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Papa's Trading Journal

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  #271 (permalink)
 trs3042 
Holland, Michigan
 
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papa15 View Post
Folks
I did sim trades this morning. I was 2 for 2, so that is good.

I was planning to sim trade through at least this week, and maybe a bit longer. I want to go slower this time, and focus on execution and controlling risk more than anything else.

I am going back to CL, using only 2 setups.
1. The inside bar trade, using a 15 min chart.
2. A pull back to the moving average on the 5R chart after a trend change on the 15R chart. This is the "A" trade from jinhar's Trend Trading in its simplest form thread. I am only looking at the first pull back on the 5R chart and letting the others go.

Today, I was able to essentially put these two setups together. To be honest, I was not at the computer when the first IB formed at 9:45. Once I got there, I saw it and started focusing on the 15R chart. I saw a trend change around 9:52 and the bar closed beneath the congestion to the left. I waited for a pullback on the 5R, entered using a 12 tick target with 12 tick stop. Target was hit, with practically no heat. Market showed signs of pulling back up towards the down sloping moving average on the 15 min chart. It appeared an inside bar would form at 10:15 (this is a dangerous assumption to make as CL can move quickly.) I saw a trend change on the 15 R and used the 5R to enter before 10:15. Market did form an inside bar, and price went on to hit my 12 tick target, again with little heat on the trade. I was a little less comfortable with this trade compared to the first as it was counter trend on the 15 min chart.

I already had a couple of conflicts later in the week that could have impacted my ability to sim trade and journal, and this morning my mom called to let me know an uncle passed away (don't be too sad, he had a long life but his health was not very good in recent years and his wife of 59 years passed away a couple of years ago, so he was ready.) I will be away for a couple of days with that, and in reality may not post until next week. Everyone trade well and profitably.
Papa15

Papa15,

Glad your trading is working better for you. You have my condolences on the passing of your Uncle.

Rick

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  #272 (permalink)
 papa15 
Wake Forest, NC
 
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The break from trading due to my uncle's funeral gave me more time to think things through, and something popped into my mind. Beth (@wgreenine) has been using an ergodic indicator recently. When I first became interested in futures trading in 2006 I purchased a system that was based around ergodics. The author designed it for use on Ensign Charts (and later made a variant for Trade Station). I was curious as to whether or not I could make his use of ergodics work on either Sierra Charts or Ninja Trader.....this was a pure curiosity move. To my surprise, it worked on both of them.

My background is nuclear engineering. I say that just to state that I can understand some complex things. I have to tell you though, the ergodic indicator is not one of them. The best explanation I found for this indicator comes from the Ensign Charts explanation:

"The Ergodic formula is a ratio of two double averages. The numerator is an average of an average of the Net. The denominator is an average of an average of the Absolute value of the Net. The Net is the difference between a bar's close and the prior bar's close.

Ergodic = (Average (Average (Net, parameter 1), parameter 2) / (Average (Average (Abs(Net), parameter 1), parameter 2)

The plotted Ergodic study line is not much different than just plotting a small period moving average of the bar's close price. "

Other sites, including the system's author, claim that the ergodic produces a near zero lagging indicator. How something that uses moving averages (a lagging indicator) can produce something that is not lagging is what boggles my mind.

Any way, I took the author's parameters and put them into both Ninja Trader and Sierra Charts. Friday, I was able to paper trade (sim-trade) for a couple of hours or so and had really good results. I am not overly excited by a one day event, but the result was enough to tweak my interest in continuing to paper trade it this coming week. I am glad I stumbled onto this. I was beginning to put some pressure on myself to resume real money trades using my two proven setups, but deep down I know I am not ready. Once I saw this method, I felt the pressure dissipate and I feel better about it.

This method comes from the Futures Trading Secrets website. I know. It is a cheesy looking site and the claims are ridiculous, and I wonder how I ever bought his stuff. Part of the reason has to do with his nuclear submarine background. It was not a whole lot of money when I bought it (I was still drawing an active duty pay check back then) and honestly, I did not know any better.

I am not using his system per se. Quite honestly, when you put his template on your screen, your eyes go into overload....there are so many colors and lines and things that you really can not see price action very well. Your attention is drawn to something changing somewhere on the chart. I did use his ergodic parameters though so I won't give those away.

I am also not recommending anyone buy the course. The booklet is very poorly written, spending way too much time on extraneous material that does not help in any way. The sample trading days he put on the CDs don't follow the guidelines in the course material.

I used the ergodics in the following manner. I used a 233 tick and a 610 tick chart. I used the parameters from the course for the egodics, but if you used a fast of 8, a slow of 34, and a signal of 8 for one egodic and 21/89/8 for the other, I think you would like the results (there are 2 ergodics on the same panel....I hid the histogram by making it transparent, and I only displayed the signal line from the smaller ergodic). I like a "clean" looking chart. The guidelines I used were:

1. Trade in the direction of the Long Term Ergodic (it is the intermediate trend after the long term trend on the EMAs).
2. When both ergodics are above the zero line, trade only long; trade only short when the ergodics are below the zero line.
3. Enter when the ST ergodic crosses its signal line and its slope goes in the same direction as the LT ergodic.
4. Hold the position as long as the slope of the ST ergodic SIGNAL line is in the same direction as the LT ergodic.

A divergence of the ST ergodic signal is a strong reversal signal especially when it crosses through the LT ergodic in the opposite direction.

The key points are #1 and #3. I was 10 for 11 on Friday following those. Again, that is a one day sample.

I found the ergodic also helped with the inside bar trade. I traded in the direction the long term ergodic indicated. The breakout was not always in that direction first, but price did go that way eventually and every one of those trades was successful.

This is just another tool I am exploring. I have attached some sample charts that are close to what I look at (the only difference is my SC workspace has a 15 min chart that shows IBs).
Papa15

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  #273 (permalink)
 bluemele 
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Papa,

I read your other thread and was interested to see where you come out on this one. This could be the filter you are looking for. Good trading on this. I would go back historically with this setup and see if there are any periods that would 'kill' the profit and lead to a huge drawdown. I know you know the drill, but just curious if you find any periods of problems etc...


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  #274 (permalink)
 papa15 
Wake Forest, NC
 
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bluemele View Post
Papa,

I read your other thread and was interested to see where you come out on this one. This could be the filter you are looking for. Good trading on this. I would go back historically with this setup and see if there are any periods that would 'kill' the profit and lead to a huge drawdown. I know you know the drill, but just curious if you find any periods of problems etc...


I would do the historical testing, but that is something I don't know how to do. I wish I did.

From my prior experience, I tried this on the ES. It just did not work very well. I know most of the reason was me. I just did not understand what I was doing. I have spend a lot of screen time in the years since I traded this system and I think that experience is helping now.

Papa15

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  #275 (permalink)
 bluemele 
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Papa,

Well, to do historicals is 1 of 2 ways.

1. Download replay data and run each day. Takes too long in my opinion unless you do it like 100X speed.

2. Set your NT screens up and hit the "F" on your indicators and bar chart and run through. One 233 tick bar at a time and decide if it is something that you would not want to recreate on your trading account.

For instance, try to find a weakspot, like a fakeout type entry and then go back through the chart patterns and try to find that fakeout where it happened 10 times in a row or something. Now, I doubt that would happen considering you are trading kind of a mix of IB's and indi's, but there could be a day where you had 5 losers in a row, then the next day 5 losers in a row etc..

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  #276 (permalink)
 papa15 
Wake Forest, NC
 
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Did the ergodic thing again this morning. I took the first trade around 8:30 EST, a bit earlier than I normally would. Took some heat but hit my profit target. Had several consecutive winners. (using 8 tick targets). Took one trade around 11 am. I let that one run. It went significantly against me but the 610 long term ergodic was always above 0 and I wanted to see if price would come back. It did. This is not a trade I would have done with real money but one I was curious about.

The inside bars played out in the direction the ergodic indicated they would. A positive thing to track.

Positives: stayed on right side of trend.
Negative: -did a trade in sim that I would not have done with real money. Need to sim trade more realistically.

I am not sure if this is a negative or a positive, but I am using a fixed profit target for now. Once I develop more consistency in my trading (and it may not seem like it but I really believe I am very, very close), I want to work on larger profit targets. Taking 1 or 2 trades a day for a bit larger slice of the pie is probably better than taking 5-8 trades of smaller profits....

Overall, a good day.

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  #277 (permalink)
 bluemele 
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Papa,

I am excited for you. Out of all the posting that I have read of yours, this seems to me that you have found your comfort zone. Seems like something is clicking.

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  #278 (permalink)
 papa15 
Wake Forest, NC
 
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bluemele View Post
Papa,

I am excited for you. Out of all the posting that I have read of yours, this seems to me that you have found your comfort zone. Seems like something is clicking.

Thank you. It is the best I have felt about trading in a very, very long time. I really like this setup. It is not a copy of someone else, it is something I can "own as my own" in a sense.

As positive as the last 2 days are though, I want to prove this some more on paper. A mistake I have made in the past is to jump in before I know how deep the water is. I really am not in a rush, so I want to move more cautiously than before.

Papa15

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  #279 (permalink)
 papa15 
Wake Forest, NC
 
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Another very interesting day. 5 for 5 between 8:30 and 9:35. The second trade was off of the inside bar that formed at 8:45. The ergodics on the 233 and 610 tick charts were above 0, so I expected the IB to breakout the top. Instead it broke the bottom but then turned around and hit my entry and went on to profit. I was watching carefully and using just the 233 tick could have entered a bit before my IB entry, but I just wanted to see how the IB entry would do.

My first trade at 8:30 took some heat. The short term ergodic on the 233 was really right at its signal line and had not crossed it in a positive manner, plus the short term ergodic was below 0 (it was turning up to cross the signal line but had not reached 0 yet). I should have waited not only for it cross its signal line, but also the 0 line. Had I done so, my entry would have been a slight bit higher, but I would not have taken as much heat. This is the lesson for today.

Papa15

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  #280 (permalink)
 bluemele 
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Papa,

I guess I missed it but your TP is 5 ticks? What is your stop?

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