Jay's Journal

[firewalker 10]

Hi fw,

 

Curious to know what the bands on your TICK chart are? Thanks

 

Hi ST, that's Jay's chart though

I just annotated it...

[jasont 10]

Hey guys thanks for the great advice thus far. It really is good to get the support from other traders willing to take the time to offer advice.

 

Brownsfan - You're right about the many trades in a 10 minute period being a serious problem. In fact I am very disturbed by it which is why I am eagerly looking for answers. I'm not a big scalper so I do not wish to be taking so many trades in such a short period. Thanks for recommending the two threads for reading. They have a wealth of information, I only skimmed them earlier but will take some solid time out to read them thoroughly.

 

My entries tend to be in ideal places, at least that is what I have experienced from assessing my charts. Yesterday I was in short at 1150.50 at around 10:23am. From there we only moved up to 1151.50 before moving back down about 10 minutes later. However I took a 1 point loss and continued to short the market and get shaken out during the next 10 minutes. I can't really ask for much more than a position 1 point from a top.

 

Another instance yesterday was my entry at 1153.50 at around 10:02am. I entered short and the market barely moved against me but I took my exit at a gain of one point when it moved down to roughly 1144.

 

I guess I am looking for help with my exit strategy as I tend to exit on a round about time or if we move against me at all. Just not sure what the solution there could be. Maybe limiting my attempts per trade to one, I guess I'd rather have my hard stop hit rather than try 3-4 times taking 1+ point losses each time.

Firewalker - I guess my problem stems from the market suddenly moving against me. I have ingrained that taking a full loss, meaning my hard stop being hit, is bad. Something which isn't helping me minimize losses but increase them. In the effort to avoid taking one maximum loss, I end up taking 3-4 half losses.

 

The idea of drawing trend lines according to candle highs/lows is interesting and something like that could provide a good way to stay in positions. I'm not looking to stay in trends as they move up, pullback and then continue going. I rather stay in a move and take maybe 2+ points, as long as it continues in it's direction and then once it is ready to pullback, take the exit or have the trailing stop hit.

 

Actually I have been doing something similar with my 3 second chart where I trail the stop on lower highs for a downtrend which tends to be the highs of the 1 minute candles. I didn't think of actually doing that from the beginning of the trade.

 

I guess this brings me to my main focus at the moment. Are other traders here willing to share ideas on their exits? I have been taught to take a trade off when my edge is no longer valid rather than wait for the hard stop to be hit. Do you guys leave your hard stop to be hit or do you have some method for taking a trade off early if it isn't going your way? For example exiting after X number of bars if we haven't moved in profit by more than X ticks? Or exiting at the breach of the recent high?

 

I have spent so much time working on my entries that I have neglected my exit strategy. I believe my exits are emotional because I haven't fine tuned them to specific rules. I know many say that exits aren't usually as defined as entries which is probably why I have taken a less educated approach as my entry strategy.

 

SoulTrader- Those are Bollinger Bands on the NYSE Tick chart. They are set to a SMA of 12 and 2 standard deviations.

[brownsfan019 17]

After reading your above post directed to me, one thing stands out - fear of losing.

 

The entries may be good and they may look good in hindsight. But a few comments sounded to me like - I was losing $ and needed to shut that off as quick as possible. And then - I made a little $ and had to take it before it turned against me.

 

So the real issue may not be the entries or exits at all. If you find yourself fearful and trading in fear, the entry or exit plan will not matter at all. This is an issue all traders at some point deal with. Could be fear of losing real $, fear of being wrong, etc.

 

Here's a few book reco's that deal with the mental part of the game:

Enhancing Trader Performance: Proven Strategies From the Cutting Edge of Trading Psychology

 

The Psychology of Trading: Tools and Techniques for Minding the Markets

 

Trading in the Zone: Master the Market with Confidence, Discipline and a Winning Attitude

 

The Disciplined Trader: Developing Winning Attitudes

 

 

It takes practice, but those books can help w/ this part of the game. IMO this is the most difficult part to overcome.

[jasont 10]

Thank you for your honest reply Brownsfan and I will admit you are right. I occasionally have periods where I fully believe that losses are part of the game and that they are smaller than my gains so it is ok. Then I have times where a loss is the worst thing in the world.

 

I get the feeling that by placing a big emphasis on not taking a full loss that in some strange way my mind considers taking a smaller loss, a win. It is helpful in some ways but when it prevents me from making gains on profitable trades or has me taking numerous losses in a short time span it is a problem.

 

I personally feel that the problem could be the fear of losing by not having solid rules for exiting. I spend so much time waiting for the opportunity to come and if I nail it, I then am put in a position of, "I don't exactly know what I'm doing". I have a general idea but what it is specifically that I am looking for is unknown to me. Therefore the slightest hint that we are going towards my hard stop triggers me to hit the exits.

 

A big problem for me with this is that it works for me in simulation. When I trade simulation I can use the same general idea on exiting early and it's fine. I believe when I mix the fear of the monetary loss with the general idea it doesn't work for me and that is why I am looking for some solid ideas on my exits.

 

Thanks for the great recommendation on the books mate. I actually have all of those on my bookshelf except for Mark Douglas' early one "The Disciplined Trader". I will have a look around for it and in the meantime read "Trading In The Zone". It has been roughly two years since I last read it. I agree that this area seems to be the most difficult to overcome, at least for me it has been.

[brownsfan019 17]

My suggestions are:

 

1) Develop an ENTRY system

2) Develop an EXIT system

Then do it.

 

Until you have something that you can put faith in, you'll constantly be trading by the seat of your pants. As you've seen, the entry is one part of the equation. IMO the exits are the most difficult to master b/c you'll never be right - exiting too early, too late.

 

But you need something to base exits off of. Some ideas:

 

1) A fixed target

2) Some support/resistance zone/area

3) Fib retracements/extensions

The key being a mechanical exit - something you can do over and over again.

[jasont 10]

I couldn't agree more Brownsfan. Thanks for the great advice. I have done some initial testing with an exit system similar to Firewalkers suggestion. I also have worked on a scaling in system with positive results but is only initial stages. Previously my scaling in approach was done in the same respect as my exit strategy, a general idea but not defined.

 

Thanks for the excellent suggestions on some exit ideas. I agree that my exits need to be more systematic as currently they are inconsistent. I really appreciate the great input Brownsfan. It means a lot.

[firewalker 10]

IMO the exits are the most difficult to master b/c you'll never be right - exiting too early, too late.

 

That's true... which is why scaling out is imo the only way to make sure you never exit "too early". You can just leave one car on till EOD and say to hell with it, move your stop breakeven and see what happens. Most days you'll get stopped out BE, but on a handful of days you might catch that big trending day. And in the end, even if you do that only once or twice your account will get a big boost on these days.

[wasp 10]

No, no, no, no, no!

 

Exits shouldn't be haphazard guesswork with scaling out and hoping for the best.

 

Entries and exits are equally important and as much effort should be made to ensure your exit is as near perfect as your entry. Until you can contently exit with near certainty that it won't continue, keep working at it.

 

People try to get the best entry using the minimal required stoploss and the same should be for exits.

[firewalker 10]

I guess my problem stems from the market suddenly moving against me. I have ingrained that taking a full loss, meaning my hard stop being hit, is bad. Something which isn't helping me minimize losses but increase them. In the effort to avoid taking one maximum loss, I end up taking 3-4 half losses.

 

The idea of drawing trend lines according to candle highs/lows is interesting and something like that could provide a good way to stay in positions. I'm not looking to stay in trends as they move up, pullback and then continue going. I rather stay in a move and take maybe 2+ points, as long as it continues in it's direction and then once it is ready to pullback, take the exit or have the trailing stop hit.

 

Actually I have been doing something similar with my 3 second chart where I trail the stop on lower highs for a downtrend which tends to be the highs of the 1 minute candles. I didn't think of actually doing that from the beginning of the trade.

 

I guess this brings me to my main focus at the moment. Are other traders here willing to share ideas on their exits? I have been taught to take a trade off when my edge is no longer valid rather than wait for the hard stop to be hit. Do you guys leave your hard stop to be hit or do you have some method for taking a trade off early if it isn't going your way? For example exiting after X number of bars if we haven't moved in profit by more than X ticks? Or exiting at the breach of the recent high?

 

I have spent so much time working on my entries that I have neglected my exit strategy. I believe my exits are emotional because I haven't fine tuned them to specific rules. I know many say that exits aren't usually as defined as entries which is probably why I have taken a less educated approach as my entry strategy.

 

I think you raise some good points Jason... and it's definitely not easy. I spent a fair amount of time determining 'the optimum exit' point, only to realize there is no such thing as thé single exit. I've spent countless hours with statistics determining what the variation of each exit was, how much this was affected by the average true range, etc, etc. But in the end all these numbers meant little as the market is dynamic and calculations and statistics don't accommodate for what happens in real time.

 

Scaling out is imo the only way to catch big rides. I'm not sure if that's your aim though. You might feel more comfortable holding on 5 minutes than 5 hours. I know what you mean about price suddenly going against you. There are two things you can do: ignore what is going on, focus on the target and let yourself get stopped out if the market shows you are wrong. The other thing is exiting before you get stopped out, but leaving the possibility of a re-entry. I'm trying to be flexible in this too but it's not easy in real time. You need a lot of patience.

 

Let me illustrate with an example from yesterday.

 

 

I had a short signal around 1527 on the NQ (first red dot). I moved my stop to BE rather soon but equally soon I got stopped out. But I shorted again several minutes later (second red dot). Support was at or around 1500. I figured with price already having fallen so much it would be unlikely to drop like a stone straight away. I've drawn some supply lines to show possible exits (at the breach of the line). When the second line broke, price rallied shortly but fast enough to come very close to my entry point. As you can see on my chart, it took my about 3 hours to get where I wanted.

 

There's the obvious trade-off between bigger profits and staying in a trade risking getting stopped out BE. Price swung wildly between 1527 and 1500 several times. If I were to put a trade on in between those levels, I'd risk getting whipsawed easily. You could say I got lucky this time that price traveled all the way to the opposite of the range. But it doesn't happen that frequently. In fact, during the summer months I'd get stopped out BE far too many times to my liking! The only way to cope for that, is to scale out for little profits first: perhaps only a handful of points, but at least that covers commission...

 

Just some thoughts... comments welcome

[wasp 10]

I moved the continued discussion on exits over to a new thread here http://www.traderslaboratory.com/forums/f103/exits-are-entries-just-upside-down-4546.html to stop derailment.

[jasont 10]

Thanks for all the great advice and help guys. It is great to have so much support and people willing to offer their advice. I really appreciate it.

 

Firewalker - Thanks for your excellent input as always. I agree with you that scaling out is the best method to ride profits. My system when a full position is on focused on taking some at an early point initially and then trailing the rest to the best possible place in the current move I could get. I still feel the method of taking some off early and riding the rest has produced the best results for me. I am going to work on backtesting my strategy I developed today and see what results are produced.

 

Ideally I would like to scale in to a full position and then scale out. I think I have a good way to scale in rather quickly and then take rather quick initial gains at this stage but it is going to be the backtesting that decides one way or another.

 

The other thing is exiting before you get stopped out, but leaving the possibility of a re-entry. I'm trying to be flexible in this too but it's not easy in real time. You need a lot of patience.

 

This I believe has been the cause of my current problems. I actually take a good entry but exit early only to realize my position was good and getting back in. The pattern repeats itself and instead of say risking 2-3 points, I ended up taking 4-5, 1+ point losses.

 

Thanks for your great example you provided. I think where you are doing better with me in regards to taking an early exit is that you are bringing your hard stop down to break even. I was relying on the reading of price action to take an early exit but obviously after giving it a shot, it is not the right way for me to trade it.

 

Wasp - I agree 100% with your comment in regards to the exits not being haphazard guesswork. I used to believe exits were something that needed to be calculated on the spot as each move had different circumstances. I now have been made aware that even though the circumstances are unique I can have a consistent approach.

 

People try to get the best entry using the minimal required stoploss and the same should be for exits.

 

That right there is my downfall in a nutshell right now. Thanks for the great help mate. I'll check out the exits thread to increase my learning.

[brownsfan019 17]

That's true... which is why scaling out is imo the only way to make sure you never exit "too early". You can just leave one car on till EOD and say to hell with it, move your stop breakeven and see what happens. Most days you'll get stopped out BE, but on a handful of days you might catch that big trending day. And in the end, even if you do that only once or twice your account will get a big boost on these days.

 

I disagree 100% with that.

 

Yeah, it's nice to catch that one day every month that moves a monster and you catch it all, but as you said, more often than not, that runner will do nothing to improve your P&L; so you are in fact exiting too late.

 

Let's look at some basic numbers:

> Trade 2 ES ct's

> Exit #1 at +3.00

> Exit #2 at +.25 b/c you were hoping for that monster move

> End result is +3.25 / 2 = 1.625 pts NET (and that's all that matters)

If you can design a system that can somehow catch the monster moves and get out when you need to, then great; but I would think that is rather difficult to do.

 

IMO trying to catch that monster move is a loser's game over time. Yes, you might hit it but if more often than not, you don't, why bother? You have to accept that you will make regular money vs. hitting a monster now and again.

[firewalker 10]

I disagree 100% with that.

 

Yeah, it's nice to catch that one day every month that moves a monster and you catch it all, but as you said, more often than not, that runner will do nothing to improve your P&L; so you are in fact exiting too late.

 

Well...

 

Last couple of months trending days have been more common than usual. I'd say in out of 3 is potentially a trending day which gives you about 6-7 days per month. On these days the daily range usually extends and on the ES it can be 40-50 points. Even if I only catch 1 out of 3 of these trendings days, let's say 2 per month, I'll make 100 points per month. That's an average of 5 per day, which is far far from bad. And that's with a very conservative point of view...

 

You said you disagreed 100% with what I said, does that mean that you would advocate NOT scaling out too? I'm not sure if you disagreed with that too... Anyhow, if you scale out efficiently (with the right portion of your position), you can protect your position as well as leave yourself open the possibility that you'll catch "the big swing" on those "one-way" days. For example:

 

Trade 3 ES contracts (stop 1 point):

Exit #1 at +3

Exit #2 at +7

Exit #3 at breakeven

Average profit => 3 points per contract with a risk of 1 point per contract

 

Now let's assume one of these one way days:

Exit #1 at +3

Exit #2 at +7

Exit #3 at +40

Average profit => 16.66 points per contract with a risk of 1 point per contract

 

I strive to have a couple of these days per month. That way I can afford to not take a trade on choppy or ranging days where trading becomes more difficult. No one says you need to trade each and every day... in fact the less I trade the better I seem to do and I think that would be the case for a lot of people.

Edited October 4, 2008 by firewalker

[jasont 10]

Week of 29th September - 3rd October Wrap Up

 

Well the wrap up of this week I tried to leave as long as possible before doing it. There is something about a bad week where writing about it and analyzing it tends to be tough.

 

What I want to do with this wrap up is focus on what I have been doing to improve my trading rather than dwell on areas I underperformed. I want to keep this as positive as I can for my growth though identifying the areas that set me back is essential for me to understand where I can improve.

 

The positive point to this week is that I don't view this setback as a lack of my ability to trade. My losses were not caused by continual bad trading but rather moments of what I like to call emotional blockage.

 

On Monday my losses occurred from 5 attempts to trade one trade idea. The first of this series of losses was caused by not waiting for the right signal, the following 4 resulted from an inconsistent exit strategy. On Wednesday I took 7 attempts to short the market, again the first one a result of not waiting for the right signal but the following 6 were due to an inconsistent exit strategy.

 

So that is all that really needs to be said in regards to what didn't go according to plan this week. The up side is that I can see a pattern of the problem and the solution appears to be rather simple in my opinion. The first area to improve upon is entering only upon solid entry signals. It can often be easier said than done so I have incorporated numerous elements to help encourage me to wait for the signals.

 

I am removing the ability to exit a trade early first off. There are a couple of good reasons for this which I will state. I have spent a long time working on how to read the markets, watching charts, understanding relationships etc. I always seem to be relaxed whilst assessing where we are headed, current trends, divergences to what the underlying asset is doing, points on charts where we are likely to hit traffic etc.

 

I often enter the market in good spots, places that are solid and have high probability of trading in my intended direction. However once my trade is on, my emotions go from a level of say 1-3, to a level of 5-8 (10 being the highest emotional level). This creates a divergence between my entry frame of mind and my during trade frame of mind. Obviously I am not at a stage in my trading where I can put a trade on and think nothing of it, just another trade. Therefore something needs to be done to regulate my exits.

 

My entries have set things I look for. I analyze the market for potential reaction points made up of last trapped traders, s/r levels, EMA's and trend lines. When we reach the reaction points I then consult the volume to see if big volume is failing to push against my intended direction. If that's the case, I enter.

 

My exits on the other hand, up until now, have been intuition work, the market "looks" like it is going here or there. Now combine that way of looking for an exit with heightened emotions and it spells problems. So when I don't have a trade on my emotions are at a level which allows me to analyze the market well yet once a trade goes on, my emotions switch gears and cause fear to enter. The fear comes in because I don't know exactly what I am looking for. So exiting early when I don't know what I am looking for is out of the question.

 

The removal of early exits also helps encourage waiting for the right signals. If I enter the market I am not getting out until either I move my trailing stop up or take a full loss. Therefore it prompts me to only put on trades that fit the plan. I cannot afford to be getting in outside the plan just to test the waters. It will be a too costly exercise.

 

No longer being able to exit early will also help my other problem I have been faced with this week. Entering the same trade idea numerous times. If I wait for a reaction point and enter upon volume failing to push us further, then my stop will be in a place that signals the idea was incorrect. That is fine with me and something I am willing to accept. This I feel is the best solution for me currently. My backtesting so far is proving that my stop could be tighter at this point but I won't make any hasty decisions until the testing is complete.

 

So this is great progress in my opinion and in a way I am grateful for the market showing me the areas of my trading that needed to be improved upon without damaging me beyond repair. It has helped me discover that some discretion on my entries works well for me, but discretion on my exits does not gel well with me. The reason being is that I am hitting different emotional gears and that is understandable.

 

I have been testing my exit plan and it is providing good results currently. I want to test it for different periods of this year so I can see how the trailing of a stop works in different volatility markets.

 

That is pretty much it for the analysis of this week. The results below really demonstrate the need for more consistency in my trading and I am happy that it is being addressed. For following my plan this week I am giving myself a 1 out of 10. I was happy that I adhered to my weekly loss limit and took time out to see what was causing the lock up of my plan.

 

Total Trades: 27

Wins: 7

Losses: 20

Long Wins: 0

Long Losses: 6

Short Wins: 7

Short Losses: 14

Win %: 25.9%

Long Win %: 0%

Short Win %: 33.3%

Risk/Reward Ratio: 1 : 0.79

Points Gain/Loss: -20

[jasont 10]

Last couple of months trending days have been more common than usual. I'd say in out of 3 is potentially a trending day which gives you about 6-7 days per month. On these days the daily range usually extends and on the ES it can be 40-50 points. Even if I only catch 1 out of 3 of these trendings days, let's say 2 per month, I'll make 100 points per month. That's an average of 5 per day, which is far far from bad. And that's with a very conservative point of view...

 

I will say that the past month has been extremely volatile and out of the ordinary. In my opinion, consistent small gains are far superior to occasional big gains. It is hard to pay the bills not knowing when you're next big win is around the corner as you lie in wait for that opportunity.

 

If you can consistently pull even 2 points per day out of the market average then you can size your positions accordingly. By all means I'm not saying don't capitalize on the big runners when you can, I just agree with BearBull that those (not saying you do Firewalker) who always try to catch the monster move play a game where odds are against them long term. I have heard numerous prop traders mention this too.

[jasont 10]

Trading For 6th October

 

Today's Trading Goals:

 

Identify The Trend And Note Changes In Trend Where Needed

Only Place Trades In The Direction Of The Established Trend

Exit Positions According To New Plan

 

9:12 Roughly 30 points down over the weekend things look pretty bleak. There is a big range bar at 8:20am which is interesting. Just when we appear to be making progress we hammer down so right now the market is a tough place to be. I'm going to trade simulation to help with the testing of my exit strategy and see how it goes. Results with the backtesting trading simulation at 3x regular speed has been good.

 

What has caught my interest is the drop in Gold of late. Not sure of it's implications at this point but something to keep an eye on.

 

9:29 There has been no strong suggestion of direction during premarket so I am going to leave it some time before I consider entering. There is no major news out today so no times I need to be cautious around.

 

9:38 Market tested 1072 and reversed. Made new high, Tick negative, looking to see what happens if we the reach 1078 area. Don't have any s/r levels down here. Long side is what I am looking for at the moment.

 

9:40 Taking off without testing market open area, will wait for next swing. Tough area where we are right now.

 

9:45 We didn't go much higher than previous high before coming back and testing the 1278 area. No big volume came in down there so it didn't trigger a trade for me. We moved up a bit but now passed the previous low. Will give it more time to see where we are headed now. Tick still negative.

 

9:57 New low for day. Now keeping an eye on the 74-75 area. Tick still negative, volume supporting the move lower. 71-72 may also be interesting.

 

10:04 Market hit just beneath 71 but again no volume extreme so no trade. I like to have a combination of evidence in my favor rather than just one element. Will remain patient. Due to the volatility we are seeing today I won't scale into positions as it brings my stop in too tight for days like today. Will just stick to half position. Tick indicating a trend down type day. Looking for move back to the 72 area.

 

10:14 Seem to be chopping up a bit down here at 1064. May not see 1072 reached before going further down. We have moved down here pretty swiftly though not much volume seems to be in the market today. The usual volume extremes I have been seeing at reaction points is not being seen today.

 

10:21 Volume extreme coming in at 1052.50. Enough to encourage a sizable bounce to short into maybe? 1st area of interest is 63-65 area, second area is 71-72 area.

 

10:29 This market is incredibly weak. We have been hitting what are ordinarily weak reaction points and pulling lower on very little volume. It appears as though there is very little interest in buying through this market at all. Has thrown me a bit today but will stick to the plan. Looking for sizable bounces has not been ideal.

 

10:38 This reminds me of last Monday, down with hardly a hiccup. Guess it will keep me out of the game for the rest of the day. Moved too far to enter already but not willing to even suggest some buying at this stage. Steep trend down with seriously negative tick suggesting stocks aren't happy until they flush out. Volume hasn't been very high but on the measly bounces we are seeing hardly any interest at all. What happens when we have a market where no one wants to buy?

 

10:45 76 points down and counting. I wonder if we will reach limit down today?

 

10:52 Calling it a night. I didn't get an early opportunity to jump on board this market according to the rules. Unusual to see so much selling without much buying interest to the degree that we did.

 

Daily Wrap Up

 

I was actually pretty pleased with my trading approach today. I was determined to stick to only trading the Reaction Points(RP) as I have been doing during my backtesting. During my backtesting I have made it a habit to only trade the areas when at least one other thing lines up with it. Each time we reached an RP area there was nothing else confirming that area so I stayed out.

 

Looking back at the day it is understandable that the regular things that are needed for the confirmation of the RP area were not present as it was an extremely bearish morning. That leads me to some learning about the markets. I picked up on the early weakness which was good however it appears that on these extraordinary days, the selling is so strong that not much is needed to halt any advances.

 

It can be disappointing seeing the market move down so much and know that I didn't get on however I am humbled by the fact that these days are not the norm. In fact it is probably the second type of day like this I have seen in my trading career. The last time was last week.

 

For following my plan today I am giving myself an 8 out of 10. I kept a close eye on the market looking for entries and identifying RP areas. I didn't trade impulsively which is a big improvement on last week alone. I will continue with the backtesting accumulating results. Thus far I have only been backtesting September. Being that September is an out of the ordinary month, I will try to test some earlier months this year as well.

 

[jasont 10]

Trading For 7th September

 

Trading Goals For Today:

 

Identify The Trend And Note Changes In Trend Where Needed

Only Place Trades At Reaction Points In The Direction Of The Established Trend

Exit Positions According To New Plan

Only Trade After 9:50am

 

8:49 We are currently a few points down from yesterdays close though there is still a fair bit of time before the open. There are no major news releases today. I'm still trading simulation so I can test my exit strategy I have developed. I am not going to place any trades prior to 9:50am as my testing thus far has seen my trades during that time not making gains.

 

The VIX made a new high yesterday which I believe may be the highest reading it has ever recorded. Definitely interesting times ahead. Gold and Oil are still down quite substantially. We had the late rally from the markets yesterday which is something to be aware of.

 

9:34 We had a period of buying around 9am which boosted the market roughly 30 points higher which means we have opened at a substantial gap up. Currently the Tick is showing positive sentiment but stocks are just opening so it's not exactly a great indication. From the open we have moved down to the 1265 support area where we currently reside.

 

9:41 Bounced from the 65 support area and made new high for day. Tick is remaining pretty positive at this point.

 

9:53 Market reversed from 1078 area, Tick now negative and we are following a downtrend from the highs. Yet to break day's low.

 

9:58 Tick action suggests a back and forth day today as we move across the zero line. Looking for possible action at 64-65 area. Though volume extreme at 55 support area suggests reversal.

 

10:01 In short at 1063.50, trend line with volume spike. Range of bars were too great to scale into this trade. Stop moved down to 1060. Stop moved down to 1058.25. Stop moved down to 1057. Trade closed at 1057 as stop was hit.

 

10:10 It seems I may have gotten in for the last leg down of that move. Big volume as we reversed just beneath support. Tick playing across the zero area showing no strong favor to one side or another.

 

10:21 Had a momentary data issue but sorted now. Have formed what could be the early stages of a new uptrend. Need to be cautious that any trend has the possibility of being short lived due to being a rather back and forth day.

 

10:28 Tough area where we are now. Big volume spike that nearly matched the size of the one nearing the end of the down move. Could signal the end to this up move may be near. Right at the 1068 reaction point as well, just not in direction of recent trend.

 

10:41 Hmm platform is missing about 10 mins of data right now. Hard to get the full picture. We reached the 1068 area from what I can see and came back to the trend line. I can't trade with this missing data so my day may end prematurely.

 

10:54 Going to call it a night here. Bit irritated that my platform was messing me round. First time it has done it though so I'm willing to forgive it. I took a good trade on the short side today. Positioned myself well without scaling the second half as I would have needed to great a stop. I took more than 50% out of that particular move which is good in my opinion. Would have liked to have made a couple more trades as the opportunities were there later on but it was not to be. Waiting for the first 20 minutes to pass in the day was a big help. It actually allowed me to focus on what the market was doing at the open than trying to pick an entry point. Less stressful as well.

 

Daily Wrap Up

 

Numerous things worked well for me today which was good. I would have liked to have continued to make more trades after my initial one however platform technical issues prevented me from doing so.

 

First of all the choice not to trade prior to 9:50am was a good one. In my testing thus far, prior to 9:50am I am roughly break even in point gains but have a 20% win ratio. Obviously a couple of lucky wins doesn't constitute a good system which seems to be what occurs prior to 9:50am. Now it's not exactly the time that is special but the fact that it allows me to assess where the market's intended direction is likely to be before placing any trades.

 

Prior to 9:50am I feel like a dog chasing his tail trying to pick the right direction so early on. For a period there I was attempting to use the pre market trading to determine where we are headed and although it is likely possible to do, it is just something that doesn't suit me.

 

My trade I made today had a few good points which I want to make note of so I can help learn what is working well. I was skeptical of the trade working due to the big volume on the bounce from 1052 however I noted we were hitting a reaction point, a trend line and EMA as well as seeing a volume spike just moments earlier. I took the trade as it is part of the plan and trailed the stop down making a 6.5 point gain. I made a good decision not to scale in as the stop would have needed to be placed nearly 5.5 points away which is not what I am willing to risk on half a position.

 

For following my plan today I give myself a 9 out of 10. A big improvement on what I was doing last week and the implementation of the new exit strategy during whilst simulation trading gave me guidance I haven't felt with exits in a long time. I am continuing to test my exit strategy with positive results and once completed with a few simulation days under my belt as well, I will get back into the game.

 

[jasont 10]

Time for a small assessment of my exit strategy. I have some figures below that I am using to help guide my plan. The first lot will have total figures and the second lot will have figures of trades made after 9:50am. It seems to be the biggest difference at this point.

 

Total Statistics

Days Traded: 13

Trade Ideas: 51

Trades: 89

Points Made: 47.25

Average Point Gain Per Trade: 0.53

Wins: 38

Losses: 50

 

Statistics Of Trades Made After 9:50am

Days Traded: 13

Trade Ideas: 44

Trades: 73

Points Made: 48.75

Average Point Gain Per Trade: 0.66

Wins: 35

Losses: 37

 

Ok so what I have learnt from this thus far is that trades for me prior to 9:50am are a losing game. Therefore I am deciding not to trade prior to 9:50am. I have mentioned before that it is not necessarily the time that is the difference but more so I get a chance to assess the market longer before trying to get in a trade.

 

I currently have less winners than losers, more so prior to 9:50am however I am still on less winners than losers after 9:50am. I have noticed that during periods of large volatility I don't perform quite as well. When scaling in during high volatile periods it is common that my stop is hit as I bring it closer upon scaling in. This might need to be rectified so I can either enter on a full position or leave my stop further back on a scaled position. It isn't very often that my hard stop is hit when I enter the initial position. A few times I have been taken out with my full position only to see the market continue in my intended direction right after. I am possibly putting that stop in a too obvious position.

 

I wanted this to be a quick analysis as I have a lot more testing to do before being ready to implement live. I have only tested the strategy during this week and mid-late September at this stage. I want to take periods that differ to the large volatility we are seeing now to determine if the strategy is valid in less volatile times. For the moment the results are promising, averaging about 3.75 points per day. I have had 10 winning days and 3 losing days. Thus far it is ok, I'd like to improve upon that and feel that the backtesting is helping me read the markets better also.

[jasont 10]

Trading For 8th September

 

Trading Goals For Today:

 

Identify The Trend And Note Changes In Trend Where Needed

Only Place Trades At Reaction Points In The Direction Of The Established Trend

Exit Positions According To New Plan

Only Trade After 9:50am

 

9:13 Market has dropped roughly 30 points overnight, globally today we had big declines in the markets. The interest rate cuts in the US initially boosted the market but it didn't last long. We have some major news at 10am so I may leave trading any positions until after then. Gold seems to be getting some solid ground, possibly a flight to safety in this environment. The indexes are all taking a beating the past couple of weeks. I have no idea how much further we will go and even at a bottom it is still up in the air as to how far we recover.

 

9:35 Tick negative as can be expected at such a negative gap open. We have climbed roughly 10 points higher and slowed down at 991.50. No s/r levels around this area for me and we appear to be highly volatile. If we keep up this volatility I will only trade my half positions and not scale in.

 

9:43 Straight up at this point. From the 970 lows we moved up 30 points to 1000. Steep uptrend, Tick playing on the zero area, volume picking up here. Is this a suckers run or real deal rise?

 

9:51 Downfall of waiting till 9:50am is that I can miss some monster moves like the one we are seeing now. Tick is currently positive, big change considering how far down we started the day. Market action suggests a big up day, Tick suggests mixed market at this stage. Volume tapered off on the most recent charge higher. Won't consider the short side a strong opportunity unless we see a volume extreme as we move up.

 

9:55 Reaction point I am watching is at 1001.50 area. Beneath that we are looking at 990 but would be skeptical of further upside momentum should we reach that area. Other option is that we continue higher locking me out of possibly getting on the up move.

 

10:16 Moved into a bit of chop here, waiting for a move lower to 1001.50 for signs of possible continuation. Tick switching back and forth over the zero area suggesting two sided action right now. We haven't seen a volume extreme on the buying side which suggests we still have further to go. In short term downtrend on 1 minute but still looking strong on 5 minute chart.

 

10:22 In long at 100.75 but may be premateur. Yep, just took 3 point stop out. Bah, hit my stop and then rebounded. Well that's just the way it goes.

 

10:30 Took another long this time at 1002, not a trade according to plan, was irritated with being knocked out the first time. Took another 3 point loss. Volatility is extremely high so a 3 point stop is tiny compared to the ranges of this market. Reasons for 1st trade was the reaction area with volume spikes coming in.

 

10:34 Currently in 1 minute downtrend. Tick making strong moves into the negative indicating stocks selling strength.

 

10:41 Now in short at 100.75 off the trend line and SMA. Market taking its time to drop. Stop moved down to 998 and being trailed as we go. Stop moved down to 992.75. Moved to 991.50. Down to 989.75. Tightened up at 987.25. Trade closed at 987.25. Well that move was worth the wait.

 

10:57 Well that puts an end to my night. I bit the bullet and took another trade in this volatile market. I'm not a big fan of this volatility, quite unusual for me to come up with two max loss trades in a day. Usually there is some back and forth which brings my stop in closer. The other side of the coin is some trades can run well like I happened to get with the short trade. Otherwise it was good to see me follow through with the plan.

 

Daily Wrap Up

 

Today saw us trade with some big volatility. My initial trade had the right idea but the market moved right to my stop point and then reversed. I took a revenge trade due to letting the market bouncing from my stop get to me. However what I was pleased with was the fact that I could put it behind me once it occurred and get my focus back on what the market was doing. After all, that is why I have stops in place.

 

The last trade was in the direction of the most recent trend met with the SMA of the 1 minute chart. I was skeptical of getting in and the market moved to within 0.25 of my stop before going my way.

 

In such volatile markets it is difficult to run a short stop point, in fact I am willing to say these markets are the most difficult I have encountered. I think the market in general is in less agreement on prices than I have ever seen. We move up 50 points because some traders see value and then we come back 40 points because other traders don't believe the value is there. All in the space of one hour. The indecision due to nobody really knowing what the extent of the current crisis is has traders disagreeing on price the most I have ever seen.

 

In a way I can't help but think luck was the major player in my trading today. It was unlucky that the market came to my exact stop point and made a short run higher. I might have only made a small gain or loss instead of a full loss from that but it all counts. Then my last trade was lucky that the market came within 0.25 of my stop and then traveled down for a large gain that put me back in front for the day.

 

When I think about that, is it any different from other days? Individual trades show an outcome that cannot be predicted, I had no idea what each of my trades would do once I put them on. However over a few trades and a pattern emerges when one does the same thing in the markets. Do I need to just let go and put full faith in my plan, stop trying to urge the market to go where I want it? Instead leaving it up to the Gods of chance and probability.

 

This whole time I feel like I have been taking an approach that I "should" know where the markets are going. Only today do I believe I am fully understanding that I cannot possibly know where the markets are going on an individual basis. I can know that if I keep doing the same thing, over time I will make money as I have seen in my testing.

 

Either way, for following my plan I give myself a 7 out of 10. I took two good trades which were in the direction of the trend and ended the day 7.75 points up. My analysis noted changes in trend and the Tick. I picked up that the Tick seems to be King when seeing what the days trading is likely to be. When we sway from positive to negative rather frequently, we can expect a back and forth type day. When we stick either positive or negative, we can expect a trend type day. It has been helpful thus far.

 

[jasont 10]

Trading For 9th September

 

Trading Goals For Today:

 

Identify The Trend And Note Changes In Trend Where Needed

Only Place Trades At Reaction Points In The Direction Of The Established Trend

Exit Positions According To New Plan

Only Trade After 9:50am

 

9:23 No major news due out today. Market at a 20 point gain from yesterday. Want to keep my eye on value areas being the 990.75 low and 1022.75 high. We are going to open inside it most likely. Will keep an eye on volatility, if it continues like yesterday I will continue to only trade a half position.

 

9:35 Mixed open at this stage. Tick playing across the zero area, no clear direction in the market action at this stage. A little different from what we have been seeing. Volume rising on the move higher and declining on the way down in the 1 min chart.

 

9:43 Bounced from 94.50 support area though volume didn't really kick in at the bottom there. Now making new highs, volatility doesn't appear to be as high as yesterday but still seems significant enough. Tick hovering in positive territory currently but I remain cautious. 1003 area now possible reaction point.

 

9:49 Tick still flirting from positive to negative indicating a ranging morning rather than solid trending. 1003 area being tested but no strong volume coming in.

 

9:56 It appears the stocks have broken down a bit. Tick going into negative territory, made a 1-2-3 top. Volume has subsided a bit on the down move as seen on the 5 minute chart but picked up gradually on the 1 minute chart. RP area around 1002. Volume at 997 area matching that seen toward the 1010 top.

 

9:59 Nearing the Value Area Low.

 

10:03 Hmm another one of those moves that like to steam away without a chance for the bandwagon to join in. Big volume on this move down that appears to be pushing us back into the value area. 998 is my point of interest at this stage but have concerns on sustaining a big down move.

 

10:14 In short at 998.5 for the RP, SMA, EMA and volume spike. It moved too quick for me to scale in unfortunately. Stop was 3 points but been moved down to 999.75 on the trail. Now down to 997. May get shaken out here. Stop moved down to 996. Stop taken. Good trade according to the plan. Nicely trailed as we are now testing the 998 area.

 

10:22 We have tested the upside a couple of times now. Not willing to press it again as the Tick suggests a ranging day rather than trending at this stage. Not saying it isn't a possibility we will go lower, just not willing to test the area twice at this stage. Big volume at the VAL area has me doubting the short side enough to wait for a break of that area before looking for another short.

 

10:27 Nice move down we have here. Guess that's a good reason to consider a second attempt at a trade you think may not go further but is still in line with the plan. Back to the idea of faith in the plan. Not to worry. Tick showing selling strength, in a downtrend on both 1 minute and 5 minute charts. 990 area next point of interest.

 

10:32 Tick extreme registered on the downside. Keeping an eye on whether or not we push far beyond the zero area and sustaining the upside momentum. Sizable volume on the low at 883.

 

10:40 Hmm, missed my entry on that one. Didn't have any sizable volume come in but that wasn't necessary to enter the trade. Had a lot going for it already. Bit of a bummer missing the trade but there are plenty of opportunities I will come across in the broader timeframe.

 

10:43 Well time to call it a night. Having an early one. Would have liked to have capitalized on the second trade but shit happens. I was pleased with the trade I did manage to get on, did a good job managing it and the entry was well waited for. My analysis was good and I stuck to the plan.

 

Daily Wrap Up

 

The exit strategy I have implemented seems to continue to produce good results during simulation as well as backtesting. Today I had two good opportunities in the market, one I managed to capitalize on, the second I was not quick enough off the draw.

 

The trade that I did get one was in the direction of the trend as well as the current tick readings. It had the reaction point going for it, the SMA, EMA and a decent volume spike to boot. I trailed the stop according to plan and made a small gain as we moved back and forth across that area for some time before dropping.

 

The second area was right at a test of the previous day's Value low after we had just stormed lower. I knew the point I was looking for but we only stayed there for less than a minute before pulling down rather quickly. It was unfortunate that I didn't act quick enough but something to remember.

 

I didn't get a chance to scale in today as the trade I entered moved beyond my second entry point rather quickly. I followed my plan pretty well today and was happy with my analysis. For following my plan I give myself an 8 out of 10. I made a small gain of 2.5 points but some days the returns just aren't as good as others or occasionally am faced with a loss. The volatility didn't appear as wild as the yesterday at the open which I felt better about trading. I won't be able to trade tomorrow so that will end this week of trading. I'll look to Monday and try to get some further testing in of less volatile time periods.

 

[sdoma 10]

Yeah, it's nice to catch that one day every month that moves a monster and you catch it all, but as you said, more often than not, that runner will do nothing to improve your P&L; so you are in fact exiting too late.

 

I agree with you for the most part. It's easy to look at a past chart and see the monster moves, but in the end you have to make sure you're booking P. Plus, 3 points isn't exactly a small trade considering normal ES conditions which is what, a 10 point range in the average day or so? Hell, there are plenty of times if I open up the day with a 3 pt trade on full size I will evaluate the action and consider going home.

 

I say the most part because there are some conditions that can lead to bigger moves such as NR4 and NR7 days, breakouts of major congestion areas, and failures from major reference points. But those don't normally happen every day, far from it. But catching one of those a month can make a huge difference in your P/L over time.

[firewalker 10]

I agree with you for the most part. It's easy to look at a past chart and see the monster moves, but in the end you have to make sure you're booking P. Plus, 3 points isn't exactly a small trade considering normal ES conditions which is what, a 10 point range in the average day or so? Hell, there are plenty of times if I open up the day with a 3 pt trade on full size I will evaluate the action and consider going home.

 

I don't mean to start an argument let alone disrupt jason's yournal, but if you take 3 points out of this market (yesterday hi-lo was about 100points) on a daily basis, then I think you're missing the point. Both yesterday, and Tuesday were trending days for as good as they get.

 

For example: analysis of yesterday.

 

Besides, what would be the risk:reward of a trade with 3 points target?

 

I say the most part because there are some conditions that can lead to bigger moves such as NR4 and NR7 days, breakouts of major congestion areas, and failures from major reference points. But those don't normally happen every day, far from it. But catching one of those a month can make a huge difference in your P/L over time.

 

Most definitely

Edited October 10, 2008 by firewalker

[jasont 10]

Week Of 6th - 10th October Wrap Up

 

It was definitely a wild week in the markets and believe I did pretty well considering. This is again going to be more focused towards what I have been doing to improve my performance in the markets rather than my results. Granted my results I was pretty happy with this week but it is only part what is a broader range of testing I have been undergoing.

 

Just a short few comments on this week and then I will get into some findings on my testing that are standing out. This week I implemented the rule of no trades prior to 9:50am and used exit strategy I have been testing. Monday locked me out of the market as we headed lower and my plan didn't provide me with any solid entries. Friday I didn't get a chance to trade as I had other commitments in the morning that prevented me from trading.

 

The three days I did trade were following the plan for entries and exits which was good. Only one trade this week wasn't entirely in accordance with the plan which is a great improvement on previous weeks. I have found that having a solid exit technique is proving to be a great addition. It is giving me guidance whilst in a trade and seems to be performing well considering the extreme volatility.

 

The results of this week are below and something that I find interesting is that my win ratio is better than what my testing has produced. I have also taken less trades on average per day than what my testing suggests. Both of these, though its only a small sample size in comparison to my testing, I attribute to better analysis during trading days. During my backtesting I don't have my regular s/r levels up nor do I have the Tick data showing. I am still able to backtest with a good idea of where sentiment lies however I believe the Tick and s/r levels give me that little bit of extra help. They could be the reason behind a better win ratio during market hours.

 

Total Trades: 5

Wins:3

Win Total: 22.5 Points

Av Win Amount: 7.5 Points

Losses: 2

Loss Total: 6 Points

Av Loss Amount: 3 Points

Long Wins: 0

Long Losses: 2

Long Trades Profit/Loss: -6 Points

Short Wins: 3

Short Losses: 0

Short Trades Profit/Loss: 22.5 Points

Win %: 60%

Long Win %: 0%

Short Win %: 100%

Points Gain/Loss: 16.5

Risk/Reward Ratio: 1 : 2.5

 

Update on Testing

 

I have been continuing my testing and have discovered some interesting occurrences. So far my win ratio is roughly 50/50 which I am happy with. Considering the risk to reward ratio is at 1.7 for scaled trading and 1.9 for non scaled trading, I don't really have any complaints.

 

That brings me to what I have been analyzing in my results. I am putting my results below to to show a comparison. The first lot are from when I enter a trade with half position and then scale into a full position. I then scale out half at a profit target and then trail the stop on the remainder.

 

Total Days Traded: 18

Total Trade Ideas : 59

Wins: 46

Losses: 48

Total Trades: 94

Win %: 48.9%

Points Gained: 151.75

Points Lost: -93.00

Total Points: 58.75

Average Win: 3.29 Points

Average Loss: -1.93 Points

Risk Reward Ratio: 1:1.70

Average Points Per Day: 3.26

Average Points Per Trade: 0.63

Max Win: 13.5 Points

Max Loss: -3 Points

Max Daily Gain: 20.75 Points

Max Daily Loss: -13 Points

Max Daily Drawdown: -13 Points

Average Daily Drawdown: -4.52 Points

 

This second lot of results are derived from only the initial entry and then trailing the stop. If I double the results to represent using a full position to enter and exit, it is easy for me to see how much better the system seems to perform.

 

Total Days Traded: 18

Total Trade Ideas : 59

Wins: 27

Losses: 31

Total Trades: 59

Win %: 45.76%

Points Gained: 105.5

Points Lost: -63.50

Total Points: 42

Average Win: 3.9 Points

Average Loss: -2.04 Points

Risk Reward Ratio: 1:1.91 Points

Average Points Per Day: 2.33 Points

Average Points Per Trade: 0.71 Points

Max Win: 13.5 Points

Max Loss: -3 Points

Max Daily Gain: 20 Points

Max Daily Loss -7.75 Points

Max Daily Drawdown: -7.75 Points

 

Now by doubling the above results to represent trading a full position I get the following. (I treated the second position as another trade so it would help me calculate brokerage):

 

Total Days Traded: 18

Total Trade Ideas: 118

Wins: 54

Losses: 62

Total Trades: 118

Win %: 45.76%

Points Gained: 211

Points Lost: -127

Total Points: 84

Average Win: 3.9 Points

Average Loss: -2.04 Points

Risk Reward Ratio: 1:1.9 Points

Average Points Per Day: 4.67

Average Points Per Trade: 0.71

Max Win: 27 Points

Max Loss: -6 Points

Max Daily Gain: 40 Points

Max Daily Loss: -15.5 Points

Max Daily Drawdown: -15.5 Points

 

So from the above it would appear that scaling in and out, though does reduce my max daily loss, it reduces my max daily gain much more. Therefore the prospect of scaling into and out of trades is not working well for me. The win ratio appears to be better by 5% on the scaling of trades however it doesn't compete with the added 0.21 points per trade reward seen in entering and exiting upon a full position.

 

That also brings me to this week where I saw my win ratio increased due to the use of the NYSE Tick and my s/r levels. If my win ratio increases then the better risk reward method will provide better performance.

 

The question I have asked myself is, why does scaling in and out appear to be the worse performer? I don't believe it is because scaling in and out doesn't work, what I believe it is due to is time frame and length of trades. It is in part due to my entries on a small time frame, using the 5 minute chart for broader trend, the 1 minute to find trades and the 3 second to time my trades. After entering on a small time frame I then usually exit on a small time frame also. Often I may only be in a trade for 3-10 minutes if it is going my way.

 

Therefore the ability to scale into and out of the market effectively almost becomes a burden. I don't hold on to trades through periods of up and down movement so by the time I would in fact scale in, I would be looking to scale out right away. That is just the way my plan works, it could very well be done better by guys with different plans and personalities etc.

 

So at this point I am swaying towards entering and exiting in a full position. I am going to continue the testing with scaling in and out whilst I do some more analysis on scaling out and scaling in just to make sure things are as they appear.

 

Except for two days, all the testing has been made on days that have a VIX volatility reading of 25 and above. I am aware that high volatility periods will act different to low volatility periods so I am now in the process of testing my plan on days where the VIX is beneath a reading of 20. Doing so will help confirm the exit strategy is solid and can work in periods of high and low volatility. I am interested to see what the results come up with.

[sdoma 10]

I don't mean to start an argument let alone disrupt jason's yournal, but if you take 3 points out of this market (yesterday hi-lo was about 100points) on a daily basis, then I think you're missing the point. Both yesterday, and Tuesday were trending days for as good as they get.

 

I agree, but that's why I said "considering normal ES conditions" which will generally run 10-15 pts avg range per day. This is historically high volatility and really, a new trader shouldn't even be trading this market.

 

Let's put it another way. If I put a trade on and take a profit of 1/3 the average day's range, I will generally go take a break, come back and really evaluate the action to see if I should trade again. No use in giving that back in choppy trade, for example. But if the action is nice I will look for another setup.

[sdoma 10]

The results of this week are below and something that I find interesting is that my win ratio is better than what my testing has produced. I have also taken less trades on average per day than what my testing suggests. Both of these, though its only a small sample size in comparison to my testing, I attribute to better analysis during trading days.

 

Let me start by complimenting your journal. This is really great, excellent job. I like how you always address and work on your weaknesses, no treading water.

 

As for the quoted text, one thing you could do is go back over each and every setup and figure out what you were looking at specifically that you didn't take the trade. At this point, you are a little vague on what is keeping you out, but there may be one or two filters there you can incorporate into your plan. In any event, quantifying what is keeping you out of bad trades can do nothing but good for you.

 

Keep it up!