I think the important thing is to learn from this experience. The main hint to me was that 10:15-10:30 (Europe time) it went into a tight trading range from 34 to 15. That's 30 tick range which is just too tight to try and scalp 10 ticks out of it. Not only that but the volume was light, it'd slow down a lot and then move quickly, making reading order flow unreliable.
We can be happy our losses were small.
Can you write a bit about how you're trading the dax. What kind of setup do you look for? What kind of charts? What kind of targets you use? It'll be useful to compare notes.
I mostly trade from 5t SbsRenko chart but recently I have been testing also point&figure charts. And favourite setups are S/R play with d9ParticleOscillator divergence. As to the money management, to tell you the rough truth, I'm pretty well undercapitalized so I trade max two contracts, sometimes only one. If two, I have the first pt 6 points and let the second run (or more usually it is stopped out at be+1). Nothing interesting today but enclosed are my entry setups from yesterday morning. Unfortunatelly I wasn't trading at the time.
I don't want to kidnap your thread so I'm going to make my own journal in a short time and definitely will notice you. Will be glad to discuss my trades with you.
The following user says Thank You to hinode for this post:
I have never seen crude so volatile outside of news. Today was amazing. It moved so fast I couldn't get filled on a lot of trades and when I did get filled 6 ticks was way too close of a stop for the high volatility. I recognized this after getting stopped out a few times but rather than just sit out I wanted to see if I could do it. I couldn't. I finished -$760 without commissions.
Rather than continue screwing around I'm going to study some of the trades and also work on a daily target & tilt level. If you have suggestions for that please let me know.
I wanted to expand on this as I believe it is really important. I have read and believe it myself that professionals aren't trading off charts. They have price levels. For example you're an oil trader for an airline and your boss says "buy 1000 contracts at 79.06 or better". So your job as a trader is to get that order filled at your price. Let's say price is at 79.20 and it looked like it might go lower but there is a bit of demand there. You offer a couple hundred at 79.24 and start hitting the bid at 79.20. You continue hitting the bid and lowering your offer by a few ticks. You take out the demand and price starts to go. Breakout traders join in and they start selling. You now start covering your shorts at 79.12 and by 79.08 you're flat and you have start putting out bids as price continues lower. Your prices are getting filled from 79.08 down to 79.00. You now have 700 filled. You then put 200 on the bid at 78.98 and start hitting the offer hard. The offer raises as you take out the supply from those breakout traders. By 79.08 you've bought your 1000 contracts at an average price of 79.04. More importantly you've stopped the decline and sent price heading higher.
Your boss comes and you tell him you got 1000 at 79.04. He's happy, 2 cents below his request and now price is trading at 79.50. That's a nice profit of $460k. (Ok maybe 1000 was too many for this example but you get the idea).
So you can see, at no point did you, the professional oil trader, look at a chart. You got an order and you worked the market to achieve your objective.
Now I don't know if this is how it really works, but this is one scenario in which I see it working.
It's all based on price. Someone studying bar charts might have taken the breakout and lost money. Someone might have seen a reversal bar at 79 and went long. Someone trading cycles might have seen cycle setup 2 and went long at 79.05. Someone might have seen MACD divergence and went long at 79.10. Someone might have seen stochastics cross the slow line and went long at 79.06. Someone might have seen price test the value area high from yesterday and went long at 78.99. Someone might have seen price pullback after a breakout and went short. Another might have seen the stoch cross the 50 line to the downside and went short. etc..
All these "someone" are traders each trading what they see. They're using their charts to read the market and find trade setups.
But I hope you can see in this example that if you were just watching the DOM and Time & Sales, you would see what was happening much better than with a chart.
Try it. Take an hour and just watch the DOM & Time & Sales. You can see the market finding demand and rising and then finding supply and backing off. You can see the market come up to the same price point several times and then finally breaking through. You can see all this without charts.
Charts can be good, I use them. But you have to be careful because as I said in one of the first posts of this thread, you can always find a bar type & size to show you want you want to see. You can always change indicator parameters to see what you want to see. I use 3 timeframes for cycles and I often have one chart in an up cycle and two are in a down cycle. If I want to be bullish I can say ok chart 1 is in an upcycle let's go long. if I want to be bearish I say "charts 2 & 3 are in down cycles let's go short". If I add a 4th cycle I might get 2 up and 2 down. Now what do I do?? With 5 it gets even more complicated. And actually I do trade with 5 for cycles, but I put more emphasis on the lower 3.
There are no parameters or periods or types when looking at the DOM & T&S. You're looking at the real raw data. To me it makes a lot more sense.
So when I'm looking at demand holding at 79.04 and I'm waiting to get long within 2-3 ticks, it doesn't matter if my chart is at 50 tick or 900 tick or 500 volume or renko or anything else. It's the price I'm looking at. I use the charts to get an idea of the big picture, but when it comes time to enter a trade I've got my eyes on the dom, T&S, and the volume ladder which is recording the time & sales information for me and organizing it in a logical way. Once I'm in the trade I focus more on the DOM, watching T&S with peripheral vision.
Last edited by cunparis; March 27th, 2010 at 10:52 AM.
The following user says Thank You to cunparis for this post:
I studied my mistakes on Friday and more importantly, "perfect trading" (trades I should have done). I focused on scalping and missed the big trades. Don't get me wrong, my scalping practice over the last few weeks was really important. Because from now on, as big Al says, all trades will start with a scalp.
My goals for this upcoming week are simple:
- focus on the big setups - no scalping
- don't get discouraged if I get stopped out, keep trying as long as the setup remains valid
- while waiting for big setups, study the dom & volume ladder, read a book, or watch webinars
The last one is really important because when waiting for big setups you have to have patience. My mind is very active so I prefer to keep busy. That's one advantage of trading with cycles, the larger timeframe doesn't cycle very often and you can easily know in advance when a cycle is approaching.
The following user says Thank You to cunparis for this post:
Panel 2: My own proprietary COT indicator. Shows commercials are still relatively long but are becoming less so. If this drops lower it could give a signal (red bar). You can see those have been good signals in the past.
Panel 3: The net commercial position in contracts (no processing, just raw data)
Panel 4: Better COT indicator shows we're overbought but in an uptrend that is not useful. Let's see how it reacts if this turns down.
Panel 5: Net percentage commercial position (no processing, just raw data)
I haven't put a lot of faith into the COT lately. I feel the commercial hedgers have been hedging which means being relatively short as the market rallies up. They've been slowly covering their shorts which would make sense if they:
- reduced the size of their portfolios
- saw less of a threat of the market going down
but lately they've been reducing longs and are even net short.