Thursday, November 21, 2013

FOMC minutes day

Am one day late on this post. But anyway, yesterday was the day FOMC minutes was scheduled to be released at 11 am PST. The day started off bearish, so I was short. Price then jumped back up and stopped me out, and I reversed into a long position. Bonds then shot up about 12 ticks in my direction before reversing and stopping me out! Oops. Frustrated, I get short again and then BOOM. A continued trend down day, all day until the close. Solid day in the end.

I'll let the chart speak for itself.



Whipsaws happen, and are frustrating, but when a good strong trend emerges, it pays for all the whipsaws and more. Wisdom on trends paying for all whipsaws and more, in a song by Ed Seykota, the trading great!




Sunday, November 17, 2013

My biggest losers - a lookback (part 1)

Few people do this but I think this is important, I'm going to write a post about all the huge screw up trades I've made over the last 3 years since I've started trading US equity and futures markets.

1. First big loss was NFLX. I bought NFLX around 88 and sold at 67, for about a 23% loss. Notice NFLX was in a massive downtrend, and I was bargain hunting here. Also notice how once I exited NFLX, it closed above the 21EMA soon and rallied to above $100.


2. Next 2 trades were the start of the most painful phase of my trading "career". TZA and TVIX. I bought 200 TZA at 28 or so, then bought another 200 to average down my cost to about 26.5. I also bought 130 shares of TVIX at 32. This was around Christmas in 2011.

January 2012 was a really strong bullish month for SPX, so I averaged into TZA and bought another 300 shares, my average price was about $24.5. I also bought another 85 TVIX at 17(wow!) and my average price on it was $26.

February 2012, market continued to go up, I continued to average into TZA and TVIX, while religiously reading zerohedge daily and talking crap about the state of the economy and where price "should really be" based on fundamentals. I had accumulated another 70 shares of TZA and another 50 TVIX, so I had about 770 shares of TZA and 265 shares of TVIX. Average price on TZA was a bit lower and TVIX was about a dollar lower as well.

March 2012 and April 2012, I do nothing. I hold onto TVIX and TZA and watch their value drop everyday, helplessly. It was horrible. TVIX continued to drop. Kind of late to figure out what contango and its relation to VIX is! At the end of April, TVIX is trading at $6 or so. I'm down almost $20 per share of TVIX.

May 2012, markets start selling off a little. This is the time to exit! My positions start to improve, so I sold all my 770 shares of TZA at $20.8, so about a $2300 loss on it. I also sold all 265 shares of TVIX at $8.6 for a loss of about $4500. So I had lost about 7000 dollars on these 2 trades, and I was relieved to have sold them. Holding onto these losers was misery.

3. By this time, I had found a new way to lose money. Options!! Buying calls and puts? Nice, so all I need to do is guess up or down, put down less than a $1000 or so per trade, and if I am right, I could double my money or more! Traded SPY, MT, AAPL, WAG, NFLX, GRPN and LNKD. Biggest loser here was the LNKD puts, I bought like 4 contracts to begin with, and kept averaging down again until I had about 20 contracts, and lost almost the entire value on these puts. Another 3000 dollars or so down the drain. I also bought many SPY puts and lost money on it. Probably another few thousand dollars in losses.

4. As I was experimenting with options, I discovered Twitter and all these amazing traders making all these winning trades using futures. So I figured thats what I should do. So I opened a futures account, made a few decent trades. I also heard this phrase "if you cant make money trading, then trade corn". So I decided to trade corn. The reason people say that about corn is because it trends. The genius that I am however, decided to short corn right before the start of one of the biggest bullish trends the year. Same story, shorted 1 contract, added another contract higher. Averaged into it again with a third contract. Fourth contract and a margin call got me out of the trade. Loss of about 20 points per contract, about a 8000-1000 dollar loss. Ouch.



There have been others, but I think I'll go over them in another post some other time. One good thing is, after these trades, I started keeping meticulous trading logs. So although I made mistakes, I logged them and studied them.

Notice the theme through out -

1. I bought things that were dropping. I shorted things that were going up.
2. I did not know when I would be wrong on a trade.
3. I averaged into losers.

Isn't that amazing? The cardinal sins of trading, laid out here for everyone to see.


Weekly update - November 10 to 15


Another losing week! But we cant control the markets, we can only control our decisions regarding trades. In that sense, I've never felt more in control of my trading. For a long time, I would enter without knowing where I would be wrong on the trade, I'd exit due to fear of losing profits, not take a loss with hope of getting back to break-even. No such feelings or emotions anymore. When its time to enter the trade, I enter, when its time to exit, I get out. Plain and simple. No emotions, just execution. Although it sucks when there's a losing streak. Last 3 weeks have been such losing ones. However, I've done everything I can. The lines below come to mind. 

God, grant me the serenity to accept the things I cannot change,
The courage to change the things I can,
And wisdom to know the difference.


This week's trade stats - 5 losers, average loser of -8.5 ticks. 4 winners, average winner of 3 ticks! Cant win with winners being so small. Also had some execution errors on my part. Horrible week over all. One other thing to note is, historically, my system performs the worst in November. Interesting. 

Monday, November 11, 2013

Make believe top caller games


From a top Eliott wave expert. May very well play out this way, but best follow price.

Nov '82 breakout above 1973 all time high, bull market top Nov '83, duration to top 12 months.
Aug '89 breakout above 1987 all time high, bull market top July '90, duration 11 months. 
Jan '99 breakout above 1998 all time high, bull market top Jan '00, duration 12 months. 
Oct '06 breakout above 2000 all time high, bull market top Oc 't07, duration 12 months.
Mar '13 breakout above 2007 all time high, bull market top ???, duration ???.  

Thursday, November 7, 2013

One of those days!

Homer in this video reflects my thoughts during today's trading day



Ha ha! Here's today's chart. Was a rough day, I made 3 trades for -11, -18 and +2 ticks as results.



One interesting thing I noticed is, on a day like today when nothing's going right and you're just tired and want the day to end, one's more likely to make poor trading decisions. Need to make a mental note of that and avoid this. 

Wednesday, November 6, 2013

Time waste - weed out the noise

Starting today, I'm tuning out most of twitter, Facebook, etc except for sometime in the morning and sometime in the night. No using of twitter between 6 am to 6 pm.

I created a separate list on twitter called "intraday" so that I can monitor for economic data releases, news, etc. Check out my list - has 5 people.

No Facebook, quite worthless anyway.

I read almost no blogs except for reading debrink.blogspot.com every morning.

Two other blogs which I read time to time are - www.etfroundup.com/ and tradingsuccess.com/blog/.

Thats it. I plan to spend more time learn tradestation programming, working on my job and the rest of the time unplugged from technology. 

Friday, November 1, 2013

October - its a wrap!

So October ended tamely yesterday with a monster loser day! Got whipsawed all day, then caught a nice down move which then ended up reversing all losses, triggering a long and then continuing to sell off. 4 trades, 1 break-even trade and 3 losers. Ouch :-)
But then, who cares about what happened during the 4 trades when I have the next 1000 trades as my view?

Week ended nicely however, with the first day of November having started off with a bang. Very nice move today in bonds, and will be closing near the low of the day.

For this week

Number of trades: 11
Winners: 3
Losers: 7
Average win: 12.6
Average Loser:  -7.5
Average risk per trade: -10

So average risk was trade was a little higher than before, average loser about the same, only problem was there were more losers than winners! About a net loss of 14 ticks for the week, no complaints after 2 monster winning weeks. Whipsaws happen.

Todays trade - short from 5 am to close.



Until next week! Peace

Thursday, October 31, 2013

Cool interview with Robert Pardo of Pardo Capital Management

Some neat quotes here. Check it out - link.

"That’s typical of the amateur. They’re willing to take more risks than they actually should, and when they finally get a winner going, it seems so unusual to them that they don’t give it a chance to run"

"One of the really important things about evaluating weightings and risk is that it is your prime determinate of how much money you need to trade a system"

"You can have a good system and still lose money if you don’t know how to trade it with the appropriate amount of capital. The minimum thing you have to do with money management is make sure you don’t overtrade; that you have enough money to weather the storm. The best thing you can do is figure out the ways to leverage your money to the maximum degree and still have enough to survive the worst market downturns."

"Gann had a great statement in one of his many books. He said a doctor goes to school for four years, then he’s an intern for four more years. A lawyer goes to college and then four more years. Why does somebody think that just because they have $10,000, they’re an expert in trading commodities?"

Wednesday, October 30, 2013

FOMC Wednesday

Pretty uneventful last 2 days, and thus my trading results were uneventful as well.

Monday - 1 trade - long 135 '05 - held it all day and exited EOD for a 2 tick loss.
Tuesday - 2 trades -
    short 135 '03 - stopped out at 135 '06 for -3 ticks.
    long 135 '06 and exited EOD at 135 '10 for 4 ticks.

So after a nothing Monday and Tuesday, was hoping for some action today, since its the FOMC day.

Trend was down when I woke up.
first trade was shorting 135 '13 - stopped out at 135 '20.
Second trade was long 135 '20 - held this into the FOMC announcement. Stopped out at 135 '08 and
Third trade was to short 135 '08 - I stopped out with 2X contracts so I was short. Covered EOD for +16 ticks.

There was a downside break, but not as much as I was expecting ofcourse, but I take what the market gives me and move on.


Sunday, October 27, 2013

The core system that I trade - passive short term trend following

So the core system that I trade is a short term trend following system, based on detecting and following the 5 minute trend. It uses the Average true range as a factor in entering and managing the trade through a trailing stop.

1. Entering a trade  - Entering a trade here is based on the price rallying long enough to trigger a change in "trend". How a trend change is determined is something I wont go into over here. But basically, this system does not guess at tops or bottoms, but waits for price to rally long enough to trigger a change in certain parameters. This brings me to the next topic, what if one is already in a trade? How long would you wait before you exit a winning position?

2. Exiting a trade - Exiting a position is done the same way as entering a position, I trail a stop based on the average true range, so when price retraces enough to stop me out, it also simultaneously gets me into the opposite direction. So if I am long and price retraces enough, I exit the long position and switch to a short. So I ride the trend as long as it goes. Only 2 other conditions get me out of a position sooner - one is if there is a 32 tick profit, or if its the end of day. Exiting a losing trade is the same way.

3. Risk management - To manage a trade this way, with a calm mind where retraces against your position do not bother you mentally - the risk management needs to be proper. With this system, I always know the spot where I'm wrong. So that gives me confidence.

4. Position sizing - The maximum risk per trade is 2% of equity at the moment. I almost always risk less than that, but am working on tests to see how my system would perform if I always bet a constant amount. That is, the number of contracts traded could vary, but the risk stays constant, say 1-2% of my equity.

The win rate of the system is around 45-55%, but each win is approximately 2X the times of the average loser, so its easy to see how this system will do well over the long run.

Few other stats of interest -

Average winner - 14 ticks
Average loser - 9 ticks
Maximum number of consecutive losers - 13
Maximum number of consecutive winners - 8

Performance curve over the last 10 years is below




Friday, October 25, 2013

Thats a wrap - Oct 20 to Oct 25 summary

Thus ends another trading week. Was a good one. Results below -

Num trades: 9
Winners: 5
Losers: 4
Avg winner: 10.2 ticks
Avg Loser: -4.5 ticks
Avg risk per trade: -9.6 ticks


So thats about 33 ticks. Number of trades was average, about 2 a day, with one quick loser ( about 30-60 minutes in the trade) and rest of the day spent in riding the trend.

Average winner was bigger last week, but average loser last week was bigger as well. Apart from the Non-farm payroll day, it was a small range week, so as a passive trend follower - I take what the market gives me.

Have a good weekend. Will try to post more often. Going to do one post tomorrow or on Sunday about the system I'm trading. 

Tuesday, October 22, 2013

Anatomy of a NFP trade

So I'm currently long ZB. I bought it right before the NFP number. Ridiculous right? Well, the 30 minute trend was flipping long, so I "had to" buy. Took balls of steel, and I was nervous as fuck buying it, but my new mentality is that since I know exactly what I'm risking, and I'm comfortable with the risk and position size - I just buy.

Look at how the trade is playing out so far.



Ofcourse I'm still in it, my target of 135 '04 may or may not hit. But its a risk free trade at the moment and thats all I care about. 

Saturday, July 27, 2013

10 Things no one told me when I started trading


1. Buy something when its going up, sell something when its dropping. 
So obvious, but when it comes to stocks, everyone's looking for the next "bargain", but most likely you'll buy low and sell lower.  I remember averaging down into NFLX as it kept dropping. Threw in the towel pretty much at the lows. Also vividly remember averaging into a Russell futures short, almost maxing out my margin. Again, threw in the towel pretty much at the top, fearing a margin call.

2. Catching tops and bottoms is the hardest thing to do in trading, do something easier. 
 Despite all the twitter geniuses buying the lows, do not bother trying to catch the bottom or the top. Let price retrace enough to give you an uptrend or a downtrend confirmation. The easy money is made in the "middle" part of the move.

3. Do not stay short above the 21 EMA. Do not go long below the 21 EMA. 
Or use whatever moving average you want, but for a short term trader, a 21EMA seems to be a good one to use. Basically, if the market is uptrending and above the 21EMA, stay the hell out of the way and dont try to catch price tops.

4. No one told me how to tell whether a markets going up or down
How would one know whether a market is uptrending or downtrending? What is your technique to identify this? Its easy to say "follow the trend", and go long when a market's going higher, but how do you know when it starts uptrending or downtrending? And what tells you when the uptrend has ended? Find ways to identify both. And test this strategy.

5. Do not trade when there's no liquidity.- No brainer.

6. ES futures is pretty much the hardest market to trade. 
Its the most efficient market in the world, everyone and their mother is basically analysing this market endlessly. Trade something better, which trends well.

7. Do not try to justify a bad trade.
If you are in a bad trade, and the trade is going against you, dont try to look at news, fundamentals, other time frames, corelations, etc etc. Get the hell out of the trade if your stop is hit.

8. Never look for fundamental reasons for price to do something. Price can go up, down or sideways irrespective of fundamentals. 
I admit I've shorted the S & P more times than I would like to remember and lost money. My justification? Ofcourse price is too high!! Look at all the reasons zerohedge provides about how the economy sucks and the fundamentals are weak, all the companies are missing earnings and all the job numbers are manipulated. Due to all thee reasons, S & P is only a few days away from a 10% drop. No? Bullshit. Respect where price is.

9. Following someone's trades, especially on twitter is a great way to lose money. 
People with thousands of followers, ofcourse they have to nail every trade right? WRONG. People are just as lost as you are, and the fact that they hide their losers under the rug, or sell a service doesnt mean you should follow their trades posted on twitter. If you want to follow them, pay them for their service, and hold them accountable for all trades. Dont half ass it. If you follow someone and you lose money, whats the accountability? Who are you going to blame?

10. Chart patterns rarely work. Chart patterns work even less when you trade off a 5 minute chart.  Price does not "have to" do something just because of a chart pattern.
After studying over 14000 charts patterns spread over the years from 1991 to 2008, Thomas Bulkowski  found out that these patterns are now 3 times more likely to fail than in the past. And everyone you know is trying to trade chart patterns off a 5 min chart. Wonderful! Good luck with that.

Wednesday, June 19, 2013

Dont do this to yourself

There are various aspects to following a trading system. It hasnt been long since I've been following one, but let me note a few of the challenges one faces:

  1. Directional bias 
  2. Entries and exits / waiting for fills
  3. Taking every setup/trade
  4. Handling losing days
  5. Execution errors/mistakes
The first one is obvious. If you have a directional bias, you cant be effectively trade a system. Infact, the more you shut yourself out from having opinions, reading other "expert" opinions, etc, the easier it is to execute the trades.

The second one, is something I've written about recently. Being patient in waiting for a fill, either to get into a trade, or while getting out is something that comes over time. A few times, the target is hit, but you dont get a fill and then the price may reverse. This has happened to me three times this week, and has definitely tested my patience. But one should just acknowledge that its part of trading. Obviously the worst thing you could do is to let it turn into a loser, so I currently protect the trade with a 1 tick profit stop once the trade is hit. 

The third one, "Taking every trade" is probably the most important among the above and it is something I struggled with today. Today being FOMC day, one can obviously expect a shit show when the FOMC statement is released. The closing 5 min bar before the FOMC statement being released was a short trigger for me in bonds. I was nervous, and did not take the trade. Bonds then happily broke down about 45 ticks to end the day near the lows. Needless to say, I was pretty upset. 
I was upset for 2 reasons - I took every trade all morning, got chopped up and lost money. And when the winning trade came, I sat out of it. What the hell!? I've listened to multiple interviews with systematic trend trades and they all emphasize this fact, that you have to take every trade your system puts out. Win, lose or draw. You have to be in it, to win it. Lesson learnt, and I shall move on and strive to not repeat this experience.

The fourth one, handling losing days is also something I've written about before. No system is going to make you win 100% of the time, there will be losing trades and losing days. Accept it. Once you understand and acknowledge that a system has positive expectancy, and in the long run makes a lot more money than it loses - then this should not affect you too much. Its definitely annoying to have losing days, but if you took all the trades, followed the proper process, then you are good. 

The last one, is execution errors. You have to understand the signals properly. This is key, because sometimes, if you're not paying attention, its easy to get out of a trade early, or reverse position. Price moves fast, so correcting this error can be expensive. Last week, I blew a $1000 just trying to reverse a 5 contract trade back and forth. Ridiculous. One cannot make such mistakes. 


Anyway, I've been focusing on all these aspects over the last few weeks, and I feel I've got a handle on most of it. There's always room to get better at everything obviously. Unfortunately, almost all the above lessons, I've learnt the hard way by being in a trade and screwing up, so here's to hoping that I dont repeat the above mistakes. Hope everyone had a great day.

To end this post, since today is an FOMC day, etc here's a really nice quote from Jon Boorman:

"News is noise. Trade trends, listen to price. Tomorrow’s just another day. The market will still be there the next day, and the day after that. Just make sure you’re trading a strategy that ensures you and your money are too."

Monday, June 17, 2013

Today's trading

Turned out to be a nice day to be short bonds. Was kind of a boring day until some story leak about Fed tapering asset purchases leaked mid day and then equities and bonds sold off, and then equities rebounded but bonds stayed down.

Surprises often happen in the direction of the trend? Atleast it was true today for the bonds. ES longs were tested however.

Something I've been repeatedly writing about and also using in my trading now is trading with the trend. This means absolutely no counter trend trades. There are various trading systems one can use to stay on the right side of the trend. One such setup is using Ichimoku. I personally dont use Ichimoku as trade triggers, but I used to before, and I still keep this chart open during my trading hours. Look at today's 5 minute chart.



Looking at the chart, what would you say is the direction of the trend? In the morning hours, when the moving averages (tenken sen and the kijun sen), along with the cloud, were up-trending  Easy enough yes? So one would need to be long, or buy dips. You need a set of rules to do so of-course.

Second half of the day, once price broke below the cloud, the price is in a downtrend. This only means one thing, and thats you either need to be short or flat. Your stop would be above the cloud.

Anyway, one would need to come up with their own rules to trade this, and then keep track of statistics, etc. But the point is, find a trend trading system, one which helps you identify the trend, and then take all trades in the direction of the trend. 

Sunday, June 16, 2013

Friday, June 14, 2013

Friday night wisdom

Truer words have probably never been spoken. Read this quote from Bramesh Technical Analysis:

"As a businessman, I have concluded that the only rational way to trade the markets is to trade a system. All of the hocus-pocus about predicting when this market will move, and how far, is just that—hocus-pocus. The people that make the big money are the ones who don't try to predict tops and bottoms but who consistently take a little out of the middle. The only logical way to do this consistently is through a well thought-out, well-designed system. It's a matter of good business sense."



Onto today's trading, it was a snooze fest, but managed to make some small profits. Was long ZB this morning into a nice bullish bar which met my target, and then ended the day with a short which I basically sat through the whole day, and then covered near the close for a small gain. I was almost stopped out on that short if the price had closed above '27, but it did not. Thats what I love about trading a system, you know exactly where you will be out, and that takes all decision making out of the picture. I'll post a chart tomorrow.

Update:

Here's the chart I promised, like I said - 140 '26 is now key to more upside, but if we break 139 '25, we should get a nice move back to retest lower levels.


Thursday, June 13, 2013

Removing twitter feed

Am removing the twitter feed on the right, adds no real value. Twitter seems to be the play ground of play callers, fake traders and perma bulls or perma bears heckling others at their failure.

I created a new private account, but wont be sharing that with people. I'll be using that as a private trade log, mostly for my own reference.

What a day in the markets today. Today is a day where not a single, yes, not a single trade setup worked for me. How ridiculous is that? And what are the odds of it repeating? Who knows..point is, I followed the rules, took the trade setups, so I should not be unhappy, but I just blew away a shitload of money, so not at all happy about that ofcourse.

1 main thing I need to fix in my trades, when trend changes via a very large bar, typically around news releases, despite the added risk, wait until the end of the bar to change or exit trades because my setups are all about the closing price of the trend change bar. Mistakes from this alone have cost me significantly the last 2 days, compounding the pain.

Anyway, moving on.

Monster rally in equities today, cos of Hilsenrath said something or whatever. Who gives a shit huh? If you traded your plan, and went with the trend, you'd have been long ES all day, and the surprise came in the direction of the trend.

Bonds however, were much worse. Trend chopped around all day, stopping me out all over the place, and making life quite uncomfortable in general. Whatever, tomorrow is Friday. Lets see if it goes my way. 

Wednesday, June 12, 2013

Putting theory into practice

Ha! Well I wrote about dealing with losing days yesterday, and today I got to put it into practice. No hindsight analysis as such, except that I made a few mistakes in executing trades, which cost me more than the over all day should have.

Annoying thing is, my one goal today was to make no such execution errors, and I ended up making a bunch of them! Anyway, tomorrow is a new day, one I'll be fully ready for. Hopefully there's some intraday action left because right now looks like bonds are up huge already in the overnight session.

ES had a very staggered drop today. I saw the trend flip bearish at 1632ish, and I should've jumped on it, but then I have decided to only trade bonds for now. Sticking to what is working, and keeping trading discipline.

ES chart from today, look how every time price dropped below a level, and came back and tested a prior support level, which had then become resistance. So now we have multiple resistances on the way back up. Lets see how tomorrow plays out. NYMO is really oversold however.



Bonds had a very choppy day, part of the reason my trades didnt go as well. The trending moves were missing today.


Tuesday, June 11, 2013

Dealing with losing days

When we go through a day when we lose money trading, as expected, we do a lot of hindsight analysis. I was talking to Debrink about this today, his thoughts:

"When we have a bad day, and we will, in retrospect you can see that you could have had a good day if only you had done x, y or z. That thinking screws everything up."

I totally agree! Why is that? Because the result, the fact that today was a losing day for example is completely irrelevant, if you followed your trading plan. If you took all the setups by your rules, and exited based on your rules, then losing days are simply part of the process, and every trade is one of the many thousands you will take over your trading career. Very insignificant from that stand point, correct?

Like I mentioned in yesterday's post, a trader's confidence should not come from winners, but from managing losers and the trading process well.

Onto the markets today..

Looks like ES made a very important low today, breaking which we target the 1596ish low and below. But then we're also setting a potential Inverse H & S, so will be interesting to watch.


Have a trading plan?


Michael Covel from trendtrading.com posting this on his Facebook, looks spot on. 



Another one from Bramesh Technical Analysis -

"It is difficult to tolerate even normal drawdowns unless you have confidence in your methods. This confidence does not come from mere positive self-talk. Rather, it is a function of testing your methods (historically and in real-time) and seeing in your own experience that they truly work."


BTW, 30 year is dumping again this morning, but yields will soon be coming in at important resistance. What I dont know however is what level this maps to on September ZB futures.


Monday, June 10, 2013

Bonds break down!

Huge day in the bond market today. We broke below last week's lows of 138 '30 and made a lower low. Ofcourse, the best thing about it was that I was there, short and happy. Huge day for me in terms of P/L, but I didnt even realize how much money I had made for the day until much later because I was focused on the process of taking each trade the right way, and with the right attitude. Like I've been writing lately, that is everything.

Over the weekend, Bramesh Technical Analysis wrote:

"True trading confidence comes from the ability to control the losers and manage trades properly. Focus on the process."

Great wisdom. And something I've been pretty much completely putting my focus on. Things I'm trying to get better at right now are being patient for fills (hate it!) and relaxing in a trade. Remember, anything can happen in the market, and all you can do is take each trade with positive expectancy, but be ready for it to be wrong, and just move onto the next one.

I dont really have any bond charts to post because I cant really identify a support level here, but be on the lookout for the BOJ announcement this evening. Could be a market mover.

I'll come back later and post some ES, TF and NQ charts. 

Sunday, June 9, 2013

The mindset of Abundance

As traders, we watch our equity go up and down with every win and loss. How we perceive these wins and losses greatly affect our overall trading success, even when you are trading a system with great positive expectancy.

Your belief, your thoughts about money and abundance will not support you in your quest to make money from trading if you have relate to risk the wrong way.



In my case, my main problem seems to be the fear of letting a winning day turn into a losing one. So once I have winners I become aggressive in protecting those profits and this makes me take profits sooner than I need to(not following exit parameters) or hesitate taking trades which in my "opinion" may not work out. Truth is, I need not worry about either. have no reason to have to think about "protecting" profits since the trade setups which made me the money initially are the ones I will be repeating.

I've already largely overcome this, so am just writing about it to track my line of thought in this matter.

There's a lot of advantages to following a systematic trading system, it takes away all the discretionary guess work of where to take profits, fighting emotions while waiting to take profits, etc.  A system tells you where to enter, when to get out and where your stop is. Then the only thing to do is focus on your own discipline in following that system. One of the biggest advantages again of following a system is that you will never have a "blow up" trade, because there's no hoping in a system, you get the hell out of a trade if your exit parameters are met. Half the traders I know who have taken large losses are the ones who held on to a trade hoping it would mean revert, so that they can get out for a small loss. Never ever do that.

Friday, June 7, 2013

NFP Friday!

Happy NFP Friday to everyone. Whatever the fuck that means ha ha, hope everyone makes money.

Dont have too many positions on right now, only weird thing is that I swore at the beginning of the year to not trade options, yet every day of this week, I've bought and sold SPY calls, every time for a very decent gain. QuantEdges was leaning long via all his research, so it gave me some extra confirmation I suppose. Besides this, all I've done is trade bonds, and it has been the best trading, and most educational experience of my life.

Only 2 positions on at the moment going into NFP, long AVP calls and VXX puts. If its a bad report, those VXX puts might be in a world of hurt, but like I posted a couple days ago, VIX is mean reverting and I'm expecting yesterdays bearish reversal bar in the VIX to continue and lead to further downside in the VIX.

AVP chart below, at support.

Wednesday, June 5, 2013

Fading the VIX

I bought some VXX puts today, since the VIX move has been quite extreme, and the VIX sma envelope setup that I've written about before is triggering here. With SPX also very overdone with a NYMO reading below -100, we should see some nice mean reversion happening here in the VIX. Remember, VIX is by nature a mean reverting instrument.


Sticking to a plan

A great trader is able to think clearly from start to finish, and while there may be some mild irritation (enduring pullbacks), minor impatience (if the position stagnates), or slight satisfaction (as the trade begins to work), they avoid letting those emotions drive their behavior. They truly do stick with their plan, making modifications to it not on a whim, but only when absolutely necessary. - brameshtechanalysis.com


I also found this yesterday, posted by someone on twitter.  Its called the "Trader's creed", very similar to the Rifleman's creed in the Marines :) and I find it highly relevant and motivational.




Tuesday, June 4, 2013

Battle of 1640

Looks like the 1638-1640 level is the primary resistance to more upside today. A breach of 1640 to the upside will get things moving quickly.


Saturday, June 1, 2013

Weekend charts update

Hope everyone has been trading well.

Some charts below. As of Friday, NYMO is below -80, VIX rose sharply, and SPX broke strong support in the 1634 area, so although we're probably in a downtrend, we might see a strong bounce on Monday.

Some quant based evidence for that here as well -> $SPY falls more than 1% on last trading day of the month

ES has strong support coming up in the 1620 area, longs with stop below is probably a good idea. I'm not encouraging counter trend trade ideas though.



TF is a better sell? Held up on Friday better than ES, but broke an uptrend line. Short a bounce targeting 973 & 968?




Bet that end of day move in ZB trapped a lot of people. 140ish area held again (June). Resistance above at 142 '10ish

Last few weeks

Last 2 weeks have been the best trading weeks of the year for me so far, only one reason for it - trading with the trend. 

Cant get any simpler than that. I've tried to catch so many falling knives in bonds,  there have been times where I've thought to myself - "bonds cant sell off unless I'm long!" ha ha. Counter trend trading is a bitch, and very bad for your trading account.

Any new trader goes through the problem of having a bias about the right "price" for the market. As if he/she knows whats too high or too low. So they short when the market goes up, because obviously its "too high" and has to drop, right? WRONG! The price is what it is, and price is going higher or lower, and our job, is to be with that direction. Even if you have a crystal ball to call market tops, first verify it by confirming a change of trend in price to the downside.

The main questions anyone should be asking before putting on a trade is:
  • Is there a trend?
  • In what direction is the trend?

Thats it! If there's a trend, and you know what direction it is in, you should be in it. If price is too extended, buy pullbacks. 

Tuesday, May 21, 2013

Stay with the trend

Not much to report except that the last 2 days have been a good "go with the trend" days. I've pretty much only traded bonds, and have gone with the ATR trend on all trades. Has been really clean.

Here's an example of how staying with the ATR would've kept one on the right side of this rally in equities.

In the ES chart below, one would've got long on the ATR trend flipping long at 1628ish, and the long trade is still on... 40 pts later!!


Saturday, May 18, 2013

Support levels continue to rise

More new highs across the board. Eventually, we'll get tired of hearing "new highs, new highs". For now, the trend continues. Support levels continue to rise across all the indices, and on NQ, 3020 has become the new support level. Updated chart with key levels to the downside.



Nice sell off in the bonds again on Friday, I was on the right side for some of it, thanks to Debrink from debrink.blogspot.com.  Updated levels on it.




Finally, TF levels, since this has been one of my favorite instruments to trade lately.


Wednesday, May 15, 2013

Listen to no one

One important thing about trading, is that everyone has his own perspective on whats happening. The market is colored by people's perception, and no one knows the complete picture, and making money in this situation is definitely not easy. The WORST thing you can do, is to try and mimic someone else's trade. Everyone trades different, so if you're copying someone, who has a different time frame, different account size, different risk parameters than you do, you're a FOOL.

Remember this lesson - Listen to no one, no one is an "expert". Learn how to trade, come up with a list of setups, and stick to them and in the long run you will make money. If you get greedy, try to swing for the fence, ignore risk parameters, then you will LOSE. You will lose in the long run, even if you made money on the trade.  This is because the key principle to make money is to understand yourself, the markets you trade, the setups, and manage risk. By listening to another, you're ignoring and over-riding ALL of these. Never ever do that.

Peace out. 

Tuesday, May 14, 2013

Madness continues

Havent blogged much because there isnt really much to say about this one way market. I'm clearly not very good at just being a dumb "with the trend" long here, so I've been attempting shorts and getting stopped. Awesome. NOT.

Things are getting pretty ridiculous though, look at the NDX again. ADX(7) > 60, but it appears to have broken above the trendline resistance? Or is it an offshoot?



ES has multiple support levels underneath, 1632, 1620-21, 1616, 1607 and 1593-95 are key support levels.



Bonds are getting massively dumped after the "end of QE3" announcement. I have 143 and 142 '20 as really major support levels here, but I dont expect them to be tested. If sanity holds tomorrow, expecting a move back above 144, and I'm looking to try longs against that area. Lets see. If I have learnt anything out of the last few weeks, it is to be a dumb trader and go with the trend. 

Friday, May 10, 2013

Weekend Charts

Will be posting various charts here, looking forward to next week. One chart I've been keeping an eye on is the NDX chart, and its pretty much peaking here around 2990, the key area I pointed out earlier this week.



Bonds are selling off because of the Hilsenrath article, and ES has gapped down this evening as well, but until 1620 is convincingly taken out, long side trades still provide better opportunities.

Levels on ZB to be aware of ,144 is a big level, and if we test it and hold it tomorrow, I'll be looking for longs. Under it, short it with stops above 144.


Stop loss wisdom from Thomas Bulowski

Thomas Bulowski from the thepatternsite.com posted this on his Facebook - good stuff. 

Stops can work wonders for quick trades that go wrong. I don't use them for buy and hold and position trades. But I DO use them for swing trades and mental stops for day trades. With this trade, I don't want to sell if the general market is taking my stock down and the industry and stock fundamentals haven't changed. In other words if all else is equal, a declining market trend will take a stock down with it. Why sell? You should sell if that market current turns into a bear market. Then hold onto long-term positions is dangerous to your wealth. Otherwise, it becomes a question of how low will the stock go and can you tolerate such a loss? Often you'll find that when you sell, about 2 weeks later, the stock bottoms and climbs. If the industry or stock internals (fundamentals) change, then holding can be a disaster. You have to evaluate each situation, do your research, and make the call. No easy answers.

Thursday, May 9, 2013

Markets are fucked up

No other way to describe it, markets are really messed up at the moment, with all kinds of corelations broken. One thing however seems to be still valid, and thats ES closely mirroring USDJPY. If this breaks, the markets should BLOW UP.


Wednesday, May 8, 2013

These days go on forever

SPX moar highs. Unbelievable! Closing $TICK reading was above 1100, so I thought its interesting to look back at prior instances when that happened.


Cobramarketview also has a chart for this - in my opinion, this is an exhaustive TICK and tomorrow and day after will close negative.



On another note, I added my twitter feed to the right of the blog :-) 

Tuesday, May 7, 2013

SPX weekly

Since I'm not trading this week, I can do stuff like look at weekly charts :-) Here's a look at SPX and the clear RSI divergence that has setup. All previous setups resulted in major selloffs, so I see a similar one setting up for SPX in the coming days and weeks.

The RSI divergence on IWM looks even more ridiculous, so buying is clearly weaker here, and this stuff has to matter, sooner rather than later.



AAPL hit resistance and rolled, so I'm guessing NQ starts this selloff? Overbought NYMO, etc and the complacency in the markets is also getting ridiculous now.


Monday, May 6, 2013

Back from vacation

I apologize for the lack of posts over the last week or so, I've been busy with work. Also kind of distracted and a little bored with trading. I took a vacation and visited Lake Tahoe this last weekend. Its a really beautiful place, and I'd highly recommend a visit if you haven't visited this place.



Now for a look at the NDX chart. This is a weekly chart, and price appears to have a little higher to go? Who knows. We might rollover from here. But with the amount of bullishness around however, it will take a few "BTFD" rallies before any real damage happens.



On a final note, I'm back but I plan to continue taking a break from trading. Feel like I need to spend some time on focusing on other things in life at the moment which I value equally - work, my woman and the weights at the gym. 

Thursday, May 2, 2013

ZB support levels

Well, the "breakdown" yesterday worked out gangbusters...NOT! Market rebounded huge today. However, key things to note are that while IWM sold off on 140 million shares or so, its rebound today was on less than 40 million. That kind of high volume selling, and a lower volume rebound, has to be a sell side setup, right? Lets see how it goes.

Anyway, putting up a chart here of ZB. Looks like it has support at 149 '05 and 149 '02, and we have some bearish odds overnight because of a gap up + end up day today.


Wednesday, May 1, 2013

Megaphone breakdown

Chris says we have a megaphone type breakdown in ES, so I tried to recreate it like he lays it out in his newsletter. Entry is basically a break of the previous days bar.



ES looks like its setting up a bear flag on the hourly. First level down is 1571, which is in my opinion is key support and bears need to break through that before making any real progress.  1557 is the next main downside target that I have, which I think we might hit this week.


Tuesday, April 30, 2013

ZB not looking good

A close below 148 '12 completes a double top at 149 '05, and targets 147 '12ish.


Friday, April 26, 2013

Updated look at the ES & TF charts

This is the state of the Russell or TF futures as we stand today. Key support and resistance levels above are outlined. Still looking to sell rallies, and if things line up, buy support.


ES - 1581 is now the key level on the upside. There's also an uptrend in progress, which needs to break for more downside. And be aware of the key 1571 level as support.




Thursday, April 25, 2013

ES - tomorrow is important

SPY put in a shooting star candle today on higher volume, so coupled with yesterday's doji, we've seen some distribution, so I'm expecting lower prices.



On ES futures, 1576.5 which was today's low becomes key, if taken out tomorrow, I'd expect 1571 first which is another strong support level, and below that comes  flash crash tag of 1557 to be tested.


On ZB, 148'08-'09 is now key for more upside. A break above brings 148 '16 into play, and then the spike to 149ish. Below, we have the 147 '20ish level which was strongly bought(hammer bar, higher volume on that bar) as support.




DOW and SPX comparison

DOW seems to be majorly lagging ES in this rally, and DOW is usually right and it leads. YM is currently trading around the same price as when ES was at 1570ish



ES however has broken above and is now treating 1570 as support. 


Crude oil, strong resistance at 92.15-20ish