Dogpile

a couple of points: you need to get it out of your head what others say about you and take responsibility for yourself. it is not their fault that you are not living up to your own standards. forget that entire excuse. also, I think you need to think less about the money and more about the set-ups. The set-ups are what matters. From John Carters Mastering The Trade: "Whenever I focused on the set-ups and not the results, I did fine. But whenever I focused on the results and not the set-ups, I got killed." Think about why you made the trade you did and if you think you had valid reasons for doing it at the time or was it impulsive. If it had good logic and fit your gameplan and the set-up met your pre-defined filters and you still lost money, you should be able to live with that. If it was impulsive, then realize that you made a mistake and you should expect to lose money on impulsive trades. Impulsive trades -- the ones that work and the ones that don't -- when totaled throughout your lifetime, will end up as one big massive loss.

jperl, I hear your point and can see that for certain strategies -- averaging-in has some merits. especially if you have wider risk tolerance and are trading a higher timeframe and feel that there will often be a lot of noise around your entries (where fine-tuning really clean entries is not your focus). but you are being disingenous when you say they aren't the same thing (scaling in and averging-down) -- they are exactly the same thing. the only difference you are citing is that you use discretion on the scaling-in -- not blindly add to a position just because it has moved against you. ok, that is a crucial element whether you 'scale in,' 'average down' or 'stop out and re-enter'. other than this discretionary second piece that is applicable to any trading strategy, there is zero difference between scaling in and averaging down. in your example in the previous thread, you mention the market only has to come back 2.5 pts to breakeven. well yes, you now have breakeven as your upside and 40 pts of downside if market drop 2.5 pts. this is not a symmetrical payoff. if it works for you, that is great. I am open to new ideas and if I am not getting it, then please give another example because there is no difference in the example you initially gave. in fact, I really should try this to some extent to balance out my 'higher timeframe' ideas.

NQ essentially sucked and I didn't make a single NQ trade today. I had a bullish bias coming in due to the 'pinball buy' daily set-up (a Rashke 'Street Smarts' daily bias) but the 15-min chart didn't co-operate for a clean set-up. one more push down in the morning would have set-up a buy for me but it wasn't to be. here is the quick video I posted yesterday regarding the 'pinball' set-up for today: http://www.youtube.com/watch?v=L8rzP7eqgQk Note that while I couldn't find a good 15-min set-up, the market did trade back to previous days POC at 2002.75 -- a common tendency. This gave nice directional bias for the morning session -- in fact it hunted down previous days POC almost to the tick (yet again) before forming a choppy coil. Note how todays early-afternoon choppy coil did not compress into a triangle type of pattern -- creating a difficult pattern to read. It did do a 'ABC' down move before rocketing higher late in the day. But I was busy trading YM. The late push up in price is nice because the market will likely be opening 'out of balance' (ABOVE todays POC). This makes for better trading tomorrow -- hopefully.

well for me and given my style... if my set-up doesn't work right away (within first 5 minutes) then the odds of it working at all drop off to something probably close to 50/50, perhaps worse. just today, a short set-up, I took it and stopped out quickly for a loss (less than 5 minutes). I re-entered at a better price because the market didn't carry big off that move, it was a shakeout move. I recognized this and re-entered. I ended up making my loss back and some profit and put myself in position to make a big win while locking in the gain with a trailing tightening stop. This is just my style. You can dance with the markets and still use hard stops. it has also happened where my stop goes off before my chart has even caught up with the real-time price. this is usually some mid-day unscheduled news that causes a very fast move in the market. my stop takes me out a few minutes before briefing.com can tell you what the news even was, much less react to it. I have just found that trading is like a Rubik's cube, you will never get that 6th side. Every method has some drawbacks, including use of stops. But the tradeoffs favor them IMO. did you see the move in the DAX yesterday? dropped -123 points in 2 minutes. that is what, $6k per contract? man, electronic markets can get sick sometimes.

<<you need to learn some advanced techniques of trade management that allows you to turn a losing trade into a winner.>> hey man, that is good stuff. I would also like a magic potion that allows me to sleep with Hollywood actresses on the down-low.

thanks for the input fellas. I have this post-it on my computer which I got from a great book I read "Trading In The Zone" by Douglas. Fear <==== Correct Mindset ====> Reckless could also read as, Insecurity <==== Correct Mindset ====> Overconfidence I find myself drifting from one side to the other of this little balance. I have learned to control this somewhat by using mechanical strategies for entries and instant hard stops on all trades. I have a few years worth of mortgage money saved. I do make money every month --it is the intra-month dry spells that cause stress. Actually, the real cause of the stress is the seeming random factor at work in the market. I love my set-ups -- but there is a certain randomness to how they work over the course of a week or a month because of the stop-loss factor. Sometimes your stop works by a few ticks and you make big money. Other times you get stopped to the tick and you lose. Other times you are just off on your gameplan and you stop out quickly and happy you did cause the market takes off in the other direction. I do truly believe in stops. There is just this funny game I play with the market for that percentage of your overall trades where the market tries to hunt down your stop before proceeding with what it wants to do. Sometimes your stop holds, other times it doesn't. This has been a never-ending process of how to set stops. But I chat with traders every day on this and this happens to everyone so I know its not just me. So you go on some run where you just feel cursed. Other times, your stop holds and you feel like you are a fine-tuning monster. Thanks again all. Always good to work on some psychological stuff -- such a big part of this biz.

Hi Future, I was a professional fundamental guy for many years. Good fundamental anlysis works very well over the long-run. Bad fundamental analysis fails miserably. The problem and the benefit with fundamental analysis is the fact that it takes a long time to figure out if you are really right or wrong. This is a benefit because of the the long-term upslope of the market. This is a problem because how do you control losses when something goes against you. Trying to use fundamental information to explain the short-term swings is useless. People that do this are making it up. The market will very often do the opposite of what the fundamental news implies. Other times, it will go in the direction of the fundamental news of the day. Anyone who tries to trade short-term on fundamentals is sure to lose. My short-term trading is 100% technical at this point. All of my trades were on the short-side yesterday and it had absolutely nothing to do with thinking about subprime mortgages. Think about all the major things that can happen that are simply unrelated to anything you can predict. 'Shocks' like natural disasters, political problems, wars, terrorism etc... what the hell do you do when these 'shock' events happen, your portfolio just got nailed, the market is plunging and you fear another big gap down the next day? Well, understanding short-term technical structure gives you a risk-controlled gameplan for any situation -- though many times that simply means sitting out. BTW, I am very familiar with Linda Rashke and she would definitely consider herself 100% technical. One note: I found 'Market Profile' to be a very interesting combination: it is technical in nature but does help you find where the market is finding 'value' -- a fundamental concept.

Doc, I have been obsessively focused on beating the markets for over 10 years now -- both in my financial job and then for the last few years as an individual trader. On the one hand, I feel being obsessive/passionate is a good thing as it takes tremendous focus and passion to do well at almost anything -- nobody can blame me for not putting all I have into it. On the other hand, this kind of obsessive behavior comes with a bad side effect: severe stress. If I go a few days without making money, I will generally get stressed and start thinking about the mortgage and what would happen if I could not make it over the long-term... and stress over whether I could still get a good job and support my family. Given this fear and the stress-factor and the fact that a good job came along that is aligned with my resume, I now face a tough decision. Give up trading and take a job that is being offered to me that pays reasonably well and offers a long-term career path and security. Or stay with something that I feel very strongly about -- my passion -- but which is also the source of much of my stress. thanks in advance for all comments...

I thought this was a thread that could have easily been ignored by traders more experienced than Abe but instead I think there is some pretty decent advice in this thread for him to chew on. Nobody called anybody an idiot. Naive is the right way to put it. Come on, the Barnes and Noble 'didn't buy the book' stuff is friggin funny. Abe, I wish you the best.

Agree with the mentoring part. Linda Rashke was my mentor. http://www.lbrgroup.com. Think its like $100 per month to get the transcripts to the trading room ($375 per month for full membership and live trading room access). There is a ton of content there for $100 if you are learning. I spent a year in that trading room and learned a ton. But first read her book 'Street Smarts'... then join the room and print off the transcripts and read them and review the charts they post on 'Daily Educational'. my second favorite book is 'Markets In Profile' by Dalton. Great book on understanding 'value' versus 'price'. he also has a useful newsletter that you can sign up to receive at http://www.marketsinprofile.com John Carters 'Mastering The Trade' is o.k. this could be a useful purchase for newer traders as it has a lot of good overview material. -------- I remember my first year. I overtraded my account big-time. All my good trades were wiped out by my overtrading. many days, I would be up big and then fritter most of it away. then I would lose money on another day and slowly bleed my account down. so my top advice would be this: don't overtrade your account. you need to build a collection of profitable set-ups. this takes time. these set-ups need to fit your personality/style or else you won't truly believe in them and give up on them. each set-up might only occur a few times per week on average. or one might occur 3 times in one day and then not for 3 days. so you have to build up a library of set-ups and trade a few different contracts as sometimes 1 just sucks for a while. personally, I favor YM and NQ. The both are cheap per tick and have all the liquidity you will ever need. Linda Rashke makes a small number of points each day but she makes money almost every day and will use big size when a clean set-up arrives. The beauty of futures is you really just need to make a small number of points to make a living. Overtrading will chop you up. Disciplined trading with high % set-ups and bigger size is the way to go as far as I am concerned. It is so nice to wait for your set-up, catch a few points --- and have your day made.

<<Wow, when I read this post for the first time I thought it was a joke...>> this occured to me to but given how long the initial post was, didn't think that was the case.... but then the part about the Barnes & Noble book reading without buying got me on the joke track again. that is some funny stuff. so funny it sounds fishy. so at this point, I am leaning more to the joke side. kind of like "I read part of a 'how to play poker' book in the Bellagio lobby without buying it, then jumped into the high stakes no-limit game... I lost. what you all think went wrong?"

Just a structural review of NQ for 2-Day period ended Tuesday July 10, 2007. Note the core concepts: trades to previous days POC ABC pattern as a continuation pattern using trade location (market profile POC) to aid your trading decisions http://www.youtube.com/watch?v=n_3waY3iv-s (I realize Camtasia is better for videos but I am not looking at doing a ton of professional videos -- just looking to get some discussion going on NQ -- my apologies if you can't see it exactly but I am just talking structure here, not presice trade set-ups -- so the indicator settings are not really what is important -- just the combination of technical pattern and a little market profile to add some trade location filtering).

personally, I use the 2-3 daily set-up for kind of a high level structural bias... then use the 15-min chart as my core 'higher timeframe' and 2-5 min charts for my execution timeframe.

other than having; poorly thought-out trade set-ups bad execution system and clear impulsive trading behavior all looks good. seriously, bro. you have a lot of work to do. not sure where to start. you need to have a well thought-out gameplan and strong discipline or you are going to blow your account out fast. I would suggest you first learn to read multiple timeframes -- a higher timeframe for the set-up and a lower timeframe for the execution. trading off candlesticks in a single timeframe with some pivot points is not going to work for 95% of us. some small fraction of traders with incredible innate ability can do what you are attempting but I would go short this concept as a rule.

for much of the last few weeks, NQ will often set up one of my long or shorts and then just go dead off of the set-up. you don't necessarily lose money, it just corrects sideways rather than shooting the other way. if my set-ups aren't working with immediate and dramatic profits, then that is a lousy market today did have 1 nice morning swing and then ended up a very weak 12 point narrow range day. I would like to see NQ go back to the 22-25 point range days with multiple 10+ point intraday swings. volume was up a bit today so I am anticipating some better swings tomorrow and beyond. NQ is made up of choppy tech stocks that usually like to rinse daily swing traders out. IBD defines a 'distribution day' for nasdaq as a -0.80% day.. Tradestation shows that there have been 38 days this year where NQ has traded -0.80% vs previous days closing price (not distribution days with price closing that low, just trading down that far intraday).. this is vs ~130 trading sessions. So this kind of 'distribution day attempt' has happened on about 29% of all sessions, a significant number. We have now gone 8 sessions without a 'distribution day attempt' -- this is unusual lack of selling. maybe its a sign of extreme strength. but the odds at this point say we are overdue for at least a little 2-way action in the short-run. I don't need big down days to make good money -- just asking for a little bit of 2-way trading.

NQ has not had a lot of good set-ups lately - probably due to lack of good volume. hopefully, it picks up soon. I like trading NQ futures in the morning session (generally counter-trend) and YM futures in the afternoon (with the trend). here is what I have been seeing lately: see NQ Structure and NQ Structure Part 2 Videos http://www.youtube.com/watch?v=5OYnIZ6mUUE http://www.youtube.com/watch?v=4h5Zj4R4bY4

here is how you can eyeball a simple market profile concept. pull up a 30-min chart for pit session only. draw a horizontal line on the chart that spans that day. place the line at the price level that touches the most bars. this is the POC and can be considered that days 'accepted price'... if multiple prices are touched an equal number of times then take the midpoint of those prices. if 2 different points are far away from each other but have similar number of touches, I exclude the opening 30-min bar and re-calculate. The opening 30-min bar is generally a period of price discovery. if you cannot draw a line through at least 6 bars (excluding the opening 30-min bar), then no price was accepted and you consider this a 'trend day'. I consider the market to be 'in balance' if a horizontal line can touch 6 bars. Watch how often the market moves just prior to enable that 6th bar touch --- the market will often make a move before 6 bars are touched. Don't fade an initial push away from value (the POC)... go with it. But don't chase it either (if you miss it, you miss it). The 1-2pm EST is common time to break away from a balance. you can try to catch a trending move here. Personally, I like to fade a morning move away from previous day POC if you have already had a 2-3 day directional move --- odds are now on 'responsive players' to come in and knock it back the other way -- for a flush -- not necessarily a reversal. If the market balances during the day and then breaks away from this balance, this is considered 'initiative activity' and you try to go with it -- this is tricky though. The biggest trap is when the market balances at a given price and then very late in the day spikes away from this balance. This is generally a trap that will see a reversal overnight or the next day back to the Point of Control.

The POC changes every day. Maybe some would consider that abrupt. Sometimes the market builds what appears to be a POC but later it then builds the real POC at a higher or lower level later. Personally, in the timeframes that I watch the market, I do not consider that abrupt. This is a core concept -- if you don't understand this -- you do not understand market profile. 'Price' moves in volatile/abrupt fashion, 'value' takes time to build. POC, by definition, does not move as abruptly as price. If you want to call POC movement 'abrupt' --- then what would you call 'price' movement -- 'super-duper abrupt'....?

<<The VWAP changes gradually over time, whereas the PVP changes abruptly.>> the POC does not change abruptly. I only say that because you previously stated that PVP and POC are the same concept. The purpose of a POC is to show that price has been 'accepted' by buyers and sellers as fair. This only occurs over time. There is no POC until price has been accepted over time -- its just price discovery until then. (if we go a day where price isn't accepted at any price, then it is considered a trend day). we had a thread a month ago or so that discussed how long price had to settle before we considered it an 'accepted price.' I agree that understanding 'value' versus 'current price' is an important trading concept -- and monitoring how price is acting as it attempts to break away from an established 'balance' is another important concept.

<<Personally I prefer to use just basic trendline analysis. Something as simple as this is really all you need. The way it leads to profitability is through discipline and consistency. The lack of these 2 traits is the true disadvantage to discretionary trading.>> yes, I can see how trendlines would make sense. nice thing about trendlines is that you will never get caught fighting a strong move as the entries will simply not trigger when this is the case. would like to see a recent example of what kind of trendlines you are talking about? can you post a chart with an example of an entry? I would be interested in experimenting with drawn trendlines on YM

YM is just incredibly active right now --- 171 daily average true range (ATR[14]). It spent 6 months under 100 until that February 'non-linear break'.... just pointing out that this is unusual --- or else maybe the 6 months was unusual and we have a new Dow --- that would be sweet... but I tend to think that this kind movement is unsustainable...

Discussion of todays action in NQ: NQ opened Mondays session 'in balance' --- near 1948.00 POC from friday... then did an instant flush down below Fridays low to 34.25 (-13.75 from POC) to wash out weak holders before launching higher. I was looking for a reversal below fridays low for a long but it was a quick-spike-whipsaw which led to tougher trade location for a long as it pushed back into the choppy range from Friday. NQ found a little resistance near 'last hour high' at 1952.00, forming a bull flag that led to a 2nd push up reaching 56.50. NQ then began to trade down before pushing a 3rd time up into the lunch hour timeframe. Volume and breadth during this entire move were mediocre. On the final push up, a price/momentum divergence formed on both the 15-min and 1600-tick timeframes -- my primary pattern focus timeframe. See attached chart which shows this divergence (price new high, oscillator lower high). It is not uncommon for a 15-min divergence like this to mark the high or low for the day. http://bp0.blogger.com/_5h-SWVGx6Ms/RoB6ZPVSL7I/AAAAAAAAAUM/KymwidlRWgk/s1600-h/NQ+June+25+2007.bmp NQ chopped slowly lower in somewhat bizarre action for NQ (it tends to move around quickly). The days POC formed here at 1953.25 -- the market appeared to have found balance. Not long after this, we had a break away from balance as volume picked up sharply. This pattern had general feel of a head & shoulders topping formation on YM and ES (NQ not so much) but the markets drifted down slowly for the first leg creating difficult location to take a short. I would be happy to hear how others may have entered a short here. To tell the truth, I was thinking about taking a long on YM but it just fell and fell and never really came close to triggering me in with parabolic break to the upside. By the close, we still have an afternoon 'trending profile' to the downside on accelerated volume -- but the market close of 40.75 is 12.50 points below the daily POC. This creates an interesting situation for tomorrow. We have ABC pattern up after a very strong momentum push down. This is an excellent short set-up. At the same time, there is a strong tendency to go touch 1953.25 tomorrow. I will not be surprised if NQ touches 53.25 tomorrow and I will not be surprised if NQ completes its ABC-up and then makes a low below todays low tomorrow. Stay flexible and take whatever it is that sets up. http://bp2.blogger.com/_5h-SWVGx6Ms/RoB9-vVSL8I/AAAAAAAAAUU/B3OnDja7V48/s1600-h/NQ+1600tick+Chart+Jun+25+2007.bmp comments on todays markets appreciated.

<<dogpile, i take it then that while you will cancel a trade based on the mechanical entry you won't enter without it?>> right. I could try to figure how to program all the usual support/resistance pivots I follow into the strategy and test it --- but I am really a 'pattern guy' so I prefer to have a really simple entry strategy (Keep It Simple doctrine) and try to think hard about the pattern and the 'location' of the trade rather than stick a bunch of filters into the program and have all these offsetting forces in there potentially screwing it up.... I am a believer in finding an indicator that really 'speaks to you' --- something that fits your personality and your style... and most importantly, something that keeps you out of trouble.

Yes, this is a market in balance and it is an attempted 'coil break' away from value. There is a lot more to this set-up though than the distribution -- you had a large, unfilled opening gap yet the put-call ratio did not surge (put-calls generally take off on a big opening gap down) -- you had very negative breadth indicating widespread weakness, volume had been low relative to previous day indicating lack of strong institutional selling --- but then it picked up sharply as price dropped down outside of the 'accepted range' -- lower prices began attracting MORE selling, the opposite of a market in balance --- this is a 'go-with' to the downside.

another nice thing about having a mechanical short-term strategy is that you have a daily benchmark to outperform. you can see the signals it generated and see which ones you took and which ones you didn't and why... you also see when a mechanical trigger is about to go off and have to time to think, do I want to take this signal or not? does the higher timeframe technical structure favor taking this trade? is the location favorable relative to the support/resistance you have identified? is it a really choice set-up consistent with a full-size position or do you see a few reasons for concern and should only take a smaller position? or is the set-up really pretty balanced with no edge whatsoever?? Friday was an example of a difficult day to trade in my opinion... my strategies did not do well on Friday after having perfect signals on thursday. you can see how Friday was not really a good 2-way market. good traders, whether bullish or bearish, had plenty of opportunities to make good money on thursday. I made money on both days but underperfomed my ('dumbed-down') mechanical strategies on Thursday and outperformed on Friday (though I didn't make much on Friday, it was a green day). if I summed the 2 days together, my (single-timeframe) simple mech strategies were basically back to breakeven by the end of Friday...