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