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Psych Journal of an ES Trader

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Psych Journal of an ES Trader

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

Here are my trading results over 3 weeks and 12 trading days. I was profitable 2 out of the 3 weeks, with 6 out of 12 days hitting my daily loss limit.

The results speak for itself, despite being profitable over the 3 weeks, it's still quite low winning percentage. 8 out of 25 trades were profitable, which is 1/3. My original idea of getting a 4pt trade for the day is actually quite difficult to do in real life. I know a lot of times I could have taken 2pt and have higher winning percentage.

I really need a higher winning percentage, and also a good risk reward ratio. Here's what I'm planning to do for the month of May:
1. Trade with the trend
2. Take 1.5-2pt profit
3. Keep losses within 1pt
4. Keep daily loss within 3pt
5. Try and stretch my daily profit target to 6pt.

Each of them has their own issue.

1. Trade with the trend
I have traded this way before, waiting for the trend to show and getting in on the pullback. Win ratio was good, but at that time my daily profit target was too low to make it overall profitable. Need to keep milking the trend if you have spotted it.

I have noticed a lot of my trades have been countertrend, once in awhile it works out, but a lot of the time it doesn't, and I should have been focused on trading with the trend.

Problem with trading with the trend is identifying where it will pullback to, either you anticipate with a limit order or you wait for the market to settle and jump in. Waiting for confirmation costs with a bigger stop, but not waiting for confirmation can get you in a good entry but can also blow through your stop.

2. Take 1.5-2pt profit
This is very much doable in the ES, problem I had in the past was just taking 2pt for the day and be done. Need to take more than 2pt for the day, because it needs to offset the losing days I have.

3. Keep losses with 1pt
This is tough. With only 1pt you can get taken out and the market can go in your direction. It's really really tough. My plan is to go in with initial 3pt wide stop and tuck the stop in when I see a turning point. There are going to be times where my 3pt stop does get taken out, and times where the tucked stop I put in gets taken out and goes anyway. But that's just the way trading goes, it's not a solution to the problem, there is no solution but a probability of things happening or not happening.
Hopefully, my average loss will be around 1pt, my win rate will be high enough, and the number of trades I can take per day will be high enough to make each week profitable.

4. Keep daily losses with 3pt
This is KEY. It's the only reason I was able to be profitable over the 3 weeks despite have 33% win rate. Ideally I would like it to be half of what my daily profit target is (6pt), but my daily profit target is not within my control. At least my daily loss limit is!

5. Try to stretch my daily profit target to 6pt
This is not something within my control, because it depends a lot on market volatility. But the idea is not to just take a 2pt profit for the day and be done for the day. This is what I've done in the past, and overall profitability has been decent to break-even.
There are days where volatility is low and choppy, and taking a 2pt profit for the day is the right thing to do.
There are days where I've got 4pt, and it looks like the trend is weakening, then I should be done for the day.
There are days where I've got 3-4pt and it looks like market is going past 11:30 and slowing down. I should also call it a day.

Here's my expectations for:
Day: no real expectations, but 2 days hitting my daily loss limit is a red flag.
Week: should be profitable every week, if not then it's red flag.
Month: always be profitable every month, if not then major red flag.

My expectancy calculation for a month where I trade 16 days, if I sucked so bad that I was making 2pt on winning days and taking 3pt daily loss limits. I would have to be taking 3pt daily loss limits for 6 out of 16 days for me to break-even, which is close to half of he days being stopped out. If that was the case, then something must be really going wrong!!

Further Thoughts:
It's tempting to go want to go back and fix things, and wishing that you could have done it differently. A lot of the things I mentioned I already know, and it looks like it's coming back full circle with a lot of my own real experience why I need to trade certain way.

It's also frustrating to think that I need to go through another sample size of 1month to see if I'm on the right track. But I think with the new changes I'm making to my trading plan, I should be able to see if I'm going in the right direction in my first week.

That's the problem with trading, you can't fix anything right now. You have to wait for the market to come to you. It's not like a video game where you can just keep playing and play restart when you die.

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

Iím beginning a new month. Tracking my progress by days, rather than by individual trades.

Today I did take 6 trades, which was on the high side. Manage to finish the day at 2pt, probably could have gotten more, but I didnít want to be involved in the noon slowdown.

I need to be more patient and wait for confirmation and pullback in the trend. Still trying too much to guess ahead, especially first half hour to an hour of the open, which can be rather choppy.

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

The day was actually quite a good day for setups, but I took a big loss just before Chicago PMI which really put me back for the day. I managed to get back to positive a little bit before 2pm, when I should have quit trading for the day.

Taking 7 trades for the day is way too much, which showís Iím not being selective about my trades. I should have a ďI donít have to tradeĒ mentality. I need to look for 4-5 trades max which includes scratches for the day.

The last trade of the day I got taken out on a full stop, which was totally unnecessary, should have tucked stop in and taken a small loss.

I also reversed too quickly, especially when the day shows an uptrend, I should be more biased towards what the market has been showing, especially after 10:30-11:00.

I need to go back to being more methodical with my trading, which allows me to be more objective with my trades, putting them on and letting them work.

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

Another day where the first trade I took just went against me. Right now Iím anticipating support and resistance on the MA, and Iím just wrong alot, not wrong but wrong very quickly. I look back at my successful trades, I usually wait for support and resistance to appear and then get in. The risk is that I am waiting for confirmation which means a wider stop, but the probabilities of it taking off is alot higher than otherwise.

So here are the changes I need to make:
- Trade with the trend
- Wait for support/resistance
- Let it go for 4 points or if thereís signal to get out.
- Be focused on 3p rule
- Go back to basic entry, no dom
- Need to anticipate what else could go wrong. Rather than anticipate winner.
- Review my previous dayís trades before trading day

Itís frustrating to have two losing days, when I look back they could have easily been avoided and been profitable. But I must look at it in terms of the month, and how sometimes itís a refining and tuning process. I now know what I need to do, and it should get better from now. I just have to be patient.

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

Was a good day, I was with the trend, wasnít fighting it. Took a small loss in the beginning, but was able to come back. My direction was right, but the trade just wasnít working like it should be. Probably should have scratched out earlier, but thatís just the probability of the play working like it should.

Second trade, I should have let it go abit longer, would have hit my 4 points.

What really worked well for me was writing down what Iím looking for in the next step of my trading process. It really reminds me of what signal Iím looking for, anticipating it, rather than anticipating the trade to be a winner. It biases my opinion towards the negative side, and Iím more prepared to act than hoping it will hit profit.

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

Weekly Review
his week was really up and down, and really had to optimise what works and what doesnít. Nevertheless, despite two losing days, I managed to finish the week on a positive.

Iím pretty much done with trading against the trend, looking back at my past trading, it really is like a coin flip. Even though I can get some nice wins with trading against the trend, it really tunes you out of the market trend. Like they say, if youíve got a hammer, then everything looks like a nail. Usually, I would just get stopped out with the volatility of the first half or first hour, and have to play recovery. Rather itís best just to chill out, let the market test abit, see where it wantís to go, and then trade with the trend.

My return to anticipating support and resistance levels at the MA was rather poor, I remembered doing it in the past, and now I remember why I donít do it. The assumed benefit of anticipating the areas, is so you can have a tighter stop, and so the market should move immediately, reducing your risk further. Problem for me was that what I thought was resistance would end up much deeper and potentially take me out. I find it much better waiting for the support and resistance, and getting in when the market starts to move. From the outside, the risk looks bigger because you are waiting for confirmation and taking a bigger stop. But if the probability of the market moving in your favour is higher (because you have found good support and reistance), then the profitability of the trade would be alot better.

Iíve gone back to the 4pt profit target, looking for small 2pt targets made me trade more of the chop. Rather than waiting for good setups that higher timeframe can see and move for a big move. I do have a setup just for 2pts, so itís a mixture of both.

Going back to focusing on timed stops for 15min. Best trades take off immediately, and I shouldnít be hung up on trades that take a long time to move.

I remember one of my success strategies in the past was being proactive and anticipating what could be going wrong for the trade. I do that by default, but Iím always anticipating every trade to be a winner, which is totally unrealistic. Focusing on other options opens up your expectations, allowing me to see the market in a more objective way.

Another success strategy is with looking at previous dayís trading, which helps me tune into what Iím looking for in the market. Sometimes I have the bad habit of inventing trades, looking at past market behaviour before the market opens helps me dial in my pattern recognitions skills. Iíve had tried sim trading in the past, but the problem was how long it took, which made it not feasible to do everyday.

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

Had some technical difficulties today, with my broker going down and I couldnít send any orders. I was in a position when it went down, and decided to get out at breakeven to call it a day. My broker is usually pretty good, and this is the first time in many years that this has happened, so I canít really be too picky. I was in a winning trade though. Oh well!

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

Took 3 trades today. Had some more broker issues that got resolved, but manage to come out on top.

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

Took a quick 1.5pt loss for my first trade, was spending most of my time waiting for a good retracement to get in long. But the market was STRONG. I havenít seen it go up in a straight line like this for a long time, days like these are RARE in the ES. Days like these are what tricks people into thinking trading the ES is so easy, you could have pretty much bought anywhere and made money, straight line up!

Looking back, I probably should have gotten long for a quick 2pt scalp. I was looking for it, but was second guessing myself thinking it will retrace deeper which never happened. My setups allow for a quick 2pt scalp on big breakout days like these, I couldnít get filled on a couple of limit orders, and didnít want to just jump in. I probably should have. Itís probably something I need to work on, but shallow pullbacks make me paranoid.

My second trade was a total DISASTER despite being profitable, I moved my stop and threw away my risk limit. I was lucky the day was so bullish which allowed me to get away with it. Things could have gotten pretty ugly and out of control if I wasnít careful. I got stuck in my own bias, and wasnít listening to what the market was telling me. I could have put in a BE stop and kept myself safe, but my focus was waning and market went against me.

One more trading day for the week, I need to really focus down on risk control, I might get away with it here and there but it can really bite me in the behind if I make it a habit.

- 15min for each trade or get out
- Hold daily risk limit of 3pt.

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June 11, 2013

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