Wednesday, January 7, 2009

Wednesday Notes - Planting the Maple

8:05pm Well, we knew it was coming as it was simply a matter of time before the market rhythm changed. And did it ever, going from two days of essentially going nowhere to a trend day that never approached Tuesday's low. The ES and VIX 15-minute charts combined to tie for the indicator of the day award, as both charts provided a decent road map throughout the session (Click to enlarge).

At this end, I continued to take January slow (more on that in a minute), yet took some initial heat by positioning for a stronger post-open move toward Tuesday's afternoon low ... at which point I was then looking to reverse short. And I felt pretty good that we'd get it. Wrong! I must have positioned 3 or 4 times for longs (enter/scratch, enter/stop, enter/scratch, enter/stop ... you get the idea). Fortunately, I kept sizes modest and applied the cost of the early morning tuition to the rest of the day and was able to turn the day modestly green by shorting the noon approach toward the 15-minute brick walls and covering on the drop.

And while I still feel as if I'm in a bit of an early-year funk, which is the main reason I'm keeping my sizes and # of sequences down -- along with simply taking it easier as was my intent for the first part of the year -- I did feel some rhythm and interest returning at times as the day wore on even when just watching the moves as my expectations seemed to match the market for the first time in a while.

Which brings me to my ongoing babbling about viewing the year as a single trade. There's a reason for the countdown clock to the left (aside from the fact that it looks cool), just as there was in 2008, as it reflects my personal preference to keep trades, days, weeks, and months in perspective. The only score I really care about is the final one at the end of the year. Said another way, I view the year as a single day, and January is the 9:30-10:00am period. And because of that, my main initial goal as I mentioned last week is to simply keep my head in the game early on and try to build some performance momentum as the year progresses.

And while last year's performance is finally becoming a distant memory, it does provide a one last sense of how momentum can build throughout the course of the "day", as the year started slowly, gained some momentum in the summer, and finally built to a crescendo in the fall before cooling down in December.

At this point, I'm not yet ready to throw size or a high number of daily trade sequences at "today's" trade. Yet I feel there may be a spark of desire and momentum starting to flicker. It's small and you have to really squint to see it, but it may be there. Perhaps when more of the top cells of the scorecard turn green -- especially "Trade Desire" -- I'll start throwing some sizes out there. Like many aspects of life, I'll probably know it when I feel it.

And while I'm not at all looking to grow another Chinese Bamboo this year, I might begin working on a nice Japanese Maple (which is actually my favorite tree). Yet like the Bamboo, the Maple will also require some firm roots.

Right now I'm simply in the fertilizing stage.

Have a pleasant evening.


tom said...

Hi Don, I came across your site this weekend and have really enjoyed reading it. I am a novice trader and your blog is very inspiring to find out that all traders have the same concerns and doubts. I have one question for you, with all the government (help) recently do you think this will change the meaning of the chart patterns. I try to find a bullish pattern along with some DD and ride it up for a few points and then get out. Thank you, Tom

Don Miller said...

Hi Tom -

I try not to pay too much attention to the underlying "cause" of price movement, although certain types of news can certainly result in more volatile short-term moves.

The way I look at patterns -- which of course only reflect one component of trading (e.g. one cell on the performance spreadsheet) -- is that they simply provide a visual representation of trader emotion at any given moment.

And as long as we have traders and emotion, there should always be some type of wholesale opportunity. Stating the obvious, the key of course is trying to both find it and align with it.


Luke said...

hi don,
I trade the ym, my trading style seems to be similar to yours, my only indicators are a simple moving average and bollinger bands. after 7 years of simulation trading and thousands of hours studying chart patterns i´m slowly making the transition to full time trading, of course much smaller size than you. my real breakthrough was about 18 months ago, when i switched to constant tick charts. Do you use constant tick/volume charts at all or only time based charts?
luke from germany

Don Miller said...

Hi Luke -

Yes I do sometimes use tick charts, especially in the overnight Globex session where time-based charts can often be meaningless.

Yet my personal "eye" typically sees rhythms best when viewing the market in terms of multiple timeframes ... i.e. I see which which timeframe is stretched, trending, pulling back, etc.

Just personal preference as always.