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I day trade RTY at thinkorswim. I’m not a good trader. I’m a classic weak hand and I scratch most of my trades. I am comfortable with my system and loathe to change. I see trading as a grind, that offers the same effort/earnings ratio of most square professions. I love it dearly because of the freedom, but I’m not obtuse to its contradicting characteristics of being an individualist attempting to imitate the behavior of others.
I use these documents:
System Manual - a full set of instructions to myself. 68 pages. Rules and mechanical procedures for futures and options. Software notes for TOS and NT8. A psychology section, etc. It’s been said that Marcus Aurelius’ Meditations, was an instruction to himself, so if it was good for the Emperor...
Journal - a standard record of my performance, method efficacy, emotional state, market conditions, etc. It gets filled in last each day. Some days I get a false impression of my performance and if I make journal entries while I’m trading, I often have to go back and correct the tone of things after looking at the day’s numbers. I make hand-written notes on my emotional state and then type them in later. I haven’t been using this doc as much as I would like since the new year.
Equity Curve - standard stuff. I do a little extra in the workspace to the right such as the last column. It calculates a would-have-been equity balance for daily trade count scenarios. I often lose money when my daily trade count gets over 7. 2018 was a $10K differential. I also tally my W/L and Scratches for monthly and annual totals. You’ll see that I have a bad itch that can’t be scratched enough. I have a Since Nadir column to monitor progress since the last losing day, or some other trading tragedy. The Since Nadir value is like a faster MA compared to the slower total curve, or a medium period like a year’s curve. Each year is a sheet and I can string them all together by linking in to a sheet’s opening bal. That of course gives me the option to omit a number of the earlier and ugliest years. I have a reconciliation section (not shown), where I reconcile 3 account statements to this single curve. I do that monthly. All monetary values are net of fees and expenses. The ROC capital basis is $500/contract (common market day rate), but thinkorswimmers have to put up the full boat, so it’s a reference value.
Pattern Log - the record of how well I trade and how well my planning is working. The Pattern Log is the primary doc and most of the info for the other docs is generated here. I log the other participant’s behavior at all of my prices of interest. I make a plan at each price or pattern - whether I trade or not. Then I make a record of it in this doc - whether I trade it or not. That gives me good feedback on my read. It’s a continuous process of drawing context out and then putting it back in with the next plan. Most of its standard and self-explanatory. All values are ticks. My trades are recorded within the record. SW = Scratched Winner, SL = Scratched Loser. RFE = Reasonable Favorable Excursion, which is a simple target setting tool. Target values that are highlighted orange are adjusted values, so I can refer back in case it goes wrong. MAE/MFE values that are highlighted brown are values that are too close to the planned values and might need to be adjusted. MFE highlighted yellow are values that exceed my 2nd tier targets (usually > 50t RTY, or generally > 3/8 of YR.). I’m also obsessed with the H/LOD and how it sets up and when it occurs, so I note that as well. I haven’t yet figured out how to tease any predictive function out of it.
The Pattern Log keeps me focused and it allows me to plan and monitor from the same simple doc.
Method:
I clipped out the section on Yesterday’s Range (YR) and attached it here. Yesterday’s Range (YR) is my contextual guide. The context drawn from it is used to take a side and then I use it to trade the chart directly. That sounds like a chicken-or-egg dilemma, but it’s just a simple and arbitrary tool to connect to the market. I take yesterday’s range and use a Fibonacci retracement tool to subdivide it into 4 or 8 equidistant curves. Outside ranges, in either direction are plotted as needed. I also trade a few basic patterns like channels and flags. The YR plot serves as a scaffold for these 1 day drawings.
I start by making a presumption for risk and target values based on Yesterday’s Range (YR). I use the historical MAE/MFE values for similar sized YR values. For RTY, I use a 20t minimum risk and 1/8 YR minimum target size (¼ YR for lower values). If 1/8 YR contracts to 20 or less, I can’t make a 1:1 plan (min ratio rule), so my rule requires me to increase risk when range is contracting below a certain point. I set the risk to greater than an 1/8 curve and set the target for a ¼ of YR. Conversely, when range is expanding, like during the fall bear last year, I have to increase my risk, but I can increase the target far more and get better ratios. When 1/8 YR is 40 - 50t, I can use a 25 - 30t stop for the bigger target and the ratio improves. Those are 1st tier targets and I find that the 2nd tier targets should use the same stop. 2nd tier targeting will produce fewer winners and that offsets the benefit of better ratios. I’m struggling to find the analysis method that will guide me to the 2 tier planning sweet spot. I seldom take a 2 tier trade and when I do, the scratch rate is higher. I also have no management plan for the 2nd tier and just use a manually adjusted stop - below whatever looks like support. That has no logical relationship to my range based planning method, so I have to find another way to get good with multiple targets.
I use channels to evaluate trend strength (context) and to predict S/R at the trend line, channel line, the mean, +/- expansions of 50%, 100%, etc.
1 W, 1 SW. Too eager to jump in early, and inside range. Too reluctant to participate later. Lost track of time and foolishly entered before news. Too few hand written notes.
2/13
2 RTY trades for $162. 1 W, 1 SW. Trade #1 was the same trade I took yesterday for a L (fade the GH for a FBO). Today it worked, twice. I showed unusual patience. They kept buying the GH BOPB for 5m, but the 1m bars looked bearish (top tails, bear bodies, lower closes). By 9:30 it was evident that today is the day I expected yesterday (gap-n-sideways open). I SOH for several buying opportunities at the bottom of this range - because now I’m thinking a HTF PB might develop out of this reduced bullishness (in the NYSE). Also, I see a HTF bull chan 75% just below this area and these chan curves have been consistent magnets since the bull began last Dec, so a buy at YR 87% is in that area and it’s a proper gap close (cash). Trade #2: At 10:30, selling is coming in to my entry target, but I didn’t like it because there was a 1d bear chan line below, the previously stated bull chan 75% theory set up too late and wasn’t lined up, and there were 3 other magnets lower yet (GL and 2 HVNs which was actually a bifurcated YPOC). So, I opted to fade a bear chan FBO by taking a buy at the GL. That same tactic got me short at the morn H, so I tried it again. I was high in this area, so not well placed and my 20t stop took a 17t test in a lethargic reversal. No bears covering in size here. I showed improved patience by waiting out 2 opportunities to bail at BE, but it was still a SW. I took 9 of 24 planned ticks.
This is the type of day that my method is designed for (sideways or 2-sided trend). My read was very good, my stop and targeting was very good, but my participation level was too low. I took and held the morn H, took and half held the morn L.
Note: there's an acronym key and some definitions in the summary post spot.
2/14
4 RTY trades for $18. 2 SW, 1 L, 1 SL.
The 12/4 H (Santa Selloff bear top) tests and pivots at 1:55, then sideways until 7:30 when a 1-sided news selloff begins. Any 1m L1 GOB works, no DCBs. All inside curve buys are losers. Starts to wheel around YL at 8:02. This H is also, the first test of an abandoned 2y POC.
Trade #1 is a L. 1st Hyde of the year. See pics for detailed stupidity.
Trade #2 is a reasonable 1d bull TL KGB and YPOC pivot, but YPOC has been crossed several times already and was off the table. I took a tier 1 profit and covered my tier 1 loss.
Trade #3 was a Cowboy FAB at the GL. Trailed too tight w/ stop (too eager to get healed on the day). Having got healed, took some reset time.
Trade #4: Sold the 12/4 SH and scratched it for BE. 1st NYSE test of this price (G traders sold it successfully) and they’ve made a megaphone, for a possible rev. Right after scratching, lost ISP. Fixed ISP, came back and saw a flat flag. Sellers at my price only got 21t (top of the area).
Frustrated w/ larger tgts today. Also participated too much in the middle and wasted too much focus on monkeying around with targets. Required stops weren’t out of range and would have held for several chip shots, so it was a waste of time. It was a somewhat difficult day with the news bear and the HWC in the middle, so I’m happy that I could tread water on a day that used to drown me. Wanted to sell the news BE real bad but sat it out. 1st mouse got 35t and the 2nd mouse got killed. I suppose most trapped news traders reconciled in the chop before they could BE.
Made a note last night to retire the Bush Funeral Gap range (with honors) and make a new HTF range from there to the 12/4 Santa Selloff top. Even though they tried to go above it, no 30m closes above and they closed the day below. But it’s still working. It showed the HOD w/ 10t & LOD w/ 21t , so maybe later. The HTF bull chan 50% had the LOD w/ 10t (magnet sucked in YL sellers with an ascending triangle trap. pics), so it’s still working too.
Trade 1: At 8:29 they spiked it up to HTF 250% (this is a BO above the Dec H), G bull CL 200%, YR 125% all here at this GH and spec capitulation. SW for 29t. Extremely sloppy Cowboy trade. Was looking for a DFA, so I stopped in short at the bell and then moved my tgt way out in front. They couldn’t get more than 10t below YH and there were bot tails on all the 1m bars. I was right to scratch, because they reversed at the HTF 1/8 and took it up through the HTF bull CL. I was lucky to get what I got selling in this market. Can’t remember when I last saw a DFA (exhaustion gap sets up late in the Globex, closes and continues in a big liquidation). I have to figure out why I think a gap-close-rev is so unreasonable. And why I have to wait for the gap to close at YC, rather than just YH.
Bonds, gold, oil, USD all up. They must be selling beans and bellies. Must be the machines because machines don’t eat. They just drink energy. Can’t bring myself to get on board long. Note: study the GOB tactics this weekend. There were 2 5m BB that worked, but they followed the first one that failed. Note: put this in a separate log page w/ the other GOB data. 1m bars also working but it’s a grinder, so not as well suited.
10:14. A very pretty 1m H2 sets up at YR 150% (pic) and triggers. I have to start logging these and take some shots w/ them. Also, an hour ago, I was dismissing the 1m chart, then the good looking setups start appearing. I don’t like the tight grinder channels because they’re not suited to measuring tactics.
Trade 2: Limit sell at HTF 275% and 3w bull chan 125%. Scratched for 1t w/ my stop. Sellers gave 22t and then they looked higher and then started sideways. Using a 20t tgt on the HTF chart seems foolish and I struggle to use such a plan. On the 1m, they made 2 legs down, set up a fair looking H2, triggered it and wheeled around the entry price once and then higher. Would have stopped out. Buying in here feels like pulling on an old weathered bungee cord. I can’t help but wince and turn my head.
11:34. 30m 1TF continues since 1:30 (with a 2t exception on the 6:00 bar. Not sure if 2t counts). Starting the day’s wrap, have to take the bat mobile to the shop.
