Wednesday Notes - Post FOMC

1:06pm Well, we definitely got the chop as expected, yet the pace has frankly been a bit sloppy ... even for chop if that's possible ... and well-contained within a tight range with pathetic volume with a capital "P". Been keeping size modest (haven't yet seen a clear "all-in" entry point) as a result and have been simply been doing some light liquidity-providing scalping to keep my mind in the market.

Have traded both the DAX and ES sessions with the day-after-trend day mentality with a bias toward the long side on dips and 1-min turns given the downtrending VIX, and the results have been acceptable but certainly not stellar. In the spirit of Yogi Berra, it seems summer trading may not go away fall arrives. Best push back up thus far was around the lunch hour.

Not relying as much on 3 Line Break in the oscillating market as that tends to be a lagging indicator on non-trend days. Might be a better indicator in the PM.

2:24pm Well, for some reason, I just lost my blog draft that I was typing over the last hour (there was some good stuff there too!), so here's a quick and dirty recap. Was getting extremely anxious in the prolonged chop -- from not trading -- and mentioned the tiny # of ES contracts I've traded over the last three days (1,720 Monday, 150 Tues, 846 through noon today, with Tuesday's likely a career low!). It was starting to drive me bonkers and I needed to make sure I wouldn't lose focus.

Was finally biased long shortly after 2pm on the imploding VIX and holding price trends and took longs at 8375 and 8475 at 2:11pm and 2:12pm. Stop was if 1 min 3 Line Break turned back south. Scaled out on the approach to 8800 and am mostly out now. Best exit so far 8725 & took most out at 8650. Holding small portion "just in case".

Most short-term conviction I've had in a while. Had a good read and execution as I was looking for this coiled spring to pop and felt least path of resistance was up, although I kept contract size still fairly modest. Still, best sequence in a while and managing well today, all things considered. It won't be a home run day, but finally got some decent wood on the ball with a couple of solid singles.

2:34pm Taking more out on this price and TICK pop. Best fill 8775.

2:43pm Flat at 8875 and that may be it for me.

That admittedly wasn't exactly my bread and butter sequence, but I suppose you have to eat off the menu presented.

Chip count up modestly on the day $7,700 -- which while lower than most days after trends, I'm OK with today's management. I'd love to see a close at new highs to set an even better stage for tomorrow and stretch this puppy some more, but an hour to go still.

Will recap additional thoughts this evening.

Tuesday PM Notes - The Work Begins

Some thoughts to close the day.

First, I've been slightly curious about the # of hits to this journal since we began this trek less than a month ago, and was somewhat stunned by the huge spike in traffic over the last two days. So much for staying under the radar! It seems Dr. Steenbarger's mention yesterday stimulated more than a passing interest. Brett and I have stayed in touch over the last couple of years, and both his site and insights are top notch. His book, The Psychology of Trading, has done as much for me as anything on any bookshelf, and while he's chosen to deflect any credit for my recent successes, there's no denying his contribution. This industry can use more people like him.

To those new to looking over this trader's shoulder, I strongly encourage you to scan some of the early stuff, especially the posts of the first few days in July and then the July 25 post to help set the foundation for this journal. There are always dangers in taking comments out of context, and that may help you better understand what this is about.

Steve's insightful comment in today's earlier post triggered several thoughts which run parallel to my preparation for tomorrow, so I'm going to think out loud in this evening blog post.

Today's box score: Dow +320; S&P +36; Don's Equity +0 (close 'nuff ... we'll forget the nominal gain)

Tonight's likely reaction by non-traders or intraday swing traders: "Boy you must have cleaned up today!!"

Tonight's reaction from this chair: "Time to go to work."

Days like today used to piss the heck out of me. Initially, my greatest losses were on days fighting extreme trends. And then after I learned that lesson and simply sat out, I had to deal with lost opportunity regret. Then I finally learned to leverage off what I believed was the stronger of market probabilities in the day after a strong trend day and plan & trade accordingly. It took a lot of market tuition capital and years to figure that out.

I greatly respect those who trade well on days when the market is up 300 points. Of course many of those traders have to make most of their income in a handful of days to compensate for the cost of disappointing chop during the rest of the time. Yet it's one strategy. I've simply chosen a different approach ... one that fits my personality and strengths. And since it's tough to trade both types of days well -- except for those times when you're truly in a prolonged "zone" that may happen a few times a month -- why not focus on your strength. Again, it's just another strategy.

Looking back at today, I saw four possible entries that interested me. I passed on two including one when the 10am data was released and the post 3pm continuation trigger. I simply don't typically trade the last hour. I missed a fill on the other one on the post-FOMC spike down, and I caught a small, but very high-probability scalp.

Back to the poker analogy for a second, today reminds me a bit of players losing to someone and then saying, "You called with that crap??" Sammy Farha & Gus Hanson both have strategies built around playing less-than-stellar starting hands. It fits them, they play to their strengths after the flop, and do well over a large sample size and prolonged period of time. Other good players play only quality starting hands. Different approach, same result.

If you're looking over my shoulder, I welcome you. If you're looking for a guru who trades every kind of market well and can predict the future, keep looking. I'm on a different type of journey than spans more than one eight-hour day and includes detours around my personal landmines.

Today's score? Meaningless except when added to the other 249 days. I have a different scorecard that I'll read on December 31. All I know for sure at this very moment is that it's time to go back to work.

Have a pleasant evening.

Tuesday Notes - FOMC Day

1:17pm DAX trading recap so far: Got a full night's sleep and didn't trade. ES trading recap thus far: Fold, fold, fold, fold, small blind, big blind, fold, fold, fold. In other words, two toe-in-the pool trades today which I promptly folded after seeing the flop. Pretty lame day as we await FOMC data in about an hour. Day pretty much following standard pre-FOMC patterns in terms of little personal trading and pathetic volatility. Passed on the early gap and run off the open since Europe had already rocketed out of the gates in its session. Was looking for early pullback long entries, yet the hands all seemed marginal at best and the prime entry continuation entry was right around 10am when the ISM number was released. Sort of like making a bet while the waitress spills a few drinks on your shoulder.

Sooooo, it's back to the blog to stay out of boredom trades and plan the afternoon. #1 objective of the day remains staying out of trouble. There are 250 trading days in the year, with the next one being tomorrow! #2 objective is to fade any extreme FOMC move with small size on any absurd TICK & price spike combination and cover on the reversion toward the mean.

My general thought on FOMC days is that since I want opportunity balanced with low-to-moderate risk, I don't expect many entry opportunities, and that 10am continuation was too close to news for my liking. Yes, trends in place when non-employment data news is released "usually" continue -- and pocket 8s are "usually" a starting strong hand -- but I frankly was willing to pass and wanted to see more hands.

Note to self heading into the PM announcement ... I want a profitable P&L and not excitement. Take it if it's there, but pass if it isn't and come ready to lock and load on Wednesday with your capital in tact. Yea, it makes for a boring blog ... so be it.

2:oopm Would love to see a drop to the mid 1260s on announcement ... good support there for the moment.

2:08pm Changing my TT price ladder from a one-tick interval to a three-tick interval. Buy order sitting at 66.00 just in case and will manage risk with size.

2:15pm Missed fill on spike down by 1.00. TICK wasn't extreme enough. -541 Max ... that was it??? Such is life.

2:29pm No woulda's/shoulda's ... focus. What is next entry point? Tomorrow? Teeny volume. 15 min about the only trend in play and high % played out on that pop. If the market pops and few trade, does it make a noise? Likely move now? No clue. Better call the chatroom horse callers ... they'll have an answer. One thing is certain ... I won't trade the last hour.

2:36pm Still no personal conviction and no PM trades. Looking more like a day off with each passing minute.

2:47pm First trade ES long on holding TICK and supports. A whopping 75 basis points from 7.50 to 8.25. Tight scalp taken out on the short-covering TICK extreme.

2:50pm Frankly very satisfied with management today and closing shop. Missed a stellar sequence on the drop by "that much" ... big whoop. Two scratches and one scalp ... pretty funny. If we run into close either way, you know the drill for the morning. 3pm witching hour approacheth ... not time to force anything.

I'll post some additional thoughts tonight.

Monday Notes

We'll keep today's entry brief as I was called away from the market for the early afternoon. Pretty much scratched on the day as I had some nice A.M. shorts offset by the cost of midday short stops where I was a bit early on the meaty entries before re-entering. I could have managed size a bit better on the morning drop -- as the lame Factory Order data gave an artificial pop toward 5-min downtrend supports, but it was frankly tough getting the blood pumping early on a Monday.

Chart of the day may again be the 1-min 3 Line Break which was a strong guide in terms of the immediate wind at one's back, especially during the downdrift into 11am, and then again after 3pm which kept me from hanging onto any stupid end-of-day longs:




I did put a toe in the water on the PM retracement to the 5 min support, but scratched when it didn't bounce quickly. 3LB was a great guide for keeping me cautious on that.

So call it a draw on the day at this end. btw, I was pleased with my poker game last night. Stopped by Foxwoods for a few hours and played in a small 1/2 no-limit cash game. Bought in for $300 and left a few hours later with $775. Best news of the day was I only played about 5 hands in three hours. The more I dabble with my poker "hobby", the clearer the trading analogy becomes ... this time in terms of making much of your income on a small % of activity and staying out of trouble during the rest of the time.

Call today a stay-out-of-trouble day as we await a pocket pair higher than 9s.

The Weekend Trader (Saturday Edition)

A few thoughts come to mind on a HOT Saturday morning, triggered in part by traderboy's heartfelt comment in the last post.

During a summer week in 2007, I had an atrocious two-day period. I don't remember the exact dates, but vividly recall it was a Monday and Tuesday after a weekend during which I had been shopping for a car to replace my 2000 Tundra pickup. Interestingly, the two days were not too different from this year's early July blunder in terms of magnitude. Now for the last twenty years, my car-buying strategy has consisted of buying clean vehicles that are about three years old with about 50K miles on them -- as this is often when the warranty expires and the previous owners trade them in. I've found it to be a great niche market where I can get great value (heck, I'm a trader).

Anyway, I had been looking for a particular model which would likely become my main mode of transportation for the next ten years, and I wanted to get both a comfortable car and value. The car I'd selected was a BMW 3-Series E46 which had been in production from 1998-2005, and it was now a matter of finding one that had all-wheel drive and was in decent shape. And believe me, that model isn't easy to find as it's one of the most popular and highest-rated models ever produced by any firm. And during that weekend, I'd looked at a couple that didn't quite fit the bill. BUT -- and this is key in terms of a misstep -- I was feeling good about ultimately making the purchase as the year was going well, life was good, and trading had been consistent at the time.

Then Monday & Tuesday "happened" which seemed to come out of nowhere. Looking back, I know I fell into the "Gee, if I can have a great Monday, I can pay for it in one day" trap. Then Wednesday came and I found the car I wanted listed on the Internet -- a black 2003 325xi with about 46K miles in very good condition at an acceptable price. The problem was that given the last two days, I had a huge pit in my stomach and felt I no longer deserved it. And even though it was a used vehicle and the net purchase cost after my trade wasn't that bad (the Tundra held its value well), it was still a significant purchase in my mind. Yet I was continually bothered by the events of the previous two days and wondered whether I really deserved any car with the letters "B-M-W" in it, no matter how old.

Frankly, as I drove the 90 miles to look at the car, I was actually hoping I wouldn't like it. Then when I saw the car and test drove it, I thought ... "Damn, this is the right one". The internal struggle was enormous. I then called my wife and told her I really liked it but wasn't certain about taking the leap. And while she wasn't fully aware of the extent of the prior two days, she knew me well enough to know it was a tough couple of days for me. Yet when I asked for her advice, she said "Do it. You work hard enough and deserve it." Those comments immediately put me at ease, I felt a burden lifted, and I made the leap and completed the transaction over the next hour.

Yet, before I made the purchase, I had to translate what my wife told me from "you deserve it" to "you don't deserve it", because I didn't. We rarely deserve anything we get. Yet I bought it anyway on the leap of faith that it was still OK to treat myself to something that I would enjoy. On the way back home, I named my car "Grace" because she wasn't deserved, yet I was allowed to have her anyway. And yes, I love the car.

Grace has some years on her and if you look closely, you'll see several nicks, scratches, and other imperfections ... just like her driver :-).

And I had no clue that the next day would be the day when my Bamboo Tree would finally break the ground's surface and begin its climb. Through all the years of toil and frustration, I'd frankly forgotten I'd ever planted the seed.

The Weekend Trader (Early Edition)

First things first. I did hold onto the morning gains and cut my size drastically on the few small remaining lures I put into the water. No sense trading late on a summer Friday on the first day of the month. Plus, I didn't see anything spectacular after the morning session. So for the first time in a while, I'd give myself an A on both reads and execution, didn't overtrade, and am satisfied with my performance -- for the moment.

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A few weeks ago, I'd mentioned my recent poker experiences and the profound impact it's had on my trading. And one of the concepts that translates well to the trading industry is managing a growing chip count. For example, one of the huge flaws in my poker game -- especially in tournaments -- is getting sloppy with a large chip count. For example, I find myself playing many more marginal hands, essentially getting away from the tight play that grew the stack in the first place. And earlier this week, I did just that and went from chip leader among the remaining five (of 30) to the first one out fairly quickly. And what's interesting is that it's not like I start playing 2-7 unsuited ... rather I start playing hands like A-8 suited, or a low pocket pair that I don't fold after the flop doesn't turn up trips. Next thing you know, I wonder where the chips went and then have to play more aggressively to get it back.

Prior to this year, dealing with trading successes over a period of time was also a large issue for me. Yet ironically, I saw the problem much more clearly at the card table which planted one of the seeds for the fictitious draw approach. In other words, always play as if you have limited chips. Some traders accomplish that by simply withdrawing funds from their growing balances. At this end, I've chosen to deal with it psychologically by not viewing my balance and simply getting myself to believe a portion has been lost. All I can say is that in eight months of this approach, it's worked. And when something works ...

Which brings me back to this blog. As I enter the second month of my constant babbling after the looooong hiatus, I'm curious as to whether opening this frank and personal diary has been helpful to those looking over my shoulder. I do know hits on the blog have increased dramatically since we began this trek, simply through word of mouth and nothing more. And it's been intriguing to say the least at this end, as I feel a bit like Sidney Freedman of M*A*S*H writing letters to Sigmund Freud for therapy. I think it's been helpful for me, yet the truth will be known at the end of the year when I compare my non-blog performance in the first six months of 2008 with the post-blog performance.

I sincerely view this business as people helping people. Yes, it's a competitive market where equity is shifted from the large majority to the small minority. But to the extent we can support each other and help plant some seeds that grow that minority ever so slightly, I'd love to be a small part of that.

Feel free to comment as always.

Friday's Notes - 'Bout Time!

11:00am Houston, we have market pace! Exceptional volume, flow, and most importantly --PACE -- to start the month. 'Bout time. And after an iffy overnight session where I'd grade myself a D, we have a trader as of about 10am fully in tune with the market rhythm. 'Bout time. Oh where have you been old friend????

Frankly, shortly after the U.S. open I got flat out mad. Mad my executions haven't matched my reads this week. Mad I let this week's opportunities get away. Mad the Red Sox traded Manny. Oh wait, that was relief, sorry. Mad about my fictitious draw to start the month. Mad as in cursing to myself, tired of this bulls##t, and going to finally do something about it. Pissed.

Almost seemed as if the market heard me while at the same time my "traders" finally got in line with the "CEO". Small meeting, but you get the point. Dr. Brett would be pleased. Caught some decent panic entries -- other traders' panic; not mine -- on the 10:09am puke (long), as well as the 10:50am retracement toward 1262 (short).

Goal for the rest of the day is to not screw things up. a $17K morning and starting to dig out of the "hole".

Look for an early Weekend Trader later today where I'd better report I didn't let these profits slip, plus another one over the weekend.

'Bout Time!