It’s been one month since I started this series and what an amazing month it has been. I started the series because I knew I was about to transform my trading in a very profound way and I wanted to journal the process. I have discussed the psychological issues that were holding me back. Then I discussed the indicators & multiple time frames that were distorting my vision of the markets. I talked about using market profile & volume profiling to determine the best areas to do business, and I talked about order flow to confirm entries.
So let’s put it all together: Before the market opens I go over the market & volume profiles. I mark off any price levels where I expect price to either be accepted or rejected. I also come up with some hypotheses for what the market may do. I started doing that for my swing trading over a year ago and it’s been very helpful. The market doesn’t have to actually do any of my hypotheses but just the act of me thinking them through helps me to be prepared. For example I may have a bearish bias, but I force myself to come up with some bullish hypotheses. Then if the market is bullish I can relate to it and see it, instead of just saying “Ah that move up is bullshit!”
When the market opens I wait for price to come to one of my areas and then I determine whether I think the level will be accepted or rejected. I mainly look for levels where price will be rejected. I look at a variety of data to determine this. Currently it’s the DOM but I also look at (or have looked at) a one minute chart and a volume ladder. I use these tools to enter and manage my trade.
If the context is right (the “where” and “which way”) then the entry isn’t as crucial. But I like to get a good entry so that I can use a tight stop. A tight stop will allow me to increase my size. Once the trade is on, this is the real challenge of trading – trade management. Most traders focus on the entries, but I believe trade management is the ultimate edge. I feel that someone could flip a coin for when and which direction to enter and I could almost be profitable. If it went against me I’d close the trade. If it went in my direction I’d trail a stop. I haven’t actually tried that, but that’s how I feel. That is what I’m doing when I manage my trades, I just use context to give me better odds than a coin flip.
While waiting for price to come to my area, I’m watching the DOM looking for scalping opportunities. As Al Brooks says in Reading Price Charts Bar by Bar, every trade starts as a scalp. If there is not much context for it then it’ll remain a scalp. I find 4 ticks to be a good target. If you catch some traders on the wrong side then it’s not difficult for the market to move one point as those traders stop out. If the trade has some context then I’ll let some of the position run. And if the trade has a swing trade context, then I’ll look to hold a few overnight.
The key to this is to have very small losses and to slowly increase size. My ultimate goal is to trade 100 contracts on ES. That may seem like an unrealistic goal but I figure if I could trade 50 and my account size was big enough for the risk to be acceptable, then I could trade 100. And if I could trade 25 and my account size could handle the risk, then I could trade 50. And so on. It all starts with 1 contract. Just getting a few points every day without excessive risk. And slowly increasing size: 1,2,4,…100. I’ve traded 8 contracts without stops so I should be able to trade 8 with stops right?
The past few days I’ve been scalping Dax, Crude & Euro but I found they only divert my attention away from my main markets which are the Euro Bund & ES. So I prefer to really concentrate & focus 100% on the single market I’m trading. Once I get that mastered I’ll think about trading a second market, if I even need to.
This post has ended up being a template for a trading plan, specifically my trading plan. I wish I had had a blog series like this 3 years ago when I started trading. I would have saved myself a lot of time, stress, and money. So I’m paying it forward by making this series available to you. I hope you have found it useful and that it will be of help to you in your own journey.
Going forward, I’m not sure where I’m going with the blog. I’m avoiding making any predictions about what the market may do. I do like to come up with hypotheses but they’re just that. Brainstorming of ideas so that I can be prepared for whatever comes. So I’d like to focus the blog more on the rest of my journey. I plan to share some trades, maybe even real time, like I used to do. And I’d like to talk about psychology as well.
In order to make all this more interactive, I have a few ideas: I’d like to organize a webinar to discuss everything I’ve written about in this series. I’ve received a lot of feedback already, with many of you telling me how much my journey resembles your own. I bet it’d make for a very interesting discussion. I’ve never organized a webinar before so maybe we can start with some informal chats. I’m usually off to bed when the markets close so we’ll have to work something out.
I’m also thinking a forum would make it more interactive. I don’t have the time or knowledge to run a forum so I’m currently looking for help with this. If you’re interested in helping, please let me know.
Thanks for reading and I wish you the best of luck for your own journey.