You Tube

Currently posting 5X a week.

Just a quick note for those who might be interested but haven't yet realized, I've recently got into the habit of regularly posting YouTube videos as a way of documenting my journey/progress and sharing any lessons I learn along the way. This means that I'm posting less here.

If you are interested in following along, you can click the YT icon to the right of the blog and subscribe to the channel so you don't miss any updates.

A lot has changed over the last few months, particularly in this past month (Jan).... most of it documented on the channel. See you on the other side!

The "Emotional Market Sphere" - Separating Yourself From The Crowd.

I think traders sometime forget that market movement is powered by other traders actions. The collective force of every trader's decision, including your own, moves the market. I call this the Emotional Market Sphere.

It's like a bubble of human consciousness that fails to see the error of it's ways. Everyone finds unique, apparently well-reasoned motives for falling into the trap of cognitive biases...some do it without ever learning that they even exist. The paradox is that, although everyone's way of expressing their cognitive short-comings is as unique as their fingerprint, the result is an entirely predictable constant. Repeatable patterns. The Emotional Market Sphere.

In order to profit from the market, we need to be able to 1) identify the EMS's emotions/actions and then 2) take advantage of them without succumbing to the same emotions (which leads to the same actions).

So the first step is to stop thinking of the market as a bunch of patterns with some rules that we can apply to profit from them, and start thinking about the emotions of the participants. The easiest way to do that is to take note of what you yourself are feeling. Look for the traps that you are about to fall in and position yourself to ride the panic/fear/greed/hope that you would have felt had you fallen for the trap. This requires you to be able to analyse yourself from a 3rd person perspective.

With practice, you'll widen the gap between what you felt like doing and when you took action...eventually, you'll hardly (hardly!) associate with the feelings that would have caused you to have knee-jerk reactions in the past. For the most part, you will have separated yourself from the crowd.

Push When Winning- Part II

Strategically adding to a winner to bag 6.7R, without increasing the original risk!

Don Miller- million dollar trader and educator- often spoke about one of the most misunderstood, and sorely neglected, ways of managing your risk. Push when you're winning and stop when you're not.

There are a few ways to do this:

1) Frequency of Stops.
2) Size.
3) Scaling In (not out!).
4) Daily Target/Daily Loss Ratio.
5) Reward/Risk Ratio.

Check out the short-lived, but very insightful, Trading After Dark series that Don created over 5 years ago for more on the above.

The only problem with all of the above methods is....they all won't work out in your favour some of the time. You need a thick skin, and a rock-solid, probabilistic mindset to allow a 3R win to come back and stop you out...or to stop trading for the day only to see that you could have made it all back if only you'd have continued ( etc. etc.).

Combine- Day 17.

On the back of a losing streak but finally starting to see a glimmer of what's necessary to move towards the combine target rather than bounce around break even, which is what I've been doing.

The second trade went nicely in favour but I only got partially filled and let my disappointment get the better of me, keeping the order for the remaining 8 contracts on the books when I should have been out for a minuscule profit. I ended up paying out as a result, throwing the day off by some $400. Need to be better prepared to do the right thing even when tested.

If you are going to step off a moving bus, you had better do so with conviction! The next few days in the Combine will demonstrate whether I have that or not as I look to replicate today's kind of engagement with the market consistently. I see two probable outcomes:

1) Quickly moving towards the profit objective- I've been trading alongside the Combine in SIM and, as has been the case for 2 years now, I'm satisfied that my method has edge. The issue will only ever be the ability to execute consistently with a cool head. If I don't do this then the other outcome will be....

2) Quickly failing the Combine- Not embracing this possibility is the surest way to make it happen as we tend to hide from information that threatens us or cling to an outcome we are searching for, quickly removing our ability to be objective.

So my goal isn't to pass the Combine...it's to trade the way I almost did today and let the chips fall where they may. I will gauge success or the lack thereof by the process I engage in NOT by the outcome of that process.

Let's see what happens.

Combine- Day 14 + Fever.

Spent 10 minutes saving, then re-saving, todays' charts to the HD...wondering why the little image wasn't appearing in the folder. It took me that long to realise that I was saving it as "130315" instead of "190315"!

....yes, some residual effects of the fever I am now just getting over. This was almost certainly caught from my daughter, except she is tougher than me and managed to walk around with up to 38.5C/101.3F while I, on the other hand, was reduced to tears, bedridden for 3 days with 39.2C/102.6F and "head pain" so severe, it made a migraine look like a headache.

I'm now happily drugged up with two antibiotics and a third tablet "to protect me from a stomach ulcer". Joy :).

Things are becoming fairly routine trading-wise. Attempted to move one step closer to respecting the ZoA target by putting in order in to scale out of half when the trade appeared to run out of steam. It was rejected for some unknown reason. So I exited for $175 less than I would have earned if the order had been accepted. Probably a fever-induced error...we'll see tomorrow.

Combine- Day 12.

Good job with patience and avoiding TWOT...I recognised that thoughts of frustration, failure and regret were running through my mind yesterday when I missed purposefully passed on what would have been a nice payment because it didn't flush the way I needed it to. No trade.

Fast forward to today and I was faced with the same situation. Recency bias- together with negative self-talk-reared their ugly heads ("take it now or you'll miss it like yesterday"). But I just simply chose not to take part in it.

Work needs to be done on trusting my targets, but acclimatising myself to 10 contract trading is my first concern.

Combine- Day 9 + How We Frame Things.

Is it a "loss" or a "cost"? A "win" or "revenue"?? How we label our subjective view of a reality with unlimited malleability will, ultimately, shape the very reality we end up living.

 

 

"Winning" conjures up thoughts of luck. A lack of skill. You wouldn't go to work as a teacher, bus driver, electrician or any other "normal" job and say, "I won my payslip!"...so why do we use this terminology in trading? Does that not encourage the gaming mentality that gets so many people, myself included, financially slaughtered??

 

Similarly, "Losing" brings to mind failure. Being less than. But when we pay for a train ticket to get to work, or buy some food etc. we don't think of that money as lost but, rather, spent. Same monetary result, different psychological framing.

 

"We pay the market to find out whether we are right or wrong in our analysis"- This is what Tim Racette told me in a recent E-mail exchange over the Christmas period (thanks Tim!). There is no winning or losing. Just revenue/earnings and costs. At least this is true if you have a tried and tested trading methodology...

 

Sincere thanks also to Pete from Everydayaware for reminding me just how important the words we use are for cultivating the behaviours we want to adopt.

 

Combine- Day 8.

Last Thursday was Day 7 and that was a profitable day with full contract size (10 contracts). Friday was a repeat of this scenario, except I did one better and just didn't watch the markets.

Since Monday, I've returned to my 19:00-20:00 CET hour (which is where I intend to stay for the rest of the Combine). I've taken just the one trade, today's, out of seven setups identified in those two hours. I managed to catch the only one that resulted in a loser an expense.

Easing in to 10 contract trading. Under water in the account but know the power of the edge so still feeling confident.

Combine- Day 6.

Confused. Will take a day to decide on a direction that can be sustained without risk of ruin as an exercise in building confidence. Will at least scale back on the frequency of updates as that is starting to become a chore too.

Combine- Day 5

Followed through with the plan...but the trades I got in didn't follow through. Not as frustrating a day as yesterday, where there was one runner and a few scalps that I sat on my hands for, but close.

Wasn't aggressive enough on the 4445.25 short...missed the 4452.25 short in to the close (not annotated on the chart) as I was doing the write-up. Too many coincidences suggest fear was in my trading today.

Good control though and live to fight another day. No regrets and will see this week through hunting for two or three "runners" and controlling losses on the rest. This will mean giving back a few scalps. Will review at the weekend and change course if necessary.

Combine- Day 4.

I was particularly pleased with the first trade today. My "Daily Goal"- one of 5 daily notes that you are encouraged to keep in the community journal at TST- was " Wait, read and react with no thought of where I am for the day (until daily tgt or stp)" 5.25 pts/3 pts respectively. This was almost achieved today.

 I walked my way through the pre-trade analysis, analysing out loud, from 14:13 CET until the trigger at 14:43 and then continued the analysis through the trade with no noticeable change in pace or attitude. It helped that I had my partner with me but the whole event, from the stalking to the entry, management and eventual exit, seemed effortless.

Of course, when it was time to put on a second trade 3.5 hours later, the ole brain started whizzing through what a losing trade would mean in terms of the weeks' result and the TST stats- both of which mean very little in the grand scheme of things.

So that second trade's MFE was 3 pts. The earlier win was 2.5 pts...but I decided to put on just the 1 lot- down from the usual 5- to protect the day and week. Long-term, this won't do...but I'm treating this week as acclimatisation, so I'm happy to pay for that in lost E this time.

Later/tomorrow, I'll be posting the uploaded stats from my own spreadsheet and looking at what I learned this week by going over each trade, and the accompanying emotions, with a fine-toothed comb. Then I'll see how I might use that to move towards sharpening the edge for next week and beyond.

Combine- Day 3.

Nothing to report here...only the feeling that I'm trading a losing approach simply because the first three trades have resulted in a net loss. Do the same thing tomorrow. Look at the result after 10 well managed trades in a row.

Combine- Day 2.

I know these days well.

It goes something like this. Happy with my actions on the prior day leads to euphoria. I can't get to sleep until late as I feverishly imagine what it'd be like to be completely location and time independent. I'm talking calculating how much it costs to live in Medellin, who I'd pay tax to if I was a digital nomad...the works. When I do eventually get to sleep, I don't rest well and my eyes are wide open by the crack of dawn.

One of two things then happens:

1) God complex in tow, I bend rules that served me well even if, in the moment, I'd swear that I didn't. It doesn't work out or, worse still, it does.

2) I become overly careful. This then leads to frustration which ultimately leads to 1). The amount of frustration is directly correlated with the amount of damage I end up doing.

In short, euphoria leads to emotional and physical exhaustion which then leads to decisions based on "then" ("it worked back then"= past or "If I get out now and it goes in favour, then I'll miss out on X"= future) rather than "now". "There" rather than "here". Gone unchecked, this can cause traders to doubt their edge, or abandon it entirely. All they needed to do was trust and stop trading so as to limit the damage. This is what I've done today.

A whole host of emotions arise when you take this kind of action; "I could have made it back and then some" or "If I have true edge, I should just plug away and take more trades" but that's just our inherent faulty wiring that causes us to fight when we are losing and run with some gains when winning.

Continuing with 5 lots for now and back to waiting diligently, taking what the market has to offer and asking for no more.

"StoryBook" Trading Meets TopstepTrader's Continuous Combine!

At the request of this frequent blogger, and this not-so-frequent one (!), I've decided to document my journey in the TopstepTrader Combine.

I'm trading the $100K account. Here are the account parameters and Combine rules:

The profit target is $6K. Past performance would suggest an ETA of 20-40 trading days. This is the result of Day 1:





A bit of background info: blue rectangles = MR, Blue triangles = PF, Arcs = C2N and Yellow ellipses = App....all colours refer to the background of the shape.

 

EDIT: I've been made aware that the charts are a bit small. This 5-min chart and this 15-sec chart should be clearer.

I opened the Combine on the 12th of February 2015, but due to US holidays and just generally getting myself set up (I subscribe to Continuum data but the program only works with Rithmic etc) I was only able to get started today.

The green triangle on the 5-min chart depicts the trade I decided to let go. My plan was to trade half-size (I intend to start trading 10 lots shortly) with a one-and-done approach, win, lose or draw. I bailed 3-4 ticks before the target because:

1) Moves tend to be quicker and more volatile during the late EST morning/early EST afternoon in the NQ as compared to pre-market (when I sometimes attempt to catch bigger moves).

2) It put in wicks a hair above the 1st target of the pattern.

My aim is to document everything here, but, should it start to take my focus away from the task at hand, I will scale back/stop the blogging and just continue with my usual record-keeping.

The Mighty Momo! Pt 2- Wood For The Trees.

Below is a recent example of the pattern in play. This time, I've included volume to show how that works with the progressively smaller magnitude waves of selling (See "The Mighty Momo!" for the original mark-up, which was a short)...

Picking out the mass of volume is the idea.

The lower volume on each successive leg of selling compared to the prior one is a sign that the sellers are losing conviction. Add in the "Golden Mean Extension"- which isn't always this clean- and you have something which gives a "trade-able bounce" (subjective: refer to the above link for my thoughts on that) around 80% of the time.

So, at first glance, it looks like volume isn't favourable for the above setup. But that's a case of missing the wood for the trees- just have a look at the body of volume. They do provide the decline we're looking for in order to take a trade. The "trees" do provide us with evidence of short-term trend exhaustion and, as such, give a heads-up as to where you'll find the pivot. Again this is not an exact science and you need to look at recent PA to determine how volume is signalling turns relative to price (at the exact pivots, slightly above/below etc).

Incidentally, I've noticed that the GME tends to also be present in terms of time. IB's charting package doesn't provide that tool, but it's quick to do with a calculator plus the approximate times the lows/highs occurred.

The Mighty Momo!

This pattern has formed the basis of the vast majority of trades that I've taken over the last 5 years and counting. Whether it be a derivative of the pattern (Pattern Failure or the Appendix) or the pattern itself...

Saying a pattern is "profitable" is, in my mind, completely ludicrous. Simply because it depends on too many factors. The pattern itself is almost irrelevant (but, paradoxically, extremely important in that it has to offer a tiny edge)...it's the framework - both systematic and mental - built around it that's (hopefully!) going to make it profitable for you.

Some of the answers to the many questions which have to be tackled when using this approach have their foundation built upon market dynamics. Some are based on the trader him/herself. Others are a combination of both:-

* What Time frame? The considerations are very different when used intra-day as opposed to swing trading...
* What high do you choose as your anchor? Why?
* How do you trade out of the third high? Reversal candlestick trigger? Channel break? Or do you just trade the level without "confirmation"
* How will the above alter your R:R? Will it alter your WR?? (See below)
* Are you using a fixed stop or a technical stop?
* How accurately can you pick off the highs? *Are you playing the statistical game or analytical one? That is, take profits that work based on R:R and WR or try to get to S/R / target levels based on...whatever?

There are probably more, but it's late and I want cereal!

Celebratory Video Review(s)!

We're not dead (yay!).....

Friday 21st December 2012

.....so I'm taking a leap of faith and posting one (or two) of the "diaryvids" that I record as part of my personal record keeping.

As mentioned in the above video's description, they aren't made for public consumption. The audience is usually limited to me and my girlfriend (poor thing!) and, as such, they are rough around the edges...but I'm sharing anyway...

EDIT: Second part of the week's review:-

Week Review (Wc 16th December 2012)Pt2

Day's Anatomy- 16th November 2012...Readers' Poll 2!

Notice the direction of ALL the trades.

I suddenly started thinking about this post that I made years ago. 2) & 4) in particular.

It (No 4 from the above link) was the same when I started this blog. That is likely why I deliberately started avoiding tracking day-to-day progress in the first place.

Do you see the obvious clues?

In the above equity chart:

Light Green
   = Paper Trading.
Dark Green
   = Live Trading.
Blue
    = Daily Blogging.
So I'm giving myself at least a month of trades without a single blog post (I'll continue updating my records though..spreadsheet, videos etc). Then I'll probably be back to report on any changes.

So I've either succumbed to the pressure of real-money trading or, coincidentally, what I'm doing stopped working when I made the switch. Or maybe it's just a draw down in an otherwise profitable approach.

What do you think?? (see poll on the right of the blog)

Back in a month!

Day's Anatomy- 15th November 2012

Knew this type of day was round the corner...

I've seen this pattern in my trading many times. Too many almost-successes (several trades that were good for target, close-to-execution trades that easily returned target-making pip amounts etc etc). Then you just let go....like sellers giving up at the beginning of a break out.

Luckily, I use stops, both trade and daily.

Was one step behind PA today. Would have been a losing day anyway.

Day's Anatomy- 14th November 2012

Pretty good day it terms of behaviour. No knee-jerk reactions.

Still struggling with the discretion involved...had I have taken every potential trade candidate, I would have had lots of opportunity for winning trades of varying degree, along with 2-3 extra losers. Statistically that is the thing to do..goes without saying.

Psychologically it isn't. At least not for where I am with my trading. Taking trades, win, lose or draw, uses up emotional capital, of which I have little! Managing trades is my stronger suit. So I'm aiming to do more with less...