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Trading Journal: Path to Consistent Profitability + Trading Career
Not happy with this week. VIX was low Monday + Tuesday as the market was awaiting the meeting minutes. Didn’t take any live trades Monday, Tuesday, and Wednesday. Then Thursday only took one trade (a loser). By Friday, I was anxious to get a winner and saw a setup, but took the same trade 3x and each time lost.
Why is it that a triumphant big winning week often gets followed by an even bigger and more exasperating losing week?
Also, recency bias is at play here, as I ended the week weak.
Psychologically, a week of all red isn’t good for me. Hopefully more setups next week, although it did provide me with such much needed demo time with trading mean reversion setups.
Among the actual trading strategy, I only consider one of the four (the last one) a bad trade. There were a lot of reasons not to take it:
Time of day (after 12PM Pacific - so after bond pit close)
3rd attempt at the same trade (todo: prevent this in plan)
Know that when the market is up by the S3 level, it’s unlikely to rally further without greater news (Carter points this out in his book)
It’s Friday afternoon, dummy. People are having drinks in NY, not trading the market.
Also, I sort of chased this market and got suckered in.
I was trading on Tilt and frustrated by my lack of progress this week.
So not a lot I can do about it now but alter my plan:
Don’t take the same setup 3x (only 2x)
Stick to trading times. After bond pit close, don’t initiate any new trades (no matter how tempting)
I noticed I was upset after my second losing trade on Friday; I think I did a good job to get away from the screen for a good 10 minutes. I think a mandatory 10 minute break from the screen is in order any time I feel like I’m trading on tilt (which I took).
Also - one thing that I think worked really well was respecting my rule of “3 strikes you’re out” (aka quit after 3 losing trades during the day). This at least helps me not lose too much on bad days.
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I think some of the frustration, too, comes from the pivot plays not working very well this week. I think one thing that I’m finding is that defining levels is really important in this market, especially when there isn’t news happening. But how does one define their levels? It’s easy enough to draw S+R but that doesn’t mean the market will respect it. Also - when do you go with it and when do you fade it?
So, its probably my third week trading futures (day trading) and sadly, Im not doing so well. Ive gotten trapped a lot, with a great deal of false breakouts, making bad decisions, like chasing a breakout, and then putting in a limit order in way too high …
. Ok. 3 weeks! Ha. Clearly more discipline + grit is required than getting through three weeks.
One of the main things I’m learning is to “embrace the suck” and put in screen time and I just assume that most successful traders have gone through this.
With that said, I’ve spent a lot of time considering: is it psychology or is strategy? And my conclusion has been: no, it’s not psychology, it’s strategy. As Bella at SMB says, often people think it’s psychology when it’s really lack of edge. And grit will only take you so far: without a winning “how to” you will never be profitable.
I’m thankful for that thread and nexusfi.com for alerting me to it (as well as the original poster plus those who followed up) for the suggestion to seek out OTA/Sam Seiden. I think that’s just one educational source out there to research. Although I still think there are some hidden gems in John Carter’s book which I have yet to discover.
I’m also curious what the community would recommend re: education around setting levels and/or setups (especially for bond markets). I’ve been through most of John Grady’s stuff + Jigsaw training, and think I understand most “conventional” TA.
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Another frustrating thing is that it appears as though I have no, or very little, edge around my “holy grail” setup.
I’m not really sure what to do about this. I’m hoping to cannibalize my own setups (hopefully finding better ones that just replace these).
---------
So here’s what I can do next week:
* Keep trading Holy Grail in volatile markets
* Figure out *exactly* where + when John Carter goes with vs. going against with his pivot plays.
* Start filling out spreadsheet each day with new John Carter Pivots (I was using automated ones, not Carter’s ones)
* Update trading plan as specified
** Don’t take the same setup 3x (only 2x)
** Stick to trading times. After bond pit close, don’t initiate any new trades (no matter how tempting)
** Fill out pivots at start of day
* Look for another setup in John Carter’s books that fits well with bonds (especially in non-trending markets).
* Read PDF of “5 years of sam seiden supply + demand teaching”
* Start coming up with a “start of day” and intra day objective measure for volatility (I have VIX already, but it’s clearly only one item that will indicate volatility, and doesn’t do a very good job of indicating volatility intraday).
Can you help answer these questions from other members on NexusFi?
Basically a breakeven week this week - small profit of $15
A weird week as VIX was elevated but not a lot f trend moves. Definitely seemed more risk on this week and less fear in the market (this was also seen in the seoll off in Gold). Also a weird week with the Labor Day weekend approaching and contract rollovers going on.
So took a few trades but by Wednesday it was pretty clear the holy grail setup wasn’t going to work very well in these markets and decided to concentrate on John Carter Pivot setups.
I actually realized half way through the week that my interpretation of his setups was actually backwards and so shifted them (v1 = first interpretation, v2 = second interpretation).
I also made a variant for myself. This variant uses only one contract although is basically the same (with minor differences: it doesn’t trail the stop and doesn’t use two different targets). Since I have a tiny account, I’d really like to play these levels with just a one lot so think this setup will suit me better.
Friday was a special day as the weekend mode was already on, volatility was really low, and I could tell that with wide ranges the trades wouldn’t make it. So I created another setup called the “level reversion” which is another similar trade, but uses 1:1 R:R and is good for these dead days (day before a holiday, big news event, etc).
I’m printing this out daily + putting it in my trading binder (with screenshots of every days trades). I’m not sure if all of this manual work is adding much, but it does give me a good way to think of potential levels + probabilities. One lesson from last week is that when the price is trading up near S3, a long is likely to fail, so don’t get long there!
I’ve also started tracking a series of metrics daily. These are the ones I’ve been mentioning in previous posts. They are sort of “volatility” gauges or general ways to determine market health.
The basic idea here is that each of these can indicate a volatile market. There are 13 metrics currently. If one of them “goes over” a specified threshold, I count it as volatile. (For instance, if the S&P is down 50 points, I consider it a volatile day). Then I add these up and divide by the number of metrics. If the rank < 33%, I consider it quiet, 33-66% Volatile, and 66+% “very volatile”.
This is definitely a work in progress and I’m not going to implement it into my trading plan yet, but I think it’s a better measure than just looking at VIX, which is what I’m doing now.
It’s also interesting because it’s dynamic, and potentially I could write a program to automatically update these real time.
Speaking of which, I also though: why do I need to sit around to test these pivot levels? With a dead market, I’ve got to do *something*. So I started playing with Metratrader (AMP has a free version for windows). And it’s amazing as it easily connected and there is market data present.
I’ve played with MT4 before (this is MT5) so things are a bit different, but nothing seems insurmountable. I’m currently working on pivot code. My plan here is that if something is backtestable, I might as well go ahead and do that instead of manually trading. But manual trading is also important, because unless I’m planning on actually executing this with an EA (I’m not), execution context is also important.
On the education front:
I took a quick skim of both John Carter and Sam Seiden.
I think the way going forward with setups will be to test manually for 5-10 trades, then backtest, and if that looks promising, then start demo trading until 25 trades. I think my process kind of sucks right now because I have to spend a month figuring out if setup works, and then I quickly realize it doesn’t, why it doesn’t, and modify it for a variant. Although this detailed contact with the setup provides a lot of great information it causes me to “reset all of my data.” It would be nice to be able to modify + see feedback immediately, and I’m hoping this is what will happen with metatrader/backtesting.
RE: Sam Seiden, he has some interesting things to say. I haven’t been through the full 150 pages of the “5 years” doc but the point is well taken: institutions buy wholesale, and sell retail. Traditional TA Indicators (like MA, stochastics, RSI, etc) do the opposite (buying high, selling low). Of course. Now the next question is: how do I create setups from that and take advantage of that intraday? Also, I have the impression that most institutions don’t day trade, they swing trade. Look at the goldman sachs reading list. No day trading on there. Also after watching some videos with Anton Kreil and his trading buddies, I get the impression that most don’t day trade - which makes sense - it’s hard to day trade lots and lots of money (aside from hedging, etc). So TBD for now. There are probably setups that could be tested, but I’ll just put it on the back burner to gain greater focus.
I’ve got a whole list of books and courses I’d love to go through. I’m halfway tempted to go on a book buying spree (or course buying spree). But I also don’t know how much this will help me develop and sort of think iterating on what I’ve got instead of acquiring new info will be more helpful for the time being.
A non trading book that I’ve been reading is “The Path of Least Resistance.” This is a really interesting book about creating change in your life, and how a lot of self help stuff doesn’t work by creating false change (that works temporarily). One concept in it is that things change only when there is first tension involved, which eventually leads to resolution. I think a key for me will be to resolving this tension in a productive way (developing setups and backtesting in metatrader) vs. in a “negative way” aka buying more books that provide zero actionable advice.
Swing Trading:
The FIT trade is still working, although FIT has mostly rallied back to my selling point. GRMN has rising though. I’m sort of holding my breath on this one.
I initiated another trade - long Grocery outlet, short sprouts markets. Idea here is that times will get bad, people will still want name brands and won’t want to spend premium amounts on groceries. Holding my breath on this one, too, and haven’t liked the price action since I initiated the starter position. Will cut at $200 loss if it gets there.
Next Week:
* Trade as per trading plan (manually)
** Holy grail in volatile markets
** Pivot plays in other markets
* Use metatrader to test Pivot Plays on 5 minute time frame
** Do this while waiting for setups
** Make sure to get at least one pivot play setup working!
Small losing week. Took a few trades at start of week but VIX was decreasing throughout the week and my one setup seems to only work in volatile markets. Despite VIX being “high” on a few of the days, it was clear that the bond market wasn’t in a huge trend (and really we saw a flight to risk-on assets this week contrary to what we’ve been seeing the last few weeks with a flight to safety assets - gold and bonds). My custom indicators did a good job of suggesting that it would be low vol most days, so that was a major win.
Since I’m not up for the open, it was mostly choppiness. And this week illustrates why I’ve been slowly grinding down my account - when I win, I don’t win big enough to compensate for these times when I lose (despite being small amounts). So it’s a gradual grind-down of the account.
Still searching for edge, so that’s where most of my focus was this week.
This caused me to switch over to demo trading and strategy development after Tuesday.
I still like the John Carter Pivot point setup. I think it’s fairly easy to follow, but have customized it a bit for my own use. (Only using one contract to reduce risk, don’t trail stops). Still demo trading it (manually) but have high hopes for it.
MT5
Got basic MT5 (metatrader) EA working with a simple backtest of the scott/carter pivot point strategy. I’m still refining it as there seem to be some data issues involved (for instance, it only seems to be trading on Mondays and Tuesdays etc)
New Setup - Trapped Traders
The basic idea: market has sold off so much and has reached a maximum down swing. Now all of the short traders are trapped. Nothing new here, just need a way to absolutely qualify this + recognize it. Still developing the strategy.
Was able to trade it on demo on Thursday, although the trade didn’t act the way I expected it to. It was not so much that short traders were trapped as short traders just stopped wanting to sell which led to a rise in price. But either way, the trade seems like it would work well. I think there’s probably some power to these sorts of setups.
This also led me to investigate Lance Biggs, so still looking at his YTC price trading manual for ideas.
A really basic setup that just fades levels. Can fade any pivot points, half pivot points, or manually determined S+R levels. The idea is that this is a good trade only for those dead days when vol is really low, and especially for those days before a news event / holiday. I think it will also be a good night time setup.
More on Pivot Points and Indicator based trading, and my progression
I also went ahead and bought “Secrets of a Pivot Boss” (the book), which several people seem to recommend.
I’m not seeing pivots as a holy grail, but definitely a key tool in my arsenal. I’m increasingly viewing indicator based trading as a good means for “continuation” type trades, but pretty bad for those types of trades that are all about testing levels (mean reversion). Often the indicator is just too late to the party - which is OK when volatility is high and you expect another move in the same direction. OTOH, it’s terrible when you expect price to move back to where it came from as iit gets you in right when the pivot based players are getting out.
One book that I’ve wanted to get for a while is Wells Wilder’s “New Concepts in Technical Trading Systems”. I know there’s nothing “new” in there (RSI, etc), but I think there are keys in there as to how a master thinks about trading technically. I think that one could customize one of these indicators to provide some edge, but only on larger time frames.
Volatility Indicator
Going to defer changing my setups for now to use my new volatility indicator. I think I need more time to see it in different volatility environments to get a sense of how good it is. But for now, I’ll continue watching it daily.
For next week:
Trade Holy grail only in VIX > 20 environment
Continue trading manually new setups
MT5 - get pivot point backtest working. Qualify it with:
Only trade at the right times (8AM - 12PM pacific)
Tough week this week. Spent the early part of the week demo trading. Then got excited as the “Level Reversion” trade setup that was working overnight and had 25 instances. Later in the week, had the Scott/Carter trade setup work as well (these numbers are week end so it was looking better when I was demo trading):
Traded the level reversion on Tuesday night. Little did I realize it was 9/11 and there was little volatility in the market. So effectively I was getting in right in the middle of the volume profile and getting chopped up consistently.
At the end of Wednesday, I had enough trades to go live with my modified Scott/Carter strategy, which I did on Thursday. Had one winner on Thursday and a couple of losers on Friday - just by one tick! Got short on Friday but got stopped out later in the afternoon, then reversed according to the strategy.
Takeaways from this week:
I have two more setups that look mildly profitable, but only mildly so.
Strategy 1: The Level/Reversion setup is probably a losing strategy in all but the quietest of markets. It’s basically fading pivot levels in super quiet markets. I was demo trading this both during quiet days and night time.
One appealing thing of this strategy is how often it happens, so it’s easy to get lots of demo data about it. OTOH, it only seems to work in the quietest of environments (pre-holidays).
Also, two things I need to watch out for: 1) the existing volume profile range - something I want to incorporate into my trading - and 2) expanding / contracting pivot ranges (more on this later).
Strategy 2: Scott/Carter Pivot Point Only three trades so still TBD. The one thing live that I noticed on Friday was that I could use volatility based stops instead of fixed stops. But I think 4 ticks of risk is all I want to risk for now (with my tiny account) so happy to keep these stops in place. Plus, I’d like more data before I modify the strategy (although this does provide an avenue I could go down if the strategy isn’t working).
Some other things I’ve been working on this last week:
I also worked on the MT5 code at the start of the week but still need to modify it for the right time of day, plus do more checking on it.
My volatility measures: I’ve realized VIX isn’t a great proxy for volatility, yet I’m still basing my setups off it. I’ve created a better measure of market volatility - but this is overall (cross-market) volatility, not just bond volatility. And these are handy numbers to have (how volatile is the world?) but it’s not the best proxy for bond volatility (for instance, we could have a risk-on market but not have a huge run up in ES AND a major reduction in VIX, but COULD have a big bond market move down - which is what happened Thur + Friday).
So basically:
VIX doesn’t work because when it drastically drops, the bond market would be very volatile. This suggests change in VIX would be more interesting than VIX per-se
Also, VIX only really measures ES option volatility / fear, not bond market fear.
And overall cross-market fear isn’t really a good proxy for volatility in the bond market (it is when there is fear in the market, but the bond market can have major moves when sentiment switches from risk-off to risk-on)
So I’m exploring keeping my main measures of volatility intact but adding a more specific bond one (which may be as simple as average daily ATR vs. today’s range, possibly waited hourly) or possibly adding pivot level breaks, pivot level expansion/contraction, etc.
Some other things I’m thinking about come about from reading “Secrets of a Pivot Boss” which really has been a great book so far. I’ve been looking a bit a Camarellia equations but they don’t seem to fit great for this bond market. BUT - I have found some value in (market) profile ranges, volume profile, etc. Still reading the book so trying to figure out how to incorporate this into my trading.
Also, all of my spread trades have gone against me, and I’ve closed all but one of them. I think they were all correlated with market fear and trade tensions. GRMN had a huge run up but FIT even more so. My spread buying has been a classic case of buying high + selling low = losing money. It’s not my main focus and is honestly distracting, so I’ll probably stay way from doing more spread trading for now...
I also started reading YTC. Clearly there is some overlap between him, pivot levels, and sam seibold. But I’ve realized I can’t read long docs like that without underlining + writing / summarizing them so I’ve sent Vol 2 off to the printers (lulu.com).
Next week I’ll be gone on a family trip so will have a shortened trading week.
For next week:
Trade with Scott/Carter strategy live, no matter what the volatility is (although make sure it’s not an “inside” day).
Allow trading with holy grail/pullback strategy if volatility explodes (and VIX >= 20)
Finish Pivot Boss Book
Read Mark Fisher Book
Consider how to if/how to incorporate the following:
Types of Day Types
Informed by volatility Levels
How to identify these early in day?
What are the day types I see in the market?
Modified Volatility Info for bond market vs. general market volatility/chaos
Market/Volume Profile Info
Initial Balance
VAH
VAL
POC
VPOC
Previous High/Low + relationship to current price
In Range, In Value
Out of Range
In Range, out of Value
Central Pivot Range / ORB (need to learn more about this)
This is a report for two weeks that were split up based on a vacation in between them.
Week 1:
* Dumb trading at night. This was w/ the level reversion setup - which was working well in demo last week but not live. Still not sure why that was. Maybe they “are running the stops” Or maybe it only works in the most quiet of environments. I’m actually thinking that night trading is ripe for breakouts + entering on stops - basically the opposite of what I’m doing here. BUT - this setup probably will work on those super slow days (holidays, etc). So I’m keeping it in my live wheel house but not doing much with it.
* Otherwise, did scott/carter setups before the vacation and on balance, not profitable although still profitable with the strategy overall
* I’ve also split up scott/carter into a scott/carter trend strategy and a scott/carter fade strategy. When getting stopped out of the trend strategy, I’ll reverse and switch to the fade strategy
* A major development this week has been marking off if I expect the market to be in a “take what you can get” mode vs. a “let it run” mode. Most of the time the market isn’t in a let it run mode, but I know one of my prime flaws has been that I’m always looking for the big win. Marking this off at the start of the day has been very helpful. Now, when I see a move but it doesn’t quite reach my take profit target, I’ll take the profit anyway. On other days, I’ll have larger targets or even move my take profits to the next level.
* I’m starting to think a mix of mechanical and discretionary is the right way to go. Clearly it can’t all be discretionary (“it looks like it’s going up” isn’t going to work!). OTOH, a purely mechanical strategy doesn’t take a lot of the context into consideration. I used to think this context (which John Grady always talks about) just meant news coming out, but it seems like it’s also taking into account what happened yesterday, pivot levels, if it was a trend or a quiet day, etc etc.
Week 2:
* Definitely felt much better this week
* Finished ACD / The Logical Trader over the break. I’m definitely starting to feel like I’m figuring out some pieces of the puzzle.
* Started using some principles from the ACD system. Now I have A + C marked off on my DOM and use it as another way of indicating market bias.
* I think going forward a big win will be only getting long with an A up, and only going short with an A down to keep in direction of the market bias.
* Another big win was figuring out how to import a spreadsheet into the Jigsaw DOM. Now I can load the levels pretty easily (see below)
* I overtraded on Friday a bit. But I think the big take away was that I should stay with the bias of the market, only going long on an A up. Fading is hard and I felt that it would be very hard when fading to get a profit from the market.
I need to stop taking out of plan trades. Instead of just trying to restrict myself, though, I need to just switch to Demo to “get my fix”. I did that successfully on Friday and it worked well (would have made this week red if I ad traded live).
Friday also helped me to introduce a new day type - the “Day Trader Day”. I knew it would be more active and probably not an inside day, but also though it wouldn’t be a one way trend day. The pivot range had contracted after a quiet day the day before so expected more activity. But the pivot range also wasn’t so tight that I expected a big breakout. So the “day trader day” (a concept I stole from Peter Davis - thank you is a day that may or may not have a clear direction, but probably won’t stay within yesterday’s bounds (so not an inside day) but also doesn’t have the momentum of trend day.
For next week:
* Improve A, C values. Should they be the same for the 5 year?
* Only trade in direction of ACD bias
* Keep using Scott/Carter setup
* Remember “take what you can get” vs. “let it run”
Very happy on this week. Wasn’t profitable, but I am starting to figuring things out.
Overall, my reads on the day type were right on every day besides Tuesday. Tuesday taught me what a double distribution trend day is. That lesson cost ~ $100. OK, no big deal there. Otherwise I’ve been trading in the direction of the A-up (so long only) and that has been keeping me in direction of the trend. Even when I get stopped out, I’ve been re-entering the trade and then it often works out.
Friday wasn’t a great day as I had zero trades, but would have made money if I had traded the afternoon range.
I think what I’m starting to find out is that a static trade setup isn’t that important; what is important is putting the day in a context / framework and then trading to that framework. This is really in three dimensions: 1) the “day type” (trend day, double distribution trend day, range day, quiet day, etc). 2) are we in take profit mode (aka “take what you can get”) or in “let it run” mode? 3) the bias. The ACD framework for breakouts (A-up / A-down) has been very helpful in forming a bias, but I’ve also been looking at VPOC change from previous day, as well as the 70% of trading zone of volume profile for range trading.
As long as I get both of these variables right, I can make money on the day.
Re: day types - I’m still modifying my day types. Instead of blindly going with what market profile says or some author has as day types, I think it’s something that I want to construct on my own. Friday was an interesting day because it was basically a trading range with a one bar huge spike on news to a resistance level, then immediately came back and traded in the range for the rest of the day. What sort of day type is that!? I guess MP would consider that a range day with range extension?
Also - it’s been surprising to me how well the market has been conforming to support + resistance zones. I always knew obvious support + resistance zones would get tested over the long haul. What I didn’t anticipate was how well the floor pivots would work, and especially the midpoints of floor pivots on a daily basis. This has been a game changer.
Putting it all together, here’s what I’m looking at on a daily basis:
* Upcoming news events (for today). What time is it happening? What’s expected to happen?
* VPOC and 70% of volume profile for yesterday + today
* Day Type (Trend Day, Double Distribution Trend Day, etc)
* “Opening Range” (30 minutes - 5AM-5:30 AM for bond market - california time). This effectively is a 10 minute opening range for pit times (since it opens at 7:20 Chicago).
* A-up / A-down (+ rejected)
* Long term + short term trend - using 20 + 50 EMAs
* Bias - very bullish, mildly bullish, neutral, etc.
* Pivots + midpoints
* Has R2/S2 broken?
* Is the pivot range expanding or contracting?
* Most obvious multi day support + resistance (usually on 1 hr or 1 day chart)
* Daily ATR
* Market volatility
* Overall “world” volatility
Which is basically all summarized in the pivot sheet I posted last week.
Another thing that I’ve started doing every day is a daily report card, a la SMB Capital. Since I now have a framework that I’m trading in (basically a modified market profile / pivot boss) I can start to evaluate my progress.
I talked to one trader this week who used to work at Axia and he mentioned reviews and how at Axia they split things up into Analysis, Execution, and Mindset. So I started doing Analysis + Execution (I’ll leave mindset for later) - ranking it on a Bad/OK/Good subjective measure, for now. Here’s an example:
For next week:
* Remember to volatility adjust stops in Scott/Carter trades
* Skim other trading books that I’ve already bought (before buying MP book)
* Keep doing what I’m doing (re: daily report card, pivot sheets, re-watching trading videos from day)
Since I’ve been doing so much review during the week, it’s a bit hard to summarize thoughts here. But overall I think the combination of pivots, market + volume profile, as well as major S+R is providing a great framework to understand the markets. Now the question is about anticipating the day types and not doing anything dumb like shorting low probability breakouts at the end of the day.
Here are some takeways from this week:
Started understanding “P” and “b” shapes in MP. Basically on a trend day you’ll get a move down to lows, but then a distribution will happen and you’ll get slaughtered if you try to short the range. Knowing this is developing is hard (for me), but there are some clues: Near R3/S3 (or Mid S3/R3) is probably a good sign the move is over or almost over
Later in the day, these ranges at the bottom/top of the move still provide high probably areas of trading. But instead of going short at the bottom OR fading (on a down day) at the low of day, it’s probably safter to short at the top of the range and either go for an extended move down (selling at a good price) or playing to the middle of the profile range
Most of my trade setups are garbage; but I do like scott/carter as a general framework (aka only get in + out at “points of interest”)
I should rewrite my trade plan to both be simpler + more specific.
I think a good rule of discipline for me is to only go long on an A-up, only short on an A-down. This will make sure I always stay on the right side of the trend.
It’s also dumb to sell the low after an extended move down.
I’d like to playbook 3 different setups: 1) “scott/carter” pullback, 2) scott/carter fade 3) scott/carter breakout.
At the end of an extreme move, only scott/carter pullback should be used (one pivot point back)
The practice of daily review + plus putting all of this stuff in a binder is a great way to review the week on fast forward. “Tape” (aka video review) is great for finding out exactly what happened in a situation, but for a zoomed out view of the week a paper binder works great.
Don’t have limits in the market if not near the inside market. At any point, news could strike, you could be filled, and immediately stopped out. This sucks. (This happened to me on 10/8)
Also, it pays to be news aware. Don’t have limits in the market even if you have a spot you want to get in at if the inside market is far away
When volatility gets over 1.5 ATR (with 6 period ATR) the market is just too volatile for me. It’s much better to step aside as algos have taken over and there are big sweeps. It’s OK not to trade during these periods. Sure, some scalpers say “volatility is a traders best friend” but for me it just drastically increases risk and I largely ever get a win here. Better to step aside.
When news strikes and you see these large 20 tick wide dojis with no conviction, it’s time to just turn the machine off and leave for the day. This kind of action is totally untradable. Just let the algos do their thing. (See the close on 10/8/2019).
If you are in a trade and there is news about to come down the pipe (bond auction, etc) it’s best just to get out. Don’t try to get the very last tick. Yes, it’s frustrating when the trade is going in your favor, you’re 10 ticks in the money and should have a 14 tick winner BUT: it’s much more frustrating to try to take 11 then have price reverse and only take 5-6 or worse.
I think a good rule for me in the future will be after a breakout that doesn’t work, to move onto only doing a pullback. Why? Since I’m trading towards the end of the day this failed breakout often signals the end of the move and the start of range trading / auction again. Going *with* trend but from a better price is better than trying to play the low probability breakout.
One big revelation (as I’ve been studying OP + personality typing) is that most of my conflicts are “with the tribe”. This is largely what drove me into trading (I wanted to get rich and make money but not have employees). Yet one of the ways to succeed is actually harnessing the collective brain power of others. One trader from Axia has been particularly helpful (thanks!). I’m constantly amazed at how generous most traders are.
Also, I spent a while putting together a new trading plan with updated knowledge. I think this simplification will be greatly helpful for my trading:
Overall a losing week, but not a whole lot of trading done last week. Mostly a disjointed week as I didn’t trade one day (no opportunity) and Monday was a holiday.
Summary for each day:
* Monday - no trades (Columbus Day). But did demo trade and found selling half M1 + playing the range would have worked out.
* Tuesday - Trend Day. Got short at S1 on a good A down; got stopped out but re-entered and caught the big move down (although probably could have taken more out of the move).
* Wednesday - Inside Day. Tried to short at M S1 but price never got hit. No trades on day.
* Thursday - Didn’t do well this day. Read the day right, but didn’t have a good game plan. Got stopped out going short at top tick; then reversed and got stopped out; yet my structure of the market was good. Was a bit confused on how I should treat this day, as I viewed it as range bound but got a good A up indicating I should only go long (instead of shorting the high).
* Friday - Analysis was spot on. My trade plan wasn’t totally in my standard rule book. I had read it as a range day and planned to get long at M R1 for a pullback, sell at R1 for a fade / range play. Never got filled at R1 (would have if I had a preset limit order, but without it my reflexes weren’t fast enough) and ended up later in the day getting long. Did make a profit on the trade.
Some observations from last week:
*I got some clarity on Range Day Types
* Seems like trades have a higher probability of working when re-entering. Why is that? (Probably because everyone who had the same idea got stopped out and is no longer in the trade)
Think the A-up framework should only be used on Trend + Double Distribution Trend Days to establish bias.
* I also adjusted my A to be a larger value. I think this makes more sense to give it a bit more buffer. I also talked to someone who used to work for fish and I ended up being pretty close but still low from what they were using (after backtesting).
* Overall, not using the A-up on range bound days makes a lot of sense - Mark Fisher even says the ACD doesn’t work in things that don’t move / aren’t volatile.
* After Thursday, I decided to change my report card to have three points of evaluation:
**Analysis of Day
**Trading Plan
**Execution
* “No Balls, No Babies” - a phrase I heard Mark Cuban say, it makes a lot of sense to me. It’s stupid to needlessly risk money. But you also need the guts to execute the plan. Friday was an example of a day when I had a plan and did try to execute it, but should have used limit orders to get fills (I didn’t have the guts to have a limit order in before it traded up there). I was hesitant to do that from getting gap filled last week on Powell news - something that was unlikely to happen this last Friday.
* I did OK on Friday partially because - despite the bad entry - that I remember it was a “Take what you can get” not a “let it ride” type of day. I think that’s very powerful to remember - some environments you just have to take profit and you can’t go for the big win. Doing so is imposing your will on the market.
And some takeaways / action steps:
* Adjust ACD % values upwards (already done)
* On Range days, ignore ACD values - they provide no help
* Need to evaluate analysis on at least two dimensions: the day type vs. the planned trades. I’ve been going over “Markets in Profile” and this distinction between market structure, time, and trading logic in the first few pages was totally lost on me the first time I read it. WTF Is that all about? But now I totally understand what they are saying: First, you need to get good at identifying the general day type (structure), next you need to understand how that day type will evolve / play out over time (time), and lastly, you need a setup or pre-planned rules that will take advantage of how the profile is evolving over time (trading logic). These are obviously separate but related skills and funny enough, most traders jump right into learning setups when that’s actually the last thing they should be learning.
I need to rememwber “Let it ride” vs. “Get it while you can” environments. When I’m in a trade, I need to say to myself: “Is it a let it ride env? Or a take it hile you can env?”
* Read/skim “Mind Over Markets”
As someone who isn’t yet profitable, I think this might be a bit presumptuous to add this section. But I also think “teaching” (aka “blasting” in OPS speak) will help me to best know it for myself and maybe someone else will find it helpful.
If I were asked today “What would I tell a new/developing trader?” or, “What do I wish I knew when I was first starting?”:
* No 1, always preserve capital when learning. With that said, you *need* real money / risk on to pay attention every day for sustained periods of time and it needs to be enough that you care, but not so much that it will seriously hurt you. For me, losing $100 a day is enough pain while I’m learning. More than that I might be financially worried. Based on that number, then adjust how many shares / how many lots (probably one lot) and even which markets you trade. Are there correlated markets you can trade that behave the same way but have a smaller price per tick? I’m happy to demo trade to 1) learn a new platform 2) learn a new setup but after that, it’s time to go live.
* Is your problem a strategy or a psychology one? Know the difference between your execution self and your analysis/planning self (roughly - pre-frontal cortex vs. amygdala/hindbrain)
If you are following a set of rules to a “T” and are unprofitable, it’s your system, not your psychology. You need a better system.
* The only way you will find this out is by tracking your trades + whether you’ve followed your trade plan
* Never beat yourself up for executing your rules, even if they lose you money.
* Do beat yourself up for bending the rules.
* Your execution self is like a dog who constantly wants to press the slot machine button and is the one who experiences fear + greed. This dog/animal inside of you needs to be trained, so when it acts bad (aka not following the rules) you need to discipline him.
* Your analysis self is more rational and comes up with the analysis of the day, the setups, what you should execute, etc. That one is more cool headed and can think “rationally”. Although you may curse it in the moment of losing money, this one never gets “beaten up” - it lives in analysis mode (and it will analyse later on when cooler heads prevail). If you’ve ever met an engineer, you know what I mean - they live in this super analytical mode and are not concerned over emotional things (in MBTI speak: they are NT nerds, not SF jocks). If they were to commit a faux pas, they wouldn’t feel bad about it, they would wonder what was wrong about it (“But why is this considered bad?”, NOT: “OMG I can’t believe I did this!?”).
* If it’s a strategy problem, I’d advise trying to read as many different books and exploring as many different ways/systems of trading as possible. Pivots, Market Profile, Moon cycles, MA crosses, whatever. Then try them out for a few days either on demo or with tiny / small positions (say, a 1 lot). How does it behave? Does it make any sense to you? Is it profitable? I’m starting to believe that certain things that work in the futures market (for instance, pivots, market profile, etc) don’t necessarily apply to stocks (and vise-versa).
* If it’s a strategy problem (and you are day trading), then the first thing is: Can you identify the day type before it happens? Will it be a trend day or sideways/range day? I think trying to track this (with a volume profile) every day will quickly get you up to speed and the market will start to make sense to you. What did you expect at the start of the day and how did your expectations change as the day went on? (Hint: also look at the volume profile or market profiles for the last few days and especially yesterday as how it relates to today). As soon as you can identify the day type, you at least put the odds in your favor as you will be either trading with the trend on a trend day or fading the ranges if a range day. Of course that doesn’t mean that your setups might not suck for one reason or another (where I’m at) but at least the market will start to make some sort of sense to you.
* Trade Review / Daily Debrief - every day. When I was executing mechanical setups this was often superfluous and felt like a waste of time, because the only question was “Did I follow my system?” and if so, then it’s a “Good day” But I was facing a negative P&L on so many days and that indicates the system sucks (since my execution was OK). If this is the case, I’d put trading on hiatus (because your plan/system sucks) and would go and look for other systems. But if you are engrossed in and/or learning MP it seems vital to do these daily reviews because you start to understand the day types. Every day you experience gets you closer to understanding the market and how it functions / how it plays out. I’m convinced these review cycles are where all of the learning takes place.
* After every trade, take a screenshot of the before + after (when closing). Then every night review these and make some notes on what happened during the day. Print these out, put them in a binder, and then review them on the weekend and come up with ways to improve. This game is one of 20% of execution, 80% of feedback + learning how to improve next time.
Four red days, ouch! And only 1 out of 8 winners. That’s really awful.
Ok - so what went wrong?
Well, this was a choppy week in the market (and personally as well). I had a shortened trading day on Tuesday and was out on Wednesday.
Monday was a day where I didn’t read it well. Also I didn’t notice price acceptance after the sell off and the volume build up.
My daily pivot sheet every day was indicating quiet / no volatility and range bound conditions, although not inside days. For the most part, I read the day types right, but how I planned my trades was poor; a simple strategy that would have worked this week is just to initiate a reversal trade at S1/R1 and exit at the pivot or HVN.
Everything could have been made up for on Friday; when the support didn’t hold (and I got stopped out) it was a clear indication to me which way things were going. I got in and found myself in a huge winning trade but tried to squeeze it to the last tick and got burned. Instead of having a +15 (where my TP was) I squandered away many more ticks. I was hopeful that as the volume profile built up we’d get another leg down, but the profile didn’t develop as I’d expect it to. That one big trade that could have made the week - I only got +7 out of it and then re-entered and also threw away the profits from that trade.
The general theme I’m getting across all of these days is that I’ve always read/heard “take losses quickly and profits slowly” but so far that’s exactly my problem; I always hold on to trades and when I do hit the big home run I won’t run around the bases because it’s not a grand slam.
I can’t beat myself up for buying support on friday and getting stopped out. 6 days in a row of range bound markets and buying support is the right thing to do there. But then after recognizing it and going with the flow of the market and getting short - but not taking a large chunk out of +17 tick winning trade - there’s something wrong there.
A few things to remember for next week:
If it’s expected to be a quiet volatility day and range bound, you must take profit quickly. TAKE PROFITS.
Even when in a trend day, leave take profits in place, just be more optimistic with them. Still, you need to remember to TAKE PROFITS.
If they aren’t working after an hour and you are in a monster trade, hit out. TAKE PROFITS.
Remember: the job is to make money every day. You won’t know how much that will be, so just try to make money every day. TAKE PROFIT OFF TABLE.
For next week:
Start doing some live exercises to take profits:
After 5 minutes, if in a winning trade with +5, hit in to take profits.
Don’t move take profit targets!
Set a 60 minute timer and exit the trade if it hasn’t hit my take profit target
Quit when up 1 tick on day.
(Yes, this seems too easy - that’s the point). Need to TAKE PROFITS.
Don’t adjust my take profit targets, but do quit when up +1 tick for the day. Next week will be +2 ticks if this goes well.
Can still stay engaged with the market - just switch to demo.
I’ve been reading “Steidlmayer On Markets” and one main formula in there is:
Market Understanding x You = Results
I think this might apply more generally to life:
Understanding x You = Results
Two threads I’ve been thinking about: 1) why taking profits is so hard for me. 2) why so much of the tony robbins self help world falls on deaf ears for me.
Thinking about it this morning, I think a lot of people are in a state of not thinking much of themselves and this self-help mantra stuff helps them to believe in themselves.
I’ve never had this problem and have always believed I can achieve whatever I put my mind to; it might take longer than I expect and be harder, but I know eventually I’ll achieve it.
I’ve always had “take losses quickly and let profits run” as something that was hard for most to do; this led to most people blowing up by letting losses accumulate. OK, fair enough. But I’ve never had that problem - instead, I always cut my losses quickly and let my winners run but end up never taking profit and even when I do hit the big trade, I don’t take profits. Why?
I’m not upset at small losses, although never want to take a big loss. This mirrors things in my life: I’m ok failing in small ways but failing in big ways is a big deal for me. So I do things + structure life so that doesn’t happen. So far so good.
But since I’m taking so many small losses in the market, when I do succeed I want it to be really big. When it is large but not HUGE I hold on and hope; but the market doesn’t care about my hope.
I don’t know what the parallels are here for my life. Maybe it’s accepting that things are good but not perfect...something many people would wish for but I’m often unsatisfied with. In a personal setting, I’ve started accepting that things won’t and can’t be perfect. But what I’ve been trying to see is that this lack of perfection actually leads to better outcomes over time; (examples might include a customer service mishap which ends up creating a customer for life, etc). Over the long run this imperfection actually creates a better outcome.
I suppose I need to do the same thing with trading. And I suspect like many things it’s a habit that needs to be trained. So this next week I’ll go for my target of hitting out based on time. I’ll also quit after I’m up for one tick on the day. That almost seems absurd but I think I need to train my brain to take profits both on a single trade and a single day - and more importantly be emotionally OK with not getting the “top tick”.
