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.