Saturday, November 29, 2008

** VIDEO ** The Year's "Trade"

In today's video, I try to put the last two somewhat opposing posts in further perspective as I prepare for the final segment of this year's "Trade".

Enjoy the rest of your weekend.

Special Post - Finish Line Adjustments

I continue to give a great deal of thought to the coming month, especially on the heels of yesterday's initial reflections of how November ended. And frankly, I'm feeling differently about things as the sun rose this morning, and here's why.

I've long preached that I view each day, week, month, quarter, and year as single "trades", with most emphasis on the monthly timeframes and above. So here we are at the end of the most important trading timeframe -- the year -- which in the overall scheme of things is the only one that matters.

As such, the more I look back at my trading towards the end of November, the more I believe my inner clock may have taken over in terms of activating an internal defensive mechanism similar to that which often kicks in for me during the last hour of the day's "trade", the last day of the month's "trade", and the last week of a quarter's "trade".

The best analogy I can provide is that I feel it's 3:30pm at the end of the day's trade. Most of the work is over, the day's mission was accomplished, my focus is drained, and I'm not looking to press my capital during a time when my focus and interest may not be at their best. And as a result, I often scale sizes back and play defense. When I don't -- and this blog is littered with last hour sub par performances -- it's reflected in the P&L.

Well, it's now 3:30pm of the "year". Most of the work is over, the year's mission was accomplished, my focus is drained, and I'm not looking to press my capital during a time when my focus and interest may not be at their best (yes, that's the exact same sentence except for one word).

Yes, this is a major shift for me. Yet I've pushed myself harder than I ever have for 334 days and it's now showing. The focus and energy level aren't there ... that's crystal clear in the posts and results of the last couple of weeks. And as a result, I believe there's strong risk of losing focus at a critical time, and even stronger risk that I won't have the needed energy or the time for another comeback should it happen.

You may recall that as the third quarter drew to a close two months ago, I chose to raise the bar beyond the initial $1 Million target to $1.25 Million. Then October provided seasoned traders with a gift of historic volatility during which time I was able to floor the accelerator. The result was a month that exceeded many previous annual tallies, which also made the setting of any further targets a futile exercise. And finally November had just enough carryover momentum from October -- both in terms of the market's volatility and performance at this end -- to shoot the Bamboo even higher.

So there it is. Most of the work has been completed. Most of the remaining work -- to the extent I choose to participate -- will definitely be over by Christmas. It's very possible that over the next month that I'll sacrifice some profit potential as I often do at the end of the day. Yet as is the case during those times, I know the next day will be here soon enough where we get to start all over again with a renewed focus and plan.

It's 3:30pm and time to act accordingly.

Look for a video shortly.

Friday, November 28, 2008

Friday Notes - Warning Signs

1:15pm Well, this week may go down as the 20th consecutive winner (marginally at +$17K with daily chip scores of +$9K, -$1K, +$10K, -$2K, +$1K), HOWEVER there are glaring warning signs heading into the final month that I need to address if I'm to finish this race the way I intended to. Two "must address" items that come to mind are (1) intensity that I'd grade a 2 on a scale of 1 to 10 (10 being the strongest), and (2) hesitancy such that for the first time all year, I'd frankly describe my trading as "playing not to lose".

Now part of this may reflect a slow Holiday trading week, exacerbated by the reduced volatility to which I'm still getting accustomed. Yet there are clearly many symptoms of something larger going on, including too many scratched trades on good entries that simply take more time to develop, losing focus during "lull before the storm" periods, "sleeping in" until well after the Europe open, trading sizes as if I had 10% the capital I do, and taking lower probability second entries rather than pouncing on the first.

It's frankly the largest struggle I've had with myself all year, including those few days of large draws (at least I was aggressive during those times ... and this type of treading water trading bothers me more than any real financial loss). Sure, the rhythm has changed and I may be trying to dance the waltz with a Mamba beat. But our job is to continually recognize the conditions and adjust accordingly, and I haven't done that very well.

I'm not even going to address the attached monthly equity chart, except to note the topping pattern at the end of November which is similar to the closes of March, April, and July.

Part of what's happening may very well be psychological, as word has apparently spread in the industry (through none of my own doing aside from openly sharing this diary) of what I'm on pace to accomplish this year. It all started a few weeks ago when my broker sent me an email congratulating me on breaking a certain unmentioned equity mark -- which I of course committed myself to not looking at until December 31 (argggghhh!). Then Larry Connors sent his congrats. Then the interview requests began, one of which I finally granted for an old friend last week.

I suppose this was one risk of doing the live blog play-by-play. And it's not the pressure, as I've been in the public eye over much of the last decade and typically thrive under increased scrutiny. Rather, it's trying to block out everything that's happened this year and simply focus on the here and now.

The point is January through November is now irrelevant, and December is the only month that matters. One month. 22 daily hands to be dealt. And then and only then will it be time to officially end the race and look at the score. And even after that, I'll still just be one trader whose only mission this year was to get closer to reaching his fullest potential as I figure out what to do in 2009.

We all know what happened to the Patriots in last year's Super Bowl. All it took was one brief loss of defensive focus and a Hail Mary helmet catch to go from 18-0 to a roadkill footnote. We also know the story of Archie Karas who went from +$40 Million to nothing due to sheer greed and a downward spiral that began so innocently, yet from which he could never recover. Most of the temporary internet bubble stock millionaires lost all of their gains, with many losing much more as they continued to double down at perceived "bargain prices" on the way down to zero. The list is long.

And so the job isn't yet done. For the final time this year, it's time to dig out of one last hole, and if I keep making the same recent mistakes, I'll find I'm throwing dirt back on myself.

We're close. But close only counts in horseshoes and hand grenades.

Monday begins the sprint to the finish.

Look for a video over the weekend.

Thursday, November 27, 2008

Thursday Notes - Europe A.M. After Trend

11:30am Non-U.S. markets are of course open today, with Europe putting in classic morning-after-trend oscillations, with Wednesday's late day range holding firm to both the south and north.

Unfortunately, I got up a bit late to take advantage of it and wasn't particularly motivated today, which was reflected in the morning's -$2K scratch as I continue to get used to the pace of FESX (Euro Stoxx).

It's clear that I haven't quite gotten it down yet and am far too tentative with it. Ironically, I was actually slightly positive on both S&P and DAX trades today, so I'm continuing to consider the modest FESX trading losses an investment in the future.

So long as it doesn't get out of hand, I'm comfortable with that.

Wednesday, November 26, 2008

Wednesday Notes - A TICK Tutorial

10:15am Going to do some in-depth intraday note taking today to try to maintain a sharper focus throughout the day. Not looking for a home run chip gain day on this pre-holiday trade, but do want an "A" grade on focus by the end of the day.

Got a decent night's sleep and nibbled on Europe's 7:30am ET breakdown via short pullbacks. The U.S. open has been tricky as there have been no clear patterns, and I've been highly reluctant to short for anything other than quick brief resistance scalps given the VIX is downtrending, and have been taking sure, tight clips on any entries thus far to try to get a rhythm going.

10:26am TICK strong so far ... spending more time above zero than below and stronger pushes to the upside. Clean long entries a bit tough, although staying away from shorts has been smart ... so far, that is. ES been clearly rejecting lower prices since early Friday afternoon and I have to respect that. We're also trading completely within Friday's late afternoon range, so all trades are scalps only.

I'd really like just one or two clean shots if the market can get its juices flowing either way today and simply sit out the rest of the time in a highly focused state. Simply put, I want to be highly selective today, and volume could slow to a crawl later heading into the holiday.

10:36am Shaping out to be one of the grind-it-out days. Apparently not many "stuck" traders on either side to fuel a fire one way or the other.

10:44am Imagining I'm sitting at the cash poker game ... fold, fold, fold, fold. Starting to wonder if there's even a face card in the deck. Both 5-min & 15-min ADXs exactly at 12.11 ... gotta be some kind of numerical oddity. Certainly no help there.

Very much a range trade, which is clearly not my strength. Even 1st pullbacks on attempted 1 or 5 min trends are somewhat risky. Of course the longer we coil, the harder the eventual break.

One thing is certain. If I can get the day's chip gain over +$10K, I'm putting a major trailing earnings stop in place for the day. While I don't normally care to focus on the day's #s like that, seems appropriate today for a number of reasons.

10:54am 7-point ES surge out of the flat line. Buying the next TICK pullback.

10:56am Nice, caught 855.25 ... best exit 857.75 and took it out into the climb. Small size.10:58am Ditto 856.00 to 857.75. Will post chart shortly. Micro scalping with small sizes ... not much market depth right now. Path of least resistance up for now but taking high-probability clips. Still inside Tuesday afternoon's range, but 5-min giving it a try. Just doesn't seem like there's enough volume for a strong push though. Europe did something similar after its open, and then imploded after catching long breakout traders on the wrong side.

11:04am ES 5-point plunge ... good reads and decisions. Here are the charts (click to enlarge) of the 1-min ES and 1-min TICK blown up to highlight the micro-scalping. The entry points are the blue circles on both price and TICK. Note the TICK retracements after the price break. 5-min could still extend, but we're still within a larger range and if it does, there should either be another pullback on a higher timeframe or extreme price to scalp short again.

11:11am ES next thrust up approaching top of Tuesday afternoon's range. TICK pullbacks remaining the best entry points so far. 1-min 3LB also long for now. Have to continue to respect the market micro-strength (in this day and age, we'll define "strength" as lack of weakness!) as well as the current range. Still not interested in longer term shorts.

11:18am ES still not able to break its Tuesday PM high of 864.25.

11:21am Until now ... by a single tick. Lower TICK reading on that last surge though ... that might be it.

11:24am TICK reading lower again on this push and stretched from 5-min support ... scalp shorted for 0.75 but expecting a deeper retracement. Will buy any push toward 856 ... the closer to 856 the better.

11:30am ES pulling down ... 4 points off high. Been purposely leaving some meat on the table, as I'm going for prime center cuts only. I'll let the other players at the "table" gamble.

11:49m TICK pullbacks still the prime entries and TICK holding solidly above zero. Doing light scalping & scratching as I get a bit more active. 5-min ADX back over 20. Granting my first national interview in almost four years at noon, so I'll need to step away for about 30 mins ... more on that at a later time. Hopefully, it won't be the kiss of death.

12:55pm Back. Slow grind up, but don't think I'd have entered anyway. Volatility slow grind down. No trader emotional extremes to benefit from and definitely a pre-holiday non-existent pace so far.

1:10pm Trend mode up off open so far ... one of those days where on the surface, pros taking sure profits look foolish as reentries are tough. Such is life.

1:51pm There's an old trader adage ... if you have to squint, pass. I'm squinting. You can't get blood from a stone. Volume dying as expected.

2:00pm zzzzzzzzzzz. Let's see if the 2pm express shows up.

2:17pm Market still rejecting lower price probes. Strength still there.

2:20pm Long 868.25 on TICK pullback after last break up ... should pop.

2:22pm Sweet ... took it out into +1230 TICK toward 871.00. Similar sequence to earlier in day.

2:30pm And again ... 870.00 to 872.00. TICK gets the indicator of the day award, with an assist from the VIX.

2:33pm Nice pop through high of day. Shorts getting squeezed. Might be one more good pullback. Finally some emotion in the charts. (Just takes one group to be hurting, and 'twas the shorts this time.) We have pace!

2:37pm Sitting at 872.50.

2:39pm Took small at 874.00 already out on pop. Want to buy any further thrust down harder. Here kitty, kitty.

Trailing stop on day chip gain now in effect.

2:45pm You're sometimes damned if you do, damned if you don't on waiting for deeper retracement entries. Might still get one more though ... day's not done yet. Will respect the day's trailing stop though and not get caught in any last 30-min whipsaws which has often been the norm.

3:02pm TICK still a horse. In watch mode.

3:11pm VIX still sustaining a 15-min downtrend and now "down" to 55. Almost a 30 point drop in 4 days. Shorts the ones now feeling some pain, although 2008 longs have more than a few legs up on them in that department.

3:27pm No trades but fervently watching.

3:35pm Tried teeny short probe on possible double-top and scratched almost immediately for -0.50. Small size and still respecting the trailing stop.

3:47pm OK, that's a wrap. Stuck a few toes in toward the end, but pretty much watched the close. Locking the gain in at a little over +$10K.

As expected, a very modest P&L day by recent standards and sizing was perhaps too light (will have to watch that if volatility continues to implode), but grading an A for solid focus and market reads, for not looking to short on this pre-holiday strength trade, and for the discipline in respecting the trailing stop during the late trade. Trend days from start to finish are always tough for frequent traders as re-entries can be few and far between, but I'm not going to complain. We'll give this day to the swing longs and investors.

Blog onlookers may want to print today's post and charts as the TICK provided some stellar real-time lessons, and I tried to capture some of them in the charts.

Europe is of course open tomorrow and the U.S. is open for 1/2 day on Friday, but I don't expect to trade much, if at all. I'll post throughout the holiday weekend though and include the November wrap and most likely a video.

In the meantime, I wish you and your families a wonderful Thanksgiving.

Tuesday, November 25, 2008

Tuesday Notes - Brutal Pace

4:18pm Some days you're the bug ... others the windshield. Today was a bit of both for me as it took me forever to get used to a market pace that I can only define as brutal. If you did well today, hats off to ya. It wasn't until late afternoon where I finally hit some resemblance of a stride, and only after looking back at my trading over the last 2 1/2 days and getting really pi$$ed off.

I was actually wondering when I'd feel that fire again ... which had been noticeably absent since mid-week last week.

The result was essentially a scratch on the day (-$687 after commish to be exact ... not even worth mentioning), but it was a helluva rebound from an early -$18K deficit due in part to some of the worst trading I've done in a while in the Europe and early U.S. session (yea, I know, I know ... no need to say anything) where I kept misfiring.

It's unfortunate that the best morning-after-trend-day action actually occured before Monday's close with the large whipsaws. Nevertheless, there were a few decent early oscillations today, although I again couldn't seem to align myself with the pace.

Hopefully, it's a good sign that I finally got peeved about my performance over the last few days. I can't put my finger on the reason for the sub par performance, but as I said above, I just haven't felt the "fire" in the belly and may need to get creative again to light the fuse.

Monday, November 24, 2008

Monday Notes - Transition Day

4:15pm Short post today as my interests were split between market and non-market obligations. I kept sizes light most of the day and seemed to do an acceptable job of negotiating the transition to a strength day and staying away from non-scalp shorts (strong TICK & declining VIX all day), although I definitely could have stepped on the 3:26pm breakout accelerator harder. The result was a modest +$9K chip gain on a miniscule 584 x 2 trading.

Not particularly impressive by any stretch, but considering it was a Monday and that most of us have almost forgotten how to trade an intraday long trend bias, it's an acceptable start to the short week.

Plenty of room for improvement as always though.

Sunday, November 23, 2008

The Weekend Trader (Sunday Edition)

A few snippets to close the weekend and get ready for Monday's trade.

10,000 Hours to Mastery - In Saturday's comments to my post, Adam provided a great link to a book extract that touches on the amount of time it takes for true mastery and elite performance. Bill Gates, Bobby Fischer, Mozart, the Beatles, and elite athletes ... they all fully immersed themselves in their endeavor for about 10,000 hours before finally "making it". Applying this same data to trading, and assuming one trades 6.5 hours a day for 250 trading days a year (no vacations), that's no less than six years -- and most likely longer to account for time off and the need to sit through years of evolving markets where the rules keep changing -- of full immersion before one can expect to reach an elite level of proficiency. And that's assuming one had the capital backing to absorb the undoubtable early losses and pay for the early shrink bills. It's a great link.

What Caused Friday's Late Day Squeeze? - Fox News insists it was the leaking of Obama's emerging cabinet picks. suggested it was the fact that Citigroup began to establish a price floor. Most of you know the "why" is irrelevant. At the time, I was of course aware of neither since I don't follow news during the trading day unless price action goes completely bonkers. The fact was the market started to climb after clearly rejecting prices below 750, and broke to new momentum highs. If you're looking for "whys" or trying to interpret news before making a trading decision, you'll likely find yourself on the retail (losing) side of the trade 99% of the time.

In this current "VIX over 50" volatile environment, trading is clearly a sport where pattern recognition and reflexes are essential. And when my own reaction speed or focus is even slightly off, it shows clearly in the P&L, with emphasis on the "L".

Resetting the Focus - Yes, here we go again. I have to enter the coming week's trade believing I took a huge hit last week and feeling the pressure to perform better. Alain Bernard (I'll finally stop calling him the "French guy to my right") has regained the lead in the final relay and it's put up or shut up time.

Complacency kills in this business. You have to be hungry and want it badly. Mom's "It will be ok if you come in second ... I'll still be proud of you" won't cut it. Silver won't cut it. This is a performance sport ... period. A sport where a small group of consistently winning traders take the chips from the larger group of losing traders. Of course, none of this is new news for those who have followed the blog, and if you're thinking "Geesh, how many times are we going to read that?", then this is serving its purpose.

Forget the initial $1M goal. Forget the Q4 bonus. Industry sources tell me I now apparently have a unique opportunity to stand among the top industry performers for 2008 in a year where most have gotten hammered. But only if I don't coast to the finish. Suddenly, the Final Table has new and real meaning.

Yet years ago, the Pittsburgh Steelers made the fatal mistake of widely publicizing their Super Bowl travel plans before the AFC Championship game with the Patriots. You know the rest of the story. I can't go there. The past year, month, week, day, hour, & trade all remain irrelevant, and the future has to be earned.

90% of the work may be done, but the final 10% push will be the hardest.

Time is running out and I'm behind.

Enjoy the rest of the weekend.

Saturday, November 22, 2008

The Weekend Trader (Saturday Edition)

It's been almost five months since this great blog experiment began, and while I'll do a full evaluation of its effect when the 2008 race is over, there's certainly enough data to take a preliminary look at its impacts.

For those new to the blog, I started the blog for two primary reasons. First, I wanted to use it as an effective means to document my personal trade journal. And second, I wanted to freely share my observations and new found revelations with those who were interested in following along. So let's take a look at each.

Personal Trading Journal - I have no doubt that documenting my thoughts, observations, and feelings has greatly benefited my results ... although in a manner in which I didn't expect. For what I didn't realize is that as the blog viewership grew (more on that later), I felt a growing sense of accountability not only to myself, but to the growing many that were now following along on a daily basis.

It's one thing to be accountable to yourself or a higher Power, yet it's far different being accountable to literally hundreds of traders with whom you are sharing every pimple, wart, and blemish. For while it's easy to deceive oneself -- even if done unintentionally or subconsciously -- it's impossible to deceive the savvy public over the long run. And as I've said before, every comment and figure quoted is 100% accurate and auditable, and I'll continue to stake my industry reputation and CME membership on it.

Further, I've found the growing interaction via comments has also strengthened my trading. Between having completely objective observers comment on what I may not be seeing about myself and the pick-me-ups during those occasional times I get down on myself, it's not too unlike the Verizon commercial where the guy has the large network following him around.

And yes, doing the blog in the manner I've chosen has been a lot of work, especially as it's evolved well past the initial version with weekend updates, videos, and more. Yet it really hasn't been "work" as I've had a great time doing it, and have found some oddball ways to have some fun with it via the countdown clock and trading analogies to poker, sports, and movies. And it's those silly analogies that have helped me stay motivated during this year-long battle where focus can so easily slip. My favorite remains the Rocky IV posts where I accidentally slipped into Ivan Drago mode before resetting the roles the next day.

So to use a Mythbusters phrase, the myth of using a personal journal to improve one's results is "plausible".

Blog Sharing - "Freely you have received, freely give." While it's taken a lot of work, toil, and self-paid tuition as my trading has evolved throughout the last decade, I still consider myself richly blessed with the results over the years, and especially this year's bumper crop. And as I've said before, while several associates recommended I follow the the more "typical" industry road of writing a book at the end of the journey or selling some kind of subscription service, I instead purposely chose a different path -- one that would allow people to freely walk alongside me on the journey if they so chose.

And while the results of the last few months may be due in part to the market's increased volatility, I believe more than a small part of it proves the more we give without motive or expecting anything in return, the more we ultimately receive. I frankly didn't expect September's results -- which came out of nowhere. I certainly didn't expect October's.

I'm also fortunate that many now following -- and the web count shows hundreds daily -- who found there way here simply through word of mouth, the good Doctor (Brett Steenbarger), or Google searches, were familiar with me from past efforts at TradingMarkets, teaching schools, or the various magazine interviews and articles from years past. For that's rekindled many friendships and relationships that had lied dormant for a while.

I've said before that in the long run, this blog isn't about me. Yes, it's my personal trading journal and has helped me in that aspect. Yet I hope when the last word is typed -- whenever that is -- that its true value will be in the seeds it may have planted elsewhere ... even if just one takes root or takes years to sprout.

Never underestimate what we can't see, touch, or feel. In a world focused on immediate gratification and the once-almighty American dollar, perhaps if we shift our focus elsewhere, the rewards will come at a time and in a quantity that we never expected.

Enjoy the weekend.

Friday, November 21, 2008

Friday Notes - No Style Points

4:15pm Well, week #47 certainly wasn't my best effort of the year, as I felt slightly out of tune much of the time, including portions of today which was essentially a scratch until I eked out a +$7K win on the late-day short squeeze (more on that later). Yet as was the case with Tuesday's comment on Monday's trade, I could easily rank the week's net trade fairly high on my 2008 list in terms of -- to use a pitcher's analogy -- getting a "W" when I clearly didn't have my best stuff.

So somehow and in some unexplained way, I managed to grind it out and scrape together enough good performance to offset the bad for a 19th consecutive weekly chip gain. The scoresheet will show +$64K with the daily box scores of -$6K, +$21K, +24K, +18K, +$7K, but again, my "stuff" wasn't all that great at times, and that should keep me far away from any hint of overconfidence heading into the final 5 1/2 weeks. Good thing the market doesn't grade us on style points.

In terms of today, I felt the overnight Europe and early ES action was a bit rough despite a somewhat textbook ES overnight pullback toward its 15-min short trend support, with the clearest morning 1-min trigger of the day coming on the 11am ES range break and pullback (see chart; click to enlarge) which finally helped push my day's chip gain into the green.

On the other hand, a similar 2pm breakdown attempt didn't have the same follow-through, which I also took and stopped. At that point I stopped looking for short trend trades as it was clear there wasn't enough volume or interest to push the market lower.

That data -- and cost of the stop -- ended up being useful later, when stuck shorts got squeezed after 3pm and I was able to avoid the wrong side (and nibble on the right side) of it. In fact the post-3pm trade was about the best pace of the day with decent volume as the market had been coiling hard for the previous few hours.

This was also a good example of where I often feel it's easier to feel a market current if you're "swimming" in the river vs. watching it from the shore, as no one can feel a possible squeeze better than a trader who took a strong short entry which stopped.

As noted in the second chart, ES certainly didn't like trading below 750, which led to the path of least resistance being up.

One of the areas I need to watch heading into next week is that I've seem to have been forcing things a bit when the volatility dies down -- e.g. suspect breakout & pullback attempts -- as well as clipping too quickly on solid entries. Essentially I was playing CME market maker for much of the week ... not a bad thing of course, yet when there's room to run, the leash can be lengthened. So we'll work on the old patience meter over the weekend, perhaps by sitting at a cash poker game for 12 hours folding 95% of the hands until that perfect trapping hand comes to take the monster pot.

And so it's onto a short trading week next week, followed by the final December push to the finish.

In 40 days we'll finally measure the full Bamboo height and the yardstick and ladder will be ready.

Until then, much more cultivating remains.

Thursday, November 20, 2008

** VIDEO ** "Play Your Game"

Some thoughts on the continuing market plummet, today's trade, and the need to "play your game". I'll refer to the monthly SPX and VIX charts below.

Thursday Notes - Managing With My "B" Game

1:33pm For some reason, I've been a bit hesitant today on a day where I normally do well -- yet another morning-after-closing-trend day. That particular pattern just keeps coming and coming. This fall has simply provided tremendous closing trends to fuel the high-probability next morning trade.

The result has been my scratching and reentering a number of trades, and while I often do that to some extent every day for risk management, I feel I've done so much more than normal today, and as a result my transaction (commission) costs have eaten into the day's chip gain which currently stands at a rather modest +$14K. Remember all figures quoted throughout the blog are net of transaction costs. Another area where I'll grade myself rather poorly today is holding time, as my entries -- or should I say re-entries -- have been OK, but I've definitely been a bit too quick on my exits.

Which leaves me heading into the afternoon a bit frustrated, yet extremely cautious not to do anything stupid heading into the late afternoon -- a.k.a. my weaker period -- especially since I apparently didn't bring my "A" game today. Yea, I know it's impossible to bring our "A" game to every one of the 250+ trading days we have each year, but knowing that still doesn't make it any less frustrating.

I'll be surprised if we get another sustained uptrend in the afternoon as (1) some of the midday juice was supplied by the automaker off-again/on-again bailout news, and (2) we're still in a strong 60-min downtrend. If so, the salmon will definitely be swimming upstream.

2:05pm Feels weak. Shorted ES 797.50 small size on a 1 min turn; stop 800.

2:08pm Added small at 795.75.

2:10pm Nice ... covered most -- best cover so far 792.75 -- holding small on free roll for fun.

2:19pm Flattened 788.00 into extreme negative TICK. Not bad. Kept size very modest, took early sure profit, and free-rolled rest. That might be it for the day. Nudged chip gain to +$17K.

2:22pm ES now 4 pts up from final cover. Gotta feed the ducks (emotional retail traders) when they're quacking. Amazing how some markets make you look like a genius while others (hard trends) make you look so lame. I posted the chart with the entry zone circled. 1 min 3LB was also short at the time, and we were in the hourly downtrend. There might be more on the downside as the 5-min is trying to join the 60, but I'll take the high probability move and leave the longer term intraday swing trading to others. Nevertheless, the long-term trend definitely remains down, and if the 5 min continues, there might be another higher-probability pullback opportunity.

2:32pm My personal witching hour approacheth. Still sensing I've had my "B" game today and at times during parts of the week, so sticking to defense for the rest of the day. VIX turning back up & TICK looking pathetic again, but ES trading in the middle of the morning range.

2:40pm Getting tired and ES chopping around. Not a good combo. Careful Don ... keep the sizes small.

2:44pm Considered shorting this 5 min pullback but execution not sharp. 'Twas nice entry for those who got it.

2:47pm No second chances so far on that one. Right read, tired fingers. Should get one more pullback try though ... sitting at 785 to 786.

2:55pm Not bad ... got my fills and took one scratch and re-entry (yes, again), but got some of the drop with best cover 781.25. Chip gain now +$18K. Trend is down but pace sporadic. ES still trading above the morning low, which is another reason I'm clipping quickly.

3:02pm ES 10 point pop. From fool to genius in 2 minutes ... amazing.

We'll close it down here to make sure I don't go back to "fool". Banking the day's gain and going to search for my "A" game tonight.

Any closing trend sets up -- well, you get the idea by now.

Thinking about doing a video later tonight ... stay tuned.

Wednesday, November 19, 2008

Wednesday Notes - Productive Morning

4:11pm There's no doubt I'm a morning trader. For that's when I'm at my sharpest and the pattern follow-through from the prior day is most in play. Such was the case today as yet another textbook "morning after trend" setup handed us some early gift long biases with the attached 5-min chart as our guide.

The market was actually kind today, as it gave those of us looking for a more conservative entry (vs. a blind 9:30am entry which I hate) a solid entry opportunity on the first pullback -- with a 1-min continuation trigger to boot. It doesn't get much better than that. And once the high-probability trade played out (approaching Tuesday's closing high), it was simply back to wait mode to let the market tip its hand -- which it did with a nicely paced 5-min downtrend into the noon hour.

At this end, I matched the market pretty much step by step throughout the morning session, and was able to grow the chip stack +$24K by lunch (on a highly efficient 650 x 2 trading, and I can't remember a stop), with much of the meat coming from shorting late morning pullbacks toward the 5-min trend line ... and with some conviction.

From there, the afternoon was pretty much a scratch for me as ES did its best to frustrate traders trying to (1) short the 820 breakdown, and (2) play for an afternoon short squeeze which only ended up being a cruel fake. I nibbled on both at times with very small size, but wasn't too interested as I felt both were too obvious and would likely chop heavily as is often the case when the whole world is looking for the same thing.

So I essentially kept the morning gains in tact ending the day as I did the morning ... just under +$24K on 753 x 2 trading (for newbies, that's 753 total contracts x 2 for a buy & sell).

I guess you could call today "going with your strengths" as I traded primarily when both the market and my pace were solid and in lock step, and sat out or traded lightly during the rest of the time.

It certainly wasn't a home run day, but I'll take the solid base hits and walks, and come back to the plate again in the morning.

Tuesday, November 18, 2008

Tuesday Notes - Skimming the Cream

3:37pm - I still didn't feel particularly focused today, and as a result kept the vast majority of my trades to what I'll call "cream skimming", which was to scalp 1-min 1st pullbacks and exhaustion extensions for ultra-quick covers. In doing so, I purposely left some $ on the table, although in the early going it seemed like 1-min 1st pullbacks only had one brief push in them anyway until the afternoon took hold. Doing so also kept me out of potential trouble.

The result was a decent, albeit unspectacular +$21K chip gain as I simply watch the rest of the day (and ES climb as I write this).

And after thinking a lot more about Monday's trade, I feel an epilogue is necessary to yesterday's post. For when this race is over on December 31 and I'm able to finally look back at the year and all the good, bad, and ugly, it will likely be Monday that I view as one of my best trading days of the year. Not the +$70K plus, or the several +$50K plus days ... but rather this one "on the surface rather insignificant" -$6K draw day. For somehow -- and I'm still not sure exactly how -- I managed to avoid the extremely choppy afternoon chart mess on the heels of a stupid & sloppy midday trade while not feeling particularly well to begin with.

I still can't describe exactly what I did or didn't do. Yet I'm convinced yesterday will clearly stand out at the end of the year.

The short-term score remains irrelevant, except in aggregation.

The eye remains on the long-term prize.

43 days to go and counting before the ball drops.

Monday, November 17, 2008

Monday Notes - "Considering ..."

3:50pm Well, considering that ...

- Today was a Monday (have I mentioned I hate them?); and

- This was one of the choppier sessions in recent memory (with an afternoon 5-min ADX that bottomed around 8!); and

- I got caught fading the ONLY move of the day which didn't immediately turn (the 11:30am - noon run) with size; and

- I went for the post-2pm breakout attempt (which of course didn't last) hard; and

- The only real afternoon breakout didn't occur until after 3:30pm ET; and

- I was at one point down well over -$20K; and

- I never felt particularly focused or alert today ...

I suppose I should be extremely thankful that my draw was only -$6K. In fact, I'm really not sure why it wasn't a helluva lot larger, so I guess I must have done something right ... although I'm having a hard time determining what that was.

I'm also not sure who was lacking rhythm and pace more ... me or the market. And when neither is in good rhythm, that can be the recipe for utter disaster, which I actually sensed starting to happen midday when I got caught chopping wood and the tree landed on me.

Momma said there would be days like this.

Hopefully, the market and/or I will be in better rhythm tomorrow.

Best news of today is that it's over.

Saturday, November 15, 2008

** VIDEO ** Simplicity & Humility

Today I discuss the dangers of overcomplicating things in trading, using my PC upgrade experience as an example. I also touch on why I moved the "fictitious draw" chart above my performance charts in the left margin.

Enjoy the rest of your weekend.

The Weekend Trader (Saturday Edition)

A snowball at the top of a mountain turns into an avalanche that destroys a city.

An out-of-control speeding driver skids on black ice and can't stop as he slams into the car stopped in front of him.

Through 63% of the 2001 regular season, the New England Patriots were an average team with a 5-5 record before going on to win their last nine games to win the 2001 Super Bowl.

The Dow crashes 778 points in one day which sets off a wave of worldwide panic that takes months to repair.

Momentum. It's powerful and often unpredictable. Mirriam-Webster defines it as the "strength or force gained by motion or through the development of events", and it can propel one to new heights or new depths.

And while it's still not yet time to reflect on the past 10 1/2 months, it's hard not to speak to the tsunami in which I'm currently caught. You see, I really hadn't planned on doing much in November & December as the holidays began to approach and market volatility returned to more "normal" levels ... however that's defined these days.

But then the market that keeps on giving gave again on Tuesday. And again on Thursday. Emotions continue to run rampant which continues to provide the market with highly fertile soil in which this year's Chinese Bamboo is rooted.

Perhaps Thursday was the market's final blast. One enormous clap of thunder before the storm moves on. Or maybe it was just the eye in a larger storm which is only half over.

Who knows. All I know is our job is simply to react to what is happening now and continue take the other side of emotion. When others are panicking, we're there with catchers mitts. When others "have" to cover to stop the pain (been there), we're on the other side. When others are too caught in the emotion of a short-term timeframe and as a result panic out on pullbacks in larger uptrends or downtrends (been there too), we're again there to take their trade.

And emotion is all that successful traders see when they look at charts. Forgot the algorithms, spinning doji whichamacallits, and Holy Grail labels ... the charts show the actions of people and their state of mind ... and nothing more. When I'm on my game I see it ... when I'm not, I don't. Pure and simple.

Unfortunately, the only way many traders finally "get it", is having been on the painful side time after time. And yes, I lived in that neighborhood years ago and still visit it from time to time.

Yet if you can make that first turnaround, you may find momentum as powerful on your side as it seemed when it was against you.

Personally, I would love to see a forest of Bamboos being planted and cultivated in some small part through the seeds of this blog, with many trees higher than mine.

For when I look back, that would be the greatest reward of this entire journey.

I'll post a video later today ... after I get a new cam as it seems my new PC didn't like the old one.

Friday, November 14, 2008

Friday Notes - Thin Market

3:36pm Well, that's a wrap at this end on a Friday the ES market depth was pretty thin for much of the day. Apparently, yesterday's shenanigans kept many on the sidelines today (those who weren't washed out anyway), and as a result I kept sizes and holding times extremely tight throughout the session by playing liquidity-provider more than speculator ... i.e. taking orders vs. making orders. In fact, I don't think I bought the ask or sold the bid all day as it didn't take much to get wholesale fills from retail buyers & sellers.

Today was actually another mini morning-after-trend day give the extent of yesterday's late day run, although I didn't take the normal early pullback entry as ES pretty much shot up right from the open and I played it cautious early by looking for a slightly deeper post-open retracement which didn't occur.

Still, the day amounted to a very surprising +$13K on the day and I'm going out on my equity highs for the day & week simply by having traded 5-30 lots for 3-6 ticks much of the day on 962 x 2 trading. (For those new to the blog, that's 962 contracts traded with a buy and sell for each one ... and please don't try to do the math and calculate per-trade stats. As I've said before, doing so would be completely irrelevant and meaningless given a high frequency trading style where scratches, immediate reentries, and scaling in and out is the name of the game, along with low CME member transaction costs.)

I'm actually somewhat surprised at the strong pace and volatility we've had at times in this mid-November, and I seem to have retained some momentum myself from the record October. I'll of course take it along with a weekly chip count that fell just short of six figures.

The ticker to the left shows 47 days to go. But I'm not "clock-watching" or looking at the stats ... there will be time for that on December 31 when I touch the wall. Until then, it's stroke by stroke, trade by trade.

As has been said, it's the journey that's important ... not the destination. And this 2008 journey continues to open doors and windows I never imagined existed. What started out as a rather gimicky "let's buckle down for 366 days and go for the million" goal in part by making major thought process shifts in January continues to snowball into something more than I ever imagined would be possible.

Perhaps it's best that we never know our true potential ... it would ruin the surprises.

I'd just better find some things I didn't like about this week to keep it going.

That shouldn't be hard.

Look for a video and Weekend Trader updates over the weekend.

Thursday, November 13, 2008

Thursday Notes - Jack Be Nimble ...

2:16pm - 3:10pm (Various posts while not trading) Where do I start? First, I got a good night's sleep [after a bad poker beat last night ... more on that later] and woke up naturally around 5:30am completely forgetting today should be setting up as "morning after trend day". Nevertheless, both the market and I got immediately in decent oscillation mode rhythm, and I started off the day in the plus trading FESX well.

Then the U.S. market picked up where Europe left off and had its own series of textbook oscillations with some beautiful wide price swings. Shorting the first spike up and buying the first spike down -- exiting on the snapbacks -- both worked well. After the first oscillations play out, it's then typically a wait and see mode as all bets are off, and I stayed out of trouble once the ripples stopped.

Fast-forward to lunchtime when I almost made the mistake of leaving my station, but thought we might get a break one way or the other so I hung around with some hunger pangs. And of course just before 1pm, the ES bottom fell out and smashed through its October and multi-year lows. I caught a couple of barf entries, including buying 818.25 -819.50 hard on the pause which turned out to be the trade of the day which I took out into the climb.

Then it got really tricky as after ES had its initial post-panic strong reaction back up, it had minimal action back down before blowing back up north catching a lot of shorts. I definitely gave up some of the earlier profits shorting downtrend retracement moves, but thankfully I realized what was going on, took the stops, and then shorted the next post-short-covering exhaustion spike after the pass back though the 1pm break line and covered on the snapback.

From then, I scaled sizes back drastically and simply faded a few more emotional extremes into about 3:10pm with very modest success at which point I shut down for the day.

The charts clearly show stuck longs on the way down and shorts on the way back up, with both stuck groups getting hurt hard. I can see where one could easily misgauge both, and it took an extremely clear head to be nimble enough to adjust and not be one of the "squeezees". Fortunately at this end, the head stayed clear enough to grow today's chip stack by +$47K. There's no doubt the day-after-trend day continues to be my favorite ... the key of course is executing. As with golf, the weather on the course can be great, but you have to hit the shots.

3:56pm Wowzer. Shorts getting absolutely crucified on the climb. You have to be flexible in this business ... those that aren't won't only not thrive, they'll get slaugtered. Jack be nimble or Jack be dead. You also have to always be aware of multiple timeframes, as look how stretched the attached 120 minute chart was on the early afternoon drop.

And back to the comment about last night's bad beat, I came in 4th in a tournament despite having played my best poker in some time -- but taking a bad beat on the river. Here's how it played out: I had pocket Qs, and the flop came 4-5-9. I successfully trapped the guy holding Ace-9, got him to bet strong (putting me all-in which of course I didn't mind one bit), called him, and then lost to an Ace on the river. The good news was that it cut my night short, allowed me get a "full" six hours sleep (yes, in this business, that's "full"), and allowed me to stay focused much of today.

Got to grab some food now ... seems I missed lunch.

Wednesday, November 12, 2008

Wednesday Notes - Starting a Cold Engine

3:20pm Once ... just once ... I'd like to begin the day in rhythm and not have to fight my way through some early struggles. Such was the case again today as I could never find the Europe rhythm on the textbook lower high (vs. yesterday's unsustainable squeezeroo) and it wasn't until midday in the U.S. session where I finally got it in gear.

I know, I know ... some will tell me to stop trading Europe. I won't give it up ... yet ... and I don't like to lose.

Actually, I spent a lot of time -- and some tuition in the form of scratches and commissions -- today trading FESX fairly heavily to see if I could get a feel for that sucker. And based on today's results, it will definitely take some time. Yet today may not have been the greatest test as pace in the Europe session was horrendous. And as I've said before, pace is more important to me than any other market attribute. More than charts, setups, etc. One thing was certain ... I wasn't very patient with it today, and FESX definitely has its own unique rhythm unlike ES and DAX.

I posted a chart showing one of the decent ES scalp setups early this afternoon to provide some insight into actual trades. 3LB was also short at the time, and I got a decent piece of the 4+ point ES drop from what I call a bear cup & handle. There was a later subsequent drop of even more a few minutes later, but I hate second setups.

Actually, I didn't find the ES pace to be much better today ... or maybe it was just me being out of rhythm in both markets. Nevertheless, the score will read a very modest +$7K chip gain on the day, and while that's mouse you-know-whats, I'm considering much of the day an investment in the future.

Please note tonight's PalTalk session has been rescheduled due to another commitment. Sorry to move it again, but priorities call.

And congrats to Peter Eastgate, the winner of this year's WSOP, and Dennis Phillips who came in 3rd and nicely represented us "elder statesmen".

Tuesday, November 11, 2008

Tuesday Notes - Solid Afternoon

5:20pm Well, we finally got some decent pace this afternoon as ES had shorts scampering by squeezing all the way to the 60-minute trend brick wall (and just south of Monday's close) before doing the old Wile E. Coyote drop to resume the downtrend.

At this end, I did well to recognize the pre-2pm turn up and got out of the liquidity-providing game and into "short the emotional extreme" mode -- a transition I don't always make cleanly as I sometimes become of of the "squeezees". In doing so I caught several short entries along the way around the 2:02pm, 2:20pm & 2:34pm exhaustion spikes, and covering each one as the emotion subsided. Of course in doing so, I never end up holding the last one quite long enough, but either you pick the final one and hold or pick each one and clip ... I prefer the former and the financial outcome is often the same. Plus, you can never anticipate the "final" one, as it can be one, two, three, or more spikes ... and if anyone ever tells you they can, I've got some swamp land to sell you.

And yes, under the right circumstances I do short-scalp with a declining VIX -- and it indeed plummeted on the price squeeze -- as it, just like price, can become stretched as rational thinking gives way to emotion. And I love trading contra-emotion.

I was also fairly aggressive with respect to size, while taking sure profits, both of which combined to grow the day's chip stack by just over +$23K. Last night's post seemed to help, and I'll give some credit where credit is due ... to the 4th quarter awakening Celtics.

A reminder we'll open the PalTalk lounge at 6:30pm ET on Wednesday. Look for the "Don Miller Trading Lounge" in the Business & Finance/Trading room list of PalTalk for virtual drinks at 7pm ET.

Monday, November 10, 2008

Monday PM Notes - The Dreaded "C" Words

Complacency & coasting.

They're killers, and I feel them slipping back into my trading. That notion was reinforced in spades while watching tonight's Celtics game vs. Toronto, as the Celts -- the better team -- slept-walked through three quarters before getting serious and coming from 15 points down to win. Sure, they played last night and were tired. Big deal ... Toronto was in the same situation and played highly-motivated, aggressive ball for 3+ quarters.

Sounds too familiar and I need to do something about it.

October is history and irrelevant. The market is my opponent and I need to prove that I'm the better team in November.

I need to feel some pain before it becomes real.

I'm 15 points down and it's time to get serious.

Monday Notes - Fighting It

4:00pm What is it about Mondays? I was definitely fighting it a bit all day, starting with a rough Europe session where I probed for long breakouts (I hate those patterns) and was generally off my game, after which I spent most of the U.S. session clipping and clawing to get back to even. We'll call it a scratch on the day with the chip stack pretty much holding steady at $+2K.

I still never felt particularly on my game throughout the day though, and my trading was a lot worse than the score indicates. And while I don't track trade specific win/loss %, my feel is it was probably under 20%. The modest green on the day is largely the result of decent size management though, as I kept lot sizes small most of the day, and only put size on twice when ES was setting up for a couple of high probability midday downtrend extension entries ... both of which paid off.

That's where poker has definitely impacted my trading for the good this year in terms of paying the necessary blinds and antes throughout the day (you don't win if you don't play), while betting stronger when the hand and pace of the game dictate.

Still, I'll need to suck it up a bit tomorrow to put in a better performance.

Sunday, November 9, 2008

** VIDEO ** "Outspoken & Driven"

Today, I ramble a bit about often being called outspoken and driven by my industry peers -- both of which are 100% accurate -- and why "self-driven" is a critical attribute for a trader.

I also continue to put the blog in perspective for newer followers.

Enjoy the rest of your weekend.

Friday, November 7, 2008

The Weekend Trader (Blog "Index")

I thought I'd have some fun looking back at the blog, as well as help some of the newer readers by reinforcing topics I often reference, by linking to some of my favorite or more interesting posts over the last four months. So here goes.

Cornerstone - This early post discusses the "fictitious draw" visualization which is the #1 reason for my trading results this year. And while I reference this concept in many other posts, here's where I first describe it.

Missing Out on Late Day Trends - Describes using this information to prepare for the next day. Again, I often reference this concept in other posts.

Chinese Bamboo - Provides a link to a concept describing how years of work can sometimes result in a delayed, yet sudden and astonishing growth like the Chinese Bamboo tree. This year is a prime example at this end. [1-4-09 Note: Apparently, the final destination link is no longer valid. I'm looking for an alternative one.]

My 2008 Mission - Describes my 2008 goal & mission.

My Largest 2008 & Career Draw - Needs no description.

My Largest 2008 & Career Gain - Ditto.

How Poker Has Helped My Trading - Describes another reason my trading has taken off this year.

Blog Concepts - Provides some important blog perspectives.

Monthly "Chip Count" - Explains what the end-of-month chip count charts reflect (including the scorecard in the left margin).

Most "Pissed Off" - Short and sour. Followed the next day by ....

My Corniest Movie Analogy - "The Russian is Bleeding!". Followed that evening by ...

My Best "Suck it Up" - Go Rocky.

Post Market Crash Thoughts - Thoughts on a historic week.

Final Table - My personal favorite.

And a reminder that all Videos are highlighted with stars in the blog archive index to the left, and that you can use Blogger's search feature in the very top left corner of the page to search the blog for specific content.


It's often been suggested I write a book after this year's journey is over. Yet something inside me earlier this year told me it would be better and more helpful to document it "live" as it was happening to provide a more powerful impact than any book could ever provide. So consider today's post a table of contents or index of sorts for this "book in progress".

I've often looked to break new ground in the industry and cut through all the hype and BS, and tried to do so with past simulations, teaching tools, and extremely frank public columns and magazine articles. This blog -- including the recent videos -- seemed the logical next step in a dog-eat-dog industry where much of the public information is more fiction than truth, and where chatroom leaders, fund managers, analysts, columnists, and other "market observers" refuse to share the substance and results of their own trading actions ... if there indeed is any. Even the Wizard of Oz finally came out from behind the curtain.

As I've said before, you'll continue to see me buck naked here as I document the good, bad, and ugly of this incredible journey. Everything posted here is 100% truth and backed up by auditable records, and I continue to stake my industry reputation and CME membership on that.

And while this blog started out as -- and remains -- my personal diary, it's clearly evolved beyond that as the visits continue to grow and this becomes one of the wider read trading sites on the web. To that end, I'll try to keep the content informative and helpful ... keeping in mind it's only one trader's opinion and there are many ways to paint the blank trading canvas.

Perhaps truth can indeed be stranger than fiction.

Enjoy the weekend.

Friday Notes - The End is in Sight

1:00pm It's been a relatively quiet day thus far (of course every time I say that the market goes nuts), and I haven't been particularly on my game today despite the normal morning-after-trend action as I've found the pace to a bit awkward. That's my excuse anyway.

Nevertheless, the day is a plus thus far with a modest +$9K chip gain due in part to some decent 3am-5am DAX and FESX sequences shorting off yesterday's resistance, and I'm officially in the "don't do anything stupid over the next 3 hours that would cause you to stew all weekend" mode. I can tell you some horror stories from early in my career about ruined weekends, but we'll leave that for another time.

Both Europe and the U.S. hit initial resistance at yesterday's key trendlines, although as is often the case the markets didn't make it particularly easy with some headfakes which required conviction to stay in the trades. Some stops and re-entries at this end are another partial cause for the modest day's gain. There was also a nice Europe opportunity around 7am ET, but the man has to shower some time, and that's about all I'll say on that.

The hourly downtrend remains in tact for now, and all I've been doing for the last hour or so is providing light liquidity with teeny 15 lot sizes, grabbing 1/2 point here and there. On the other hand, the 5 & 15 minute charts which were power houses yesterday have been pretty useless as is usually the case on the next day. The name of the game is always finding the market's pulse, and again day 2 is often the opposite of day 1 (in part because of poor traders who try to trade day 2 like day 1 after they're ticked at missing day 1 ... thus losing on both days!)

2:55pm Going to call it quits as I still can't quite match today's rhythm and things are getting a bit wild. Nudged the count to +$10K on the day and +$42K for the week, and am taking my chips off the table.

All in all, an acceptable start to this year's final table.

7 1/2 weeks to go, which will include a couple of Holiday weeks with suspect volume and opportunity. The end of the race is in clear sight and I'm now slightly ahead of the French guy to my right and ahead of record time as we sprint for the finish. The breathing is definitely labored and I continue to run largely on momentum and adrenaline. But I have to win. I have to outrace and outsmart him over the remaining laps.

No one ever said a 52-week million dollar race would be easy, and I've discovered a new found respect along the way for every self-made millionaire that's ever made it. It's work. At lot of work. A llllotttt of work. We want it to be easy, but it never is. You have to work harder than 99.99% of everyone else and want it even harder. In prior years, I didn't have the necessary sustained fortitude. This year, I committed to no excuses. Failure remains no option.

Who'd have thunk a 47-year old would be leading the race at this point.

But it's not over yet.

Not for another 7 1/2 weeks.

Thursday, November 6, 2008

Thursday Notes - Monster Trends

3:11pm - OK, I've ordered my PC from Dell which should be here in about a week. I went that route as my TT trading platform runs on XP and Dell still provides that option. So I'm on my backup system.

Having said that, today was a monster trend day with the 5 & 15 minute trends in perfect play. I mean you rarely see both timeframes in almost perfect formation as noted in the posted charts (click to enlarge). At this end, I focused on contra-trend emotional extreme entries for the most part, and exiting on the snapbacks and put in a pretty decent day to grow the chip stack by a little over +$26K with the proceeds spilt about equally between Europe and U.S. markets. Eric: +$9K USD equivalent from FESX as I get used to that rhythm.

Which brings up three points. First, many years ago I would have gotten hammered on a day like today by doubling down on fades or going for reversals and stopping a hundred times (like many traders did today which results in the monster trend ... duh!). The key though if entering long on the four hour trend-a-thon is knowing such entries are only extreme contra-trend scalps with exits back toward trend support, and managing the trade and expectations accordingly. They are not intended to be trend reversal entries. I like these entries because trends rarely last as long as they did this morning -- and thus trend pullbacks grow more risky the longer the trend lasts -- and they're usually either profitable scalps or a bonus reversal entry on the latter ones.

Second, the blue and red lines on my charts reflect 15 & 20 period moving averages. Many have asked me over the years which is right? Duhhh, there's no such thing. The key is to have something that provides a reasonable view of trends. MAs, 3 Line Break, ADX ... they're all simply trying to provide a general backdrop in terms of trend action. Precision kills in this business. I simply like to view both as sometimes there are probes beyond the 15MA and it's easier to see the "trust trend until broken" principle with multiple lines.

Third, today again confirms that "stuff happens" in this business, and we simply move on. As I mentioned yesterday, Wednesday morning was a mini-horror show for me. I was off my game much of the morning, which then got worse when I lost my station when I was long about 15 DAX and 30 FESX right before support gave way. And no, I don't use auto-stops ... they're all manual as I again prefer to manage risk via size and manual stops using judgement. The point is we just move on. We don't fret, we don't curse (OK, I broke that one big-time, so let's forget about that one), we don't blame anyone, and we don't stop trading ... we simply keep moving. And to that point, I encourage you to re-read the red paragraph in Friday's post.

3:33pm Banking the chip gain and not even thinking about placing another trade. Will watch the market into close to set up the morning.

One thing I do know is that I'll need to catch up on my sleep this weekend big-time. Yet with Europe providing ample opportunity, you have to fish when they're biting.

Oh yea, almost forgot about the VIX chart ... not a bad indicator either. If you see longs for anything other than contra-trend scalps, you're looking at something else. Check out Tuesday's video for more on that.

Wednesday, November 5, 2008

Wednesday Notes - A Beautiful Draw

That's right. I'll sleep extremely well tonight with today's -$13K draw. Seems my old reliable trading station decided to blow a gasket right in the middle of a major trade in the Europe session where I was a bit early on the 60-min retracement, and I spent most of today clawing back from an early abyss.

Bottom line is it could have been (and was) a helluva lot worse, but I had a very strong performance in the afternoon U.S. session once the 5 and 15-minute trends kicked into gear, with the majority of profits coming on shorting pullbacks heavily.

As they say, stuff happens. No biggie and I'm going shopping for a new PC tonight. (So no PalTalk session while I sort things out.)

Tuesday, November 4, 2008

** VIDEO ** Poker, VIX & Mkt Rhythms

On this election night, I discuss some of my thoughts on how poker has strengthened my trading, the tremendous power of the VIX, and the market's evolving rhythms.

Tuesday Notes - A New Game?

1:47pm Just as we expected, there's a new game in town for the moment in terms of rhythm, pace, and price action. It's admittedly taking my eye some getting used to as the days of minute-by-minute emotional price spikes have subsided for the time being. Yet the VIX continues to provide a strong backdrop in terms of rhythm expectations, and I've done fairly well in seeing it and adapting -- although I need to keep an eye on my sizes which I haven't adjusted much from the past few months which is resulting in some profit suboptimization.

Many of the best patterns and pace came in the Europe session in terms of breaking Monday's logjam to the north, with several tradable pullbacks along the way. I found the U.S. gap up a bit tougher to trade, and as a result, about 1/2 of the day's +$12K chip gain has come from the DAX and FESX.

I again stress to myself and those looking over my shoulder that so long as volatility is subdued, I do not expect the $30K-$50K days of the past few months, simply because my trading style is more suited to volatile markets where trader emotions are at their peak. And while sizes can be adjusted to accomodate the changing winds, I'll be perfectly content with performance of the earlier months of 2008.

I've posted the 3am-6am (U.S. Eastern Time) DAX chart, which I suppose could be entitled "Anatomy of a U.S. Gap", or "While You Were Sleeping. Fortunately, we trade in a 24 by 5 global marketplace where there's no such thing as a "gap up or down". At this end, I was up around 4:30am and traded the patterns OK, although I left more on the table than I would have liked.

2:04pm VIX trying to cross up on the 15-min, and we're also stretched on the 60-min chart, so anything goes heading into the afternoon and there's the possibility this respite was short-lived, but time will tell.

2:19pm That's a bit more like it in terms of my preferred rhythm. Gotta love it when that 15-min VIX crosses to the north. Picked up a few extreme emotional scalps. (If only I could read other poker players as well.) Chip count now approaching +$13K.

Approaching my witching hour in terms of less-than-stellar results (much like my late night poker performance), so going into major gain preservation mode for the rest of the day.

2:29pm 992ish holding as interim support ... scalped a few longs off that. Got some "ping-pong" trade patterns here as short-term trends (1 & 5) are down and long-term trends (30 & 60) are up, so anything other than scalps questionable. Chip count now over $15K, and given the trend conflicts, that may be it for me.

3:00pm Calling it a day. I don't care to flip a coin heading into the last hour. Any run should set up the morning trade.

Monday, November 3, 2008

Monday Notes - Little Interest

3:10pm Simple post today. Little volume + little pace = little interest at this end. Volume has been incredibly light on this pre-election day Monday, and my primary goal today was to simply keep moving, albeit lightly. To that end, I've begun digging my way to the 11/30 surface with a baby step +3.5K chip gain, and am closing it down for the day.

As I said at the end of October, I'm not expecting the windfalls and volatility of the last few months, and it will undoubtedly take some time to adjust to the new rhythms and adjust my sizes and trade frequency accordingly. Fortunately, results of the last few months have bought me time (remember, that's the only thing trading profits/losses do ... allow us to gain or lose time) to either get used to the new rhythm or sit out if I simply choose to keep things light for a while. Such is the benefit of maximizing opportunity when volatility presented itself, which certainly makes it easier to sit out non-moving markets.

I imagine there may be some who appreciate the lull in volatility, and who may actually be able to trade these markets easier than the Sept/Oct monsters. For them, it may be their turn to shine now. At this end, I'll sit back a bit until we get at least some improvement in volume and pace before getting too interested in getting back into high gear.

As I mentioned last week, my main goals for these final two months are incremental gains balanced with chip protection. To that end, I'm satisfied with today's very modest "first hand" of the final table as I get a feel for the new game.

Sunday, November 2, 2008

The Weekend Trader (Mohegan Sun Edition)

I suppose what goes around comes around, as I got back all of Saturday's Foxwoods loss and more by winning a $1K pot at Mohegan Sun with my quad Jacks beating out an Ace-High flush.

I was admittedly a bit lucky -- just as I was "unlucky" last night at Foxwoods, as here's how the hand played out:

I had pocket Jacks, raised to $12 pre-flop (we're playing $1/$2 no-limit Hold 'em), and got six callers ... to my chagrin. The flop came J, 8, 5 ... all diamonds. I checked, as did the guy with the flopped flush (of course I didn't know it at the time), and then one guy bet $25 (there's about $90 in the pot by then). I then raised to $150, not wanting anyone with a flush or straight draw to call, and the guy with the made nut flush goes all-in with his $800 stack. At that time, I had a $500 stack that I'd quickly built from the $300 buy-in.

It was a tough decision, but I figured he was likely on a draw and was doing a semi-bluff, which if true, had the odds slightly in my favor. Of course, he could have had (and ultimately did) a made flush and didn't want to risk losing to a full boat (which was what he was probably thinking), yet even if that was true, I at least still had some outs if the board paired. I wasn't figuring the case Jack would show. So I bit the bullet and called.

Thankfully, the case Jack came immediately on the turn, allowing me to take down the largest pot of my modest poker career of over $1K.

From that point, I only risked the amount over $1K for about two hours (aka "trailing stop"), before heading for home with exactly $1,005, or +$705 from my $300 buy-in. And yes, that's the actual chip stack pic taken about 15 minutes before I called it quits. Each stack is $100.

Grades? I'd say A for luck, an "Incomplete" for the decision to call (the call is likely highly debatable ... comments appreciated), but most importantly -- an A+ for putting the trailing stop in effect after the hand to lock in the net two-day gain and close the weekend on a high note. The trailing stop was of course "borrowed" from trading ... and is a concept I occasionally have trouble implementing in the last hour of both trading and poker nights ... so perhaps trading is helping my poker as much as poker has helped my trading.

Either way, the weekend's net efforts were good reinforcement of proper trading practices, including leaving Foxwoods Saturday night when I wasn't on my game and before I did any further damage, and starting today with a clean slate and shutting everything down shortly after I got back in the green. I also felt I read the other players' emotions well in today's session, which is another strong reminder that trading -- like poker -- is all about reading the other participants and taking the opposite side of the emotional play. Another good reminder for "chartists" who don't understand what charts truly reflect ... human emotion.

Plus I had a lot of fun.