks, it’s only Corn” – the first lines held on to me, quoted below

The Corn charts are extremely compelling. The market is setting up for a $1 per bushel or so move. The question is: “In which direction?”

But what completely captivated my sight was the corn chart itself. It was exactly similar to the chart I had just come out of so confidently with a short bias. (Chart Copyrights of respective owners)

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The conclusion he was coming to was “……. all [the above] stack the deck for a bullish resolution in the Corn market.”

There was a similar stout support line on ABB right now at 825 and the market had twice deflected all attempts to push below it – a breakout pullback was the third attempt - the third attempt barely reached 825.15 and the market pushed higher.

Similarly, the market ticked one tick below this breakout pullback and printed 825.10 before rushing higher. It was a clear double bottom that my short-only eyes had missed.

Also, even though I was following my rules till that point since the major bear trendline had not been broken, various minor trendlines had been continuously broken and a tiny break had occurred at 12:14 when the price ticked up to 830.95.

The First Quick Thing - I immediately covered the short positions. Luckily only a few ticks loss.

The Second Quick Thing - At 13:16 a pinbar formed with its high at 830.20 and its low at 827.55. A buy order was placed at 830.30 and a corresponding stop loss order at 827.

13:38 The stop loss was hit, but the resulting bar was again a pinbar. I remembered that I should have avoided the earlier trade since it was barb wire, but then took this one as there were trapped shorts who would definitely drive the market higher. I placed a limit order to go long above 829.70 and a stop loss order at 826.

13:40 Filled! (Second second quick thing!)

15:06 The market had a reversal bar and a bull trendline had already broken hence I placed a sell order at 848 which was near the extreme of the earlier trend which was 848.7, and which would probably be a breakout test on a lower timeframe chart such as a tick chart.

15:20 Filled and all positions sold at a profit.

15:25 Used my SWING portion of my capital and sold a futures contract. Probably not a very great place to go short, but I think by this time I was elated and had forgotten what Confucius says at the beginning of this post.


Humility. If you want to learn a lot about yourself, welcome to the markets.


Last edited by iqgod; March 9th, 2012 at 07:23 AM. Reason: Formatting
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  #22 (permalink)
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Day 8: Crying in trading - will you join me right now?

Elation is not a good strategy,and it was proved right at the opening bell of the market when my broker's risk management system neatly took me out of the market at its very top.

I watched in agony as the market them proceeeded to tank a full 20 points in my favour.

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There is no crying in trading.Especially when you enter without a clear setup, and without waiting patiently for your plan to trigger an entry.

This now also means I am deep in red having lost around 10% of my account and will have to papertrade for the rest of the week on my swing portion.

The EURUSD trade played out nicely, with the market coming down and executing my orders at 1.3084 and 1.3090. The ride is showing a nice profit and I have marked the trendlines that were used to trigger the trades.

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  #23 (permalink)
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EURUSD - the payoff of waiting for the market to come to you


Entered long thrice - first 1.3100 second 1.3090 third 1.3084

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Sat through the pullback of the scary looking pinbar, but followed plan since there was no trendline break prior to the pinbar formation and hence stayed in position which has paid off. Yippee!

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  #24 (permalink)
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Day 9: Profit at end of day, but took bad setups


Perhaps the market might be wanting to make me a philosopher.
I took Bad trades today but got the honors of a Good guy – i.e. I was profitable.
I was profitable because a few setups I took were pure gold and they offset all the losses of earlier trades.

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10:00 Missed the first good trade of the day – I could have gone short at one tick below the nice pinbar’s low.
10:30 Made the first mistake of the day. Entered a long swing (!!) position on this bar – took an UNLCEAR setup by fading the EMA Gap Bar on the 2-min chart. This was 1. Barb-wire 2. No EMA Gap Bar on 5-min (1 and 2 in hindsight, but a pathetic trade nevertheless).
10:45 Exited the position with a loss.
Takeaways:
No entering swing positions on 2-min charts – strictly on 5-min charts
The obvious one last: Do not fade 2-min gap bars

02:45 Entered on a pinbar break. At this point traders must only look to buy because a bear trendline has been broken earlier and the low has been tested. This was correctly followed, slightly late though, had gone for an expensive toilet break. J
3:30 Exited almost at market close with a windfall profit. However, elation had set in and made the earlier mistake of immediately going short. Probably this bad trade might dig into today’s windfall.


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  #25 (permalink)
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Day 10: Vengeance: EURUSD takes back all profits, goes red and near stop but misses

The EURUSD trades taken at 3.1000 etc. were wildly profitable, but since they were paper trades I did not monitor my positions at all. Let's review these trades:


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This does diverge from the seriousness of the trade factor but I was sort of in a buy-and-hold mode mainly because of lack of time to monitor these positions.

A few astonishing things happened over the past few days starting from 7th March:

1. I entered long on a limit order at 1.3100 and was filled at 1.30995
2. The price moved in my favour in 1.3290. That is 190 pips of sheer profit left on the table or $190 on one full contract. No time to enjoy the sweet fruits of labour as I had not checked my price charts till 12th March.
3. On 12th March price was hovering at the same magical number of 1.3100 and was heading even lower. I was bullish as projected at that time and hence I entered limit buy orders at 1.30900 and 1.30850. Both orders were executed and price ticked up again to 1.3191 giving 90 pips of profit per trade, i.e. a total of $270 on the three contracts I was long on. On the table again since the market started ticking lower from that point.
4. The price dropped like rock and hit 1.3030 but surprisingly did not hit my stop which was placed at 1.3025 (which I referred to breezily at that time as much much lower than 1.3050)
5. The bar where I placed the three red arrows was deemed as an ideal place to go flat – mainly because the huge bear trendline is still not broken – thus a round number such as 1.3000 or 1.2950 would be a good place to initiate long trades. Repeating the rules: Never trend countertrend until a major trendline has been broken, and even then only trade with trend till there is a retest of the old trend’s extreme. (an Al Brooks quote)


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I also realize with this post what a great thing it has been to start a journal here, contest or no contest. Analysing the trades for the benefit of other traders (rather than benefit, I can use the word for ‘review’ of other traders, because there are greater eyes than mine who see these posts too) makes oneself a much better trader and brings to light the nuances which otherwise would have been lost in a will-o-wisp.

Hindsight shows I traded great, but hindsight is not a trader's tool :-) here is the chart while I was typing this post:

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Last edited by iqgod; March 14th, 2012 at 10:56 AM.
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  #26 (permalink)
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Days 10 & 11: Madonna and Trading with Frozen Candlesticks

I don’t quite know how to start this post. For the past two days I have been taking setups with low probability, not waiting patiently (which used to be my number one strength, see plan). I have been procrastinating writing this - the reality is that I have not followed my plan and momemtary lapses of discipline have been cosstly.
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As the chart shows, I took a HUGE number of trades in the chop area. Paid my broker handsomely. Put simply I committed the cardinal mistake of OVERTRADING.
The other mistake I made was the good ol DEEP FREEZE. Observe how I bought a top on 16 March at 13:55 and then sat through some ugly action where the price fell to the downside off a cliff. And subconsciusly I was ANTICIPATING a fall earlier and don't know why I took the flimsy trade.

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As price did the Great Indian Rope Trick by rising in a seemingly solid manner after breaking a steep trendline and posting a lower low, and then stayed above the 20 EMA for a dozen bars I got some stupid courage and bought a futures contract with my swing capital.
And then I watched. And watched. Price did a merry waltz and I was its partner. It would fling me, tilt me, left me gasping but I would not let go its hand. Overtrading was like going around the edges of the ballroom asking the shy women to dance. Hardly a thing to get a kick out of. Now this was the opposite – a non-stop sweaty fling all over the place with all the excesses. Neither of it was fun.
An old habit. I now need to pull out my capital out of my broker’s and hoard it up in my locker until I am profitable on paper again.
I think I should have Madonna playing in the background while I trade. What else but the song FROZEN.
I’m frozen….
You only see what your eyes want to see
How can life be what you want it to be
You're frozen When your heart's not open
Oh no… I am still long and will be margin called by my broker again on Monday I guess. A trading account’s funeral is no place to burst into song.

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  #27 (permalink)
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Story of Hope - Will I EVER make it as a Trader? Learning from Defeats (13,14,15,16)

Is Trading Profitably (capitalized) just a temporary phenomenon? After being a trader for more than four years, after having used many strategies, even seemingly great ones which are based on price action, it took me just a fortnight to give back all my profits and go deep into red.

When I entered trading with its magical illusion of untold riches, easy money and a life full of free hours to do whatever I wanted to do it all seemed so very easy. Now I realize that it is the hardest easy money I ever made.

I discovered trading in the middle of the recession, when the intraday market moves were wild and ‘glacial’ (as dbphoenix had once said) – no order seemed applicable and all you had to do was become adept at riding wild beast and – I could easily get off the beast before it threw me off its back. How could I have missed all the action all these years of my life slogging away at jobs and obeying masters when the free life awaited me?

I entered the arena full of punch and ready to take on the market. How easy it all was. Within minutes I had made thousands and was secretly laughing at myself at the great foolish world passing by like one great herd that went to offices, slogged, made a career and brought home a regular pay to raise a family.

The random luck did not last. I lost more than I had ever made over a period of two weeks in five minutes. Needless to say I had become cocky and had increased my position size manifold.

I discovered trading books. I ‘learned’ that this was a necessary phase – that I need to pay the market its ‘dues’ before I could beome profitable. And how could I become consistently profitable? By learning the ‘secrets’. That was how most trading books were titled anyways. It sank in that I had to be on the ‘other’ side to make money. I couldn’t be an ‘insider’ nor could my money be ‘crooked’ or ‘manipulative’ but I ‘realized’ that everybody in the game making money ‘knew’ what was going to happen.

Enter technical analysis.

The crystal ball.

The ‘secret’.

I locked myself up and I toiled hard with the books (too many to name, literally hundereds of books have passed under a pair of eyes multiple times). I learnt that indicators are ‘evil’ and ‘price action’ is the way to go. And when I actually tried out my new found knowledge it all seemed to work.

Armed to the teeth. Ready to go into battle.

Except.

I had forgotten that a good soldier needs chinks-free armor.

Such was my confidence that I entered and lost. Entered and lost. What would appear to work on paper suddenly became an anxious ‘please work, pretty pretty please work’ plea to the markets.

Money flew even more from my account to the market – the confidence gained with bits and bits of knowledge was turning me into a desperate person with a desire to get rich quick.

It would work once twice thrice and then I would get cocky and take it another time (where I would have increased my size four-fold) and immediately go under water. It was freezing down there. No stops. No sense of reality. Just looking frozen eyed with hands turned into cement blocks unable to click, eyes unable to cry for the fear of missing a reversal – it will come now, soon, and I will be richer and free.

In fact I gave away all the freedom in the world in this nauseating quick ride to ‘riches’. I became a walking ghost, unable to think rationally. A possessed man who would think of nothing but the markets. Perhaps the direction was right – I was learning the ropes, but I was learning nothing about myself. All my dormant negative qualities had come into play. The market exploited all of my insecurities.

I then entered a Utterly Confused phase. I had such acute knowledge which I was sure no one in the world possessed (really? With all the books bought from Amazon?) I would enter an order and quickly take a tiny profit and convince myself that I did the right thing because so many things were looking dicey about this trade. I would not give it time to move at all. My five second trades became a joke at the brokers’ offices when I was on the phone. A surprised female voice would say ‘But sire you JUST bought this and now you want to sell. The market is still open for another four hours – why don’t you wait?) But no, the evil forces would get me. By this time I was using stop losses. But they KNEW where my stops. Or so I thought. Why else would the market momentarily slide off a cliff, dive into my stops and then go straight up to its platform where it had bungee jumped from? SOMEONE was tipping off SOMEONE and all these SOMEONES had greater resources, were closer to the market forces, or were somehow scheming and were on cohorts with each other to get me. They would always be there lurking and trolling and would personally empty my wallet, just like a mugger on the lookout for a single lone person walking down an empty alley.

Finally I thought of giving up. it was a losers game anyway. All who made profits were insiders anyway. Industrialists. Or politicians who made interest rate cut announcements. Or manipulators and operators who sold stocks in round-robin spirals and then suddenly brought them down by ‘bursting the bubble’. What was I doing in their world donating my hard earned clean white precious limited money?

I became the butt of jokes of my colleagues. ‘So how much money have you LOST this week’ (Chuckle!)

Now I wish to thank them for their insults. They were what kept me going when no hope was left.

I discovered many things all at once. And they had nothing to do with technical analysis though it was the bedrock and could be trusted because all of these people used it. And these people were no ordinary people. They were harbingers of hope – messiahs who had the power to heal my wounds.

I healed after long therapies.

The words of some people became precepts, tenets. They were conduits who enabled me to make the LEAP OF FAITH. That something as flaky as technical analysis could be trusted as a framework to take decisions. They made me write a plan. They became my Drona (a guru in Indian mythology) in self-study. They made me learn money management. I however kept avoiding a few things here and there and thought I could ‘beat the markets’. I do that till this very day. I am not yet a trader. I just think that I need to overcome a ‘bit of’ a psychological weakness. I disobey my rules I have laid down so firmly. The markets then teach me sternly. Sometimes they reward me for breaking the rules, but I soon realize that I am a goose who was being fattened for thanksgiving.

I discovered dbphoenix, Wyckoff, Semantics of Magee, various members of the James16 group, deep and hard to decode Al Brooks (but priceless and rewarding when you have the ball of wool unraveled and woven together again!). I ACQUIRED them but had no taste for them (they were all bland, not nearly as exciting as all the ‘secrets’ trading books) ,earlier until I tasted these bitter truths.

Like life I learnt that the values in markets remained the same. The teachings became a religion, the books became scriptures, analyzing the markets was a stream of consciousness thing. All the wisdom that parables taught in the real world was applicable to the markets manifold.

And this is what happened in the past four days. The ominous rumbles of getting to a blown account were almost apparent, but I have been unable to stop the destruction. No amount of technical analysis in this world can help me if done in such a hotch potch, bit by bit, patchwork methodology. The plan has to INTEGRATE all the necessary things and tie them into an elaborate knot - a proper unambiguous strategy for entry and exits, money management and many elements of discipline defined to their very minutest details. One loose thread and the parcel of your pile of money goes down the never satiable black hole of the markets.

I have blown yet another trading account in the past four days. And I know that I can’t love myself because I have no one left to blame.

Sigh! Sometimes I wonder if the investment of so much time, energy and concentration will EVER payoff (a voice in my head says ‘It will, it will, you need to …..’ ) Many voices start talking here. A mind becomes a schizophrenic entity before it reaches a pure state of realization. How far beyond that state is I do not yet know. But all I know is that I have made my journey much harder than it needs to be by being stubborn. By not flowing with the markets. Like a stiff oak tree which comes crashing down in a gale rather than like the reeds which bend with the wind in the willows.

I can hear the market burp greedily and whisper to me ‘So long and thanks for all the fish.’



I am posting my charts of entries and exits, where it is painfully obvious how I entered at the exact wrong times, had no stop losses and donated teh maximum amounts of money that were possible in the range of the day just because I thought that the market would 'come back' and its 'just another pullback before the major reversal'. I have been too depressed to post for the last four days.

Your warm comments will be most welcome. Even if they are a friendly way of telling me I am an idiot.

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  #28 (permalink)
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Hey IQ,

Very painful to read, IQ... but reality for most of us out there. It's a struggle and the margin for error is close to zero.

If there's a ray of hope, it's that you are NOT trading the Al Brooks setups correctly. Study his 3 new books, particularly the Reversal one. Look up the chapter on best trades. Pick 2 types. Study them religiously, become an expert, paper trade them profitably for a month... AND THEN go back to live trading and kick some ass.

"...the degree to which you think you know, assume you know, or in any way need to know what is going to happen next, is equal to the degree to which you will fail as a trader." - Mark Douglas
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  #29 (permalink)
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IQ - thanks for your honest post, hopefully you can take solace in knowing you're not alone - many (most?) go through the stages you've been through. A year or so ago I came across the following post (from FB123) and I found it helpful. I don't know you at all so please don't take this advice as prescriptive - its just something that resonated with me. If you find it helpful, great - if not, well, it didn't cost you anything...:

...................
You are missing one key thing that you need to be a successful trader. I wrote about it in another thread, but I'll state it here again.

What you need, and what you lack, is a "shut off switch". You need an internal mechanism that makes you STOP TRADING when you are screwing up. It is amazing what a difference a simple half hour break can do. If you had this mechanism, and if you had actually walked away while you were losing, you would have regained your sense of perspective and either come back successfully for the rest of the day or else taken some time off and eventually come back the next day, or the next day after that. Instead you continued to trade and took large losses.

The only advice I could give you is to actually visualize yourself placing a bad/stupid trade. Visualize yourself getting angry about it, and placing another one, causing even more damage to your account. You need to visualize this scenario because it IS going to happen.

Now continue with the exercise, and visualize yourself stopping and walking away. See yourself calming down, and then returning to the computer in a restful state of mind and doing whatever needs to be done.

There is no point in only visualizing positive outcomes and great trades. Those things are important, but if you don't prepare for and practice those times when you are going off the wall, you will not be able to handle them when they occur.

It is ridiculous to expect that you can trade without making mistakes, and equally ridiculous to think that you will never get mad at yourself. The #1 thing that successful traders have is an internal "self monitor", that allows them to analyze themselves (not the market), and stop themselves when they are screwing up.

When you screw up, the goal is not to fix whatever mistake you just made and get the money back, the goal is to make yourself WALK AWAY. You can't possibly fix your mistakes in an emotional state of mind, so step #1 is getting away from the computer.

If you ever decide to trade again, make sure that you spend a heck of a long time visualizing and practicing what I said. You need an internal shut off switch, and if you don't have one naturally, then you'll have to practice getting one. If you can't do that, then for god's sake just walk away from trading because you are 100% doomed without this ability.

(And by the way you're absolutely right, the market IS literally out to get you. It is nothing more than all the other traders in the world doing actions that are specifically designed to screw you over and part you from your money.)


... one more thing I will add, for those that are trying to learn how to do control themselves properly:

Take a look at Tiger Woods. The reason that Tiger is the #1 player in golf is not because he is more skilled than the other players, or because he can hit shots that they can't (although both things happen to be true).

The thing that sets him apart is his mind. If you watch him play, you will see him hit a terrible shot many times per round. Sometimes it's really bad, like 50 years off line and behind a tree. Whenever he does that, he lets out a loud curse, slams his club into the ground, and looks like he just swallowed a raw egg. The man is a perfectionist after all, and he expects every shot to be right down middle of the fairway, even though he consciously knows that this is impossible. This is very similar to trading... we all expect every trade to be perfect, even though we know it can't be. And that's why we get mad when we screw up.

The thing that makes Tiger special is not how he reacts to that shot, it's how he reacts to the NEXT shot. The next shot is always taken with a fresh mind, as though the last mistake never happened. And if he makes another mistake on the second shot, then he curses again - but the third shot is not affected, and so on. No matter what, he is always "grinding" his way around the golf course trying to shoot the best possible score that he can. I have seen him score 3 bogeys in 4 holes, and then pull himself together and grind the next 12 holes for par, followed by a finish with a few birdies. That takes a lot of mental discipline, because most people would fall apart after those first few holes went badly and wouldn't be able to grind out two thirds of their round just making pars after that, before the birdie chances came around. Many players would try to get those bogeys back right away because they couldn't stand the feeling, and would therefore end up pushing it and making even more mistakes.

Tiger also leads the PGA Tour in par saves, which is emblematic of this ability that I have described. A par save only occurs when you first shoot a really terrible shot or two and then pull out a really good shot or two to save par. There is nobody in the world that has ever been as good as him at this. Other players make a couple of bad shots, and before you know it, they are dropping shots left and right, doing stupid things, and shooting themselves out of the tournament, but he never does that. That's why he's almost always near the top of every tournament he enters, and why he has only missed a small handful of cuts in his entire career.

The next time you decide to trade, visualize yourself approaching the screen the way that Tiger approaches the course. Know that you are going to screw up, but make it your #1 priority to always clear your mind before the "next shot", or in your case, the next trade. Personally I try to visualize myself trading the way that he plays golf, which is why I have trained myself to immediately walk away when I do something stupid. It helps a lot.

Seek freedom and become captive of your desires. Seek discipline and find your liberty. - Frank Herbert
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Thank you so much for sharing. It takes a strong yet sensitive soul to bare it all. Now, at least I do not feel so isolated. There are people like us who are struggling to make the hardest "easy" money.
I agree w the previous post about the mindset being key in trading and I guess in any endeavor. I am reading Market Mind Games by Denise Shull who had a webinar here on futures.io (formerly BMT). It's a good book too re: treating trading as a sport. She recommends getting plenty of sleep, good nutrition, exercise and taking breaks from the screen. It just makes sense that you need 110% energy to focus on the markets. Of course this is all easily said than done but we are all works in progress especially in trading.
Thank you again for sharing, it is much appreciated.

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