Oct 072011

A year ago I wrote a really revealing series entitled A look back on my journey.  The last thing I said at the end of that series was

With 6 months profitability daytrading I think this first journey is complete… But when one journey ends, a new one begins.  This new journey will take me from a 1-2 lot trader to a 100 lot trader.

So how did I do?  Am I trading 100 lots yet?  Far from it.  The year that has passed since I finished that series has been huge for me.  I severely underestimated what I had to learn and how long it’d take to learn it.  And so one year later I’m still trading 2 contracts!  I would have never thought that would be the case one year ago!

So let’s go back to October of last year.  The reason I wrote that series was because I had discovered Market & Volume Profiling, the auction market theory, and FuturesTrader71.  I knew I had to change my trading from a multiple-timeframe indicator method to a support & resistance auction method.  I was on simulator in October and had good results so I went back to real money in November and had an outstanding month making around $5k.  In December I made $700, partly due to me not being able to trade the last 2 weeks of the year and partly due to a large loss that wiped out a lot of profits.

In January I started trading full time with trading as my only source of income.  I had another large loss and that’s when I stopped trading real money and went back to sim for 3 1/2 months.  Losses were OK when I had my consulting business to make up for them, but without the consulting income I had to fix my trading problems.  That was very difficult to stay on sim for that long but I experimented and tried a variety of things and then my results became consistent.

In May I started trading real money which I’ve continued to do until today.  I had a bit of a drawdown when the Greek crisis started but I was able to adapt to it and take advantage of the volatility.  One of the major changes I made to my trading plan was to stop fading and focus on trading pullbacks with the trend.  This was a huge change for me as I had always been a “top & bottom picker”.  I thought I was good at it and that it worked, but I was only kidding myself.  I mean I had made a small amount of money picking tops & bottoms and I guess I was better at it than most (since most lose money doing that).  But it’s not a skill one should aspire to do well.  I can’t stress this enough as it has made a huge impact in my results.  Last week was my best day trading week ever so I’m confident I’m on the right track and I’m very optimistic about the future.  In the future if market conditions change and we go back to a rotational market then I will consider fading again but for now I’m more of a trend trader.

If September 2010 to May 2011 was the “FuturesTrader71 period”, the past 6 months have been “FlowTraderES period”.  He’s been very helpful to me and I’ve learned a lot from him.  I can also add RobSpain & Eminiplayer as a great source of learning for the past 6 months as well.  It’s interesting how we learn what we can from someone and then when we’re ready we find a new teacher.  If you aren’t studying a successful trader, please consider it.  I don’t think I would be where I am today if it were not for the teachers I’ve had, mainly Barry of eminiwatch, James Dalton, FuturesTrader71, FlowTraderES, RobSpain, & Eminiplayer.  It’s better if you can make contact with them but they don’t even have to know you exist, just learn everything you can from them and practice it as much as possible.  For example I’ve learned a lot from Dalton and he doesn’t even know who I am.  Note: I’m not endorsing Dalton’s paid material, I’ve learned everything from his books, blog & & free webinars, which I think is why he stopped doing them because of free-loaders like me.  My point here is trading education shouldn’t be expensive, most of the traders charging money are crooks.

Regarding trading size:  I did increase it one week and my results were only slightly better but with a lot more stress, so I went back to two.  Trading just 2 contracts is producing a nice income so I shouldn’t be in a hurry to trade more.  My current focus is on making my trading more mechanical and less discretionary so that I can eliminate mistakes.  I’m working on controlling risk and learning to trade well and once I can do that I will increase my size.  So my goal of trading 100 lots will have to wait but I’m confident by this time next year I’ll be on my way.

This morning I rewrote my trading plan from scratch.  I came up with a 10 step checklist for my trades.  I’m making an excel sheet to track these 10 items for every trade.  This way I can track if I’m trading well.  I’m not going to worry about the P/L, my primary focus is to follow my trading plan the best I can.  Once I eliminate my mistakes and I’m trading well, I will then start increasing my size.

I encourage everyone to have a written plan.  Make as many decisions as you can in your plan instead of on-the-fly as you trade.  Whatever decisions have to be made on-the-fly, try to provide a check list so that you can track your progress and update your plan as needed.  I have to admit I got really careless about this.  I hadn’t updated my plan in a long time and unconsciously my trading had been slowly adapting.  I started picking up bad habits such as cutting winners short or fading the trend.  So I’m now taking this very seriously.

A lot of people would like to know if I’m doing anything different than what I wrote a year ago.  The answer is “not really”.  My ability to read the market and understand what it’s telling me is what has changed the most.  I still use the market & volume profile levels, I still wait for price to come to my levels, and I look for the market to pause there and start to reverse and I enter my trade.  It’s really simple.  And as I said, I avoid fading.  Trading doesn’t have to be more complicated than that.  It sounds simple but it’s not easy.  I’ve spent one year improving and I’m still far from perfect.  I estimate that if I could trade well I could make 2-3 times what I’m currently making.  Trading well is really powerful!

I plan to change the focus of my blog a bit, from my monetary performance to “trading well” performance.  I plan to write more about the challenges of trading well and talk about some of my mistakes.  Also I have been posting my thoughts & plan before each session (European morning & US cash open) on Twitter so if you’re interested you can follow me on Twitter and comment on my thoughts.  Feel free to disagree and/or ask questions, that’s what makes Twitter more fun than the blog – it’s much more interactive and instantaneous.

So that’s about all I have to say, I want to wish everyone luck in trading well and thanks for reading.  I want to especially thank every trader who has commented on my blog and given me things to think about.  I’ve learned a lot from you guys.  This blog has been a great help to my trading and I hope it has been helpful for your trading too.




  20 Responses to “A look back on my journey – one year later”

  1. Nice post Michael!
    Reading it, I think you have the right ideas and attitude to get there, wtg!

  2. Hi Michael,

    Really good post and a motivation for us beginners!
    I hope you are closer to your 100 lot goal this time next year 🙂

    Good trading!!!

  3. Very nice job! I’m still in the “must consult to pay bills, hope to find some time to trade” mode but I find I’m coming through a lot of the same struggles you have gone through, so I’m about 6-8 months behind you, and I enjoy learning about your struggles and successes. Keep up the good work!

  4. Jeroen & Leandro – Thanks!

    Shodson – I think trading part time is not a bad thing. The only disadvantage is it takes longer to get your 10,000 hours. 6-8 months is not long in this marathon, I look forward to seeing you catch up. Cheers.

  5. Hi Michael,

    Nice post and congrat for you improvement !!
    Could you tell me, whats your daily average trades ?

  6. foner – I’m not sure what you mean but if you mean trades per day I took around 125 in September so that works out to be around 6/day.

  7. Hi Michael,

    Yes, thats what i mean. Thanks

  8. Hey Michael,

    I just started following you, this is a great post and I look forward to reading more about your progress. It’s really inspiring for a new trader like me! I’ve been trying to learn to trade the ES, following FuturesTrader71 and others as well. I’m actually just using the SPY and trading that off levels that I identify, so I’m not even using futures contracts yet, but at least it’s a start! Can I ask what platform do you use and which broker (if different)?


  9. Michael,

    It seems as if we’ve followed similar paths to reach our present positions. I was a project manager for 20 years in software development, including 8 years in video game production. During the last 5 years, I was building my trading knowledge so that I could shift careers.

    I transitioned to trading by shifting to a part-time position (M,W,F) so I could trade on T & Th. A little over 6 months ago, I became a full-time trader. We have near identical online mentors, so I won’t reiterate those. It wasn’t until I identified my own style of trading and customized my plan to my personality that I truly began being consistently profitable. I trade off a combination of volume/order flow and volume profling, Stochastic RSI to indicate cycles and pullbacks, and CCI to identify the larger trends. I use range bars or TICK bars to reduce the noise. Like you, I found the cycle theory from Hilbert & E-mini Watch interesting, but ultimately non-predictive, however I do find value in the ProAm indicator.

    I’d enjoy talking in more detail sometime.


  10. Hey Michael,

    I’m looking at Order Flow Analytics trading tools at the moment – have you looked at these and if so what are your thoughts?


  11. Greg – I’m familiar with the OFA stuff but I personally do not find it’s a match for my trading. The Footprint is the center of the OFA approach. In my trading I look for good S/R areas and only use the footprint to help time an entry, so the footprint is a very small part (and a lot of the time I don’t even use it). So honestly I think basic market & volume profiling along with Support & Resistance and the basic footprint concepts (that you can get from free) is best.

  12. Hi Mike,

    Hope you are well ?

    Not been trading the Eminwatch system too much recently although what I have done is a little over breakeven. Not enough to convince the wife I’m ready to go alone ! Have had exams to study for work so that has been a distraction. Still not convinced or comfortable on the EminiWatch system. I’m frightened to loose too much money finding out. Trades that line up and would be a text book example have just taken me out. Like just now at 1214 ! End of Trend, Exhaustion, Pro Bars etc – you know the sketch. I have a predisposition to fight the trend a lot. Anyhow, I’ve been looking at Order Flow / Volume etc and was wondering if you have come across Fulcrum Trader at all and his offerings ?



  13. Jason – i do not believe in the theory behind cumulative delta divergences. they disappear real time and in hindsight we only see the ones that worked.

    I also do not believe in the sine wave cycles. The market cycles between areas of acceptance and rejection, so if you can spot those you can do better than the sine wave which is based on lagging moving averages. I think better momentum is useful but only for very short-term because at any moment new orders can come in and that divergence can disappear (just like with CD).

    fighting the trend is not good except at very strong S/R with a tight stop and even then the reward doesn’t usually justify it. so I focus on getting the direction right and tagging along.

    I tried eminiwatch for 1.5 years and couldn’t make it work. looks great in hindsight. now I trade based on auction theory & balance. that works better for me as when it doesn’t work I at least understand why.

    I’m still trading and doing ok. I’ve changed my setups a bit and getting used to them. not doing as well as I was before but I think I’m on track to start increasing size next year.. maybe february.

  14. I also trade primarily on auction theory combined with momentum. I do trade divergences, though, when they coincide with areas of interest on the volume profile.

    Jason, I’ll echo what Michael said about sine wave cycles. If you read Ehlers books and the code upon which it is based, then you see that it’s primarily intended as a predictive measure for markets undergoing relatively consistent periods of up and down movements. If treated as such, so that you use the patterns of the sine waves to identify symmetry in the markets, it can be traded. But, lately, the markets are not doing this–at least on an intraday level–see the % of extremely high/low breadth days. However, one place where this type of indicator, or for that matter an RSI indicator helps, is teaching intuition about the cycles of stock movement, so you can learn to enter on pullbacks instead of peaks (or on those peaks if you’re trading extremes:) ).

    Speaking of order flow analysis, if you can find it, Master the Markets by Tom Williams provides a good orientation to identifying shifts in order flow, volume imbalances, etc. It’s an update to Richard Wyckoff’s methods, and the book was written to sell the TradeGuider software, which I don’t recommend, but the examples and the reasoning behind the examples are quite good. If you can’t find it, send me an email at becomingatrader (at) gmail.com.

  15. Jeff – outstanding post and I second the recommendation of the Tom Williams book. in fact it’s been a year since I read it and I’d like to read it again. it’s full of gems.

  16. Michael / Jeff, Thank you for your comments and suggestions. I hear what you say regarding Sine Waves. It’s hard to trust when what’s behind it does not carry much weight. Having said that, when you line up Sine Wave support/resistance with the other two non correlated indicators from Eminwatch, it can give decent signals. All in the interpretation.

    I read Master The Markets earlier this year. Funnily enough it was Barry’s (from EminWatch) recommendation. Yes, very good book and learnt some useful info.

    I looked into the TradeGuider software and rented the indicators for my eSignal for a couple of months. I lost interest when bombarded with daily emails from Gavin Holmes constantly selling different parts of the course and offering deals. Even watching the webinars was frustrating. He would take forever to get to the point and always reminded you of his great calls. I’m sure he’s a nice bloke but the hard sell was too much.

    As per Michael’s recommendation I will be taking the Balance Trader Market Profile course. Look foward to it and hope it helps in my quest to become a full time trader.

  17. Congratulations for your job. I have a question: Where can I find FlowTraderES? I want to learn to read oreder flow.
    Thank you

  18. Daniel – you can find him on Twitter @FlowTraderES

  19. Thank you. I tell you. I trade under the VSA principles. I have the Tradeguider Software and very well. I look for support and resistance areas too, there I sse the signal. I want to improve my enter/exit and I´m thinking about order flow-Footprint-ladder can help me. I´m BMT elite member too. I have zondorTim ladder too. What is your opinion about this? How Can I learn to read it? Thank you

  20. I think the footprint is useful, but only when you want to enter a trade or take a scale. And I find it much more important to enter as close to a S/R level as possible, so the footprint isn’t really necessary. I could do without it and often enter and exit without even looking at it.

 Leave a Reply

You may use these HTML tags and attributes: <a href="" title=""> <abbr title=""> <acronym title=""> <b> <blockquote cite=""> <cite> <code> <del datetime=""> <em> <i> <q cite=""> <s> <strike> <strong>