Friday, February 6, 2009

Friday Notes - The Elephant in the Room

4:00pm OK, first things first in case you missed my Thursday PM comment. Despite yesterday's post about sometimes needing to fold a strong pair, I didn't fold A-Q on an all-in bet at last night's final table, and even though I read it right and had my opponent crushed (he had A-10), lost the tourney when a 10 hit on the flop. So the night ended with me going out in 7th, and temporarily losing the grip on the #1 seed for the quarter.

Now, fast forward to today where I held what I also believed was a strong hand (shorting the early approach to 850 for one last short sequence) when the market rocketed north without stopping for a breath. Yet once again, I was able to overcome the early deficit -- this time a five figure initial chip loss as I was heavy and the market provided little opportunity to nimbly scale out -- by nailing the first subsequent pullback along with a similar afternoon sequence to again end the day positive. See chart; Click to enlarge.

All I can say about the morning is that was one helluva thrust that caught a lot of shorts -- including me -- which left us with two clear choices: (1) cower and whimper about how unfair life is, or (2) cash the tuition investment in quickly knowing that the harder the unexpected move, the higher the probability that there's a ton of traders needing to buy any initial pullback which should drive the price back up. btw, I've tried cowering ... it doesn't work.

And by shortly after noon, I was back in the black before trading lightly in the afternoon to end the week with a chip gain of just under +$28K. And yes, I think it's safe to begin talking about weekly gains now that we're five weeks into the 2009 journey. Daily math still means little though except in aggregation.

Which brings me to the "Elephant in the Room" that I've tried extremely hard not to dwell on ... although I've referenced it as of late. And that's the fact that there seems to be another Bamboo growing this year, which while it won't likely be nearly as tall as 2008's as I try to have a life this year, seems to be emerging from the ground with a thicker trunk. And that "trunk" now symbolizes 29 consecutive days of gross chip gains (I double-checked my records and had actually miscounted earlier), with only two in the red after commissions by a combined -$600. The streak is by far the longest of my career.

Even scarier, since the very day I locked up 2008 and set the earnings trailing stop (after a modest draw), daily chip gains have outpaced losses by a "sick" 140 to 2 ratio.

As I've mentioned in recent posts, I normally could care less about these sorts of things -- and to a large extent I still do as the bottom line remains the only number I care about. Yet something is going on here that is worth documenting in this personal diary as I've made a few changes over the last few months that may be having a greater impact than I first thought.

Think about the blog over last few months. What's different?

Well, first, I started the color-coded scorecard concept in the left hand margin to begin the year. And since then, I've not had a poor late afternoon bonehead sequence. Coincidence? Second, I've signifcantly reduced Europe and overnight U.S. trading and am sleeping more normal hours. Third, I've taken a great deal of the 2008 "race" pressure off myself, although the feeling is beginning to stir again as I'm stepping up sizes slightly and finally got around to setting a bona fide target for 2009. Fourth, and this isn't necessarily a positive, my trading volumes are down about 15%-20% from last year.

As was the case last year, I never expected this. Never. Hell, I was taking a "break" in January. As I mentioned in my '08 stats, I normally trade at a 78% daily success rate. And my 2008 daily win/loss ratio ended at 4-1. Not virtually 100% and 70 to 1.

Now of course this is only over a relatively short period of time and may look completely different when the full 2009 stats are reviewed at year-end. In fact I expect the final ratios to look very similar to last year's when all is said and done. And the bottom line again is trailing last year's record year. Yet the data tells me I now have a major decision to make: Do I step up size now that my head seems more into trading now than on January 1, or do I simply continue as is with no tweaks??

I don't have an answer ... yet.

All I know is there's a large gray animal in my office that I may not be able to ignore for much longer.

And oh yes, Monday begins by believing this week, and today in particular, was a terrible disaster. It will be a rough weekend as I prepare to heal.

I'll check and respond to comments tonight and post again Saturday morning before heading to Boston Saturday afternoon and Sunday for a weekend getaway. So keep the comments coming and I'll post and respond as I can.


NQJ said...

Hi Don,

Thanks for the post. It helps me a lot to see what you traded and compare notes with my day. Was wondering how you place your orders - limit / market, mouse click/ key stroke, and if you have an automated way of scaling out (where system places the orders for you) or do you manually enter the scaling out after certain tick moves.

Thank you,

Don Miller said...

F&W -

All orders are entered into the Trading DOM (Depth of Market) screen. They're all price-specific limit orders.

No automation at all as I hate auto-pilots and trust my judgement.


Get In Get Out said...


Wanted to know your opinion on a few things. Do you think the market bottom is in since we rallied huge today on a very bad unemployment rate of 7.6% Also, was curious about what markets you trade overnight in the europe & U.S. overnight markets? Do you trade the sps overnight as well?

abel said...


That is amazing what you are achieving. All those small gains per contract really add up! Per your figures this week, the average gain is 3.4 per contract, approx. Now this may be incorrect, if the contracts traded reflect both a openings and closings, in which case, the gain is approx double the figure above, (if one chooses to calculate it as such) Please clarify either way.

If one were to estimate the rate of activity, using this weeks numbers as a guide, that works out to approx 4 contracts per minute, every day, day in and day out, (RTH). 8230/2025 = 4.06(405*5=2025 total minutes per week, RTH).

What do you estimate is your average holding time per trade?

Anonymous said...

Don, just wanted to introduce myself and say thanks for letting us look over your shoulder. I'm hoping to move to full time trading someday, but for now am learning with the ES. I've enjoyed reading all the past posts and seeing how you reacted to the markets last fall. (and learning as I go.)

Please keep it up!



Don Miller said...


I have no idea on the longer term market direction. My strength is in short-term price movemements with fewer variables and based primarily on techincal signals, and it would seriously mess with my head to even think about an extended timeframe.

When I do trade overnight, it's a combination of ES and the DAX, and I've experimented with FESX just a bit. Yet I don't do much overnight trading anymore.


Don Miller said...

Hi abel -

Not sure about "amazing", but it's undoubtedly been an interesting couple of years.

The # of contracts shown in the scorecard grid reflect round-turns, so if I show a total of 1,000, it's 500 buys and 500 sells.

Be careful with doing such math though, as keep in mind I often scratch and reenter to manage risk which drives the volume up and the average gain down, and also almost always scale in and out.

So there's really not much sense in trying to figure out average gain per trade, etc. as in my view it's a completely meaningless statistic for me.

My average holding time is pretty short, probably ranging from 30 seconds to 5 minutes as I tend to exit into the higher-probability initial movement. On rare occasions I'll consider holding a partial position longer, but 30 minutes would be like a retirement fund for me :-). Plus, I'm simply not that patient.


Don Miller said...

Thanks Paul.

The blog has also helped me keep my head in the game outside of market hours, and has likely contributed to some incremental success at this end.

Frankly, this could become a case study in that I continue to find the more one gives in life without expecting anything in return, the more prosperous one inadvertenly becomes.

This blog has been an eye opener for me, and has reinforced some strong life lessons. I truly think the "pay for my method" approach has it all backwards.


Unknown said...

(sorry if its a duplicate, not sure if 1st one went through)

Hi Don,

Heard your interview on and just found your blog. So far, I've covered the recent and key posts and I think its a godsend for many aspiring traders out there like myself.

Thanks so much for the sharing and I will be spending the weekend covering the rest of your blog... Simply priceless...and so vital for us embarking on the trader's journey and you have shed light on our paths ahead...on what we can aspire to...

Thanks again, and I'm sure I'll be reaching out pretty soon..

Have a great weekend getaway.

Travel safe.


PS: can I reach u via email. Thanks!

Don Miller said...

One more thought in response to Abel's "All those small gains per contract really add up!" comment.

That comment by itself will hopefully turn many lights on. And it's one large reason I have the stupid countdown clock ticking to the left.

$4K a day on average (remember it's an average and simply the end result of many gains that MUST exceed it to offset the draws) is $1 Million a year.

I can't comprehend making a Million or a multiple of a Million. My brain just doesn't work that way. But I can certainly comprehend a small figure over and over and over, and simply let time and math do the heavy lifting.

Time and math. So simple, yet few in this impatient world -- and especially in the U.S. -- have the patience and longevity to make it work for them.

It's not about today. It's about tomorrow.

Don Miller said...

Welcome to the blog GT.

I don't currently use email to communicate with traders, and instead use the blog comments so all can benefit from the dialogue ... plus it saves a world of time at this end.

Good reading and you may want to check out the key posts to the left which might provide some decent mile markers for your initial journey.

Looking forward to hearing from you.


Driven! said...

Hi Don, congrats on your success..
I am trading 6-8 times a month, trying to go for 25-30 points a trade. Have been pretty successful with my techniques over the last 2 years, doing well over 100% a year(trying to match your record :))
I must admit, you did wet my appetite for daytrading, swing trading gets boring at times...therefore a question:

I have studied your blog for the past 5 days, noticing Tick,Vix, SMA, Adx, 3 line break, pullbacks from the trend, fades,etc...
I know you are here not for "signal publishing blog", but you do tease us all with your results.
Is there anyway you can at least once a week go over your trading for a particular day trade by trade?

None of us will be able to duplicate your success with the method that you use. But we do want to learn and not only "drull" over your results.(trying to be funny here)

Thanks alot,

Don Miller said...

Hi driven.

No tease intended as this remains primarily my personal diary ... and as mentioned in the FAQ to the left, it certainly isn't intended to encourage daytrading.

Doing a trade by trade analysis is tough for several reasons, including my #1 priority above all else is limiting my market focus during the trading day to my own trading.

Having said that, there are a few posts sprinkled throughout the blog where I narrated to time-stamped sequences, and there's also a visual chart recap of one day's results at:

Yet because I'm scratching and re-entering and scaling in and out frequently, as well as providing liquidity, a blow by blow description after the fact is tough.

Hope that helps.


Unknown said...


Its funny, I got stuck at 850 too… and haven’t seen an up day like that in a very long time!

When you used the word “crushed” on that poker hand, I went to the poker calculator just to see and it was about 3.5 to 1 in your favor but the surprising thing was that even having KK wasn’t much better.

When someone raises me pre-flop I usually put him on a pair or A-something (of course depending on many other variables too) so unless I’m coming from way behind I call vs. going over the top- as it destroys me emotionally to play for hours –make it to the final and go out with a pre-flop all-in on an above average hand.

Have a nice weekend Don :)


Get In Get Out said...


Wanted to ask you what your average position size of contracts is per trade. I understand you have a scaling system, Do you have a minimum contract size you scale in and out with for instance a minimum of 50 lot increments per scale?

Don Miller said...


As I've touched on many times in the blog posts, I usually trade in 15 or 30 contract increments, and I'd say my average trade sequence size at any one time (flat to flat) ranges from 15 to 75, keeping in mind I'm often taking size off, putting it back on, etc. during the sequence and sometimes hold a small piece if I think the move has greater potential.

Occasionally, I'll press the accelerator harder, but that's pretty typical.


PC said...

Hi Don,

From this post I see you are wondering how to answer the question... should you step up in size now you are deeper in the 'Zone'.

So put another way... should you alter a winner formula by using more size? Well, are you happy with what you are making from the markets? From past performance, do you have to push yourself in order to stay in the zone?

Enjoy your posts Don. Keep it up.


James Stollenwerck said...


Using the rubrik "When the vix is high, it's time to buy" and "When the vix is low, look out below", it interested me to observe both the vix (3 min.) and the market (3 min.) going in the same direction at certain times in the day implying despite the market moving higher, vix said it's time to buy.

Goes to show.

emacro said...

Any more of these posts can be instructive and helpful. Thanks