bondtrader's Blog

Futures Trading, Musings, and Random Thoughts

Thursday, June 10, 2004

Recap of Trading Day: 2004-06-10


Tradelog 20040610

Today, I decided to time myself while in a trade.

Looking back at my previous live trades, I noticed that I tend to exit right within the first 5 minutes of the trade, usually one bar later. This really doesn't allow for much time for the trade to actually play itself out; however, even though I know that in theory, in reality, anxiety wins out over logic.

Yesterday, I talked about the initial discomfort associated with putting on a trade, at least for me. I realized one of the ways to combat that initial discomfort is to set a timer once I've entered a trade. Anxiety plays tricks on us. When you're waiting without knowing how much time has elapsed since you put on a trade, it seems forever, even though you entered the trade just a minute ago.

So I set on a timer and promised myself to not do anything, (i.e., change my targets, tighten stops, get out, etc.) within the first 5-10 minutes. It worked for me! It kept me from getting anxious and wanting to take profits too soon; and instead helped me to stay in the trade and see how it unfolds.

In my first trade, the market only gave me 2 tics, so I took it. My second trade was entered after a choppy period, and the market reversed on me after I was good for 2 tics. After 30 minutes, I moved my stop to breakeven and was filled. Good thing because the market reversed with conviction after that. The last trade was cut short - I went long, then it looked like a CCI zero-line reject pattern was forming, so I took what the market gave me up until that point. It turned out to be a new trend change; my signal was correct. The trade proceeded to go up, albeit sporadically due to the quiet market, and I didn't take any more trades because tomorrow the markets are closed.

Not a bad trading day. I'd say I traded well today, and followed my trading rules. I also found a way to curb my bad habit of getting out of a trade too soon.

This also shows how valuable it is to keep a trading journal. It can help point you to clues about bad trading behaviours that need to be changed, and help you improve your trading.

Wednesday, June 09, 2004

Recap of Trading Day: 2004-06-09

It will be a short post today.

Tradelog 20040609

I did 2 trades; managed to capture 1 tic per trade.

I find there is a certain trepidation that comes when you're only holding one (1) contract / position in the market. There is a need to ease the discomfort that comes when you first put on a position, which is typical of newbie traders. Hence, we newbies tend to scalp our trades, instead of holding on for the ride.

There are 3 things I can think of to take care of this:

1) Turn off the price or minimize your trading window, so you do not focus on the price.
2) Remove price from your charts; you just focus and trade off of the indicators (some traders like Woodie have been known to do this)
3) Trade with 2 contracts; then scale out of the first contract to ease the initial discomfort, then hold the other contract for the rest of the ride.

I'm not sure yet which option I will be going with, but it's something to think about for now.

If anyone has any more suggestions, I'd like to hear them.

Tuesday, June 08, 2004

Recap of Trading Day: 2004-06-08

This is all about honesty (and because I have some people I am accountable to); so even though today's trading was not pretty, here it is:

Tradelog 20040608

The first trade was done in a choppy market (see 2 posts below). I lost 3 tics on that. I made another trade towards the end of the day, 25 minutes before the close of pit trading. The last hour of trading in the bonds is not the same as last hour of trading in the e-mini; not nearly as dynamic. I took 1 tic profit because it was near the close. (Well, okay... also because there was a level of anxiety after the last trade). Interestingly enough, I was thinking of getting out at 4 tics, which is right around the R1 pivot point (courtesy of The Rookie's Corner), and true enough, the market did go there. I should take a closer look at these pivot calculations. There may be something there.

Anyway, I need to go back and do some more work on my psychology, and get ready for tomorrow. This is an ongoing never-ending process and we all need to do it if we want to find success in the markets.

I also will try to refrain from posting anything until the markets are closed as I need to give my full attention to my trading.

Lessons From Athletes

Funny how a trader's mind works.

After the last 3 days of making money, albeit small, I was thinking, "3 straight days of profit under my belt, I'm itching to make the next trade net a bigger profit", and I get a little careless, and try to force trades (see post below) even when there's nothing to be had.

Then a loss forces us to go back to zero, back to the basics again, and get working again, without the psychological distractions of exhilaration, cockiness and greed.

The trick is to stay on an even keel, win or loss, no matter what the last trade's outcome was. Every single trade is unique and stands on its own. We need to 'get back to zero' every time we put on a new trade, as if this is the first trade we've ever made.

Similar to how the great athletes like Tiger Woods, Michael Jordan and Wayne Gretsky do it. The three things mere mortals can learn from Tiger Woods can be applied directly to us in the trading arena.

The Chart Doesn't Lie

This morning I was itching to get into a trade but I refrained from taking the first one because my chart background was coloured grey, indicating that the trend is not strong and we could be in a choppy market.


choppy

Well the first trade I passed up did go up somewhat and I was a little sorry I passed it up because my chart was telling me to stay out. 'Sometimes these things don't work', I thought. I was raring to take the next one, promising myself not to pass it up. My charts were still coloured grey. When I saw a long red bar, I decided to take a short, relying on momentum and volume indicators, ignoring the weak trend the grey background was indicating. I ended up being caught exactly in a choppy market, until it eventually reversed on me.

The charts don't lie. It may signal a bit too early, but they tell the real story in the markets. I got caught in wanting to force a trade, even though there are no trades to be had.

My chop indicator supercedes any momentum or volume indicators.
I recall countless number of times it has saved me from getting into a sideways market, far more than the number of times it signalled too early. I would do well to pay attention to it, and to what the charts say.

Monday, June 07, 2004

Staying the course and Focusing on the "Process"

I made one trade today.

tradelog

Today, I decided I'm not going to scalp trade, but to seriously hang in there and take only the signals my system dictates.

The trade was a trading range breakout. (I entered on the highlighted bar.)


entry


The market went immediately in my favour, up to 3 tics before it started stalling. I was starting to fall into my regular pattern of wanting to take the 2 tics profit and get out of the market but I decided to buck down and stay the course - all my indicators are still in the extreme buy zone telling me that there is more to go up in this market.

At this point, the market started to go down (in a pullback), closing in on my paper profits so far and here's where I got into trouble - I started focusing on the price. I decided it would be better to get at least 1 tic profit just in case the reverses from this point on. I moved my target level down to 1 tic, and guess what? I was filled as the market stopped pulling back and continued in the direction of my original trade. (sigh).. got caught in that one again. I'm guessing this is probably where most newbie traders get caught too - the bigger players are trying to get in at a better entry price and the newbie players are tightening their stops already by setting it to breakeven or just below it. The bigger players run those stops to get a better entry price, just before they move the price again in the original direction.

A huge lesson learned here. FOCUS ON THE PROCESS, not the price.

The 3 P's of trading are: Process, Persistence, Psychology. Note that price is not one of them; price is a just a variable in the market, but not a foundation of successful trading.

..........


(The above also serves to illustrate a basic market principle: resistance becomes support, support becomes resistance. In the chart above, the resistance level during the trading range (red line) became the support level after breaking out from the range.)