Jan 282012

My plans of increasing size were derailed a bit as last week was a losing week and the one before it was flat.  I can attribute my regression to a few factors:

  • Trading 2 lots made me more risk averse since my size was bigger
  • I started getting lazy with entry timing by entering half position and planning to add on to it at a better price
  • I scaled my first lot early in several cases which effectively “cut winners short”
  • In a couple trades, I neglected to keep the tight stops I’d been using due to overconfidence in my read

The last point was the biggest factor.  When we broke out of the multi-day trading range to the upside, I expected follow through and bought pullbacks and give it plenty of room and added to my position.  This is my old method of trading.  It’s not compatible with my new plan.  Had we had continuation I would have had a major win and done great.  But it didn’t.  And I took a big loss.  Then then the next day we broke to the downside and since we failed on the breakout higher I expected us to break down to 1297.  I shorted pullbacks, scaling in to build a large short position that I eventually capitulated.  Double whammy.

This was good punishment for reverting back to my old methods and gives me more confidence in my new plan.  Had I followed the new plan I would still have had 2 losing days, but the losses would have been minimal.

At this point I don’t want to go to 1 lot again because I think trading multiple lots gives a better edge (can stay in longer).  So I will take the best setups with real money, ideally 1-2 per day and the rest on sim.  Two losses per day will limit my daily loss to around $250 and I can live with that.  So I shouldn’t have fear right?  I’m sure I still will.  But I hope it’s manageable.

For the sim part, I’ve been abusing sim lately, using it to control my urges of wanting to put on risky trades.  I need to curb that.  I need to treat sim as real money and be very selective.  So my focus for the next two weeks are to have profit results sim & real.  I need to learn to be patient and sit out when there is no edge.

So a bit frustrating the last two weeks but I’m still confident in my approach.


Jan 252012

I’ve avoid speculating about what the market may do because I don’t really find it useful.  But the past week has been very suspicious.  My trading was great the first two weeks and since then it’s been not very good.  I’d be slightly negative the past week and a half had it not been for some overconfidence on my part to let some small losers turn into bigger ones.   When we broke out of the multi-day balance to the upside, I was sure buyers would support it on a pullback.  But no.  Then we broke out to the downside and I was sure sellers would keep it from going back up into balance.  But no.  Those should have been smaller losses but I thought they were great opportunities and went with larger size and larger stops and.. well.. larger losses!

But that’s not what this post is supposed to be about.  In my opinion the market is not behaving normally.  I see that many other traders are not doing well.  But profits & losses aside, it’s just frustrating.

So I start wondering.  What if some traders know something we don’t.  What if they drove price up in order to unload?  What will happen if some bad news comes out?  There is so much volume up here that if bad news does come out, we could get a very powerful move back down.  And if the bad news doesn’t pan out, we could get a very powerful move up.

I read yesterday that the COT report showed the largest net short position on the Euro in a long time.  And then the Euro rallied.  That could have played a role in ES moving up.  But those Euro shorts could be hedging against a real disaster and if that disaster comes the hedgers will be protected and the speculators will have huge losses.

News is coming out about Greece and it’s not good.  Now Merkel is not so enthusiastic.   Soros expects Greece to exit the Euro.  I think it’s about to hit the fan.  And with ES extended so far up I think it’s not going to be pretty.

Now I’m not swing trading so really that was all just curiosity on my part, so what does it mean for day trading?  All I know there is my trading isn’t working the past few weeks, partly because the setups haven’t panned out and partly because I’ve made mistakes.  So I’m cutting back and being very careful, even just watching.  I think the best bet here is to wait until ES makes its move and then go with it.  As we got faked out twice we have to be patient and wait for the real move.  Which should be obvious.

So if you’re not doing well lately don’t fret it.  Just relax a bit, the markets will be there next week.  If my kids weren’t in school we’d take a vacation right now, but that’s not possible.  So maybe a mental vacation.



Jan 242012

Yesterday, BenkoTrader asked about trailing stops.  I thought the topic deserved its own post.

Ironically, the very same morning that he asked about that, I got zinged twice by the Bund for trailing my stop too closely.

I try to trail them 1-2 ticks beyond the last pullback high/low.  On the first Bund trade it didn’t hit my hard stop but it did hit my mental stop and I bailed.  Which was the right thing to do.  But it still sucks.

On the second, I try to get to no risk ASAP.  Since no risk was 1 tick beyond the last pullback high, it was a logical spot.. for a lot of other people.  The Bund poked up, hit the stops, and kept on truckin’ with me sittin’ on the sidelines.  I watched in horror as it went on to hit my original target.  That incident had a psychological impact that lasted the rest of the day.

What I find is that ES often respects levels to the tick.  Bund and other markets with more volatility do not.  So from now on I’ll trail my Bund stop 3 ticks beyond and see if that doesn’t work better.

I will also say that last week I was stopped by a tick or two in ES trades several times.  So far I think that’s my fault for not keeping them beyond key levels.  So I’m paying attention to that as well.  But overall I think tight stops on ES has saved me more than it has cost.

Yesterday I took a short that would have worked had Euro news not come out which caused it to spike up.  In this case I was glad to have a tight stop as I only lost 6 ticks.

Personally I have found the past 6 days very frustrating and I’m not making money.  So I’m slowing down a bit, being more selective, and hoping things will pick up soon.