Friday, July 18, 2008

The Weekend Trader (Early Edition)

I'm starting on this weekend's edition on Friday morning given the early market chop. Looks like a capital preservation day so far. We'll do today's post in the form of diary notes, with live market/trade observations in italics.

I hate earnings reporting season. Nothing like constant blah-blah-blah rhetoric to put a damper on natural market rhythms. Objective? Stay out of trouble. Consider any earnings a bonus.

Note to self: Never trade day two like day one. You make most of your income on day two, so don't ever worry about missing a day one move. ["Day one" meaning the initial impulse move ... can be day, trade, week, etc.]

Note #2 to self: Continue to trade what other people can't/won't. You love trend pullbacks, but you're also adept at fading trend extremes. "The trend is your friend" is the most misunderstood market myth out there. What trend timeframe? Has the trend run its course? Is there stochastic/tick divergence? Does 3 Line Break show 20 consecutive bars in the trend? Is it the third -- and likely final -- push? Have the stuck positions finally emptied their stomachs?

10:30am Looking to fade any approach toward 1260, but market back in its salmon-swimming mode. Been sitting at the 1258 bus stop for short entries, but nothing yet.

And speaking of "stuck", this week was a good reminder that markets move fastest when traders are covering losing positions. Stuck traders drive prices harder than anything as fear is greater than greed. Nothing like being cash 95% of the time, and in the market 5% [but over and over again]. Ah, if fund managers only had that ability.

Nice to see my EESM recovery mode narrowed from 20 days [last significant bonehead draw many moons ago] to seven. Here's last week's actual EESM equity curve:

Note the chart scale purposely skewed to show (1) upside and (2) future time. If you're printing equity charts, this is a must. The most important part of this chart? THE BLANK SIDE TO THE TOP AND RIGHT!

10:58am Faded the initial approach toward 60, but pop too strong, scratched short and scalped long on first pullback. Sticking to tighter scalps than normal today. This is why I also don't believe in chatroom "advisory services" a.k.a. horse race callers who have no skin in game or refuse to share their own trades. Don't get me going.

11:11am VIX turning down ... another ES leg up? Watching. Not too interested in sardine can trading. I want Jacks or better ... so far, it's all been marginal A-8. Third approach toward 1262. Maybe we get DAX-like short capitulation spike toward 70.

11:20am Fold, fold, fold, fold. The beach starting to look pretty darn good.

Had an interesting poker night last night. Played well but lost in our weekly tourney by going all in with a full house. Problem was the other guy had a higher full house. Did decent in a small cash game later though.

Skimming The Tao of Poker again ... pages 148-149. It's such a great read for the bathroom, nightstand, or trading breaks. It's written in USA Today-like snippets and sooooooo applicable to trading. Rule #222 on page 148 talks about finding ways to reach back to when we were the sharpest. Brings a certain fictitious -- er, I mean real --- equity chart to mind!

Teaching my youngest daughter to drive. Reminds me of not looking back at trading results to predict your trading future ... kind of like learning to drive by looking through the rearview mirror.

11:45am Need one decent chart pattern & entry. Just one ... is that too much to ask? Maybe so on a summer Friday.

12:18pm That looks like all the north side for ES. Looking to short into 5-min downtrend on a retracement.

12:25 Shorted 45 ES at 56. Want 75bp for 15 and hold 30. This could tank and I want some position on in case.

12:29 Covered the 15 and holding 30 short. Let's see if the late-to-the-game longs are caught! Covered another 15 at 54.50 and looking for the tankola now on the free ride. Will scale out into any further drop.

12:35 Flat; best cover price 53.75. Will reload short on any climb or buy any mini-capitulation. Not sure we have the volume for a full panic midday on a summer Friday.

12:48pm OK, got that one good trade. Look out below if selling picks up as I can't see longs buying dips on day 3 of the moonshot too aggressively, but time will tell. The short covering appears pretty much done.

12:59pm Selling picking up. Scalping lightly from short side. Any break of the downtrend and will wrap it up for the day. Indicators mixed.

1:33pm Just awoke from a nap. ES officially in no-man's land and wrapping it up.

A very good week, but it means absolutely nothing on Monday. Lots of work left in the year, but now it's time for some sun and perhaps some poker over the weekend.


nocved said...


Stumbled upon your site, good stuff. I'm trying to make transition from floor to screen with es my vehicle of choice. Seems like 99% of site Ive found are hucksters and carnival barkers so its refreshing to find someone who's actually in the trenches. Your few post helping reevaluate some of my practices.


ps Doesnt hurt I'm fan of all teams in Boston

Don Miller said...

Thanks for the kind words Tom. No agenda here and never will be. It's helping keep me focused and if it does any good for people looking over my shoulder, all the better. Thus far, I've shared the link only with a few people and have no plans to formally publicize it. I know the transition you speak of is difficult. I've never traded on the floor, but can relate in a way. Hang in there.