Nov 072010
 

As a reminder, I went to sim beginning of October in order to work on some issues.  I wrote about that in the series A look back on my journey.  I had made radical changes to my trading plan:  I eliminated the sine waves & multiple timeframes, better momentum, and I used tight stops.  After a few weeks I was ready to go live with real money on October 29.

So this past week marks my first full week back on real money.  I still did some scalping on simulator to test out ideas but the majority of my trading was on real money.

I’m tracking two key metrics for my trading.  The first is Profit Factor.  This is simply the total wins divided by the total losses.  My profit factor was 1.92 which means I won roughly twice as much as I lost.  This metric does not include commissions simply because it would greatly complicate my excel file.  I export my trades from my platforms to CSV and then paste the trades into my trade journal where I do my metrics myself.  If I have time I’ll update this metric to take into account commissions.  Ultimately my goal is that commissions will be a relatively small part of my results, so this shouldn’t be an issue.

The second metric I’m tracking is the net gain per contract traded, including commissions.  This is ultimately what counts as it shows how much money I made.  I break this down to per contract because some trades I trade more contracts than others.  My average win per contract was $10.77.  And I must admit I was quite suprised at how low that figure was!

So surprised I spent a while going over my trades to figure out how that could have happened.  I took a lot of trades so I had a very good week.  I made more than I expected.  But averaging under 1 tick per trade is way lower than I was expecting.  With $4.50 commission that means commissions took up 1/3 of my profit.  Ouch!  Normally this should be around 10-15%.

I determined two reasons for this low figure:  The first is I scratched a lot of trades.  As an example, if I got 4 ticks on one trade and scratched another that would give me an average of 2 ticks/contract.  So to make up for these scratches I need to have some bigger winners and I didn’t.  My goal last week was just 4 ticks on ES.  My plan is that if I can be profitable with a target of 4 ticks and a stop around 4 ticks, then I can increase size – add a second contract and go for 6 ticks on the second.  So a 4 tick target isn’t optimal, it’s just to get the ball rolling.

The second reason is I overtraded.  I took too many trades that were just “ok”, and that explains why I scratched so many.  So I need to be more selective.  I need to wait for really good levels. This is my key focus this week.  I want to trade less and make more per contract.  I think a good goal would be to double  it and go for $21/contract.

This week will be a short week for me as I’m leaving Thursday for a long weekend to Normandy (weather permitting).

I’ll be tracking these metrics every week and I’ll also talk a bit about the size I’m trading.  I’m currently trading 1-2 as my base size.  I need to see an improvement in my average win per contract before I increase my size.

These stats are only for daytrading and does not include swing trading.  Speaking of swing trading, I listed three scenarios for ES’s test of the previous top and it looks like scenario 1 is ruled out and scenarios 2 & 3 are still possible.  I really expected 1216.50 to hold and it did not.  However, my interpretation of the price action above 1216.50 is that it is weak.  I think the overnight session tonight could be a good opportunity for  a gap down.  Basically I’m looking for two things – either a strong sign of selling for me to hold my trade, or a pullback for me to exit the trade at a loss.  I’ve been a bit more patient with it than I should have, but that’s because the potential is quite huge (estimated around 60 pts).  The move up this week has been news-driven and has not had a normal auction.  Now that the news is out the auction should be more efficient.

Good luck with your trading this week.

  2 Responses to “A quick review of my day trading this week”

  1. Congrats, Michael, your average profit is quite good for short term trading. If you can scale it – trading more contracts – it will add to quite a lot. And it is better to have 6 trades a day with an average of 1 tick than 2 trades a day with an average of 2 ticks.
    Do you have a stop loss for you swing position in the market just in case we do not gap up but perhaps down?

    Cheers,
    Markus

  2. My goal is 2-4 trades with 4-8 ticks profit. 🙂 I set high goals.

    I don’t like to use hard stops. I always get taken out at the high/low. I’m not very comfortable here but I trust my intuition. I want to see how it goes on Monday. I believe smart money was selling on Friday but that has to be confirmed.

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