The Weekend Trader (Saturday Edition)

Reviewing August's results got me thinking about taking a more detailed look at my monthly performance trends throughout this year of the grand experiment, yet doing so in a way that would keep me out of all of the dangers of looking back in the middle of the race in progress so that I keep pushing ahead.

So, this crazy 47-year old mind got out his QuickBooks, Excel, and -- get this -- some virtual crayons to craft the above monthly performance chart that will hopefully balance a quick rear-view mirror analysis while keeping the eyes on the road ahead to avoid a possible loss of focus and crash. (I think I finally figured out how to make sure all charts are expandable ... click to enlarge.)

If you've been following any part of this blog for long, you'll probably be able to quickly understand why the chart appears the way it does without my needing to comment. Suffice it to say it's an Excel chart based on a QuickBooks download, with several adjustments including adjusting the horizontal X-Axis from zero to a level above my best performance (ground level) so that my goal remains to break through from my starting hole to above ground ... which hasn't yet been achieved. Each sequence of lines reflects a sequence of daily performances within a single month.

Taking this larger look-back does provide some interesting observations, including putting the post blog-starting performance (last two sequences) into greater perspective. It also shows how I was apparently more aggressive in March and July, resulting in greater volatility in results -- including the July brain cramp -- yet ranking 1st and a virtual tie for 2nd of the 8 months. Perhaps this is the most useful conclusion as I begin yet another attempt to "break ground". Maybe I need to find that lost aggression and be willing to accept the swings (sans brain cramp) that accompany the final result. On the other hand, I'm not sure what the April & May lackluster attempts mean.

I'm going to study this some more, but thought you might be interested in the approach. Heck, you'll probably see something that I don't as a third party observer, so feel free to comment.

Four months left and I need to break through to that surface. I need to breathe some air.

Friday Notes - Another Hole Filled

11:20am A nice end to the month with both the DAX and ES cooperating nicely in this morning after prior-day trend mode.

Hmmmm ... what do the following two opening charts have in common????

Hello????

It's been an interesting dance thus far today, as I try to balance opportunity with monthly gain protection. Been keeping sizes on the light side to compromise between the two, which helped protect early profits when I gave some back fading the drop after the first hour (often a high probability move on the day after a strong trend).

------------------

So another month comes to an end, and for the eighth time this year, another hole has been filled. Here's the daily equity chart for the month (again, without number labels for a reason):

Conclusions? Well, it was certainly much more consistent than July with lesser volatility. The 17- 4 daily gain /draw ratio is OK, but I'm a bit concerned that I had only two days of $15K+. The fact that the largest draw was $5K -- essentially mouse you-know-whats -- seems OK ... although I seriously wonder if I'm being too conservative in terms of risk/reward and position sizing. I need to think about that.

What I find extremely interesting is that both July and August arrived at about the same end-point, albeit via two completely different paths. I also now have almost two full months of post-blog data that gives me some indication that documenting my thoughts this way hasn't explicitly hindered my trading, with each month producing six-figure results. Again though, it's tough to measure whether there was greater potential without exposing one's self to undue risk.

You can also see the various points of plateau, the most recent of which was driving me crazy and literally keeping me up nights a few days ago.

Yet you know the drill by now. September cleans the slate once again and this all means squat. For the past -- both immediate and distant -- will always remain irrelevant.

All I know is I see four more holes ahead of me. Hand me the shovel.

Please note this week's Weekend Trader was posted last night as I'll be out during parts of the weekend. Keep the comments coming though as we work to strengthen our collective "team".

The Weekend Trader (Pre-Labor Day Edition)

I'm going to "try" to take a good long mental break this weekend to gear up for the final four-month push of this 2008 journey into the unknown. Before then though, here are a few random thoughts before I completely clear my head.

Fall Trading - If history tells us anything, September and October should be two of the better months for trading volume and pace. As such, I expect we'll see a marked shift in trading patterns and opportunities in a market that moves more like a slithering snake and less like a jitterbug. That's not to say we won't see volatility at times ... but it should still be more fluid with the added volume.

Keeping Score (Not!) - Over the last couple of months, I've often stressed the mental image of the fictitious draw in terms of my needing to feel that's where I stand equity-wise before every week, day, trade, etc. If you've been looking over my shoulder for much of the past few months, you know by now that it's how I have to perceive where I stand on my equity curve, so that I trade in a very comfortable and natural place for me ... and that's after a debilitating punch-in-the-gut draw. It took me only a decade to figure that out.

Yet I haven't spent much time discussing item #2 of that "cornerstone" post, which is not to view my equity balance except for June 30 and December 31. And this remains one of the hardest things for me to do ... especially as I approach another month-end. But I kid you not ... I do not know what my balance is right now. And while I often quote daily chip gains/draws, show weekly equity curve results (note those charts are without figures though), and ballpark monthly tallies, I view such comments as simply (choose one of the following) legs in a relay race, hands in a Hold 'Em tournament, individual holes in a golf championship, etc. etc.

And yes, I know "about" where it likely is, and if I wanted to add up all of the individual results, I could get pretty close. Hell, I could also simply glance at the bottom of my daily statement and see the exact figure. But I can't go there. Not yet. I've done everything possible at this end to not focus on where I really am -- including booking an actual killer draw at the beginning of each month so that my QuickBooks results (which reflect all of the detailed daily results and of course has a running balance) include that " draw" that constantly moves to the beginning of the current month and grows larger each month so that my real records replicate the now infamous motivational equity chart:


Doing so has still not been easy for me, especially for someone who keeps extremely detailed records, has a MBA, and has overseen books for major corporations. And while trading "in the dark" did seem to get easier as the first six months wore on, once I took the mid-year peek I found it difficult to get back "on the wagon" and not look at it.

As this second six-month session approaches its 1/3 mark, it does seem to be getting easier again ... yet that gnawing desire to view the complete scorecard never completely goes away. I think what keeps me going is that I know if I look at it, it will kill my belief that (1) I deserve more, and (2) that the profits should flow easily ... both feelings of which are constantly reinforced by the above chart! Try visualizing that chart as an intraday ES chart ... where is it most likely to go at that point?? Especially after a little bit of a momentum bounce?

I can't overstate these concepts enough, as they've been the fertilizer for the roots of this year's experimental Chinese Bamboo Tree, which will be fully measured and evaluated on December 31. That is a day I look forward to. Yes, it might very well end up a Maple or Elm ... but I'm reading up on Chinese gardening for a reason.

I've said before that this year isn't about greed. It's also not about "Look at what I did" B.S. -- for the market will knock that person down faster than a Michael Phelps reach for the finish line. This is simply a journey in the life of one trader who won't settle for Silver this year. And I'll say this if you're looking over my shoulder ... if I can do this with all my faults and shortcomings (and there are plenty) ... there's room for others to do so much more.

And if this year's tree indeed ends up being a version of the Chinese Bamboo, I'd better deflect all credit to its proper Source. If I've done anything, it was simply getting out of my own way.

Four laps to go after tomorrow and I'm feeling energized.

Have a restful and peaceful weekend.

Thursday Notes - Active Overnight Session

11:13am Not much cooking in the U.S. session as ES has been rangebound after the GDP-induced gap. I suspect volume will die a slow death over the next few days heading into the long weekend, but then again the market often does what's least expected.

The majority of my trading was on the 8:30am pop, and while I bungled the 1st ES pullback immediately after the pop (entering and then stupidly scratching for a deeper retracement), I was able to nail some DAX overextensions, and most of today's early $6K chip gain has been via the DAX.

1:30pm Pretty much one strong thrust -- after a nasty shake-out -- since last post and then volume again died. Doing some teeny ES scalping, but just for yuks and to keep my head in the game more than anything.

2:04pm Possible topping action on 3LB turn and preceding TICK vs. price divergence.

2:13pm Buyers still in control ... 15 min trend a horse so far and range fluctuations only ... and I'm clearly not a good range trader. Scratched short attempt on small size for small loss, and that might signal the end of the day for me. Tough to buy with high % at these levels, but they can of course run it.

In day gain preservation mode now. Banking the $7K increase unless Aces come up.

3:02pm No trades since last post. Any trades from here for anything but Aces and I'll need to have my head examined. No volume at all.

4:43pm Oops, forgot to hit "Post". Last day of month tomorrow ... will play it cautiously.

Wednesday Notes - Breathing Room

11:48am Well, I'm not quite sure if it's me or the market, but one of us has better rhythm today. I sense it's probably a bit of both. Got off to a good DAX start for once that carried over into the U.S. session. Looks like that initial personal momentum from yesterday ... regardless of Tuesday's very modest score ... did provide some nice inertia.

It's interesting that the DAX pretty much trended down from its open (and I traded largely from the short side) while ES traded north out of the gates (been trading it from the long side) ... with the 8:30am economic data providing an interim turning point. That last sentence itself is highly enlightening in terms of both markets actually trending for more than 10 minutes, as well as my being in sync in both sessions thus far. 5- and 15-minute trend pullbacks provided good opportunity in both markets, and the VIX led the way on ES and kept me out of trying to short yesterday's highs.

So I seem to be on my game -- including making the mental transition between markets better than I often do (which could have been tough given today's two completely different paths) -- and have been dancing without stepping on anyone's feet. The result as been a decent $10K morning chip gain ... a stack I don't intend on risking much, if at all, for the rest of today's summer session. Put it this way: It would have to be Trip Aces and I'm heading out for a long lunch.

btw, I finally watched this year's World Poker Tour Finals last night in which Gus Hansen lost a heads-up battle ... after he had a 7-1 chip lead on the other guy! Made me immediately think of seeing many traders --- including me at times in years past -- steadily give back huge gains in such a way where an initial snowball turns into an avalanche. Granted, he lost as the result of a river suck-out -- and had accumulated much of his own stack earlier in the session by sucking out himself several times -- yet it did seem he played poorly at times and left himself vulnerable to that single unlucky instance that did him in. That's why I get so concerned with even a couple of draw or "treading water" days in a row. Momentum can be such a double-edged sword.

12:12pm Putting lunch plans on hold ... VIX plummeting & ES surging. Should be a decent overextension or pullback coming.

First card is an Ace ... looking for second card.

1:14pm Been stealing some blinds in terms of some light $0.50 - $0.75 liquidity-providing scalps both ways on the climb. Pace continues to feel good. Last trade if it shows up will likely be fading a further exhaustion move north or steep retrace south. Have to be extremes though to carve out 1-2 point profit potential ... everything else is tick scalps up here.

Trading still feeling very natural. Stroke by stroke, I seem to be gaining on the French guy. At least the water isn't hitting me in the face now. Keeping strokes short and swift. VIX gets the award for the indicator of the day.

Guess no lunch for me today ... a good reminder that the market dictates breaks, vacations, etc. As Napoleon Hill once said, success means being willing to do what the vast majority of others won't do. At least I think it was Hill.

1:32pm Come on, one more major thrust down to shake out the late-to-the-game longs.

1:46pm Looks like I let that bus pass. Got dealt A-J unsuited and wanted a high pair. Oh well, next deal. I did catch a piece of that first pullback for a few ticks, but wanted one more thrust for entry safety. Market a total coin flip up here now ... lousy probability.

Heading into afternoon gain preservation mode. Day's chip count +$14K and feeling slightly better about my trading vs. recent days.

1:52pm Hmmmm ... this might get tempting on a further plunge. Shhhh ... be vewwy vewwy qwwwiet. Don't do anything stupid Don. ES has to be in the 76-77 range for a decent low-risk long scalp attempt.

2:00pm Nibbled on short-side ... noticed 3LB never went long on last climb and there's room to fall to longer-term intraday supports. Currently short from 82.25 small size, covered partial already, and holding teeny size now. Sitting at 79.75 and on free roll for the rest now.

2:04pm Good read. Covered more 80.50. Size very small though ... getting tired given the early AM DAX trading and market also approaching another "on-the-fence" mode.

2:07pm Flattened final at 81.25 and calling it a day ... still room to drop, but clearly losing focus and stamina. Final chip count +$15K, with a little under 1/3 coming from the DAX. I'll leave the next few relay legs to the rest of the team. At least we have some P&L breathing room for the moment. Any run into the close will set up Thursday A.M.

2:14pm Funny that ES just ticked 79.75. I guess that gives me something to improve on for tomorrow. Not a bad thing at all.

Tuesday Notes - Consolidation Day

12:31pm Been providing some liquidity on fades in this day-after-trend day and taking some modest pots. Did OK on the 10:40am turn back south ... about the best setup I've seen in a while. I'll say this though ... I've been at this for 10+ years and have never seen such pathetic ES market pace as I've seen over the last several days. And as I've said before, pace means more to me than any chart, pattern, trigger, etc. to optimize risk management. A market that runs and then comes to a complete halt time and time again doesn't do much for market feel ... sort of like playing a hand of cards, starting to get a read on the guy next to you, and then everyone breaks for a while before the next hand is dealt. Lots of phony bids/asks ... sometimes over 3K in size ... also showing up in this no-volume market.

The good news is that this pace is really starting to aggravate me ... hopefully a positive sign for when all the major players are back after the Holiday and we get some R-H-Y-T-H-M. Perhaps the FOMC minutes release at 2pm will stir some action. Whether it will be readable remains to be seen.

3:17pm More of the same heading into the close. Cashing in my modest chip gain. Not sure we'll see much better opportunity until after the Holiday. Got the performance momentum flowing back on the + side though and will carry that forward into the next lap. Still not mad enough though ... I may need some more water splashed in my face.

Tuesday AM Notes - Silver or Gold?

2:05am Just awoke from a nap ... not to trade, but to try to get my head into Tuesday's potential trade. Somehow, I need to start the day feeling real pain. Pain to awake and motivate this trading soul to reach beyond what I feel has been complacent August performance. Pain to mentally translate two days of treading water into two days from hell. Pain to make that fictitious draw which has worked so well for eight months feel real again without actually experiencing it.

Two days of treading water is typically a huge warning sign for me. And while I have every legitimate excuse in the book to look back at the last two days with equity-protecting "satisfaction", I can't even think of using that "s" word -- never mind feeling its emotion -- until this 2008 experiment/race/paradigm shift is over.

Perhaps said another way, I've been riding the wave of the French swimmer ahead of me in the next lane for the last 1/2 lap. What I need to do now is feel the pain of being behind and make the push when the time is right. I could coast for the rest of the month and year and easily finish with the Silver ... 99.9% of people would be extremely "satisfied". I can't go there. It's no where close to time yet and I want Gold.

This year isn't about greed ... rather it's about unparalleled excellence and stretching one's self beyond what he previously believed was possible ... period. If it takes corny Olympics analogies to help make that happen, so be it. No one else is going to motivate me, and I care about one result and one result only. Perhaps the greatest test of this blog experiment will be to see if it helps me stay the course and remain motivated for the next four months ... for I felt mid-year that I might lose the personal drive to make it to the finish line, especially as the summer trading season began, which is one reason I chose to share this year's approach "live" as it was occurring and evolving ... versus recapping it in an often-requested book after the final results were in.

Yes, we're in pre-Labor Day week which is often when many traders take time off for the fall performance push. Yet while coasting may be fine for a few strokes -- and perhaps necessary to rejuvenate me for the next required sequence of pushes -- all I know is right now is there's one swimmer ahead of me, the world-record green line is gaining on me, and my inner coach is screaming at me to time the next push right.

My coach is tough and I hate him at times. He's also right.

Monday Notes - Buyer's Strike

4:45pm Not too much to say today as much of my day was spent tending to non-market priorities. Turns out that might not be a bad thing as we gear up for possible morning-after-trend-day in the morning. I did trade lightly to provide some liquidity and keep my head in the game, yet pretty much scratched on the day as I focused on looking for double tops, bottoms, or divergences at the likely turning points for my primary entries, and the market didn't cooperate. Surging and consolidation seemed to be the rhythm of the day, providing for a rather tricky pace at times. Oh do I look forward to fall trading!!

The more important issue heading into Tuesday's trade is getting myself in that totally-pissed-off mode to maximize opportunity, as the last two days of scratches could easily be lulling me to sleep. I'm going to give that some strong thought tonight ... perhaps sleeping on the floor to get myself angry for the A.M.

Short post today as I have to head out for the evening.

The Weekend Trader

I've thought a lot about Friday's trade before shutting that side of the brain down for the weekend, which triggered the following reflections:

Morning Spike - It's interesting that I didn't mention anything about news when discussing Friday's early morning spike. And yes, I did peek quickly at Briefing.com during the chaos and learned of the Lehman Brothers talk ... which I suppose reinforced my decision to short the next spike hard which cut my initial losses drastically. Yet while the news may have been a catalyst, the fact remains that the market went up because the buyers -- including short coverers -- were stronger than the sellers. Period. And the next move was likely to have a lot less momentum. Period. It really didn't matter what the news was or whether my last trade was a large win or large loss. For I run a store whose objective is to buy wholesale and sell retail ... in either order and without regard to what the last customer did.

There's no doubt that what I did on that recovery trade wasn't for the faint of heart or newbies. Yet it came down to survival instinct ... and that is one attribute that is a must for anyone who's serious about this business.

Lackluster Fund Returns - Dr. Brett has some great links on his blog today that discuss poor 2008 returns across a great many investment and hedge fund sectors. For the next few moments, I'm going to ask my "trader" -- who needs to remain completely unaware of his 2008 performance -- to leave the room.

This got me thinking about what is working this year, especially for someone overseeing a seven-figure private fund that grew 86% in the first six months alone this year. Perhaps the answer in part is the growing need to be able to react extremely quickly -- as in "on the proverbial dime" -- to changing conditions.

This week was a good example where the only funds generating net income for the week would have been those able to maximize profit from a market that went nowhere ... yet everywhere. Our fund stumbled a bit in the early hours today, yet the ability to react quickly allowed us to limit any daily damage to a tiny scratch, and resulted in adding another $22K in chips to the stack for the week. Of course that means nothing the minute the virtual ink on those words is dry.

OK, tell Don he can come back in now.

Mirror Image - Did you pick up on the fact that last evening's "fun" chart looks a helluva lot like today's ES 5-minute chart?? Now that's downright scary.

And the best news of the day? The game starts anew on Monday.

Enjoy the weekend.

Friday Notes - Hold the Phone

8:11am Ugh. (I assume the blog blocks swearing.) Shaping up to be one those days as I got caught short on the 7:40am DAX 45-point spike on fairly decent size. Talk about an early and unwanted wake-up call. Funny thing is I sensed the spike might happen as it was shaping up while I was providing liquidity, yet still walked right into it. Of course, right before that I received a disturbing phone call from home (nothing major, just a nuisance). Coincidence?? I think not. The better news is I was able to cut what could easily have been one of those "ruin the weekend" losses by a whopping 2/3 by refocusing immediately, covering on the first retrace, nailing the second spike on waning momentum, and covering on the second retrace.

Here's a pic, with the unshaded circles reflecting my approximate initial short entries, and the shaded circles reflecting my covers:

OK, so the comeback mode feels "real" for the first time in a while. It was like the band was playing the waltz for much of the week, and then all of sudden transitioned to the Mamba. Such is life as a liquidity provider. As I mentioned yesterday, it was likely going to happen when no one expected it, and the Friday Globex session has provided the backdrop ... at least for the time being. Immediately going into EESM mode for the rest of the day. Bernake speaks at 10am which might create some opportunity for the focused. Will go dark on the blog until noon.

12:31pm Been doing some heavy ES scalping in EESM mode, but am still slightly off my game. I did let ES trade without me at open again, and this time it kept me out of early shorting trouble. Immediate goal is a getting close to a scratch on the day, but the entries have to be cleaner ... somewhat doubtful heading into a summer Friday afternoon. Got a solid week and month going, and need to keep it that way.

Note to self - Another good example of how irrelevant "daily goals" are. Let's say I had a stupid $1K daily goal ... I'm probably down $6K-$7K or so now -- not sure of the exact # but I do know I'm pretty pleased with where I stand all things considered -- so I have two choices: (1) Try to find $8K from on a day where I'm slightly out of rhythm and likely turn the $8K loss into -$20K; or (2) pick spots and book the day's result without much attention to it and wait for Monday. Yea, so the French guy is ahead on the current relay leg. Big Whoop. The wall gets touched on December 31.

1:23pm Definite change in volatility/pace today. Some shake-and-bakes on the midday turn that I definitely could have traded better.

2:43pm Finished my last scalp of the day on that last push. Was a clean entry and solid exit at 91.50 into the retail thrust. Overall, a nice comeback and we'll call the P&L a scratch at a $3K loss. (ES trades were actually green.) I guess I've pulled about even with the French guy heading into Monday's leg ... or maybe he's a German DAX trader .

An interesting but OK week, with most of the chips increasing on Wednesday & Thursday:

But we know the drill though in terms of the only chart that's relevant, and there will be no problem focusing strongly after today's action.

19 weeks to go. Then we'll see what all this means.

I'll post more thoughts over the weekend.

Thursday PM Notes - We've All Been There

One of the I.C. members (from a group mentoring effort we did a few years ago) forwarded the attached that I thought I'd share. I'm told it's not copyrighted, and the original source is unknown. (Click to enlarge.)


We've all been there. It actually looks a lot like August's intraday ES charts.

Thanks Joe.

Thursday Notes - Range, Range, Break

1:44pm Some day, they're going to take this market out of the current logjam range ... and the break will be hard. That much is certain. As for the when, how (don't care), why (don't care) ... ok, as for the "when", who knows, although it will likely be when everyone has been sufficiently lulled to sleep. Been nibbling on small 1-minute attempts to bust out of the longer term range much of the day, with one early stop, and most other sequences doing OK as I've been dumping the majority of my position as we approach the range tops and then typically cutting the rest loose on divergences or a move back down. That way, I lock in something while keeping a small position on in case "she blows" ... even if it would just be a moral victory with a very small size.

Have only traded 360 x 2 ES and 38 x 2 DAX contracts ... teeny sums for me ... with much of ES on the 1pm-1:30pm climb and attempted range break.

Not too much to complain about here and am satisfied with the very modest $4K take, although I could have been more aggressive at the open on the early move up as I instead opted to see more cards. I did have a decent DAX sequence and captured the following charts and DOME at the time:

You can see the attempted breakdown and 3LB being short, so I entered on the pullback and took most of it out on the drop ... using the same ES scaling out strategy as I mentioned above given the risk that we'd remain rangebound. The DOME shows the 6264 entry price and the remaining contract I was positioning to cover below the market. Turns out the market never traded down there and I had to dump the remaining piece at the entry price. Yet it's another good example of how I'm trying to trade this summer's recent rangebound action ... looking for mini-trends within the larger range. It's certainly less profitable than buying the range bottom and selling the tops, but my brain has never worked that way as I prefer to view the market from a trend perspective ... even if the trend is microscopic.

2:27pm Pop goes the weasal. Caught some of that using the same strategy and this time the VIX pointed the way:

Looking for the first strong pullback. Might be a while if at all since I expect this pop will be strong. Range bound traders now stuck.

3:02pm Nice ... nailed 78.75 entry on the retrace ... taking it out on the pop. Clean trade and good market pace. Crap shoot now ... if they run the close, will gear up for A.M. after trend mode. One eye on clock and one eye on gain preservation. 3LB turned south on that last hard retrace, so not interested in riding any further wave.

3:09pm Good decision for now ... market down 2 points off my exit. It might hold here and gear up for another move, but it will go without me as I'm now looking to the morning. $7K now in pocket. I actually thought that pop would be stronger given the likely # of stuck range-trading shorts. There's still time though. 5-min trend now in play for the first time in a while.

3:14pm That's more what I expected ... fast three-point surge. Caught the first move ... sat out the second. If 3LB had held, I would have considered a long on the deep retrace. Hard 2+ move back down now. In the words of Devo ... "Whip it ... Whip it Good". Too tired here now with 40 mins to go. Calling it a day and will let others have at it. OK day, but I need to find something I didn't like about it as the week's not over yet.

Wednesday PM Notes - Time to Stop Thinking

Following up on some of the morning comments, and to satisfy some of my own curiosity, I wanted to review the morning's 1 minute ES and TICK charts. The first charts below show two price vs. TICK divergences, the first of which I nailed and the second of which I missed. In the pre-10am sequence, the divergence appears as an angle difference between the two price lows and the TICK lows. It's subtle, but there and immediately rebounded two points. The second one (the infamous 11:14am fish that got away), was a screaming divergence and immediately dropped a full 2 1/2 points from the price peak. (Click on the chart to enlarge. )

As I've said before, I actually often prefer two minute ES charts which is what I was watching at the time, but am showing the 1-min charts here for clarity. You can also see how sloppy the one minute "turn" off the high was, and even though 3LB did eventually turn back down, I couldn't sense a clean entry.

Good traders know that divergences like these by themselves mean nothing many times and can be totally useless in a trend day. But couple them with the expectation of a wildly fluctuating market after a trend day or two, and they can be a powerful tool.

Looking to Thursday morning, I have absolutely no clue what to expect now that today has played out. It may very well be one of those "see what develops" days.

One final note for the day. I am humbled by the attention this blog (which is really a personal experiment) has gained in a very short period of time. I peeked at recent blog traffic stats tonight, and the trend over the last few weeks is startling. If you're new to this, I encourage you to go back to the early July posts and at least skim the weekend material to gain some perspective of what this is -- and isn't -- about.

As I've said before, I've found this to be a great tool for me to capture my thoughts and "talk to myself" -- because that's how I really view this. It's essentially one man's journey to recognize and overcome his own limitations once and for all, and in doing so, pursue a "Bamboo Tree" paradigm shift in his performance. At the end of the year, I'll open the full book of 2008 performance to myself and those joining me on this odyssey. Yet that's for then, and this is now.

I do know one thing ... we are all capable of doing far more than we think we can. I'm simply trying to stop thinking.

Wednesday Notes - Volatility Returns

8:10am Starting blogging early today as I'm a bit peeved that I woke at about 6:15am, right after a textbook DAX & ES retracement occurred off their overnight highs and in the area of Tuesday's resistance. Now I need to channel that pissed-off feeling to productive action for the rest of the day. The good news is that Tuesday's resistance seems to be in tact, despite the slight overnight pop, and early focus will be on carefully establishing a core short position -- ideally in the mid-to-high 1270s -- assuming the market gets back there in the normal session. A nice gift would be the market trading up there, pausing, and then turning south on a 1-min timeframe. Should that occur, I'll look to establish an initial position on the fade with a long leash (managing risk with size), and add to it on a turn.

My general feeling is that I should be able to let off the brake today and press the accelerator given we're now in "day-after-day-after-1st trend day" mode. As a result, I expect several good oscillations today, which would normally have occurred yesterday, since we're stretched even further and given the overnight action. Bottom line is I need to be sharp, make sure the gas tank is full, and not be a wuss -- meaning I'm willing to risk more chips given what I feel are high probability opportunities. The market dealt Aces overnight when I was sleeping, and I expect it will deal Kings at least twice during the day.

12:20pm Wow ... where do I even start? So many themes ... so little time. Well, we did get exactly as we expected -- in terms of the delayed day after trend day action -- which because of the one-day delay, resulted in even greater and extended intraday volatility that's still in play as of 12:20pm! When's the last time that happened? Said another way, imagine an absolutely still pool, and then Michael Phelps jumps in ... can you say "ripples"??? The hourly downtrend also remained in tact, volume increased, and the market did trade into the mid-high 1270s.

Lots of TICK vs. ES price divergences on both short-term peaks and valleys throughout the morning. btw, if you nailed that 11:14am spike to short ... congrats. While I was expecting that same "take out the swing high stops, and then whip down hard" rhythm that I mentioned yesterday has been a common theme this summer -- and was ready to scale into a heavy short position on that last thrust -- the bottom fell out. Apparently, the market didn't get my memo asking for a PAUSE! (See 8:10am comment.) Very tough entry with little second chance, and at the time, I felt the subsequent 1-min turn was too far off the high to enter. In hindsight, it wasn't.

Ironically, despite my early eye on shorting, I've actually traded much more from the long side given the early plunge and then the "frustrate the hell out of everyone" 11:14am shake and bake. No matter though, for if we can nail the rhythm, plenty of opportunities should evolve as the day develops. I've also traded smaller sizes than I expected to ... perhaps because of the violent action ... often scaling in and out of modest 30-40 contract sequences, and have missed a few prime entries. Yet today is another great example of where you only need to nail a few of them to carve out decent profits.

One of my huge concerns heading into today was fear that I might not be able to make an effective brake-to-accelerator transfer, especially since the foot had fallen asleep on the brake in recent lackluster market action. Kudos to Aman's comment to Sunday's post (also see my response) that helped me turned the missed Globex opportunity frustration into a call to focus and action during the regular session. His note was well-timed.

There's no doubt I could have traded better, and in the words of Bill Belichick, there will be plenty for me to work on for tomorrow's game, yet I'm OK with the morning $13K take in light of the relatively small sizes traded and violent early action. And while that could have easily been doubled if I'd nailed the 11:14am short (give it up Don!), my primary goal for the rest of the day is not to try to make up for lost opportunity and lean on the brake a bit as I wait for the next strong hand.

1:37pm Looks like it's back to the still pond again. ES trading right on top of both its 5 and 15-min 15MA moving averages. A quick aside ... played decently in a small local Hold 'em table tournament last night, managing to eek out first and win a whopping $100. What's amazing is how much more that "felt" like real money vs. trading earnings that drawf that. Still trying to figure out what that means.

2:04pm Going for a quickie short sequence on the attempted turn ... looking for 1-2 points on small size. 3LB went short, and the 2-min charts trying to turn off that last high. Stop 1271ish on a 3LB turn north. Will scale into cover on any drop.

2:12pm Good ... averaged up to 67.50 on the entry and best cover 64.75 on the drop. It ran more more, but I wanted the high probability in case they jerk this back north, am getting a bit tired, and want to lock up the day shortly. Plus, we're still in a larger triangle pattern in the middle of today's range. Here's what I was looking at:



2:59pm Too funny ... exit looking better now as ES turned up hard. Amazing how that happens: One minute you're the donkey on the flop, then after the turn you look like Daniel Negreanu. I want the high probability period ... others can gamble.

3:30pm Market back to flatline ... calling it a day. Nudged the day's take to $14K. Not a grand slam and definitely fouled off some pitches today, but overall a pretty high on-base percentage and touched home a few times. 133 days to go and back to work tomorrow.

I might follow up with another post later tonight when my head is clearer. Been a long but decent day.

Tuesday Notes - Any Green is Good

11:13am As I suspected in my reply to one of the comments yesterday, much of the tradable post-trend oscillation action unfortunately happened in the last hour yesterday with ES climbing 8 points off its low in the last 25 minutes, and thus far the optimal pullback toward key 15-min downtrend supports (my term for trendlines supporting down moves instead of "resistance") occurred at yesterday's close and again in the Globex session. As a result, I've been trading enough to keep the blood flowing, but that's about it. Tried a few longs looking for bungee snapbacks, but they never materialized and I'm essentially flat on the day with small winners offset by small scratches.

Keeping an eye on the next consolidation break which I sense may be down given the morning buyers' strike, uptrending VIX, and TICK which has been nowhere close to sustaining a + reading, but darn tough to short a market that's short-term oversold, and entering on trend extension signals on the day after a strong trend is typically a road to ruin. Gonna let the market make the next move.

11:32am Still no conviction at this end ... this too shall pass. Focusing on my non-market obligations but keeping an occasional eye on the screen.

1:00pm Watching the slow climb. Prefer a stronger squeeze surge to short into, although action thus far has been at a snail's pace both ways. As I've said before, market "pace" is as important to me -- if not more so -- than technical setups. This has been like watching the "Slowsky" turtles in those Comcast commercials. Been paper trading a bit on the climb, but no conviction to put capital on the line yet. Amazing how paper trading fills are never a problem. 15-min trend still down for now.

1:38pm No rhythm at all to today's pace, making it difficult to enter cleanly.

1:41pm OK, I'll bite ... shorted 70.25 stop 71.50 going for lower high ... small size cuz of past patterns (more on that thought later). Never mind ... scratched 70.75.

1:46pm Shaked and baked ... that wascilly wabbit. Everyone wanted the same thing ... hate when that happens. Next slight pop should be better entry.

1:48pm Reentered short 1270 ... that TICK pop was pathetic.

1:53pm Best cover so far 1269 ... heck, a point in this market is like Filet. Too funny. Sitting at 68.25 on remaining cover.

1:56pm Ding, ding, ding. Flat. Might finally get a decent scalper's pace going if this keeps moving ... I don't care which way, just move!

2:05pm Caught some of the overextension down by grabbing a wholesale long for a few ticks. Keeping everything tight in terms of profit expectation and size for now. Longer term "investors" not looking good now ... lots of overhead resistance in the 1280s and charts looking worse vs. early August even at the same price:



They can of course bust through it, but it will take some work.

btw, that earlier short shake-and-bake sequence was very typical of this summer's rhythm. Traders entering anticipating lower highs or higher lows and using prior highs/lows as stops have been getting stopped right before a whipsaw turn. If you go back and look at the short-term summer ES charts, you'll see that pattern time and time again. I was aware of that pattern going into the first entry, which is why I scratched before my stop was hit sensing it might happen again ... saved a point or so by doing that.

Not too interested in much more sardine can trading though. Lining up to be one of those days where any green is good. May take my paltry $900 (yes, that's two zeroes) to the bank today and let them run the market either way into the close ... which has also been an extremely common summer pattern.

Actually feeling pretty good about not overtrading today. Tough to do much with 5-8 offsuit, and you can't bluff the market.

2:35pm zzzzzzzz

2:42pm 5-min attempting another leg down, but no conviction in high probability entry points as larger timeframes are stretched.

3:07pm Got a small nibble shorting that last reaction up, but keeping it tight still.

3:48pm Quite the closing spin-cycle. Closed barely green for a sandwich or two, but any green may be good on a day like this.

Monday PM Notes - 3LB Reversal Failure

Thought I'd share one final thought and pic in response to Roger's comment to Monday's post. While I find three line break extremely beneficial as a supplemental signal -- especially for reversals after significant trends -- Monday's late day rhythm goes to show that no signal by itself is infallible.

Extremely sloppy short-term chart patterns, and I was frankly fortunate I don't typically trade much in the last hour due to decreased focus (don't get me going on my deteriorating poker play after a long session) and from seeing occasional end-of-day chop like this at times. Still, the first green bar in the circle -- or even the one to the left of the circle -- could have signalled the beginning of a significant and consistent late-day squeeze. This time of course it didn't.

I'm still looking for that 100% probability trigger. It will be a long search.

Monday Notes - Trend Day

1:36pm Interesting rhythm today as it's been a "spike/consoildation/teeny pullback/repeat" day, which can make it difficult for both extreme spike and deep pullback wholesale entries. Doing OK so far as traded the DAX to the long side on the Europe mid-A.M. climb, and have traded ES both long and short on the drop south, covering on the retracements back toward the mean. First trade was a 9:37am long on the early drop, which I quickly scratched for a small loss upon seeing further weakness, and then began focusing on the short side given both the early weakness and the 15-min VIX which has been uptrending all day.

I've only traded three or four ES sequences, booking modest profits on most, and have not looked at my P&L since the U.S. open, but sense I'm reading and trading in fairly good rhythm so far. I'm not too interested in going into gain preservation mode yet given the nice market movement and potential future opportunities in the afternoon ... I don't expect traders to be leaving early today as was the case Friday! Market seems in no-man's land here, but might be interested in fading the next hard move up or down.

2:58pm A bit tricky down here as 3LB went long, then shaked and baked and hasn't been much help in the chop indicating no sustained buyers and thus no likely short squeeze in the afternoon cards (yet). Focus now turning toward the "morning after trend" setups and being cautious heading into the last hour.

3:33pm Disappointing pace/rhythm in terms of clean entries ... either that or I'm just not in sync. No trades since 3:03pm. Looks like the prime entries will be in the A.M. Pretty typical performance for me on a trend day ... up minimally on the day ($4K, half of which was from the DAX) which is pretty irrelevant in the larger scheme of things. Call it close to a scratch day as I look toward the morning. Strong resistance in the mid-to-high 1280s for the moment and looking for day after trend day rhythm in the morning if we close down hard.

3:55pm Watched the swimmers fight it out to the finish line and wasn't interested in participating as the goggles were a bit foggy. Pretty wild price swings toward close and am hoping they save some of those for the morning. Should be one or two solid entry points tomorrow, and will have to be on my toes.

The Weekend Trader (Sunday Edition)

If it isn't blatantly obvious by now, I have a significant trading and poker playing Achilles heel, and it reared its ugly head again at Foxwoods last night.

What is it? I don't start very well and play terribly when "ahead". And that's not a defeatist comment by someone who doesn't understand the value of positive self-talk -- rather it's a flat-out objective truth. I don't know why I'm wired this way, but I am.

My trip to Foxwoods last night was yet another case in point. I bought into my usual $1/$2 no-limit cash game for the maximum $300 at about 3pm. On the fifth hand, I had Pocket Qs in the big blind, raised pre-flop, and got one caller who had about $200 in his stack. The flop then came 3, 7, 10. Looking pretty good, right? I then bet the flop and got called again. The turn came deuce at which point I decided to check to see what Mr. Caller would do. He then proceeded to go all-in with his remaining stack which I called thinking he had a middle pair which didn't trip up. He then says to me before seeing my cards, "I've got your pocket Qs beat with my pocket Aces." The river was no help and I'd lost 2/3 of my starting stack.

I then spent the next few hands playing that one over and over again in my mind, asking myself "How did he know?" Then the more I thought about it and put myself in his position, the more I realized I was (1) incredibly transparent and (2) not yet in my prime playing mindset. With respect to #1, since I'd been playing tight initially and raised in the big blind, it would have been obvious I likely had a high pair or something like A-K. Then when the flop came out, that opinion would have grown even stronger since I bet again post-flop, feeling confident with an overpair and trying to buy the pot right there instead of risking Mr. Caller tripping up on me (leading to his conclusion that I didn't likely have trips myself). At each point in the betting, he knew his Aces were good while increasing his sense of what I likely had. I could have had pocket Kings or Aces, but he knew Aces were highly unlikely since he had two of them, and if I did have Kings, he'd still beat me. So he put me on Qs.

Yet the more important point is #2. I'd only been playing for a short time, should have seen how my own betting was being perceived by him, and should have concluded that he had a higher pocket pair because of how he was reacting to me!!. Yet I wasn't yet in a truly mentally attentive state.

For the rest of the night -- and I played until 11pm -- I played pretty well, never having to rebuy and ultimately turning a low stack of $70 to a final cash-out of $292 ... essentially my initial buy-in. btw, I feel I'm nowhere close to moving to higher stake games until I hone my skill further at this level. I've pretty much given up tournaments though and am focusing primarily on cash games, or "true poker" that doesn't involve escalating blinds which invites a much higher degree of luck -- one reason why tournaments are often dominated by amateurs.

The parallels to my trading are downright scary. For I played extremely consistent after the first 30-minutes, picking my spots and making solid reads of both where my hands stood and where other players' hands stood. And I ended the day quadrupling my low stack of $70. But I did so only after putting myself in a position where I had to come from behind.

Sound eerily familiar?

Perhaps we can't surgically repair an Achilles heel, yet if we know it's there we may be able to create an effective strategy that detours around it -- even if it involves lots of hopping.

The Weekend Trader

Despite an enormous overnight thunderstorm, I finally got some good sleep last night and feel energized today. Crashed (me, not the storm) at about 7pm for about four hours, and then got seven more solid hours. Today's to-do list is simple: Transplant shrub, fix bare spots in lawn, go to the dump, and then have some fun (more on that below). Essentially, I'm going to pretty much shut down the trading brain until Sunday night.

Blog Reflections - Here are my current views on whether the blog is helping or hindering my results:

On the helpful side, yesterday's DAX posts #1 and #2 were strong examples of how talking through the market "out loud" helped me stay focused and off of the wrong side of the market. And despite initially front-running the early breakout signal and then not catching the majority of the first breakout, I was able to carve out some nice profits by (1) waiting for the first pullback, (2) catching the final short-cover spike, and perhaps most importantly - (3) NOT being on the wrong side of the subsequent cliff drop by paying more attention to the 3 Line Break signal than I might have otherwise. For example, given the extent of the DAX drop off the morning highs -- see the top chart of the second post -- there would have been many opportunities where the market "seemed" oversold and primed for a long re-entry, yet the primary signal (3LB) never went long. By commenting on "virtual" paper, I can say with conviction that doing so kept me out of what could have been a losing and frustrating situation.

This is perhaps the strongest evidence to date how the blog has helped me. And yesterday took a page right out of Dr. Steenbarger's The Psychology of Trading -- specifically page 40 that encourages traders to think out loud "as if you are delivering commentary to another person". I've said this before -- and I'll say it again -- Brett planted more seeds with those 318 pages than I could ever sow in a lifetime, and even after having read the book a few years ago, I've just now begun to truly water and fertilize those seeds that he planted. By the way, I know the specific page reference because I have no less than 24 Post-It markers sticking out of the right side of the book referencing key points. It's the most often-referenced book I have in my library. Simply put, it's a must-read for any serious trader.

Another benefit of the blog seems to be my ability to look back at past posts and draw conclusions of my own trading. For example, the word "tired" seems to occur too many times recently. So enough of that ... I'm going to stop simply talking about it and take some action, beginning with today where I'm going to do everything I can to have some fun, perhaps starting with a massage.

As far as whether the blog has hindered my trading at all, I sometimes wonder if I get distracted from market opportunities when I type during the day -- which is one reason I often type after a sequence is over except for small tidbits -- or whether it instead provides a healthy distraction to stay out of marginal opportunities. So far, I think it's been more the latter.

Another possible pitfall is that by choosing to openly share the blog with others, I may think I have to "perform" for people looking over my shoulder, a number which has grown over the last few months since I've been back "on the grid". Fortunately, I learned that hard lesson years ago when I wrote and taught for the industry, and have gotten well past any sense of needing to perform for anyone but myself. No one will ever be a greater critic of my trading but me, and my goal remains simply doing the best I can, and to leave no stone unturned in making that happen. I also continue to look forward to sharing my screw-ups along the journey ... which should instill the required humility to keep any ego in check.

Ultimately, time and the P&L will provide the most objective answer, as I compare pre-blog results with post-blog results toward the end of the year when I have a larger sample size of post-blog results. And while I won't tell people whether to trade or not, I do encourage those peeking over my shoulder if you do trade to continually seek ways to distance "yourself from yourself". Dr. Brett's seeds and a personal diary may be steps you can't afford not to pursue.

Enjoy the weekend.

Friday Notes - Removing Chips From Table

9:32am Not sure I'm going to trade ES much today ... we'll see what the charts provide. Energy level still a bit drained (got to find better ways to revitalize myself as the year is taking its toll a bit ... remember I stink at taking vacations and am also balancing this with daily non-market obligations). No doubt I could use some serious R&R this weekend, but there will be time to rest after 2pm today ... and then a long mental break at 12/31. Let's put it this way, I'm not going to force anything today (should I ever??). Jumping the gun on the DAX breakout signal was a good reminder to be patient. Going to let the market make its move first.

10:27am Ha! Fooled the market into thinking I was going away. Nailed a nice short scalp sequence on the drop off the early morning cliff, shorting 94-95 and covering 92-93 with a final teeny portion stop at 94.50. 3LB had gone short and there was immediate resistance at 96. This could break down further as that morning climb attempt was pathetic ... deja vu to the DAX?? 5-min consolidating now though so keeping it to scalps until the market provides more info. Blood seems to be flowing at this end a bit ... a good sign. Wonder where that came from ... maybe one final Friday energy push before I collapse at 2pm! Sleep? who needs sleep!!

10:40am Seas a bit choppy though ... need to be careful. So far, seems like a possible "fade the extreme" day as ES having a tough time deciding where to go.

Have had a good morning ($9K) and chip gain is at its peak for the week and WILL NOT GIVE THE MARKET BACK ITS CHIPS! Nope, can't have 'em, ain't gonna get 'em ... they're MINE. And yes, I'm a bit punchy and running on adrenaline. It will be fun to read back through this diary in January when I'm sane again. Here's a visual on performance for the week:

11:00am Maybe too quick to judge the early weakness. Keeping open mind but in major gain preservation mode and not going to anticipate breakouts. Frankly, I hope the market goes to sleep so I can join it.

11:23am zzzzzzz. Calling it a week after watching that last false breakout. Only one ES sequence traded. Need to rest up, because beginning Monday it's back to work again to dig out of yet another hole (new readers may want to check that link to see what I mean ... everyone else is probably sick of hearing it). A reminder that this is the only chart that matters:

Lots more work to do and only 138 calendar days to go. In other words, there's only one leg left of the Men's swim relay and I'm swimming the anchor leg and trailing the French with two laps to go. I need to catch him.

Friday Early Notes - DAX Part 2

Thought you'd like this picture. No need to comment as I'll let it do the talking as a follow up to my earlier post today.

'nuff said!

Also, since many have asked, here's a snapshot of my main trading screen ... in this case ES. Note the charts in the top and bottom rows are from yesterday's close (I don't show the Globex session), while the 3LB, TT price ladder, and Tick Bar charts on the second row are real-time as of 7:18am this morning. Click on pic to enlarge.



At the micro timeframe I alternate the top left chart between 1 and 2 minutes depending on the market's pace, while the 3LB chart is always 1-min.

I'm also working with my broker and TT to activate a feature that automatically logs my actual trades on a TT chart (which I used to have on another service), but we haven't gotten it to work yet. It's supposed to be part of TT's XStudy package but it seems there are a few bugs in it.

More later.

Friday Early Notes - DAX for Breakfast

4:06am Nice 1st hour breakout on the DAX with 3 Line Break a nice trigger. Note the combination of 1-min 3LB going long (6504), and a break from consolidation on volume. Jumped my signal a bit (consider wrist slapped ... I'm not a great breakout trader) but caught a piece of it and looking to buy any pullback so long as the 5-min trend stays long. Problem may be given the pace and strong break, there may not be much of a retrace, but there should be one bounce on any decent drop where stuck shorts have to cover.

There's of course no VIX to track in this session, but the feel and sense is volatility is waning substantially which bodes well for at least one reaction back up.

4:47am Textbook reaction to retest last high. Here's the 5-min follow-through:

4:52am Holding partial long "just in case" we extend. Will stop on 1 min 3LB turn.

4:56am Back to flat on stop. Maybe a push back down to the breakout top or one shake-and-bake before resuming. We've seen plenty of those in both ES and the DAX lately.

btw, my business plan does not include DAX profits as it's not my strength and main focus. That's why my strong July DAX results weren't expected. As I've said before, I find it a very difficult market to trade (often like grabbing a mosquito with tweezers) given its pace and much lower liquidity than ES. You have to nail the opportunity when presented and it's very easy to get shaken. You also HAVE to have resting exit orders in the market as it often spikes and then that's it (except on breakouts like above.) I monitor and trade it essentially to keep my head in the game and stay sharp with chart patterns. Plus, I'm not mentally very alert during the hours when Europe is trading. So my expectation is a small loss at the end of the year, with the results of my efforts reflected in improved ES trading -- which I believe has been the case over the last few years.

Another way I look at it is using it as a similar tool to an on-deck hitter who makes practice swings in the on-deck circle with a weighted bat. Then, when he steps into the batter's box, his normal bat feels light by comparison. Heck, whatever works. I only care about total bottom line on 12/31 ... doesn't matter how I get there.

5:10am Still looking for one more late Europe AM push.

5:22am Long DAX again on the 1 min turn. Path of least resistance still seems up to squeeze remaining stuck shorts. Stop is 6527. 15 min also suggests one more leg up. If we tick 6540, should run stops 10 points or so. Looking to exit on spike through 6540 if market cooperates.

5:35am Should get it. Looking for volume spike.

5:36am DING DING DING. Took partial off at 6542. Looking for 6550+ on final. Look at that volume bar.

And yes, I do keep changing the timeframe of the posted charts as I do on my own screen. Depends on what's telling the current story in terms of opportunity and trend "in play". Still looking for 6550+ on final (out most now) and sitting there waiting for panic covers and premature shorters to bail. Tapping fingers on monitor to see if it will help.

5:48am Looks like that might be it. Good example of the absolute need to have resting exit orders to capture the spikes. I caught the second highest tick on that primary exit.

5:50am Flatenning final on turn. Nice sequence. Jack be Nimble, Jack be Quick, Jack is going for a nap. More after the U.S. close and this weekend.

Thursday Notes - In Rhythm

2:23pm Not sure if it's me, the market, or both, but I seem to be in fairly decent sync with the markets today. Not a home run day, but good consistency. Got off to a better start this time in the DAX, which has transferred well to ES. Primary bias at this end has been long once I let the first 30-60 minutes play out -- I essentially gave up potential early profits to see the market tip its hand more. Sort of like not betting until the turn. Several solid pullback opportunities ES on the 5-min climb, although that bias is weakening heading into the final 90 minutes.

Going into early gain preservation mode a bit early here as my conviction has lessened. $7K thus far and earned much easier than yesterday. One complaint I may have is my continuing August contract sizing issue, as I remain reluctant to trade very heavy in the whipsawing market and am still playing more defense than offense. Still though, a solid read day which I seem to have sleepwalked through a bit. That in itself can be dangerous and I continue to be concerned about possible complacency.

3:31pm Tried a couple of ES scalps on the 2:46pm breakdown, but frankly am tired and not very focused. Calling it a day. Held onto gains which is a plus. Solid reads and good early decision to let the market tip its hand both on target. Continued concern about complacency though heading into Friday.

Boring blog today ... so be it :-). Poker night tonight and I'll blab a bit more over the weekend.

Wednesday Notes - Tale of Two Markets

12:03pm I don't know why, but I tend to trade better when mad. After botching an overnight opportunity in the DAX on its late-day breakdown out of consolidation prior to the U.S. open, I got pissed and have finally got back in lockstep with the U.S. market. I guess it's how I'm wired and why the fictitious draw programming works for me (that is, when I actually believe it ... which is becoming an issue I'm struggling with).

15- and 30-minute has initial resistance above in the mid 1280s, and I'd like to either buy the next leg down or fade a clear retracement with some size. Just a matter of the market cooperating before and after! Not much to ask, is it?

I almost did a late night blog entry last night as I was thinking out loud trying to figure out if I've gotten complacent in these late dog days of summer in terms of reduced size and interest at times, or if my size management has actually done a decent job of keeping me out of trouble -- and if so, I'm simply beating myself up over nothing. I decided to instead get a good night's sleep after figuring that time would provide the answers ... time in the context of a few more trading sessions before I jumped to any conclusions. Plus, I was tired from watching the 36 runs in the Red Sox - Rangers game!

I sometimes think back to Herb Brooks' constant encouragement to his team during the 1980 Miracle On Ice run ... "Play Your Game" (when he wasn't cursing at them). Those words ring very true to me any time I feel unsettled, and I'm relying on them strongly as this summer nears an end and days of treading water run together. My game? Chip away at the market providing some liquidity day after day -- sometimes marking time -- until such time I feel I'm locked into an opportunity at which point the defense comes off the field and the offense finally lets loose. Right now, the defense looks tired and is screaming at the coach saying they want to come out of the game. And the offense is taking off their warmups.

12:42 Want to begin establishing a short position if ES gets to 1283 with a preferred position closer to 1285-86. Been nibbling on the short side on this midday climb, but keeping size light and holding time tight (even for me).

1:16pm Longs have some work to do as we're back below Friday's breakout for now.

1:28pm Shorted partial 1282 in case that's all she wrote. Will let it run against me; managing risk with size. Can run to the 30/60 min (1286-88) and still sustain downtrend.

1:32pm Added small 84.75.

1:48pm Right read on expected squeeze; wrong read on extent. Did some dancing on size mgt and re-entries. Flat now and looking for possible reentry on any divergences with 30/60 min at back.

2:04pm Reestablishing short position 88.00. Prefer to see 1 min turn now to add. Hard stop at 90.00. Will take it out on TICK drop.

2:11pm Dive little TICK, dive.

2:12pm Flat best cover 86.25. Didn't add ... traded what I had. Too much action to memorialize all activity, but think I captured the gist of it. Just missed a clean reversal long at 1:50pm as I was scratching the short sequence on the drop and had bids in below to reverse. Want a mulligan on that one. Very fertile ES scalping market on overreactions. Reassessing charts now as we have multiple timeframe ping-pong going on.

2:25pm Quick self-assessment. Decent size management ... a good reminder that risk can be managed by size, stops, or both. Never had full size on and had a fairly loose leash on initial short probes. Seems I ended up essentially flat on the sequences. A reminder if you're looking over my shoulder that I do fade immediate moves at times to provide liquidity ... but have seat belts and airbags at my disposal. I prefer to trade with the 1-min trend, yet sometimes I'll put some probe bets on, expecting the market to run against me initially.

2:34pm Still kicking myself over that 1:50pm reversal pitch over the heart of the plate that I just missed. Good battle of a strong 5-min uptrend banging up against 30- & 60-min resistance. Not too interested for reentering right now as they battle it out, and less interested in shorting.

3:01pm Tale of two intraday trends with equal opportunity ... trend shorts win in the A.M.; trend longs early P.M.; overreaction longs A.M.; overreaction shorts & longs P.M. Trader flexibility critical today as in not getting locked into changing biases. Personally, I think it's tough to clean up on both sides ... probably better to stay out of trouble on one. Did pretty well here on the shift at least by staying off the short trend bias as the day went on. Potential longer-term triangle as we now bounce around a bit, but decent wholesale opportunities within the larger range with good pace. Also a good day showing why moving averages only relevant when used in combo with momementum & strength indicators.

3:04pm Gain preservation mode.

3:45pm Clipped a couple of stretched bungee scalps to end the day. Decent comeback from the early DAX mess to end +$9K with a solid ES showing. Missed enough opportunities and was still wrong enough though to have plenty to work on tomorrow ... not a bad combo.

140 days to go.

Tuesday Notes - Trendless Action

12:41pm Been a pretty trendless morning. Main trade attempt thus far was taking a shot one of the early post-10am attempts for the hourly to turn back up but stopped out at 10:19am at 1299.75. Turned out to be a decent stop, but did result in starting the day with a larger draw than I'd prefer. Been doing some light scalping since then to cut it somewhat. 5 min & 15 min ranges tightening up quite a bit, so looking for possible afternoon breakout action. My guess is up based on the hourly, but tough to trade on a guess as lesser timeframes need to tip their hands on some volume.

btw, just responded to a request to post expandable charts ... I'll look into it, yet please keep in mind this is simply my personal trading diary and I'm not too focused on infrastructure :-). 99.999% of my focus has to be on trading and December 31. Essentially, if you're looking over my shoulder, consider it looking at my scribble pad.

1:23pm Perhaps it's down we go? VIX suggesting a possible price thrust down. Sitting on sidelines.

1:28pm Short ES at 9650; Stop 9800; Size modest.

1:35pm Best cover so far 9550; Holding small free-ride now with same 9800 stop. Sitting at 9375 in case Wile E Coyote visits with his anvil.

1:44pm Scratched rest of sequence ... market didn't react fast enough and too many timeframe trend conflicts. Was worth throwing some chips at pockets 9s though.

2:05pm Shaken and stirred a bit on that one. No market pace to speak of. Very "chippy" rhythm. No trades now unless a clear break. Very easy to get sucked into whipsaws.

2:44pm Closing the books on a modest ($4K) draw as I head into a 3pm meeting. Not too interested in much more slop. They could run it in the last hour again, and that would be fine to set up the A.M. OK with today's management and the cost of antes. Could have been a lot worse in this chop. September will here soon enough.

Monday Notes - Changing Rhythms

1:20pm Admittedly, it took me a bit to get the blood pumping today on the heels of a family event from which I returned late last night. Got some of the initial pop off Friday's supports, but have been watching the rest of this climb. Finally felt confident about putting some size on this midday pullback to 5-min support. Here's a nice pic ... I'm currently long and will take it out into any pop with a stop on the 1-min 3 Line Break (bottom chart) reversal. Faded into long best price 1307.50 and added on the 1-min turn. Very high probability, but as Forrest Gump would say ... "market is as market does." VIX 15-min looking to continue its downtrend ... which also suggests price bounce.

1:25pm Taking it out into the pop. Looking for 1310+ on final exit.

1:32pm Flat. Nice set-up and pace. Took the high-probability reaction. It can run to the moon now for all I care. Here's the 15-min VIX after the bounce (didn't have time to capture during the trade but saw it). Note how it pulled back to downtrend support and then continued its push.

1:37pm Yea, yea, yea, I know ES ticked 1313+ and 1310 now looking like a stupid exit. Then again, other days it would be the peak and I'd look like a genius. Neither of course would be right ... I want the high probability move and don't like to gamble! Had OK size on, but could have added a bit more on the turn to take out into any extreme pop. Steady as she goes Don ... step by step, day by day. Eyes on December 31 only.

1:50pm Heading into income preservation mode. $7K on the day and a good start to the week (btw, all figures quoted are NET of commission expense). Gotta be a helluva pullback entry now toward 15-min support as 5-min high probability move has already played out.

1:59pm Would love a cliff drop toward 1305 ... might have some late-to-the-party stuck longs bailing. But has to be a premium hand only. Might do some light wholesale scalping on any drop as volatility picking up a tad.

3:10pm OK, earlier exits looking better ... too funny. Scrambled a bit on the drop which did come in all the way to the top of the A.M. breakout range. ES only overshot my 1:59pm wishlist by 5 points! 3 Line Break continuing to be a great stay-out-of-trouble guide as it never went long on that full retrace. Picked up a few extra $ on the drop, but picking optimal wholesale entries a bit tough. Hate it when the whole world sees and wants the same thing!!

3:21pm Definitely got some stuck longs on that earlier blow-off top. Nice market rhythm though today with lots of mini-trends in play. Did OK and nudged day's chip increase up to $8,400, but it won't be hard to find some things I didn't like about my trading today. Size management may be one, and perhaps a bit too cautious in the P.M. Also been a while since I've had a five-figure day ... need to put my finger on that. Maybe size management again.

Will need to do better.

The Weekend Trader

This Week's Trade - Quite a market dance this week as the band kept alternating from Waltz to Disco to Classical and then the Mamba. Seemed just when traders got comfortable with one, the song changed. Talk about needing to stay on your toes. Then again, I suppose if this were easy, we'd have a staff of monkeys and would be lying on the beach listening to far better music.

Early Bird Gets the Worm - Repeating one of Friday's comments, it was interesting that both the ES and DAX markets did provide early pullback shorts and follow-through from Thursday's late-day range breaks ... with emphasis on early as in their overnight sessions. ES indeed dropped 12 points (1274 to 1262) off its overnight high before the moonshot. Guess the final short-term ES barf happened for the most part in the lower liquid Globex session.

Trader Imperfection - One of the things I tried to stress when I traded live for teaching or demo purposes was that I wanted people to see firsthand the significant number of imperfections in my own trading. Let's face it, name the last day -- or any day -- where you optimized entry point, contract size, and holding time on every opportunity presented. It never happens. Yet in my view, the perception of required precision was one of the greatest negative side effects resulting from the unregulated chatrooms and trade callers over the last decade. For it seemed no one ever made a mistake, everyone posted gains which were inflated and without losses, and room gurus would find excuses every time their calls didn't work. I remember one time the leader actually left the room and hid! That was a damn shame.

I'm not sure about you, but I screw up hourly. I suboptimize size, miss ideal entry spots, get distracted, lose focus, don't let winners run enough, step away from the market right before the move, misinterpret a signal, get shaken and stirred, etc. One of these mistakes happens every hour of every day for 250 days a year. Some days, I flat out suck. And I want to be extremely careful with this next comment which I feel is necessary for shock value and which I state with all due humility -- I expect to earn fully auditable seven figures this year after expenses. But forget about the number, my point is the only way I can expect to profit is to do so by accepting my humanity and constant flow of mistakes. Let's bring out all the cliches -- you don't score if you don't shoot; a .400 hitter fails 60% of the time; it's not how many times you get hit, it's how many times you get back up; yadda, yadda, yadda.

We are imperfect beings, and that ain't going to change.

Trading Coaches - Dr. Steenbarger had a great post on Tuesday discussing trading coaches and why he never went into private practice of counseling. I faced a similar dilemma when I was asked to teach years ago during which time I found teaching trading to be one of the most challenging tasks I'd ever pursued -- more so than all the hard hits I took learning my own trading -- in part because I'd take student failures to sleep with me and ask myself if they should be doing this or if I could have taught better. And yes, many shouldn't be trading, which is a highly personal decision. And while I tried to find innovative ways to "do it right" and provide seat belts for the apprentice driver, it was frankly hard to be fully at peace. Plus, the resulting energy loss zapped focus on my own trading (which was why I was asked to teach in the first place!)

I will say I'm very much at peace now. I look back at those years knowing I did the best I could, and now feel perhaps sharing personal trading diaries can do more good ... with pimples and warts in full view as always. Who knows. I suppose we'll have all the answers in the next life.

Emerging Blog Community - I'll be out of touch most of the weekend, and will catch up on any comments on Monday. Keep the dialogue coming. I do read and respond and feel we've started to build a nice little community of professional and honorable traders to support each other. It's been nice to see some old friends and make some new ones, even if it's just in writing. Perhaps some day, we'll share stories in person over a drink or two.

Enjoy the weekend.