Tuesday, March 31, 2009

Tuesday Notes - Setting the Pace

4:00pm Flip, turn, and push. 1 Down; 3 to Go

First, with respect to today's trade, I never could get my head into the game despite strong VIX and TICK signals as it was apparent early on that I was going to be a step too quick or a step too slow (nothing to do with the market as always, it was just me). As a result, I essentially passed on taking another hard stroke into the wall and took a mental day off for the most part with a very modest +6K chip gain, which was largely the result of trading the opening oscillation and 3:15-3:30pm sequences well (yes, I got off the 3:30pm bus well before late-to-the-game buyers got crushed).

And so it's time to lock in Q1 performance which now sets the pace for the remaining three laps, and take one brief look at the 2009 starter leg by first clocking in March, followed by Q1 and the all important pace figures at the end.

March 2009
Daily Gains: $210,570
Daily Losses*: ($9,761)
Commissions: ($22,922)
Overheads: ($3,231)
Net Profit: $174,656 - 'Bout time; 3rd best behind '08 Sep & Oct.
Win/Loss Ratios:
- Days: 21-1
- Daily Gains/Losses: 22-1
Contracts Traded: 46,738

Q1 2009
Daily Gains: $462,703
Daily Losses*: ($43,569) - Yes, February 10th will haunt me all year.
Commissions: ($59,157)
Overheads: ($11,516)
Net Profit: $348,461
Win/Loss Ratios:
- Days: 58-3
- Daily Gains/Losses: 11-1

* Note there's a difference between these figures and my daily narration as daily gains or losses shown here reflect the day's activity booked by product. For example, in the case where I lost on Eurex for the day which was more than offset by U.S. gains, the Eurex trade will be included in the loss figure here while the daily narration would talk only to the net of all products.

Net Profit Pace (vs. Continuing Annual Goal of $1,000,000)
- Last twelve months: $1,650,992
- Jan-Mar annualized: $1,393,844

Observations? Not many as it's just 25% of the year and a tiny three months in a trading career (never forget the Svithjod Rock post). Nevertheless, it was nice to see a decent March after spending much of Jan & Feb trying to get the dang engine restarted after the 2008 race ended.

Yet as always, it's now history and 100% irrelevant, and in my view I enter tomorrow as I do every day ... far behind and coming off the worst loss of my life.

Now the real work begins.

Flip, turn, and push.

Monday, March 30, 2009

Monday Notes - No Squinting

First, a very happy birthday to my dad who's still on his game at the age of 82. Have a great day Dad!

1:30pm OK, I'm beginning notes earlier today than normal to make sure I stay on my game -- and most importantly out of trouble -- as I continue to position for Tuesday afternoon's Q1 lap turn.

And I feel I need to be particulary focused given my horrendous track record for Mondays, and fact that I'm sitting on a rather strong +$14K intraday chip gain as we approach today's afternoon session as the result of fading the early oscillations and TICK extremes after the gap down.

2:20pm In watch mode only and not interested in fading further unless we get a significant mini-squeeze to the north or further long puke to the south. No-man's land here. Stay focused Don. Pace atrocious now and I'll be more than OK with not taking another trade until Tuesday.

3:00pm Last hour approacheth. Not your strength Don and pace still a mess. No problem with sitting out any final hour trend extension to set up the higher probability morning trade. No trades since closing out last sequence at 12:44pm.

3:40pm Seeing divergences on climbs but not getting cute. Focus not particularly there at this end.

3:50pm That's a wrap ... took a few trades but nothing with size and held onto the A.M. gains.

4:00pm In hindsight, I'm very pleased with sitting out the PM session for the most part. As they say, "when you have to squint to find a trade, back away". Very good PM discipline as noted on the scorecard.

I could have held one late morning short longer (thus the orange grade for "exits"), but overall not too many complaints and a surprising Monday +$14K splash in my favor as we reach for the turn tomorrow.

Sunday, March 29, 2009

The Weekend Trader - Dear Sigmund

Some thoughts on a rainy day on the coast.

Of All the Nerve - I'm unfortunately still dealing with a significant pinched nerve in my neck and related symptoms that I picked up on my recent trip to Atlanta (main problem is tingling in the small two fingers of my right hand and some swelling in the neck ... which oddly enough started immediately after having sat in one of those demo massage chairs in a Brookstone store) that had worsened to a point where I chose to undergo a head and spine MRI yesterday to supplement my chiropractor's current treatment. btw, one has a lot of time to think while in the casket-like MRI tube for 50 minutes. I think I planned the next 90 trading days.

Anyway, technically I have "multilevel spondyloarthropathy", with among other things, "moderate bilateral foraminal stenosis at the C7-T1 levels". Sounds like some techno-trader describing a simple pullback in an uptrend. Translated it simply means my back is showing its 48 years, and I have some pinching where some of the hand nerves exit the lower neck.

Oh, and I also learned that the "visualized brian parenchyma is unremarkable" ... which ironically means my brain is OK ... although I'm sure many would dispute that.

Not sure where I go from here, but obviously it remains a concern until licked.

Yet I'm a trader, so consider it simply water splashed in my face ... which leads me to:

Comment of the Week - Goes to Steve in response to Thursday's post:

My wife used to say the hardest part in open water triathlons was getting kicked in the face during the swim. It's not something you can train for, and all the solo running, biking, and swimming miles doesn't prepare you for it. But being able to expect it (possibly) and recover from it means you might finish the race.

I couldn't have said it better.

Dear Sigmund - As we get ready to enter month ten of this public diary experiment, someone mentioned to me the other day that this blog now ranks ahead of many trading sites in terms of both growth rate and sustained traffic (and apparently still inching toward the list of top 100K sites for the entire 'Net at 237K last week ... and jumping 1.5 Million Q4 08 to Q1 09 in terms of 3-mo average), to which I simply shrugged my shoulders. Don't worry, the market will keep any ego in check.

You see, from my perspective I still view this as simply writing to myself and perhaps my alter ego. Sort of like Dr. Sidney Freedman writing to Sigmund Freud in the classic M*A*S*H series. Why don't they make shows like that anymore?

Yet I suppose we may have inadvertently planted another Bamboo. Still, all I want to do is focus on my own trading. One man climbing another mountain, and so much work remains.

That, and solve the pinched nerve puzzle. Maybe Hawkeye can help on that one.

Enjoy the rest of your weekend and check out yesterday's video if you missed it.

Saturday, March 28, 2009

** VIDEO ** The Weekend Trader

Today I discuss some thoughts on the past week and recent performance using one of my favorite trading books, "The Tao of Poker", as well as touch on why I use so many silly game and race analogies for motivation.

Have a great weekend.

Friday, March 27, 2009

Friday Notes - Time to Exhale

5:00pm I'll say right off the bat that some may wonder why today's scorecard reflects dark green accross the bottom section with only a light green bottom line, yet I felt I managed today as well as any day I have in a long time in terms of trading a market that was no where near condusive to my preferred backdrop in terms of pace, volume, pattern ... you name it.

So with both the 5-Min and 15-Min ADX readings nose diving worse than A-Rod's batting average in October, an opening gap down that had all the potential for a strong pop off the 60-min support that never really materialized, and market chop that I'm sure felt to some like death by a thousand paper cuts, I'll bank the +$7K chip gain on what was again extremely light personal trading volume that has me both closing on the week's equity highs at +$32K as well as wiping out Wednesday afternoon's give back.

Those that have followed me via this blog or over prior years know I hate complimenting my own trading more than 2o degree weather in late March. [Warning, make sure you're sitting down for this.] Yet as we approach the first official 2009 lap turn at the end of Tuesday, I'm going to take one momentary breath of relief for somehow managing the last two days of virtually flat action pretty darn well and heading into the first turn still having incurred only two losses in the first 59 trading sessions of this year ... with February 10th's momentary loss of focus continuing to serve as a powerful reminder of what I shouldn't do.

Case in Point: Consider this excerpt from my February 11 post on the day after the only signficant loss of the year:

Perhaps I needed yesterday to finally stop trading on eggshells and move forward to more intense trading. Case in point: Last time I had a major bonehead day it provided the foundation for the $700K Oct-Dec 2008 run. Maybe I needed that major butt kicking to make the fictitious draw feel real again. Who knows. All I know is I always trade my best after a draw, both because large draws are usually based on signficant market moves which rarely repeat on consecutive days (thus providing high probability sequences on day two), and because it essentially coaches me into getting my act back together.

And it's no surprise to this trader that since that date, I've been on a $241K run with a single $2K daily loss. Simply put, I know what fuels me, and it's getting pi$$ed off at a stupid sequence as happened that day.

OK, it's off my chest ... y0u can beat me up now. Yet while last year I held my breath for the full year and allowed myself one momentary pat on the back on December 31, this year I'm going to take four breaths. So consider this the first one as I expect to be in gain protection mode much of Monday and Tuesday.

Of course it still means nothing until 12/31, and I have to approach Monday as if today and this week were disasters. And I will. Yet you have to understand how hard it was for me to restart the engine after the 2008 run and mid-December shutdown. The challenge is of course evident in many of the ealry '09 posts, yet remains difficult to fully explain. Frankly, this quarter was one of the hardest for me ... ever ... on the heels of last year.

So it's time to exhale ... but only for a moment.

We hit the first turn on Tuesday.

More over the weekend as usual.

Also, in case you missed it, Tim Bourquin syndicated Tuesday's "Perfecting Imperfection" post on the MoneyShow.com site.

Thursday, March 26, 2009

Thursday Notes - Mouthwash Day

4:oopm I'll be frank as always ... I had one goal today after yesterday afternoon's P&L detour: To quickly rinse the bad taste out of my mouth by trading lightly to keep my head in the game, while ending the day green by at least $1.oo (that's one dollar) by not doing anything that might risk the dreaded "s" word -- rhymes with "plump" -- from sneaking into my vocabulary.

And considering the lack of preferred setups for this trader today, along with an absolutely horrendous pace (it seemed as if many traded today like deer in the headlights after yesterday's late day moonshot), I'm more than content with today's modest +$3K chip gain on very light personal volume, which was largely the result of providing liquidity for a few ticks on a handful of sequences as I had zero interest in intraday speculative trades until the conditions improved. Note to newer onlookers: I explain the difference in the "Providing Liquidity vs. Speculating" key post link in the lower left hand margin.

And so with a mere three strokes remaining before the first key turn of this year's race when Q1 ends on Tuesday, my current plan is to simply keep swimming stroke by stroke and not be bothered or distracted by any water that may get splashed in my face as happened late yesterday.

I suppose that's why swimmers wear goggles and race horses wear blinders.

The fresh breath feels good too.

Wednesday, March 25, 2009

Wednesday Notes - Royal Flushed

4:00pm There's a reason I don't normally trade the last hour. Tired, lack of focus, lower % plays ... you name it, and today was Exhibit A as I went for one trade sequence too many ... hard ... and finished substantially off my intraday equity highs for a +$10K gain.

Essentially I was in rhythm all day right up until the last 40 minutes, including nailing the early morning 5-minute pullback long and then catching some nice shorts on the early PM breakdown, when I then got a bit cocky given the groove I was in and established a strong short position on the last hour pullback toward 800 -- a short that was supported by both the earlier breakdown and the 15-minute trend.

And while I'd take the trade again in a heartbeat, I should have protected the earlier hard-earned gains a helluva lot better than I did with better size management. And of course that made scoring today's scorecard tough, and I purposely replaced mostly solid green in the lower section with lesser scores to teach myself a lesson.

On the positive side, I suppose there's a major silver lining in that I eventually stopped the sequence which I could have very easily not done given my conviction in the pattern, and at least still salvaged a 5-digit green day, rather than barf-covering my triple digit sized short at 812 like some did for what could have been a monster P&L hit. Obviously based on the squeeze, I wasn't alone in leveraging off the round 800 figure. Show of hands please.

Ironically, the first 3/4 of the day I felt was the best I'd traded all year, and thus I pressed it right into close ... which this time was costly.

Nevertheless, today was a good reminder that patterns and performance are all about probability, and nothing is ever 100%.

Even a pattern with two simultaneous supports and a trader who was in the zone for most of the day. Sort of like losing Aces full of Kings to a Royal Flush ... but you still have to bet the the full house every time.

Trading and poker ... they can both be cruel games at times.

The next hand gets dealt tomorrow.

Tuesday, March 24, 2009

Tuesday Notes - Perfecting Imperfection

4:15pm I'm going to take a different twist to today's diary entry based on comments from newer onlookers with common themes I'm seeing over and over again. So, I'll recap today's trading and reinforce my strong convictions in the market in the form of a self-interview Q&A. Seasoned onlookers, please bear with me, but let's have some fun with this.

Q: How do you think you traded today?
A: Terrible ... made too many mistakes on a type of day that's one of my strengths. I'd frankly grade it a C.

Q: So you lost money then, right?
A: No, I increased the chip stack by +$8K.

Q: I'm lost, how can you trade terribly and still make money?
A: Ever see a golfer miss several fairways and scramble to make pars and birdies?

Q: Yup.
A: There's your answer. Plus, I've played today's course a thousand times ... it's one of my favorites and I know the hole placement by memory, which aided the score. I just didn't hit as many greens as I would have liked.

Q: What about this year, how do you think you've traded?
A: At times, terribly, just like 2008.

Q: So you must be pretty much breaking even then, right?
A: No, aside from one very minor ding, I've only had one loss on the year.

Q: I don't get it.
A: I know. That's why I trade and you ask questions.

Q: But there must be days where you don't make mistakes. Last year, for example, you said you netted over $1.6 Million. There couldn't have been many then.
A: Wrong. I made mistakes every day in 2008. No, make that EVERY day. Plus I had one bonehead day last year that cost me $90K, and I've sucked many times this year.

Q: Well, maybe you need to tweak your style. Have you ever thought about altering your trading style by (names a variety of "tweaks")?
A: Nope, and never will.

Q: Why not?
A: As I've said, focus is the only thing that will ever keep me from making money. I have no interest, desire, plan to change how I trade ... ever ... and I turn a deaf ear to anyone who suggests I tweak my approach. Frankly, it gets mentally filtered out the moment I see or hear the suggestion. Let's never forget Seve Ballesteros. It's all and only about focus and execution. Always has been and always will. Said another way, why buy another lock when you know the combination???

Q: OK, let's try this. I've calculated your average point gain per day based on the # of contracts and your stated daily chip gain, and it seems that you make .00000001 points per day on large size (OK, I'm exaggerating, but you get the point). What does that mean?
A: Not a damn thing. Check the posts addressing why the volume is relatively high which includes risk-managing interim insurance scratches. I care about one number ... and that's the net profit on December 31 each year.

Q: Yesterday, the Dow was up +500 points, while today it was even for much of the day before the late day sell off. You must have cleaned up yesterday.
A: Ummm, see my last answer ... you know, the part about "one number". Who the hell cares about the net index gain???? That's like saying the Celtics won by 40 last night ... therefore you must have cleaned up today. It's completely irrelevant data.

Q: Why are you so hard on yourself with respect to your performance? Seems like you're trying for martyr of the year.
A: It simply helps remind me I have much room for improvement which in turn keeps me coming back every day to try to do better. It's what drives me deep down, and I'll be working on improvement until the last trade I ever make.

Q: Why do you reference 2008 so often? You must have had some recent stinko years.
A: Laughing. You can't be serious.

Q: Why the constant comparison to '08 and your current annual $1 Million goals then?
A: They're current personal benchmarks, nothing more. If people are insulted by my using them for motivation, it's a darn shame they're not focusing on their own trading. Talk about misdirected focus and lost potential!

Q: Does blogging negatively affect your trading?
A: Huh? If it did, I'd stop it in a heartbeat. It actually helps keep my head in the market after hours, and keeps me accountable to both myself and others.

Q: But doesn't it add pressure?
A: The only pressure I'll ever feel is from me, which is far more intense than 500+ daily onlookers could ever provide.

Q: OK, thanks for your time, although I admit I still don't "get it".
A: I know. If you're looking for that perfect trader, system, method, setup, etc., you'll have to wait for the next lifetime ... there aren't any in this life. I just try to focus and stay out of my own way ... some days better than others. You can call it "perfecting imperfection" if it helps. And I can give you a million reasons why it works. Side note to onlookers: STOP TRYING TO BE SO DAMN PERFECT!

There, I feel better.

Back at it tomorrow ... the early test of 800 should be interesting.

Monday, March 23, 2009

Monday Notes - Pinch and Squeeze

4:00pm I'm not sure which pinched more today, long-term shorts (or traders not able to read today's tape) or my neck as I've been dealing with a significant pinched nerve over the last week or so that worsened over the weekend (yes, I'm seeing my chiropractor who's worked wonders for me in the past, but we haven't been able to lick this one yet as I was born with two neck vertebrae virtually linked together that I don't notice 99.9% of the time).

So suffice it to say that I wasn't particularly focused as noted on today's scorecard, although I must have been focused enough to stay out of trouble on one of those once or twice a year +/- 50 point ES days while growing the chip stack a very modest +$4K. And need I say again that I never expect to make much keep on monster trend days given the lack of solid wholesale entries as the move accelerates ... it's that darn day after and I'll need to significantly ramp up the focus tomorrow if I have any shot at taking advantage of it. So get out the Ibuprofen Don.

Actually, I read the market pretty well, yet was a bit too light on size even knowing I'd likely only have a handful of low-risk wholesale entries once we gapped higher and held. I also got into a bit of trouble in the Globex market trying to jump the gun on the long entries in the 8:00am - 9:30am chop, so at least I was able to finish near my equity high on the day.

For me, the work begins tomorrow as usual.

btw, if you're at all bothered by the Dow being up 500 while your trading equity treads water on one of these once-a-year days, a reminder that the only movement that matters is your long-term trading capital curve. Don't get sucked into thinking you "missed" anything ... that's a rookie/newbie/Cramer way of looking at the market.

Saturday, March 21, 2009

** VIDEO ** The Weekend Trader

Today, I try to put my recent performance in perspective, and discuss the importance of focus for me (yes, I won't forget February 10), my thoughts on varying sizes using Friday's trade as an example, perspectives on hitting rock bottom, and a "still being planned" upcoming get-together once the weather warms up here on the New England coast.

btw, if you're not in the Northeast but would still be interested in attending such an event (no cost aside from what a facility might run us, meals, etc.) please let me know via a comment so I can gauge the general interest. Please note it would not be a teaching weekend ... rather it would simply be joining as a group to share stories, have some fun, etc. If you've previously expressed interest via the local Boston area group, you don't need to respond.

Enjoy the weekend.

Friday, March 20, 2009

Friday Notes - Feeling "Right"

4:00pm I'm getting close. For the first time this year, I feel my focus and energy level are such that it's only a matter of time before I finally break the frickin' $20K daily mark that I nailed 26 times in 2008. I can feel it, smell it, taste it ... you name it. I also feel I may have finally located my 2009 sea legs.

Today I was close ... very close ... as I was on strong alert for the tight coil breakout, and for the most part traded it well except for some wholesale long foul balls toward the bottom of the afternoon plummet. After testing the water a few times with small size, I traded the initial break well, along with the first major retracements toward both 5-min and 15-min resistance (see charts; click to enlarge). I passed on the final 3:40 - 4:00pm extension as the action was getting whippy, I was getting tired, and thus preferred to be cautious in light of expiration Friday. If you nailed it, congrats. The top chart also shows a bit of how I trade in terms of varying sizes for "probe trade" vs. setups that have more confirmation.

The result was a solid +$18K day (ES gross was +$19.7K) for the best net of the year to end a decent +$47K week. Maybe I really did need that Monday scratch to begin the next run.

OK, so one day doesn't make a year. Yet today, all I can say is that once the range broke, everything felt "right". And while I traded it far from perfectly and the pace at times was less than stellar, I'll take an imperfect win any day.

Now where did I put that Bamboo fertilizer?

Look for The Weekend Trader over the weekend as usual, and likely a video.

Thursday, March 19, 2009

Thursday Notes - Phone Booth Trading

5:30pm Was that some kind of putrid afternoon session or what? Talk about zero breaks or extensions ... sort of like playing ping pong in a phone booth (for those of us old enough to remember phone booths).

Thankfully, there was just enough movement in the late Europe and early U.S. sessions to offset the putrid P.M. session, and the only reason I was able to increase the chip stack by +$8K today was decent size management that had me testing extension probes with extremely light sizes in the afternoon. While I don't track intraday win/loss, it had to be under 25% in the afternoon, yet for once my size selection in both sessions was on target.

I definitely finished off my equity high for the day as the result of the afternoon blinds and antes, yet as with the New England weather, if you don't like the pace, wait a day.

For the tighter the coil, the harder the potential move.

Poker night tonight.

Wednesday, March 18, 2009

Wednesday Notes - First Lap End in Sight

4:30pm I'll start off by saying I have two regrets today, one for not holding the post 2:55pm short longer after ES probed 800 only to immediately fall back (you just knew if ES didn't squeeze shorts further after that magic number probe, that the tank was likely empty), and the second for not shorting the subsequent 3:12pm right shoulder, although I did short the confirming move back down through 791. Ideally, that entry would have instead been an add to an initial right shoulder entry.

Yet other than that, I clocked an OK +$10K chip gain on the day where about 2/3 of it came from fading the post-FOMC moves on unsustainable +1400ish TICKs (my ESignal chart actually ticked +1562 ... keep in mind the #s vary by provider), although I kept sizes light as my main goal on FOMC days will always be to score the "Avoiding Trouble" scorecard objective greener than green.

So absent any crazy overnight action, Thursday will start with a fairly well-defined range of 780 to 800, with ES closing near the middle of a range it hasn't seen in about a month.

In terms of my personal trading, I simply have to build on recent momentum to finish the first quarter a helluva lot better than I started it. Only nine sessions remain before reaching that first major marker of the year, and I need to be ahead of my $1M goal pace.

As I stated recently, the goal this year is now set at "Back to Back" $1 Million performances, and I still need to step it up a few notches to hit some resemblance of my stride. I'm seeing glimpses, but I'm still not there yet as I seem to be lingering in "cruise" mode and need one solid kick in the a$$.

Yet for now, all eyes are on finishing the Q1 lap strong, before making the turn for the remaining three. Nine more strokes, and then we'll officially clock in.

Maybe the silly pool analogy that kept me going through 2008 will help.

Now I just need to find and catch the French guy (old joke familiar to those following last year's journey, referring to Alain Bernard in the Olympic relay).

Tuesday, March 17, 2009

Tuesday Notes - Play It Again Sam

4:00pm Yup, play it again Sam. You just have to love those mornings after strong closing trends, and such was the case again today as both the overnight and day sessions provided high-probability oscillations which got the day off to a decent start at this end. That, combined with the 3pm mini-bear trap extension (5 min bull cup and handle) to the north and a good rhythmic pace to the day, provided a decent +$13K chip gain on the day.

About my only criticisms of the day were (1) my aggressiveness at times, especially on the 6:40am short sequence, and (2) adding to my initial position once a Tick or two confirmed the immediate likely move, especially as I felt I was pretty well aligned with the market's rhythm throughout much of the day.

So a good ebb and flow today for those of us who don't prefer slow extended grinds which we've seen much of over the last week or so, as the market proves yet again that it's an equal opportunity employer.

And perhaps it's appropriate that St. Patrick's Day ends with a
green scorecard.

Still need to work on more dark greens though.

Monday, March 16, 2009

Monday Notes - Scratch Day

4:00pm Keeping it brief today as I never did find my stride today amidst what I felt was a rather sporadic start-and-stop pace. I mostly provided liquidity today for an acceptable -$2K chip ding due to transaction costs and some blinds and antes on the speculative side.

So consider the day a scratch (technically the second draw of the year) which actually has me a bit relieved as I try to focus more on long-term bottom line. Seriously, 49/50 going back to December 29th was sick and again tells me I may be trading far too conservatively at times.

Heading out to see my Mom's new hip, so back at it tomorrow.

Saturday, March 14, 2009

The Weekend Trader - Slightly Off Target

Some thoughts before I head back home late Saturday.

Slightly Off Target - Yes I've judged my at-times lackluster performance harshly thus far this year -- again bottom line wise, not the stupid % daily gains which remains off the charts yet won't continue that way throughout the year -- and I'm starting to confirm one of the key differences I see vs. 2008.

First, last year I often committed every moment of every day to that ultimate test of seeing what I could do with 100%+ dedication that intentionally put me in "fully immersed" mode throughout the year. If you recall, I traded every market day last year, including Europe if it was open when the U.S. had a holiday. This year, I've obviously chosen to increase focus on a few efforts other than trading -- including this trip -- that is allowing me to have a bit more of a life in 2009. In fact if I were to use the current 2009 scorecard to score 2008, you'd likely see only a handful of days where the top line "Ability to Monitor the Market" score would be shaded anything less than medium green. This week's scores on the other hand, show a sharp contrast ... which I plan on improving.

Second, I've decided to avoid trading Europe and the overnight U.S. market much, instead choosing to wake naturally and get more sleep this year. And in doing so, my 2008 hunch that despite my likely net negative results trading that period last year, that overall it aided my later day U.S. performance by helping me get into the flow and get my blood pumping, is turning out to a pretty accurate assessment.

I say that in part because I'm seeing far too many times where I'm coming back from a poor start this year later in the day, which is leaving me less time to find the day's (including overnight) rhythm -- both the market's, and more importantly mine. So as opposed to 2008 when I'd often begin to find my stride say from 5-6am ET after having traded Europe prior to that, now I'm often finding it 10:30am and beyond, which is not normal for a trader who has spent years performing best at the U.S. market open.

So it would seem I have a decision to make in terms of whether I begin waking earlier (not necessarily at 3am, but say 5am every day) or continue as is and accept the lesser outcome.

And while this theory is debatable -- recall we had great back and forth discussion on this last year -- all I can say is I know my inner clock and it's clearly taking me until later in the day to get "warmed up". And this was reinforced yesterday when I watched Europe's open and traded it rather poorly despite some strong setups, which served as additional motivation -- in addition to Wednesday's omission of course -- for making sure I didn't repeat it when the U.S. doors opened.

We all of course have different approaches to trade within the context of standard market biases. And just as there are an infinite number of batting stances one can assume in the batter's box, there's no single right trading "stance", and those that sell such dreams are doing prospective traders a huge disservice. Don't get me wrong, there are important fundamental market tendencies that won't change as long as the sun comes up every day, and some trading "batting stances" will simply never work ... sort of like standing backwards facing the pitcher I suppose. Yet the rest has to fit our personal internal rhythm.

I saw a great Poker interview the other day where J.C. Tran was asked to critique Tuan Le's play (or it may have been vice versa), and J.C. said that Tuan was a great player, but his style would never work for J.C. just like J.C.'s wouldn't work for Tuan.

And such is the balance in sharing this personal diary which reflects strong convictions of what makes me tick and what works for me. A good example is I recall reading some material on another site not too long ago that referenced my fictitious drawdown concept, and the trader indicated that such a mental image would make that person a nervous wreck.

Perhaps revisiting the "Jazz Trader" post -- which btw has now been syndicated twice on commercial trading sites -- would be a good reinforcement for all of us.

Blog Community - Peeking at site stats last night, while the number of onlookers continues to grow, it seems we've leveled off in the 500-600 range of consistent unique weekday visitors to this journey (slightly less on the weekends), who collectively visit the site 600-900 times during the day. As I've said from day one, I really don't care if I'm the only one who reads this, as its primary purpose remains as stated in the first line of the FAQ: "first and foremost a personal historical journal (diary) and motivational tool".

I admittedly remain surprised at the large continuing interest in my babbling -- here's the Google traffic log over the last month and public Alexa traffic link if you're a stats geek. Yet like the market, I suppose trying to understand the "why" behind the reality is merely a waste of time and counterproductive, as it is what it is.

I do get a kick out of occasional spammers who question what I say or why I say it for the sole purpose of trying to get under my skin. And while such comments are extremely rare and I know some of the sources, they provide great comic relief and I laugh every time I see them (before committing them to the spam filter forever, and once they're there I never see them again as future comments are automatically deleted before reaching me), because this remains simply one person scribbling in his diary ... with one notable exception: there's no lock on it and it's not secretly hidden under the bed.

And I suppose it's worth restating that I am not accepting advertising solicitations, which also go immediately into the spam wastebasket, including those stupid Google ads which are making the Internet -- and every trading site I've seen -- look more and more like the National Enquirer every day. For this diary will remain 100% commercial-free and without hidden revenue-producing agenda, aside from the obvious goal of trying to continually improve my own trading and life, while sharing my journey with interested onlookers and providing a platform for professional discussion.

Yes, I've always loved going against "popular" convention ... whatever that means.

Have a great and relaxing weekend.

Monday will be here soon enough.

Friday, March 13, 2009

Friday Notes - Avoiding Another Wednesday

3:40pm Today was important for me in one regard ... to close the week on a positive note considering the events of this week which obviously made it difficult for me to focus 100% on a business that requires 120% focus. And it wasn't going to be easy due to another non-market commitment that took me to Atlanta.

Thankfully, we had the oh-so-textbook morning after trend setup (insert "monster" before "trend"), and this time I refused to let anything stop me from shorting the first decent climb and buying the first meaningful pullback ... and I mean anything which included needing to transition to the new (June) front-month contract, trading on two hours sleep and on my 11" laptop via Sprint wireless, and a chance of repeating Wednesday's opening sequence opportunity loss -- from which I'm still steamed and which served as positive motivation today -- due to other morning priorities that brought me to Atlanta.

And while I kept size very modest given the circumstances -- especially the lack of sleep and Sprint connection -- I'm fairly pleased with the day's acceptable +$10K chip gain and was more than happy to close up shop early today and get this very tough week behind me once and for all. Forget the week's +$27K gain and another 5/5 week ... as I'd grade much of this week's performance of errors and omissions a D at best.

Of the two major sequences, I found the midday turn off the 30-minute support the tougher to trade as the market tried its best to shake anyone with less than full conviction. You knew there were a ton of traders looking for that first strong retracement, and as usual when the whole world is looking for something, the market makes it tough. Nevertheless there were three opportunities to get 2-3 points with very tight stops, and I caught decent pieces of the 11:58am and 12:25pm snapbacks.

And so this week that I've wanted to forget can now finally be tossed aside, and at least I can head into the weekend in an improved frame of mind.

I'm still not on top of my game this year ...that much is certain.

And while the wins continue to pile up as the chip stack slowly but steadily grows, I'm still searching for that one significant moment when I get over this first quarter "sleepwalking" phase that I've referenced several times this year.

Less needs to be left in the locker room and more left on the court.

All of it.

Thursday, March 12, 2009

Thursday Notes - Worse Than a Transaction Tax?

4:15pm Brief post today as I'm sitting on the tarmac at Logan heading to Atlanta for the next few days. Not much to say about today in terms of tradable action aside from the early morning support test and hold, after which I traded some bear trap extensions long after the 5-minute trend proved itself and turned back up.

The afternoon on the other hand was a slow melt up on plummeting volatility -- which is the only thing worse for a trader than a transaction tax -- which resulted in a give-back of some of the morning wins as I tested a few reversal probes that didn't materialize to end with a very modest net +4K chip gain.

A reminder to check yesterday's late night post to put Wednesday's earlier one in proper persepctive. I admit I'm still not fully healed and simply tried to go back to "grinder" mode today and keep the emotions in check.

I'll update the scorecard for today when able (probably later tonight after I land) ... which will ultimately reflect a light green bottom line on very light trading with some yellow and orange in terms of pace, pattern conviction, and energy level.

9:00pm Plane has landed and scorecard has been updated.

Wednesday, March 11, 2009

Wednesday Epilogue - Upon Further Review ...

Important epilogue to today's earlier post:

While I obviously use this diary to vent, which I did today, I feel I should more fully explain today's comments to those new to looking over my shoulder.

For those new to this journey, today's missed opportunity and reference to last year's home run wasn't about greed ... which couldn't be farther from the truth. Instead, it was about what drives the long-term P&L in this business ... and that is many small (and a few large) losses that must be offset by those occasional home-run gains -- in addition to the steady modest daily keep -- to drive a significant long-term bottom line. And this point is precisely what many scratch traders miss and is often the missing link that separates them and part-time hobby traders from the tiny minority that make significant long-term income from trading.

Of course the concept is similar to (1) my trading day where much of the day's income is made from a few trades amidst the 20-30 sequences, as well as (2) poker where cash players make their keep from those rare large hands, or tournament players who make their keep from the small # of high-placing tournament results. The rest is usually offsetting chop. Or as has often been said, you can't eat like a bird and crap like an elephant.

Said another way, you have to be like Tom Cruise in A Few Good Men, who went for the jugular when Jack Nicholson was on the stand when he sensed everything lined up and the time was right. Who could ever forget:

Jessep (Nicholson): You want answers?
Kaffee (Cruise): I think I'm entitled to them.
Jessep: You want answers?
Kaffee: I want the truth!
Jessep: You can't handle the truth!
Later ...
Kaffee: Did you order the code red?
Jessep: (quietly) I did the job you sent me to do.
Kaffee: Did you order the code red?
Jessep: You're goddamn right I did!!

If you recall, while Kaffee had prepared to push the issue and get Jessep to admit he ordered the Code Red, he was only going to push it hard if he sensed he had Jessep on the ropes. And so it is in this business as well. You had to recognize heading into Wednesday's open there was a world of stuck shorts after Tuesday's action who had to cover on any initial drop ... which was also clearly evident during the overnight Globex trade. And that is why the morning after a monster trend often provides very high probability opportunities, especially if the first move is toward the most recent trend support. As with poker, it's not about your hand ... it's about the other guy's.

100% probability? No such thing. Yet it was darn high and like being dealt pocket Aces and seeing A-A-K hit the flop. And you had to be at the table to get dealt the dang Aces.

Yet perhaps last year's daily profit distribution explains it better in pictures than I can say in words. Note the "tail" of the curve to the right is what drove a significant amount of the bottom line (7-2 ratio for # of days exceeding +/- $40K), and currently if I were to draw a 2009 curve, there would be one large loss to the far left (albeit the sole loss of 2009), and none to the far right ... the exact opposite of what I need to see. And this is exactly what is separating my 2008 vs. 2009 performance ... not going for the jugular when the probability is right.

So it's not about greed. Not at all.

It's about not falling into the trap of a scratch trader, and instead driving the long-term bottom line.

It's about "handling the truth".

I'm out of my isolation chamber now and have reactivated the comments. Thanks for respecting my privacy.

Wednesday Notes - Five Stinkin' Minutes

4:00pm I'll be frank as always. I was as aggravated with my trading today as I've been with any day in the last several years, and for that reason am heading into the isolation tank this evening and have thus turned off the comments for today's post.

Suffice it to say that I lost a major chance at buying the hell out of the initial post-open retracement (my all-time favorite sequence), because I couldn't be at my trading station until 9:45am after ES had popped 8 points off the first pullback. Anything under 720 on the first TICK retracement was a high-probability GIFT ... no other way to say it, and the sequence was very, very similar to the $70K+ day I had in 2008 when I loaded up on the first bungee support.

I was ready for it, especially after watching the Globex trade since 5am, yet had a commitment I just didn't reschedule, thinking I could be back by 9:30am. And I should have. There are times in this business you have to cancel anything short of a wedding (your own) or funeral, and today's open was one of them.

It was frankly all I could do to reign in the emotions and try to make something out of far lower probability sequences after that "gimmie" played out. And it was a major struggle all day to scrape together the ridiculously teeny +$5K chip gain I ended with -- knowing I should have easily earned 1-2 week's pay today -- as my emotions kept returning to the morning opportunity loss. I was teetering on tilt big-time, and am still aggravated as I write this.

You plan, and then life happens. On top of that, I'm heading out of town Thurs PM and Friday and will need to rely heavily on my laptop ... assuming I haven't thrown it through the door by then.

Yes, I realize I've only had one net loss in the last 49 trading days. Yet this missed opportunity hurts ... bad.

Not a good way to start my 49th year.

P.S. Sorry if anyone found yesterday's initially posted blog photo to be offensive. I was unaware of the source and simply Google images that fit the day's blurb. It has since been replaced. And thanks for yesterday's well wishes.

Tuesday, March 10, 2009

Tuesday Notes - No Complaints

4:30pm Chalk today up to the investors and swing long traders as the market finally decided to give them a few crumbs falling off the trading table which has been set for the last nine months or so. At this end, I spent much of the early morning probing shorts on the gap and surge, before focusing long for much of the rest of the session ... which was tough given the low number of acceptable-risk wholesale entry points.

The net result was essentially a wash (+$1K chip gain but barely worth mentioning) on a day where (1) I had to be away from the PC during a couple of peak times (including the midday surge ... my only regret for the day), and (2) where my mind was often wandering to thoughts of my mother who underwent hip replacement surgery this morning at the age of 81.

And so it was that my focus and interest were both less than stellar, which is often the recipe for a disastrous result ... especially in a run-away market. Yet the mind and focus must now sharpen as we turn to ... repeat after me ... possible high-probability morning after trend day oscillations where liquidity providers typically make up for losses incurred on monster trend days.

All things considered, I'm actually not sure why I too didn't incur a loss at this end, although the VIX and TICK both combined to keep me away from going for short reversals, which helped keep me out of trouble after the early short attempts. I was certainly looking to load up on any double bottom on the 2:50pm retracement, but all we got was a single spike which left me settling for small bear trap extensions on the turns back up where I don't normally size as strong.

So call it a good day for investors and traders with the mental dexterity required to recognize today's momentary change in pace.

And considering that 48 years ago, my mother gave this trader his first breath (after having a devastating still-birth two years earlier ... lest I wouldn't be here), I shouldn't complain about a darn thing today.

Thanks Mom, and I wish you a speedy recovery.

Monday, March 9, 2009

Monday Notes - Blind Squirrel Stuff

3:45pm There's just something about Monday mornings that I hate, and I traded today's morning session worse than a rookie watching three fast balls sail over the heart of the plate as my head just wasn't yet into the rhythm ... despite one of my favorite opening sequences (gap down to prior day support after a monster closing trend) that I would normally be all over.

At so it was that I sliced and diced my way to a nice morning draw before finally aligning my brain to the the beat of the market (instead of to the beat of whatever was going on in my head) from -- ironically -- 12:30pm - 1:30pm. I say ironically, because that's when trading opportunities are often at their poorest ... yet the small bull traps with downside extension potential were enough for me to give it one more go to try to get with the program, and it was enough to allow me to turn the day into a modest, yet much-improved +$8K chip gain. Note the day's scorecard pretty much reflects an average of the entire day ... I could easily have scored everything red in the morning session.

From that point, it was pretty much stay on the sidelines for the rest of the session, aside from providing some light afternoon liquidity after getting back in rhythm.

So whether it was (1) adjusting to the time change, (2) recovering from a weekend where I pretty much shut my trading brain down after Saturday's post (note I didn't post on Sunday ... which is a rarity) and spent some quality time with my family (oldest daughter home from college), or (3) the subconscious effect of a rather large weekend purchase (remember the story of my car Grace!), the motor was misfiring.

Fortunately, there's always another bus around the corner, as well as probability that eventually you'll find your game.

And as Art Cashin says, "Even a blind squirrel can find an acorn every now and then."

I'd simply add if you can't find one ... keep looking until you do.

The only other option is to go without food.

Saturday, March 7, 2009

The Weekend Trader - Throwing Down the Gauntlet

Some thoughts on this weekend as the 2009 countdown clock has now moved under the 300 day mark, which tells me the 2009 game is in full swing and I need to keep the recent momentum going.

"No Regrets" - Some diary onlookers have commented favorably on my adding "No Regrets" to the daily scoresheet. Over the years, I've found focusing on a goal of having no regrets by the end of the day (with or without a formal scoresheet ... which remember I just began using recently as an experiment) can be a huge help in avoiding the woulda/shoulda/coulda hindsight pain.

This concept came in handy when I first pursued a trading career, especially as I -- like everyone -- drove through the early potholes, ruined a few axles, and occasionally thought about giving up. And after Tuesday's trade, it became clear that for some reason I'd begun hesitating at times and needed some way to recapture trust in my instincts and simply accept the lesser probability outcome if I was wrong.

Obviously, it seems to have helped ... at least a little bit.

Indicator Preference - I still occasionally get questions asking me why I don't use certain indicators, the most recent one addressing candlesticks. My canned response -- which btw will never change -- is "why do some people like black cars and others red?" Or said another way, if I want to know how cold it is outside, I have several choices ... check the thermometer outside the window, check my Google home page, tune into the Weather Channel and wait for "Local on the 8s", or step outside and feel it. I don't need to check them all! So I usually just check the thermometer and then confirm it when I step outside. And I don't care if the thermometer is digital or mercury based.

When it comes to charts, it's the K.I.S.S. rule for me and I simply try to keep my charts as basic and uncluttered as possible. Some of the charts I saw at the Expo would make one's head spin. Hey, if you want to drive a Ferrari -- or perhaps a better analogy is a Lear Jet ... and on auto pilot for that matter -- down the street to the grocery store several times a day, then perhaps you're more interested in the fancy plane than getting the goods. Yea, I know there are lots of vendors selling Lear Jets and auto pilots ... 'nuff said.

Don't get me wrong ... I like toys. But I'd rather be focused on earning income. Plus, for many younger traders, "toys" are a crutch ... pure and simple ... and are like trying to cure nearsightedness with Aviator sunglasses. And while crutches can of course help, most people who use them just need to learn how to walk.

Hell, all I know is this. Crutches sold to people who should just get off their a$$ and learn to walk make money for crutch vendors. Fancy PCs and displays put money in vendor pockets, and guru horse race advisory "do this" calls put money in guru pockets. Both are crutches. There are only two pockets I'm interested in putting money in ... and I happen to be wearing both of them.

And while I don't give advice on this site, if it were me teaching my daughter to run to the store and back, I'd say, "There's the car. It's proven to be highly dependable, has an accelerator, brake, and steering wheel, and the store is right there (pointing). See you in ten minutes."

I'm not kidding when I say much of my trading is done on a 11" laptop when I'm traveling, and it has no detrimental effect on my trading. None. And even my main trading station consists of a single trading screen. Yea, I know, it's not eye candy ... but I don't care for high-priced junk food.

As with life, less is more for this trader ... a lesson I've learned many, many times in my soon-to-be (next Tuesday ... hint) 48 years on this planet.

Trader Transaction Tax Updates - A reminder that Green & Company posts occasional updates on their view of the tax issue on their blog. I check it from time to time, and there was a recent update on March 4. My most recent comment on this can be found at the end of Wednesday's post.

Views on "Ejection Lever" Stops - As I've often said, I'm a huge believer in managing risk, yet rarely use "stops". Huh?? Well, let me clarify that I rarely use my definition of a "stop" which to me means completely forgoing an attempted trade sequence when the initial premise for the trade is no longer valid.

Now we need to keep three thing in mind. First, I manage risk primarily with size. Second, I'm usually beginning to enter when prices approach wholesale levels ... meaning I already have a decent starting hand, so the probability is usually pretty high and I've got to be pretty damn wrong for the market to move hard against me. And third, I often scratch and reenter trades -- which I only consider as temporary pauses to reassess, followed by re-entries at better prices or upon further confirmation -- which are not stops.

So to me, stops are the final "cease and desist" order.

OK, so when do I use them? Well, I had to dig out the tool on Friday morning after the range break to the north on strong volume failed to do anything other than pause on the pullbacks (see attached chart; 5-min on top 60-min on bottom; click to enlarge). So the sequence went something like: provide liquidity for the panic short coverers, cover on the retracement toward the mean, and then position 2 or 3 times to reverse into the pullback long entry, scratching several times along the way, before finally "stopping" pursuit.

Yea, I know the 60-min was down, and had there been a double top of sorts, the entire wholesale world would have been shorting the hell out of any weaker second pop ... too obvious of course. Yet I certainly expected there to be what I call some interim 5-min vs. 60-min ping-pong activity. But the market of course had other ideas, and I had to pull the ejection lever.

2009 Goal Update - After toying with another slightly higher figure earlier in the year, I've decided to not fix what's not broken, and have adjusted my '09 bottom line goal to mirror the initial '08 goal of $1 Million. Should I exceed it, I'll do the same thing as last year in terms of setting it as a trailing stop and being on a 100% free roll, yet should I earn only a penny over it, it will be an extremely satisfying year to go back-to-back.

And yes, for the first time in a while, I personally revisited the final 2008 "Night to Dance" diary entry the other day (which btw was always meant primarily as a motivational tool for others), which included the following blurb:

Regardless of what happens in 2009 and beyond, no one will ever be able to take 2008 away from me. Ever. Like other far more important life milestones, the year will find its own place in a corner of my heart that I'll be able to tap whenever I question my ability to conquer a challenge in front of me.

Why did I look back? Well frankly, I needed a morale boost. For as extremely harsh as I am with my own trading and performance day in and day out, I needed to tap that feeling -- if only for a brief moment. I needed to see that carrot on the stick.

As I mentioned in
last weekend's video, the industry's top CTAs rarely -- if ever -- have two exceptional years in a row. As such, some have recently suggested that my 2008 performance was an anomaly, and that it would be impossible to sustain the necessary focus and skill level to have back-to-back million dollar years, especially in "this market environment" (whatever the hell that means ... last I checked markets still go up and down).

At that very moment, the 2009 gauntlet was thrown down and the internal bulletin board material went up.

I suppose some will never understand that rattling the beast only makes him hungrier. Well, consider the cage door opened.

And should I fail? Well, I'll have no regrets (** see footnote below).

Have a relaxing and peaceful weekend.

** btw ... I don't plan on failing.

Friday, March 6, 2009

Friday Notes - Weird Day; Decent Week

5:00pm I'll keep today's post short for now as I'm tired, which showed toward the end of the day in overtrading the 2pm-3pm slop in anticipation of the short squeeze that didn't happen until later in the session. Talk about a cruel tease ... you knew it was coming, yet leave it to the market to finally do it after everyone looking for it gave up!

Frankly, I imagine a lot of traders were frustrated today, and I could have easily been roadkill -- a.k.a. Maverick in Top Gun getting caught in the jet wash -- had I not eased up on the throttle and grabbed the ejection handle (probably a terrible metaphor, but you get the point).

Yet considering my low energy level today, the early-day squeeze that had absolutely no bounce (which I fished for on the retracement ... more on that over the weekend including my view on "ejection handle" stops), and the mid-afternoon slop I mentioned, I'll take the +$11K chip gain and close the week at a decent +$54K, which is a bit more like when the motor was in full gear in the fall of 2008.

And while it seems that I'm finally starting to find some rhythm, it's important that I don't lost sight of the "cornerstone" fictitious draw concept -- which I haven't referenced much lately, yet reflected one of the key mental breakthroughs for '08 that I can't lose sight of -- which is to view this week as a disaster when Monday rolls around to avoid any chance of resting on laurels. So on Monday, I'll need to be in focused comeback mode.

I'll post extensively over the weekend as my brain is in full gear on tax issues, changes to the scorecard (I'll elaborate more on the "No Regrets" idea), and other thoughts. In the meantime, I'm going to unwind and have some fun at a local cash game tonight, so I'll respond to comments on Saturday.

Oh, and I managed 4th place last night at the table. Still in 3rd overall, but the gap continues to close.

Look for "The Weekend Trader" posts as usual over the weekend.

Thursday, March 5, 2009

Thursday Notes - A Glimmer of Hope

4:15pm Well, there may be a glimmer of hope after all [for my trading ... not for investors], as I made a few adjustments today that seemed to pay off to finally allow me to grade the bottom line dark green for the first time this year ... albeit barely at +$15K which is my lower end threshold for dark green, so there's certainly nothing to shout about.

First, I've modified the daily scorecard to now include grading both trade entry and exits (vs. lumping them both together), while adding a "No Regrets" objective, which is exactly as it suggests ... having a recurring goal to end the day with no regrets, especially in terms of not hesitating in taking the trade when the opportunity arises.

I also added emphasis on the sizing component of the scorecard to emphasize adding to positions where I feel I have the upper hand (btw, adding for me is simply adding a Tick or two higher ... we're not talking about establishing long term intraday positions here).

And finally, I'm trying my darndest to focus on increasing my contract sizing during certain times of the day from increments of 15 to increments of 30.

In terms of technicals, the indicator of the day award goes to the VIX, which gave little reason to go long for anything other than scalps. The 15-minute price chart of course looks like a mirror opposite.

So while I still have a long way to go, call it a possible breakthrough which only time will tell if these slight adjustments will kick the brain back into "2008" gear.

We know one day means nothing.

As always, time will provide the true answer.

And here's the quote of the day from Briefing.com's midday update:

... yet the bottom line is that despite some very intriguing valuations down here, this is still a scalper's market, making predictions that go beyond the next few hours a hazardous undertaking.

I couldn't have said it better, except perhaps to change "hours" to "minutes".

btw, I know I'm a bit behind on comment responses ... please be patient as I catch up and continue to check prior day's posts for follow-ups. Plus, poker night tonight. Still 3rd with 4 weeks to go, but closed the gap a little last week with the 2nd place finish.