Nov 222011

I can’t believe it’s been 3 weeks since I updated the blog.  I’ve had a few people ask me if I was still trading!  I guess they don’t follow me on Twitter.

As I’ve said in the past, I think Twitter is currently the best tool for public real time collaboration in trading.  To me it makes a lot more sense to Tweet my plan before the open, and then tweet what I’m seeing real time.  Tweeting takes a few seconds, writing a blog post takes a lot longer.  This may not seem so obvious but when writing a tweet it’s a short idea and you fire away.  On a blog post I think things over, reread, proofread, rewrite, add images, etc.

I said Twitter is best for real time.  After the market is closed is a good time to review trades and study what went right and wrong.  And that would be best shared via a blog post.  There’s a problem though:  My time zone.  I trade until 6pm my time and then that’s it, family time.  If I’m lucky to get some time to do my homework at night I do it but usually I do my homework in the morning before the open.  Which is a real challenge while getting two kids ready for school.

So when something has to give, it’s the blog.  And to be honest I’ve haven’t had much to say lately.

There are a few tricks to using Twitter though, and many traders I know purposely don’t even look at it.  Here are some ideas:

  • Only follow a few traders who trade in a similar style as you.  Or if you’re learning, those who trade in a style that you would like to learn.  Traders on Twitter all have different ideas and methods, so it can get really confusing.  For example I follow one trader who is very nimble, likes to fade, and can flip directions on a dime.  Another trader looks for big setups and doesn’t fade.  That’s OK because I am very familiar with them and understand their thought process, but someone unfamiliar with them could be totally lost.
  • If you have your own method & plan, don’t be influenced by Twitter.  I used to catch myself taking trades outside my plan because someone else Tweeted a trade idea.  That didn’t work very well.  So now I do my best to stick to my plan.  If a trader whom I respect tweets something supporting my trade, it gives me confidence.  If they Tweet something that doesn’t support my trade, I can re-examine it to make sure I didn’t overlook anything.  But it’s important I stick to my plan.  I have a hard enough time doing that without Twitter.
  • Don’t expect traders to tweet everything.  I’ve been long thinking I was long with another trader and then had them say they’re scaling out of a short.  Oops!  They flipped from long to short and didn’t tweet it.  Which leads to the next point:
  • Don’t try to tweet too much.  It’s really hard to trade & tweet.  I’ve missed key setups and/or scales because I was not fully focused on my chart.  While waiting for a trade I set alerts and try to do other things, but when I’m in a trade I need 100% focus.

I emphasized “public” when recommending Twitter.  I think Skype is the best tool for private collaboration and I’ve been doing that with a few other traders.  It’s useful for me to explain what I saw and even more useful to hear another point of view when someone else explains what they saw.  Which leads to:

I think it’s very useful to have a “trading buddy”.  If you don’t have one, I suggest finding one.  Someone better than you is a good choice but even if it’s someone not as far along as you, you will learn by explaining things to them and by answering their often challenging questions.  I suggest Skyping with them before the open and after the close, and if your trading methods are very similar, maybe even while trading.  I’m still not sure on this last point as it has tons of advantages but also can have disadvantages as well.

On a personal note, the main reason I’ve been quiet is because I’ve been working on my own issues that are mainly psychological.

  • I’ve been adapting my plan and working on decreasing risk.  I’ve been trading mostly 1 contract so that I can work out these issues without stressing out.  I use tighter stops and trail my stop.  I expected to make less, like half as much, but in fact I’ve been doing OK trading just 1 contract.  Now I hate trading 1 because it’s harder to stay in for the big moves so this is just temporary, but it’s a lot less stressful.
  • I’ve been working on staying in for my full target instead of finding excuses to cut the winner short
  • I’ve been working on trusting my stop loss instead of scratching trades.  I hate losers so usually I prefer to scratch rather than take the risk of a loss if the trade isn’t going right.  However even if there is 50/50 chance of a loss, as long as my target is bigger than my stop, it’s still better to sit tight and let it play out.

So I’ve been working on these issues and there isn’t much to say.  I can show a chart with my target and where I got out but I don’t think it’s very useful.  Here’s an example on my two Stoxx trades this morning:

The first I cut short.  Now I had a good reason to do that, based on the order flow, my reason disappeared a minute later.  Need to be more patient.

The second is a classic mistake that I make a lot and I really need to get that under control.  It went to 60 and didn’t hit my target (57) but I could have gotten out at 62 and had 7 ticks.  So avoiding a potiential 5 tick stop was not a good decision on my part.

So you can see a lot of my work is rather personal, psychological.  So that’s one reason I haven’t updated.  It’s not easy to talk about the more personal issues, and since I don’t know if this applies to everyone I’m not sure it’s useful.  I tell you though, once I get these issues worked out, I will be tearing it up! <grin>

As always, I enjoy feedback on what you find useful or what you’d like to see.  Explaining this does help me but this post has been in progress for over 1 hour so it takes an enormous amount of time.

Good luck with your trading and maybe see you on Twitter.




Nov 022011

Yesterday I set my stop and went to the store.  Was really bummed to come back and see I was stopped to the tick.  It was my fault as I put it too tight.  1 tick above the previous little high was also my entry so it seemed like a good place.  Too obvious I guess.  So now I always put it 2 ticks above.  Had I not been going to the store I would have kept the stop looser and watched how it traded but that wasn’t an option.

Nov 012011

A few days ago I posted about the Euro being at a key area.  The level was a 62.8% fib re-tracement of the entire bear move down, backed by the composite VPOC.  The Euro broke through both and was consolidating on Friday.  Since these high prices were accepted rather than rejected, I expected ES to test the 1300 area.  However yesterday a string of news events came out and that sent both the Euro & the stock markets down.

One of the news items was the decision by Greece to have a referendum on the EU bailout package.  It is not expected that the Greek population will vote for it.  The average Greek is not the one who wasted all the money and blew up the deficit so why should they pay?  If I were Greek, I wouldn’t vote for it.

The markets had a huge run up so it doesn’t take much to spook some late longs into bailing and that spooks the early longs into profit taking.  Hence we get long liquidation and that can pave the way for a continuation up.  It all depends on the news and what the Euro does.

I’m not swing trading the Euro or ES so this is all just speculation for fun.  I’ve been taking my day trading setups as they come and I try my best to forget about all this market outlook stuff while day trading.  I am just looking for support & resistance areas with good trade location and letting the R:R take care of it.

I apologize for the lack of updates.  I’ve cut back on my trading hours and have been very busy with non-trading activities.  I will continue to post to the blog when I have some free time during my trading hours.  For example as I’m writing this I’m waiting patiently for my target on my ES short.  I find it’s much easier to be patient if I pre-occupy myself and not become enchanted by the DOM. Pre-occupations include playing music, working on a programming project (trading-related), or reading.

In this case I waited for a good trade location on a short which came when ES pulled back to its DVPOC just short of the European cash open (dotted green line).  I put on my short, scaled half at +2 pts and set the target for the lower HVN thinking ES will fill out this profile.  I trail my stop to lock in profits.

This trade is a good example of what I’ve been doing.  It’s really all about picking spots and being patient enough to wait for them.  My losses come from when I invent trades and/or take trades in bad areas.  If I can just reduce these mistakes my PL would improve considerably.

Good luck with your trading.