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Trading ES with Depth of Market


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Trading ES with Depth of Market

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  #1 (permalink)
 isla 
Kyiv/Ukraine
 
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I decided to start a journal because I noticed there is no thread with regular posts on trading ES using the DOM (at least for non-Elite members).

I am planning to post some of my trades with explanation of both entries and management. Given we are in a summer market, I hope there will be something to write about

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  #3 (permalink)
 isla 
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Felt a bit rusty in the first 5 minutes after several days of a dull market. It was easy to see straight away that today may have some moves. I guess not having any support levels from yesterday or overnight session also helped.

Here is a trade I took with some comments on its management:

We sold off after the pit session started and built quite a bit of volume between 1963.50 and 1964.25. This gave me an indication that many buyers were positioning themselves here. I placed my sell order when I saw that market broke lower and left those longs trapped:

My stop was just outside of this volume cluster, but ES only ticked to 3.50. Market moved lower 5-6 ticks pretty quickly but then got stuck at 1962.50 and started trading volume there. To me it looked like momentum wasn't present so I exited half of my position at 2.50:

I keep my trade management tight and try not to let on-side trades turn into losers, so I am constantly looking for reasons to exit. I noticed that we couldn't really push lower than 2.25, with very few contracts traded at 2s. It looked like 2.50 was absorbing sellers and started holding as a support:

So when I saw next wave of buying I hit into 2.75s and closed second half of my position.

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 joselopezde 
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Congratulations on the thread. It looks interesting

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 isla 
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Moving to London this weekend. Will be back trading on 22nd. Best of luck to everyone!

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 isla 
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In other threads I read about traders' experiences trading on the floor or on screen with prop firms. I thought I'd share some of mine as it seems to be more recent.

These are just my thoughts and conclusions based on personal experience.

I joined a prop firm in February of 2011. I was in the first intake with 6 other guys. Our office mainly traded European STIR products through spreads and strategies like butterflies and boxes. Within 6 months we got involved in softs and energies spreads as well.

We had support from senior guys with couple of years of experience as well as our managers who traded longer. Occasionally we had visits from our company's directors and they had chats with us about trading and how things were going generally.

Essentially, we were market makers, liquidity providers. We were selling volatility expecting to get filled on the other side for a tick. That's what we were taught and that's how our group started seeing first positive results.

Now, some people may think there was more to it. And I will agree. Unfortunately, I could never understand what it was.

Some things in trading take time, like gaining experience, but I think I gave it a good shot. I must admit I wasn't among the best when I decided to leave 2.5 years after I started, but I wasn't among the worst either.

I made money both years but never even close to the bonus territory. The most disturbing thing for me was my complete disbelief in what I was doing. To me positive results didn't feel like a sign of my skill, nor did I think I had an edge. The way I saw it, people who made bonuses took more risks, made more intuitive decisions and enjoyed what they were doing (presumably).

Another important factor for me was that nobody could really explain logically why we were expected to make money trading for a tick or how to determine conditions when the market may strip 10 prices one way. I heard quite a few vague explanations and was satisfied with them while I was still in a "take a leap of faith" mode. I should mention that, in my view, it was a proper trading firm and we even got paid straight away to keep us going.

As I said, I was profitable. 2011 and first half of 2012 were quite active with a lot of uncertainty about European economies and interest rates. There was a lot of paper in the market and things looked rosy. But then something changed.

I noticed this change only on my year end review. I stopped making money in STIRs, which was my main market, and couldn't find another explanation to this fact apart from market being "slow".

That's when I turned my attention to outrights. Partially because how uncomfortable I felt trading spreads, partially because of the abundance of information available online. But intellectually I believed that this should be my future path.

I did economics at uni and after years of research I knew enough about market inefficiencies and changes that take place. I believed that manual market making in spreads would have the same story end as in outrights. Obviously the drop in volume, that could have been temporary, didn't help either.

I think being able to make decisions on your own is one of the main advantages an individual trader has compared to any institution. Now I trade what I got an understanding of working for a firm, which is how traders position themselves and how those positions influence future decisions.

Markets are always changing, I agree. But, in my view, an edge must be based on actual market mechanics, not on a temporary inefficiency or correlation.

If anything, what I wanted to say with this story is that there are no secrets in trading. The market generates more than enough information to enable a trader make decisions about what works and what doesn't. Keep track of your ideas and results and you will have as big edge in current markets as any veteran trader.

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 isla 
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ES is trading at all-time highs, but unfortunately volume is not there, hence opportunities don't come around often. It's weird, considering the trend, that majority of momentum trades have been on the short side for me recently.

Here is what I saw today:

We opened around overnight session high and yesterday's high. ES did push through these levels but reversed sharply. Given yesterday's close and overnight session low were quite far away, I started looking for a good place to sell.

Market built decent volume between 1978.50 and 1979.00. If broken, these prices could hold any upside, so I waited for shorts to attack:



I placed my order at 1978.00, just in front of volume at 8.25. Trade started working pretty quickly. I have my first scale out at two points. Not that I use fixed targets, but it is a reasonable size of an impulse move, in my view. I try to manage all my trades anyway.

ES sold off to 1976.50 and 6.75s started absorbing sellers. I don't like taking heat on my first scale out, so if a decent size gets absorbed, I am out:



You can also notice that on the last attempt to push lower only 51 contracts traded into 6.50s. Combined with buyers at 6.75, it was enough of a reason for me to exit half of my position.

More contract got absorbed at 6.75 after my exit and we only traded 10 lots at 6.50:



At this point I started bidding 6.75s, then moved my bid to 7s. I was willing to get out for a scratch or a one tick profit worst case.

Market did go to 1977.75 but quickly traded back to 7.25 and then I saw this:



A couple of block orders got absorbed on the bid, clearly indicating that 6.75-7.00 can now present some support area. So I moved my order to 1977.25 and got filled on the second half.

It did look like 7s were holding the price for a minute, but we did have another push lower.

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 isla 
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In attempt to adjust to the current more "rangy" environment (who knows, maybe it's all back to normal considering today's session), last couple of weeks I've been practicing in execution of some new ideas.

I haven't changed anything in my plan, just added a couple of new "setups". And I feel that a Combine will be the best place for me to see how it all works together.

So, given all the macro data coming out tomorrow and on Friday, and generall instability in the world, I decided to postpone the start of my Combine until Monday 4th August.

I haven't decided yet about the format in which I'll be showing my progress. I still want to keep this trhread devoted to DOM trading, not just sharing results. For now, I think I'll be posting charts with all the enries and exits and then possibly adding some comments if I have time.

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 isla 
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Took one trade today:


Here is how the DOM looked seconds before the trade:


You can notice strong sell limit orders above 0.75. When I saw a block buy order into 0.75s got absorbed, I put my limit at 0.5s as soon as they went offered.

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 Bankrobber 
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Good thread this.... keep up the good work

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 isla 
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Got a lesson on not going too crazy while trading today. Market was thinner, which added some pressure I guess.

First two trades were according to the plan. Direction was clear, management was trickier. Both trades were based on volume clusters break on the way up.
Trade1:

Trade2:




Now, the third trade was a mistake. I got angry after the second loss (happens) and chucked my mouse (also happens) both breaking it and accidentally putting myself into a new short. I didn't have a shortcut key set up to flatten the position, so while I was struggling to fix the mouse my stop got hit.

Normally, when I see that my exit wasn't optimal (second trade) I re-enter around the same price. So should have been a close to scratch day.

Definitely disappointed, but it is just one day. I set my daily stop limit at around 15 ticks (which I reached), and considering the circumstances, decided to just watch the rest of action.

This was the first time my physical reaction actually affected my PnL. Mistake noted, another learning experience.

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 isla 
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Well, if yesterday I felt some pressure because of slightly thinner market, today I actually felt a bit scared

Not much volume in the DOM required some adjustments to trade selection and, more importantly, high degree of alertness in trade management.





After my exit, I started thinking that today will be, what I call, a thin market/small range day. Relative volume turned lower and there weren't many participants in the DOM. To me it means unfavourable trading conditions and I just stay out.

Essentially this type of trading is characterized by low volatility. Since May I've been testing a possible short trade in VIX on days like this, because I noticed that this behaviour persists sometimes for hours. Looks promising, but the sample size is very small so far.

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 isla 
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Market conditions are similar to yesterday's first hour or so of trading. Unless this range breaks strongly, I'll be just watching.

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 isla 
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Wanted to quote this post from iqgod's journal. Thought it will be useful for me (and maybe for someone else) to have it here. Many great points I can relate to.

Thank you iqgod!


Quoting 
1. Love the Process of trading.

Trading is embracing a lifestyle, an attitude, and accepting the long journey where change and uncertainty are constant companions. Expect to sweat out during the learning part, and master many things before seeing peaceful days roll by.

The key here is: Have no desire to act inappropriately. Love and be proud of all the times when you consistently are able to not have any desire to act inappropriately, notice that this happens when you are engaged in the process instead of focusing on rewards/reprimands.

2. Patience and Inaction are Your Edge

Avoid taking trades, playing at all unless your mind calmly notices that it is time to act. Doing nothing is trading (more so than taking marginal trades and then hoping, coaxing and praying).

Patience and inaction arise from Discipline (not from Sloth). Wait until there is money lying in the corner and all you have to do is pick it up. Once you know what you are looking for then wait in preparedness for that to materialize. Not taking a single trade all day is perfectly acceptable.

To repeat the key again: Have no desire to act inappropriately. This comes easier when you are in complete immersion, in the flow, in the zone - these being alternate terms for Being in The Present Moment where time fades, hence impatience does not exist.


3. Don't make much ado about being patient and disciplined

Make your ego so small, so minuscule, and so elastic that it is blessed with agility and flows naturally with the market and be peaceful with the fact that you are achieving your goal - namely that of being here to make money and getting paid for having an edge. The call of sirens being loudest when you are virtuous - as if the market owes you and wants to pay you; as if being a good tape-reader, patient and disciplined means 'you have arrived' - all these thoughts simply mean you are shifting focus away from the process and glamorizing it in itself. As a lifestyle change, remove the'I' from everything in life and be humble, helpful, kind and know your place in the universe is not in the center of it. Simple and frugal living, surrendering to some faith, and understanding that the order that move the markets is the same order than makes the earth spin,sun rise and seasons happen is the enlightenment that is always needed for trading.

4. Love thyself

Make peace with yourself. Place yourself in the best position to Give your Best; but also Forgive yourself for letting that trade slip away, for missing those zillion pips had you stayed in instead of exiting. Love yourself enough not to take marginal trades, revenge trades, or do any other thing that will diminish confidence in the Self or see yourself any lesser than the imperfect but yet so perfectly trustworthy being you are. Never hate yourself; this is the key to prevent depression, mania, hatred and irrationality. Only allow the clear stream of reason to run the forefront of your engine - be your boss by reasoning with yourself and not tolerating lapses of discipline, never adding to losers, not exiting a perfectly working trade, never slack on studying and improving. Do not substitute attitude for work, do not fool yourself into procrastinating by trading needs a special elevated mood or that one needs to meditate one's self into some magical zone. By doing the necessary preparations in whatever mood you are in, you make sure that you do not refuse the pips that the market offers NOW; do not foolishly say that this Now is not right for me to make money, I'll have that Now tomorrow or (insert time period). Days turn into weeks turn into months and you will find yourself looking back at a series of days when you were 'broken' and realize it was all a game of pretend and excusitis. The other end of this is wanting to win Now and seeing things that haven't materialized yet (good trades where there are marginal ones or sometimes no setups at all) - this is assigning more importance to the I, making it bigger and more bloated than it really is - the I is not important, and the I needs to submit itself to the market's agenda and flow with it, and get out if that isn't happening. Not getting excited is a part of loving yourself and taking I out of the equation. In this game you win when you surrender.

As Mark Douglas says, be the observer of the I - catch yourself thinking about committing a trading error - if you don't then your realizations come after the experience.

5. The Journal is your ultimate line of defense

Record your losses most of all. The journal allows you to judge whether you erred or whether you took the best decisions in the light of available information, but the bad result was simply due to variance. Anyone reading your journal should be able to follow your line of reasoning and follow the same steps that you would later.

A journal does not ask 'What do you do in this situation?'

A journal asks The Relevant Question 'What all aspects have you considered when you approach this situation before determining what is to be done?' and also records the honest answer.


6. Be natural. Forcing yourself is suicide

The mind has a muscle for self-regulatory behavior. That muscle has limited strength and energy and needs building up, conservation. As we trade and take decision after decision, the resource is weak and tired and depleted. Removing the I allows pure strength to be fed directly this muscle, adding I cramps it and restricts it. Nevertheless lot of screen time is akin to a workout and you become capable of sustaining more of its continued use. Know where your meter stands and be prepared to walk away when you realize that further decisions on a tired muscle may bring the weight crashing down and cost you dearly. The players who simply play defensively break even, the ones who play the A game become profitable. It is simple, difficult.


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 slowsie 
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Thank's for posting that quote. I need to take that to heart

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 isla 
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While there is no escape from uncertainty of outcomes in the markets, a trader should try to eliminate/reduce uncertainty in his own reasoning and actions. Preparation and repetition are tools that enable strengthening of one's views. But this post is for people who, for any reason, don't feel comfortable about what they've been doing and are willing to try something new.

There are two sides to trading: one is your method, and the second one is you as a performer. At the same time, psychological problems that affect trading performance can be roughly divided into two categories: discipline problems and trust problems. While interconnected, these causes of frustration have their own peculiarities. Discipline, in my view, can be mastered by observing own behaviors and reactions, and working towards eliminating harmful habits. The goal is clear, or becomes clear after a period of keeping a trading journal. Trust or belief in your method, on the other hand, is a bit trickier I think.

I want to approach this question not just from an abstract point of view, but would like you to really think about what would make you feel confident about your decision making process in the markets. For some it may be statistically significant back-tested data. Some get into methods that have wide following on forums and keep their faith while they see other people's success. I would like to share my view.

This post is not intended to be negative or even critical about other methods and practices. Anyone is more than welcome to point out mistakes in my judgement.

I believe that any trading idea should make sense in order to be trusted. I never really got into trying indicators, because I think they have no causality with future price development. I struggled a lot with implementing price action principles, and while I agree that context is extremely important, I don't agree with predicting the context. Market is in a trend/trading range/trending trading range until it's not. Price action reading (as I see it) suggests a story based on subjective notions of context and signal patterns. It is useful to think about trapped traders, but I couldn't convince myself/find supporting evidence of a chart helping me to see these situations.

I'm sure that majority of people who will read this post have some understanding of market structure, how liquidity and volume move the price. If you look at the DOM and see 10 lots five levels deep on both bids and offers, there is no argument your 2 ticks stop will be of no use (talking about liquid futures here). At the same time, if average volume of a bid and offer is in thousands, playing for a 50 ticks move is a low probability trade to say the least. It's not about possibilities and statistics, it's about aligning your expectations with events which are normal to your market.

At the same time, when you see volume trading at a price, you see exactly how many people are entering/exiting their positions. If this volume is exceptional, you can be sure other people will be paying attention to that price/prices.

The basic idea behind watching the DOM, volume and order flow is this: if you bought, you want to see more buying, you want prices to progress upwards, you don't want sellers stepping in and absorbing buyers (which may accumulate trapped traders). When momentum is out it is reasonable to become cautious and to look for reasons to exit. Market is not giving you any supportive information to stick to your original position, so be alert. (Opposite is true for short trades). Trade management is as important as trade selection. It's all about being in the NOW. Overall, the process itself must bring clarity and induce confidence in one's actions.

This kind of reasoning, even though oversimplified, once made sense to me and I hope someone can take it as a starting point for own research. There is loads of more detailed information on jigsawtrading website (I have no connection to them).

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 isla 
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To be totally honest, not sure I would have gotten filled on my last trade if it was live. I know that at least a couple of hundred contracts traded there, but then I refreshed traded quantities on my DOM. Well, it is what it is:



Trade1: momentum volume cluster break.
Trade2: will skip similar setups in the future. We traded some volume at 1940.50 on the initial bounce off the lows and I thought it may cap the upside. Location was worse because of a possible climax after Trade1.
Trade3: same idea as Trade2.
Trade4: same as Trade2 and Trade3. Volume at 1946.75 and 1947.00 as resistance.

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 isla 
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Quite a sticky day for my style of trading. Moves were slow but market was thick, so there was some volume to lean on.

After relative volume dropped to current levels I decided to wrap it up:



Both trades were attempts to front-run a breakout. ES was too slow to take off hence the results.

This is why I got into the first trade:



We ticked through the previous high and pulled back to the POC at 72.75. Then we pushed into highs again but stopped at 73.50. You can see that bid absorbed over a thousand contracts and one of the sell orders was 105 lots. I tried to bid 73.50 but they didn't trade much so I hit into 73.75s. Had my sell limit at 75.25 but got out when sellers came in.

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 isla 
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Trades today:



Trade1: 1 point pullback after selling momentum at the open. Was aiming for 4t but didn't get a fill and then my OCOs got executed at the same second when I was exiting, so had an additional scratch.
Trade2, Trade3: front-running a BO. I thought ES may stay in a narrow range, so switched to SIM to try out some new ideas and forgot to switch back to the Combine account. Noticed only after my exit. A bit silly.
Trade4: minor reversal. Trading range day, we broke out but many people got stuck around 1982.75 area.

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 isla 
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A great post by Dr Brett Steenbarger:

"...As Angela Duckworth's research attests, sheer grit--the ability to persevere under adverse conditions--is a central element of success across career fields and performance domains.

The notion of grit has so captured the interest and attention of students of success that Duckworth's second factor has gone largely unnoticed: self-control. Duckworth explains: "Self-control is the voluntary regulation of behavioral, emotional, and attentional impulses in the presence of momentarily gratifying temptations or diversions." Grit refers to the ability to persevere over time. Self-control is more of a moment-to-moment, day-to-day phenomenon: the ability to resist temptation and distraction and stay focused on bigger picture goals.

Indeed, Duckworth's review finds that self-control is as central to positive life outcomes as such variables as general intelligence or socioeconomic status. Interestingly, not all who possess self-control also display grit and not all gritty people exhibit strong self-control. It is the two in concert--the ability to weather temptations in the short run and setbacks in the long run--that appear to predict success.

When you see how grit and self-control work together, you can appreciate why so many successful traders are process-driven traders. By focusing on the process of good trading rather than the daily outcomes, traders rehearse both self-control *and* grit. In other words, a process orientation to trading is daily training in the dynamics of success, a kind of behavioral priming. By defining and following a robust process during good times and bad, we literally train ourselves in grit and self-control."

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 isla 
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The day started off with decent volume and participation, but turned into another slow-grinder. Unfortunately I got into two trades in the first half an hour and didn't have a chance to make anything back after.

I expected a breakout lower on both trades, but I guess we were channeling down rather than trading in a range:


Relative volume keeps dropping so I'm done for the day:

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 isla 
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I understand people who go on holidays in July-August

Was hunting a breakout, but no follow-through:



Here is the original range I was watching:



And it expanded into:


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 isla 
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I didn't trade ES last summer. So far it's been a useful learning experience. I've been trying to pick only relatively active days, but sometimes there is no way to tell when volumes just leave the market.

Trade1: not the strongest trade. Will be looking for more participation for this setup next time:



Market was trending from the opening and got stuck in a clear range. I had some doubts about a possible climax at the lows, but got in anyway.



Trade2: a mistake. Thought there was a climax after a prolonged channel on a trading range day. I didn't notice a couple of volume clusters on the way up (trapped shorts) when I placed a trade. Scratched when realized my mistake.

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 kronie 
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@isla...

what you just (honestly) admitted to is the flaw that makes trading using that method as the primary decision driver, such an impossible flaw.... namely being stopped out frequently enough to trigger one's risk management principles of 3 losers and shut down for the day...

I blend chart, of some smaller / larger outside timeframe paired with the depth market approach, just to prevent that scenario you're describing.

that however invalidates the "purest" approach that adherents to this method insist you must have to attain its nirvana...

hope that makes sense and fits with your karma....

just war stories from the front lines....


have you found a solution or work around yet?

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 isla 
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kronie View Post
@isla...

what you just (honestly) admitted to is the flaw that makes trading using that method as the primary decision driver, such an impossible flaw.... namely being stopped out frequently enough to trigger one's risk management principles of 3 losers and shut down for the day...

I blend chart, of some smaller / larger outside timeframe paired with the depth market approach, just to prevent that scenario you're describing.

that however invalidates the "purest" approach that adherents to this method insist you must have to attain its nirvana...

hope that makes sense and fits with your karma....

just war stories from the front lines....


have you found a solution or work around yet?

Hi kronie,

Thanks for your advice!

I'm not sure I said anything about being stopped out too often though. I did have this problem before, but much less so now. I do use a chart all the time, but I'm not a pure DOM scalper anyway. Although, more often than not a Volume profile would be sufficient for me.

Not the brightest performance is more a result of setups not coming around often. But, considering volumes, that's ok. I'd rather get more experience identifying days/periods when I should just stay out.

I know my limitations trading-wise and I guess this thread can be a slow-burner

So if you feel like posting any of your trades/ideas you are more than welcome.

Thanks again for stopping by!

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 kronie 
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I am in New York, and you shouldn't be surprised to hear this often quoted axiom:

"the world starts at the NYSE", when it comes to stock trading.

your question needs translation into your local times, based on your chart scales, and then you will have your answer, but the heavy volume times in NY are just before the 9:30am open through the Euro market close, which comes around 11:00am NY time, and lasts as long as 11:30am NY time

the second best time to trade are position squaring times towards the close, and buffered by the usual 2:15pm - 2:30pm financial and FOMC meeting notes announcement times through into the 4:15pm futures close, again relative to NY time

hope that helps

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 isla 
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I thought this post will be a good reminder that we actually need to know what we are doing in order to be profitable long-term. Ups and downs in results, mood or focus, although play a big role sometimes, shouldn't prevent achieving the goal if the "edge" is there.

"As I mentioned some months ago, mad props to anyone who can duplicate dubstep with regular instruments, especially with a bass guitar that plays a magnetic field theramin-style. One way to stay creative is to stay in touch with people who are creative--across different fields.

I was recently contemplating whether markets would bring us scary pullbacks or spritely rallies when an email came from a group interested in a webinar. They were soliciting my participation, according to my contact, because--as we all know--90% of trading success is the mental game. The group would be open to any topic I chose, he explained.

Until, of course, I chose the topic of how 90% of the mental game is skilled trading.

Now why is it that no one proposes to a brain surgeon that 90% of what he or she does is a mental game? And if 90% of performance is a mental game, why do Olympic athletes spend 90% of their time on skill development?

Is making an instrumental version of Skrillex the result of mastery of a mental game? If you control your emotions and stick to a plan, will you generate music like they do?

C'mon.

But 90% of the mental game being trading well; there's a bass guitar worthy of a Hot Hand!

So here are three trading practices that reliably lead to emotional disruption:

1) Poor risk management - Oversized positions; holding positions that are more correlated than you realize; failing to clearly define and trade a risk/reward relationship for each trade--all of these create outsized losses, which in turn generate outsized emotional responses and subsequent potential for disruption of trading.

2) Failure to plan - Trading without an explicit process for clearly formulating an opportunity set; trading ideas and patterns that are untested and unproven: these generate loss and frustration, which then color thought and action going forward.

3) Failure to adapt - Markets become more volatile but trading sizes don't change; the trade becomes choppier but trading continues to pursue momentum: doing the same thing when the environment changes is a sure way to become confused, then frustrated, then reactive.

Show me traders troubled by emotion and nine times out of ten I'll show you traders who are taking improper risk, who are underprepared, and/or who have been trading static methods in dynamic markets. What those traders need is not counseling, coaching, or therapy. What they need is to trade more intelligently. If a chess player takes imprudent and uninformed risks early in a game, does not prepare for an opponent, or plays the same way regardless of the opponent's strategy, we would not attribute his or her losses to a failure of any "mental game."

True, psychological variables become relevant once skills are honed. Then mindset can help deploy them consistently. But no amount of focus on the mental game can substitute for skill and preparation and the need for strategies that possess an objective edge in the marketplace. Trading randomness with a positive attitude will make one a good loser, not a high performing winner.

That's the Scary Monster webinar no one wants to sponsor. It's so much easier to believe the Nice Sprites that tell us we can all make money if we just have the right attitude. "

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 isla 
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Trades today:



First three trades were attempts to play the range.

Last trade was a bit messy. Was too early with entry and then couldn't get out for a smaller loss. After my exit I thought it was another tricky tight range day so left the screen. Possibly shouldn't have.

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 isla 
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I may have missed the very first breakout of the day. Range was tiny at that point and even though my setup was there I didn't pay much attention to the market.

Apart from that, don't think I could have done anything better:


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 isla 
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Seems like some new ideas don't stand the test of time:


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 isla 
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Yesterday I looked through my Combine trades so far and thought some adjustments are necessary. Like with many other things in trading, losses/mistakes/problems can actually create an opportunity for improvement.

It is clear that my Range Breakout trades are not performing that well. During testing in July this setup showed some promising results. But 20 trades cannot prepare you for all the variability of situations in the market. Hence, I need to use current Combine experience to either decide if the "setup" is tradable and requires adjustments or should be abandoned completely.

I will go with the first option as I can see context-wise some trades are better than other. The reason I got into testing this setup originally was a high number of days with horizontal, fairly tight ranges in July. I spotted how successful breakouts looked like back then and just tried to replicate the same trade in current environment. Although I should have given it more thought. Looking back at my Combine trades I can see that many of them were taken when market was already channeling in one direction, as opposed to accumulating positions of range-traders. That's why I need to focus on the way the range is developed and only look for momentum breakout if market is going sideways.

That's where I see the difference between trading your analysis and trading your understanding of the market. I don't look for patterns or signals, but follow the same logic I apply to everything in my trading: determine traders' possible positions and wait for a moment when they start bailing out. I acknowledge that I may still have negative results trading breakouts, but at least I have confidence to invest more time in this idea.

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 isla 
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Not much today:



Management: around 6k contracts traded at 1990 so I scaled out first part; we popped up a couple of ticks and I thought 1990 may be a minor support now so put my bid at 1990.25 for the second part.

Will be away next week. Hope I won't miss all the good stuff. Good luck everyone!

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jamesico
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I uploaded a video sometime back. DOM trading on demo account.


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 isla 
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jamesico View Post
I uploaded a video sometime back. DOM trading on demo account.

Hello jamesico,

Thanks for your post. What was the reason for the trade? Do you actually use some algorithm for entries?

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 isla 
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Close, but not close enough. Was bidding for 4t on the first trade and for 6t on the second but ES only moved 3t (on first attempt; some aggressive buying so scratched) and 5t respectively.



Trade1: range trade



Trade2: front-running range breakout

Trade3: SIM, please ignore

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 isla 
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Trades today:



Trade1: front-running a breakout. We formed a range between 1977.50 and high of the day, with high volume (poc) in the middle. I tried to depict how this range developed. As you can see ES didn't manage to push through high volume levels on correction off the highs. I got in when I saw a block sell order absorbed on the bid:



Trade2: volume cluster break. Volume at 82.25 as support straight after larger range break on a trend from the open day.

Trade3: got it a bit wrong. Looked like buying momentum was healthy so got in on a 1point pullback. But I guess high volume at 1988.25 was a problem.

Trade4: similar to Trade3. Better momentum.

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 Jigsaw Trading  Jigsaw Trading is an official Site Sponsor
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That was amazing yesterday how they held onto that 77.75 level - did you see how much effort went into trying to push down through it?

When it did break through, sellers just could not hold it. Amazing how much buying pressure there is here.

If you have any questions about the products or services provided, please send me a Private Message or use the futures.io "Ask Me Anything" thread
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 isla 
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Hi Pete!

Yeah, there definitely was buying absorption with cumulative delta moving down quite a bit. I guess that's why the push up was so strong. Many traders who were selling that range needed to get out.

I mainly focus on smaller setups but recently started testing some bigger picture ideas. I was short (paper trade) in 79.50 area as sellers stepped in at second POC of the day (first one was around 78.25). Your observation about the lack of follow through on 77.75 break would have been useful for managing that trade. There was also support from yesterday's Value area high.

Thanks for checking my journal.

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 isla 
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A bit of an emotional day. Could be expected with FOMC tonight. Another mouse gone. Good thing I had a spare one this time. Learning from mistakes

Realistically, there was one tricky moment today, when on Trade2 I decided my worst case would be 1t profit (I was 2t onside at that point). But ES "skipped" my price and I was too hesitant/slow to bid for a scratch. So 3 trades with 0t heat, but lost 2t:


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 isla 
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One trade today. Good selling momentum, but hesitated a bit initially as thickness of volumes in the DOM wasn't clear.

Got an optimistic SIM fill on my target (only a couple of hundred lots traded). Would have exited for 1t/scratch on a bounce:


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  #41 (permalink)
 isla 
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Found a very interesting journal here on futures.io (formerly BMT) today. @Profiler shared his journey of learning to use auction theory principles after scalping FESX successfully for many years. For me, his introduction was especially close to heart. I got into prop trading hearing stories about guys who were making money day-in day-out with 6figure bonuses at the end of the year. It was just a year before Profiler noticed that markets were changing and decided to start over.

Sometimes I wish I could have started earlier and see those "great" times, but hopefully current markets will produce new generation of tough traders.


Quoting 
Hello all-
Im starting this thread in hopes of it becoming a collaborative effort to figure out how to make money trading the ES. A little background first: I was a very successful fesx scalper in the past. For 9 years i literally made money virtually every single day including only 1 losing day in 2005. At my peak in 2007 i was trading 6000 contracts a day working only 4 hours a day. I was living the life. I had edge and took it whenever i saw it. Until last year when some new algos took my edge away. Over 3 months my steady profits dwindled to nothing and after losing 8g's the first week of april i just walked away. I stand before you (figuratively speaking) a humbled man/ trader.

3 months ago i started trading spoos. I trade 1 lots, i am down $1300 so far including commish. I use volume profiling/ auction market theory. I have no edge. I understand the theory but as said in daltons books it depends on context. I am contextually blind the majority of each and every day. I am unable to prioritize the most important contextual factors at any given time. The worst part is that i dont know what i dont know. Ive been in various chat rooms and seen what other guys are looking at. I have the exact same charts as them. We are looking at the exact same things and they are crushing it while i am clueless. They are not smarter or better than me. They know how to filter the noise from the signal. They see subtle clues and understand the importance. I WAS the same way.

I know many of you are exactly like me. Lets help each other out and speed up the transition to profits. I will be posting here on a daily basis my nightly homework, my trades that i make and pnl. I will be posting a daily recap of what the market did as it relates to context. If you see me do a trade that was just obviously stupid, reply and tell me why! Im going to do whatever it takes to make money again so if you see me lacking in some way, tell me! This is trading, brutal honesty is required. If i wanted a friend i would get a dog (fyi i have one). Lets do this!


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 isla 
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Choppy day. Not many clean moves, every breakout was followed by a pullback into prior range. Couldn't find a good entry after my last trade:


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 isla 
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After today's session I decided I will not continue trading my breakout setup. It seems that particularly its management depends too much on behavior of algos, as I was looking for either immediate continuation or couple of ticks stop. Good breakouts don't happen often enough to cover small losers and roundturns. Sample size is still too small, but I think it will be a very difficult strategy to trade long term.

Trades today:



Trade1: thought selling momentum was strong enough to play 1point pullback.

Trade2,3: front-running breakout. Got stopped on a high tick both times. As I mentioned, I think it's too close to algos' tricks.

Trade4: good selling momentum.

Trade5,6: possible climax. Good location at the end of a prolonged channel+acceleration in cumulative delta. Both trades not ideal. The first setup was weak and I just overlooked some details, so scratched very quickly. The second was a bit better, but entry questionable at this point. Decided to give it a go hoping for some momentum, but market slowed down so I exited with 1t.

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 isla 
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Last day of the Combine. Reduced my size planning to try a bigger picture trade but nothing came around.

Trades:


Trade1: volume cluster break. Yesterday low and slow action made me exit faster.

Trade2: possible climax after a prolonged move up but someone started scooping thousands of contracts on 85s so I joined in.

I will post official report tomorrow. I am down around $1300 trading 3 lots. Generally satisfied with how I performed (not results). If I didn't trade breakouts and didn't have that hiccup on Day2 would have been a scratch Combine. Not great, still need to find a way to take my trading to the next level, but August wasn't easy.

I think I described pretty much every setup I use. Hope it was useful for someone.

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 isla 
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 isla 
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"One of the great disappointments I encounter when I read writings on the topic of trading psychology is that they invariably touch upon the same themes: discipline, controlling emotions, etc. Having worked with traders and portfolio managers for over a decade now, there is so much more to the psychology of trading than "sticking to your process" that I decided I had to write a book about what I was experiencing but wasn't reading. The title reflects that interest: Trading Psychology 2.0: From Best Practices to Best Processes.

I think Ted Hayes hit on something important in his recent interview. He pointed out that the personality traits relevant to success among early career traders are different from those that generate success for experienced ones. Perhaps so much writing concerns discipline and emotional control, because those are the dominant concerns of the new traders who buy the books, haunt the websites, and seek the help.

At several of the firms where I work, no one even gets an interview unless they have years of experience managing significant capital with a solid track record of profitability and risk management. So by the time those traders join the firm, discipline and emotional control are not screaming priorities. Instead, they deal with other challenges. In Trading Psychology 2.0, I refer to these challenges by A-B-C:

* Adapting to changing markets
* Building on strengths
* Creating creativity

In adapting to different markets by leveraging their strengths and generating new ideas, successful market participants are not so different from successful businesses in fast-changing industries, such as technology or social media. When markets change from year to year, stasis is a formula for failure. The successful trader, like the successful tech firm, must constantly innovate. Moreover, once traders generate those innovations, they must turn best practices--what they do that is successful--and turn them into robust, best processes.

I think this is very, very important: What makes a trader successful is discipline: doing the right thing with fidelity. Whatkeeps a trader successful is innovation: doing new things and turning them into disciplines. Conscientiousness makes for success, but it is openness that makes for adaptation. Trading psychology as a field has done a fine job of articulating the importance of discipline. My hope is that the new book will broaden the discussion to include a research-informed look at mastering change and innovation."

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 Macan 
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Are you still trading ES with DOM? I'm thinking about learning trading with the dom as a supplement to price action, so I'd like to hear your thoughts about it. Did it give you any edge to your trading?

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 isla 
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Macan View Post
Are you still trading ES with DOM? I'm thinking about learning trading with the dom as a supplement to price action, so I'd like to hear your thoughts about it. Did it give you any edge to your trading?

Hi. I still trade with the DOM but focusing on 6E in European morning and ZN when America opens.

I changed my approach from trading DOM setups only to using auction theory/market profile principles to generate trade ideas and then DOM for execution. This reduced number of trades I take but brough more confidence in quality of setups as losers became less frequent.

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 TickedOff 
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Macan View Post
Are you still trading ES with DOM? I'm thinking about learning trading with the dom as a supplement to price action, so I'd like to hear your thoughts about it. Did it give you any edge to your trading?

If you want to scalp with DOM, the no BS daytrading videos by John Grady are excellent. I should warn you though he is very skeptical about charts in his videos. I find them very useful for overall market structure. Even if you don't scalp, reading order flow can help u with entries and tell you whats going at at particular levels. So pretty much what isla said. Also the Jigsaw DOM (available on ninjatrader, S5 trader and soon multicharts) is pretty much the best you can get.

Understanding yourself is just as important as understanding markets.
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 Blash 
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Could not agree more regarding Jigsaw tools they really help open the door for me, to what I'll just call the truth of the market, and increased my understanding by a large magnitude along with Peter instructive videos and a lot of time in front of the tools on diff markets.

I tend to be a much bigger Joel Parker fan then John Grady but it's just personal preference. I just find charts extremely helpful put it that way.

Ron


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 Macan 
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TickedOff View Post
If you want to scalp with DOM, the no BS daytrading videos by John Grady are excellent. I should warn you though he is very skeptical about charts in his videos. I find them very useful for overall market structure. Even if you don't scalp, reading order flow can help u with entries and tell you whats going at at particular levels. So pretty much what isla said. Also the Jigsaw DOM (available on ninjatrader, S5 trader and soon multicharts) is pretty much the best you can get.

Did you also take his courses and webinars? I'm thinking of giving him a try.

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 TickedOff 
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Macan View Post
Did you also take his courses and webinars? I'm thinking of giving him a try.

I watched the beginner and intermediate course. Definately have a look at the beginner one, its not too expensive, and if you like that get the intermediate one. A lot of his trades revolve around market gaming, and that has helped me read markets (and charts) a lot better. For example I now notice that when market has strong momentum downward, often u see continuation patterns like pennants and what not break their upper trend line, and then whip back down before the market continues. I bring that to mind because I distinctly remember that exact scenario and I bought the pop up, and took a loss and was wondering why the market just crashed after that. Its large trades who push the market up or down to trigger stops so they can get fills on their position. So having an understanding of market gaming will help u whether or not u use DOM orderflow. If u have cumulative delta on ur chart on a 1 minute time frame, u will be able to spot plays like that when you see a sudden flux of buy market orders, and then a sell off immediately after (either leaving a selling wick on cumualtive delta, or u just get negative delta following the push up). Maybe send me a PM if you have more questions, this is Isla's journal after all.

Understanding yourself is just as important as understanding markets.
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 Big Mike 
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Johno1
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isla View Post
"One of the great disappointments I encounter when I read writings on the topic of trading psychology is that they invariably touch upon the same themes: discipline, controlling emotions, etc. Having worked with traders and portfolio managers for over a decade now, there is so much more to the psychology of trading than "sticking to your process" that I decided I had to write a book about what I was experiencing but wasn't reading. The title reflects that interest: Trading Psychology 2.0: From Best Practices to Best Processes.

I think Ted Hayes hit on something important in his recent interview. He pointed out that the personality traits relevant to success among early career traders are different from those that generate success for experienced ones. Perhaps so much writing concerns discipline and emotional control, because those are the dominant concerns of the new traders who buy the books, haunt the websites, and seek the help.

At several of the firms where I work, no one even gets an interview unless they have years of experience managing significant capital with a solid track record of profitability and risk management. So by the time those traders join the firm, discipline and emotional control are not screaming priorities. Instead, they deal with other challenges. In Trading Psychology 2.0, I refer to these challenges by A-B-C:

* Adapting to changing markets
* Building on strengths
* Creating creativity

In adapting to different markets by leveraging their strengths and generating new ideas, successful market participants are not so different from successful businesses in fast-changing industries, such as technology or social media. When markets change from year to year, stasis is a formula for failure. The successful trader, like the successful tech firm, must constantly innovate. Moreover, once traders generate those innovations, they must turn best practices--what they do that is successful--and turn them into robust, best processes.

I think this is very, very important: What makes a trader successful is discipline: doing the right thing with fidelity. Whatkeeps a trader successful is innovation: doing new things and turning them into disciplines. Conscientiousness makes for success, but it is openness that makes for adaptation. Trading psychology as a field has done a fine job of articulating the importance of discipline. My hope is that the new book will broaden the discussion to include a research-informed look at mastering change and innovation."

Thank you for bringing this author and book to my attention. Generally I don't read too much on trader psycology for the reasons he states. After 25+ years in the markets and far longer in business his observations resonate.
Cheers John

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Johno1
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In other threads I read about traders' experiences trading on the floor or on screen with prop firms. I thought I'd share some of mine as it seems to be more recent.

These are just my thoughts and conclusions based on personal experience.

I joined a prop firm in February of 2011. I was in the first intake with 6 other guys. Our office mainly traded European STIR products through spreads and strategies like butterflies and boxes. Within 6 months we got involved in softs and energies spreads as well.

We had support from senior guys with couple of years of experience as well as our managers who traded longer. Occasionally we had visits from our company's directors and they had chats with us about trading and how things were going generally.

Essentially, we were market makers, liquidity providers. We were selling volatility expecting to get filled on the other side for a tick. That's what we were taught and that's how our group started seeing first positive results.

Now, some people may think there was more to it. And I will agree. Unfortunately, I could never understand what it was.

Some things in trading take time, like gaining experience, but I think I gave it a good shot. I must admit I wasn't among the best when I decided to leave 2.5 years after I started, but I wasn't among the worst either.

I made money both years but never even close to the bonus territory. The most disturbing thing for me was my complete disbelief in what I was doing. To me positive results didn't feel like a sign of my skill, nor did I think I had an edge. The way I saw it, people who made bonuses took more risks, made more intuitive decisions and enjoyed what they were doing (presumably).

Another important factor for me was that nobody could really explain logically why we were expected to make money trading for a tick or how to determine conditions when the market may strip 10 prices one way. I heard quite a few vague explanations and was satisfied with them while I was still in a "take a leap of faith" mode. I should mention that, in my view, it was a proper trading firm and we even got paid straight away to keep us going.

As I said, I was profitable. 2011 and first half of 2012 were quite active with a lot of uncertainty about European economies and interest rates. There was a lot of paper in the market and things looked rosy. But then something changed.

I noticed this change only on my year end review. I stopped making money in STIRs, which was my main market, and couldn't find another explanation to this fact apart from market being "slow".

That's when I turned my attention to outrights. Partially because how uncomfortable I felt trading spreads, partially because of the abundance of information available online. But intellectually I believed that this should be my future path.

I did economics at uni and after years of research I knew enough about market inefficiencies and changes that take place. I believed that manual market making in spreads would have the same story end as in outrights. Obviously the drop in volume, that could have been temporary, didn't help either.

I think being able to make decisions on your own is one of the main advantages an individual trader has compared to any institution. Now I trade what I got an understanding of working for a firm, which is how traders position themselves and how those positions influence future decisions.

Markets are always changing, I agree. But, in my view, an edge must be based on actual market mechanics, not on a temporary inefficiency or correlation.

If anything, what I wanted to say with this story is that there are no secrets in trading. The market generates more than enough information to enable a trader make decisions about what works and what doesn't. Keep track of your ideas and results and you will have as big edge in current markets as any veteran trader.

An excellent post. Thank you very much. Cheers John

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