Dogpile

Analysis of European Session Thus Far... This is a 5-min DAX chart -- which is another way of thinking about what happened overnight for the S&Ps. We will gap up -- notice location is not good to be long at this point.

For tomorrow, my bias is bearish. Taylor trading technique shows that the 2-period closing ROC is high and due to flip down, particularly for Nasdaq. Moreover, we built lower value today (other than Nasdaq) -- showing no residual upside momentum from Fridays big up day -- somewhat surprising. Friday is looking like an 'excess high' was made and we may have begun a good downward auction here? ES & RUS both have 3 bar 'cap' formations (an Art Collins 3-bar daily pattern with highest high and highest close occuring in the middle day). All that said, we traded down and formed a fat profile low in the 2-day range -- indicating lack of seller conviction. Volume was extremely light. Nevertheless, I was a bit surprised that bulls never really showed up when they really could have taken control from the bears today. The lack of buying pressure today combined with a gap down off an excess high is all a big red flag in my book. I did not go home short though because of the PVP/high-volume area just below us in the 1558.00 area. Ant, what you thinking for tomorrow?

<<Based on the relationship of Friday's close and today's open and similar occurances during the past 10 years, that 1558.00 area has 75% chance of holding>> don't tease me like that... please elaborate. any advice on where to put a stop? I got long at 60.75 and took some off at 62.25 just so I could keep a wide stop on the balance --- how would leave a stop relative to 58.00 at this point. you are saying it shouldn't touch 58.00? thus 57.75 for the balance of my long? thx in advance

12pm update of my thinking -- would be curious to hear others. Fridays high is starting to look like an 'excess high'... so there are 2 options here: 1) a new down auction began and just ran down -10 pts off 70.25 Friday PVP -- could run further but also could be long in the tooth. or, 2) this morning was just a shakeout move down to get the weak longs out and the up auction is ongoing and could re-ignite in the afternoon session. #1 seems more likely but that is just a guess. location close to the 58.00 high-volume area along with potential upside residual momentum left-over from friday argues for a long entry somewhere not too far above 58.00 and play for a re-test of Friday high... if we do re-test and make lower high --- that would then be bearish. until then though, still considering the long-side if a short-term entry presents itself and 1558.00 support is not too far beneath the entry. attached is simplified PVP summary

no mention of 'tilt' yet so I will enter it into the conversation... tilt is when you begin to play/trade worse because you have suffered some losses. frustration is the cause. tilt is a MAJOR factor in poker. if you control your 'tilt' -- you have a much better chance. in poker, it is widely accepted that absolutely everyone goes on tilt to some degree. don't think for a second that you are different -- it is human nature. the key is to try to recognize the conditions for when this happens and try to remove yourself from this situation. the other day I suffered a brutal stop-out -- to the tick before the market went very strongly in my favor. this was kind of like losing a big pot for most of your stack and then only have enough money for an ante while you go on to make quads vs somebodys full-house (in poker, the biggest pots are when one person makes a really big hand but someone else makes a slightly bigger hand -- as opposed to making quads when nobody else has anything). I found while playing online poker -- if you suffer a string of bad luck or you make some very bad decisions and you feel the frustration coming on -- it is often just best to shut your computer down and take a break. realize that your head isn't right and you should be patient and wait for it to be right again. shutting down the computer forces you to stop. so much of trading/poker is psychological. so I have adopted this to trading -- after a brutal stop out or just a bad trade -- I will shut my Tradestation down for a bit and take a break. get some air, get some water, take a shower etc... I find this prevents a revenge trade from happening. controlling TILT in trading is extremely important, just like it is in poker. I just find that you must figure out a way to accept the fact that everyone goes on tilt --- and then to try to adopt some methods to limit the damage from this crucial factor.

This thread is for discussing futures trading for this week. Friday began a new 'up auction' after a decent multi-day downswing. Thus, we enter the new week with the expectation that there is 'residual momentum' leftover from Fridays trend day up. We did get a late afternoon corrective move down so I am expecting bulls to retake control and the odds would expect us to make a higher high versus Fridays high at some point on Monday. A higher high is expected but should not be expected to have large continuation in the morning session. The afternoon session after a trend day tends to be the more likely time of day for a continuation in the direction of the trend day. The morning session often has a false breakout after a trend day. Many times, a new 'coil' will develop through lunch-time where a balance develops --- and then an upside breakout could then occur. PVP for Friday was 1570.25 but volume was not significant at this level -- 48,537 contracts is not indicative of an important level. I will watch closely to see how VWAP builds on Monday relative to this level. Friday was day 1 of a new 'up-auction' so I would look for buys either on a good downswing Monday morning --- or wait for the expected afternoon coil-break should a balancing develop in the morning. Attached is the volume distribution for Friday, showing 'Initiative Buying' (Buying resulting in range extenstion above last value area) -- with a 'single print' at 1563.75.

note this pattern set-up for 2nd time this week --- Monday and Friday. My very favorite pattern of all: the 15-min First Cross Buy (best after a downswing or good coil).

I guess I should have said 'inspired by Mastering The Trade' --- this one works for me -- no clue what they actually use.

no secret that we are in a coil. can see it well in the 15-min chart. this is a John Carter 'Mastering The Trade' Set-up (chapter 10) applied to a 15-min chart. The indicator puts up a red bar at the bottom when the 2.0 std dev bollinger bands compress inside the 1.5 Keltner Channel (both are set to trailing 20-bars in timeframe) . This kind of compressed range sets the market up for a hard directional push.

appear to be balancing now. we formed a higher low and traded up thus the taylor bias played out --- I didn't trade it. 49.00 to 51.00 has been a high volume zone and we have now traded back down towards that level with VWAP ~1551.75 --- slightly above yesterdays closing VWAP and above yeterdays 1550.75 PVP. Thus we are building value about equal to yesterday so far -- slight upward bias but could go either way. Hopefully, we get a clean break and this mornings test-up can serve as a 'high made first' selling tail and we can get some downside continuation. this would be consistent with what looks like an 'uncompleted bottom' yesterday where the market did not put in a good buying tail type of rejection. we did make a higher low today which would be viewed as bullish but that trade ran out of gas and have since pushed back below VWAP. attached is the noon-time volume distribution. not much to say other than the morning test up could be seen as a selling tail by the end of the day. either way, we need some renewed momentum away from 50.75

lol Tin, yah agree, open was in no man's land. can see how the market twice traded down near 47.00 area yesterday --- it did not form a tail or reject this 47.00 level -- thus can be reasonable expectation that it might exlpore down there again --- ie, below the 49.00-51.00 high volume zone. will see if we get buyers down there after exploring that area? that is my expectation for now.

well, we have traded up overnight and will open at a level that will begin to build higher value than previous day. That said, we are overbought and so I will still wait for a good swing down to go long -- which might take a while.

ok, built lower value 2 straight days and formed a fat volume distribution ('b' profile) low in the range (1549-51) with a big PVP built at 1550.75... My initial bias will be long for tomorrow. trying something new by simplifying the high-volume areas. this just takes the PVP for the day as a proxy for the high volume zone. you can see how we have built lower value 2 straight days. Taylor concept would be to look for a test of the previous day low to go long (could be a higher low or a lower low than previous day) -- just looking for some kind of morning test down to then go long. If it tests up first, then we will look for resistance in that 57.50-58.00 zone and not enter any longs if disadvantageous position relative to those levels. So those are the 2 key zones: 1546.50 on the downside (todays low) 1557.50 on the upside (Tuesdays PVP) The next level down would be 41.75 from 9/27 should we get a bearish day.

This thread is an extension of the Martingale thread but deserves its own place. The Kelly Criterion is a forumula that maximizes growth of account. This is a high-risk, high-reward strategy and isn't recommended -- but the concept is valid and one can use this as a starting point and take down the risk. It is worthy of discussion. http://en.wikipedia.org/wiki/Kelly_criterion ----------- Basically, it computes a % of how much of your portfolio you should risk on the next trade given your long-run expected win rate (W) and the expected dollars won for a win vs dollars lost for a loss ®. Drawdowns are problematic using this formula -- but growth of capital is awesome if your win rate is there. ----------- K = W - (1-W)/R K = Fraction of Capital for Next Trade W = Historical Win Ratio (Wins/Total Trials) R = Winning Payoff Rate ------- For example, say a coin pays 2:1 with 50-50 chance of heads or tails. Then ... K = .5 - (1 - .5)/2 = .5 - .25 = .25. Kelly indicates the optimal fixed-fraction bet is 25%.

hi Darth, I gave most of it back on this one: http://www.traderslaboratory.com/forums/f34/sickest-stop-outs-2583.html It was a bearish day and we have now auctioned down --- will wait to see next set-up --- which probably won't be today for me.

This thread is to post the sickest stop-outs. pretty self-explanatory. note: yes, you get your share of sick fills where the trade isn't a good one but you get lucky on the exit. I am not starting a thread for those. This thread is just to bask in the 'pain-trades' -- the ones that drive you crazy. The ones that you just can't get out of your head. The ones where you feel cursed. Need I go on? Bring on the PAIN!

my post-mortem using a concept I presented in last weeks thread. The 15-min LBR 3/10/16 'slow line' is a nice way to think about the TREND of the momentum. In general, I try to keep my long/short bias not with the trend of price -- but with the trend of the momentum. Momentum is generally a leading indicator to price -- but the slow line is a lagging indicator to momentum -- so you have to think about it dynamically rather than waiting for it to actually cross zero. Yesterday had 'ABC up' pattern into heavy resistance at 1558.00. A failure there could set in motion a downward auction -- as the trend in the 15-min momentum was poised to flip downward. This is what happened overnight. My twist on the LBR oscillator is to use the 5-period 15-min stochastic. You can see it is low right now so its difficult to short down here. You can see it was HIGH yesterday afternoon --- this was the spot to short -- so here you had to ANTICIPATE the downward auction to begin with the failure at 1558.00. The late 'ABC up' pattern was a bull trap and the failure there sows the seeds for a hard flush down. Helps me to understand structure if I try to explain it in writing so that is the reason for this post. I find that thinking hard about the 15-min 'slow-line' keeps you in-step with the intermediate term direction of the market. Then you find set-ups that are consistent with that bias. that is one key way I like to think about it anyway, would love to here comments on this.

re today, my first thought when I see a good overnight 'impulse' down is to look for a short if it does a 'abc-up' pattern. ideally into a Fib resistance zone. http://bp2.blogger.com/_5h-SWVGx6Ms/RwOUZiyj7XI/AAAAAAAAAc8/sfcrfoPxl9k/s1600-h/Oct+3++ABC+Up+Possible+Into+Fib+Resistance.png

the blind squirrel stumbled on to a nut last night, thanks TinGull. so I rolled out of bed at 4:30am California time. I come down to my computer and see no positions on the top of my screen ('position graph bar' on Tradestation). great, I stopped-out... nope, turns out the computer needed a re-fresh. I stick a limit order in to cover and it fills like 1 minute later. I had no coffee in me yet and was still sleepy. Pure luck - check out the luck of the timing of when I woke up.

This book just came out and is kind of the day-trader version of 'The New Market Wizards' book that came out 10-15 years ago (by Schwager). Interviews with home-traders that make good money using their PC's and a dsl line. This book is inspiring and it has some very good tips and you will find yourself nodding in agreement a lot. It is not a book of precise set-ups -- but I find this book an interesting read to remember the key concepts that make for good trading. What makes this book good is that its focus is exactly what most of us here do every day. This is not another book about yet another hedge fund manager with a giant forex position that he put on for 6 months and made a killing. It is a book about people who make a living off the market through short-term trading. http://www.amazon.com/Millionaire-Traders-Everyday-People-Beating/dp/0470049472/ref=pd_bbs_sr_1/002-2754035-2551259?ie=UTF8&s=books&qid=1191414453&sr=1-1

I have a camcorder and recorded the opening 2 hours for a few weeks. Was very cool to watch your day in review and see your indicators telling you what to do --- since you know what will happen next, you can watch the action and see all the things showing you the way that you probably missed the first time around. was very educational. Was also crazy to hear my breathing patterns change when in a position -- had no idea... Come to think of it, I should start doing this again - this was a very useful exercise.

thumbnail attached http://bp2.blogger.com/_5h-SWVGx6Ms/RwLGuyyj7WI/AAAAAAAAAc0/TLYn3oJqrgw/s1600-h/Oct+2+Chart+of+QQQQ+distribution+days.png

yes, I hold a smaller position overnight and play for a larger gain. since you have to ride through the european hours, this makes overnight trades tough as most of the time you will see 2-way action... so I try to be selective on overnight holds. Usually, I am shorting a lower afternoon high or going long a higher afternoon low. I will use a smaller position and my initial stop will be near the swing high/low. If the market moves in your favor in the hours after the close but before european hours, I will move my stop to breakeven -- or take a partial profit and set my stop for remaining such that I have a free-ride. Factor1 why a flush down: Nasdaq is generally a difficult market to 'hold' -- because it has so many shakeout days. What I use to think about this is: any time the days low is less than the previous days close by -0.8%, that is a 'distribution day attempt'. It doesn't have to close that low, just has to go there intraday to shakeout some of the longs. Note the attached chart shows how frequent these are. We have now gone 11 days without such a day. Factor2 why a flush down tomorrow is a decent bet: Yesterday we had a psuedo trend-day up. It ran into a wall at 1558.00 where a lot of volume traded. Today, we built value below 1558.00 and made a lower high in the afternoon (afternoon lower high failed right at 1558.00). thus, I feel we are due for a down day and the market profile seems to confirm that. I could be wrong but I feel it is worth a shot. If we do gap down -- the reward could be large if we do a distribution day. On the other hand, I could be right and still stop out due to overnight noise. Such is life. Also, the market could gap up and then do a distribution day down -- that would mean I stop out but I can then trade that pattern tomorrow live. Thus, the overnight play is kind of a hedge. Very often my thinking going into the next day plays out in the overnight market with a gap and I am then screwed as I didn't catch the move. I use a smaller position so that if I stop out, its not that big of a deal. And ideally, you can take your stop to breakeven and get a free ride on the potential for the move down. I shorted NQ near 36.25. My stop is 38.25 now - the afternoon high. 2 pts maximium risk for potentially 10+ pts down. If the market can trade down before Europe opens, I will take stop to breakeven --- if that stop gets hit and we gap down anyway -- well, then I am sh_t out of luck.

took a late NQ short --- holding overnight -- hopefully INTC or somebody doesn't do anything positive this afternoon.. with some luck, maybe somebody pre-announces a negative quarter. market looks set-up for a good flush down tomorrow. wanted to be there in case it happens overnight.

thinking of doing a late-day short today for an overnight hold we formed a big volume bar at 58.00 yesterday. we have actually built value (VWAP) below that level today. we just made a lower high to that level and a lower high to the opening price (opening price is often a magnet such that it could be underlying weakness if don't make it back to that level 1559.25) VIX is above yesterdays high NQ is due for a trend day down NQ could also close with a 'cap' pattern today if it closes < 2135.25