Thursday, September 18, 2014

New 30 Day Challenge: Developing New System

Scalping Sucks

Well after months of working at it, the system from my original 30 day challenge does indeed work.  I ended up positive about a grand at the end of it, but it comes with so many problems.  The biggest is the fact that you have to be insanely disciplined and put your own personal feelings to the side.  My biggest challenge was fighting the URGE to counter trend trade.

It is human nature to want to get in at the very bottom, and sell at the very top.  Instead of trying to join the trend, I kept finding myself wanting to counter trend trade.  It was obvious that I was wrong in hindsight, but human nature is pretty powerful.  If trading was easy, everyone would be doing it.  I believe that it is inherently designed to be go against human nature.

I believe that scalping out one point on the E-Mini is just not worth it, and too much of your profits are being eaten up by commission and fees.  After all was said and done, I believe that way too much of my hard earned money went to pay for the broker.

Instead, I spent a significant amount of time developing a trend following strategy using a few different indicators.  While, a lot of people might not have trouble with the urge to want to counter trend trade, I do.  I have a simple indicator that lets me know when the market is trending or consolidating (and what side to be on).  I use another to spot divergences, and let me know that a reversal is imitate.  I also use two more that are simply used for entry points.  I will go into more detail on the system below.  It is still in development! DO NOT USE IT LIVE!

New 30 Day Challenge

Instrument: /CL (Crude Oil Futures)
Contract Size: 1 Contract (Proof of Concept)
Indicators:  AroonIndicator, VolumeZoneOscillator, FW_MMG, FW_SOAP,  PersonsPivots, and WoodiesPivots
Moving Averages: 21, 50, 100, 200
Chart Time Frames: 5 Minute (Main), 1 Hour ( Longer Reference)

There are two-three types of trades with this system. I say 2-3 because while there are three different reasons why you would be taking a trade, two of them look almost identical on the charts.  You are just taking them for different reasons.

Trade Type 1: Trend Reversal
This type of trade is a bit risky mainly because it requires you to do some interpretation.  I would recommend waiting for a conformation of a reversal before trading it, but I am willing to take a risky trade if the price action matches the indicators.

You would be looking for a divergence between the price action and the VolumeZoneOscillator.  I would also be looking for nasty looking candle to confirm that we might be reversing.  Basically, if you are looking to go short, then the price action would need to make a new high of the day, while the VolumeZoneOscillator making a lower high.

Here (two yellow boxes labeled point 1) we have a brand new high of the day, that is significantly higher then the consolidation.  The break out actually would match Trade Type 2 and 3, and you could have easily been in position to capture the 20 tick move.  The problem is that the VolumeZoneOscillator is screaming that there is something wrong, and then the nasty looking candle (Green Boxes labeled 2) confirms that we might be reversing.  It would still be a risky trade, but I would have taken it all the way down to the Pivot Points, 80 ticks.

Trade Type 2: Consolidation Breakout
This type of trade requires that there is a clear range established, and that the Aroonindicator lines are going parallel to each other.  You would simply try and position yourself for the breakout, or you could simply sell it when it reaches the other end of the range.  This actually happened in the previous example, but the range was so tight that it wouldn't make much money.  From about 8:05 to 8:35 the AroonIndicator was indicating a period of consolidation, and then you got a 30-40 tick pop.

On the other hand, sometimes the range is so wide that your target is just the other side of the range.  Either way, you just have to play it by ear.

Trade Type 3: Follow the Trend 
When trades types one or two get stopped out with small moves in your favor, then you might need to follow the trend. 
In this example, we have a trade that is consistently following the trend and making legs up.  I find these the hardest to trade, but the idea would be to buy in when it is testing the high of the previous leg. 

The Trading System: In Development

Here's where things are a little bit fuzzy. I am still working on the fixed betting system. It is hard to explain in words when you should close trades, how wide your stop should be, and just managing the trade in general. For example, in trade type one, if the trade does not reverse and instead enters a period of consolidation instead, then you should scratch the trade.  I will be working on this portion of the trading system as part of my 30 day challenge, and I will attempt to quantify everything.

Monday, February 24, 2014

Midir's Stock Market Challenge: Day 14

Results For Today

Trades: 3
Total Contracts: 3
Winners: 3
Scratch: 0
Losers: 0
Profit: $132.48 after commission
Gross: $150

Taking It Easy

I've been taking it easy since my platform crashed costing me a nasty loss. While I already recovered, I've still been feeling a bit off edge. I decided to trade singles till I get back to my comfort level. It was a very easy trend day today, very bad day for anyone who tried to counter trend trade. I marked a short, but I did not take it. It would have worked out, but it was such a strong trend.

Trade 1: Entry off the EMA on open with paper buyers on pit audio.
Trade 2:  Two legged pull back to EMA with a second entry long.  This was a little bit more risky then trade one as you were pretty close to the highs of Friday.
Trade 3: Second entry long after the trend broke with the EMA.  I figured at least we would make a new high before reversing.  Turns out we kept going.

Thursday, February 20, 2014

Temporary Interuption: Day 10,11, 12, and 13


 Results For The Duration of the Interruption

Trades: 6
Total Contracts: 8
Winners: 5
Scratch: 0
Losers: 1
Profit: $10.30 after commission
Gross: $46.72

Temporary Interruption

This was definitely not my week. Two weeks ago, Friday, TDAmeritrade's Platform ThinkOrSwim crashed on my a minute or two after I entered a trade. I logged back in pretty quick. I look and realized that price hasn't moved, and think to myself that I'm glad it didn't go against me. A minute or two later I realize I'm not getting tick data. After some investigating, I realized that I'm actually down $500 bucks. I closed the trade -$300 bucks lower then my max stop should have been.

Basically, I got caught in a short trap right on pit open. I actually use an automatic trigger system that automatically places my stops as soon as I get into a trade.  I am also looking for a new broker.  I didn't have stable data all of Friday.  It would keep freezing after working for 5-10 minutes, and it made it impossible to trade.

I ended up having to work a lot of overtime all of the week during prime trading hours.  I didn't really get to trade until Tuesday, Wednesday, and Thursday this week.  It took all of those three days to make back the $500 buck loss.

Recipe: How To Blow Out Your Account

A lot of other brokers offer $500 dollar ES trades per contract.  This lets you over leverage your account very quickly.  TDameritrade requires about $5,000 per ES contract, and it makes it very hard to blow out your account in a single day.

One common mistake new traders make is applying the martingale betting strategy.  When a trade goes against them they try and average their costs down.  The problem is that this works great on range days, as the trade usually comes back to where they got trapped.  This method fails very quickly on trending days, and you combine it with $500 dollar per ES contract brokers then you get a recipe for disaster.  A trade can keep trying to pick tops only to keep loosing more and more money, until they run out of money.

Always stick with your stops! If I took my $200 dollar loss, I would be up $300 dollars right now.  It's very easy to make up a $200 dollar loss, but takes a bit longer to make up a $500 dollar loss.  There's a psychological component that effects your trading when you are trying to make up a loss that is going to take longer then a day to make up.  I found myself trying to take greater risks, and I had to step away more then once to get myself back in the mindset.

I ended up transferring $400 dollars back to my trading account (I made $100 back at this point) from my bank account. Since I was able to visually see $10,000 dollars in my account, it took some of the pressure off!

Wednesday, February 5, 2014

Midir's Stock Market Challenge: Day 9

Results For Today

Trades: 2
Total Contracts: 4
Winners: 2
Runners:16 Ticks Over 2 Runners
Scratch: 0
Losers: 0
Profit: $276.64 after commission
Gross: $300

Difficult Day

Today was a very difficult trading day, and you really had to work to earn your money. I had no valid channels drawn until 1030, well not any that you could trade. I took the two trades as second entries short with a untested trend-line that was pretty hard to see. I used Pit Audio for extra confirmation on my trades. Both work out. Going to keep this post short, because it was very choppy today.  I really should have sat on my hands.

Trade 1: I drew the trend line off the lows, I dragged it to the top and prices stopped right there.  I took the second entry short, and had confirmation on pit audio

Trade 2: This trade worked ideally.  I took the 2nd entry short, and sold my runner at my target!

Tuesday, February 4, 2014

Midir's Stock Market Challenge: Day 8

Results For Today

Total Contracts: 7
Winners: 5
Runner:16 Ticks Over 3 Runners
Scratch: 1 (+2 Ticks)
Losers: 0
Profit: $397.44 after commission
Gross: $450

Channel To Range To Channel

What a great day! I got kinda upset with my first trade, because I only took one contract. So out of a 8 point move I only banked 1 point. I decided it was time to get more aggressive.  I'm getting tired of missing all these trades because I was scared unless it was ideal.  I've watched so many trades I didn't take work out great, and missing that great runner was the final straw.  Time to start making some real money.

I'm also going to try doing this a little different.  I labeled all my trades, and I will describe why I took each one in a more organized fashion.

Trade 1: Second entry long with a first break of the overnight ascending channel.  It never retested the lower channel line or the top, so I figured it would head at least there.  One contract, only for it to continue in my direction.

Trade 2: It was a bit aggressive, but it was a new high after a trend line break.  I'll admit I was a bit off-edge on this trade, and decided to get aggressive.  I only banked 2 ticks on the runner (came back and stopped me out).  I should have sold the runner sooner.

Trade 3: I missed two trades because I had to take my eyes off the market, but I realized we were in a trading range.  Again, I entered with two contracts.  It was a new low with a second entry long.  I banked 9 ticks on the runner.  Could have banked more.  Oh well.

Trade 4: I made my profit goals for today, and I figured I would just make a little gravy.  I decided I would only trade one contract for now.  I did commit a big "no no" when it comes to trading.  I added something untested to my strategy and started to listening to pit noise with commentary.  Goldman Sachs came in and started buying so I scratched the trade. 

Trade 5: I saw what looked like a new trend line, and the short side looked a bit weak.  I saw a second entry short, but Goldman Sachs came in buying, so I figured it might trap.  I took it for a quick 50 bucks.

Trade 6: As I was typing this there was another trade that set up.  I decided to push my luck and went in with two contracts.  Closed the runner at +6 ticks, because of the fed speaker coming up.  Picture is included below.

Monday, February 3, 2014

Midir's Stock Market Challenge: Day 7

Results For Today

Trades: 5
Total Contracts: 5
Runner: No Runner
Scratch: 1
Losers: 1/2 (scratch would have been stopped out)
Profit: $120.80 after commission
Gross: $150.00

Everyone Makes Mistakes

It was a strong down day, and I did my best to keep myself from wanting to counter trend trade.  I know that is my biggest weakness.  I did a great job at it too, until I didn't.  I took a second entry long against the trend, and it decided to trap and head against me.  I did see the trap and quickly scratched the trade at -4 ticks.

You have to be able to admit your wrong, otherwise the market will prove you wrong by blowing out your account.  One of your main goals should be to live to trade another day, but it is very easy to find yourself trapped and frozen with fear not knowing what to do.  I remember one trade I did early in my career as a futures trader where I wouldn't accept a $500 dollar loss.  It quickly turned into a $2,000 dollar loss before reversing with me selling at +1 tick.  You should NEVER take $2,000 dollars worth of heat for a 1 tick profit.  This is how you blow out accounts, after this trade finished I went back to Simulation Trading to practice.

Massive Down Day: ES

It's funny because in a massive down day, my first trade of the day was a second entry long. It worked out, and I would consider it a valid trade. The descending channel was not yet established.  I missed the second entry short because I did not have a channel drawn yet.  I missed the second entry short because I still didn't have the channel drawn.  I took the very next entry short for another 4 ticks of profit, followed by another.

I could see that the descending trend was getting weak because we did not test the bottom of the channel on two attempts.  We broke out of the channel, and then tested the low once more outside of the channel.  This is depicted by the three gray circles, and I was looking for a chance to go long.  There was not a second entry long, so I passed on the trade.  Instead, I did take the second entry short blind as soon as it triggered.  I got another 4 ticks.

We continued down, and eventually entered into a small range.  we broke lower which turned into another channel, but I decided to counter-trend trade.  It was a pretty decent set up to go higher, but it would have had to go through the EMA for me to scalp me 4 ticks.  It ended up turning into a trap, and thankfully I realized it was a trap and scratched the trade -4 ticks.  A full stop would have been -8 ticks.


A problem that I am seeing over the course of these last 7 days is the fact that I am not being aggressive enough. I will not take all the trades that are presented to me, even though there is nothing wrong with them.  Another problem is that the trades I do take do not have a runner because I do not buy with two contracts.

So there are two solutions to my problem, first I could take more trades.  Not a bad idea, more trades will give me more experience.  Another idea is that I could enter with two contracts, and let the other one ride. The final option is to do nothing at all and keep scalping 4 ticks at a time. 

I think I may try option two and try and get some runners.

Sunday, February 2, 2014

Tecnical Analysis of General Motors Stock


Forex, futures, stock, and options trading is not appropriate for everyone. There is a substantial risk of loss associated with trading these markets. Losses can and will occur.  I am applying a method that I use for Futures for the analysis of stocks.

General Motors

Symbol: GM

Very interesting break out of the bottom of the channel that GM has been in for months. It looks like the markets are not sure what to do with the stock, even on the very day it broke out the candle ended up being a Doji (an indecision candle). I see too much indecision for me to risk much money on, but it doesn't look to bad for a retest of the highs. The problem is that it doesn't look too bad for a short entry either. Lets take a look at the chart and do some analysis to see if we can't figure this out.

A:  First, we have a channel that the stock has been in for months. Pretty strong channel, and this is the first time the channel has been broken to the downside.
B: We have a horizontal support line that has functioned as resistance and support in the past.
C:  Strong, almost unsustainable, move down.
D: Here is a pretty strong Bearish signal. We have a new high that broke out of the top of the channel, and then a retest of that high.

1.) Doji that broke out the bottom of the channel.
2.) What looks like a retest of the bottom of the channel line, but I see something else.  If you do a little candlestick math and add candle number one with this candle then I see a hammer (bullish candle). Basically, it's a failed breakout of the of the bottom of the channel.
3.) Here we have a very strong gap down, and then It's stopped dead in it's track and it bonces back up.  I could consider this the first break of the bottom of the channel.
4.) This is the retest of the bottom of the channel.
5.) We have another move that's lower, but it is stopped dead at the support line.

The Analysis
Here are some of the interesting things that I see.  Each time the stock attempted to move lower, Candles 1,3, and 5 it was stopped.  The interesting thing is that on candles 3 and 5 the stock did in fact move a few ticks lower then the attempt before it.  This should have run a few stops, but instead the selling was absorbed.  This is a very strong move sort term move down, but the overall trend of the market has been up for months.

If it breaks lower and then reverses I would see it as a sort trap, and I would go long immediately.  It could also be part of a measured move, but we still don't have any sort of pullback. Overall, I think this is a good chance to go long some GM stock.  I would set a stop below of candle number 5 and see if you couldn't catch a ride back to the EMA.  Options might be a good bet for this type of trade.

My Personal Trading Problem
The problem I have with this stock is with candle number 5.  In order to get a entry that would adhere to my trading rules, I would have to wait for a bar that goes above the bar before it.  Not a big deal, but then I would have to place my stop below bar number 5.  This means that I would need to have a stop that is a bit outside of my comfort zone if I was to take a large position in the stock.  Given how much indecision their has been on this stock, I recommend exercising caution!

Technical Analysis of Intel Stock


Forex, futures, stock, and options trading is not appropriate for everyone. There is a substantial risk of loss associated with trading these markets. Losses can and will occur.  I am applying a method that I use for Futures for the analysis of stocks.


Symbol: INTC

The stock is at a key decision point.  I highly recommend that you keep an eye on this one. The stock has been stuck in a channel for the past few months, and it broke out the top of the channel in the middle of January.  I would like this to break out of the bottom of the channel as well before turning around and retesting the highs, but that is not the only possibility. Technically speaking one of three things should happen, and it could make a great entry for a trade.

Bounce of Bottom of the Channel then Test the EMA
I can see this heading lower before finally reversing to test the highs.  I would be looking for a second entry off the bottom, meaning I want two see two attempts to head higher.  I would prefer it to keep heading lower and break out the bottom before making a second entry, but if it heads over 24.70 tomorrow it could retest the highs, and at the very least it  should head to test the EMA.  There would be a lot more shorts trapped to the downside if we broke the bottom of the channel before continuing higher, so I would be conservative with my profit targets.

There is also a little bit of a possible short trap that formed off the matching lows, but the there was only a slight increase in volume.  That suggests that not a lot of people took a short position at the level. Then again, if you look at the big picture and assume that people have been loading up on short positions over the past 4 days we could have a major move to the upside if they get squeezed.  Or are they going to be the power that push us down?

Head Lower
I could also see it heading lower if it breaks the trend line (kinda funny because that's what I want to see for it to head higher too).  The key difference is how the bars develop. If we break out the bottom of the channel tomorrow then the following day I would like to see a retest of the bottom of the channel that does not head higher then the previous days high.  If we get that the stock should head much lower on the third day.  If we do not get a retest of the bottom of the channel, then I would be looking to get long on the right step-up
Head Lower then Reverse
I would love to see a couple smaller bars down, and no retest of the bottom of the channel.  This is hard to draw because there are so many different ways it can happen.  I would expect it to look something like this, but it may head a lot lower before we get the first green bar.

Final Thoughts
It is possible something completely else might happen, but that is the life of trading.  This analysis is based on what I would expect to happen intraday within the ES, and it may not work out on a individual stock on a longer time frame.  This will be my first attempt trying to take this method and apply it to other instruments and time frames.

Friday, January 31, 2014

Midir's Stock Market Challenge: Day 6

Results For Today

Total Contracts:2
Runner: No Runner
Scratch: 0
Losers: 0
Profit: $88.32 after commission
Gross: $100.00

Finding Bottoms

One of the hardest things to do as a trader is trying to pick a bottom.  The fact of the matter is that strong trends do not reverse on a dime, but they give the illusion that they do.  There should be multiple signals that a trend is reversing before you should even consider a counter trend trade.  Every trader wants to get in on the very bottom, take no heat, and then ride out a channel for 100 tick move.  It's never going to happen. as a trader you have one goal.  Learn to take small constant gains, and then worry about runners.

Accept the fact that you will not catch the bottom of a move and relax.  Wait for trade with the trend, and if you don't know what's going on then stay the hell out.  Personally, I think that drawing horizontal support and resistance lines does more harm then good.  I used to buy blindly and hope that the resistant or support would hold, but when I took them off my charts my trading improved dramatically.  All I do is draw channels and wait.  I wait for a entry with the trend, but I always keep an eye out for unexpected things.  If I didn't expect something, then other traders didn't either.

Hopefully, when the unexpected happens you are not in the trade.  This lets you be clear headed and think about whats going on.  A lot of trading systems try and remove the thinking aspect from their systems, and this will just hurt you in the long run. It will make it impossible to see the obvious, and you will miss out on some of the best trades.

I only start looking for a bottom when the opposite side of the trend line has be clearly broken (this works the same for finding a top, the opposite side must be broken).  I'm going to go over the example what happened today, but just know that this works in up-trends as-well just in reverse. 

Today, we had a pretty decent sell off in the aftermarket on the ES.  In all the volatility that happens on the aftermarket, the only time the trend line was broken was once at 7 am, point number one.  This screams to be that either there is too many buyers, or the move was too big and people were scared to get short.  Eventually, there was a second entry short (would have worked out and been a great trade with trend).  At this point, I would still be looking for a chance to go short, but I would keep and eye out for more clues that we reached a bottom.

I still don't think we reversed until we reach point 2.  The stock makes a new low, and instead of running stops making it going lower it breaks higher.  This means that even though it went lower then last time, people were still buying it.  I guarantee that there were a lot of bulls that were shaken out when the stock broke lower, but it still got rejected out of there.  Personally, I am probably way to conservative, and I still would not have taken the trade.

Point 3 is where the obvious trade was, and it could have made you quite a bit of money if you kept a runner off it.  The price drops down a second time and retests the new low.  Sadly, I didn't start trading until about 9:30 so I missed it.

Instead, I drew a trend line off the tops, and dragged it to the bottom.  I just waited for second entries off the bottom line, and both of them worked out for a quick 100 bucks.

Thursday, January 30, 2014

Midir's Stock Market Challenge: Day 5

Results For Today

Total Contracts:2
Runner: +3 Ticks
Scratch: 0
Losers: 0
Profit: $125.82 after commission
Gross: $137.50


Commissions make trying to make a living off the ES extremely difficult, especially when you are trying to scalp.  I currently pay $5.84 per round trip on the ES, and slightly more on the CL.  While I've thought about switching brokers, I don't like the fact that a lot of them have extra hidden fees.  For example, one of my money management strategies is taking profits out of my account at the end of every day.  Some brokers charge $25 dollars per withdraw.  Other have hidden platform fees, and on some your forced to pony up a grand for the ninja trader platform.

The problem with commissions is that you need to factor them into your profits! You cannot simply ignore them.  In theory, if you have a strategy that gives you a 51% chance of winning a point, and 49% chance of losing a point then you should be turning a profit.  When you factor in commissions, then you realize your going to be losing money until you win 56% of your trades.  Even then, you will be making an amazing $16 dollars over the course of 100 trades!

You would need a scalping strategy that wins at least 70% of your trades if you really want to start making some money.  Then it just becomes a matter of increasing your contract size to make even more money.

Now those of you who are trying to scalp just one tick need to be psychic or just some of the luckiest people on the plant.  These types of traders are only really making money for their brokers.

On the other hand, commissions affect you less the more ticks you make per winner.

The trick is to increase how money money you win per trade without destroying your win/lose ratio.  I personally use a two contract system.  I use one contract to scalp one point, and then I use the other as a runner.  Since I started this blog, I've only had one small runner.  Now if I took the very next second entry, then I would still be in the trade with a 20 tick runner.  It's all about fine tuning, and trying to get the best of both worlds.

Sit down and do the math yourself.  If anyone wants a copy of the spreadsheet I use, feel free to leave a comment below.

Runner Runner! Missed Trade of the Day!

I turned the TV off for the day, and instead watched a few trading videos on YouTube. They are just the right amount of distracting and boring to keep you focused on the market, but not so boring that you want to rip your hair out!

The market was a bit all over the place today, and I still passed on a few trades that I saw earlier. All of them would have worked out! I viewed today as being pretty similar to yesterday. We had a huge run up the after-hours trading, and then a counter-trend channel. Once we had the second break of the channel there was a break-out pull-back long, but it moved so fast I couldn't get in.

Instead, I waited for a second entry.  I got one about 10 minutes later when the price pulled back to the EMA, and I entered with two contracts.  I used the second contract to lower my average cost.  I put my first sell order at my usual one point target, and I put my runner right on the resistance line.  Both my orders were filled.

The way this was setting up, I head a feeling it was going to continue higher to form a new high at the very least.  There was another second entry long, followed by a break-out pull-back long right after I exited my trades.  Did I take either one of them? No.

Anyways, I'm done for the day. Time to get started on my taxes.

Wednesday, January 29, 2014

Midir's Stock Market Challenge: Day 4

Results For Today

Total Contracts:2
Scratch: 0
Losers: 0
Profit: $88.32 after commission
Gross: $100

Too Much TV And Not Enough Trading

One of the many challenges traders face is the fact that trading gets boring, really boring. One of the things I do to combat boredom is watching TV. Other then the fact that I've seen everything on TV, and started watching really weird stuff, watching TV is one of those confusing things about trading. Let me explain, when a trader is bored, they might start seeing things that just are not there. Boredom simply overwhelms you, and you decide to take a trade because if feels good. This in itself is a terrible situation, and if you ever find yourself taking a trade simply because if feels good or right, then you need to stop trading immediately.

Watching TV while trading is my way of combating boredom. The problem is that it works a little too well, I missed so many obvious trades today.So here's the question, how can you combat boredom during the trading day without getting too distracted that you start missing trades?

I'll get back to this topic once I figure out an answer.

ES Analysis

As for the ES, it is currently on the way to test the bottom of the channel. Overall, I expect the ES to continue it's downward trend, but I would have liked to see it break out of the top of the channel before heading down. I wouldn't be surprised to see it break the bottom of the channel and trap a bunch of trades to the short side, and head back up. Just sitting back, and maybe I'll play if price action sets up a trade.

As you can see, we had a very strong channel down, and then we sorta feel into a upward trend channel.  We never broke either side of the channel, just now.  At the moment, we have our first attempt up.  If we get a second entry, I'll try and get in.

At the moment, I'm really thinking I should start recording video. As I'm typing this I just got in the trade on a second entry.

Very easy $50 bucks.  It hit my target, and I got filled at my target on a touch since I had my order in as soon as I entered my trade.

Done for the day! See what happens when you turn the TV off and focus?

Tuesday, January 28, 2014

Midir's Stock Market Challenge: Day 3

Results For Today

Trades: 1
Total Contracts: 1
Winners: 0
Scratch: 1
Losers: 0
Profit: $19.16 after commission
Gross: $25
Missed Profit from Taken Trades:  $0
Missed Trades: N/A Half-Day
Mistake of the day: Half-Day

Damn Ranged Day

I'm only human and occasionally I make mistakes, and today was one of those days. The key with mistakes not to allow one mistake to wipe out your account! That's why it's important to use stops, and get out of trades as soon as you know that you are wrong. 

For the life of me, I could not figure out what was going on today.  It wasn't until after I entered the trade that I realized that it was a ranged day.  I quickly scratched my trade, and not a moment too soon.  Actually, it was one of the trades that I should have reversed on.  There were two ways to look at this trade.

When I originally took the trade, I was betting that it was a breakout-pullback long.  I didn't wait for conformation, and the trade started looking not so good the moment after I entered it.  I zoomed out to see if I could get a better picture, and realized it could be a range day.  I figured this could be the new high of the day, and scratched my trade.

If I realized there was a decent change it could be a range day, I could have entered on a obvious second entry short.  It would have been an awesome day, and my runner would have been safe!

As long as you live to trade another day, it is a successful day!  If you are out-of-sync with the market, then don't try and force trades. 

Monday, January 27, 2014

Midir's Stock Market Challenge: Day 2

Results For Today

Trades: 1
Total Contracts: 1
Winners: 1
Scratch: 0
Losers: 0
Profit: $44.16 after commission
Gross: $50
Missed Profit from Taken Trades:  $0
Missed Trades: N/A Half-Day
Mistake of the day: Half-Day

Half-Day, Deep Thoughts, And a Quick $50 bucks

Sadly, I missed another great trading day because I was suck at work until mid-afternoon. Luckily, I managed to log in right on-top of a quick second entry long on a pull back to the EMA and trend-line. The trade worked out for a quick $50 bucks, but that got me thinking. One of the variables in my trading plan has been whether or not to buy in with one or two contracts. I've always looked at this as a subjective thing; something about the setup just seemed to look better then the others, but that got me thinking even more.

If I thought a trade had a chance of not working out, then why would I take a trade in the first place? I mean if I could find one set up that had 100% accuracy, I could just sit around and wait all day for that one trade. Even if it happened once a week, I could just trade that one set up with 10 contracts and make a fortune. Sadly, no system will ever be close to 100% accuracy, and traders never take a trade because they think they are going to lose.  A trade takes a trade because they think that something about their system is giving them an edge, that the odds are in their favor.

So here's the question of the day: Is it possible to even be able to judge a set up based on how "good" it is? And more importantly, does it matter? 

An Argument for Non-Discretionary Trade Management

Before I get to answering the question of the day, let me throw around a few definitions for anyone whose new to trading. Discretionary Trade Management is simply opening and closing a trade because you feel like it.  Non-Discretionary Trade Management is always managing a trade in the same way, for example every trade you take you set a 1 point target with a 1 point stop.  A lot of people say that you should always use a one to one profit and stop ratio, but that's a subject for another time.

There are a lot of befits to using for using a fixed trade management system.  For one, it becomes really easy to tell whether or not your trading system is even working.  Since most people use discretionary entries on their trades; it makes it really hard to tell if your system is working.  One of the many issues traders face on the markets is the fact that we are overwhelmed with variables.

The more of these variables that we can turn into constants, the more consistent we can be at turning a profit.  The key to any trading system is simply discipline and eliminating as many variables as possible. Once you find a trading system that works out in your favor more then fifty percent of the time, and you have the discipline as a trade to follow that system to the letter then it simply becomes a math equation so see how much money you make.

Adjusting My System

I've always been a big proponent of using a fix trade management system to eliminate variables, but then I realized why am I not always trading with two contracts?  I can really skew the results of my trading by adding just one contract.  For example, what if I am just a terrible judge of when a trade setup is better then others? I could end up with a winning loss to win ratio, but I could still lose money because I threw more money at my losers.

Instead, I decided to adjust my strategy slightly. One of the things that I've always noticed when reviewing my past trades is the fact that I don't always get the best entry.  I intend to use my second contract to improve my entries by getting a lower average cost.  I will use a stop limit order to catch the trades that really just take off, but I will use my second contract as a realistic limit order.  The idea is to lower the amount of money I lose per losing trade by having a lower cost average.  The majority of my trades will have a opportunity to get a lower average cost, but a significant amount of trades will simply run the second my stop limit is hit. This gives me the best of both worlds.

Friday, January 24, 2014

Midir's Stock Market Challenge: Missed Day 1

Missed Trading Day

Due to issues at my afternoon job, I ended up missing the trading day.  I will not be able to trade until Tuesday! So I will be missing one more day at the very least.  It sucks because today was an amazing trading day!  I guess it would look amazing once you have the power of hindsight behind you!  It was pretty easy to lose a lot of money if you didn't know what you were doing!

Analysis For Today: ES

The ES made a huge move down on some impressive volume.  There was about twice as many trades today based on the width of my 2000 tick chart as there was any other day this week!  I ended up missing the trading day, but I attempted to mark all the trades (if they worked or not) that I could find.  The day sorta screamed trading range day to me, but it wasn't until later that you could have realized it was actually a channel down.  The first trade I could see was a break-out pull-back short  of the overnight low.  You wouldn't have got a runner but once the price broke lower, you could have easily scalped out 4 ticks with room to spare.

Then it really looked like chop to me.  I would probably be still thinking range day, and there were two second entries long that I could have took.  Both would have worked out, but only for the scalp.  There would have been no runner on either trade.  The second trade is the one I would have most likely took, as it was the easiest one to see.  Regardless, both would have worked.

As you can see, while I would have been able to scalp out 4 ticks, my runner would have been stopped out (and for good reason as price really moved against my long position).  At this point, I would like to think that I would have drawn the two trend lines, or at least considered the fact that we might still have a downward channel.  There was another second entry long off the then low of the day, and it would have worked out for a quick +4 ticks.  It was at point you get another test of the upper trend line, and it was pretty good bet we would be heading lower.

The second entry should would have been the trade of the day.  The odds would have really been in your favor.  You have a third test of upper portion of the downward channel (it should have been very easy to spot at this point), your making lower-highs, and your with the trend.  Nothing in trading is ever going to be 100%, but the odds were stacked in your favor! This trade could have easily netted a 8 tick runner, longer if you didn't sell on the pull back as your break even stop was never touched.  It just depends on how you manage your runners.  The next thing I see is more of a break-out pull-back short,  followed by a second entry short about half a hour later.

Final Thoughts

I would love to think that I would have taken all these trades and made a fortune, but I am not perfect.  I could have read everything wrong, and lost a fortune today.  When there is no pressure, no money on the line, anyone can do this stuff.  It's easy.  When there is money on the line, then it's like trying to trade drunk.

Thursday, January 23, 2014

Midir's Stock Market Challenge: Day 1

Results For Today

Trades: 2 (one with 2 contracts)
Total Contracts: 3
Winners: 1
Scratch: 1
Losers: 0
Profit: $69.98 after commission
Gross: $87.50
Missed Profit from Taken Trades:  $62.50
Missed Trades: LOTS
Mistake of the day: Scratched trade (it would have worked if I left it alone)


Analysis For Today: ES

The ES was in a spike and channel down. The after-hours trading was absolutely crazy and on my chart there was even a gap down between the pre-market session and the open. I had a feeling that it was going to fill the gap and then continue lower, especially since it could fill some of the gap without even breaking the down channel. It ended up filling about 50% of the gap before heading lower which lead to our first trade. Also, as a side note, the system I use for trading did mark an entry for the gap fill, but I did NOT take it because it would have been a counter-trend trade. I ended up taking the entry after the gap fill for the with-trend trade. It worked out for +4 ticks.

What I Learned For Today: Trades Don't Feel Good

I keep having the same problem over and over.  I do not take my trades.  These types of trades work out early in the morning before the trend line has been broken later in the day.  This means that they do not feel good to take because you haven't seen the trend line being tested over and over.  By the time that it feels good, the trend line is probably going to break from being tested so many times.  Even this time it will usually turn around and test the low/high before heading in the opposite direction.  So it would still be a good trade.

It's funny, as I'm typing this the CL just demonstrated my point.  The CL is slightly different on counts than the ES when it comes to second entries; there just seems to be a lot more noise.  I've been working on a theory to help with the CL, but that still has to be tested.  That is a topic for another day, but let's get back on topic.  Don't mind the random walk index indicator at the bottom. I'm just using it for some testing.

The price broke the trend line, and it might have stopped out a few people with really tight stops (called weak hands).  It then ran up nearly vertically, only to make a new high and head lower.  The trend line failed again, went a bit lower, and then reversed again! This time it barely made it higher before going lower again.  This is where you head a pretty decent trade set-up again.  The price tried for a third time to go higher!  This time it couldn't even make it over the trend line, and as soon as prices broke lower you could have entered for a very quick scalp. You had to watch out though! While you could have easily scalped out, the lower price was rejected.

It seems like a lot of traders piled on shorts and ended up getting trapped.  This caused the price to move up rapidly as traders tried to close their losing positions. 

I did not take any CL Trades.  I did attempt to take an identical set up on the ES, and while my target was touched, I did not get filled.  I ended up scratching that trade at about +1 tick per contract.  Nothing works 100% of the time.  Funny thing is, that after some market noise it did exactly the same thing.  It just made a new low.  The picture is included below.

Late Day: Second Trade

My second trade of the day did not work out so hot!  I didn't lose any money because I ended up scratching it at + 1 tick on one contract and +2 ticks on the other.  The annoying thing is, that price actually touched my target but I didn't get filled.  Once the EMA was broken, price dropped and took out a chunk of open orders at my target.  I was fiddling with my buy order and if I left it alone I probably would have been filled.  Orders are on a first come, first served basis.  You want to put in a closing order as soon as you get in the trade, so you are higher in the queue.

This trade might look familiar, because it's the exact same thing that happened in the CL earlier, just in reverse.  This time it just happened in the ES.  It's taking a lot longer to work itself out, but I have a feeling that it will attempt to retest the low, or at least the trend line.  Actually, as I write this, it just retested the trend line, and just made a new low of the day.

The worst part of this is the trade would have worked out.  My original stop was never touched when  the price rebounded.  It would have taken some time, but eventually the trade would have worked itself out if I didn't touch anything.  Missed out on $62.50! Worst of all, if I kept my runner in place I could have made a few hundred bucks!  It just made a new low, just as I cleared my drawing for the day. 

Oh well, ended the day in the positive! +7 ticks!

Tuesday, January 14, 2014

First Day Hiccups

Introduction To The Site

I find it really hard to start a new website or blog.  I never know where to start, and judging from a lot of books that I've read about trading, neither do a lot of other authors.  Everyone assumes you don't know anything about the markets, and you end up reading the same beginner stuff over and over.  So I'm going to skip explaining all the beginner stuff for now, I'm not going to explain what futures are, how to trade em, etc etc.

Instead, I'm going to assume that you have a basic understanding of what the stock market it.  Eventually, I want to turn this website into a free how-to guide.  It's crazy how much money I've spent on tons of systems, that really just don't work.  Instead, I'm going to post ALL my trades asap on twitter (eventually, once I get it all set up and running).  I'm going to make it public that I am going to be trading with a starting account of $10,000.  It may or may not be a simulation account, not sure if I can legally say that it will be a real account per SSC rules.  So officially it may or may not be a SIM account.

I'm going to write about my journey on becoming a professional trader.  I am going to work on addressing all my character flaws, and documenting all my trades.  By learning from my mistakes and my accomplishments, I hope that you can accomplish all of your own financial goals.  Whether you are looking to enjoy the freedom of being your own boss as a professional day trader, or simply looking to earn a little bit of extra income on the side, I hope that this website will help you.

About Me

I'm also not a professional trader, and I have NOT used this system in the past.  I have no idea if it is going to work or not.  I have a LOT of serious character flaws that I need to address if I'm ever going to become successful at this:

1.) I take profits way too early.  I will get freaked out and take a 2-3 tick profit, when my goal is 15 ticks on the CL, and 1 Point on the ES.
2.) I've taken some substantial losses because I never used stops.
3.) I'm always looking to counter-trend trade, and nail the exact bottom.  

The System

The system that I am trying to use has worked for a few other people on other sites, but just because a system works doesn't mean that you will be profitable at it.  I must address all my character flaws if I am going to be successful at it.  I am going to try and post a daily recap of my good and bad trades on the CL and the ES.  I am going to keep a running total of my profits, commissions, and losses.  Anyways, here is the system:

1.) Trade only with trend - This is really hard for me to do.  I am always looking to counter trend trade, I even caught myself doing it subconsciously today.
2.) Take only 2nd entry's - It gets a little hard to spot these for me in areas of congestion, but it is probably the easiest part of this system for me.
3.) Profit Targets - 1 Point for ES, 10 Ticks for CL.
4.)  Stops - 10 Ticks for CL, 2 Points MAX for ES (preferably 2 Ticks).
5.) Runners - Move Stop to Break Even plus 1, and actually let them run.
6.) Discipline - This will get it's own sub-page.

Please bear with me while I get this site up and running.