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lovetotrade's YM Breakout Journal
Started:November 6th, 2014 (04:13 PM) by lovetotrade Views / Replies:11,140 / 187
Last Reply:November 22nd, 2016 (11:16 AM) Attachments:137

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lovetotrade's YM Breakout Journal

Old May 18th, 2015, 11:32 AM   #101 (permalink)
Student of the Markets
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Ok, so today is my first attempt at a reversion to the mean trade. This has been something I struggled with for a long time, but now that I am seeing the markets more clearly it is making a big impact on my trading and thought processes. In auction market theory you have periods of balance and imbalance, and I believe to be successful over the long haul in trading you must be able to identify these periods, and you also must trade them accordingly. The Achilles heel of my previous trading was over-leverage, and trying to seek trades of imbalance every day, and in all market conditions. This did not bode well for consistency.

The hardest part I believe is identifying the transition from balance to imbalance and vice versa. For me this is where trading becomes art vs. science. I also believe as with most aspects of trading this is where it is important to have systems and processes to help you identify when those changes occur, and what to do when they happen.

So fortunately today is providing another one of those awesome market lessons I love so much(sarcasm here as I enjoy much more that my theories prove to be correct on the first try). I would say that I executed this failed reversion to the mean trade pretty flawlessly. I scaled in down to the lows and the VWAP 2nd SD band, and then after we got a good bounce we consolidated near the lows I scaled back out to exit fully with very little damage.
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So here comes the lesson. I should not fight the market if price action is telling me loud and clear that it wants to go higher, or in this case lower. There were a few things going on structurally that should have given me indication of a break to the downside if we didn't reverse at the extreme. Basically I didn't have a plan B. And that is a problem. What if this move had been larger or even much larger? Or I guess even worse, what if this is the only decent trade for today? It is Monday with no news and I was already expecting limited movement.

So there are some positive remarks for execution, and also a valuable lesson to take away. As long as I am journaling correctly and applying what I have learned, I expect my trading development to soar to new heights relatively quickly.

"We are what we repeatably do. Excellence, then, is not an act, but a habit." -Aristotle

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Old May 18th, 2015, 03:18 PM   #102 (permalink)
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Hi,

dont know if this useful or not. for mean reversion strategy, i found that for me its really helpful to include session highs and lows into my trading, like in the pic below ...

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Old May 18th, 2015, 03:46 PM   #103 (permalink)
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lovetotrade View Post
Ok, so today is my first attempt at a reversion to the mean trade. This has been something I struggled with for a long time, but now that I am seeing the markets more clearly it is making a big impact on my trading and thought processes. In auction market theory you have periods of balance and imbalance, and I believe to be successful over the long haul in trading you must be able to identify these periods, and you also must trade them accordingly. The Achilles heel of my previous trading was over-leverage, and trying to seek trades of imbalance every day, and in all market conditions. This did not bode well for consistency.

The hardest part I believe is identifying the transition from balance to imbalance and vice versa. For me this is where trading becomes art vs. science. I also believe as with most aspects of trading this is where it is important to have systems and processes to help you identify when those changes occur, and what to do when they happen.

So fortunately today is providing another one of those awesome market lessons I love so much(sarcasm here as I enjoy much more that my theories prove to be correct on the first try). I would say that I executed this failed reversion to the mean trade pretty flawlessly. I scaled in down to the lows and the VWAP 2nd SD band, and then after we got a good bounce we consolidated near the lows I scaled back out to exit fully with very little damage.
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So here comes the lesson. I should not fight the market if price action is telling me loud and clear that it wants to go higher, or in this case lower. There were a few things going on structurally that should have given me indication of a break to the downside if we didn't reverse at the extreme. Basically I didn't have a plan B. And that is a problem. What if this move had been larger or even much larger? Or I guess even worse, what if this is the only decent trade for today? It is Monday with no news and I was already expecting limited movement.

So there are some positive remarks for execution, and also a valuable lesson to take away. As long as I am journaling correctly and applying what I have learned, I expect my trading development to soar to new heights relatively quickly.

"We are what we repeatably do. Excellence, then, is not an act, but a habit." -Aristotle

Nice job man! Relying on your scaling plan is pretty hard when the market decides to show strength opposite your position. Props to you for trusting yourself and not bailing early.

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Old May 18th, 2015, 04:04 PM   #104 (permalink)
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Thxo View Post
Hi,

dont know if this useful or not. for mean reversion strategy, i found that for me its really helpful to include session highs and lows into my trading, like in the pic below ...

Feel free to elaborate further as I am not getting a whole lot of explanation from the picture. I am always interested in a different perspective. Thanks!

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Old May 18th, 2015, 04:06 PM   #105 (permalink)
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Nice job man! Relying on your scaling plan is pretty hard when the market decides to show strength opposite your position. Props to you for trusting yourself and not bailing early.

Haha yea that was interesting to say the least. Keeping my size a tad bit smaller and scaling in against the position helped reduce the risk, and made me feel better about the trade. If it had blown right through there I would not have felt so good about it lol.

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Old May 19th, 2015, 04:09 PM   #106 (permalink)
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First I want to give a shout out to Bruce Bower of SMB Capital. I never get tired of reading his material which is awesome and is also a huge free resource. Here is his blog. The How Of Trading - Trading Meets Psychology and Self-Development

Ok so yesterday and today I spent a little more time on getting positioned better for intraday swings in the market that line up with the intermediate trend(for me this is 60 minutes). My failed squeeze setup that happens against this trend helps with entry into the trend as the counter trend momentum dies.

My first trade today was an attempted entry into the trend about a half hour before the building permit report that came out at 8:30 this morning. From what I have seen if it is a stand alone report then the market will stay in its current trend sometimes right up until report time. So I was thinking I might be able to get a little cushion. Not this time. So I started to scale out as it moved closer to my stop and we got into the last few minutes of report time. I was able to capture some nice profits as the report pushed the Euro quickly lower.
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My second trade I used the failed squeeze setup as the market tried to break out counter trend into a nice low volume area. Never got a nice pullback to scale in higher but the trade worked out decently.
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The boxes are the areas of trade from the previous two charts. Another day that puts a smile on my face.
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Old May 20th, 2015, 10:08 AM   #107 (permalink)
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So my first trade today had some kinks in it, well I guess I should say a kink. While I did enter this trade close to the highs of the consolidation area, my thoughts were that the move looked like it had conviction, and if it went any higher I wanted to be in it. Basically I would regret getting left behind more than I would being stopped out. I don't know if this is good psychology or not, but I knew my risk of failure was a little higher here as well so I entered at about a third of my risk.

Well we got a good rejection from a test of the recent high, and in my experience if it looks like it was a strong test and it doesn't break the immediate trend, then conviction should ramp up as we are taking off when we break the highs or lows. And just as I was deciding that I needed to place another buy order at the highs it blew through them by 15 points. Leaving me in the dust with a small position. Bummer.

So just trying once again to utilize this as a learning experience. The first question I ask in every trade is "where is my stop?" The next question needs to be(if a partial position is entered) "where do I plan to add?"

The result was a stop out, but a cheap lesson. The trade may ultimately end up working out, but I have pretty specific criteria I am looking for as I like to keep things simple. Super complex pullbacks are not one of them.
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Old May 21st, 2015, 10:38 AM   #108 (permalink)
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So things look good for today's developing trade so far, let's dive in. (Well was developing, for the last few days I have been writing in my online journal instead of paper notes as the trade happens, and plan to continue)

There is something I have noticed that's pretty interesting regarding news events. It's a pretty simple concept really. So obviously depending on where these economic forecasts end up(along with how much in the spotlight they are), impacts the dollar higher or lower. So for example, this morning's unemployment claims beat the forecast just slightly. This is slightly negative for the dollar, and therefore positive for the Euro.

Well the Euro was in a short term downtrend and just outside of some good support. So with a report in the mix this is a critical juncture for me to base a trade idea on. So after the report we immediately jumped back above support as expected, but then we started to sell off pretty hard. So this information is very important. That positive news did not give us a large enough kick to restart the uptrend, so this gives us confirmation for our downside bias. New lows along with any pullbacks should be shorted as the Euro will be searching for value to the downside.

Simple concept but fairly complex to execute.

So I put an entry order at the new lows, and because of the vertical nature of the downside move I expected a bounce shortly thereafter. So as we bounced I layered in at my original entry and just above with another 1/6th of my full position at the new lows. I got lucky and nailed the high as I was trying to trade against the momentum higher.

The only regret I have, is in trying to reduce emotion and trade error, I do not watch the trade development on my one minute entry chart. I could have done a much better job saving some of my profits as the market moved against me if I had been. First target(s) at lower VWAP bands.

Context chart:
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Entry chart:
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Just enough scale out to reduce risk average closer to entry.

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Old May 27th, 2015, 11:58 AM   #109 (permalink)
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Well this morning's lesson is on entry and execution.

I seem to start every day with one small trade in a fairly random location, as if I need to be in the market to get a feel for the day. This doesn't make sense and needs to stop. I have been making an effort to focus only on specific market action that lines up with my specific setups and kind of ignore the rest. Or at least zoom out enough so that I only focus on how it relates to the overall picture.

Like this morning's first entry should have been earlier and larger. I let the 5 minute chart break down to new lows, and then randomly got in a small position on a new low on the one minute chart. I have added some new specific entry rules that should help me trade my setups a lot more consistently. Trying not to add too many rules but I must make a positive impact every day.

So I got great entry on the next pullback(which should have been my add on to the initial position. And this time I still got in too small, so no chance to scale out meaningfully. So my new entry rules specify position sizing depending on location as well so there is no confusion there either. Captured decent profits, but definitely got out early too.

My next entry into the trend was quickly blown out as the Greek news blasted the market higher. Hadn't set a stop yet as I was waiting for price action to develop, so I quickly got out. Overall lots of work to do on execution, but I am focused and driven. It will all work out in time.

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Old May 29th, 2015, 10:52 AM   #110 (permalink)
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Doing much better with execution today. I had conviction in my trade ideas, and entered the market in correct size. Emotions were very much in check, and even though the trades didn't work out I felt good about the process.

Done for the day already as it is pretty clear we don't have much conviction in the market this morning, and I don't look for any real moves on Friday afternoon.(And now that I am posting this the wedge is breaking out to the upside it looks like)

Looks like it is not worthwhile to put any trades before news reports, the 8:30 a.m. one anyway. Unless I started trading another hour earlier. These have been pretty consistent losing trades. I missed the first scale out today by 1 pip, but that's all I would have gotten.

I have chosen to use a 44% fib retracement as my pullback entry for use in my directional trade setup. It's the middle point between the popular 38.2 and 50%, and gives me confidence of entry into most pullbacks during a trend.

My second trade today was after the news report. We tested the hourly support and resistance area during the first couple of minutes. The hourly/ 15m/ 5m trends were up, and we started consolidating above the VWAP. So I took a long above the previous highs as it looked like value was developing higher. Once we pulled back into the value area, and price was rejected lower away from the first SD bands I got out. This confirmed everything I needed to see to get completely out, and that my long trade was no longer valid.

My third trade was half size, and after a failed attempt higher I was giving the downside a chance to hopefully be tested which did not happen until after I was stopped out go figure.
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So like I said, happy with my trading today. I feel like I was reading the market correctly, and executed my trades well according to those convictions.

Just to add a note to my last trade, I really need to try not to take trades close to the VPOC which is basically an area of randomness. I need to wait for price action closer to the extremes to give me a signal when we are in a trading range.

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