Exits

I suck at letting profits run.  If left to my own devices, I will cut my own throat with winners every time.  I will begin by lightening super early at arbitrary prices, then will continue lightening as it works some more, and then I'm left with a core position which seems so puny, that I decide to just exit because I wont make any money on it even if it works.  Of course that last exit is usually too early and although the position was small, staying in would still have made me more money.

The way to fix this mookish tendency that I had come up with is to stick to the script and go for a get out all at a predefined target based on the setup.  The problem is, its hard enough to follow when I have a setup, so when I don't have a specific, predefined plan yet still find myself in a position, I quickly resort to the only way I know how to exit, which I have already said sucks a big ball.

So, I have a new plan.  If I have a predetermined plan, I will stick to it.  If I don't, I won't allow myself to set arbitrary limits to exit.  Instead, I will say to myself, how much do I like this trade?  If I love it, I wont lighten or exit until I get an extreme tick reading of 1000 plus.  If I only like it somewhat I can wait for 800.  If I hate it, i will wait for 500.  I guess if i am super amped about it I could wait for 1200 or 1300.  But I usually hate a play as soon as I'm in it, so at the very least I will attempt to get 500, which are better, wholesale prices for my exits.  This only applies to profits.  If I am negative in the trade I have to respect my stop and not be tempted to wait for wholesale price at the risk of getting a horrendous move against me first, and hold through it.


I will try to stick to this new plan and reassess later.

-fmlt

Further Refinements, and thoughts on long PC day

It occurred to me i don't have a contingency planned for when my down day pc play (DDPP) starts to work but then there is a late day reversal.  So here it is.  Once it starts to work, if it dips back above the MA, my exit is 4.5 points away from the initial touch of the MA, or my original stop loss exit, whichever is closer.  That should hopefully be a good one.

Today was a great PC day on the long side.  If i had tried to apply the DDPP rules to it, but reversed for an up day, i wouldn't have gotten in at all because there never was a sufficient pullback in the market.  It got me thinking that i had seen a lot of up PC days that never had a decent pullback but closed by their highs.  That would be a classic trend day.  I'm not sure if this is because up days are always like this, or the bull market that we find ourselves in,but that seems to be the case.  I'm going to look into it further in order to come up with a good UDPP setup rule list, but in the meantime, i am inclined to think it will have to buy it at a worse relative price, all the while keeping a sufficiently far stop.  So it would be riskier, but could still be quite profitable.  I will revisit this soon.

Down Day PC Play rules adjustment

Well it worked today, and like gang busters. I didn't do much for various reasons.  Suffice it to say I suck.  Also I did it wrong.  But that's neither here nor there.

Here is my adjusted rule list on this play.

Get in 2 Points above where if first crosses above the MA after 1PM.  Stop 2.5 points away.  Exit if it works - as soon as the market goes 4 points below the MA after 3PM, else, right before MOC's come out.

heres the chart of today (if following the new rules, locked 9.75 of profit and only 2 points of pain at the worst.)

new bearish pc play to try out

Seems like we just might be rolling over  for a little while, daily chart-wise in ES.  I've looked back a couple weeks, with the assumption, that if the dynamic of the market has changed recently from bullish to short term bearish, there would be some kind of pattern emerging with the way down days play out.

PC has been working better lately than it had been.  I have been really trying to get involved in that again.  So I have been looking at these down days for an afternoon PC trade.  I have noticed that out of 4 similar down days that i looked at, 3 of them had nice drops close to the close, or after 3 at least.  The fourth one did drift up the last hour and a half but didnt rip or anything.  So i came up with this trade:  If by 1 oclock, we havent had a real bounce on a down morning, wait for the first squeeze to the MA, (if we are above at 1, wait for a cross below for confirmation, then sell the next squeeze to it)  then put on a short trade for a couple hours- pc style.  Stop-loss has to be fairly far, like 4.5 points.  The exit, if it works, is into the first decent size drop after 3.  If you don't get one, out before imbalances come out.  Out of the 4 samples, i would have made nice bank on 3 of them, and lost about 2 points on one (if didnt take a small profit of 1 or 1.50 on the drop shortly after 3 and instead got out exasperated around moc time).  Two of the 3 that worked were today (actually yesterday, its after midnight) and friday, so recent action confirms.


Since this bearish action in the markets has only started recently there were not many examples to look at, meaning that there isn't quite so much confidence to be gained from any patterns found, but PC is something well tested.  Also, I have thought that the market tends to do what its been doing recently much more often than would be implied by mere coincidence, and also much more often than it tends to repeat behavior over long periods like months or years.  Because of this i think there is a strong chance that in the near future this behavior is likely to repeat, and so i am compelled to try to do this play.  I will try it out the next couple times I see it, and hopefully not mess it up too bad.  I will reassess then if i need to.  Lets say, next setup like this i see, i will do it with 3k shares of spy.  That loss if, it goes wrong of 1350 gross doesnt seem too bad...  If it really starts working repeatedly and my account balance recovers i can always size it up later.

here's how it would have worked out today

-fmlt

my dog

Learning Day

I didnt get any good quality setups today, so i am not pissed about being flat.  On the other hand, PC worked great so I have to formulate a plan of action for that bitch.  I am thinking buy either once or twice, a point below the MA and a stop loss 4 or or 5 points away from that, cover at 3:40 or 3:20.  Need to work on that this weekend. Also, what to buy? SPY IYR or KBE would be the most likely candidates.











-fmlt

today sucked. i am smoked

i dont have anything else to say

fml

Snoozefest

Friday was slow.  Today is slower.  Friday first half hour TVOL 122 mil shares.  Which is abysmal.  Today's is 112 mil.  Why work on the day Columbus accidentally thought he found india but instead found jamaica or some shit? Also,  no opportunity that i can see.  First hour's range in the S&P eminis- 4.5 points.  That is terrible.  Im gonna go hang with my wife and son.

note - That pic above is supposed to be Reese Witherspoon yawning.  Or deep throating a well-endowed ghost.  Im not sure which.

This market is very gay

                           

Super dead right out the gate.  There was one small oportunity that I didnt go on.  I hope next week is a better success than this week's fiasco.

-fmlt

Dearness. High-priced; expensive

"That which we obtain too easily, we esteem too lightly.

It is dearness only which gives everything its value.

Heaven knows how to put a proper price on its goods."

-Thomas Paine

This got me thinking how sweet it will be to finally have success when it comes because its been a long hard road.

Didnt go on my trade

Lack of discipline begets more lack of discipline.  Still kicking myself over messing up my morning trade, I didnt go on a FMATANT trade and missed out on 1500 more dollars.  Starting tomorrow i cant allow any slipups!

-FMLT

I Made some Dough!!! (Epic Fail) :(

OK so today and yesterday I made money.  But i didnt follow the plan.

Two trades yesterday would have worked, and would have brought me flat on the week.  Instead I made half on one, and didnt take the second one.  And so far this morning, another trade worked.  Today was better than yesterday, because I made about 60% of what I should have made.  If I had followed the plan on all 3 trades I would be up 1500 on the week.  Instead, I am still down 1500 on the week.

I think its a lot easier for me to follow the plan when i get stopped out than when I get out of my trade a winner.  Its very hard for me to resist taking some profit.  I think its ingrained in my psyche from years of inconsistent trading.  If I see some money sitting on the table its hard to leave it all there and let it ride, to maybe be snatched away, and have to take a loss to boot.  Another thing that makes it difficult is this- when I put the trade on, its a 2 to 1 reward/risk.  When it moves towards my target, It starts to look more like 1 to 2, because my reward is an additional small move whereas if i get stopped out I lose all my unrealized profit plus the loss.  Anyway, all these are reasons I dont follow the plan, but they are not an excuse.  I have to make following the plan the #1 priority, like I have been saying all along.

Goal tomorrow: Stop fucking around.  Get my shit together.  Follow the plan!

FMLT

DOH! (no dough)

OK so after getting stopped out of my first trade, I had a nice chance for a comeback when the MA got tested at around 1030.  Based on what I was thinking about yesterday, I waited patiently for the previous bar's value.  Never got there.  Almost, but not quite.  Would have worked sick too.  Doh.

-fml

fixing rules

I have a thought about getting rid of the ambiguity of the moving MA from my setup (bottom of this post). Use the previous bar's value. boom, problem solved.

Assignment: Gotta go back and backtest when i am looking at charts

some observations

I was thinking about 3 different situations that may signal that doing my setup is risky and should be avoided-

1. after 12pm
2. after a reversal hammer bar like today after that 10 o'clock number
3. immediately following a successful gap fill like the 9:40 bar today


Assignment to self- when checking charts, look to see if any or all of these exceptions to the rule are warranted.


also, judging from today's actions so far pc is alive and well....

Success!! (I am smoked)

OK judging by how i followed the plan, I succeeded. But i was stopped out almost immediately on 2 trades so I am now down almost 1700 net and its 10:13 AM. Somehow i dont feel very good about my "success." Done for the day. FML

-FMLT

Week's Plang

OK I have decided to do this week with 4k. Also, my placement is at the MA.

this week blew a moose cock

Between having to go to the dentist Monday, internet issues Tuesday through Thursday, and today not getting the good setup except for a split second today, which i missed, i have to say that this week sucked in terms of being able to trade. Add to that my smokefest on Wednesday and you have a shitty week that will be great to recover from next week.

Speaking of next week. I am inclined to keep in last Friday's goal for this week of 3k shares on my setup. But i am also thinking that negative account aside I should be able to withstand the risk involved with my setup for 5k shares. Especially since it seems to work more often than it doesn't. So either I will do 3k, 5k or split the difference and do 4k. I have to decide that this weekend and have it down in the blog for accountability reasons before the market opens Monday.

More and more I am seeing that you can get your setups airtight but they are only as good as their execution. Reading trading from hell has confirmed that he is struggling with the same problem. When it comes to ostensibly smart traders that continue to underperform, i am starting to think that our main shortcoming is how we handle the task of trading than our analysis of the market. The best way i can think of to handle that is to make the trade as easy as possible, and then make following it the #1 priority (above the actual money made or lost. See my post here .) And to constantly try to push the amount of shares i can do that with over time.

reminder to self- this weekend try to come to terms with the best place to be setting my entry limits- at, further or closer to the MA- This is something i have never fully figured out. One thing that came up today is the fact that the latest candle's movement before it finishes (the 5 minutes are up in a 5 min chart) ends up moving where the line is.

set aside a setup???

note: been having internet troubles that prevented me from trading past couple of mornings. I hope to have them solved and be up and running tomorrow. my plan from the last post still applies!! just delayed a couple days.

Anyway, my internet got fixed soon after and i managed to smoke myself pretty badly.

some analysis:

I have a setup where huge volume comes in on a big move, then we retrace to the middle of the bar. That's where I take the other side (same side as the initial direction) and stop close to the other extreme of the bar. limit 2X as far as the stop, or a size that is a little smaller than the bar (because i am not stopping the top of the bar, just close to the top). The thing is, this setup is for the 1st bar with volume. If it is followed by more move with volume in subsequent bars, it still only applies to the first bar. And that is where i went wrong. I started to short on the retrace at the middle of the 2nd bar, whose volume exceeded the first one.

I started writing this to say that setup doesn't work for me and I should put it on hold, but then i realized that I actually got really smoked on another trade. I just thought i was doing that one. Instead i just shorted way too early into a big, low volume retrace of a high volume big move. I shorted way too far from the original high volume bar and because of that i kept getting back in, or moving my stop away because I sensed that being stopped out didn't mean the trade wouldn't work. Sure enough, by the time i threw in the towel it really was over and the trade proceeded to roll over.

I think the lesson to be learned from this, is to avoid going on these trades that resemble actual setups i like but have no clearly defined exit, or have one but too far away. Specifically, i must remember, No more trying to randomly pick ends of retraces! It either has to be an exact setup i am approved to trade or I leave it alone.




Incidentally, if i had done the actual setup, i would have lost money, but it would have been 20 or 25 cents instead of 70 (which i ended up losing with my 3 attempts to short as we chugged higher), a number that is much more palatable, and numbers aside, would have been way better because having followed my rules and setup would have been a lot less psychologically damaging. Also, i am finding that this particular setup is a lot less successful when it happens after a lot of bars vs. just a handful or less. I think i should consider not doing it if a long time has passed, or do it way smaller. Something to contemplate.

In the midst of the repeated smokefest of this trade, I ended up missing another great trade setup in the spy which worked beautifully. The old FMATANT. Gotta be on the lookout for this beauty. Gotta avoid dumb trading that prevents me from catching hot setups.

fml

this is why im hot

Mims - New Music - More Music Videos

OK that title is wrong. Its actually "this is why i suck". Sing to the same tune as that mims song. I suck. The reason why is that even though I have an edge with the couple trading setups that I have made, I dont do them, or do them small, and then once im in i do them wrong. I have doubts and concerns about the trade and why "this time it's different." Also i have other things on my mind. stupid things like what im gonna eat for lunch or what songs i need to download for my iphone. Then i see them work and I say to myself, oops i fucked up. Should have followed the plan. Then i proceed to hang around and trade when i have no edge and usually lose a little bit of cash.

Meanwhile, in stark contrast to my absolute mediocrity, u have a man with a vision. A man who sees his edge and pounces to the max of his BP and ability. Who looks before he leaps and plans it out and follows the plan. A man who has the strength of his convictions and faith in his method. A man who banged out a ridiculous day just following the plan and going all out when he has an edge. I fucked around and lost a couple pennies.

This is why I suck.
This is why I suck
This is why
This is why
This is why I suck.

Fuck that! im sick of sucking. I am promising to myself right here right now. I am going to follow the plan on the trade setups i got. At the very least my morning trade. Every day next week. Three thousand shares. If I dont do it may god strike me down because I dont deserve to live.

Check back next week to re-asses and set new goals.

fml

trading quotable

I am continuing to have issues with not going on my morning setup when it arises either because I am distracted by another (usually worse) trade or because I have some misgivings due to resistance/support nearby or something similar. I feel reasonably sure (as sure as I can be without true backtesting) that it works more often than it doesn't and also, if it works, I make twice what i lose than if it doesn't so I just have to close my eyes and pull the trigger. Once i'm in, an even harder feat is getting out where I am supposed to and not deviating from the plan. Anyway, I know what I must do. This is purely an implementation problem so I don't want to over-analyze this issue.

I wanted to put down a great quote from a wise trader I was talking to earlier so i can remember it in the future. It basically concerns what I was talking about in the beginning of this post.

He was telling me that when it comes to learning to trade properly, I have to tell myself that

"its more important how well i execute this idea than how much i win or lose. If I can make that my goal and gauge of success or failure, then the making money part will come on it's own."

ok that's it I'll post more when i got something.

-fmlt

today's mistakes

Today, I did something I do often. I start out with one trade idea. I attempt to lower my risk by going small, but then my exposure is small. I cant stand the thought of having small exposure if this is going to be a successful trade. So I increase my exposure by putting on other small positions in related trades. This way, I believe i am attempting to deceive myself. It looks like a few low risk trades but its still all one basic trade, and its still a lot of exposure and risk. So the risk is harder to see, but its still there. Then often, like today, when the trade goes wrong, I end up losing way more than I thought I was risking because of the confusing exposure.

I think the better approach is to just put more exposure on of the 1 trade that i think is most likely to benefit from this anticipated move. That way, the risk is much easier to see, it is where my stop is. I have to remember to do that because that way my plan is more obvious, leaving less to interpretation. Also, I know how much i will be down if the trade doesn't work out, something that is a mystery with the other technique. I have to remember, if its just one trade, i must force myself to concentrate all the exposure in one etf or stock.

*The one exception to this would be if its a trade based around an index, and the index doesn't have a thickly traded corresponding etf. In that case I have to trade the index but do so with a basket of it's thickest stocks. This is what I attempted to do with my airline trade, and it brings me to today's mistake number 2.

Today's airline trade would have been a wonderful profitable trade. I saw the airlines rolling over and breaking yesterdays low. I then sent a basket of the thicker airlines short, but because I was afraid to pay up too much I sent it limit away from the market, and then only ended up getting filled on one of those stocks and then barely making any money in it. I think if i am going to be trading the index with a basket I have to trade it at market so I can avoid partial fills that throw off the risk/reward calculations. So that is the lesson I learned with that today.

Finally, an observation. If i am going to be basing a trade on some other security, like today's long in the SPY/GDX/XME (see mistake #1) based on the action i observed in the FXE, I need to see that the action is significant. The FXE was showing strength which i felt boded well for the three stocks i bought. But the problem with that was that despite showing some strength, it was still stuck in the middle of yesterdays range (after having dipped below and then bouncing) Because of this, the strength wasn't really that significant and wasn't going to pull up my stocks with that action alone. In fact, the FXE was pulled back down from general market weakness. In the end, the strength I had observed was probably useful, because the FXE didn't make a new low when the ES #F did, and that divergence may have been a contributing factor to a nice bounce in everything i had dumped at a loss soon after. So perhaps the proper way to go about it if the move is not significant, would be to wait for a divergence then make a trade with good risk/reward due to the divergence as a catalyst. This begs looking into in the future. for the time being though, put any non-significant move as a reason for a trade on hold. I hope to observe a few trades like this and coming to some conclusion that will enable me to do craft a setup like this in the future.

1st post

Hello everyone aka no one.

A trader can be thought of as a plant.

If the plant is a healthy, hardy specimen (a good trader) he will continue to bear fruits (make money) consistently in the long run, and will likely survive the winter (shitty trading conditions) and storms (trades that go terribly wrong due to lapses in judgment, extreme volatility, gaps, or system failure).

If the plant is weak, it is always in danger of dying in the next winter, or in the next storm. It may go long stretches without bearing fruits, and when it does the harvest is small. When the weak plant bears fruits, it is tempting to think, oh, the plant has turned the corner, it is now healthy. But as soon as conditions worsen, the lack of hardiness of the plant is once again revealed.

To extend the analogy, a healthy plant doesn't need much maintenance. It is growing stronger daily. Provided the next winter is not unusually long and cold, or the next storms not unusually severe, it will continue to live on and in fact, will usually grow (improve) on its own momentum.

On the other hand, the weak plant is like the global banking system at the end of 2008. It likely needs help if its going to survive. It needs to be pruned, watered, fertilized, etc. It needs to be protected from the cold of winter and propped up before the next storm. If this is done it has a shot at becoming a strong healthy plant. Of course, this could happen on its own with the right conditions, but those conditions are unlikely to occur. Therefore, assuming the goal is to go from a weak to a healthy plant, a "hands off" approach is not ideal.

Currently, I am that weak plant. For too long, I have tried to wait it out for conditions to improve and for my trading to become better on its own. There have also been some endeavors at intervention, but these attempts at improvement have been misguided, in that they always chased some kind of magical new market paradigm, or new indicator, or new market rather than focusing on a sustained routine of hard work like analyzing past trades, tightening up current trading rules, creating new ones, all the while putting in the requisite time after hours looking at charts. This is what a really good trader has assured me is the secret to his success. This is what got him to healthy plant status. Now, even if he were to rest on his laurels, hes not endangering his career by doing so. His trading success will likely grow on its own. This is also what i see as a recurrent theme within great traders' whom i want to emulate careers.

And this is what i resolve to do. This blog is just a small part of what i have to do, but i think its an important one. I may recognize that i made a mistake in my trading, but i tend to repeat it frequently. If I write it down it may hopefully stick in my mind more, and I can avoid it in the future.

Also, this blog can be a medium to develop trade ideas i may have. A lot of times the ideas i have are vague and floating around in the recesses of my mind. Then, in the heat of battle, I may remember one of them and attempt to put a trade based on that idea. Usually it ends badly because I have never fully defined the idea, and therefore the trade is half baked. Even if i have a stop loss and expected gain in mind (which i usually don't on these trades), I don't have a plan for all the likely outcomes. So then I end up having to think on the fly and that is where i am at my worst: things are going wrong and i have to make it up as I go along. At this point i am probably trading on my emotions, a bad idea for any trader. Anyway, if i have a place to put my ideas down, and flesh them out, it will lead to me having less half-baked ideas in my head, which might mean less mistakes during the trading day.

So this is the plan with this trading diary blog.

FML