Nov 192010

Today was a day that started out great and then went downhill real quick.  I did very well on the bund, despite taking only 1 out of 3 good setups.  Then premarket I got 4.25 pts on ES.  I almost didn’t trade ES because I had already made more than my average and because it’s options expiration.  But I thought that was my fear monkey and if I had traded well that day I should continue.  Before the open, my hypothesis (tweeted on #FT71) was that if 93 held we’d probe higher and if it didn’t we’d probe lower.  93 was key.

In the end, my hypothesis did turn out to be correct.  93 didn’t hold and we tested yesterday low.  So why did I lose money?  Because I thought 93 was holding and I went long at 93.50 partial position.  Then I thought 92.50 was holding and added on.  Then I thought the CLVN at 91.50 was holding and added again.  And what I realize was I was no longer trading my hypthesis!  I was just inventing one on the fly and that’s not good because I was in a losing position and not thinking rationally.

Market went down to test yday low and there I got some good signals and I bought the low several times, scaling out at the CHVN at 90.  This made up for some of my losses and I closed everything by the CLVN at 91.50 (later moved to 91.75 if I remember correctly).  So I ended up down 1 pt on the deal but there’s a catch – I racked up a huge amount of commissions!  1/3 of my ES profits went to commissions.

I’m not sure the best way to handle that.  I got lucky 87.50 held.  If it hadn’t ES would have went to 84 and then I would have had a huge loss.  On the other hand, it was hard to stop out with a level just below me.  But I think that’s what I should have done.  Had I stopped out at say 90.50 and taken say 6 pts loss.  I could have went long 87.50 and covered that at 90 and made the 6 pts back.  The P/L result would have been almost the same, however I would have been better protected had 87.50 not held.  For one if I had seen that it wasn’t holding I wouldn’t have entered and my loss would have been capped at the 6 pts.  If I had entered 87.50 and it didn’t hold I could have stopped out at 86 and then tried again at 84.

Note: I’m using 87.50 because it was the low.  I wouldn’t really be entering at the exact low.

Or I could have recognized an open drive down after the first stop out and stayed out.  Lots of possibilities, and here’s the irony – the one I choose ended up giving me a good P/L but it exposed me to more risk than I should have and for that reason it’s not the right choice.  As FuturesTrader71 says, and I paraphrase, “don’t trade to make money, trade to trade well and the money will take care of itself.” I didn’t trade well.

So one more.. it bounces up to VWAP and I go short again at 93 and that doesn’t work and I scratch the trade for 1 tick and put myself on the bench.  You can see how I racked up so much in commissions.  I scratched several trades and when I do that it really brings down my $/contract average.

After those 3 trades, rather than watch the market trade in a 2 pt range I studied all this so that I can learn from my mistake.

I think next week will be an experiment.  2 pt stops.  No exceptions.  I can stop out and enter again but I must take the stop at 2 pts max.   I’ll be thinking on this over the weekend.

So here’s the month to date performance.  I blocked out the actual $ made, not because it’s a big secret but rather because I want to track some metrics that are independent of size.  so that I can track the same metrics as my size increases.   I’m averaging $228/day which works out to be about 2 ES pts/contract per day.  I used to think that was all I needed, after that I could just increase size.  But now I think I’m not trading well and I shouldn’t increase size if I’m not trading well.  Sure 2 pts/day is a lot better than being negative.  But I know I can do much better.  Averaging less than 1 tick per contract is not good.  So this value must increase before I increase size.

So my focus for next week is :

  • 2 pt max stop and honoring them.  Even if it means being negative next week.
  • Higher $/contract

When I see improvement in those then I will increase size.  This journey is turning out to be a lot more complicated than I thought it’d be.

Have a nice weekend.

  4 Responses to “ES trade review & week metrics”

  1. First let me say your stat looks very good to me. An average of one tick is not bad, man, if you can do this not for 3 weeks but for 3 months. And with enough size you will make a decent living of it, especially if you can hold to the ratio of your winning days to losing days. Good job

    “In the end, my hypothesis did turn out to be correct. 93 didn’t hold and we tested yesterday low. So why did I lose money? Because I thought 93 was holding and I went long at 93.50 partial position. Then I thought 92.50 was holding and added on. Then I thought the CLVN at 91.50 was holding and added again. And what I realize was I was no longer trading my hypthesis! ”
    — Just guessing: Perhaps you have not traded your hypothesis but followed the one of FT71. I am glad that I do not trade the ES so I am not tempted very much to follow his trades.


  2. I think you hit the nail on the head. My plan was to get short if 93 broke and you’re right, FT71 was wanting to go long. I even saw Adam from SMB get short. I let myself get distracted and then the stress of being in a losing position just made it worse.

    It’s amazing how much I learn every single day. Blows me away. And I have to repeat mistakes several times before learning. I’m not the sharpest tool in the shed. But making progress!

    Thanks for bringing that to my attention. I have to be very careful of that.

  3. Guess what, I think you have a very sharp mind and it looks like you are already a profitable trader, even though you have been just 4 – 5k hours of your learning curve. But I don’t want to massage your ego cause this would harm your trading. It is better to look always for improvement.

    Besides psychology I think it is very important to get to a concept of trading and the markets which fits to ones personality and is quite robust. Auction theory can be such a concept. I started trading short term momentum retracements which works for example much better for the FESX than for the FGBL (the latter one is great for break outs imo). Now I have started to trade more fades before support and resistance levels. I use MP mainly to better define my areas of support and resistance. Yet, I also watch how the opening evolves and how VPOCs shifting up or down to better understand “what the market tries to do and how good a job it is doing” – to grasp the bigger picture. Well, just my 2 cents.

    Have a nice WE,


  4. Hi Markus,

    I was just redoing my P/L spreadsheets when I saw your comment. I forgot what I estimated my hours but I think it was over 6k. I hope by 10k I’ll have it all worked out. 🙂 Don’t worry about ego, I had a bigger ego several years ago when I thought I knew what I was doing. Now I’m very humble. The farther I go in my journey the more I realize that the journey has just begun.

    I agree with everything you wrote, about the bigger picture. Starting Monday I’m going to come up with my hypotheses every day and trade them. I’ll try not to be distracted by the noise.

    I updated my excel spreadsheets and there is good news. The way I calculated $/contract weighted them all equally and that isn’t the best way to do it because the scratched trades penalizes the profitable trades. For ES this month, my expectancy is 0.44 pts/contract per trade which works out to be $21.90 (this is net after commissions). I feel much better about this and I’m sure I can improve it. I’ll be writing more about this once I’m finished redoing the spreadsheets. Bund is next. I remove crude, dax, & Euro from the equation as I’m no longer trading them with real money and they distort the results.

    As always thanks for your input, I really enjoy it both here and on twitter. It’s great to get feedback from others who see the market in the same way. That was my goal in creating the blog – to find others & collaborate. I didn’t find anyone using the eminiwatch method (wonder why? hehe) but since I dropped all that to follow FT71 I’ve found several traders.

    A nice weekend to you too. We’re doing cleaning & preparation for a party next weekend.

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