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The CLQ/LWR (Cut Losses Quick-Let Winners Run) system
This is Monk (not my real name of-course).I currently work as an engineer at a small manufacturing facility. I was introduced to trading (actually investing) in 2012.Since then I have been investing either in blue chip stocks or etfs. Played with options for a little bit without adequate knowledge. Realized quite early, I'm playing with fire.
Trading experience:
I was introduced to Nadex binary options by a friend (more of an acquaintance rather) very recently (~Jan 2020). He described it as easy money. Anyway, I got convinced, looked into it and started sim trading binary options on index futures; Only to realize it was NOT easy money.
In my quest to find a profitable strategy, I started looking into index futures. Soon, I realized I'm better off trading the futures markets themselves. There was a higher profit potential (and a bigger loss probability that I ignored obviously). Since then I have explored a variety of indicators (MACD, Supertrend, ADX, etc), watched a lot of youtube videos, followed famous twitter and youtube personalities some of whom claim to have secret sauces delivering 98% win rates.
One day, while meaninglessly wandering through twitter forest, I came across a tweet referencing Jim Dalton's market profile trading. Bought the book immediately.
Just realized this story keeps getting longer. I'm going to cut it short. So, there was this one question I had, that I never came across a convincing answer for.
"How does price move?"
The common answers, "there are more buyers than sellers, so price is moving up" or "there is more supply than demand, so price is moving down" were just too vague for me. So what if there is more supply than demand? Why the f* is price really moving?
This question I think is what ultimately led me to priceladder/DOM and Jigsaw Trading. For the past four months, I have been educating myself in this area and doing the single toughest thing, unlearning what I thought was standard. My burning question got answered.
I also realized something crazy; This journey will never end...
Okay, so why am I making this journal?
To get better at writing of course. On the side, if it helps me identify and eliminate undesirable behaviours and improve my trading effectiveness, I will take that gladly.
Journal Plan:
The plan is to post daily
- A review of trades from the previous day
- A pre-market prep for the current day
I will do my best to do this everyday. If I'm unable to on any particular day, it was either because I was engaged with my engineering work, tending to the family or just purely wanted to sleep.
I'm excited to see where this takes me. Thanks to the good people at futures.io and everybody else for taking the time to read through this.
- On the highest timeframe, market is clearly undecided as evidenced by bar on weekly chart with long wicks on both sides.
- My bias on this tf is long supported by the fact that price closed on top of weekly volume profile
- Market is well extended beyond 20MA and 50MA on this timeframe. Just something to keep in mind.
- On the daily tf, price seems be moving in an uptrend evidenced by a strong blue bar. But then price is approaching the dotted control line which has provided significant resistance in the past. This area is one you should keep a close eye on.
- There was a double distribution on the daily volume profile.
- Price closed inside the top distribution which is a sign of acceptance.
It is important to see when market opens, if price stays inside this distribution or falls below.
As of 7:00 CST, price is still inside the distribution.
All overnight activity has been inside it. A sign of acceptance.
As of yet, my bias is long/neutral.
We are going into a week which is just before a holiday.
I expect market to be slow with little activity.
I will likely not take any trades. If I do, they will mostly be long.
It feels like fading profile extremes will work better than breaks.
Good orderflow on buyer side will be another sign market is doing as expected.
Major levels I am watching All time high – 4278.75
Friday Spike Low – 4269.75
Friday Value Area Low – 4263.75
Friday RTH low – 4260.75
Watch out for any swift fall towards RTH Lo after open supported by orderflow on seller side.
If price falls below it and fails to get back in, none of the above holds and bias should be re-evaluated.
_The scenario I expected would likely occur, did occur.
_As per plan, most trades I took were long.
_Clearly, I'm not letting winners run.
_Like the past two days, morning session was a slow grind.
_ I stopped trading a little around 10:00 CST
Regular session closed at the top of the range
For the most part price remained above yesterday’s value high in the overnight session. This is strength.
Price rallied to the top after lunch
A double distribution was formed on the daily volume profile
For most part, price remained inside the top distribution through overnight session
As of 7:00 CST price stays in yesterday’s top distribution; a sign of acceptance.
Due to the holiday week, the chances are good big volume is out. This will increase chances of a range bound day
My long-term outlook remains long/neutral
Most positive sign is remaining in the top distribution with good buying volume coming in at levels above LVN
Most negative sign is falling below value area low, failing to come back in and big selling volume at these levels
If price falls below RTH Low and fails to get back in, that will turn my outlook to short term bearish
If price falls below LVN in last weeks profile and fails to get back in, that will turn my outlook to long term bearish
Price levels to watch
See attached
Todays approach
Depending on how the order-flow is, I will try not to trade much. If I do, I will mostly take longs and fade range extremes
Will keep in line with scenarios 1,2,3
_Stopped trading at 9:49 am CST
_Clearly there was not much going on.
_Established range in the first 1 hr was just 5 points. This is too small for any profits.
_Did not keep in line with planned approach in premarket prep. Took too many shorts.
_Price stayed above LVN for the entire day. This was more in line with scenario 1.
Price broke above last week Hi
Last week printed a strong bullish bar
Entire week rallied strong closing at the top of the profile
Big picture looks very strong
Last regular session 7/1 was a trend day.
Close was at the top of the profile
Strong bullish bars in the last two sessions
No sign of any breakdown here either
Holiday session and overnight session remained in the top half of 7/1 price distribution.
As of 7:30am CST, price remains above holiday sessions pullback low and 7/1 value area low.
Price currently hovering in a tight range. Seems like players are waiting for market to open
My long-term outlook is long
Staying inside 7/1 top distribution with good buying volume coming in at major levels supports this outlook
Price falling below pullback low with good amount of negative order flow is a preliminary sign of liquidation
If price falls below VAL and does not pull back in, that will change my short term outlook to short
If price falls below last week open, my long term outlook will change to short.
Price levels to watch ATH – 4348 ONL – 4336.75
Pullback Low – 4333
VAL – 4326
I will let the day play out in the beginning and take trades after I watch initial order flow.
Will try to mostly take longs unless a clear down trend is established by rapid price break below ONL and Pullback low.
Expected scenarios:
_Not sticking to the pre-market plan resulted in getting burned
_The day could have been really good if I had realised after the first few setbacks that day was trending down
_Even better, as per premarket plan, if I had waited the first 15-30 minutes for day to play out, I would have had much higher chances of profit.
_If you have greater than 3 losses/setbacks, stop, reevaluate the market and take a look at your premarket analysis
_Key thing to notice here is, I did not take any of my predefined setups and all the major losses were due to going against market trend
_A positive thing here is I am able to cut losses quickly. This is something I'm happy about.
_Lastly, my mental state yesterday was a little agitated, something that might or might not have contributed to this setback
Weak indecision daily bar printed in the regular session
First half of the session was a strong trend down followed by a bounce back up at control line
In order flow terms, major liquidation took place in the first half of the session.
Overnight session formed a double distribution with a split exactly in the middle
Price remained above the last major RTH pullback
Not exactly a rally to the top but a slow grind inside two different ranges
Today’s activity should be observed closely with respect to these ranges
My market outlook is currently neutral/undecided
I’m expecting price will remain inside yesterday’s range at least until FOMC meeting minutes
Price levels to watch ATH – 4348
RTH Hi – 4345.75
ON halfback – 4335 ONL – 4325
RTH Lo – 4305
It is better to watch what market does in the first 15-30 mins of the session before taking any trades.
I will look for range fades primarily shorting at top of range.
If market rapidly breaks above RTH Hi/ATH in first 15-30 mins of session, take long at pullback with a keen eye on sellers
If market rapidly breaks below ONL in the first 15-30 mins of session, take shorts at pullbacks
If market is in a slow grind, in the first 15-30 mins, look for fades at ON Halfback, ONL and RTH Lo
_Clearly, I am cutting my losses quickly but I am also cutting winners quickly
_I missed a couple of opportunities because the short cut key for entries does not work if DOM window is in the background
