Nov 042012

Thursday was a big holiday here in Europe and when holidays take place on Tuesday or Thursday, the French usually take the extra day to make a long weekend.  We didn’t have plans to leave town so I would have worked Friday but I would have been the only one.   So I took the day off.  And that let me have my first full trading day in a very long time.  I’m used to trading the last 90 minutes and it was very challenging trading the globex and the open.  In fact I almost didn’t trade, but I figured I shouldn’t waste this extra opportunity.

The results were very good so I thought I’d share them.


The first trade was a long in Globex.  I couldn’t stick around so I let it play out.  I later came back to see I had stopped out by a point or two, just before the huge run up.  Right idea, my tight risk control just didn’t let it work.  That’s ok because I’m committed to having very tight stops.  I share this trade list partly due to a response I just recently made to a comment by Max about using stops.  For a while I used very large stops or no stops at all (I call those pain stops because you stop out when the pain is too great).  That worked for me most of the time but when it didn’t, it wiped out many gains and the effects on emotional capital was even greater.  I have a hard time taking stops.  Even when trading 1 lot.  I just don’t like being wrong and losing.  That’s a great personality trait for a software engineer, but a terrible one for a trader.  So I’ve found the smaller the stop the easier it is to take.  A 6-8 tick stop doesn’t hurt me.  A 4-6 tick stop is almost in the “don’t care” category.  I trail my stops quickly once it moves my way so I’m often in the “don’t care” category.  And that’s the best place to be for trading.

However once a loss gets to be around 4 pts it’s too painful to take and that leads to one of two things:  Joy at being able to get out with a smaller loss (when it comes back) or the extreme pain of taking an even bigger loss (when it doesn’t come back).  I think we must avoid this at all costs.  Not just for the monetary loss but for the emotional capital loss (thanks to FT71 for this term).

I’ve been targeting the next area of S/R which is often between 1.5-4.0 pts away.  If it’s 1.5 I try to skip the trade unless the risk is 1 pt or less.  If the R:R is 1:1 that’s a 50/50 trade and it’s not the best opportunity.  Trade #2 was one such trade.  I don’t remember the risk but it was around 5-6 ticks.  I actually targeted two on that one but I had planned to reverse if I saw sellers defending 1426.00.  They did and I flipped.  It’s very rare that I flip.  I try to trade with a bias.  That long was counter-trend and was not a great trade.  The shorts were the best trades.

One may ask why I took just 2-3 pts on a huge trend day.  The first reason is that I’m trading 1 lot in a way that will be scalable.  So once I add the 2nd lot I will still take that first off at 2-3 pts (like Rob Spain, FT, and many other traders) and use the 2nd lot to capture more of the move.  The 2nd reason is I took that scale at support levels which could have held.  It was not an obvious trend day until price broke below yesterday’s balance area.  I actually thought price was going to go back up.

I hope all that makes sense.  I apologize for posting tiny charts but my disk usage is almost maxed out and since this blog isn’t providing an income, I hesitate to increase my costs.

I did some more “fine tuning” to my plan during my time off the past 4 days and will test these changes out over the next few weeks and will share results.  Thanks for reading and I hope your trading is going well.