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FM's Trade Log

  #151 (permalink)
 
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Friday 31 Mar 2017
==================

I got one scalp in CL this morning for 8 ticks profit, picture at bottom.

I also managed to enter a position in UGL (2x long gold ETF) at the close on a limit order but got a partial fill of about a third of the shares I wanted. I had the limit sitting there, but volume today in this symbol was dismal - average volume is 80k but today was around 9k. Not ideal at all. This ETF approach on commodities is total amateur hour and I may just need to take gold out of the rotation if I can't find a long/short pair with enough liquidity for this style. We'll see. But I see this whole project really as a "training wheels" experiment to see if I have any potential of doing this with futures and higher risk parameters. I may also consider opening a small forex account at some point for similar training purpose.

To-do for this weekend if I have time is whip up a little business plan and a spreadsheet for manually tracking key data on these trades. Today I allocated less than 5% of capital for this idea and a fraction of a percent at risk. Setting aside the very real risk of gaps and slippage, for which I should probably come up with some kind of average buffer I tack on to my perceived risk on any trade. Treading lightly while I feel this process out. I'll see how it looks on Monday and decide at that point if its worth buying the remaining shares up to around 10% allocation.

My fitbit is telling me that in order to get a good circadian rhythm going, I should try waking up at the same time every day. Thanks for that, fitbit. That's a real gem.


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  #152 (permalink)
 
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Wednesday 05 Apr 2017
=====================

Yesterday's CL intraday trading yielded -2 ticks overall. Nothing particularly interesting to show in my chart there. Today CL is continuing its float higher. Above yesterday's highs. Cut through 51.40 resistance overnight, retested and got a bullish bounce in conjunction with VWAP.

51.40 below. 52 above. Either the RTH will continue the squeeze that was started overnight, or it will change its tune and start to track sideways or down. Not forming a rigid plan, just going to wait for the open and take levels that make sense. Due to the clear uptrend, I'll lean toward longs and be extremely cautious with shorts.




My swing long in gold was looking pretty good until the close yesterday. Price rejected an attempt at the monthly high, which is not unexpected. Holding here to see if it can take another stab at it. I'll deconstruct some lessons learned on this trade once closed out.



EDIT:
No trades today. I had a hunch when price broke below .63 and absolutely nothing happened, that was a sign I wasn't going to get my level (.59), and up we went. Lesson learned. But how well will the lesson be retained?


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Thursday 06 Apr 2017
====================

This morning I was again intending to favor longs and be cautious with shorts, with buying dominating overnight. I had my eye on 51.50 for support, but I was a bit rushed. My first trade was not very sensible - didn't go through all of my usual "if this, don't do that" routine. I ended up taking a short trade right into 51.50, which I would generally try to avoid especially when counter trend. Today I added a few ES charts to my workspace for intra-market guidance and I think part of this tripup was me getting use to the new information and what to do with it.

Lost 5 ticks on that, but fortunately shook it off and recovered with a very good entry right in the opposite direction off a 51.50 bounce. Unfortunately I had a target of 13 ticks and just missed it by 1 tick. Ended up getting 6 on the trade, so scratching the day at +1 minus commissions. CL intraday charts at bottom.

My swing long position in gold is currently getting a boost in the asia session. We'll see if it holds.

I'm having trouble keeping this journal as structured and formal as some of the other journals I admire on FIO. I've decided that's just how it's going to have to be. I envy the folks that run through the same template of ritual documentations and markups day after day. I will get there eventually perhaps, but at the moment I am liking the looseness I have here. I'm sort of naturally evolving in that direction and I'm not going to stop it. Here's a few random remarks about where I'm at currently with my trading. I'll block it out with intraday first, and then swing.

* INTRADAY

* Since starting live trading again a week ago, I've taken 8 trades, and I have turned a tiny profit after commissions.
* I'm starting to realize and become OK with the fact that right now, my primary objective here isn't to make sizable profits. It's to get better at this.
* I'm taking much smaller losses, and smaller targets than I used to. The most MFE I've had on a trade was today's at +12. The biggest target I've hit was +8. Meanwhile my losses are all -5 or less, averaging -3. That is REALLY tight. It is counter to a lot of the things I used to try to do.
* But, it's working, I see room for it to work a lot better with improvement, and it feels like the right step right now. I still want to get to a place where I am targeting larger gains and really trade the meat of the day, not the meat of the minute. However, with my time restrictions and honestly with some of the poor performance / psychological impact of that, I am really enjoying getting winners more often and being more comfortable. And I am really enjoying being able to trade one lot and not see trades go from +10 all the way to 0 because I thought +20 was coming.
* I don't want to plan too far ahead, but basically for the rest of April I want to continue to hone this one-lot, small-targets, small-losses approach. I want to eliminate some of the mistakes, become more confident with it, and get a larger sample of live trades to really get some confidence with it.
* I also want to continue focusing on my personal schedule, my time and sleep management. I want to get those schedules more habitualized and get into a better rhythm to increase screen time for trading and also allocation for other things like exercise, other personal stuff I am busy with, and just generally doing a better job of carpe-diem-ing. I think this can have just as much positive impact on my trading results as will the practice itself.
* Again, don't want to plan too far ahead, but if all goes well, the next natural phase will be to take the skills and confidence gained from pinpointing entries and keeping losses small, to build into larger targets. This could be a daily approach of building a pillow in the early part of the week, and then pushing into larger targets later in the week. Or even on good days starting small in the early morning and going for doubles / triples after the open. That's all a bit pie in the sky right now.
* In the background I will continue to work on some ideas I've had brewing that will require coding - the inspiration comes in waves, as does the time it takes to work on them.

* SWING

* Still just getting started. Here's what I've got so far.
* I created a draft version of a spreadsheet to track trades. Will undergo lots of revisions as it grows.
* At the center of the process is risk management. I basically am assigning an "R" value of 1%, and then position sizing using a combination of a "perceived risk" of where I want to exit a trade if it goes south, and a "woops" risk of 2 ATR in case there's a huge move or gap and I don't have a way to get filled. I take the mid point of those two and use that as my % risk for the trade.
* I calculate the risk using the primary instrument first, but then I use the leverage multipliers of the trading instrument to control position sizing. In other words, I might use GLD to do my analysis of the trade and calculate risk % using GLD prices. But then if I'm using a 2x inverse gold ETF, I'll factor in the leverage and use the 2x ETF for position sizing, so I might only need to invest HALF of the dollar amount in order to put on the same amount of risk.
* I am finding out quickly that most of the commodity ETFs that trade inverse are too illiquid and I will do well to find an alternative. If I want to trade a move in Gold I may actually use a MINERS 3x etf instead, much more liquid and tracks gold pretty darn well most of the time.
* I am intrigued by the Guggenheim Rydex mutual funds for index trading. They always exercise at the close and will track their markets better than the ETFs. May look into it down the line.
* I am still feeling this out and will gradually ease into the full 1% 1R per trade. If my decision making process is not yielding good results, I can turn down the R value. If I'm doing very well, I can turn up the R value.
* I will probably be doing most of my decision making in the early mornings or on the weekends. I am considering using only mental stops in many cases. If a level is broken intraday and stays broken, then the next morning I will close out on the open.
* Trading leveraged ETFs complicates my timeframe choice a bit. Unless a move is very one-directional, these instruments decay gradually. This means holding for multiple weeks becomes disadvantageous. Will see how it goes. I may end up keeping most trades under 5 days, with a few exceptions that go longer. If I can gain the skill of nimbly taking 2 - 3 day meaty bites off of a trend, getting back in and out and milking multi-week moves that way, all the better. I'm not that good though. Not yet at least.






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Wednesday 12 Apr 2017
=====================

4:43 AM.

CL's long run up has stayed remarkably tight and clean. The channel can't hold forever, and when it breaks it is more likely to break the lower boundary than the top. With major resistance overhead now. a retest of 53.15 and potentially lower before breaking 54 seems most likely.




On the 5000-volume chart, the major structure at play is an upward channel since yesterday's open. We're currently above last week's high and yesterday's high. Buyers still have control, and if they can hold above 53.70 we are looking at another leg up, but several mean-reversion and resistance obstacles are giving reasons to look short for a test of Y_High and possible the 53.25 area.




--------

Meanwhile, an update on my swing trade in GOLD. 10 days later, this is up nicely. If I had gotten on my full position size, I'd take at least half off here and let the rest ride a bit longer. However, since the position is already small, I'm going to let it roll for a bit, but will be tight to exit if the daily dips significantly.




Looking for one more day of follow-through before taking profits.




Will put up more analysis on this trade once it closes, as well as more thoughts on devloping framework for next set of swing trades. Obviously very happy with the result on this trade — regardless of whether my approach turns out to have an edge over many trades, this has been a valuable experience just to remind me how much less active work it takes to place and manage a swing trade, vs day trading. The potential here is really great. And I think I'm noticing it even more since I've had so much training now on day trading ... swing trading feels relaxed by comparison, so far .

-----------

Back to my CL morning day trades. Over the last few days I've mostly scratched each day. Yesterday lost a few ticks. I've been noticing the detriments in this strategy of both a) waiting too much for confirmation that a level looks like it's holding before entering and b) managing too tightly, getting over-involved with the trades.

Today, I started off weak again, had the right idea getting short on the first two trades pre-open but my entry position and trade management style kept me out of it. On the last trade, I made an effort to simply pick a level and take the trade if it hit. I was more hands-off managing the trade, which of course was easy because it never looked bad at any point.

So, +13 all told today. Continuing to move account in the right direction, but lots of small losses and scratches are eating way too much commission, with average win size still pretty low. Tomorrow, I'm going to continue to nudge myself in the direction of loosening up just a little bit, and being more agressive with taking entries whenever and wherever my analysis says go.


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Thursday 13 Apr 2017
====================

5:10 AM

As expected, CL took a breather yesterday and broke the lower boundary of its up channel. For now the usual options are on the table. We could just be going sideways, resume a new up channel, or begin a retrace down to say 51.50 ish. My assumption will be sideways until the 52.50 - 54 range breaks.




The 5000-vol chart reveals the downward channel from yesterday now broken over night. Heading into the open, price is trying to retake the 53.21 - 53.34 area that saw a lot of the action over the past 2 days. It's 5:30 now and I'll probably sit out until the open. I would take a long in this channel here if it sets up over 53.25 and shows some strength, looking for 53.50+. If it breaks down, then I'd be happy to take a short against that same 53.25 level, looking toward 52.95.



----------------------------

I closed out of my Gold trade when the market opened. Time to take the money and run, heading into the long weekend. I'd probably take another long entry next week if it comes back to retest the breakout level. I hope to post more about this and other swing setups over the weekend.



----------------------------

Results from today's CL morning trading a bit meh, but still moving in the right direction. Came away with just +3, mostly eaten by commissions, after a missed opportunity bailing out of a good trade. Although the action was a bit stiff, the market obliged by sticking to my bias of being range-bound and respected levels pretty well today. Of course my options are limited with my time constraint of usually having to leave the computer around 10am eastern, 7am here in LA. Would have been nice to trade the rest of the morning.

Yesterday I said I would A) be more aggressive on my entries by trusting my analysis instead of waiting for information / confirmation, and B) be more loose / let the trade work itself out.

I made some good strides on A, but failed on B. More work on that in the coming weeks.


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Sunday 16 Apr 2017
==================

The following are my swing-trading analysis for ES, ZN, CL, and GC, heading into the week of Apr 17 - 21.

ES
--

On the ES continuous contract, we see the weekly chart still within a solid uptrend lasting over one year. We've corrected nicely and at any point here the dip-buyers can jump in and push it back to the highs. However, as long as we remain in this corrective band, I'll expect it to continue to around 2275 at which point "everyone" will be looking to buy.




The daily chart lets us zoom in a little further on this correction. As I mentioned, there's no law that says this has to go all the way to 2280. We're still in a bullish overall trend, and buyers can rip this higher at any point. Here on the daily we see another good spot for an early buying opportunity, just above even 2300.




This week, I'll primarily look for buying opportunities in equities if we can drop a little bit further. I might entertain a short if we come up to around 2360 and start to look soft. If an entry does present itself, depending on how each chart looks, I may choose to enter on nasdaq or dow.

---------------------------------------

ZN
--

The 20yr notes weekly chart looks iffy. Double bottomed and rising into heavy congestion. If it can cut through, there's room to run, but the going will be tough. The mean-reversion-ist in me wants to look at a short here, but the last 5 weeks are pretty strong and I'll need a better indication before trying to fade it.




One way to play this would be to wait and see if this breakout level 125'220 gets a retest later in the week. If it firms up there, we could be looking to really push higher off of that. If it fails there, look out below.




I'll be in wait and see mode on ZN.

-------------------------------------------

CL
--

Our friend CL is looking pretty strong after bouncing hard the last few weeks. Everything about this chart says strong base getting ready for a breakout. I expect a bit of a battle for $55 and if buyers can push past, next stop $60. Sellers want to prevent a new high here and push it back below $50.




I want to highlight something on the daily that I'm still trying to wrap my head around. The continous contract vs the ETFs for oil show a significant difference.

On the futures chart, I've got price firmly situated in this congestion zone.




But on ETFs such as USO or OIL, we're just shy of that area:




My first guess is that the discrepancy is due to fees / expenses / poor tracking on the ETFs. In other words, the continuous contract is going to be a better source of analysis than the ETF. However, in the back of my head I'm also conscious that the continuous contact is not reflecting actual traded prices, and wondering whether this makes a difference to my approach. Did we just come into resistance (ETF), or did we already break through and now sitting at support (continuous futures)? Kind of important.

Well, I'm going to trust the futures charts until I have evidence to the contrary. "A trader has to hang his or her hat somewhere," somebody once said.

I'd like to see CL retrace a little bit this week and form a little mini-base on the hourly around 51.50, 52 ish for a buy. Will need to drill down and see how it develops in this congestion area.

------------------------------

GC
--

You kind of have to go back to put this run in Gold into perspective. Not going to paste that monthly chart here, but suffice it to say that gold has had a tough time maintaining price above 1300, and hasn't traded over 1400 in 3+ years. I'd expect 1310 to act as a barrier, but if it blows through, there's not much else stopping it.




The daily GC is really clean here. It's a gutsy move, but if I can get the math to work out, I'd be interested in a short attempt off of 1300 - 1310. If we get a retrace back to the 1265-70 area, I'd be interested in a long there.


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FlyingMonkey View Post
Sunday 16 Apr 2017
==================

I want to highlight something on the daily that I'm still trying to wrap my head around. The continous contract vs the ETFs for oil show a significant difference.

On the futures chart, I've got price firmly situated in this congestion zone.




But on ETFs such as USO or OIL, we're just shy of that area:




My first guess is that the discrepancy is due to fees / expenses / poor tracking on the ETFs. In other words, the continuous contract is going to be a better source of analysis than the ETF. However, in the back of my head I'm also conscious that the continuous contact is not reflecting actual traded prices, and wondering whether this makes a difference to my approach. Did we just come into resistance (ETF), or did we already break through and now sitting at support (continuous futures)? Kind of important.

Well, I'm going to trust the futures charts until I have evidence to the contrary. "A trader has to hang his or her hat somewhere," somebody once said.

Hey FM, on the futures vs ETF I have always been taught that the futures should be used for any chart analysis.

On the continuous chart issue, Jack Schwager just posted an extract from his latest book on the issue which is a must read.

https://www.linkedin.com/pulse/should-futures-charts-spread-adjusted-contract-opinion-jack-schwager

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Tuesday 18 Apr 2017
===================


muttoez View Post
Hey FM, on the futures vs ETF I have always been taught that the futures should be used for any chart analysis.

On the continuous chart issue, Jack Schwager just posted an extract from his latest book on the issue which is a must read.

https://www.linkedin.com/pulse/should-futures-charts-spread-adjusted-contract-opinion-jack-schwager

Thank you immensely @muttoez. This is by far the most informative reading I've done on this topic, and it is incredibly helpful.

I have a few comments - first, it would seem that for my approach, generally speaking the adjusted charts will be most useful. HOWEVER, as he discusses, a hybrid approach is probably best or at least worth exploring. I am primarily concerned with trends and movements, and proportionality is absolutely key to the way I look at charts (lots of channels). However, I do use long term S/R also... insofar as one believes the actual price NUMBER is the most important player in the validity of S/R, then one needs to consider non-adjusted prices. But I want to contradict Schwager every so slightly on just two points.

1. If one considers that it is not just the price level itself, but the fact that groups of traders who did business at that level may be interested in doing business at that level againbased on the positions they took historically and still hold / have rolled over, then a price level S/R drawn on an adjusted chart still has merit, because those positions taken by those groups are at that level reaching their break-even level, a key decision point. There are other pieces to this argument as well, such as the pervasiveness of this type of chart, the similarity to spot price charts, which many traders will be looking at and seeing the same levels...etc.

2. Schwager states that there is no case where one would want to use a non-adjusted chart for back-testing a strategy. That can't be true. I can think of at least one example I myself was working on a few months back - checking the validity of round-number reactions. If you want to backtest how price action works around even numbers over time, you absolutely can't use adjusted charts for that. That's just one example, but there may be others.

I did some time digging into the data in thinkorswim a bit more and came to an embarrassing conclusion. First, I realized that at some point my selection of "adjust for contract changes" reverted to NO. All the analysis I did this weekend was on non-adjusted charts! Talk about amateur hour. Second, there is a bug in thinkorswim at least on my version. All of the charts DAILY and lower handle adjustment fine. However, the WEEKLY charts appear to display unadjusted prices regardless of the setting. Guess I'll be forced to look a both angles for the time being. Maybe that's for the best. Over long periods of time, especially on monthly futures, the distortion becomes pretty extreme. On OIL especially, the contango is so extreme, things get weeeeird. On the long term charts, it's pretty much sideways since early 2016 using adjusted prices. However with non-adjusted prices we have a nice clean up channel. Ponderous.

I'm also curious if in some cases there may be other tools for viewing price that give a more pure picture. What about a spot gold or a spot crude chart? Current Oil Price: WTI Light Sweet Crude
How about the raw index ^SPX chart in lieu of the /ES?. Maybe none of this matters as long as the proportions are correct. What percentage of professional traders are using futures to do business vs some other vehicle and chart? If that's where most people are looking, then that's what I should be looking at too.

Enough rambling, now for a trading update - I entered two positions today. A long in Crude via the 2x ETF UCO and a short in gold miners via the 3x ETF DUST. Neither of these perfectly track CL and GC, but they're good enough. Maybe I was a bit impatient with my entries. Could have gotten better entries if I just set limits at levels over the weekend. Maybe next time.

My long position in oil (UCO) is roughly equivalent to an entry at 53-even on the june contract. This could easily shake out lower and my hand isn't that strong. But I still think this is worth a shot. Not super optimistic on this one, and whether it dies a quick death may depend largely on the reaction to tomorrow's EIA report.



Compare that chart to this same daily chart with no adjustment. Look maww, it's an uptrend! Crazy.



And my short on the miners (DUST) is roughly "equivalent" (yes, I know it's an equities position but humor me) to an entry at 1290.



Not planning on giving this a lot of rope but it does seem reasonable for price to come down to the 1265 area in the next week or two, presuming our nations can take a breather from bombing and slaughtering for a bit. Meh.

I also took 9 ticks with a long in CL this morning, so still looking solid there. I could have done even better, but I'll be really happy with April if I can close this month out with a continued string of small gains, and decide in May how to push for the next level.

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Thursday 20 Apr 2017
====================


The market taketh and the market giveth. Well, obviously I got steam-rolled yesterday in Crude. That was awesome! My position sizing was accounting for 2xATR risk. Unfortunately we got 4xATR so I got tagged with a loss of 2R. Not good. Obviously if that is the norm, I will go bankrupt. My method of no-stop-in-the-market and only-make-decisions-in-the-morning in this case definitely backfired.

The no-stop-in-the-market is 1) avoid BS volatility spike stop-outs at the edges of trading hours. I've had this happen before and it's annoying. 2) to have control of gracefully exiting a position on my own terms in case I am getting rolled over.

It didn't really work out this time. I'm going to consider using Good-Until-Close stop orders that I place after the market opens each day. That might be a happy compromise so I don't have resting stops sitting overnight. Can always get back in if I get shaken out intraday, which would be better than getting hammered as I did here. Well, that's never happened to me before so there's a first time for everything I guess

The other thing is that when I calculated risk on this trade and factored in the levels in combination with 2xATR . . . In the future I will make a point of looking at the MAX atr as well over the last 100 days or so. Different instruments behave differently. I have been trading CL long enough to know it has the capacity to whip these huge moves out at least once a month, so I should be prepared for that.

Rather than show CL, I'll show UCO the actual ETF I used for the trade.




Fortunately my short in the gold miners is just the opposite. Got a great position and I've taken half off to "lock in" 1R of profit. I'm letting the other half ride for a bit. So I still have a chance to net a gain on these two trades. We'll see if GC can resume its drop.

Rather than show GC here, I'll show DUST the ETF I used for this trade:




My daytrading in CL has been off the past few days, and I've just given back gains I had from Monday, back to a little less than scratch for the week. I got a minor cold from my kid over the weekend and fell slightly out of my morning "killing it" rocky routine that has been working pretty well for me the past few weeks. I have one more day in the week to get back on track. We'll see. Next week I'm traveling first half of the week so not many days left in the month for me and I'd love to close out strong.

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Friday 21 Apr 2017
==================

15 minutes before the 9ET open. Poor little CL wants to get up off the mat. Does it have what it takes?




Locked in consolidation ranges here until further notice.



I finsihed with +2, scratch after commissions, had to leave just before the real fun started.
First trade was OK, a long off of support, took off at -3.
Second trade was NOT GOOD. I made a mistake of having a limit order resting right at the equities open. The volatility of the open took me out in the blink of an eye. Stop too tight also. -5
Saved the day with third trade just as I was about to shut down for the day. Pounced on a spike into resistance+vwap. I moved to stop to BE and walked away, coming to +10 target hit.




I'm holding onto that half-position Gold Miners short through the weekend. Recognizing that the French election may cause some extra volatility on Sunday, we'll see how that goes.

I'm not sure what to do with next week regarding my CL day trading. I won't be able to trade until Wednesday or Thursday, coming up on end of month. I'm already starting to feel the next tweaks to my trading approach brewing in the back of my head. The current ideas in my head revolve around slightly wider and more dynamic stop placement, more hands-off trade management, and a more distilled logic to deciding when/whether to enter.

I believe I'll be retreading over familiar ground with the modifications I come up with, but same ground with more experienced eyes can prove fruitful.

A decision to enter can be expressed logically in very simple terms. You have a profitable scenario or you don't. You believe based off of your assessment of the market that price is L% ikely-enough to hit P profit target before it hits S stop over a given period of T time. If L*P>(1-L)*S and if you are right about your assessment, then you should enter.

When you actually boil it down to just that, the decision to enter is fairly straightforward. It takes a vivid perception of the market to get it to that level of simplicity, have those assessments be ACCURATE AND ERROR-FREE and therefore profitable. But if you can't do that, you're just not ready yet.

The approach I'm using right now is an improvement over some of my past results, but the errors here and there are taking my profits and turning it into a scratch strategy. I can work to improve execution and eliminate errors, which I will do. But I can also tweak the approach to be slightly less error prone. The idea here is to simplify the factors that go into making the decision, and to reduce the number of decisions that need to be made.

To be continued.

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Last Updated on March 30, 2020


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