Feb 282011

Well I’m making progress just not in my P&L.  Let’s take a short step back and get caught up:

November I had a great month making around $5k.  My average trade was just 2 ticks.  I wasn’t going for big winners, I was just going for say 6-8 ticks.  Although my average was 2 that doesn’t mean I was going for 2 as maybe I’d get a 8 tick winner and a 4 tick loser and that’d average out to be 2 ticks/trade.  December was more of the same but I didn’t trade the last few weeks due to holidays.

In January I went back to sim to try something new:  Trading 3 contracts and going for big wins à la FT71.  It has been an amazing learning experience but I must admit it has not been profitable for me.  I find going for big wins to be a very different mindset.  I’d wait patiently for a setup and often stay in a winner for hours.  I’ve identified several challenges for me with this approach:

  1. I get very bored waiting for setups.  As I try to trade only at CLVNs sometimes I wait for hours.
  2. A stop out with 3 contracts hurts.  And sometimes it takes several attempts to get on a winner.  After stopping out a few times it’s hard to do it again and often I miss the setup that eventually goes on to be the big winner.
  3. When I’m in a winner, I always seem to find a reason to take some off and I end up not being in for the entire move.
  4. When I don’t take any off, it seems to come back and stop me out leaving me with a very large MFE but no profit.

I’m not sure this is possible with only 3 units.  It would definitely be a lot easier with 8 units as any time price approaches a potential obstacle then one could simply take off 1 unit and lock in gains as you go.  With 3 this is very difficult as it’s easy to take a couple off in the beginning and then there is only one unit left.

But that’s not the only issue holding me back.  I stop out too often which means I’m too quick to enter.  And like I said, I’m too quick to take profits.  So this isn’t a critique on an idea or a method but rather observations about my challenges implementing it.

I actually wonder if I wouldn’t be better off going back to how I traded last year.  I was still entering at levels, mainly CLVNs.  But I wasn’t going for big wins.   I’d take profit at 8 ticks and be happy with it.  My wins were small but they were more often.  My day wasn’t as dependent on catching that one big move.

The other thing I’ve realized is that trade management is much more important than I thought.  I’ve tried “target or stop” and that doesn’t work for me.  I think one must be able to recognize when price isn’t advancing and scale out a little and/or scratch the trade.  I’m making some improvements here but still have a long way to go.  This same skill can be used to decide to scale out or hold for the big move.

I also realized I haven’t been applying myself as much as I could.  I’ve been a bit pre-occupied lately with setting up some music software on my PC and when trading gets boring I work on that and then Oops! I miss a setup and the opportunity to have a winning day.  So all non-trading activities are put on hold while trading.  I need to focus more.  As I’m writing this the bund is balanced and far from any level so while I don’t think I will miss anything but really I think when trading one should focus 100%.

My focus for this week:

  1. Be more focused.  Continuously analyze the market.  Avoid distractions.
  2. Focus more on the Market Profile & daily chart rather than the 1min & volume ladder charts.
  3. Don’t miss any trades.
  4. Use tight stops (4 ticks) and re-enter if I see a good entry after being stopped out.
  5. Avoid stopping out with a full (3 contracts) position.  Take at least one off if it’s coming back to my entry.  This isn’t to bank profits but rather to reduce risk.

Hopefully this week will go well.  Good luck to you and if you have experiences or comments about any of this I’d love to hear from you.

  4 Responses to “A report on my progress.. (or lack of..)”

  1. Good points, Michael. Staying focused is very important and I get better at it by narrating the mkt and imagining scenarios again and again. I left so much money on the table by not being connected to the flow in the past that it’s a shame. Therefore I trade only one instrument and shun most of the time all distractions.
    Regarding exits I think the first 33% – 66% of the scales should be within a normal rotation (8 -12 ticks for the ES and about 7 – 9 ticks for the FESX) and it also depends on context. If you fade in the first hour or later in the day after a range has build and you see a balanced day makes a difference.


  2. Michael,

    I have read a lot of FT71 posts, comments and webinars, maybe missed some of them also, but as far as I remember he does not rely on runners to be profitable….I remember reading he takes most of his cts at 3pts as that is the avg he wants to have long term…..of course as he takes some at 1.5pts he needs a 5pts scale to avg that 3pts but as far as I understand it, for him runners are a gift more than a target…..why don’t u focus on getting consistency on ffor example 1.25, 3 and 4.5 pts scales and from that point document how many pts u leave on the table by not having 8 cts….or intead of 4.5pts fix target just define a level based on destination trade and trail your stop…..just ideas….

  3. Markus – how do you determine normal rotation for stoxx? I used the fractal indicator and tried to do it for the bund and I come up with 7.7 ticks. That explains why lately I’ve had targets at 8 ticks that never got hit.

    Gonzalo – You have very good points and I’m coming to similar conclusion – I shouldn’t need runners to be profitable. I’m also not going to try to copy FT any more. I don’t know everything he does and so I need to find what works for me.

  4. Right, copying someone does not work in trading even if it makes sense to emulate someone but you have to find your own path as FT71 has said like others a lot of times.
    I do not use the fractal indicator for getting the normal rotation. I just look at a 2 minute bar chart and determine the width of the swings (I know this is kind of discretionary) and then I plot a graph which shows the frequency over a rolling 200 swings sample (about the last 5 days).


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