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.


steve said...

Good reminders about a trend intact usually stays that way. I looked for a turn too early and instead of keeping the VIX-wind at my back I "peed into the wind" and is usually a bad idea.

Anonymous said...

Well done today. On paper it was easy a day as it comes. For me, I fell into the camp of trying to fade after yesterday's trend day down. I managed to scratch the day after buying it all the way down (ugh). To your point, I would have done much better going with the trend. These type of days are where I normally get my a#$ handed to me. What's funny is I saw the trend day yesterday clear as day, and booked a nice day of performance. Oh well, guess you can't win em all.

Don Miller said...

Sean/Steve -

'twas indeed a rarity today in terms of the 4 hour marathon trend. I also probed for a few reversals, but clipped partials for profits quickly and the other half often scratched.

Don't feel bad if you didn't do well as if you trade the rule and not the exception, you'll have days like this when the 'rare' occurs ... much like my early October draw.

About all we can do is to bank the memory so when we see it again, we'll rely on some real experience ... even if it was costly. Those that can't, aren't around over the long haul.

Hang in there.


steve said...

For me this may have been a "not trading what I see" day and clouded by a bias or expectancy. The VIX was obviously up all and the the TICKS were well below 0 most of the day but by bias was long.

Anonymous said...

Don - Good to heat the FESX is treating you well. I figured the pace & volume of that would better match the ES that you're used to.

You should be able to get some good size on in it once you get acclimated.

I have gotten back into the swing of things more this week & am working on getting some wins under my belt to get re-adjusted and back in my comfort zone quicker. So far its worked out well. I do a lot of spreads & think things should provide plenty of opportunity now that we appear to be returning to some level of normalcy.