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Zach's Log

  #141 (permalink)
 
Fluid Fox's Avatar
 Fluid Fox 
Bangor, Maine
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This post is going to be a long one. Lost 5.25 points in the MES today.

At the open, price was on the edge of a bullish breakout. I had prepped for this scenario earlier and thought it was possible for price to push up towards Wednesdays POC and stall halfway there (that's where my profit target was placed). Two minutes into the open, price tested higher highs and established a new one by a couple of points, and this is when I got in long with 2.5 points of risk. I quickly got stopped out:



I risked so little because I wanted to see strong and fast momentum to the upside or nothing. The first sign of a breakout failing is hesitation, and price can respond dramatically to this lack of activity and sell off fast, so it would make sense to keep risk minimal and get stopped out sooner for a small loss, than to get stopped out later for a bigger one on a regressive move that's more probable than a breakout, in response to it's failure.

After that, price wandered to the downside, approaching the 2830 level. I got interested in the potential breakout of 2830 after price failed to breach it twice but was still hanging in there. Long story short, it broke that level and I got in:



My profit target for this trade was yesterdays POC, and price came within at least 2 points of it and reversed to stop me out. Today was definitely the biggest test of my discipline this week, and as for today's trading, I did great again- not technically, but psychologically.

So it turns out that I am capable of trading in a disciplined and consistent manner. I met both of the goals I set for myself last week, which are: 1. To hold my trades no matter what. Stop loss or profit target only. And 2. To only act on breakouts or double-tops. (I decided to act on breakouts alone for simplicity's sake). The sole reason I made and met these goals is because I had an incredibly hard time in the recent past with these psychological aspects of trading. I couldn't hold a trade, and I couldn't just trade one set-up. Now I know I can.

Where do I go from here? Currently, I'm reading "Markets in Profile: Profiting from The Auction Process" in an attempt to better understand how markets move in relationship to their volume and market profile. Because of the recent knowledge I've gained about the different kinds of market profiles and their statistical frequency of occurring, I think that it's unlikely for me to become successful at this game trading breakouts alone, especially in a more range-bound market like the MES. So eventually, something is going to have to change. What I think I need to do for my trading as of right now, is to add a bit more sophistication and involvement on a technical level. For example, the past two days I could have come out on top had I taken profits earlier- which suggests to me that for range conditions, I should be setting even closer profit targets, compared to the distances I've been setting them this week. That's one change for this breakout strategy that could have vast implications on my bottom line.

Given that it's only been a week of consistent performance, I'll continue trading the way I have been trading. I just need to be a little bit more adaptable to current market conditions. I especially need to become more realistic with my profit target placement in this weeks kind of conditions in the future, so that's what I'll focus on. If market activity changes to the way it was when the MES was first released- I'll recognize that, and trade with longer targets.

In the meantime, I'm going to keep educating myself by reading this book. I suspect that it will influence my trading.

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  #142 (permalink)
 
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 Fluid Fox 
Bangor, Maine
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"..if a market is trending upward and higher prices are attracting new buyers and additional volume, then the mean is continually rising. If the opposite is true, and higher prices are attracting less volume, then it becomes apparent that the mean has remained well below the current price, which means the odds are high that price will return to those levels. If you can identify when the odds are changing and then act on that knowledge, then you have a meaningful advantage over the majority of investors who wait until proof is incontrovertible before making a move. In the highly competitive investment business, the reward—even if only a few percentage points—can be very significant."

Looking back on my trading this week, I see that I need to put more emphasis on trying to figure out what kind of trading day it's going to be before I even consider entering a trade. Even with signs that the day was likely to be a non-trend day or a neutral day (implicit recognition), I still took breakout trades- not having explicitly separated or known market profiles had me in an ambiguous place, which made it hard for me to judge whether or not to trade- and I defaulted to trading, for the sake of consistency. I've been trading blindly to a higher level of market context to some degree this whole time. Putting names to these possibilities of price action is more valuable than I would've thought, because it provides structure to the market, which you can make reasonable decisions from. It beats unfounded hypotheses.

I also learned that I learned to become biased against responsive trading. I'll put effort into trading the extremes of value areas, instead of always defaulting to breakout trades. I've been trading as if trend days are the norm. The opposite is true.

I've got plenty more reading to do- I can't believe how ignorant I am/was on a technical level. I guess you can't become profitable on psychology alone.

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  #143 (permalink)
 
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 Fluid Fox 
Bangor, Maine
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A potential major opportunity in the ES, MES, NQ, and MNQ.

We'll see what happens!

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  #144 (permalink)
 
Fluid Fox's Avatar
 Fluid Fox 
Bangor, Maine
Legendary Retail Failure
 
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+1.75 points in the MES.

Practicing bracket trading this week if the MES gives me the opportunities to do so. I've decided that I'm going to stick to the rule of not manually exiting trades while range trading (I closed manually today and didn't like it), and instead just set very close profit targets in relationship to MP and VP POC. I'll be responsively trading the extremes of value areas if price behavior calls for it, and I'll set my profit target somewhere near the POC, on prices side of the fence. This way, there will be consistency in my range trading, although it will be different in scale, depending on the width of the value area. It all depends.

Today's set-up:



Price was showing moderate conviction to the upside out of the open but stalled at ~2840. The longer time went by with price not being able to ascend levels, the more I became bearish. Relatively large size sold around 10:06 and that's when I decided to enter short. Unfortunately, I got in 2 ticks late. Long story short, price infrequently surged towards my PT, but there were solid moments of stalling as well. I got impatient and closed the trade, and 5 minutes later price surpassed my profit target. I need to get used to being patient in ranges.

Goal for tomorrow: If the market calls for it, the goal is to do exactly what I did today, except I need to hold the trade no matter what. I won't have an issue with this.

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  #145 (permalink)
 
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 snax 
Chicago, IL
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Zachary Standley View Post
+1.75 points in the MES.

Practicing bracket trading this week if the MES gives me the opportunities to do so. I've decided that I'm going to stick to the rule of not manually exiting trades while range trading (I closed manually today and didn't like it), and instead just set very close profit targets in relationship to MP and VP POC. I'll be responsively trading the extremes of value areas if price behavior calls for it, and I'll set my profit target somewhere near the POC, on prices side of the fence. This way, there will be consistency in my range trading, although it will be different in scale, depending on the width of the value area. It all depends.

Today's set-up:

Attachment 266302

Price was showing moderate conviction to the upside out of the open but stalled at ~2840. The longer time went by with price not being able to ascend levels, the more I became bearish. Relatively large size sold around 10:06 and that's when I decided to enter short. Unfortunately, I got in 2 ticks late. Long story short, price infrequently surged towards my PT, but there were solid moments of stalling as well. I got impatient and closed the trade, and 5 minutes later price surpassed my profit target. I need to get used to being patient in ranges.

Goal for tomorrow: If the market calls for it, the goal is to do exactly what I did today, except I need to hold the trade no matter what. I won't have an issue with this.

@Zachary Standley we very nearly took the exact same trade today, and we came away with similar results. I like your comment about setting closer profit-targets in relationship to MP and VP POC. I am constantly manually-exiting trades, which you refer to as having done this morning as well. You inspired me to try setting closer profit-targets now, it may serve as a bridge from manually-closing trades to actually hitting bigger profit-targets in the future. Thank you!

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  #146 (permalink)
 
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 Fluid Fox 
Bangor, Maine
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@snax, It's funny, I read a little bit of James Dalton, now we're taking the same trades. Lol!

Build that discipline of not intervening with trades (if you don't have it already), and then if you don't like trading that way, change it! You know what's realistic in terms of where price is most likely to go given current market conditions. It's just a matter of taking the heat and not interfering at all.

Whatever you do, stay consistent.

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  #147 (permalink)
 
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 snax 
Chicago, IL
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Zachary Standley View Post
@snax, It's funny, I read a little bit of James Dalton, now we're taking the same trades. Lol!

Build that discipline of not intervening with trades (if you don't have it already), and then if you don't like trading that way, change it! You know what's realistic in terms of where price is most likely to go given current market conditions. It's just a matter of taking the heat and not interfering at all.

Whatever you do, stay consistent.

That's awesome. It will be interesting to see if we got in at the high-extreme of the day's range during the initial-balance development, Dalton points out that the initial-balance sets one of the day's extremes quite often (I was going to track this, I should start). I've had several days now since starting his book where I've closed a trade for peanuts and then saw that it was set at the high or low extreme of the day. Excellent lesson in patience and holding onto trades. Market-profile is a great tool for seeing this, though admittedly you can see it on the chart too, but I really like the data-representation of the market-profile.

cheers

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  #148 (permalink)
 
Fluid Fox's Avatar
 Fluid Fox 
Bangor, Maine
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MNQ Live Trading

Lost 13.5 points in the MNQ. (-5.63% loss, -$27)

I've been anticipating a bearish move in the MNQ since Saturday. I actually stayed up late last night, watching as price took a dive to the downside. I wanted to capture this move and had been planning for it for a couple of days, and I established to myself from the very beginning that the money in this account is no object, and I'll take whatever risk is necessary to act on this opportunity- within reason. I obviously hit a very lenient limit today.

It has become apparent to me that I was attached to and firmly believed in this move happening, which is something I thought I was immune to (to some extent), but I behaved in ways that I would normally consider foolish. Last night around 9 or so, I entered short in the MNQ attempting to get a head-start on this move/get decent trade location. Price wasn't volatile, and there wasn't much volume at all. When I entered, this wasn't the case and I got stopped out for a 4.25 point loss quickly:



That's what I get for entering overnight, I thought. I knew it was the wrong thing to do, but I did it anyways (lapse in discipline). As for the second trade, this one was the most reasonable of the three trades I took. Price approached lower lows 10 minutes after the open, and that's when I entered short for the breakout. There were hardly any takers, and price reversed hard. Honestly, price was going too fast and being too erratic for me to understand in the OrderFlow, it just reached a break-out level I came up with, and so I entered short. I didn't want to miss the move. But yeah, I got stopped out for a 5 points loss there:



After this, I paid closer attention to how price was behaving. I figured that price was establishing a new range, after watching it bounce off of and between levels. At first, I dismayed the idea of entering the market a third time live, because I'm not all that experienced with bracket trading. This sentiment quickly changed after I noticed a double top developing in my short-term volume chart:



I was correct about the direction of price, but my stop loss was too thin and I got stopped out again for a 4.25 point loss. What did I learn from all of this?!

- Don't trade the overnight session. There is not enough volume and volatility, and price is more erratic. I really won't fall for this again.
- My stops are way too small for the MNQ. I thought that because every point is worth $2, that it would be acceptable for me to trade with this account size. My stops aren't sufficient for these wild moves. The first time I traded the MNQ, I profited 14.5 points. I think this distorted my view of the MNQ.
- Even though I'm not attached to this money, I should be more balanced about losing it- as in, I should care more about my risk. After all, I'm in this to make money, not to lose it.
- I wasn't being objective. I didn't wait to establish what kind of trading day it was (range or trending) because my bias had precedence over the behavior of the market at the open.

I will say though, being able to trade so freely is beautiful. It just has to be balanced with an objective take on the market, which I didn't have. I had tunnel vision on this bearish move. I will meditate on all of these mistakes further, and I sure as hell won't repeat them again. The overall message I'm taking home from this is to focus on remaining objective while trading, and that biases should always come second.. Admittedly, I fell into a fantasy about growing my account from this move. Because of my attachment, I did foolish things. That sentence just about sums it up.

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  #149 (permalink)
 
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 Rrrracer 
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Being objective and ready to switch gears at a moment's notice is critical. Strive to never, ever let bias cloud your judgement or what the chart is saying. Practice looking at your charts from both viewpoints as much as possible.



I had to learn this the hard way... a few times LOL. Nowadays, if I am biased, it is to my account only.

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  #150 (permalink)
 
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 Fluid Fox 
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The reason I went off the rails is because I fantasized about making money, and because I deviated from my process. I put some time into getting specific about what I think I need to do in order to become a better trader. I believe that if I can follow this process, that I'll be on the right track. Here it is:

Trading Process

Every step of this process is an absolute must in order for me to trade on a given day. If I don't meet the conditions of even one step, I will not allow myself to trade. The days that I have followed my process are the days I do the right things, so my "ritual" needs to be taken more seriously.

Step 1. Meditate for 40 minutes. Focus on breathing slowly and deeply, then sustain that attention and clarity over time. To get specific as to what it takes to satisfy this step: There's a clear difference in my experience when I meditate- not to get poetic or too personal- but the silence of meditation brings about this inner peace. It's when I hear that faint little continuous buzz, and when there's hardly anything happening in my mind, that I consider I've reached a meditative state. Once I get there, I try to intensify this experience by going deeper, by letting go into these sensations. Some days, I can get there fast. Other days, I can't reach it at all. I think its accessibility is a matter of practice.

Step 2. Genuinely address your fear of losing and accept the risks before trading. Go over acceptable risk parameters / check current max daily loss limit. The most important thing for me personally, is to remember that the outcome doesn't matter as much as doing the right thing. I haven't had to focus on this step like I used to, because I don't care as much about losing money now- I just want to be a fantastic trader for the sake of it, and I know I have to pay my dues right now to grow. I'm aware that I'm going to make mistakes and lose, it's just a matter of being on top of these mistakes and correcting them as soon as they come up, and because I think this way, this step comes relatively easily now. I'm still going to practice it, though.

Step 3. Review the charts. Do a top to bottom analysis; check out the daily, the hourly and the smaller timeframes. Also, check market profile and volume profile. From all of this data combined, come up with realistic scenarios of future price action, for both range days and trending days. Identify biases explicitly (on paper) so that they can be acknowledged in real time, so there won't be the mistake of only acting on their behalf. Also, I'm going to deliberately acknowledge and remind myself that I'm poor at trading "what is," so I consciously try to trade what is, instead of trading just levels. This is critical for me. I have developed the bad habit of only trading what I want to happen, and it must end.

Step 4. Assess the initial balance before even considering taking a trade. How are market conditions? Establish if it's a range day or a trend day, then act accordingly. If price action lines up with the plans- fantastic. If not and there's an opportunity- also fantastic. Keeping the lines blurred here have put me in trouble in the very recent past. I may have to "attach" this step to something tangible, so that it grabs my attention easier, and so that it pulls me out of my habitual ambiguous analysis of the market. I consider this step and step 3 the most important steps to focus on for my development. With that being said, all of them matter.

Purposes: The first step gets my head straight; it's my approach to get focused, and to get relaxed, simultaneously. The second step specifically addresses my fears of trading, which makes me act in a more uninhibited manner, because I end up accepting the risks. The third step is my analysis and preparation. It puts the market in context, and in doing so, I get familiar with likely possibilities (it's my job not to get attached to them). The fourth step emphasizes being objective and adaptable. It addresses proper performance.

So my goal is to satisfy every step of my process for the next two days, then all of next week. I'll do my absolute best to accomplish this.

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Last Updated on December 31, 2019


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