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RB's Formation Trading Process for Futures
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RB's Formation Trading Process for Futures

  #21 (permalink)
Elite Member
Newport Beach, CA
 
Futures Experience: Advanced
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Thanks: 4 given, 42 received

010515

Down about $2100 net. My demons come out when market transitions to strong trend. There were 3 core mistakes that turned a favorable start (I had unrealized gains in EC and CL of over $1K early on) into melt down. 1. Having had a decent week last week, especially trading around the open in the indexes and crude, I decided to treat the Sunday open as if it were the active pit open and throw caution to the wind, losing $750 taking trades I had no business taking. 2. Sunday I did my homework and had all my alerts set. As equity mkt starts selling off, alerts ring in 5 different markets so I in haste I end up taking short cuts in my trade analysis routine. 3. Vicious circle - the time consuming part of my process is analyzing directional strength so that I am taking trades in the direction of strength, counter to the direction of weakness, the critical filter to keep me from fading strong T mkts and losing a bunch of dough. Very disappointing but I am going to shake it off. My TP is sound and if I had followed it then today could have been very good. If only I could have followed my TP...

1. B 4 YM 17698 at 15:07 (Sunday), S 4 17679: ($397)
Not per plan. Entire trade based on 1m timeframe. Sunday open trading should be reserved for HTF structural opportunities, and LTF PA is reserved solely for entry into TTF/HTF SU. LTF PA to be used only in midst of strong trend mkt or in extreme volatility. Hopefully won't do that again.

2. B 1 CL 52.09 at 17:48 (Sunday), S 1 51.75: ($344)
Same thing - not per plan. Trade based on 89 tk timeframe. Treating the Sunday open as if it were the active pit open. Recent wins in CL got me trading very sloppy. Down $750 and wasn't even Monday yet.

3-5. Took 3 more sloppy LTF CL trades Sunday afternoon: ($0)
2 small losses offset by 1 decent win. pissed off my wife trading all Sunday afternoon.

6. B 1 CL 50.74 at 6:02, S 1 50.44: ($304)
This trade started today's emotional collapse and sloppy decisions. This was a good trade, per plan, had 0.35 or $350 gain as Px approached my Tgt of 51.09. But I needed to make up for Sunday losses so I moved Tgt and convinced myself this would be the big turn in crude.

7. B 2 EC 1.1929 at 6:08, marked at close 1.1939: $241

8. B 4 YM 17662 at 6:33, S 4 17654: ($177)
Per plan, 1m ufBO of PrevD Low, but failed BO failed, became dBOp, and this was the trade of the day (I missed). Accg to my plan, when fBO fails, and BO PB holds at fKPx, I am supposed to take that trade automatically unless into SR.

9. B 2 ES 2026.5 at 7:00, S 2 2021.25: ($534)
27000tk, confluence of uKPx including 50% retrace (uW5). HTF trade so 1/2 size. Structurally reasonable, but in the face of 3 very strong dTBs so should have scalped out and waited for 2nd entry if SloMo. Had 5pt gain but decided to hold - of course - need to make back bigger loss!

10. B 2 ES 2025 at 7:38, S 2 2021.25: ($375)
same trade, entered on 5m Trigger. same outcome but this time immediate loss so should have reentered short at 2025 on dBOp. So obvious when emotions are calm.

11. B 2 CL 50.56 at 8:08, S 2 50.35: ($429)
Going well so doubled size - smart. impulse trade, no basis for SU. entered using LTF SB.

12. B 1 CL 50.34 at 8:45, S 1 50.17: ($170)
Impulse trade, Px held at 49.95 so wanted to get long for possible buying pressure, but no valid SU. This area could have been traded if I had simply waited for a valid SU.

13. B 2 ES 2016.5 at 10:08, S 2 2012.25: ($425)
Impulse trade, no valid SU.

14. YM B 4 17430 at 10:18, S 2 17454, S 2 17451: +$433
Actually a valid SU, although still no evidence of buying pressure so risky.

15. ES B 4 2014.5 at 12:27, S 4 2017: +$483
Was watching 2014.5 = September Swg Hi but trade was based on 5m PA. questionable trade.

Attached Thumbnails
RB's Formation Trading Process for Futures-010515-cl-3kt.jpg   RB's Formation Trading Process for Futures-010515-ec-987t.jpg   RB's Formation Trading Process for Futures-010515-es-27tk.jpg  
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  #22 (permalink)
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@ribtrader - So you are a position trader that enters the market at key levels? Do you test the market with small risk trades at those key levels or fade the entry? If you lose X amount of dollars per your daily draw down, then do you begin reducing the number of contracts traded? Perhaps these questions are more rhetorical in nature given what I have read. Thank you for sharing. Without question, you are to be applauded for your courageous sharing here. Is there a 'piece to the puzzle' of your trade plan that if it were found, may facilitate better entries? If so, what might that be? Or do you see your trade plan as sufficient to profitably trade but strive to manage the necessary discipline to trade it?

The read is enjoyable but painful for you, at times, I am sure.

Ken (COTtrader)

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  #23 (permalink)
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010615


Down about ($600) net. Still struggling to manage trading in substantially higher volatility. This has me staring at developing bars rather than conducting market analysis and planning trades. Contrast this to my trading last week. I was relatively inactive so stayed out of any of the LTF chaos, mapped out choice trades, and was content taking no trade should PA not develop appropriately. This week I find myself chasing every swing, jumping from market to market, time frame to time frame. Price is moving to fast to allow this. As a result I am cutting corners on the analysis, missing obvious tells that I am trading counter to strength. The increased volatility should lead to the complete opposite. Only a handful of qualified trades are necessary to generate solid gains, and sloppy trading is punished severely.

PA in this level of volatility is actually quite good as you would expect given heightened emotions surrounding bad trades (see ES below). The real challenge for me is staying mentally flexible at each decision point. The market seems to have a far easier time pushing through normally strong KPx levels. When price enters SU area I have to be on guard for either a short or long trade, perhaps entering one way and quickly reversing. Lately I had been able to get away with BOs against me coming back to the BO pt to allow near breakeven exits and small losses. That is what got me hurt today - BOs running and not coming back - ouch. Very humbling, reminding me how mentally challenging this profession is.

I took 26 trades (if I take more than 8 then I know it is a bad day) so no need to detail them, but here is breakdown of PnL by market
CL 7 trades net $260
ES 12 trades net ($1,531), due to 3 outsized losses - why stick to stops if you know what the market is going to do...
YM 2 trades net $598
EC 2 trades net $124
GC 1 trade net ($54)

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  #24 (permalink)
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$ribtrader with the YM being your biggest winner today given the volatility, and so strongly correlated to the ES, it is surprising that you held onto losing ES trades even when you may have already closed out a YM trade.

Just an observation. I set stops just behind areas of S/R drawn by a trendline or outsized delta by price.

It sounds as if your $800 drawdown the other day that came back to make money may have been an unconscious expectation that this one would win, too. For myself the ES is far too efficient for me trade and hold at the risk of the trade returning to my entry and stopping me out.

Ken

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  #25 (permalink)
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Reply to Ken


COTtrader View Post
$ribtrader with the YM being your biggest winner today given the volatility, and so strongly correlated to the ES, it is surprising that you held onto losing ES trades even when you may have already closed out a YM trade.

Just an observation. I set stops just behind areas of S/R drawn by a trendline or outsized delta by price.

It sounds as if your $800 drawdown the other day that came back to make money may have been an unconscious expectation that this one would win, too. For myself the ES is far too efficient for me trade and hold at the risk of the trade returning to my entry and stopping me out.

Ken

Ken,
Thanks for the feedback. Much appreciated! I think you are right about misguided unconscious expectations. Resulted in very sloppy risk mgt given the change in the market. The big driver of my late day trading was strong conviction that a temporary bottom was in place. I had misguided expectations about the strength of the rally (also due to random memory) and mismanaged trades in ES. The close was holding at an important level which led to the trades in YM that I managed better.
Rich

Attached Thumbnails
RB's Formation Trading Process for Futures-010515-es-9000tk.jpg   RB's Formation Trading Process for Futures-0101515-es-2h.jpg  
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  #26 (permalink)
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010715

Up $407 net. I am not very happy about the results b/c the market transitioned to PA that is right up my alley and I traded overly cautious due to getting spanked the last few days. That really hit me emotionally - still recovering. Made me realize how much I can deviate from my trade plan, how much discretion I am applying to trade decisions (discretion as to which trades I expect to be winners and losers - kiss of death), and how much tighter my decision making process needs to be. Today I hesitated taking many valid (per my TP) trades, missing the bulk of the moves, especially in CL and EC. The old adage is very true - trade what you see now and read PA relative to the current structure. I was looking for confirmation when none was needed. I took only 5 trades, 3 in ES for roughly +$175 net and 2 in CL for roughly +$230 net. I will resume detailing the trades tomorrow. Running out of time today.

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  #27 (permalink)
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@rlbtrader - Your journaling is very beneficial to myself and I would imagine anyone else who chooses to read it. I see myself in your comments. I am little aware of my own trade psychology but reading your comments are very helpful to me.

Ken

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  #28 (permalink)
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010815

Up $564 Net of fees. These strong trend days in the indexes should be easy to trade - PA is free from recent range, no major SR to reverse price - but I find myself too focused on looking for areas for CT (counter trend) SUs and missing the simple PBs. I am torn between completely ignoring strong trending markets - they cause me lots of anxiety and require ongoing focus - but the swings can be huge. I spent most of the day focusing on (staring at) the indexes and missed quite good SUs in CL and GC. One issue I notice for me with the strong trending markets is the heightened feeling of uncertainty. In more swinging or ranging markets the KPx levels are far more clear so my SU area and trade plan can be determined well in advance. Today, early on in the indexes the PA was different. When it is that tight I believe the entries are all BO PBs (BOp) of failed KPx levels, which should be easier for me to trade since that type of analysis is my core process. I map out the market with KPx levels, typically measured move levels or preceding swings. I then look at relative strength of WT and CT swgs (concept I call relative directional strength, RDS), and anticipate the test swg to slightly penetrate, slightly miss, or come close to the KPx level. In markets like today, ultra strong RDS, impulses BO thru the KPx (you can see strong WT TBs originating at the KPx levels on YM chart), and the entry is on the reaction back to the failed KPx. Always easy in hindsight.

All PnL gross of commission/fees, all times PST
Format: Bought/Sold (B/S), #cts/shrs, Ticker, Entry Price, entry time, exit (S/D), Exit Price, PnL

1. B 1 EC 1.1776 at 4:29, S 1 1.1804: +$346
3000tk, per plan entry and exit

2. B 4 YM 17696 at 6:36, S 2 17711, S 2 17731: +$483
1m, day session chart, per plan entry, exit

3. S 4 ES 2043.25 at 6:50, B 5 2044.25: ($217)
3000tk, not per plan - LTF CT - and I knew it was invalid trade at the time

4. S 4 ES 2046.25 at 7:37, B 4 2047.25: ($217)
same thing - covering short when I should be buying long on uBOp of last failed trade

5. S 4 YM 17822 at 11:32, B 2 17830, B 2 17829 ($167)
entry using 1m chart but based on dKPx from 15m, entry per plan but exited early

6. S 4 YM 17828 at 11:50, B 2 17827, B 2 17822 +$53
entry using 1m chart but based on dKPx from 15m, entry per plan, sloppy exit

7. S 4 YM 17826 at 12:56, B 4 17811 +$283
Final try - frustrated so exited at 2:15 PM close, rather than holding for swg as planned

Attached Thumbnails
RB's Formation Trading Process for Futures-010815-ec-3000t.jpg   RB's Formation Trading Process for Futures-010815-ym-1m.jpg   RB's Formation Trading Process for Futures-010815-ym-15m.jpg   RB's Formation Trading Process for Futures-010815-ym-1m-late.jpg   RB's Formation Trading Process for Futures-010815-es-3000tk.jpg  
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  #29 (permalink)
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010915

Roughly flat (up $26) net of commissions and fees. Trading was reasonable with the exception of 2 badly mismanaged trades. The first was the AD trade. I rushed to plan this ahead of the employment report and didn't carefully consider the target which I had beyond the obvious TL of the channel (missed by 5 tks). The other disaster was a late day trade in YM. For some reason I became convinced that the early selloff was functioning to create a big TR, and given it was a Friday the mkt would end up retracing much of it. I was also convinced a clear bullish (weak) channel had developed. I expected mkt to retrace possibly down to 17650 area so took small position at aggressive price and added lower. It was late, I was tired, and I basically had no concrete plan for exiting in the event of a strong selloff. This was costly and killed the day. On the bright side I came to terms with a psychological issue, ala Mark Douglas, that has been plaguing my trading forever and will try to take steps to mitigate this next week.

All PnL gross of commission/fees, all times PST
Format: Bought/Sold (B/S), #cts/shrs, Ticker, Entry Price, entry time, exit (S/D), Exit Price, PnL

1. S 1 AD 0.8124 at 5:35, B 1 0.8137: ($167)
3000t, entry per plan, had Tgt beyond uTL, 40tk gain turned into 13tk loss, bad!

2. S 1 ES 2061.25 at 5:37, B 1 2051.25: +$496
2H, entry per plan, exit not per plan - planned to exit ahead of next Swg Low = 2030.5, but impulsively exited as chop developed after day session open

3. S 1 AD 0.8134 at 6:32, B 1 0.8139: ($67)
3000t, entry/exit not per plan (emotionally driven from earlier trade)

3. B 1 CL 48.07 at 7:57, S 1 47.87: ($204)
1m, entry per plan, exit per plan

4. S 1 CL 47.68 at 8:42, B 1 47.55: +$126

5. B 4 YM 17672 at 10:09, S 2 17682, S 2 17688: +$243
987t, per plan entry and exit

6. B 2 YM 17690 at 12:33 , S 2 17704: +$132
987t, 1m, day session chart, per plan entry, exit

3. B 1 YM 17695 at 12:35, B 1 YM 17666 at 12:57, B 1 YM 17649 at 13:03
S 1 17640, holding 2 17633 (closing price): ($533)
987t, entry/exit not per plan.

Attached Thumbnails
RB's Formation Trading Process for Futures-010915-ad-3000t.jpg   RB's Formation Trading Process for Futures-010915-es-2h.jpg   RB's Formation Trading Process for Futures-010915-cl-1m.jpg   RB's Formation Trading Process for Futures-010915-ym-987t.jpg  
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  #30 (permalink)
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thoughts on psychology


This likely will seem obvious to anyone who has read Mark Douglas or Denise Shull or any other mainstream trading psychologist who studies the influence our subconscious has on trading decisions. Something really hit home for me on Friday for some reason. I noted my thoughts leading up to a handful of questionable trades I took (I noted the thoughts b/c I knew they were questionable when I took them) and after the close I reflected on them. Basically I found that whenever I shortchanged my process (either fast moving market or seeing SU when already in SU area, about to trigger), confirming, say, only 3 out of 5 conditions necessary in my TP, my subconscious took over. What then dominated my decision making process was some "similar" pattern in my memory and the pattern's outcome. First, we know it is the subtleties of PA that tip us off as to the sentiment bias in any pattern, not the general pattern condition, thus the importance of our exhaustive process to identify these (like solving a challenging sudoku puzzle). Second, at least for me, the patterns that remain strongest in my memory are the patterns that had the low probability or unexpected outcome, likely the result of some new info coming into the market (econ report or news event), resulting in a major market shift (and likely a big loss if I did not manage the trade properly). I have read "trading in the zone" at least a dozen times over the years but this is the first time I really came to realize how my subconscious will dominate my decision making process if I am conflicted or unprepared. This has been in my head the entire weekend so I am hoping, along the lines of Shull's work, that I can recognize the conflict my subconscious is likely creating when I have doubts about taking a trade that meets my TP criteria.

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