Crawling before I can walk with goal of one day running
I had recently watched the "Where to start as a trader?" video by BigMike and was inspired to use his forum for my journals. Partly to force myself to express in words my trading experience, and partly to benefit from feedback from all of you who are reading this. I very much believe that you don't have to be a successful trader in order to help someone become successful.
I have a very similar background to FT71 (Construction management). I have a degree in
construction management and one in accounting. I have read a large number of books including
all of Graham's value investing books (Intel. Investor, Securities Analysis, etc.). I have also
read a lot of trading books including those on Market Profile, and psychology (Mark Douglas,
and Ari Kiev--currently reading).
I was introduced to day trading through a friend, and I was inspired by the idea that this
could allow me to become more financially independent. As I read more books and after having
watched FT71's videos I understood that my goal should rather be to survive and staying in the
game long enough to learn enough.
I work full time, but I am on the west coast, so I can trade before work (first 2.5 hours of
the market). I wake up at 5:50am every morning, do my pre-market analysis for the first 1/2 hour,
and then watch the market for it to confirm my hypothesis. Something I need to work on is doing
a good half-hour to an hour of post market analysis.
My trading style:
I am a strong believer in simplicity. I try to keep my charts completely clear of anything other
than the candles. I have recently added CCI & cummulative delta to my ES 3 minute chart, though, I only use that for confirmation. My main trading screen contains only clean charts with, at most, some area highlights for where I want to stalk.
2 screens (1 x 17" laptop & 1 x 24" screen). My laptop contains my DOM and
Time & Sales window. Recently I have also added 3 charts (S&P Sector etfs -- Financial, tech,
and Dow Transports, though this is very new and am evaluating its usefulness). My main 24"
screen contains 6 charts (ZN, NQ, 6E, YM, ES, and SPY).
I set levels to stalk (using Volume Profile & Market Profile), then I use Time & Sales to check strength of buyer/seller, and use CCI / delta / other markets for confirmation. I.e. If I am long and I see ZN break higher, I will get out of my long. If I see no other markets confirming breakout in SPY, I will tighten stop to break-even and get stopped out or get out on the spot. I try not to overstay my welcome. For this I also use a 10min window. If I don’t see confirmation of my hypothesis (break-out of current Time & Sales range of 1-2 pt) in the first 10min, I will try to scratch the trade or take what-ever profit is on the table.
My instrument: SPY Charting software: Sierra Charts Broker: IB
I have experimented with IRT and Ninja, and I find Sierra gives me what I need at this time
for a price that I can stomach. My goal is to keep my costs as low as possible, until I become
consistently profitable... keep my fixed & variable costs down. My costs are $45/mo on charting
and $20 for internet.
My evolution as a trader:
I started last June (2011) simulating ES contracts until August. I was somewhat profitable, but
I did not have a clearly established style. I then was introduced to the concept of survival.
Upon understanding the benefits of that I started searching for a market that would allow me to
keep my risk down while I am learning. I tried NQ, YM, Forex, etc. (all in sim), and finally
settled on SPY due to favorable trading hours/volume, and the fact that it is like the junior
league if you want to one day be in the pro league (ES). I traded SIM until this past February
at which point I felt I was ready to go live. My SIM success rate was 60% trading around 1-4
round trips per day depending on if I'm in the zone or not. First surprise was discovering
how weak my psychology was. I went from 60% success rates down to 30% when I went live.
The reasons for this are many and I foresee most of my growth as a trader will be spent focusing
on unravelling the mystery of my psychology.
Some things I have identified that may be contributing to my low win rate include:
1. failure to properly establish specific trading setups;
2. being impatient with entries (was using market entries--now using LMT orders);
3. ignoring my plan to some extent (entering before area to do business--chasing market);
4. fear of draw-down resulting in extremely tight stops (1 point);
5. trying to catch trend days by jumping into market in first 30 min of trading (before swing high/low even established);
6. Not scratching enough, rather, letting trades turn into losses.
My trading plan was initially developed based on a template from the EliteTrader forums. After some experience, though, I tossed that one and wrote one from scratch based on my own criteria (table of contents):
1.0 Trading simulator to live strategy & goals
2.0 Morning ritual
3.0 Account size for trading
4.0 Instruments to be traded and times
5.0 What broker will you use, what software will you use for charting & order entry
6.0 What charts will you use for what purpose
7.0 What indicators will you use
8.0 Trade position sizing decision considerations
9.0 General strategy - entry on SIGNAL with confirmation from OTHER SIGNAL
10.0 Setups that will be traded (LEAST RISKY @ TOP)
11.0 Entry strategy
12.0 Exit strategy
13.0 What to do in case of sideways market
14.0 What to do after losses/scratches
15.0 What to do after wins
I should mention that I am trading super small at the moment. My plan dictates that I start with 100 share lots of SPY at 1 pt stop (will look at revising this to 2pts to avoid being kicked out by noise). Though, I am finding I don’t get stopped out that often, unless the market is going way farther against me. My stops/entries are always based on market turning points. When I gain $100 for two weeks consecutively, I will graduate to 200 share lots, and then to 400 shares, etc. My last level is ES 2 contracts.
I will post my first journal tomorrow. Looking forward to your feedback. One thing's for certain, I am not giving up. Not after almost a year of working on this. Expect regular updates. I will also try to post my morning plans in addition to post-mortem journals.
Last edited by devshell; April 24th, 2012 at 10:57 AM.
The following 7 users say Thank You to devshell for this post:
Congrats on taking this step. Looking forward to your posts.
Due to time constraints, please do not PM me if your question can be resolved or answered on the forum.
Need help? 1) Stop changing things. No new indicators, charts, or methods. Be consistent with what is in front of you first. 2) Start a journal and post to it daily with the trades you made to show your strengths and weaknesses. 3) Set goals for yourself to reach daily. Make them about how you trade, not how much money you make. 4) Accept responsibility for your actions. Stop looking elsewhere to explain away poor performance. 5) Where to start as a trader? Watch this webinar and read this thread for hundreds of questions and answers. 6) Help using the forum? Watch this video to learn general tips on using the site.
If you want to support our community, become an Elite Member.
Just an idea in case you haven't seen it. ThinkOrSwim through TDAmeritrade is a complete platform that doesn't cost any monthly rate nor initial platform fee. You could also just register an account through TDAmeritrade but not fund the account to try the TOS platform in the sim mode.
Once you have an account you can start the desktop live and papertrading version concurrently. It's all self-contained so you can trade most all stocks and instruments, like options, forex, pairs, futures and mini-futures. Their initial margin requirements for futures are higher than most but it's heard they can accommodate a better rate for traders who day trade futures more. Most every instrument is supported. And some options on futures though not as much as OptionsExpress, but that's just options on futures which is rarely traded anyways. they also have included market and volume profile and a bunch of included "studies" and more can be self-written in thinkscript which seems to be more of a recursive language than procedural. https://futures.io/thinkorswim/18786-tos-thinkorswim-trading-platform-monkey-bars-mkt-profile-volume-profile.html
For example one could trade forex on the Eur/Usd at 10,000 and just "pip" value would be .10 not counting the spread. It used to be TOS speed was not good enough for daytrading futures, but they've improved and continue to improve all aspects of the platform. I've compared ninjatrader/zenfire to TOS and it's completely feasible to daytrade on TOS now. Good luck.
ToS would certainly help with the charting software (fixed cost), but it would blow my variable cost (commission) sky high ($9.99 per trade). I am currently paying $1 per side ($2 round trip with IB). I would rather keep my fixed cost a bit higher, while keeping my variable cost lower.
Another way to look at it, $45/mo = ~5 ToS trades or 2.5 round trips. At 100 share lots, my risk to commission ratio would be 2:1 or 50%. That is not sustainable. I need to keep my commission to risk ratio under 10:1 or 10% of my risk. With IB my risk being $20, and commission being $2, I am just within my requirements.
Also, my poison is SPY. No forex for me.
Last edited by devshell; April 23rd, 2012 at 09:27 PM.
Please give me feed back as to what would be more useful to you guys to see, i.e. charts & what on the charts.
Also, is the before/after market chart useful? I will make a better effort in the future to mark it up. At the moment I am trying to keep it clean and self-explanatory (levels). Though, let me know if they are not so self-explanatory as I seem to think they are.
So some background first.
I have been trading since February. I have made over 50 trades, and have a win rate hovering around 30%. This includes many weeks that I didn't trade. So I don't absolutely trade every day. Though I try to show up to the game as often as possible. Sometimes life throws stuff in your path.
I have gone up as high as 6.8 points in my P&L, but most recently I am down 13 points. Furthermore, I have a record of 7 losing trades in a row and 2 winning trades in a row.
My current losing streak started with the current bracket. While I am down the most I have been so far, my biggest winning streak has been 11.3 points and biggest losing streak has been 8.9 points.
My main goals in the next few weeks are:
1. Don't enter using market orders: use LMT only, and set order ahead of time based on plan (remove if market behaves strangely);
2. Concentrate more on managing the trade rather than on getting the perfect entry;
3. Do weekly preparation macro homework for the week ahead (i.e. study bracket levels)
4. Write this journal whether I trade or not;
5. Don't re-enter a position immediately after being stopped out; and,
6. Trade only my setups, and do so without failing to do so or error.
Now, the bad news is that I am out of the week due to reaching my loss limit for the week, and month. So I will only start entering orders again next week on Tuesday. I will, however, continue waking up and doing everything as though I would be trading.
I had a hypothesis that the market was going to retest the lows of the O/N session. While one of the levels in my hypothesis from this morning held, the other didn't get tested (low of O/N session). Furthermore, as I am not trading the first 30 min these days, and as there was a news announcement happening 30 min after open, I did not enter at the level I had hypothesized. Then, because the market took off so quickly, I decided not to chase it. Rather, I wanted to wait for a re-test of the open swing high.
The OS high test came at around 10:15 am PST. My plan was to enter between 137.00 & 137.10, however, the market only got to 137.13 and then started to rotate back up. I decided a test of my area was now unlikely and entered at 137.15 with a STP at 137.95. As this was during lunch I was extra cautious and was keenly aware of the possibility of a STP run below the 137.00-137.10 level. After an initial break-out attempt in my favour I moved my STP up to 137.05. Then, following a further attempt and after noticing weakness in other markets / failure to confirm strength, I moved my STP to break-even. The most I was up was 1 pt by this point. After a final break-out attempt the market started to rotate back down and I was stopped out for no loss.
I wish I had ended my day there. HOWEVER, my monkey said "Hey, they are just faking you out again, like all your other losses this month". So I immediately got back in at 137.14, and took the market down to 137.00 for a 1.5 point loss before finally coming to my senses and stopping myself out, and shutting it down for the day.
On a positive note, I am proud I didn't play chicken with the market, as it broke down significantly lower before returning to my original entry location. I would have lost a lot more had I not come to my senses so quickly. I sincerely believe this is thanks to my 6 months on the SIM.
I had a good trade today, but ended up with a loser (not just a trade that didn't work, as it would have been if the monkey didn't get loose). In the future, I added a rule that I will not execute another trade in the same direction until after I fill out my log, close my eyes and take a deep breath for 30 sec. However, I will seriously look into using a STP near the middle of the entry bracket in case the STP was a fake-out.
Dealing with fake-out re-entry is something I will need to research further.
I am sure I am forgetting a lot of things, though, I am also hoping this journal will improve over time as I develop a system for this.
Last edited by devshell; April 25th, 2012 at 02:00 AM.