Feb 242012

My ES trading was great last year and I thought I had it made.  The first couple weeks of January were OK too.  And since then my ES trading has went down hill.  This has prompted me to start trading Euro, Crude, & Gold and to see if I could do better on those markets.  And I have.  So why have I not done well on ES?

The first reason is the current market conditions.  A look at a weekly chart will make it very clear.  The orange arrows point to volatile areas and the blue arrows point to slow grind up moves with very little volatility.

I think it’s not reasonable to expect the results in the current market.  I suppose some traders are able to adapt to these different market conditions.  I’m not yet able to do that, at least not quickly enough.  By the time I adapt the market changes again.

This is why I don’t believe in mechanical systems and backtesting.  A system that works well in that volatility is going to perform differently in the slow grind up and vice versa.  And this applies not just to automated systems.

Now I can’t blame all my problems on ES.  I have many areas to improve.  One of them is I feel I’m not prepared enough.  Another is I sometimes don’t stick to my plan.  So I thought maybe to overcome these I should start posting my plan to my blog.  I have been tweeting my plan now and then, but I think posting my plan and the resulting trades and an analysis of what I should have done would be very interesting both for me and for readers.  The basic idea is if I am posting it to the blog regularly, I’ll be less likely to blow it off.

An example, yesterday I said my bias would go to bearish below 54.  However my bias for NQ, Euro, Crude, & Gold were all bullish and all we did was poke below 54, we didn’t build value down there.  So I was quick to flip my bias to short in order to allow a short on a pullback of 54.  I really believe if I had done better planning I could have seen that a 3 pt drop below 54 was not enough to change my bias and I could have went long 51 (which was one of my support levels) and/or 54 instead.

So I need to be better prepared and I’m hoping the blog will help me do that.  I will give this a try next week and see if it helps me improve my trading.  My blog will be my journal.  And I hope you will find it useful, and if you can give me feedback to help me improve that would be great as well.

I will close by sharing my sim results for Euro,Crude,Gold which are quite encouraging to me.

I plan to go to real money on these markets very soon.




  12 Responses to “A look at recent [lack of] ES volatility and Euro,Gold,Crude”

  1. Hi Michael,

    I think it is a good idea to use your blog as a journal.
    You have explained why you are now going to trade Crude, Oil and Gold, but I remember that you wrote several weeks ago that you will focus only on ES (and a little FESX). I think it does no good to shift things very often, especially after you have found your edge which you have proved last year. Every animal is different. If you now trade 3 very different instruments on a discretionary basis you are really challenging youself.
    Even very a successful trader has dire straits which can last weeks or months or even longer. Why not just staying focused on a proven approach and working on issues (eg. risk mgmt), but not changing instruments one has become very well known. Not trading is a very big part of trading and patience is the name of the game imao.


  2. Excellent post. I encourage you to share on your blog. I agree with ES being difficult to trade lately compared to other markets and to more volatile times. We are due for some ES volatility though; 10 weeks without a pullback is extreme.

  3. Markus – Crude, Euro, & Gold are a new separate plan for February. I trade them mostly in the European morning up until the US RTH where I focus on ES. I only take a few trades on these markets and I use audio alerts so it doesn’t really interefere. And I think that’s why I’ve done well with it. There is a minimum of thinking required. I’ll be writing more about this.

    For ES, one can’t squeeze blood out of a turnip. I simply feel there are better opportunities elsewhere. In the european morning I’ve been trading bund & stoxx in addition to ES.

    I debate trading ES only but if I do that there can be hours where I have no trades so I prefer to watch several markets and pick the one that is offering the best opportunities.

    Today I only took one trade, on Stoxx. lately I think Stoxx has been giving me more clear setups than ES..

  4. Hey Michael,

    I’ve been following your blog from the beginning. I started trading the ES about 10 years ago. Like most I got killed at first, then learned to control risk and break even or slightly profitable but never enough to continue trading full time for a living which was the goal. Now I am employed again as an investment advisor for a bank. But I continue to follow your journey in hopes that if you succeed that will be some validation that at least some retail trader can trade the ES for a living. honestly, over the years I do not know of anyone who has done it. I’ve become close with some fellow traders I met at a seminar we attended at Mirus and none of us were able to succeed at it. Barry at Eminiwatch is the only one I know on the internet that appears to consistently pull 3 to 4 points a day out of the ES. I know you started with Barry but got frustrated with his indicators/method and moved on to new methods. From a casual observer, while you think you have made progress, it does not seem to me like you are a whole lot further along. I do not mean to be critical as I this does not surprise me at all. We have tried dozens of different methods and never found anything that worked enough to feel confident I could trade full time for a living. I realize to even attempt to do that one needs substantially more capital then most “gurus” selling garbage tools/strategies would lead the naive “want to be’s” to believe.. Maybe it is just me on my own flaws. Anyway, thanks for continuing to share your journey and I wish you luck and hope you make it.

  5. Steve – Thank you for your comment. I totally agree with you. I haven’t see anyone do it. And quite a few that claim to, I’m sure they’re not. Your post comes at an interesting time because I’m discussing with a previous client the possibility of doing part time consulting for them again. That would give me a stable income. I’d do it in afternoons which would allow me to trade the european morning which I find better. I planned to write about that in the blog but now is a good time.

    Last year I was able to make a couple hundred per day but this year I’ve not made money and after 4 years I really need to have a stable income. $200/day is only a small fraction of what I can make consulting. I’m not going to quit, but I think trading 3-4 hours/day is enough for me and the rest I could spend making a guaranteed income (which would be much more than I could make trading). I’m a bit depressed about that but I think at this point doing consulting work would be a refreshing change and would take away the stress of trying to pay the bills from trading income.

    I’d like to skype about this with you, feel free to give me your contact info if you’d like to chat.

  6. @Michael and @Steve

    What about robspaintrading (twitter nick)? He is a retail trader. And he seems to profitable. And doubts about that?


  7. Markus – Rob just kind of appeared as a profitable trading professional. I think what Steve was asking is if we know anyone who went from unprofitable to profitable. And I don’t know a single person. I know many who claim to be profitable but I’ve never seen any proof.

  8. I have to say I disagree with Steve- If someone is able to “consistently” (because we’ll only ever know if we were truly consistent at the end of our careers..) make that kind of money with that kind of initial/per trade risk means they can and are doing “it”.

    So the market has changed- keep records, know your game and change with it ala “Who moved my cheese”!

    If the other markets are working then the solution has been found.

  9. Hi Michael. I commented on your last post that it is not worth trading ES unless you are using size. I believe both Oil and gold is much better for traders not able to trade more than 3 contracts, as they have very good daily ranges.

    You have inspired me to create my own blog and I am now journalling my trades, warts and all. Also I agree about putting your plan online as it will make you stick to it.

    I have updated my last live trade on my blog and it shows how I use both Better Volume and your Volume patterns indicator in my chart analysis and trade entries. I would greatly appreciate if you could have a look on my blog and tell me what you think about it. Here is the link – http://theshortcableguy.blogspot.com/.



  10. FWIW I have to disagree with Steve. You’ve made progress. You ARE further along than when you started.

    A very very very small percentage of profitable retail traders are going to have a presence on the web. Giving away information for free or for a fee are equally pointless.

    I remember in the fall of 2010 when you were trading the BUND. You were consistently taking money out of the market. My point? Maybe your brain is built for a faster market? Everyone is different. This could be the reason why you’re finding success with the Euro, Gold, and Oil.

    I also want to add that I truly believe trading the ES with one contract is borderline impossible. Trading with two is better but still tough. Three is ideal. I do not believe it’s because of risk reward either. Volatile markets offer bigger ranges and thus more opportunities. If you make a nice trade you are rewarded quickly. It’s easier to trade 1-2 contracts in a volatile market (I don’t care what the trading books say) and that is why I think you had success with the BUND. Again different people different styles. Play your strengths.

  11. Michael, I have to agree with “unnamed”. I makes no sense to trade 1 lot in a kind of FT style cause you cannot scale out. But it might be ok if you scalp or if you trade a momentum system.

  12. unamed & markus – I wrote about 1 lot trading in my latest post. for me it was just a step. Prove the first scale is profitable using tight (6-8 ticks) stops. I underestimated the impact it would have when I’m not able to capture more of a move.

    unamed – I have been following bund for several weeks now and I do like it better. I plan to trade it more and at least for the European morning, give it as much if not more attention than ES.

    Dudley – I’ll be reading your blog, looking forward to 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>