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Ideas: I think the journal works like a stop-loss for our pain and flaky ever-changing trading theories. Yesterday I was frustrated even though I had been feeling pretty good overall about my 30-trade challenge which I'm only 7 trades into. I had a frustrating morning and already I was looking for ways to change in order to improve. I don't feel good so I should change things right? Well, no, if we want consistency we should establish a baseline with a big enough sample-size to draw some sort of inference from. I want wider stops but I started this challenge stating 8-tick stops so that is what we will continue to use for this baseline challenge.
If something is causing us pain in trading I think we should try to quantify it somehow. I feel as though many of my losing trades with 8-tick stops would be winners with 16-tick width. I can go back and measure how far it actually dropped and see if my hypothesis is correct. In this challenge, 16-tick stops would have saved me yesterday, but not the earlier loss I sustained. I will measure this going forward. At the end of the challenge I can re-assess based on the performance what should be changed.
In the end I think most of my pain was due to my own impatience.
***
So for today, @7:20AM CST, S&Ps down 6 bucks, the VIX up slightly at 15.51, I'm using 1-minute charts with interesting price levels highlighted.
My first impulse is to jump in short at 2786.25 but I'll hold off because I haven't adequately prepared.
Hard to tell if this is a rangey or trendy day yet. Side-note, I see this little pattern a lot but I never do anything with it because I don't really believe in patterns but its interesting:
I think this would be a good time to check order-flow, DOM, etc. if I had those tools. I think institutions are building their positions slowly here but I don't know where really, if I had to guess it would be around that 2786.25 level. If they intend later to try to push price down to yesterday's low that would give them 3 points from here. Dipping a bit @7:35AM CST.
Note to future-self, I think these little pre-market price-oscillations will be a nice play when I have a larger account with more freedom, 5-6 ticks back and forth while the market builds, you could catch ~4 pretty easy and with 2-4 contracts those seem like nice relatively-safe plays.
I am beginning to like these 1-minute charts. I know I need to dive down the rabbit-hole of understanding quality data, different tick-charts and different data-providers and what works with which platforms etc, but that is a lot of research that is going to take some time.
@7:46AM CST, Moving up now. I switch to 3-minute chart to see the forest. If I were to decide to go long, 2789.25 might be a good spot. If we go short maybe 2782.00. I put some stops in just to give myself a wake-up call and be a trader not just be a philosopher all morning.
@8:04AM CST here is what we look like:
Nice movement, I know a lot of traders don't like this kind of price-action but I feel like opportunities are everywhere. I only observe because I'm isolating a specific strategy that is not getting a signal right now. But I can observe what types of stops would be sufficient to capitalize. I clear my stops now and re-focus.
My previous stop would have been hit and now I watch as it rises to 2792.50. My plan would have been to hold out for 2793.00 but we won't know for now.
@9:00AM CST price begins to rise again and I set up a stop-buy for 2789.00, it fills and drops immediately, and stops me out at 2787.00 for an 8-tick loss. I walked into that re-test thinking it would trend up.
I have hit my limit for losses for the day but I've been seeing opportunities all morning. @9:10AM CST price begins to drop rapidly, I enter a Stop-Sell at 2782.00, (knowing that if I lose again I'm going to have to reset my challenge for breaking my own rules), and I scramble to get a limit-order to cover at 2778.00. In the chaos I forget to set a stop-loss, but I am safe almost immediately as I hit my limit and close out for a 16-tick profit.
I sense this is an opportunity to profit off a turnaround so I set a limit-order to buy at 2777.50 and set a limit-order to cover at 2781.50. I also remember to set my stop-loss at 2775.50. to set a stop-loss at 2775.50, and I am quickly filled for another 16-tick gain.
I walk away happy, I like this type of market-behavior, trading where I don't over-think and over-analyze. The price-points lined up with the levels I had noticed earlier so I feel good about that part of my judgement. It was reckless to trade when another loss would force me to reset my challenge but I felt these opportunities jump out at me.
Refresh erases my lines, here is what the chart looks like as I vow not to enter another trade today:
I also notice I have some strange slippage in the final results, where it looks like I accidently set my limit to cover at 2778.50 but got the benefit of two extra ticks for closing at 2778.00, maybe it is a bug in the simulator because I don't remember setting it for 2778.50.
I think there is a fine line between trusting yourself and being too reckless, I think I was a little of both today.
My final results:
What i liked:
- I felt more free and active, less mechanical.
- Biggest profit of the challenge so far.
- Trusted myself.
What I did poorly:
- Not sure if this was too reckless, I don't really think so, I'm just more used to walking away after a loss.
Goals for tomorrow:
- Dig for more information about volume and order-flow.
- Read more about different datafeed types.
- Read more in general.
expectancy & progress towards challenge goal
avg win = (8 + 7 + 8 + 12 + 5 + 16 + 16) / 7 = 10.29 ticks
avg loss = (8 + 8 + 8) / 3 = 8.00 ticks
% win = (7 / 10) = 0.700
% loss = (3 / 10) = 0.300 expectancy = (10.29 * 0.700) - (8.00 * 0.300) = 4.803 ticks $1500.00 profit goal.
$600.00 achieved.
$900.00 to go.
10 trades of 30 entered, 20 trades to go.
Need an avg of $45.00/trade, about 4 ticks
current expectancy is 4.803 ticks, I need to continue increasing the averate number of ticks I gain on my winning trades, and continue to keep my win-rate up.
adjust your entry to: where you want to get in -10t for long or +10t for short. That way you can cut down number of trades, keep you original 8t stop and raise your win/loss ratio.
Thank you very much, Cory. This is interesting, at first glance it does seem like I am defeating the purpose of seeing the price break away from areas of contention. For a hypothetical example, consider this market scenario:
If I for whatever reason want to get in ~10 ticks away from the pink-line, but I haven't decided which direction yet, I would have to enter a trade at a very ambiguous moment, where I haven't seen any confirmation of a move up or down. Does this make sense or am I missing your point? It almost feels like I would be more susceptible to false-breakouts?
A good day could put me over $400 for the week and into my bonus where I can choose to bump my size up to 2 contracts since a loss would still put me up over $200. I don't think that is wise yet since I will still have a ways to go to get to my target of $1500 and I don't want to erase the winning trades I made. I think if I have another good week next week that puts me over $400, that could put me close to my target with a lot of trades to go and I could safely take on more risk, but for now I'll stay conservative.
Need to make note of that move, I wonder if some institution was covering a bad trade or what it could be.
Well this got interesting in a hurry. Price is back-tracking a bit off of 2792.00 (76.4%). Well we're in a 4 point range which is great, but I'm missing opportunities. Down 4.50 on the day, haven't moved much from the open despite these volatile moves. Small price-oscillations now.
I am starting to see trends and timings that have burned me recently. I notice this slight upward trend coinciding with pre-market jitters. I am going to hold off a bit because here is where I usually jump in and get stopped out. Maybe I can enter with a better basis if I am more patient:
Opening bell, just a bunch of thrashing. I haven't determined what kind of day we're going to have so I'm waiting.
Cancelling working-orders since I am being distracted by other non-trading stuff now.
Final results:
What i liked:
- I was patient.
What I did poorly:
- Nothing that is obvious.
Goals for tomorrow:
- Dig for more information about volume and order-flow.
- Think about how big institutions would get large orders into the queue.
- Read more about different datafeed types.
- Read more in general.
expectancy & progress towards challenge goal
avg win = (8 + 7 + 8 + 12 + 5 + 16 + 16) / 7 = 10.29 ticks
avg loss = (8 + 8 + 8) / 3 = 8.00 ticks
% win = (7 / 10) = 0.700
% loss = (3 / 10) = 0.300 expectancy = (10.29 * 0.700) - (8.00 * 0.300) = 4.803 ticks $1500.00 profit goal.
$600.00 achieved.
$900.00 to go.
10 trades of 30 entered, 20 trades to go.
Need an avg of $45.00/trade, about 4 ticks
current expectancy is 4.803 ticks, I need to continue increasing the averate number of ticks I gain on my winning trades, and continue to keep my win-rate up.
@7:21AM CST, S&Ps up 17.50 overnight, that is a significant move, I had actually thought about starting this day's trading last night with a quick short at 2785.50, I didn't go through with it because I didn't have a real reason to place the trade other than experimentation. Very thankful I didn't make that trade.
Right around 5:20PM CST would have been a good time to get in long.
I feel like this will be a trending day based on the overnight action and there were lots of over-reactions to negative news yesterday.
@7:30AM CST I see that we plunged through the 38.2% extension and I see a pattern that I've been noticing. I place a limit-order to go long at 2800.00, I'm getting the price hit but I can't get filled. It keeps pinging my price and no fills.
I keep it open and we are filled a couple minutes later @2800.00.
Since I feel like this will be a trending day, I would like to try holding out until it gets past 2802.75, then adjusting my stop-loss to that around that level and see if it will run some more after that.
Price comes back down to test my BE. This is ok, I am fully-committed. I believe this is a good spot to be because the queue was exceptionally deep and it was hard to get my order filled here (well its a simulator, but still), and I think the market is going to want to ride the bullish momentum...but the question is will my 8-tick stop be wide enough to survive pre-market maneuvering. If so I think we will be golden.
It occurs to me that perhaps large institutions could have the following strategy. Slowly Build up large long position at 2800.00. Once that gets filled little-by-little over some time, open some smaller (but still big) quantity of contracts for short position to attempt to push price down in order to lower the basis of their existing position, knowing that novice traders like me are hoping and praying for their stops not to get hit, which provides more liquidity for the large institutions to buy in bigger and lower their basis. THEN comes the big move. So maybe it would be smarter for me to see this pattern, wait for first assemblage of position by big traders, let them move price down a bit to lower basis, then I jump in where my stop-loss would normally be. This would also coincide with user @cory 's advice about establishing my posistion 10-ticks lower than my first instinct. And vice-versa for short position. Maybe there are more tiers to this strategy.
I get the move I was looking for, but it won't budge past 2802.75, so I close out a little early at 2802.50.
I may regret it later, but that took a lot of mental energy, so I'm going to hold on the side-lines for now up 10-ticks. I may want to follow up on the major move I thought was pending, but I think its going to come quickly here. I like this morning's trade though.
Yep, leaving money on the table. That's ok, I'll improve :-)
And here are the results for now.
What i liked:
- I am trading well, it may be for reasons other than what I think they are, but I see improvement that can be quantified.
What I did poorly:
- Need to improve patience once I've established a winning trade. Better trade management would have improved my gains.
Goals for tomorrow:
- Dig for more information about volume and order-flow.
- Think about how big institutions would get large orders into the queue.
- Read more about different datafeed types.
- Read more in general.
expectancy & progress towards challenge goal
avg win = (8 + 7 + 8 + 12 + 5 + 16 + 16 + 10) / 8 = 10.25 ticks
avg loss = (8 + 8 + 8) / 3 = 8.00 ticks
% win = (8 / 11) = 0.727
% loss = (3 / 11) = 0.273 expectancy = (10.25 * 0.727) - (8.00 * 0.273) = 5.267 ticks $1500.00 profit goal.
$725.00 achieved.
$775.00 to go.
11 trades of 30 entered, 19 trades to go.
Need an avg of $40.79/trade, about 4 ticks
current expectancy is 5.267 ticks, I need to continue increasing the averate number of ticks I gain on my winning trades, and continue to keep my win-rate up.
Over the weekend I learned about a new concept called "Harmonic Rotation". It refers to the natural "breathing" ebb & flow of the price action for a particular product, and it has strong implications for things like stop-loss depth vs the current volatility of the product. I think it also can be a tool for gauging how far to adjust stop-loss working-orders in trending markets in order to lock in profits without getting. I like this, it gives a name for something that I've suspected but found hard to express. I don't know much about calculating it yet, or what time-frames I should focus on. My instinct is that a week's worth of data would probably be more than sufficient for my current style of trading. I think this is valuable even for a simple trading strategy in oscillating markets that are ranging within the harmonic rotation.
Strong move up to 2814.75, I decide there seems to be 2 levels of support to protect my stop if I go long at 2813.75 [2813.75,2812.25], so I enter a limit-order to buy at 2813.75.
Thinking that I always do this on Mondays, I am excited to trade so I jump in at the first possible opportunity with little thought. I need to be aware of impulsive over-excited trading.
Things are looking nice and trendy at 7:40AM CST. I would like to hang on to this trade for a while if this remains to be true. Price tests 2815.50.
There is some resistance at 2816.00, I am up 9 ticks, but I think we will surpass this level by the opening bell. I think 2815.75 will be a good place to adjust my stop after opening bell.
We test 2816.00 again. I think it will not hold. Another test.
I am keeping the concept of harmonic rotation in the back of my mind as I consider how I'm going to manage this trade. We are almost to opening-bell. I set an optimistic limit-order to sell at 2823.75.
Price surges to 2818.00 but I hold off from exiting the trade. I am considering where to adjust my stop.
@9:02AM CST I get stopped-out at 2811.75. Well that hurts, I have no idea what caused price to plunge so drastically.
Final results:
What do you think, should I have closed out at 2817.00 or held on?
Side-Note: my status went from trading apprentice to "trading for fun". feels like a demotion ><. This was not fun.
What i liked:
- Patient and more emotionally-detached from the price-action. I used to have a very strong physical reaction to the ups & downs, but now I am committing more easily and confidently, at least in sim.
What I did poorly:
- Over-excitement for new week of trading led to a somewhat impulsive trade.
- Had a winning trade but I held out for more ticks, market eventually took a drastic turn against me.
Goals for tomorrow:
- Read more about Harmonic Rotation and try to quantify Harmonic Rotation for a few of the products I like to trade.
- Read more in general.
expectancy & progress towards challenge goal
avg win = (8 + 7 + 8 + 12 + 5 + 16 + 16 + 10) / 8 = 10.25 ticks
avg loss = (8 + 8 + 8 + 8) / 4 = 8.00 ticks
% win = (8 / 12) = 0.66
% loss = (4 / 12) = 0.33 expectancy = (10.25 * 0.66) - (8.00 * 0.33) = 4.125 ticks $1500.00 profit goal.
$625.00 achieved.
$875.00 to go.
12 trades of 30 entered, 18 trades to go.
Need an avg of $48.61/trade, about 4 ticks
current expectancy is 4.125 ticks, I need to continue increasing the averate number of ticks I gain on my winning trades, and continue to keep my win-rate up.
I feel this day was coming eventually. I've been struggling to hold on to my winners and just let them run without running away with a couple ticks profit. Today I really felt detached and wanted to let a trade go free.
I don't think it was greed for a 40-tick trade that was what did me in, it was more me just challenging myself to hang in there and wait out the storm, to keep pushing against my tendency to close out as quick as possible.
In retrospect I think I am glad I pushed to hang on, but also I would have benefitted from some context.
I was thinking in terms of pushing the number of ticks, when I maybe should have thought in terms of how best to reach my current trading goal.
I was only thinking in terms of the 12-ticks I would have taken had I closed out at 2817.00, but really it was a 20-tick swing to the negative side that I would be avoiding by taking the 12-tick profit. That would have put my P/L at $875.00, rather than $625.00, a $250.00 difference.
In the end I like that I held onto this trade. I still have plenty of trades to reach my goal. I got past some fear of mine even though I lost, plus I think I gained some insight into why its ok to just take the 12-ticks when that price range was tested multiple times and didn't really break. I think this trade was good for my overall experience and future decision-making.
Moving forward I will strive to stay focused on increasing risk/reward-ratio but also be careful and take profits as they come. It is a fine line and kind of blurry too, but I think I had ample warning today. Its very subtle, and when I'm not sure, I will take the profits.
