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Starting All Over - Finding My Trading Niche


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Starting All Over - Finding My Trading Niche

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  #1 (permalink)
Armidale, Australia
 
Experience: Intermediate
Platform: XT
Broker: AMP Futures, IB
Trading: FGBL, ZN
 
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Posts: 108 since Dec 2012
Thanks: 58 given, 103 received

My Trading Background:

I live on the Gold Coast, Australia and work occasionally as an Engineer outside of my full time trading efforts. I started trading in November 2009 after reading a friends Gann based trading course. I turned my small 2k into 5k on a Wheat move, quit my 150k engineering job to trade fulltime , and 6 months later found myself (and my now fiance) living out of our Hyundai hatchback while driving between house-sits. I continued trading and researching fulltime while in search for the Holy Gann Grail and took on contract work for the bread and butter. The more effort and money I have put into pursuing trading the more my ideal lifestyle has approached, but from the engineering work I try so very hard to leave behind (another story).

Suddenly in November 2012 after a nearly break even month of swing trading and too much commissions, it occurred to me that the dozens of books on trading that have told me there isn't a holy grail.. are right. The years of effort finding the correct planetary alignment and square of nine combination to tell me which swing to load up on.. suddenly seemed a bit silly in the context of actually making consistent money. So I researched how the prop shops go about business, and December I dove into order flow reading and price action skills in a new bid to master the markets. But the book Enhancing Trader Performance by Steenbarger has struck a chord, and I plan on following his advice on finding my trading Niche.

Being a recent member to futures.io (formerly BMT), it seems a good place to keep myself true to the goal of finding my trading niche by writing a journal, and hopefully getting some good advice along the way.

My current plan is to trade a variety of methodologies, one round at a time, each for 6 weeks total. Methods being:

Round 1 - Scalping the Eurobobl - No BS Style
Pros - I have spent roughly 3 weeks of studying the DOM in Jigsaw and studying everything from the No BS guy's (John Grady) site. Order flow reading seems a necessary skill to day trade. Gives me time during the day (in Australia) to practice, review, and work on Round 3 systems
Cons - Seems a bit dull watching the ladder for that much time. 6 weeks might not be long enough to get the feel for it.
Round 2 - Day trading ASX Stocks in Play - SMB Capital Style
Pros - Can draw off scalping experience for entries and filtering trades. I am confident in finding price levels. It seems action filled. I enjoy the competitiveness and range of skills demonstrated and talked about in One Good Trade for their trading style
Cons - Nasty commission rates. It seems a lot of work to just trade (the SMB fundamentals). Time consuming. It seems the most disadvantaged method for retail trading.
Round 3 - Systems Trading Futures Intraday
Pros - Am a computer engineer with expert coding skills. Can fully automate trading. Enjoy writing code to solve problems I chose. Can get creative for once in my programming. Can draw on Round 1 and 2 experience to create systems.
Cons - It takes a lot of time required to test ideas. I am probably up against many systems development teams probably making smarter systems.
It would probably make more sense to the reader that I should just dive into Round 3 - Systems Development, and this is an urge I am trying to come to terms with. Fact is I would love to have an automated system to trading away while I am out surfing or climbing so it would suit my lifestyle and I know I can get into the 'The Zone' writing software and it is fulfilling. But my fiance made the good point that perhaps I would like just as much to scalp for 2 hours a day if it made enough consistent money to support my lifestyle. Dr Steenbarger made a good point to find your strengths, and I think I can't intellectualize what they would be without the experience. So here is too experience.

I will trade with small real positions to keep it real. Please let me know your thoughts. Thanks and hear is to finally getting traded sorted in 2013!

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  #3 (permalink)
Armidale, Australia
 
Experience: Intermediate
Platform: XT
Broker: AMP Futures, IB
Trading: FGBL, ZN
 
grahamg's Avatar
 
Posts: 108 since Dec 2012
Thanks: 58 given, 103 received


I traded 5PM to 8PM which is equivalent to Eurex 8AM OPEN to 11AM

Strategy is basically to piggy back off size entering the market at steps in the profile and at the high / low for the day. I configured hotkeys to enter orders on the NT SuperDOM while watching Jigsaw. Awaiting funds in AMP Futures to clear to enable CQG data feed so trading SIM account only. Interactive Brokers data feed had to suffice in the mean time.

I mustered up a surprising amount of focus for SIM trading. Previous few days were down days on light volume. Bobl opened up near Friday high then sold off for first fifteen minutes. I could not read a thing and market seemed quiet compared in my limited experience. No important numbers in Forexfactory but listened to talking-forex anyway. I started trading among the chop and got cut up. I became highly frustrated after first trade and 4 tick loss - didn't need a negative start. Market appeared to have bottomed, but didn't seem all that pumping while I tried a few failed trades escalating into a 6 tick loss. At this point I was experiencing a lot of emotion, with lots of thoughts on 'scalping isn't for me... why don't I just start writing code which I am good at...'. I told myself to suck it up and get back to B/E though, which snapped me out of an unusually negative mindframe.

About 6PM larger prints into the bobl at new high though bund and schatz were selling off slightly. Only one print ticked into 64 and sat there after over a thousand at 63. I watched this for what seemed like ages and hit the bid with one. Prices quickly sold off and I covered for a 4 tick profit at 59, right above a big profile step. Couldn't believe how good that felt, as it was like I had won something. I scratched a trade after the same step did not support a quick break back to highs though should have held a bit longer. I managed a one tick profit before the market got seriously range bound and even more quiet. I called it a day.


The last three trades were not at a loss which felt really good despite being down 6 ticks total for the day. I only aim to watch the market for the morning Europe session as this should give me ample opportunity to find if I enjoy it. Being a normally unemotional person - the swings in mood felt invigorating and I enjoyed this trading session. I have read many books on why everything should be done to REMOVE emotion from the table, but this is what made me want to fight back and be competitive.. ride my highs, overcome my lows.

Enjoyment 7/10
Trading 5/10

Trades summarized in below tick chart.


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  #4 (permalink)
Armidale, Australia
 
Experience: Intermediate
Platform: XT
Broker: AMP Futures, IB
Trading: FGBL, ZN
 
grahamg's Avatar
 
Posts: 108 since Dec 2012
Thanks: 58 given, 103 received

Tuesday was a tough day to read for me. I was continually drawn to watching the Bund while committed to trading the Bobl. I felt I was reading the Bobl quite well considering the choppy conditions and entered a trades scratching them mainly. Biggest mistake was switching to the Bund finally having missed out on an obvious trade. The obvious trade in the Bund was a large iceberg that occurred at its lows stopping the market in its tracks. In a few seconds a thousand or more traded at the lowest 2 ticks and then traded smoothly up 6 ticks or so. Watching this go on I thought I could fade in the Boble the iceberg occurring in the Bund which didn't work out well.

The biggest lesson of the day was holding onto a loss. For the last 3 years I have been a swing trader and always have stops in the market below swings or daily bars, so never experienced the feeling of holding onto a losing trade. Now I have and that won't happen again. I lost 8 ticks (now in the faster moving Bund). Then made an immediate of reversing my position which was a school boy error. I wanted to reverse my LOSS, not my position. I was losing on a +1 position. I reversed my position at the 8 tick loss in frustration so was now short at the bottom of the move and copped the bounce on the wrong side before hitting my šlose all hotkey to get me out. All in the space of a few minutes.

I managed to catch a 4 tick winner now trading the quicker Bund but it was a fluke trade. After all the textbook errors were experienced the markets shows conviction for remaining choppy and I called it a day.

Lessons I learnt:
1. Don't trade one market based purely off another markets price action with no confirming indications in said market.
2. Don't get caught up in only price levels / steps in profile / speed of market. The goal is to find size and trade in line with it.
3. Cut losses short. Don't hold on in hope.. dah

Enjoyment: 5/10
Trading: 5/10 (started out reading Boble well)

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  #5 (permalink)
Bridgwater, UK
 
Experience: Beginner
Platform: Ninjatrader
Broker: MB Trading
Trading: Forex
 
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Wishing you a fulfilling and profitable journey

know thyself
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  #6 (permalink)
Munich
 
 
Posts: 29 since Nov 2012
Thanks: 3 given, 33 received

Just something to challenge your mind, maybe it will help you on your journey as it helped me.

What are your goals with each strategy?
How will you capitalize to reach them?
Have you determined a risk-reward-ratio?
What are your worst case scenarios?
How do you determine if your systems work / don't work? (Metrics?)
Do you have clearly written down every rule of your strategy?
How does it feel to trade the systems?
...

Just writing down answers to these and similar question can be a great help in my opinion.

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  #7 (permalink)
Armidale, Australia
 
Experience: Intermediate
Platform: XT
Broker: AMP Futures, IB
Trading: FGBL, ZN
 
grahamg's Avatar
 
Posts: 108 since Dec 2012
Thanks: 58 given, 103 received


puravida View Post
Just something to challenge your mind, maybe it will help you on your journey as it helped me.

[1]What are your goals with each strategy?
[2]How will you capitalize to reach them?
[3]Have you determined a risk-reward-ratio?
[4]What are your worst case scenarios?
[5]How do you determine if your systems work / don't work? (Metrics?)
[6]Do you have clearly written down every rule of your strategy?
[7]How does it feel to trade the systems?
...

Just writing down answers to these and similar question can be a great help in my opinion.

[1] - The goal is to find a strategy that suits my personality. 3 years of trying to swing trade and forecast like a guy from 100 years ago (WD Gann) did not work out well for my trading. The goal for each strategy is the same - do I suit the strategy? Can I make consistent money with it? The first two Rounds (Scalping and Day Trading) are to experience short term trading as my personality suits this shorter horizon for feedback, correcting path, income.

[2] - Not sure what you mean here.. I will capitalize off the models and skillsets displayed by John Grady for scalping, and by SMB Capital for round 2 (holistic day trading style) and my own skills for systems programming. The shift here from my previous approach I employed for 3 years - is that instead of trying to trade a recipe and find a secret edge - I will work on the nuts and bolt trading skills employed by successful traders competitively trading in proprietary firms or equivalent and fine tune them to my own abilities. If I get a good eye for scalping and enjoy it then it could be a niche that has a multiplier effect talked about by Dr Steenbarger. ie I can get REALLY good at it. Got to find niche first though.

[3] Risk - Reward ratio is a tricky one. All my previous experience I would mechanically predefine my Risk and Reward to 3R (Profit = 3 X Risk) and (Risk <= 5% of Trading Capital). So many times I would stick to this as encouraged by the Van Tharps, and so many times where I so desperately wanted to take profit I would stay in and then lose back all my paper profits. My new goal is to be more flexible, reading the market and taking rough risk - rewards based on what I am seeing in the market, and not what I precalculated.

For Scalping - I will now declare that I want to get to the point that I am at least profitable on 70% of my trades with a Risk = Reward on average. So find areas in the ladder where 2 ticks will be enough to know that I am wrong, and to get out at market with more than 2 ticks profit.

For Day Trading - SMB employ a 5R strategy. Tight entries with Reward = 5 X Risk.

For Systems Trading - Unsure yet. But it will be a fusion of the above two methods, coded mechanically. Any guidance on a realistic Systems Risk : Reward would be appreciated.

[4] Worst Case Scenarios - I don't enjoy any of the methods and / or I can't make any money with them. I then either find new methodologies to try, find a trading coach to improve on what I do enjoy or stalk a profitable trader until they give me their secret I got into trading in all honesty because I wanted to make serious money not limited to what I can bill for an hour of my time. Then I got caught in the mystical side of things, how well can I predict the future? Now it is a challenge I want to overcome and have fun along the way. If I haven't found my way in 12 months that is 4 years I have spent searching for my answer to making money trading and I should probably find another niche in life. I estimate 15k I have spent on courses and trading losses which is not too much. On the upside because of trading I quit drinking, got back to my competitive swimming fitness levels, and as time ticked away inherited an engineering company by default (the other guy made it big in his line of business - possibly because I attracted success one way or another with all my efforts in trading?? The Secret DOES work!! haha).

[5] Systems work if I can get to the Competent level in them. ie Cover my costs. 6 weeks to make back all the ticks I lose in the learning stage, and cover data, software and commission fees. If I can do that then there is potential to take it to the next level if I am hooked on that particular method.

[6] RULES?!? Not at all. Scalping is find patterns in the depth of market and tape and take advantage of them. I gravitate towards fading size and need to work on momentum trades (see next journal entry). SMB style I will make a list of rules in an IF THEN style to follow for my selected Stocks in Play. Say I identify something that is going to get a lot of interest, then a definite price inflexion point, IF THENS to enter trades on either side. I STRONGLY have resisted writing an objective, unbreakable trading plan since day one, despite having done so on numerous occasions. For some reason I resist it a lot. I understand that we need rules as traders. Systems Trading will sort this issue out for good as the rules have to be programmed. Other than that my rules are fundamental ones - don't hold onto losses, have a positive expectancy on average, don't get too creative!

[7] Most important. I want to be able to thrive with my chosen trading system. I want to look forward to the trading sessions and I want them to integrate easily into my lifestyle (pretty active one). If it feels BAD, then I won't pursue it. I am surprisingly enjoying scalping a lot despite my negative expectancy at present. IT feels like the text only computer games I was hooked on as a kid.. strategy style. Will see if that feeling sticks around as it is a good thing. Programming feels good also - perhaps I can do both.

Thanks for encouraging me to think through these things.

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  #8 (permalink)
Armidale, Australia
 
Experience: Intermediate
Platform: XT
Broker: AMP Futures, IB
Trading: FGBL, ZN
 
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Posts: 108 since Dec 2012
Thanks: 58 given, 103 received

Today seemed a more successful day and was certainly captivating. From the open the markets seemed pretty dull.
Good trades were taken but scratched or had to take a small loss. I had visualized getting out of losing positions and tried to imagine the internal hope for the market to turn around and recognize that as a sign to close positions. This seemed to work alright on all my trades. Unfortunately no profitable ones for a while. I bounced back in the second hour. Lesson of this session was to be aware of what sort of market you are in. The third hour things got hectic! The bunds pretty much took off and trying to fade highs would have been terminal - but I had burnt myself out trying to catch ticks in the first two hours. I will need to work on my momentum trades as pullbacks where where I should have been scalping long. I took a bad trade at the top of a run and regretted it. This was triggered by noticing a significant step in the profile and lots of size stepping up hitting the offers. I got on a couple of ticks away from the profile step expecting breaks to new highs and ended up buying the high tick for that move. Bad move. Once again got caught up in the price action and not recognizing the low risk entry patterns (profile step, size).

It was an interesting session though and I am now aware that the opening 2 hours may not offer most of the opportunities. Unfortunately I lost my trade data from NT charts. Will make sure to get a screen capture at the end of each session from now on for trade review. I am expecting the next session to be '═n play' based off the action today. I will continue to focus on the size and bids though and not the volatility. Watching bids and offers pull away seemed more obvious than usual today and seem to be good signals of a move in that direction. I took an EASY tick right at the top of a move when a large iceberg held at the offer of 3000 odd in the Bobl. 50 printed above it then size hit the bids and so did I - though took one tick in the interest of having dinner as had been watching the screen 4 hours straight WILLINGLY.

One more good trade worth recalling in the future (remember the good times eh?) is being long the Bobl which was not moving (this is in the first hour). I then saw a similar pattern in the Bund as yesterday with a refreshing offer holding a lot of size. I nearly instinctively scratched the Bobl trade and hit the bids on the Bund for a 3 tick profit. Nice work me!

Enjoyment: 8/10
Trading: 7/10

The leap into freedom is the exchanging of risk for reward. This can be done only by shifting from tension to ease, and that can be done only when one perceives the reward and not the risk. That you won't win all the time has nothing to do with it - that's life, that's the [stock] market. The trying itself is freeing. And being free has its own reward - Justin Mamis, The Nature of Risk
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  #9 (permalink)
Los Angeles, CA
 
Experience: Intermediate
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Broker: Rithmic
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grahamg View Post
3 years of trying to swing trade and forecast like a guy from 100 years ago (WD Gann) did not work out well for my trading.



Best wishes that you become as great a trader as you are a writer.

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  #10 (permalink)
Armidale, Australia
 
Experience: Intermediate
Platform: XT
Broker: AMP Futures, IB
Trading: FGBL, ZN
 
grahamg's Avatar
 
Posts: 108 since Dec 2012
Thanks: 58 given, 103 received



plethora View Post


Best wishes that you become as great a trader as you are a writer.

Haha - Wait up, I should add this to


grahamg
[4] Worst Case Scenarios -

Write a book.

"Trading Isn't for Everyone - How I Turned My Failure Into Profits" - By GrahamG

Of course there are some genuine good trader / author combos out.. I'm not that cynical.

The leap into freedom is the exchanging of risk for reward. This can be done only by shifting from tension to ease, and that can be done only when one perceives the reward and not the risk. That you won't win all the time has nothing to do with it - that's life, that's the [stock] market. The trying itself is freeing. And being free has its own reward - Justin Mamis, The Nature of Risk
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