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Psych Journal of an ES Trader

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Psych Journal of an ES Trader

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  #51 (permalink)
Posts: 137 since Aug 2009
Thanks: 2 given, 64 received

Thursday 11th April 2013

Was a pretty simple read. Market has been quite bullish past few days, so bias has been on the long side.

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  #52 (permalink)
Posts: 137 since Aug 2009
Thanks: 2 given, 64 received

Weekly review

Been a good week, took only 4 trades. Funny how trading is always better when it's less. Less risk, less commissions, less time in markets, less emotions involved and hence less attached to the outcome. It's also been a busy week for myself, so alot less time to think about the markets and dwell on the market. Allowing me to let trading as one of those little things that I do in my life, and not something that dominates my life.

I have been told that trading is one of the most competitive endeavours out there, and you are competing with some of the best in the world. You have to be focused and dedicated to your craft, have honed skilled from lots of practice. Like a Kobe Bryant who pretty much eats and sleeps basketball all day long, with long hours of practice and studying videos of games. He's currently injured now, feel real bad for him, the guy is a champ!

My experience of trading has been rather the opposite, being too focused and obsessed with winning can really screw you up! Reason mainly is with trading, there is less in your control than playing basketball. Playing basketball, you are amongst 5 players on the court that can effect the outcome for your team. Whereas trading, you are amongst thousands of participants, with some participants bigger players than others. Imagine playing basketball against someone who is 5x bigger than Shaq, covering the basket, and swatting your ball away anytime you shot the ball!

Eventhough the last scenario is unrealistic for a basketball game, it is very real for trading the markets. You will have big market players that can come in and take your stop out, or not move the market so you are sitting there not able to make money. Fortunately, in trading you can change teams, and join the big players for the big moves. But you don't know when they will be arriving, and your studies only show a "likelihood" that they will show up.

So if you think about it, what do you really have control of? Risk! In practical terms: trading size, entry and exits. Everything else is pretty much out of your hands, in God's hands if you would like to put it that way.

You might say, this is so simple. It is, I pretty much know this when I first started trading 8 years ago. So what's the problem? Well unfortunately, human beings are not exactly wired to be traders, we have too many attributes handed down from the cavemen days. Our fight or flight system kicks in at any sign of threat, and our logical brain goes out the window. Hence, the challenge of being a consistently profitable trader.

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  #53 (permalink)
Posts: 137 since Aug 2009
Thanks: 2 given, 64 received

Before the market open, I like to have a roadmap of what I'm looking for. Here are the scenarios.
Trading ideas:
1. 4500t supp, possibly go up
2.. Gap down 6 points, possibly double tap and sell off with 4500t resistance. But been bullish past few days.
3. Chop sideways between Friday's range.

Took 2 trades today.

Took first trade short, was against TICK so was aware of it, and saw weakness so scratched out.

Second trade I quickly reversed, and wanted to see followthrough, which I did. Made mistake of not taking 2points when offered and held the trade back to entry over news release which I didn't want. Should have taken my 2 points and reversed for my 2points and be done for the day.

Having looked back at the trading day, it was an enormous down day. Could have kept trading, but I was focused on finishing with a 4pt profit target. Getting in and out of the market quickly, calling it a day.

To be honest, days like that don't happen very often. I want to rely on a consistent strategy, and not hope for big trend days.

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  #54 (permalink)
Posts: 137 since Aug 2009
Thanks: 2 given, 64 received

Here was my roadmap for yesterday's trading:

Trading Ideas:
1. Short bias from yesterday. 1500t resistance and sell off
2. Quick short covering from yesterday. Possible quick long trade with 4500t b/o and 1500t supp
3. Volatile chop with no direction

Took 3 trades.

Market looked very choppy first hour, with no real conviction. Lots of barbwire in 5min chart, which is usually a good indication to stay out. Which I did after 2 scratched trades.

Third trade I was looking for the trade to go 4 points which it almost did. I decided that it could retrace a little and followthrough, since it looked like there was range extension. I accidentally got out of the market on the retrace, and jumped back in. Hoping on a test of new lows.

My bias of the market got the best of me, with the market going against me and taking out my stop.

One of my bad habits is letting days like these make me want to switch up my trading, I need to keep trading the way I trade. Tomorrow is another day.

Only issue I have with today's trading was how I wasn't fully focused, multitasking a few times when in a trade. Need to be aware of:
- Market telling you to take profits, even if it's not my profit target. I can always take another short trade and be done with my daily profit target.
- BE after 2points, trade is over after it takes BE stop. Wait for next setup.
- My bias of what the market is going to do. I had a short bias yesterday, but the market can do anything.
- Good trades move quickly. Rather be out wishing I was in than, in wishing I was out.

Also, keep an eye on your trade volume, 3 trades is pretty high for the day. Watch your trading setups, make sure you are trading them strictly.

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  #55 (permalink)
Posts: 137 since Aug 2009
Thanks: 2 given, 64 received

These were my trading ideas before the beginning of the day.

Trading ideas:
1. Test off PDL with 1500t support and 4500t support
2. Go up and form resistance in 4500t and sell off

Took 3 trades today. It was on of those days where if I stayed with my first trade, I would have hit my daily target and be done for the day. Hindsight is 20/20, but at the moment of the trade it looked like longs were building up and I got out and went long. It pretty much went against me immediately.

No point in second guessing what I could have done, it's just one of those days where things just didn't go the way you expect it. Don't try and readjust your trading strategy, because there are plenty more days where your trading strategy works great.

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  #56 (permalink)
Posts: 137 since Aug 2009
Thanks: 2 given, 64 received

Thursday 18/4/2013

Took 5 trades, with 3 scratches and 2 hitting my 4pt profit target. 5 trades is on the high side of the number of trades I want to be in, but this whole week has been more challenging than before, so needed to get out and look at different trades.

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  #57 (permalink)
Posts: 137 since Aug 2009
Thanks: 2 given, 64 received

Weekly Review

This week has been a bit more choppy than last week, so requiring more trades than I would like. Out of the 4 days I trades, 2 were profitable, but overall the week was profitable.

Here's some thoughts on each day's trading.

Monday: Get out when the market is telling you, even for a 2pt target. A quick 2pt target means you can take another 2pt trade and be done for the day. Been more tempted to stay in the trade and hold on for retracements.

Tuesday: Again, was holding on when it was time to take profits. Was a down day, which could have been profitable.

Wednesday: I couldn't really fault myself for the day, because I would have traded the way I traded on this day. Was a down day.

Thursday: Was actually pretty pleased with the day. Took 5 trades, which is more than I would like, but today made my week profitable.

Problem with trading
Problem with trading is that losing days are not just a loss capital, but also a loss of opportunity to make a gain. An example would be this week where I was profitable 2 days out of 4, with 2 of those days hitting my daily loss limit. Those days that I took a loss, I also missed out on an opportunity to make my daily profit target. So lets say your daily loss is $3, and your daily gain is $4. Hitting your daily loss limit has a total impact of $3+$4=$7 on your account.

Lets say for me I trade 4 days a week, looking for $4 gain each day, so my weekly net would be $16. If I take a daily loss on 2 of those days for $3. My weekly gain would be $4+-$3+-$3+4 = $4-$3-$3+$4 = $2. Compared to my potential weekly gain of $16, I lost out on $14 worth of gain on my account!

It's the cost of doing business. You can say that I can tweak my numbers by having bigger daily loss limits so I can keep trading, or to take more trades, or to let my winners run longer. However, from my experience it's not always so simple, there are factors like: volatility of the market, my own psychological capital, etc. For example, if I increase my daily loss limit, there's a real risk of making this a losing week or even worse a losing month!

That's why I'm hesitant to project my performance to the future on a straight line basis, saying with the way I'm trading, I just have to scale up and my performance will reflect that. This is what most newbies would do, they would calculate how much they can make a week, multiply that by 52 weeks, and compare that to the income they can make out in a salary job. Telling themselves, they can make more money than a lawyer, doctor, etc.

This is exactly how alot of the trading industry educators lure newbies into their "training program". Hopefully, I can give someone who's looking into trading, some insight on how the reality of trading really is.

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  #58 (permalink)
Posts: 137 since Aug 2009
Thanks: 2 given, 64 received

Just one of those days where I was flat out wrong! Took one trade and got stopped out.

Had all those emotions telling myself that I can make the money back, but with experience I was able to detach myself to those emotions. Funny thing is with emotions, they usually just fade away after awhile. It's funny how a good night sleep would usually fix whatever you think felt really negative. I guess all of this comes from years of experience, hard work and self awareness. Because in the big picture, it's not a big deal, just Monday, just random set of events.

Keep trading the way I have been trading, don't be tempted to trade scared.

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  #59 (permalink)
Posts: 137 since Aug 2009
Thanks: 2 given, 64 received

What a crazy day! Luckily I was done trading before that fake AP tweet about Obama. I was looking at the markets through, and thought there was a glitch. Well, I just wanted to add a 5min and 1min chart to commemorate that I was there when this weird thing happened.

It really makes you think how little we know and how susceptible as traders we are. How there are bigger players out there in the markets, and you're analysis of the market really doesn't mean much. As Mark Douglas said "Anything can happen", which I have it stuck on my monitor.

The market moved down and back up in a 15 point range within 4minutes. Think about that! Someone had their finger on the trigger on some really large size. If I was still long in the market, I could have been taken out with huge slippage, and the market would have bounce right back. All under 5mins!

Anyways, lets discuss today's trading.

I took 2 trades today, I had a long bias with where the market was opening, and my market internals looked strong. Just had to really be patient for a good long. I pretty much banked 2 points and later on banked another 2 points and called it a day.

Days like these are kinda slow, so have to see that and take my profit and call it a day. I probably could have held my first long for the full 4 points. But I made it a point to myself this week to really be taking profits when the market is looking to reverse on me.

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  #60 (permalink)
Posts: 137 since Aug 2009
Thanks: 2 given, 64 received

Wednesday 25th April 2013

Today was quite a choppy day. Usually when I get in a trade, Iím looking for quick followthrough, when it bounces around is when Iím at the mercy of the market. First three trades chopped me up for 1.5pts, so the last trade which I should have traded half the size didnít have enough wiggle room (despite being right, but early).

I need to watch out for trades against the MA. Big move down. Look for retrace. Basic stuff!

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June 11, 2013

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