Update – I have a new journal that I’m working on and will be making it available real soon. Please check back.
Everyone talks about the importance of a trade log and/or journal for trading. I can’t tell you how many times I started one only to quit because it was too much work. So after many different attempts, I think I have found a good solution that works for me. The key is to have a minimum of manual tasks and automate as much as possible. I do this in three steps which are explained in this video and in the text below.
Step 1: I do all my daytrading with the Ninjatrader DOM which keeps track of the performance for me. I can generate performance results with just a few clicks. I can separate performance by instrument, by DOM strategy, and/or account (real or sim).
Step 2: I copy the wins & losses into an excel spreadsheet so that I can track my progress each day. I do this for a couple reasons. First I trade European & US futures so I have to convert euros to dollars to get a total for the day (Ninjatrader does not do currency conversions in its P/L). Second I include my swing trading results. My swing trades are executed through Interactive Brokers and don’t appear in the Ninja account performance report. They could if I traded them through Ninjatrader but I prefer IB’s TWS for swing trades.
Step 3: I write down my thoughts on each trade along with a list of the criteria that was met for the trade (per the trading plan). I note any mistakes I made so that I can review them at the end of the day and again before the beginning of the next trading day.
This last step is new for me so we’ll see how that goes.
The data in time & sales is the only data we have that is generated by the market in real time. The time & sales shows:
In my opinion the time data is often ignored yet highly useful. Moves start and end with a flurry of trade activity. If you watch the time & sales when trading then you’ll see this, often called “flooding”. At the beginning of a move if you’re long you want to see a flood of buying. Ideally you want to be in before the flood to avoid slippage and getting in at a higher price, but at the same time this flood can give you confirmation for your trade.
At the end of the move, all the “laggards” will be joining in, thinking that the move will continue forever. Using the long as an example, the late-comers will be buying in. And the high price will attract sellers. The result is another increase in the trade intensity. Only this time it’s a sign of exhaustion.
Exhaustion doesn’t always mean the move is over. The market can simple pause and take a breather, or even pullback a little. It can then either continue the original direction (up in our example) or go into a correction. This tool alone cannot tell you which is going to happen so it’s important that you use it with other tools.
I also find that there will be an increase in the trade intensity when stops are taken out. This often happens immediately before a reversal.
So how do I use this tool? I use it to alert me to potential buying & selling exhaustion. I do not use it as a signal to enter trades. My trading is based on discretion. I look for a confluence amongst all my data, and the pace of tape is just one piece of the puzzle. I typically don’t even look at the chart. Instead I rely on the audio alerts.
The following video and chart explains some of these concepts. For the indicator to be responsible, a very fast tick (or volume) chart must be used. It’s important to point out that I do not trade off this chart, I’m only showing it here with my chart markers to illustrate how the indicator can be one element in a decision making process. Please make sure you understand that I am not looking at this chart while trading. This has been a source of confusion before and I want that to be perfectly clear. Since I trade using multiple charts, the reasons for my trades cannot be seen on this chart alone.
The image below shows the signals & trades that I discuss in the video.
Click the image to see it full size
This indicator only works on a fast tick chart (does not work on minute or any other chart time). I I suggest putting it on its own chart and not on your main trading chart that way you can trade whatever timeframe you want.
There are 3 settings you need:
The tick bar size. This is basically the increment size for the reading. If you use 100 tick it’ll increment by 100. So a 1 tick would be most accurate but I prefer 100 so that I can read the price action on the chart.
The period is the number of seconds in which to look for the trades. If you put 5 seconds it’ll display the number of trades in the last 5 seconds.
The threshold is the required number of trades in the last period in order to give a signal (turn orange and display the paintbar). There is no single best parameter as it depends on the market and the activity. I just eyeball it so that it gives me a few signals but not too many and then update it every week if needed.