Sep 182011

I don’t know if it’s Murphy’s law or just coincidence, but the week that I decided to trade larger size turned out to be one of the most challenging weeks I’ve had.  I took two stops this week and that had a large impact on my profits, but I’m glad I didn’t let them get out of hand.

My profit this week was actually pretty good, but I do not think I traded well.  I took several fade trades against my rules and I entered a few trades that in hindsight were not good trades.  No one is perfect but I could have traded a lot better this week.  I also got distracted by some other ideas I was testing out and without realizing it my entry criteria shifted a little bit.  So I want to roll back a little and focus on how I was trading before this week.

This week also had two rotational days where I entered on a pullback and didn’t get any continuation.  I’m going to keep my eye out this week to see if we have more rotational behavior or if the market trends more.   I need to be able to adapt and trade both conditions – the problem is in the first hour we don’t know what we’ll get.

October will be a major milestone for me as that will make 6 months of profitable real money trading.

One reader suggested that I not increase size just yet, that I wait a few more months.  I thought about that a lot this week.  I think these difficult weeks come and go, and maybe I need more practice with the difficult weeks.  I still want to keep my minimum size at 2 contracts, but I will be a bit more selective before trading 3-4.  Mainly I’d want to trade larger only when trading with both Value Area & Intraday trends.

The other thing I want to do is cut losses a little quicker.  I’ll be looking to identify opportunities to do this, even if I don’t, but I want to be aware of where I could.

So to summarize for next week:

  • Stick to trading plan.  Avoid fading without a reversal pattern (such as a lower high or higher low).
  • Increase size only when trading with both trends.
  • Know at all times if we’re in a rotational or trending market (hard to know in the first 30-60 minutes but will make an effort).
  • Try to identify when my trade idea is wrong.

And a word about the market’s activity this week:  I noticed on several sessions that ES was not allowed to drop.  It was supported by relentless buying.  I thought that was due to options expiration and that next week we may see another trip to the lows.  However this weekend I read that we may get “Operation Twist” (more easing) and that could be driving up the market.  I still feel the Europe situation is far more dangerous than the politician’s would have us believe and that makes me bearish for the markets for the longer term.  But for the short-term, I will not fight the buying.  Those buyers know a lot more than I do.


  4 Responses to “Results of first week trading larger size”

  1. good job michael…keep it up!

  2. Nice series & overall blog my friend. What observations do you anticipate being most beneficial in determining early on the day type (trend vs. rotational)? I’m interested in your feedback & methodologies for early detection.

  3. smcclstocks – I’m struggling with this as I don’t know how to tell. I’m not sure it’s possible. One idea is that it’s a trend day until proven otherwise. A reversal pattern such as double top or lower high for example would tell me it’s not. Or one could say it’s a rotational day until proven otherwise. For example if the resistance level above is taken out, it’s not rotational.

    I think either of these could work and it really doesn’t matter. What’s important is to have a framework for interpreting the action and being consistent in order to verify the edge over time. As it is now my trading is too discretionary, and one of my goals is to make it more mechanical, if that’s possible.

  4. Good feedback. Funny the direction we take ourselves as we attempt to self-audit & improve. You finding yourself too discretionary & in need of some more discipline (mechanical reference) while I’m finding myself to be TOO mechanical & in need of more discretion.

    Nice read.

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