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swansjr

Return of Daybreak Trading

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Return of Daybreak Trading

 

My first attempt at day trading was based on the Watts Method. Dissatisfied with my performance I've since abandoned that technique in favor of what I consider a simpler approach. Because it's "simple" I feel I'll be less prone to paralysis-by-over-analysis. This was a problem I had with my previous system. I also find the techniques make a lot of sense because they jive with how I believe markets work. The methods and techniques I'll be structuring my trading around is entirely based upon Al Brook's methods as described in his book, Reading Price Charts Bar by Bar.

 

Let's start.

 

I've been rather poor at keeping a trading journal in the past. So I've decided to keep a journal here. I hope by posting daily updates (or nearly daily updates since I most likely won't post if I don't trade) I will feel more compelled to trade well. Hell, everyone can see my trades (the good, the bad and the ugly), right? So I better do this well. So, my hope is with this new accountability of showing my trades to fellow traders on this site, I may become more strict when executing trades against my trading plan. I've been also toying with the idea of recording my trades with a video screen capture program and a microphone. But that's another story.

 

I'm trading the EC market with real money in my TradeStation account.

 

I execute trades on two basic setups:

 

1) Trend Continuation Pattern

2) Trend Reversal Pattern.

 

Trend continuation patters are just that. Entering the market in the direction of the intermediate trend as determined by trend lines. This often means entering long on H1, or H2 pullbacks. Or, entering on the short side on L1 or L2 pullbacks.

 

Trend reversal patterns are a great opportunity to catch a good sized move. These consists of the intermediate trend reversing. Brooks has a specific setup for this which consits of a intermediate or major trendline break and a retest of the extreme. I would like to explain these more in detail soon. Perhaps a video would be best.

 

Below are a few descriptions of my trading environment and money management rules which will most likely will evolve over time.

 

Trading Times: 5:00am - 830am central.

Screens: 610-tick chart with a 20 period exponential moving moving average.

Position Size: 1 contract.

Scalp Target: 8 ticks from entry

Open Target: discretionary. Often break of trendline or a previous resistance area.

 

Risk Per Trade:

The maximum to risk is 12 ticks (12 ticks * $12.50 per tick = $150). Many of the setups will risk far less per trade.

 

When to Stop Trading:

 

After two consecutive losing trades, stop trading for the day.

After three consecutive winning trades, stop trading for the day.

Maximum Day Loss: $200.

 

 

Again, my goal is to trade well. That means executing against my trading plan without deviation. It also means to show consistency over the days, weeks and months. Emotional reactions are the enemy. Its fine to be emotional, but don't let it affect your trading decisions. When emotions bubble up, walk away from the computer. Cool off.

 

Now it's time to get down to business.

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Day 1

November 6, 2009

 

P&L: $430 on 3 trades.

 

I've been trading my new method for a few weeks now. I've been experimenting with which size tick chart to use, target levels and just getting an over all feel. Thursday (November 5th) I made a few mistakes as I noticed I was getting sloppy. I set a commitment to myself to begin this journal Friday, November 6th. I studied my setups the night before and reminded myself that I should be only taking the very clear signals. In short, if in doubt about a signal simply wait for another signals. Things really could not have worked out much better for my first day.

 

Trade #1 Trend Continuation - Entry on H2 pullback. While my first trade was a great entry I got spooked and exited at break even. Naturally, the trade would have worked out fine. This was my first trade of this new thread and I got spooked. :confused: This turned out to be my only mistake for the day.

 

Trade#2 Trend Continuation - After the trendline broke I was still looking for a trend continuation trade (short) as I was anticipating a test of the previous lows.

 

Trade #3 Counter Trend - After a test of the lows I was now expecting the market to reverse. I was planning on holding this as a runner. Price did make a new lower low and I entered a H2 after the the market created a lower low above the EMA. I played this one safe! Attempting to determine when to get out was another story. I immediately noticed a former trend line from days before that extended into my chart. I placed a sell order just below it.

 

I could not be happier with today. Outside of my first mistake I executed everything very well. The market made it "easy" as it moved in textbook fashion. Trendline break followed by a retest of the extreme where I can enter counter trend. Beautiful! I really felt good today.

 

Attached is a video review of my trades:

 

Trading_Review_2009-11-06.swf

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Day 2

November 9, 2009

 

P&L: $97 on 1 trade.

 

 

Today I woke-up to find the market made a huge bullish move in the overnight session. I drew what I thought was a major trendline. In short order price action broke the trendline which put me in a counter trend mode. I waited for a re-test of the highs before going short. Price proceeded to slowly meander for hours. It was not until around 8:30 (nearly three hours later) did the market retest the overnight highs. I shorted at the first sign of weakness which was an L2 entry after a bearish bar broke though a support line. Because it was so late in the morning (I needed to get to work) I only took a 8-tick scalp.

 

Attached is a review of today's trade:

Trade_Review_2009-11-09.swf

 

In summary, I waited for three hours to get my setup. Nice job as I stuck to the plan! ;)

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Day 3

November 9, 2009

 

P&L: $147 on 1 trade.

 

Today's video is a live trade! Check it out below.

 

Today I woke-up to find the market in a bullish mode. I had two bullish trendlines on my chart. One was a short-term and the other, which extended over a day, was a longer-term trendline. The market came down and testing the short-term trendline and I was looking to go long at a H2. I was never filled as the marked moved down to test the longer-term trendline. Once again no setup. So, here I had two broken trendlines and I started to watch for a good L2 entry near the newly formed bear trendline or the EMA. But I noticed the downward action was weak and not very convincing. I thought to myself I will sit this out to see what happens.

 

Some time later the market broke the bearish trendliing and I waited to see a test of the lows. In fact I was anticipating the market to create a lower low as it tested a former support level. In short order the market came down and tested the very level I was watching. I planned on going long at a H2 after the test of the support line. I did enter but it was a bad fill. The market was moving swiftly and I had to do a little chasing. This did not make me feel very well. My stop was $150 and I adjusted my target to $150 as well. I did not use a scalp target because I was playing this as a reversal trade (which it was) and the potential for a sizable move was real. Since I had to go to work I could not use an open discretionary target.

 

Then my Internet connection went down! This has never happened with an open order. My connection is very reliable. I called TradeStation and in a very short time I was speaking with a representative. He told my my target was hit and my stop loss was cancelled. I was told that when I enter my trades on the "matrix" the orders are sent directly to the exchange. At least, that was my understanding after his explanation. So, target it.

 

This is five good trades trades in a row. Well, the fist one was a scratch. So, lets call it four good trades in a row. I'm very pleased with myself. The last two trades were entered after I watched the market for over 2 or 3 hours. I'm patiently waiting to for clear setups and entering. This may be beginners luck, but I'll take it.

 

Attached are two videos of today's live trade.

 

Live_Trade_2009-11-10_Part_1.swf

Live_Trade_2009-11-10_Part_2.swf

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If you could post charts of your trades with the notations that would be really helpful. Looking forward to seeing your progress.

 

Good luck.

 

Yes, I agree. I'll be posting images soon.

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I'm gonna have to go back an re-read brooks because your interpretation of H2/L2's is completely different from mine. lol.

 

Well, I might be wrong as well. But I think I have the gist of it.

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Day 4 - Day 5

November 12, 2009

 

Day 4 (Wed, Nov 11, 2009) I placed no trades as none of the patterns looked very appealing. It was on of those days where most of the price action happened very early in the morning and stalled in the few hours before the opening bell at the NYSE.

 

P&L: ($17) on 2 trades.

 

2009-11-12_1.png.f8ae8ffc28d0604f92adb09ad47397fa.png

 

Today was Day 5 and proved to be my first losing day since starting this thread. My first trade of the day was a reversal setup as price broke a trendline and re-tested the extreme. I entered on the first H2 bar after testing the previous lows. However, I was promptly stopped out.

 

Price would move lower and hold at a previous day's support level. This constituted a lower low after a trendline break and I was weary price was simply going to continue to move down. However, I made my second attempt at going long by purchasing the H2 bar. The second trade sputtered as it move up which resulted in me moving my stop up fairly aggressively. I was expecting a more forceful move on a reversal trade. In retrospect I may have been too aggressive in moving my stop. The rally was short lived but I managed to grab 9 ticks. Price made three distinct pushes up then failed to hold it's bullish trendline. Staying in the trade until the trendline broke would have resulted in 11 more ticks.

 

Attached are two videos of today's live trade.

 

Live_Trading_2009-11-12_1.swf

Live_Trading_2009-11-12_2.swf

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Day 6

November 13, 2009

 

 

P&L: $97 on 1 trade.

 

2009-11-13.thumb.png.09eab90d7efcc3e3c7bb0fb9e96c799b.png

 

The market was in a bullish trend in the overnight session. When I started watching the market at 5:00am the bullish trendline was in the process of breaking. I watched as the market was coming down to test a major support area (the yellow line on the chart) and planned on going long there. The market created two legs down and hit the support level. This is a continuation pattern (bullish) so I went long.

 

I scalped this trade, but in retrospect that was based on emotion. Anyway, my target was hit and I was done for the day. Lots more info on the attached video.

 

Attached video of today's live trade:

 

Live_Trade_2009-11-13_1.swf

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Day 7

November 16, 2009

 

P&L: $45 on 2 trades.

 

2009-11-16.png.270de628830f76feb3364b40d8623960.png

 

This morning I decided I was not going to take scalp profits. Instead I was going to let the market move in my favor while I advanced my stop. I would exit either on a test of an extreme level or after a break of a trendline. The market was in a bullish trend during the overnight session. When I started watching the market at 5:00am the bullish trendline was in the process of breaking. I watched for two legs down and purchased the first H2 bar - a typical trend continuation pattern. Price moved in my favor but not very much as my stop was hit. I lost around $50. In retrospect my initial drawing of the overnight bullish trendline was not have been correct. With a slight adjustment I could see I was actually buying the first pullback - not the second.

 

The market would fall to a longer term bullish trendline. It appeared this was the second leg down and I wend long at the first H2. Again, I held on systematically moving my stop up. This time I was taken out for $100 profit.

 

Today would have been a good scalping day, but that's OK. I followed my rules well and I'm aiming to make more profit per trade. Holding on to these trades and knowing when to get out is a skill I've not worked on at all!

 

Attached video of today's live trades:

Live_Trade_2009-11-16.swf

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Day 8

November 17, 2009

 

 

P&L:$(244) on 3 trades.

 

Today was a screw-up. My first two trades were well executed. My first trade nearly hit my scalper target. When it missed it by a tick or two I moved my stop to break even +1 tick. I was stopped out. OK fine.

 

My second trade took me out the same bar that I entered. Now, this was a signal that something was wrong. I even noted this in my video recording. However, I let my emotions get the best of me as I entered on third time. The entry was not even a valid setup - I was chasing the market - and I got nailed for it. Damn! :crap:

 

I was on the verge of catching myself but I lapsed into trading emotionally on my last trade. Time to refocus once again. I need to constantly remind myself. I need to push away from my trading screen when my setups are not materializing. There will be other days to trade. I want to make consistent money, so that means I need to stick to my setups.

 

Please see the attached video for today's screw-up in more detail.

 

Live_Trade_2009-11-17.swf

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Day 9

November 18, 2009

 

P&L: $97 on 1 trade.

 

2009-11-18.png.8b4cfd151263fe822cf34cf3b759baf1.png

 

This morning consisted of a lot sitting and watching. The market was, once again, in a strong bull mode all throughout the evening. Kind of makes me want to stay up late. In my days before I got married I was a night owl and trading EC at 2:00am would be realistic. I'm not so sure now.

 

Anyway, the market started breaking trend lines when I appeared on the scene around 5:00am. Today's action was also a little confusing because I noticed two distinct trend lines that were in play. After the first one broke, the second one broke I was asking myself, how do you count the two downward pushed after a trend line break? do I count four? I started guessing that it would be a three push down to a resistance area and sure enough it happened. The first push down broke the second trend line and the last two pushes were for the second (longer term) trend line. But I did not take the trade because I was not convinced my concept was correct. I'm trying my best to simply trade setup I have defined, and this is not one. So I watched. Sure enough it bounced. Then it bounced even harder creating a very strong bullish candle. I jumped in for a quick trend continuation scalp that took less than 1 minute to complete. Price would then test it's extreme from the first trend line break. I would have shorted at this point, as per my plan, but it was getting late in the morning and I needed to get to work. This work thing is really getting in the way of my trading!

 

 

No video today.

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Hey Swan, I'll be following this with interest. I'm a great fan of Al Brooks' book and I have highlights and flags all over my copy. I would say it's the 'Bible' for the price action trader and I urge every new trader to read it. I have a mate who is a Broker in London and he purchased a copy and has said it's revolutionised his view of the charts/markets.

 

My interpretation of the H1 and L1s is that it must be at a swing (ie the price must reach into new ground but the candle/bar high /low must be taken out by the next bar to confirm it as a swing point) OR a HL/LL at the 20ema.

 

I'm sticking to 3 trade types but I'm out on the daily Forex pairs.

 

1. Wait for a significant TL break and then look for PA to get back with the trend, expecting a HH test of the 'old' trend's extreme.

 

2. Long/Short at the ema with H1's and L1 and M2Bs etc along with ema gap bars.

 

3. Taking every with trend PA SR opportunity / pullback that the market offers.

 

I'm re-reading the book for the 3rd time and I still keep learning as I read, the stuff I missed before ;)

Good trading

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Hey Swan, I'll be following this with interest. I'm a great fan of Al Brooks' book and I have highlights and flags all over my copy. I would say it's the 'Bible' for the price action trader and I urge every new trader to read it. I have a mate who is a Broker in London and he purchased a copy and has said it's revolutionised his view of the charts/markets.

 

My interpretation of the H1 and L1s is that it must be at a swing (ie the price must reach into new ground but the candle/bar high /low must be taken out by the next bar to confirm it as a swing point) OR a HL/LL at the 20ema.

 

I'm sticking to 3 trade types but I'm out on the daily Forex pairs.

 

1. Wait for a significant TL break and then look for PA to get back with the trend, expecting a HH test of the 'old' trend's extreme.

 

2. Long/Short at the ema with H1's and L1 and M2Bs etc along with ema gap bars.

 

3. Taking every with trend PA SR opportunity / pullback that the market offers.

 

I'm re-reading the book for the 3rd time and I still keep learning as I read, the stuff I missed before ;)

Good trading

 

Thanks for the reply. Yes, I do consider Brook's book the "Bible" for price action as well. There is so much information you must read the book several times. Likewise, I found his trading style revolutionary. I find myself buying and or selling in areas where I never would have just a few months ago. But strangely, it feels more natural. I think it's because I understand the psychology behind the price and thus, it makes sense to enter a particular trade as described by Brooks.

 

Yes, my initial impression of H2 and L2 appears to have been wrong. I do find his definition in his book confusing and I'm now adjusting my definitions.

 

Best wishes!

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Day 10 and Day 11

Friday, November 20, 2009

 

No trading on Thursday, November 19.

 

P&L: ($284) on 4 trades.

 

This day simply consisted of frustration as the market proved me wrong. In retrospect, I totally misread the market and discovered that I accidentally placed an important daily supportlevel in the wrong location. This error most likely cost me hundreds of dollars today. :doh:

 

First, watch the gory details of my trading in the following to videos:

 

Live_Trade_2009-11-20_1.swf

Live_Trade_2009-11-20_2.swf

 

Then hear my explanation on my errors which caused me to misread the market:

 

Live_Trade_2009-11-20_Review.swf

 

It's all about the details! On a positive note I did keep my cool, I think, and did follow my plan even though I was wrong on my market reading. You can be sure I will be much more careful going forward.

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Day 12, 13 and Day 14

Wednesday, December 2, 2009

 

No trading on Monday, November 30. No trading on Tuesday December 2.

 

P&L: $80 on 3 trades.

 

Today's trades were largely clear cut to identify and were executed textbook fashion. All trades were setups based on price bouncing of a trendline and/or 21EMA. Most notable today was my last trade which was a long. Price came down to touch a longer term bullish trendline. This trendline extends for days and I think it's an important lesson in keeping trenlines on your chart for days or weeks. I don't know how often I see price react at these levels.

 

Below is an image of today's trades which are self explanatory.

 

2009-12-02.png.33c51b8037deadb9fad40bab9cc7f960.png

 

I did record today's trades but I accidentally recorded it as a mp4 file.So I will not post it.Instead I decided to comment on a couple of observations about price action. Price today in the EC, at least in the early morning, was following the rules and created very predictable entry points.

 

Trade_Review_2009-12-02.swf

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Day 16

Friday, December 4, 2009

 

P&L: $710 on 1 trade. :)

 

2009-12-04.png.a0a0d03288be31f651d8d3402d49fce1.png

 

I was able to capture some of the movement after the U.S. unemployment figure came out. The market was moving down sharply and I had to sit and watch for a set-up. Painful! Then an EMA touch happened and I took it. Within 3 minutes my target was hit for a $710 profit. The large profit was due to me seeing how fast EC was falling. Thus, I abandoned my scalp target and replaced it with a distant trendline that appears on my daily chart. I also aggressively trailed my stop. Well, EC ripped right down to the daily trendline while I took no heat. This was my biggest daily profit so trading EC. Most importantly, I followed my plan 100%. I was tempted to continue to trade, and if I was a better trader I should have. It is days like this, when the market is rewarding your trading, you should stay in. However, because I'm not consistent enough I backed off. That was probably the right thing to do. I look forward being more consistent where I can continue to press days like this.

 

Attached is a video of today's trade.

 

Live_Trade_2009-12-04.swf

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Day 17

Monday, December 7, 2009

 

P&L: ($127) on 1 trade.

 

2009-12-07.png.ad1e49dce78dc4eb13b3335fd429cd9d.png

 

The very second I sat down at my computer I saw a 21EMA Touch setup had just formed. I jumped in at 5:11am. Within 60 seconds I was drawing trendlnes on my chart and noticed I was long in a bearish environment. I held on to the trade and was stopped out soon after. I really should have taken a moment or two to view the bigger picture. I would have noticed a bearish trendline was broken and what I was witnessing was most likely bearish action.

 

No video today as I did not even have time to get my software up-and-running.

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Day 18

Tuesday, December 8, 2009

 

P&L: $322 on 1 trade.

 

2009-12-08.png.7ce1cc7f7ae4146d1ff0291d3a5fa2d6.png

 

EC looked choppy early today. But if you took a long distance look it seemed down was the way to go. I shorted a failed test of the 21EMA and set my target at a convergence of a resistance level that I drew days before and a bearish trend channel line. It sure looked far away at the time. But before I knew it, my profit target was hit. After my trade, I did notice that the upside was hitting lots of sellers. I was tempted to take other short trades during the morning, but I was distracted with other tasks and I talked myself out of it. Today would have been a great day to hold though much of the action as the EC spent most of its time grinding lower.

 

Attached is todays trade on video.

 

Live_Trade_2009-12-08.swf

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This marks a sharp jump from the 35% risk estimated just last month—and more than double January’s 20% projection. J.P. Morgan issued a bleaker outlook, now forecasting a 60% chance of recession both in the US and globally.   Global Leaders Respond as Trade Tensions Deepen   The dramatic market sell-off was triggered by China’s sweeping retaliation to a new round of US tariffs, which included a 34% levy on all American imports. Beijing’s state-run People’s Daily released a defiant statement, asserting that China has the tools and resilience to withstand economic pressure from Washington. ‘We’ve built up experience after years of trade conflict and are prepared with a full arsenal of countermeasures,’ it stated.   Around the world, policymakers are responding to the growing threat of a trade-led economic slowdown. Japanese Prime Minister Shigeru Ishiba announced plans to appeal directly to Washington and push for tariff relief, following the US administration’s decision to impose a blanket 24% tariff on Japanese imports. He aims to visit the US soon to present Japan’s case as a fair trade partner.   In Taiwan, President Lai Ching-te said his administration would work closely with Washington to remove trade barriers and increase purchases of American goods in an effort to reduce the bilateral trade deficit. The island's defence ministry has also submitted a new list of US military procurements to highlight its strategic partnership.   Economists and strategists are warning of deeper economic consequences. Ronald Temple, chief market strategist at Lazard, said the scale and speed of these tariffs could result in far more severe damage than previously anticipated. ‘This isn’t just a bilateral conflict anymore — more countries are likely to respond in the coming weeks,’ he noted.   Analysts at Barclays cautioned that smaller Asian economies, such as Singapore and South Korea, may face challenges in negotiating with Washington and are already adjusting their economic growth forecasts downward in response to the unfolding trade crisis.           Oil Prices Sink on Demand Concerns   Crude oil continued its sharp slide on Monday, driven by recession fears and weakened global demand. Brent fell 3.9% to $63.04 a barrel, while WTI plunged over 4% to $59.49—both benchmarks marking weekly losses exceeding 10%. Analysts say inflationary pressures and slowing economic activity may drag demand down, even though energy imports were excluded from the latest round of tariffs.   Vandana Hari of Vanda Insights noted, ‘The market is struggling to find a bottom. Until there’s a clear signal from Trump that calms recession fears, crude prices will remain under pressure.’   OPEC+ Adds Further Pressure with Output Hike   Bearish sentiment intensified after OPEC+ announced it would boost production by 411,000 barrels per day in May, far surpassing the expected 135,000 bpd. The alliance called on overproducing nations to submit compensation plans by April 15. Analysts fear this surprise move could undo years of supply discipline and weigh further on already fragile oil markets.   Global political risks also flared over the weekend. Iran rejected US proposals for direct nuclear negotiations and warned of potential military action. Meanwhile, Russia claimed fresh territorial gains in Ukraine’s Sumy region and ramped up attacks on surrounding areas—further darkening the outlook for markets.   Always trade with strict risk management. Your capital is the single most important aspect of your trading business.   Please note that times displayed based on local time zone and are from time of writing this report.   Click HERE to access the full HFM Economic calendar.   Want to learn to trade and analyse the markets? Join our webinars and get analysis and trading ideas combined with better understanding of how markets work. Click HERE to register for FREE!   Click HERE to READ more Market news.   Andria Pichidi HFMarkets   Disclaimer: This material is provided as a general marketing communication for information purposes only and does not constitute an independent investment research. Nothing in this communication contains, or should be considered as containing, an investment advice or an investment recommendation or a solicitation for the purpose of buying or selling of any financial instrument. All information provided is gathered from reputable sources and any information containing an indication of past performance is not a guarantee or reliable indicator of future performance. Users acknowledge that any investment in Leveraged Products is characterized by a certain degree of uncertainty and that any investment of this nature involves a high level of risk for which the users are solely responsible and liable. We assume no liability for any loss arising from any investment made based on the information provided in this communication. This communication must not be reproduced or further distributed without our prior written permission.
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