February Review/ March Gameplan

Having gone through february's numbers, along with the projections for future potential, a few areas of improvement stuck out. These will be where I direct my focus for March...they are:-

* "Missed" Trades- For various reasons, during February, I missed 5 trades...will look to get that number closer to ZERO in March...

* Errors- I only made TWO errors during February, but they were avoidable...will look to keep that number low.

Basically, my goal for March is to Continue as February- but more efficiently.Future efforts will look at, in order of attempt:-

2 Contracts- Trading exactly the same way...but with the addition of another contract.

Getting Back In On The Move- Allocating a certain percentage of banked profits to take an opportunity to jump back onboard.

2 Contracts...and run- Different ball game...exiting 1 contract where I'd usually be all out (be it with 1 contract, as I do now, or 2...as "2 Contracts" above) and then running the other to a larger target while limiting potential loss on that 2nd contract.

YM Chop @ Midday Reversal.

Nicely positioned reversal. Had my "managerial hat" on when I found this one as I was doing some end-of-month calculations...as a result, rushed the entry and got in short at 7169. High was 7178. This meant me getting stopped for breakeven instead of for a small profit...

The price activity out of the midday reversal had alot of chop- due to the pace going into the reversal being quite strong in addition to the shape of the momo reversal being more wedge-like instead of skewed...

Equal Moves And Q4 Preliminary GDP announcement.

Nice 3.75 point scalp out of the 08:30ET momo reversal in the NQ which coincided with the Q4 prel. GDP announcement....proof that news is built into price action...

While I'm happy with the my consistent approach and the frequency I'm able to take relatively small but meaningful profits out of the beginning of a trend move, it's time to review the last X amount of trades and see how I might have managed an extra contract...granted you don't always get subsequent moves of this magnitude (100mins after the trigger and the NQ is up 25 points!)but it definitely merits looking into!

Seems obvious that the trade off between what's lost on losing trades/trades that don't get further than the initial profit taking point would be worth the opportunity to take more of the gains which I'm currently leaving on the table...we'll see...

Slightly unusual trade in that there was no Pivot Support but two forms of measured or Equal Move Support, which is illustrated on the 30min chart. Caught it 4 ticks off lows with an 1108.25 entry- out at 1112.00

GBP/USD- Just past 09:00EST.

Another GBP/USD trade. Feel as if I'm getting to know the rhythms of this pair. Not quite the accuracy I usually aim for with the entry but still nice. Got "jigged out" (been watching waaay too many TODAYTRADER VIDEOS!)before the big move- often happens to me due to my risk management style.

As mentioned before will need to look into multiple contracts when I'm ready to take more risk onboard...let part of the position go a bit further.

GBP/USD 13:30EST

Routine trade on this one. Picked off the low by 2 ticks with a 1.4175 entry, exiting at 1.4211. Just a shame I didn't go in with the extra contract...needed to find a balance between the willingness to trade and keeping the day's potential loss within emotionally acceptable limits. So the 36 point gain will have to suffice.

Slipping on Crude

Took a loss today on Crude Oil APR09 futs today.

As always, there's the instinct to take profits early than the plan dictates. I resisted and so allowed 10 points in my favour to turn into a 12 point loss.

Looking back at the chart 45mins after the trade, it's obvious that I've been wicked out. I had decided on 10 points of risk before hand...perhaps I underestimated the volatility on this contract, having never traded it before? Or maybe I was too eager to make money and too scared to lose too much? (had targets in my mind which is always a bad thing). Maybe it's the blood they took at the hospital this morning! lol. Whatever the case, it was almost as if I needed to lose some money to balance out the fear and greed demons. Now I've been reminded that the equity curve can't just shoot straight up without any pullbacks...much like any chart of any financial instrument.

Incidentally, the chart of my own equity curve suggested that I might be in for a pullback...Had a strong upside move (ie long green candles) followed by a series of smaller wins (they'd be the smaller real-bodied candles) This meant that the Pace had slowed...resistance is account equity highs.

PS I did take a trade in JPY/USD March09 futs yesterday, which I forgot to post at the time...got 4 pips out of it...

Momo Season

It was that time again today...many momo reversals in the one 24hr period. Still suffered from pulling the trigger for a 2nd time- got distracted by some bad news that I had received just prior to the entry...did take the other two though:-

1st trade was a play off the daily equal move setup into 7250 ish in the YM, 11:45ET. That one fell through but I ended up with a slight gain due to the way I move stops.

2nd trade (the one I didn't take) was in the Oil futures (CLJ9-apr 09). Again was hitting an equal move zone, 38.85, on the all-sessions 1min chart. Move out of 09:00ET into 10:15ET was roughly equal to 11:45-13:00ET move. Also had larger timeframe pivot support...

3rd trade was in GBP/USD mar 09 futs. 13:20ET. Some pivot support on the 30min. Didn't get very far much like the YM trade, but got 9 pips out of it anyway.

As luck would have it, the two "missed" trades had legs- the two I took didn't. At least I improved my account balance...

Frozen

Still can't believe I just let go of a 50 pip opportunity in the EUR/USD. I missed one by half an hour when I logged in at the airport this morning in London's Stansted airport. That ticked me off but I knew that it couldn't have been helped as I wasn't there. Then after arriving back home in Italy, I let go of this perfectly good setup. It could be the travel, change of location...maybe the fact that the last setup I was looking at failed. Whatever the case, I need to wipe the slate clean and patiently wait for the next strong setup.

Good "Trade".

Nice little momo into 09:00ET in GBP/USD. Great higher timeframe resistance (30min). Played out perfectly...currently 70 pips in favour of the trade- but I didn't take it. The last hour of trade before the trigger reduced the odds of the trade working out and the trigger, slightly after 09:00ET, meant holding through two announcements (which I won't do if it's near my entry...not so bad later on in the trade)

So although I "missed" some decent gains and I had been tracking the trade for awhile, I've made the best trade and have no regrets whatsoever. Anyone who's read "Way Of The Turtle" will be aware of the "The Sunk Cost Affect" and "Recency Bias"...very much kept at bay in today's trade...

Stalking the AUS/USD.

Unusual one today for two reasons: 1)The length of time I was "stalking" the trade and 2) The time spent in the trade (42mins- usually they are somewhere around 10mins in duration)

I do regularly see them coming in advance, such as the example in this chart , but usually don't have to wait 5 hours!

Same routine- different country though as I'm currently staying with my Sis in London. Glad to see that I can still trade (not talking about profitability here, just whether I'm objectively following the plan or not) even though I'm not in my usual environment.

YM- Just Before 10:00ET

I remember Toni Hansen, a brilliant technical analyst who first taught me the momentum reversal strategy, saying that it's a good idea to do your market musing (keeping your charts, studying etc) just before market open to put you in the right frame of mind...to keep yourself in rhythm with the market. Well that's what I was doing when I noticed the YM making a somewhat steep momo into 10:00ET. Pivot support on the 30min was accompanied by the short term potential for upside with the rounding off of the last few days at lows. Caught the lows within 2 ticks with a 7846 entry (stop 7840-although I didn't keep it on the books, had my order ready).

Got out at the blue line, 7875, because the overall pattern was fairly steep so took profits aggresively at first sign of resistance rather than try and trail up. Often times you'll get a bad fill if the market turns quickly...sell into strength.

Afternoon Rally 12th Feb.

Following on from the mismanaged 12:30ET reversal, I was passively going through how I would manage the trade even though I had long since been stopped out. It was going into those lows, detailed in the ES 1min chart, that I noticed some serious technical support...

There was the equal move intraday. The final low not also completed an equal move on the hourly, bringing it squarely into the 2nd of Feb low. The slow down in pace (shown in yellow) added some extra weight to the setup.

After seeing all the above, I quickly went in search of a momoreversal in a stock to take advantage of this bias. I found COP. It too had strong multi-timeframe support in the form of 3 wave trend exhaustion (on the 30min it was testing...on the daily it was triggering one)...the various lines intraday show entries, stops and exits.

Lack Of Consistency.

Obviously the little drawdown is having an affect. Beautiful opportunity in the indices at 12:30EST. Nice pattern intraday in the NQ but the ES wasn't so pretty intraday. It did, however, have a fantastic pullback to the All-Sessions hourly/daily range (beginning 20th Jan)...the NQ's was a bit messy. So I was trying to combine the biases in the two. It played out well but I didn't trade it the way I normally would. This could be partially attributed to the fact that I rarely trade the NQ. But it's probably largely down to my slump.

I got in a shade early, the green line intraday. What I'd normally do is add another contract then set a stop for the two. Feeling a bit risk adverse, I decided to add right at SUPPORT!....in short, that changed the whole dynamic of the trade and got me stopped out for a loss of commission.

Deja Vu- EUR/USD

You wait for ages for the bus to come- then several come at once. It's the same with losses!

This time, I can't say I did anything wrong. Intraday was good, entry great and larger timeframe resistance good too. Just one of the few that didn't work out. Even if it's unusual to see two losers in a row, I'm not gonna think about pulling back or tweaking anything (for now) as I know from experience that's a debilitating thing to do. I'll just think of it as a routine drawdown. Of course, if I take a couple more in a row, I'll have to stop and reassess. At least I'm keeping those losses small compared to the winners...

EUR/USD loss

Been awhile since I've taken a loss in the futures. Took a setup with a strong larger timeframe resistance but the intraday was weak. The intraday chart shows three different scenarios in yellow: 1) The type I usually pass on-The weakest of the three. 2) The most common and 3) The strongest. This was a classic case of outcome bias along with plain impatience. I need to keep in mind that weak setups are not validated by a positive outcome. Even weak setups will work sometimes but that doesn't mean you should trade them (unless you're not interested in high probability trading) Likewise, taking a losing streak whilst trading strong setups should not deter you from continuing to take them. Patiently wait for the same strength of setup!

Same Old Story.

Aside from the fact that I went ahead and still traded a stock inspite of what I kind of promised myself in the prior post....I'm starting to see a pattern occuring. It's annoying. It slows down the whole process, but I believe it's necessary until I learn how to manage my emotions more efficiently. The pattern goes like this...

1)Nice profitable trade creates euphoria...I want to continue to do what I'm doing more often, with more contracts etc.

2)I realize that my stock screening process may be negatively influenced by me feeling higher than a kite...I decide to "just watch" until I return to my objective self *cringe*

3)I inevitably see, and pass on, many nice setups such as the YM 14:30ET reversal shown in the accompanying chart. I get frustrated by the battle between missed opportunities and the need(?) to achieve balance. I also believe that I'm scared to lose some of what I've just made.

4)I take the next setup, with lower risk (ie a stock). I expect it to fail- it does. After I'm out of the trade, I realize it wasn't that good to begin with...I was trading it in place of the recently missed trades, not objectively based on it's own merits or lack thereof.

5)Points 3 & 4 repeat themselves...usually at least a couple of times. I get tired of making half attempts and losing money slowly. The feeling of euphoria has disappeared. I decide that, if I'm gonna lose money, I might as well lose money trading my plan.

6)I stop the half attempts- but I don't trade the plan either.

7)I finally accept that I can't protect every dollar in my account and make money at the same time. I patiently wait for the best entry and take it. If I lose I'm happy I followed through, believing that the system will make money over time. It does. If I win I go back to step 1!!

In short, it takes me about 3-4 times longer than it should do to reach a certain $ amount in my account, when based on the number of setups I identify compared to the number I take. The next challenge is to take the next one I see after a win to see what really happens....

Futures VS Stocks.

As I wrote in a prior post, stocks seem to mess up my thought process when it comes to trading this pattern (which is the only trading I do). After going back over January's statement, I was alittle shocked by what I saw. Essentially, as good as some many of the trades were I lost money trading stocks. My profitable month was down to my much more infrequent, but substantially more profitable, futures trading. Sometimes less is more...

Here are the facts: I lost roughly 16.6% of profits made on futures trades (ie would have been 20% more profitable) by trading stocks. The time spent trading stocks was the vast majority of the hours the market was open to do so. If we say 4 out of the 6.5 available that's 88 hours for the month. On the other hand, futures was done on the fly...my guess is around 10-20 hours for the month, but it's hard to quantify as I was doing other things at the same time.

So what does this mean for me? Looking at this from my perspective, I'm disappointed. I've always invisioned myself making slow but consistent profits day in day out (with losses throughout obviously) but, looking at it from a business perspective, I have two choices:-

1) Find out what I'm thinking/doing to damage a winning edge to the extent that it's losing money when used with stocks (I'm sure that it "works" in stocks as well as futures)

2) Simply focus on what's working and find other ways to fill my day during market hours....there are less appearances of the pattern during these hours in the forex futures...

The many reasons for my...uh...blunt edge are, as far as I can tell:-

*Lack of trust in stocks...I see them as being easier to manipulate or fall prey to adverse movements as they are under the "markets" bias.

*Being able to scale in and scale out- in futures it's boom or bust. You can't split a contract so maybe that enforces more discipline with entries and exits. I've often times watered down good trades (in stocks) by scaling out far too quickly to "protect downside"...lol

*Using lower risk....because I can. As above, this could be having an affect on discipline.

*Number of stocks/frequency of pattern- simply put, too much choice. I'm able to keep an even keel when there's an extended period of time between trades. It allows me to dampen the affects of despair and euphoria/fear and greed.

*Giving "room" for trades (misplaced stops)- similar idea to being to the ability to scale....I can widen my stop by taking on less size instead of committing to the trade as I'm forced to do with the futures. This waters down any good the trade might do by giving me less reward for my risk.

Need to work through the above if I'm to use stocks as a profitable market for me...until then, I'm going to let setups like RDS A go...

Fear Of The Futures?

Been awhile since I took a futures trade and realized that, perhaps, I'm scared of success. The more I succeed, the more I tend to worry about reversing that success. So I've made a deal with myself to reset the counter (in my head) to zero so I have a new beginning (by taking profits out of the account after achieving certain equity levels). Of course, this doesn't protect my account directly as I'm still exposed to risk but it allows me to build confidence by periodically "locking in success"- boxing off the past so I can go forward without the worry of reversing that success. Thanks goes to Brett Steenbarger for this idea (if I remember correctly!)

Took one early morning (for me...19:00ET ish) in the ES but scratched it as I wasn't ready to leave orders in and go to bed. Had I have done so, my target would have been met...oh well :)

Better fortune with the 2nd trade. GBP just before 06:00ET. Got in early with one contract at 1.45410 before the price shot up and stalled right at the highs of the trendline...waited a few seconds then added another contract as the GBP has less risk per tick than the EUR/USD futs contract. I did this knowing that, should the price exceed those 1.45560 highs by more than a couple ticks, I'd be out. I pretty much immediately got confirmation as the sellers quickly stepped in and the trend changed. Lightened up pretty quickly by covering 1 contract which allowed me to ride the trend down to the whole number support...tightened stops after seeing a shift in downside momentum exiting the last contract at 1.45090 to take 46 points.

I've noticed that the appearance of the momo is cyclical...there's been somewhat of a draught in the past few days but I feel that we're coming round to another fruitful period. Of course we won't know until after the fact....

Financials

Missed my entry in Morgan Stanley (MS) @12:45ET...left to go to the bathroom :( Did make up for it with Goldman Sachs (GS) later, scalping it in the 20mins leading up to 15:00ET- gave up on it just before it rocketed off, pausing at my target resistance level of 82.70 before completing a $2.5 move in half an hour. The reason: my setup was no longer valid. Stuck to the rules and managed 2.5R for the day...I'm happy.