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The Logical Trading Journal

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  #111 (permalink)
Toronto
 
Experience: Beginner
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iNeo View Post
It is hard to realize the power of journaling without experiencing it first hand. I am glad I got motivated by the 70% discount being offered by TST and started a journal here at futures.io (formerly BMT).

All of this week, I have been wondering where I have gone wrong since clearing the TST combine. What happened? Why am I struggling now when I was doing much better before?

The answer was in this journal.

My primary method of trading changed since I started this journal - I switched from being a breakout trader to an ACD trader. This happened midway during my winning TST combine so even though this changed, I still managed to clear the combine.

Ever since then, I have been constantly trying to refine my method and as it has been pointed out countless number of times by many good traders, THIS was what broke it and my confidence in the process. I changed too much.

I realized this when I was reflecting upon my chat with @mfbreakout and when he asked - "How can I help you?". I didnt have a good answer. Its pretty clear that I had no idea what was wrong with my trading. I knew I did not need spoon feeding on the trading method - what I have picked up from his journal works just fine. I feel that I just wasted his time after he was so generous for having spent almost an hour with me on skype.

So after a lot of analysis and reflection and reading my own journal multiple times, I realized that when I cleared the combine, for those few days, the setup that I had was the best so far. The difference between then and now is that I have moved away from the slower charts I was using to much faster charts for my execution and overall. For whatever reason, I am watching the orderflow every time regardless of where price is in relation to the trading levels. Most of my trades have been random - pulled out of thin air - manufactured on the fly - whatever one may want to call it and I always try to look for a reason to justify every such trade.

Being a programmer, I wrote a beautiful piece of code that identifies temporary imbalance in the order flow and 9 out of 10 times, price moves accordingly - as the imbalance suggested. The problem came when I started looking at this imbalance at the micro level and taking trades at random levels. A month ago or so ago, when I first wrote this and used it with slower charts, it worked just fine when used at known levels. It helped me clear the combine.

So, all this reveals that I need to do the following:
  1. Go back to the slower charts - 5 min primarily.
  2. Take only the bread and butter trades - nothing in between. Failed As and retest of the 3 sessions are the ones to look for primarily. In fact, I am going to try my best to take only these. I don't want to etch this in stone because that screws with my mind in a different way.
  3. Do not change anything going forward.

Hi
Can you post one of your chart to show how you confirm a pullback entry using order flow?

Thanks

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  #112 (permalink)
Houston, TX
 
 
Posts: 294 since Aug 2013
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Raj1 View Post
Hi
Can you post one of your chart to show how you confirm a pullback entry using order flow?

Thanks

I have posted this before in response to someone else's question. You can read it here:

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  #113 (permalink)
Houston, TX
 
 
Posts: 294 since Aug 2013
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Someone asked for my cumulative delta code I use in TradeStation so making it available here.

 
Code
Inputs:
	PitOpen(800),
	PitClose(1330),
	ResetAtPitOpen(False),
	ResetAtPitClose(False),
	PlotZeroLine(False),
	UpColor(Green),
	DownColor(Red);
	
Vars:
	BADelta(0),
	UpVolume(0),
	DownVolume(0),
	CumDelta(0),
	MyOpen(0),
	MyClose(0),
	BarColor(0),
	Intrabarpersist MyBarNumber(-1);
	
	If ((Time >= PitOpen And Time[1] < PitOpen And ResetAtPitOpen)
		Or (Time >= PitClose And Time[1] < PitClose And ResetAtPitClose)) then
	Begin
		CumDelta = 0;
	End;

	UpVolume = Upticks;
	DownVolume = Downticks;
	BADelta = Upticks - Downticks;
	
	// Previous bar cumulative delta is current open
	MyOpen = CumDelta;

	// Now add current bar delta to cumulative delta
	CumDelta = CumDelta + BADelta;

	// Current bar close is previous bar cumulative delta + current bar delta
	MyClose = CumDelta;
	
	If (MyOpen > MyClose) then
		BarColor = DownColor
	Else
		BarColor = UpColor;
	
	Plot1( MyOpen, "Open", BarColor ) ;
	Plot2( MyClose, "Close", BarColor ) ;
	If (PlotZeroLine) then
		Plot3( 0, "Zero");

	MyBarNumber = BarNumber[0];

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  #114 (permalink)
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  #115 (permalink)
Houston, TX
 
 
Posts: 294 since Aug 2013
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In order to be fully committed to ACD methodology, I changed my username and the name of the thread accordingly. Thanks Big Mike.

Going forward this journal is about trading the ACD method modified with a lot of help from @mfbreakout, @BTR411 and @Balanar. I appreciate every bit of help I have received from them. I am also grateful to @TradeFlightPlan for his generosity.

The past 2 and a half weeks were spent solidifying the trading plan. I am amazed at the potential of Mark Fisher's ACD. No need to get into the details but I have enough of ACD programmed to help with day trading CL.

This journal is what it is to hold me accountable for my trades going forward. For that same reason, I am including my trading plan below. The plan is not black and white. It is not an if this.. then that kind of a plan. It is a discretionary plan. Something that I have always been afraid of but I am well prepared this time.

I am going to be fully realistic about my trading plan. I do not expect to start hitting home runs. I do expect to hit singles and doubles with the occasional home run and avoid being struck out as much as possible. This is an evolving plan that will mature as the days go by. It is not my full plan but it is enough to keep me honest in a public forum.

Concise Trading Plan

Guiding Principles
  • I fully embrace the fact that losing is part of trading and that there will be losses no matter what.
  • I fully accept the fact that the market is in control and that I can only control when I get in and get out of a trade.
  • I fully accept my trading to be completely free of ego and completely full of conviction.
  • I will have no bias strong enough to accept that a trade has been proven wrong or even to reverse trade direction

Context
Context or big picture or bias is required before a trade can be put on. This is what defines the why.

Context will be defined based on the following:

Context areas:
  • First day of the month defines the monthly pivot range for the rest of the month
  • First asian session of the week defines the weekly open range for the rest of the week
  • 45 minutes of the Euro session starting 1:30 AM central defines the Euro open range
  • 45 minutes of the US session starting at 7:30 AM central defines the US open range except inventories day
  • Daily 6:30 PM to 1:00 AM central defines the asian session range
  • Daily 2:00 AM to 7:00 AM central defines the Euro session range
  • Daily 8:15 AM to 4:15 PM central defines the US session range
  • 5 PM to 4:15 PM defines the ETH session
  • 7:30 AM to 4:15 PM defines the RTH session
  • RTH Range with exchange close defines the daily pivot range for the next day
  • 3 day ETH range with exchange close defines the 3 day pivot range for the next day
  • ETH session range defines the Previous Day high/low for next day
  • Exchange close defines the Previous day close for the next day

Other factors affecting context are as follows:
  • Average Daily Range
  • Current Daily Range
  • Time of the day
  • Results of current day trading

The lists above cover most of the factors that will be considered for defining context.

My trading day begins at 7 AM at which point in time the following context areas are available:
  • Weekly open range
  • Daily pivot range
  • 3 day pivot range
  • Asian session range
  • Euro open range
  • Euro session range
  • Previous day high, low, close

These areas will be examined with relation to current price and price action so far since ETH start to determine immediate context and potential trade locations.
  • Bullish bias is determined if price is above daily pivot range, 3 day pivot range.
  • Bearish bias is determined if price is below these 2 ranges
  • Price in relation to Euro A' and C' targets determines further bias
  • Price in relation to Weekly OR determines further bias

Most of the days, it is anticipated that there will be a high probability trade setup between 7 AM and pit open.

US OR formation completes at 8:15 AM with the exception of CL inventories day when it is 15 minutes after the report. At this time, in addition to the already established areas, the US OR is available to develop further context. ACD principles governing US OR will be taken into consideration from this point forward along with the already established context.

The following will be continuously monitored throughout the trading session:
  • Average Daily Range
  • Current Daily Range
  • Time of the day
  • Results of current day trading

As the current day range approaches the average daily range, probability of an existing move to continue further diminishes.
The later on it is during the day, the lower the probability of large moves is
There are no set rules based on current days trading results so this is currently left up to discretion

...to be updated further

Entries
Context will help identify 2 categories of trades - scalps and trends. While the major focus will be on trend entries, scalps may be attempted when a trading range (box) is established that is large enough.

Once context is determined, order flow will be used to find an optimal trade entry price.

2 home grown order flow algorithms will be employed for both types of trades:
  • One is based on temporary order flow imbalance when order absorption is evidenced
  • The other on order flow divergence when higher highs/lower lows are made on lesser order flow evidence

The existence of either one of these is enough to confirm trade entry.

Requirements for trend trades
  • Entry will always be taken with a stop market order when the market starts moving in the direction of the trade.
  • Entry will be taken such that the stop is below the most recent swing point by several ticks
  • Entry will be taken such that there is a high probability of the target to be at a location that allows for a minimum of 1:2 risk to reward ratio

These requirements will be slightly relaxed for scalp trades but points 2 and 3 will be adhered to as much as possible

Trade Management
This area is open to a lot of improvement since it is difficult to formalize rules without taking several trades but at least the following will be adhered to:
  • Once minimum R:R has been achieved, order flow will guide the exit as much as possible along with context areas
  • Stop loss order will not be moved at all for trend trades
  • Stop loss order will be moved to protect scalp trades as much as possible without suffocating the trade

... In progress, to be completed during the weekend.

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  #116 (permalink)
Houston, TX
 
 
Posts: 294 since Aug 2013
Thanks: 1,420 given, 757 received

... Concise Trading Plan continued...

State of the mind, psychological guidelines:
I intend to read these each day until the time I do not have to. This is like the stress-free me talking to the stressful me.

When not in a trade:
  • There is no rush to get into a trade. "Its not going to run away". There is always a next opportunity. This is not a sprint, its a marathon. Pace yourself.
  • Focus always on initiating a trade when there is context and confirmation. First context, then confirmation. Past habits will crop up but always suppress them, focus only on these 2 things. No context, no trade. No confirmation, no trade.
  • Time of the day is as important as current daily range in relation to average daily range. Later in the day or when current range near or greater than average range, become more passive. If everything lines up, take the trade but keep targets reasonable.

When in a trade:
  • The initial moments after getting into a trade are the most stressful for the mind. Stay calm. It is out of your hands at this time.
  • Whether trade goes against you or not, always think what next. It does not help looking at the DOM, look at the charts. Plan next steps. Think as if you are not in a trade, is a different trade setting up or are the charts suggesting neutral? Some of the best trades are right at the exit of an existing one. Be one step ahead.
  • If trade stops out, reassess the context and confirmation. No one proved you wrong. You do not have to be right. There is no ego. No one has to prove anything to anyone. Just say, "Next!" and move on.
  • If trade goes in favor, once minimum R:R is achieved, get out at first hint of unfavorable order flow. There are no fixed targets, instead let the order flow tools show the exit.
  • When in a favorable trade, watch the strength of pullbacks using the divergence algo to determine when enough is enough. There are no other rules regarding retraces yet so build them with experience. Use the same rules for scaling into a trade.

Commercial issues:
Currently, 2 accounts are available to trade. I have 7 days to go in the TST LTP account. Current balance is ($1,115). Balance required for funding is $750. I will leave this account alone for another week or so. In the meantime, I will start practicing using a new TST 150K combine which I got at a 70% discount for writing this journal. Thank you TST and futures.io (formerly BMT).

I will stick to an all in all out approach so that it is transferable to a smaller account. The new combine is for 20 days so based on some simple calculations, I will trade a maximum of 5 contracts starting out with 2 until a cushion is built. Will reassess at the end of each week.

...End

Much of this plan will remain the same for the next 4 weeks whichever account I trade. I do not want to make changes every other day. I will make only minor tweaks each week. The idea is to gather sufficient data so that there is sufficient evidence before any major changes are made.

I will have to figure out a way to put this all some place where it can be edited. It looks like past posts can only be edited for some period of time and not after that.

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  #117 (permalink)
NoVa, USA
 
Experience: Beginner
Platform: NinjaTrader
Trading: CL
 
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Thanks: 562 given, 193 received

Masterfully written and thanks for sharing. I will incorporate some of them to mine. I signed up for another combine, Wasn't aware of getting discount on a combine for writing a journal.

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  #118 (permalink)
Houston, TX
 
 
Posts: 294 since Aug 2013
Thanks: 1,420 given, 757 received

Today's trades:

We were above the DP and RP

Euro C Up formed at pit open and long bias was further confirmed


Trade 1: Price pulled back to WORH, long from 93.43 got stopped out. In hindsight, there was no confirmation. There were several things wrong with this trade. Neither order flow algo confirmed. Stop was exactly at DP high which was also around the Euro ORH.

Trade 2: Price pulled back to Euro OR. Waited for 2nd pullback (this wasn't necessary, order flow had already confirmed), confirmed divergence and long at 93.26. Once US ORH was cleared, protected trade (trade was 30+ ticks in favor at this time), anticipated pullback to ORH, saw that the downward strength was very low, so held it. Saw orderflow diminish on 2nd leg up and placed order to get out 2 ticks above high at 93.70.

In hindsight, the exit was also good for a short scalp but there was no context so no trade.

Bias is still FULL LONG but ADR approaching and most likely done for the day.





11:00: Not trading anymore but marking observations for benefit of trading plan:

What to look for on a FULL BULL day



11:16: Posted about Friday's setup on MFB's thread. Thought I would record an image of what I was talking about for future reference:

Price made a Euro A' Up around 6:45. Pullback to RPL and EORH can be seen with evidence of diverged orderflow. Strength can be seen in the orderflow as price makes new highs from the bounce.


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  #119 (permalink)
Houston, TX
 
 
Posts: 294 since Aug 2013
Thanks: 1,420 given, 757 received

Monthly pivot range for Dec has been established:
MP High: 93.65
MP Low: 93.32

ACD methodology describes the monthly pivot range as a significant range for the rest of the month. Once price moves above or below the range, it tends to stay that way for the rest of the month.

After being below the monthly pivot since mid-October, today price is above December's range for the first time. Is it going to stay that way?

Take a look at the chart for 2013. 8 out of 11 months, once price moved away from the range, it did not break the monthly pivot for the rest of the month after moving above or below.



A close above 93.65 or below 93.32 is significant tomorrow and I will be watching this range and how price reacts here. First/Second day of the month has set the tone for the rest of the month on several occasions in 2013

Same thing for 2012. Similar behavior can be seen during 2012


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  #120 (permalink)
Houston, TX
 
 
Posts: 294 since Aug 2013
Thanks: 1,420 given, 757 received


All of the backtesting, reading the book numerous times, coding it to perfection etc, does not bring in automatic trust. It takes time. It was a picture perfect setup that I had already anticipated last night. Just didnt trust it enough.



Placed the order at 93.78, as it was about to be filled, I cancelled it for reasons I cannot explain.


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