Jonbig04's Log

[jonbig04 10]

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[jonbig04 10]

The world hates me.

 

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[jonbig04 10]

The world hates me.

 

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Welp my would-be target filled about an hour ago. I can never get used to being stopped to the tick. It's not like there's anything you can do about it. Just bad luck I guess. Cost me over 100 ticks this time though. :crap::crap:

 

Anyway I'm not averse to shorting the same area again, but I'm really waiting for a BO above 83.5ish.

[jonbig04 10]

Whew, I hate rollover. Finally starting to get back into the groove of things. Took a long on CL last night that ended up BE. Kind of disappointing as I had high hopes for it.

 

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Interesting action on ES today. It became pretty clear that we were going to break out above the 65 area, but the failing pattern wasn't big enough so I didn't enter on the break out. Instead I am waiting to buy the flip test of 65, which I'm hoping will happen tomorrow or tonight. I consider an entry on the breakout a good trade, it just with my rules I want to see a larger pattern confirm or fail. I figure then we have a better chance at seeing a full 10-15 point break out. In this case, I'm thinking price will pull back and flip test before hopefully making higher highs.

 

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[jonbig04 10]

So it's been a while since I last updated! Sorry about that. A lot has changed in my trading in the last 2 months. One day I began to look back at my trading. Sometimes it went well, sometimes it didn't. My gains were more than my losses, but it just seemed so...hard. My losses were always under control though.

 

As many of you know, I am trading for a living now. I pay my rent, food and booze with profit I make from the market. No profit, no booze haha....and no rent. I say that because it quite an experience. The market is altogether different when you depend on it for everything. It's horrible...and great.

 

I had a month where I was in the red, a month when I would do well, a mediocre month. My trading was just ok. I didnt like that. Then I came across this quote my the great Paul Tudor Jones:

 

"I'd say that my investment philosophy is that I don't take a lot of risk, I look for opportunities with tremendously skewed reward-risk opportunities. Don't ever let them get into your pocket - that means there's no reason to leverage substantially. There's no reason to take substantial amounts of financial risk ever, because you should always be able to find something where you can skew the reward risk relationship so greatly in your favor that you can take a variety of small investments with great reward risk opportunities that should give you minimum draw down pain and maximum upside opportunities."

 

Frankly, compared to his approach, I was picking up pennies off of the freeway. Risking $300 to make $900 or whatever. I scrolled through journals of traders here on TL and elsewhere and we all seemed to be doing the same thing. That is, compared to Paul Tudor Jones and other managers, we all seemed to be picking up pennies off of a free way.

 

In reading journals, some of the traders that are struggling or just getting by are so smart. They annotate charts brilliantly and have so much good stuff to say. Yet who's making all the money? I got into trading to make a boatload of money. As I said before, I'm not in it to wax philosophically about the market or the "best" way to trade or whatever. I just want the money.

 

I wanted my R/R to be tremendously skewed, like he mentioned. Sure those opportunites may not come around often, but who cares? Everything I read seems to say the same thing. Sure you can lower your stop, but you'll just be stopped out more. Sure you can raise your target, but you'll just hit that target less. In other worse there is no real difference between a system with a 1:5 RR and one with a 5:1 RR. They equal the same expectancy in the end. Your accuracy will just be lower with one and higher with the other.

 

So..what we need is a system with decent accuracy AND high R/R. But how? A high RR system means a small stop (in relation to your target) and that means more stops.

 

What I have learned is that this isn't necessarily true. I looked back in my journal and realized I already had the darn answer to this question! Momentum.

 

If you can find a trade that depends on and foretells momentum as well as direction you don't need a wide stop. Sometimes you don't need a stop at all. There's no point in my going over the setup because I already have many times. I've just realized that with that setup, I don't need to take anything else. The R/R is so skewed and the accuracy so great (relative to the R/R) that all I should be doing is looking for those setups!

 

What's funny is that I've actually said in here "I should just looked for these setups because they are awesome". So I just started taking my own advice! :doh:

 

Since I've made that change things have been going very well. My average R/R is 1:10. My accuracy is around 50%! Granted, that's only through the last 10 trades, but even at 25%, with that R/R, I'm in business. Trading has become so much less stressful. If the market isn't breaking out hard, I just bail on the trade for BE or a few tick loss. Then I start looking for the next opportunity. I look hard for the perfect setup and when it comes, I bet big. There are too many markets and too many opportunities for me to plays these mediocre setups.

 

The setup doesn't happen very often. But that problem is solved by adding instruments. I've almost sworn off ES entirely. I'm sick of it. I hit a 60 tick target (15 ES equivalent) on 6E the other day in less than one minute. How long does it take the S&P to do that? Too darn long. The damn indices are the ultimate freeways and I'm not playing on them anymore. The hunt is on for things that move. Crude and 6E are the bomb. I tried out ZN for a while, but that thing just doesn't move like I need it to. I'm thinking i should look into FX, but I really don't know enough about it yet. I'm open to suggestions on instruments.

 

So that's my spiel. I'm not sure if anyone follows this thing along or not, if so feel free to ask questions. I can post trades up here if you want to see them. As I said, I'm doing the same thing I've went over in here about.

 

Momentum is where it's at for me!

[Gabe2004 10]

I looked back in my journal and realized I already had the darn answer to this question!

 

I believe that most people who are involved in trading for a period of longer than 1-2 years already have a system that will make them money and it is only what's between their ears that preventing them from taking advantage of their knowledge.

 

Good luck in your newly found way.

 

Gabe

 

PS a few charts would be nice. Thank you.

[jmonday 10]

I haven't read your whole journal so I'm not sure what setups you look for and take (could you post an example, screen shot, and explanation?), but it would be cool if you did post your charts and trades/setups, as I do still read this journal. It is an interesting approach and has much validity. Personally, even if taking only a few setups, its hard for me to watch more than 1-2 instruments. Unless you can seek out momentum based setups easily on various instruments, looking back and forth at them without giving them more dedicated attention to 'feel' the momentum or how price is acting, would be tough, at least for me.

 

Thanks!

[jonbig04 10]

Jmonday please see this page of the journal: http://www.traderslaboratory.com/forums/103/jonbig04s-log-4210-17.html

 

It's post number 665 in the thread under break out setups.

 

It's true what you say about instruments. They all do "feel" different and it's important to get comfortable with each one. Keep in mind that I'm not as much of a day trader as most here. I take a trade on average probably once every day and a half or two days, and generally use a larger time frame. Usually my setups take a few days to form and could be weeks in the making. So I'm not doing a lot of switching back and forth from instrument to instrument during the day.

 

Here's my last few for Gabe. Notice this isn't an accurate representation of all my trading. I don't have 85% accuracy lol. Pardon the big blue arrows, they are just there to block the number of contracts traded as I don't really want the whole world wide web to know how many cars I'm trading.

 

BTW for those not familiar with 6E, it's tick value is the same as ES.

 

simple short breakdown

 

 

Break out upwards, notice the 2 tries it took. I lost 3.5 AVG ticks on the first stop out.

 

 

Another breakout, notice the requisite increasing volume

 

 

Getting owned on ZN bc of its dirty little break out. Had the trade right but there was no way to get it without risking more than I like.

[jonbig04 10]

Sorry, I just realized you can hardly see the text in the charts. The targets are usually always 40 ticks. Even on the one where I scaled, AVG is still 40 ticks. Stops are anywhere from 2-4 ticks, depending on slippage.

[SIUYA 11]

Jonbig - glad you have had an epiphany.

 

I think you will find that ultimately all these things still boil down to the same things.

cutting losses, good risk to reward, patience, a few good setups etc; etc; ad infinitum.

 

sometimes all it takes is a slight change on how we look at one aspect of what we are doing to make everything fall into place.

 

Personally - day trading does not work for me. I trade longer term, and some short 3-5 day swings as a little extra. But the ideas are all the same.

A friend of mine has profitably traded for 17+ years, yet was getting stale, his setups were getting too relaxed, he was getting in too early etc;. He has revamped his ideas, become more structured again, and the one thing he said that helped him get back into a consistently profitable mode was to look for those trades that really had a good RR structure. He stopped the second guessing, he stopped trying to pick up swings against the major trend. Basically he chose his plan (setup, instrument, view) and then he waited for the best time to enter on his plan. If a good entry never evolved he never traded, even if his view was actually proved correct

He asked himself - do i want to risk loosing X three times and then finally getting it right, or do I want to wait until I can risk 3 times X, and only need to do it once. What he found was that by willing to risk the 3x, and by waiting, he ended up only risking about X anyway. Patience is an often understated trading attribute. (that unfortunately day trading seems to encourage less patience)

[Dinerotrader 10]

Good to see you back Jon. If your willing to share, throw up some trades you are stalking to discuss, especially on Oil. In the end, I am hoping to make long term and short term trades part of the plan.

 

How quickly are you moving stops to B/E?

[forrestang 10]

Nice Jon.....

 

I too have been trying to find/discover/locate/understand what momentum is for a while.

 

I still haven't quite found it, but I am developing and idea.

[jonbig04 10]

Good to see you back Jon. If your willing to share, throw up some trades you are stalking to discuss, especially on Oil. In the end, I am hoping to make long term and short term trades part of the plan.

 

How quickly are you moving stops to B/E?

 

I haven't taken a trade in CL for a while. It's been down trending so hard I haven't been able to. I'm sure something will pop up for me soon though.

 

I am looking to short 6E at around 1.2463. Not the best setup in the world, but I will give it a shot if it makes it down there.

 

I move to BE asap. Usually around +4 or +5 on 6E. With breakouts there is no need for a stop loss, and I bail on the trade if it starts to go against me at all. Taking heat isn't an option. Many times, like yesterday, the momentum is so great that I get fill 6 or 7 ticks into the green, even entering at market. In which case stop goes to BE immediately.

 

If I get stopped out BE, I usually place another buy/sell stop a tick below or above the high/low of the move.

[jonbig04 10]

Just noticed a potential on CL. If, and that's a big if, it drops down to around 70.20 from here without making any higher highs, then I will be looking to buy around 71.26.

[Dinerotrader 10]

Just noticed a potential on CL. If, and that's a big if, it drops down to around 70.20 from here without making any higher highs, then I will be looking to buy around 71.26.

 

Why 70.20?

 

[jonbig04 10]

Why 70.20?

 

 

 

I play breakouts of what I consider to to be major s/r levels. The two factors that go into determining how "major" of a level it is in my view are the tests and the rejection. We saw rejection here at 70.24, and before at 70.20. 4 ticks apart is pretty good for the tests, but not great.

 

The next part is the rejection part. In CL I consider a major move to be 100 ticks, thus I want to see rejection of around 100 ticks, hence the 70.20 level.

 

Everybody seems to be wrapped up in this S/R zone stuff. I don't play "zones" anymore. I look for a line in the sand. The more specific the better. Sometimes there will be moves in CL that are in the hundreds of ticks, yet getting rejected just 0-3 ticks apart from one another. That way I know exactly where the BO will happen, if it does.

 

Also, looking at your chart I see you have levels at 71.4 and 71.15. A great trader once told me that when you have a level that is bent before causing a rejection, the level moves the low/high of that bend. In other words, I would submit that 71.4 and 71.15 are the same level, just that the 71.4 level got moved to 71.15. That's how I do it anyways, just my two cents though.

[Dinerotrader 10]

We saw rejection here at 70.24, and before at 70.20. 4 ticks apart is pretty good for the tests, but not great.

 

The next part is the rejection part. In CL I consider a major move to be 100 ticks, thus I want to see rejection of around 100 ticks, hence the 70.20 level.

 

Maybe its because its a Friday. I'm not seeing the 70.24 rejections you're talking about.

[jonbig04 10]

Maybe its because its a Friday. I'm not seeing the 70.24 rejections you're talking about.

 

Ah sorry, I'm an idiot. Let me rewrite:

 

I play breakouts of what I consider to to be major s/r levels. The two factors that go into determining how "major" of a level it is in my view are the tests and the rejection. We saw rejection here at 71.24, and before at 71.20. 4 ticks apart is pretty good for the tests, but not great.

 

The next part is the rejection part. In CL I consider a major move to be 100 ticks, thus I want to see rejection of around 100 ticks, hence the 70.20 level.

 

Everybody seems to be wrapped up in this S/R zone stuff. I don't play "zones" anymore. I look for a line in the sand. The more specific the better. Sometimes there will be moves in CL that are in the hundreds of ticks, yet getting rejected just 0-3 ticks apart from one another. That way I know exactly where the BO will happen, if it does.

 

Also, looking at your chart I see you have levels at 71.4 and 71.15. A great trader once told me that when you have a level that is bent before causing a rejection, the level moves the low/high of that bend. In other words, I would submit that 71.4 and 71.15 are the same level, just that the 71.4 level got moved to 71.15. That's how I do it anyways, just my two cents though

[jonbig04 10]

[jonbig04 10]

I'm not sure why the other axis didn't show up on that chart above, but its CL and the line is at 71.20.

[jonbig04 10]

shorted 6E last night. Took two tries and I got slipped quite bit on my first try when I bailed out. cost me a full 5 ticks, my biggest loss of the month. Caught it the second try for +40 ticks avg.

 

[jonbig04 10]

Potential next trades:

 

Short 6E at 1.2138

 

Long 6E at 1.2602

 

Short 6B at 1.4224

 

Long CL at 71.26

[jonbig04 10]

I've made my hatred of trailing stops, scaling, moving your stop to BE etc pretty clear. To me these are just psychological feel-goods. But I've learned that peace of mind does have some value to it, thus I have started scaling recently.

 

I do it a little differently. For example, instead of having an all out target of 40 ticks, I would have 3 targets. One at 20, one at 40, and one at 60. That way my expectancy can't go down.

 

One thing I've always hated with a passion is a trailing stop. I hate them because they always give up profit. Sure every once in a while trend doesn't retrace and your trailer does get to do its job, but it never seems to make up for all the times it made you exit a position prematurely.

 

However since I only trade breaks outs....it got me thinking. Trailing stops only work well in swift trends and swift trends are all I'm taking (ideally). So I'm gonna give them a try. It's not gonna be anything crazy. I'm gonna put the stop 3 or 4 ticks back when price gets to its usual target and have it move up every 4 ticks of profit. It's a tough thing to backtest, but with some of the swift movement in 6E lately it may make a large difference every once in a while.

 

This isn't so much of a log anymore than it is just a journal. I may or may not post my trades in here, unless it's a really good trade or a really bad one haha.

Edited May 26, 2010 by jonbig04

[SIUYA 11]

unfortunately Jon, everything is a trade off (no pun intended) I spoke with some traders the other day and we were discussing temptation. (That would be a good idea for a thread.)

 

I too have battled with these ideas.One thing that helped me organise it in my head was to say, the only real stop is the initial stop, the rest is just an exit point. Especially if you are trading breakouts, you have to either be prepared to let the whole thing return to the initial stop or BE, this style means you will not pick the best place to exit. Point is that it is how you view it that or rationalize it that makes it easier to handle.

 

eg; its not a stop, its an exit point.

I will not be tempted to take profits, as I know the trailing exit will ensure that I exit at some stage.

I will not be tempted to try and guess where the exit is, or tempted to stuff up the trade by locking in profits early, as the trailing exit does that for me.

Alternatively, my take profit level is a certain amount that I look to capture, after that i will not be tempted to try and get more out of the trade, as thats not the objective. Instead I am looking for more opportunities to capture that same amount.

 

Hope that helps.

Edited May 26, 2010 by SIUYA

[jonbig04 10]

Took that CL long. Was able to get a few tries in but it was rejected instead of breaking out. -6 ticks on all which was in line with my 70 tick target.