Monday, March 2, 2009

Monday Notes - In Like a Lion ...

4:00pm Well, score one for patience today as it took until mid-afternoon for ES to finally present my idea of a high-probability wholesale short entry, and it was two speculative short sequences that provided most of today's decent +$9K chip gain, with liquidity-providing sequences pretty much scratching on the day. btw, a good example of what I discussed over the weekend in terms of my high volume being misleading ... most of my strong gains came on a few sequences.

Even then, ES did its best to shake me loose and it took a few scratches and immediate re-entries, along with some conviction in the pace and pattern to hang in there. See chart; Click to Enlarge.

Earlier, I'd passed on many of the other shallow bear trend retracements, in part because I wanted to first make sure my head was in the game ... remember, I often suck on Mondays ... and go for the ultra-high probability pattern before putting my chips in play. Essentially, until I felt I was focused, I wanted pocket Aces.

Of course, I'm sure some shorted the open and held, which will never be my game. I'll instead take high-probability clips for 200 Alex.

Hopefully, we'll see some early textbook morning oscillations after yet another investor barf day.

24 comments:

john said...

Don,
Great trading and great blog.
Appreciate your honesty.

I have a long way to go as a trader.
Feeling pretty defeated so far... but losing less than in the past, so I guess that's progress? ....but it's still losing. Feeling my own sense of wanting to capitulate and give up, and still trying to succeed at this is very frustrating. Not sure what to do beyond trading much smaller until I get on the right side of trades. Trading is so much harder than i ever imagined. Perhaps I have to admit that I can't trade successfully in the current market environment and just walk away for awhile?
Any advice (if you have any) would be greatly appreciated.

Otherwise, thanks for listening and allowing me to say what's true for me without editing - feels good to be real here - following your lead with the diary entry here.

Blessings,

John

Don Miller said...

Feel free to vent John.

As far as advice, that's frankly a tough one as I have my hands full fighting my own demons.

It's quite the inner journey for all of us.

Don

NoSquigglyLines said...

Don, I've been reading your blog for a month or so now with interest. I'm enjoying it but one question keeps entering my head and you brought it up in today's post.

"Of course, I'm sure some shorted the open and held, which will never be my game."

An even better position could have been had in the first 30 mins, going short and holding for most of the day. I missed the move myself, my own demons, but what I wonder is why will this type of approach 'never be your game'?

I appreciate that everyone views trading differently and has different ideas, that's the beauty of it I think, I'm just interested in your opinion.

If you've covered this in an earlier post then I apologise, must have missed it.

Thanks

Charles said...

@john, Don's right, its hard to tell someone to keep going or not...the bottom line is, you can either read the tape, or you can't. So your idea of trading small is a good one i think...until you feel "tuned in" to the mkt's rhythm...hope it works out for you eventually.

@Don, i have to agree w/ john, your blog..er diary, has a really good vibe to it...so kudos to you bud... i have already made more comments on the DON MILLER TRADING JOURNAL(nice plug eh?) than on any other site. Also, had a couple questions for ya if you fancy answerin' them:

1- what settings do you use for your MA's?

2-(yes, a newbie question) what is the nature of the relationship between the cash and futures mkt? does one lead the other?

charleS

Don Miller said...

Hi NoSquiggly -

Just my style. I feel I can read the market fairly well on a short term basis, and simply prefer to be in cash the rest of the time. If I could take 2 points with size, that would be my perfect scenario day in and day out.

Plus, I'm always after high-probability and the norm, and to me, a gap down below a multi-year low and a slow drip from there is pretty rare. I'd rather trade the following day (just search for "morning after trend" and you'll find I make much of my keep during those days).

Many market makers make very little on trend days, as opportunities go get back in at an optimal wholesale levels after exiting a sequence are often tough.

To me, it doesn't matter if the DOW is down 500 or flat ... I only care about how my own equity curve moves.

Different strokes for different folks of course ... swing traders HAVE to have days like this to offset stops and slop on other days.

Welcome aboard.

Don

Don Miller said...

Hey Charles -

I use 15 & 20 ... just to remind myself neither is right, and I just want a general "zone".

Re: Futures vs. cash, never really focused on it ... although I think futures vs. equities is a bit of a chicken and egg thing. Got enough stuff bouncing around in my head so as not to go there.

K.I.S.S. :-).

Don

Severino said...

Hello Don,

Thanks again for sharing.
May I ask what made you not take the first climb back up to 710 (previous resistance) on your second sequence and instead wait for the second climb that is now seen in hindsight? Is that something you would normally look for? Meaning, going for a countertrend on a first try on the oversold with other conditions, (15 period) however when it tries it again wait for the double pump on the second sequence? (I hope this makes sense)

Thanks,

Severino

Don Miller said...

Severino -

If I remember right, the market shot back up pretty quick through that 1 min trend line, and I either wanted a pause or divergence if the 1 min was trending up, and by the time we got it, it had passed the prior high of 710ish.

Also, I've been a bit leary of shorting a lower high approach as ES has had a recent tendancy to shoot past it before finally caving hard. (I know, because I've gotten shaken.)

So perhaps a little bit of reading, some recent memory, and a little luck.

Don

Max99 said...

Hi Don,

Discovered your blog thru your recent TraderInterview.com appearance. I will say that it is an invaluable resource, for me anyway as someone who has traded for 12 months. I am just beginning to feel that there may be light at the end of the tunnel. I don't know how long John has been trading but I can truly empathise, as I am sure will any trader who is trying to stick out the long learning curve. As another recent guest said on TraderInterviews.com, you need to survive years 1 and 2 in order to begin to reap the reward in years 3 and 4. I think he had it just about right! Trade small to survive, John.

Just to show there is more than one way to crack an egg (as we say here in the UK), I took only one trade today (on the SKF as it happens), also in the purple circle area on your chart Don but in the opposite direction. Saw the trend had been down all day. In recent weeks anyway, this has often seemed to be followed by a sharp trend break after lunch. Using the TICK chart as my new found friend (thanks Don), I saw several attempts for the SKF (SKF is an ultrashort ETF for those not familiar) to probe higher, but TICK bouncing off the session lows, then for the first time probing positive territory. Took this as my cue to short SKF with a tight stop. Trade worked perfectly (for once), scaling out half for 2 bucks, the last half for 4 bucks.

SKF seems a great instrument Don. Strong volatility and decisive moves when it breaks. Also allows me small share size while still finding my feet. What is your opinion on merits Don, versus ES ?

Great blog Don. Don't stop!

Don Miller said...

Hi Max99 & Welcome -

Nice trading and thanks for the kind words.

No idea on SKF ... as I don't track or trade it. Got my hands full with ES :-).

I too probed some midday longs at times, and caught some of the pre-2pm climb, but didn't hold it for very long and was pretty much gunning for the short sequence.

See you around the blog.

Don

trader said...

Don,
What do you mean by "overextended market?" and how do you calculate it? I think it is perfect to short in the fading breakout at about 2:40.

Don Miller said...

trader -

Merriam-Webster defines "overextended" as "to extend or expand beyond a safe or reasonable point". Not sure I can do much better than that. [And as has often been said, over-extended can become more over-extended.]

Personally I still haven't ever seen a "perfect" entry ... only high-probability.

Sorry if I sound flip, but keep in mind I'm simply documenting what works for me and everyone trades differently.

Don

estrader said...

Don,

Great Dialogue today. I also went long probing a reversal break-out above 710 at which point I went in. You mention scratching and re-entering, when 710 did not hold for the upside probe do you tend to have a point loss limit on scratching for instance 1/2 -2 points or do you go by feel? As 710 did not hold I tend to wait too long before scratching for a loss as I got out at 708.75 just incase it made another attempt above 710 for a break-out. one of my weaknesses I am working on. I guess this is where low commissions and being quick comes into play. 2nd you mention that as a liquidity provider for the most part you are scratching & re-entering and you mention that you realize that much of the time it can be for a loss on average. Since you make most of your keep on high probability sequance trades, have you ever thought about re-strategizing, by providing alot less liquidity probing entry trades and amping up your lot size to 100 lot high probability trades for $5,000/pt looking for 2 points on 2-3 high probability sequances through-out the day. This would provide you with more end of day net instead of having to offset with low probability liquidity providing trades.

Charles said...

RE: "sorry to sound flip"...Don, i've never heard that...is it a new england expression? does it mean "not thorough"?

(another useless comment by charleS)

pkmaui said...

Don,

Have you ever had aces and went up against someone who had aces too?

and here I am (like you)watching those: "Earlier, I'd passed on many of the other shallow bear trend retracements" and saying to myself "WHY didn't I at least TRY 1of them?

Until getting off my LAZY ass doing that same short where you did- thinking "God, that was easy" & WHY do I get so afraid to play JJ cause I too am waiting for those aces ONLY?

I think they call it: Being human Don!

pk

pkmaui said...

AND Im my WORST ENEMY DON...

Winace said...

Don & John ;-),

First off, Don, poker face and a steady hand... nice trading.

Second, John, pocket your coin, trade paper relentlessly without lying to your self (believe me, you will!) Find your system, something that removes emotion, fear and greed/joy. Leave nothing within your approach to the markets an emotional issue, or anything emotions can impact. Define your loss up front, know the absolute maximum your willing to lay on the line (treat the paper as if it were real, hell, you get consistent, go buy yourself something with the coin you saved!). There is nothing that can accelerate your time exposure in the markets, so don't rush it. When you get something down, the market, and better yet, your coin, will still be there.

Don,
I linked your blog/journal from mine, I like the conversation flow here, real people, real issues, and no one looking for a hand-out. Good work.

Winace said...

Don,
Love the use of over-extension, over-sold and over-bought are used way oout of context. Half my trading technique (I define technique as my entry/exits, style is the management of the trade while in play) is on extension levels.

The more I read, the more basic approach similarities I see.

Mark Perkins said...

Max99 if you like SKF you should check out FAZ

Mark Perkins said...

sorry if this is a stupid question but I don't know much at all about futures trading or platforms but I'm looking to learn. Are those charts in this post your main charts you are monitoring intraday? I noticed they have different colors sometimes from previous posts and don't use candlesticks.

Don Miller said...

estrader -

I have no plans to change strategy until something stops working for an extended period of time.

Providing liquidity -- even at some cost -- allows me to feel the pace fairly well and "usually" prevents me from having trigger lock.

No plans to change at all.

Don

Don Miller said...

Hi Mark -

Yes, they're the exact charts I use during the day. My 15 min almost always has a white background, the 5-min a blue background, and the 1- or 2-min a yellow one.

I don't use candlesticks ... simply personal preference.

Don

Don Miller said...

All -

One other thought on providing liquidity, is that if I'm on my game and providing it with the flow of the market, one such trade could very well evolve into a beginning entry for a speculative opportunity with greater potential ... which is why I've said in the past that they tend to blend together and often can't be separated as one could morph into the other kind.

And to reinforce, why in the world would I ever want to change/tweak/modify/adjust/screw up an overall strategy that -- and this is key: for me personally -- that has worked in the long run over the years. Such is why I still remain reluctant to increase size or change anything (please remember the Seve Ballestaros reference!!)

As I've said before, when I don't trade well, it's for lack of focus 99.9% of the time.

Don

Charles said...

RE: "As I've said before, when I don't trade well, it's for lack of focus 99.9% of the time."

Don, i feel the EXACT same way, and I've only been in this about 14 months...but i get that its mostly about self-mastery.

I know i have a strategy that works, so then its just a matter of me being in the right state of mind to execute it PROPERLY. That being said, this biz can be friggin HARD at times, but thats just part of the gig i guess.

I am big on gratitude...and I am very grateful for you taking the time to put this blog together. I hope you are properly rewarded for your efforts.

So Don, don't bother posting this comment, as it really is just me wanting to say THANKS DON, for sharing such insightful/personal thoughts...they really are helpful to us "newbies".

best,
charleS

BTW, i'm at zenrecords@hotmail if its ever useful to ya.