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Pajot's Trading Journal

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  #71 (permalink)
Toronto, ON
 
Experience: Intermediate
Platform: NT
Broker: IB
Trading: ES, CL
 
Posts: 148 since May 2010
Thanks: 13 given, 38 received


aquarian1 View Post
"Now, identifying the type of day might be a different story" - le vrai mot

"My strategy is a proxy to many strategies" - sorry I'm not clear on your words here

"my code "falls" for signals that work on days with wider ranges, trending or not. I have code for trading ranges, but not for narrow ones" - In essence a wide ranging day can be though of as several minor trends, up and down within the range -assuming the range is wide enough. So for example an "N" day is three legs. (Certainly not the same as an upslash day.)

Hey aquarian1!

What I mean by "proxy to many strategies" is that my strategy is not looking for one setup, enters on the signal, exits on some criteria. I have a collection of reasons for entries. Some are related to horizontal levels, some to trendlines, channels, measured moves, gaps, breakout tests, TICK, and so on, all ordered by the importance I assigned them. Subsets of these "atomic" strategies can be productive during days of certain type, but they are not clearly identified as working only during one type of day. Everything is controlled by a single "mother" strategy, the proxy I mentioned. I hope this clarifies my words there.

Regarding the types of days, I like how AB (Al Brooks) identifies them in his books. I don't have a problem seeing what kind of day is in front of me after the fact or after a big chunk of the day has passed. Instead, I am looking for telling signs within the first bars about what kind of day is developing from here.

I think some of the elements to look at are:
- open gaps, trend bars
- volume (cummulative delta)
- the size of the pullbacks
- % overlap between bars
- how it behaves on breakouts (of bars and of trading ranges)
- higher timeframes channels
- opening gap
- swings high/low and their sequence.

I think a combination of values for these entities would offer the footprints for all types of days.

Of course, in case I wasn't clear, my problem is how to do that in code, too.

I may start by going backwards, meaning I can record the footprints for all the values of these entities for a large number of days and, by manual assignment, I can "teach" the code what to "see" when the combinations repeat in real-time. This will practically be a sort of supervised machine learning, where I feed days after day of tick data along with the levels in the set of entities, generate a classifier, and apply it to future sets of data, making sure to refine it with new findings. It might work.

Or I can write the classifier from scratch, with the problem that I don't know how to define a day from the values of the entities listed above.

What do you think about the list? Would you add anything? I wonder if anyone else cares about the type of day or only about the bars in front of him/her.

It's funny, but a friend of mine referred to the upslash day as a melt-up day. Someone should write a slang dictionary for trading people.

Cheers!

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  #72 (permalink)
Toronto, ON
 
Experience: Intermediate
Platform: NT
Broker: IB
Trading: ES, CL
 
Posts: 148 since May 2010
Thanks: 13 given, 38 received

ES is still running in Sim and I like some level for shorts above: 1386, 1389.25, 1393.25.

I had my first real money trade in a long time. Entered in QM at a perfect level for a short, 107.25, I had some $160 on it, was greedy and it got me out at break-even. I actually had the stop at +1 tick to cover the commission, but there was slippage. I can't catch a break . Another confirmation that my levels are good for a quick sure bounce, not for big profits...

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  #73 (permalink)
Market Wizard
Point Roberts, WA, USA
 
Experience: Advanced
Platform: IB and free NT
Broker: IB
Trading: ES
 
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Pajot View Post
Hey aquarian1!

What I mean by "proxy to many strategies" is that my strategy is not looking for one setup, enters on the signal, exits on some criteria. I have a collection of reasons for entries. Some are related to horizontal levels, some to trendlines, channels, measured moves, gaps, breakout tests, TICK, and so on, all ordered by the importance I assigned them. Subsets of these "atomic" strategies can be productive during days of certain type, but they are not clearly identified as working only during one type of day. Everything is controlled by a single "mother" strategy, the proxy I mentioned. I hope this clarifies my words there.

So does this mean you have a number of sub-strategies and each one contributes on a weighted basis by level of importance to a signal "buy" "sell" signal?
Or
That various substrategies are bought into play or not (in a binary fashion - on/off) controlled by the main governing strategy?

Ian

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  #74 (permalink)
Market Wizard
Point Roberts, WA, USA
 
Experience: Advanced
Platform: IB and free NT
Broker: IB
Trading: ES
 
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Posts: 3,926 since Dec 2010
Thanks: 1,480 given, 2,510 received


Pajot View Post
I don't have a problem seeing what kind of day is in front of me after the fact or after a big chunk of the day has passed. Instead, I am looking for telling signs within the first bars about what kind of day is developing from here.
--------------
I think some of the elements to look at are:
- open gaps, trend bars
- volume (cummulative delta)
- the size of the pullbacks
- % overlap between bars
- how it behaves on breakouts (of bars and of trading ranges)
- higher timeframes channels
- opening gap
- swings high/low and their sequence.


Hi Pajot,

I read a long post #14 where you asked how could you tell an entry would be guaranteed to have 100% chance of a 1pt profit potential (PP) before reversing. And you have a five minute bars at the beginning of the example.

Looking at the list you have above for identifying day-types early on I see a similar situation.

A story
Once a friend who doesn't day-trade, was asking me to explain what I was doing, that is how I was looking at the market. Part way through he interrupted and said:
"Why not write a computer program to tell you where the market is going?"

I asked him if he had heard of Long Term Capital - he hadn't.

Then I said:
"Do you realized that there are enormous banks and trading firms with:
  • Virturally unlimited trading capital - hundreds of millions of dollars to live trade test strategies,
  • Teams of skilled experienced programmers,
  • Money to buy the best computers and programming tools,
  • Teams of mathematicians and statisticians and bright MBAs CFAs to work on it,
  • Rapid access to many more data-feeds than you or I could ever imagine,
and they can't do it?

Different viewpoint
Please understand that I am NOT saying you can't beat them, but I believe that if you are going to you must do it differently from them. You can't play their game and expect to win. You are out-gunned. You must have a different viewpoint to develop different strategy. You must play your game.

So in your list the very first item "open gaps" is something that thousands of people look at.

You seem to have great programming skills. I'm sure you will have success if you step back from the problem and ask yourself how can I look at this differently than everyone else?

I hope it helps!

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  #75 (permalink)
Toronto, ON
 
Experience: Intermediate
Platform: NT
Broker: IB
Trading: ES, CL
 
Posts: 148 since May 2010
Thanks: 13 given, 38 received


aquarian1 View Post
Hi Pajot,

I read a long post #14 where you asked how could you tell an entry would be guaranteed to have 100% chance of a 1pt profit potential (PP) before reversing. And you have a five minute bars at the beginning of the example.

Looking at the list you have above for identifying day-types early on I see a similar situation.

A story
Once a friend who doesn't day-trade, was asking me to explain what I was doing, that is how I was looking at the market. Part way through he interrupted and said:
"Why not write a computer program to tell you where the market is going?"

I asked him if he had heard of Long Term Capital - he hadn't.

Then I said:
"Do you realized that there are enormous banks and trading firms with:
  • Virturally unlimited trading capital - hundreds of millions of dollars to live trade test strategies,
  • Teams of skilled experienced programmers,
  • Money to buy the best computers and programming tools,
  • Teams of mathematicians and statisticians and bright MBAs CFAs to work on it,
  • Rapid access to many more data-feeds than you or I could ever imagine,
and they can't do it?

Different viewpoint
Please understand that I am NOT saying you can't beat them, but I believe that if you are going to you must do it differently from them. You can't play their game and expect to win. You are out-gunned. You must have a different viewpoint to develop different strategy. You must play your game.

So in your list the very first item "open gaps" is something that thousands of people look at.

You seem to have great programming skills. I'm sure you will have success if you step back from the problem and ask yourself how can I look at this differently than everyone else?

I hope it helps!

Hey! I enjoyed your message a lot and thank you for the kind words.

It sounds like a nice good story to tell your grand kids one day, but I don't find the premise to be correct. The big firms are actually profitable big time. One of the ways to benefit is to get in their way and feed off their crumbs. Of course, we all hope for more like MF Global to reach our targets and that firm is a good example of how good institutions can be.

I don't think I am at a disadvantage when it comes to programming, knowing my skill and experience. I am being objective, not pretending something I'm not. I actually have to be better than them, because I don't have the comfort of almost unlimited capacity for doubling down to get me out of trouble or to withstand huge drawdown. I am trying to be like a sniper and understand why bounces happen at any level. This is my approach and I'm not saying it is the best. It's only best modeled after my trading personality. People writing code for institutions can also make mistakes, so I don't feel at a disadvantage on the science front. My hardware, Internet connection, data feed, distance from the exchange are all weak on my side, so I work with what I can. And it's tons of fun, because I love programming, solving problems, and now trading.

Also, I don't think doing something completely different than what institutions do makes sense, because they move the market. If I figure out what the majority is doing, then I have the edge of understanding which way to enter. Mimicking them will make money. Of course, I don't know what they're doing, so I focus on refinining some sort of heuristic theory of that, trying to maximize profits, like all of us.

Again, very good exchange, thanks much for contributing. I know I may expect too much from this forum, but I don't know what other traders are doing, only a very limited view. There must be better ways for everything and I am on a quest to find them. Cheers!

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  #76 (permalink)
Toronto, ON
 
Experience: Intermediate
Platform: NT
Broker: IB
Trading: ES, CL
 
Posts: 148 since May 2010
Thanks: 13 given, 38 received

Not helping my point in the previous post, but very timely, as a good friend of mine sent me this a few minutes ago:

Quote from Paul Tudor Jones

"I love trading macro. If trading is like chess, then macro is like three-dimensional chess. It is just hard to find a great macro trader. When*trading macro, you never have a complete information set or information edge the way analysts can have when trading individual securities. It’s a hell of a lot easier to get an information edge on one stock than it is on the S&P 500. When it comes to trading macro, you cannot rely solely on fundamentals; you have to be a tape reader, which is something of a lost art form. The inability to read a tape and spot trends is also why so many in the relative-value space who rely solely on fundamentals have been annihilated in the past decade. Markets have consistently experienced “100-year events” every five years. While I spend a significant amount of my time on analytics and collecting fundamental information,*at the end of the day, I am a slave to the tape*and proud of it.


I see the younger generation hampered by the need to understand and rationalize why something should go up or down. Usually, by the time that becomes self-evident, the move is already over. When I got into the business, there was so little information on fundamentals, and what little information one could get was largely imperfect.*We learned just to go with the chart. Why work when Mr. Market can do it for you?*These days, there are many more deep intellectuals in the business, and that, coupled with the explosion of information on the Internet, creates the illusion that there is an explanation for everything and that the primary task is simply to find that explanation.*As a result, technical analysis is at the bottom of the study list for many of the younger generation, particularly since the skill often requires them to close their eyes and trust the price action. The pain of gain is just too overwhelming for all of us to bear!"

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  #77 (permalink)
Market Wizard
Point Roberts, WA, USA
 
Experience: Advanced
Platform: IB and free NT
Broker: IB
Trading: ES
 
aquarian1's Avatar
 
Posts: 3,926 since Dec 2010
Thanks: 1,480 given, 2,510 received

Interesting post (above).

I guess you meant MF Global tongue-in-cheek - the 6th biggest bankruptcy in US history and next to Lehman brothers. Long-Term Capital nearly brought down the entire financial system. And then there was a huge British Bank broken by a rogue trader and another in France. Of course not to forget Lehman or the giant insurance firm --- recused by the US govt when the stock was down to a dollar and change and looking like it would go to zero.

However, I didn't say the big banks and trading firms don't make money.
What I did say is that they cannot write a program to predict where the market will go.
I will go further and say that they cannot make 3 (travel) pts consistently per day over the long term - like 2 years.

But we stray.

It is about how we as small traders figure out the puzzle through innovative insight.
and that we can do!

With God all is possible.

Take care,

..........
peace, love and joy to you
.........
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  #78 (permalink)
Toronto, ON
 
Experience: Intermediate
Platform: NT
Broker: IB
Trading: ES, CL
 
Posts: 148 since May 2010
Thanks: 13 given, 38 received


aquarian1 View Post
Interesting post (above).

I guess you meant MF Global tongue-in-cheek - the 6th biggest bankruptcy in US history and next to Lehman brothers. Long-Term Capital nearly brought down the entire financial system. And then there was a huge British Bank broken by a rogue trader and another in France. Of course not to forget Lehman or the giant insurance firm --- recused by the US govt when the stock was down to a dollar and change and looking like it would go to zero.

However, I didn't say the big banks and trading firms don't make money.
What I did say is that they cannot write a program to predict where the market will go.
I will go further and say that they cannot make 3 (travel) pts consistently per day over the long term - like 2 years.

But we stray.

It is about how we as small traders figure out the puzzle through innovative insight.
and that we can do!

With God all is possible.

Take care,

Tongue-in-cheek is how I meant it, yeah. And it's not lost on me that you had to be explicit about which post you found interesting: the one with the quote, not the one before . I am perfectly aware this is a game of probabilities and there will be a time when I will drop the need for perfection and will trade odds, still algorithmic. Thanks!

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  #79 (permalink)
Toronto, ON
 
Experience: Intermediate
Platform: NT
Broker: IB
Trading: ES, CL
 
Posts: 148 since May 2010
Thanks: 13 given, 38 received

I had one of my rare real money orders waiting to enter short in SPXU at 9.25. I haven't looked at this ETF in a long time and I had a mental reminder to get a position when ES is at around 1400. It didn't get me in, as it almost always happens with my unreasonable levels, and I checked the chart at the end of the day.

Take a look! This was a very surprising move and I am not sure if it means some big player really wanted to establish a large position (long SPXU, short S&P500) expecting a correction or that the price was moved up artificially, on low volume, at the close, so someone could get rid of a large position, expecting a big move up in S&P500. Well, the volume was not that high, compared with the previous 1 min bars, but it was probably large for the after market, since this was the 16:00 to 16:01 bar.

I am not sure how to interpret things like this, so please let me know if you know or give your best shot guessing. Thanks!


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  #80 (permalink)
Toronto, ON
 
Experience: Intermediate
Platform: NT
Broker: IB
Trading: ES, CL
 
Posts: 148 since May 2010
Thanks: 13 given, 38 received


Not an awful day. One good thing is that the code to override the distinct ATM strategies per entry type with a single strategy when the ATR is under 2 (I think) works. I have decided for a 1:1 RRR, with 4 ticks profit and 4 ticks stop loss. It made me 92 bucks in the beginning of the day and I could see that one strategy being used until the last one, once the bars started to be larger.

I had a couple of real money orders that would have been good for at least a bounce, but I kept moving them, so I never entered in real. Still too shy with the trigger...

Here is the story of my indicator flirting with ES today:






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