The Weekend Trader (Saturday Edition)

I did get some decent sleep last night, although as my body is still slightly aligned with Eurex hours, I find my self awake earlier than I'd like this morning. So it's time to post a few thoughts triggered by this week.

Blog Perspectives - I do continue to peek at the blog stats every now and then to get a feel for whether there's sustained interest in my constant babbling, and if data means anything, the interest level continues to grow at a rate similar to Friday's PM ES climb -- and merely from word of mouth which is how I'm going to keep this. If you've recently chosen to look over my shoulder in this manner, I strongly encourage you to check out my July 25 post, which addresses why I choose to narrate to actual dollar results, especially since doing so goes against the grain of what I've done in other forums and has seldom been done on the web.

Over the past decade, I've looked for ways to break new ground in this industry, whether it be developing trader teaching simulation tools, filming my trading live unedited for multiple days, or simply posting candid commentary in daily or monthly industry publications ... some of which made the editors apprehensive and for which I had to fight to get published without edits.

Yet those are past lives. This effort is simply another attempt to further strengthen and perhaps bond a group of interested traders where I (and you) can share anything and everything at any moment ... with the exception that my trading focus is dedicated 100% to just that -- trading -- during the day.

Comments remain highly welcome and encouraged.

Integrity & Accountability - At this end, I've discovered that the blog helps push me and keep me accountable to someone other than myself ... for we can easily deceive ourselves (been there). And speaking of accountability, a reader recently asked me if I'd be willing to have this year's narrated results validated by an independent party. This was my response:

No problem on verification. My books have always been open to my past publishers, and once the race is over and the books closed on 12/31, we’ll find the best way to make that happen. Industry and broker integrity references will also never be a problem which I can email upon request.

In the meantime, I HAVE to keep believing every day that the fund is down substantially and trade accordingly -- else all is for naught -- and won’t personally view the balance again until 12/31 [see the July 4 “Cornerstone” post]. At that point, we'll all find out whether the tree is a Chinese Bamboo or Elm.

Simply put, I feel strongly this business should be 100% about integrity and accountability, and that those with a public voice -- even with a personal trading diary such as this -- should carry a much higher standard than others. Anyone can hide in a chatroom or blog behind a fictitious name and share only partial -- or even worse -- false information. I've seen those perils firsthand -- including highly destructive battles of egos as people who think they can read a chart or two attempt to self-promote themselves to "guru" status -- and the damage they've inflicted on thousands of traders has been unfortunate and distasteful. There's of course some good stuff out there, but it remains in the tiny minority.

As I said when I started this new journey, I'm not looking to sell anything or try to elevate myself to any status other than simply one who is aiming for personal peak performance. Ultimately, I will some day be fully accountable for my actions when life's journey is over. Talk about the good, bad, and ugly! Then, there will be nowhere to run, and no chatroom nickname to hide behind.

I've made more than my share of mistakes in this life and will continue to. Even in this business, I make at least one or two poor decisions every day and did so on Friday. One of my greatest pleasures is when a former student would say to me "I didn't realize I could make so many mistakes and still do well." Such is the danger where "chatroom speak" makes people believe no one has a loss, and that every trade is appropriate for every participant.

Maybe we need to change the overused "Make your winners run and cut your losses" to "Maximize the good, minimize the bad, and continually forgive yourself."

To err is human. In a business where results are based on probability, it's also a requirement.

Enjoy the weekend.

The Weekend Trader (Early Edition)

First things first to complete today's earlier post. After taking that midday break, I did nibble on a couple of afternoon short attempts looking for turns south, yet scratched/stopped on them which slid today's final chip gain to +$25K. I was actually surprised that that market didn't do more of a P.M. about-face after the initial squeeze and figuring traders were unlikely to hold longs over the weekend, yet then again we were indeed stretched on the hourly charts, and the market still closed in an hourly downtrend despite the oversold bounce.

A few reflections on the last couple of days, and I don't have to reach very far to find a few things I didn't like about my trading. First, twice early today I passed on two-point gains in hand looking for larger reversals which turned into scratches and re-entries. I also -- and this is incredibly rare for me -- didn't even pare down as the trades moved to 2 point profit potential. I suppose those were more than made up for my nailing a couple of the ultimate solid moves, but it reminded me that my optimal objective is 1-2 point moves with decent size. And while conditions over the last two days let me get away with it, I'll definitely need to tighten that up as the markets begin to consolidate over the next few days.

Another thing I didn't like was my initial reluctance to trade the first move of the day, as I seemed to hesitate despite reading the market open very well both days. I'll need to nip that hesitation in the bud going forward.

And I'm well aware that the weekend interruption will break me out of this three-day "zone" I've been in. In fact, the teeny afternoon giveback may have been just what the doctor ordered to remind me that trading never remains easy for long. My comment earlier today about "almost laughing" should have been a HUGE warning signal. Fortunately, I scaled my size back drastically on the afternoon attempts which allowed me to maintain the vast majority of the morning gains.

Yet there's no doubt I was in the zone. Market reads, entries, exits, and size management were all aligned nicely from Wednesday through Friday, and it was quite a dance. As I think back now, the eerie feeling reminds me of those times when you catch yourself not remembering making the last few turns on your drive home ... i.e. on complete auto pilot and frankly scary. That's truly how I feel right now as the last few days are a complete blur in my mind.

I also didn't sleep very well last night ... like a kid on Christmas eve ... as I kept playing possible morning scenarios over and over again in my mind. I think I got two 90-minute naps, but that was it. Maybe sleep indeed is overrated ... at least for one night.

And yet it was just three days out of roughly 250 trading days a year ... or a tiny 1.2% sample size. Irrelevant (except for aggregation with all the other days) in the scheme of things.

My wife will tell you my memory is terrible when it comes to certain things. That's not a bad attribute for a trader.

I'll post more thoughts over the weekend.

Friday Notes - Market Pace From Heaven

12:10pm Pinch me. Then again, don't. It's been a long while since I had back to back $23K mornings and so I'm putting the brakes on here. Traded the morning very similarly to yesterday ... again passing on the first fade (which would have been a short this time) and getting into "fade the extreme" scalp mode. Also noticing how much easier the turns are to trade with this rhythm vs. that August from hell ... e.g. divergences, double tops and bottoms, and the ability to trade with extremely tight stops with reentries that don't eat you up. This must be how markets trade every month in Heaven.

15-minute in control heading into midday but my brain is officially toast as the focus over the last two days has been incredibly intense. I truly did enter today's trade thinking I'd just drawn down big yesterday, which helped carry the focus over from yesterday despite very little sleep.

Got good chunks of the 11:04am & 11:20am ES barfs as white towels were lining up left and right, nailing several strong price entries and scaling out for the 2-3 point snapbacks. You could just see traders trying to time the turn and getting frustrated all morning ... including me at times as I was providing light liquidity waiting for the turn and kept scooping up modest long positions every time the traders lost their lunch. (The turn had to happen, otherwise at the current pace ES would be trading at zero in about a week).

Having said all that, I'm very well aware that I have to quickly forget about these last two days, which happen about once a year. The trading will get tougher next week and I'll need to be alert and ready.

If you're new to the blog, please read the early July material ... the results of the last two days are the exception and have to be put in perspective of this year-long journey. I always said I'd post the truth ... good, bad, and ugly ... it just turns out there was some good over the last few days.

Today truly does mean nothing on Monday. Heck it means nothing now.

I'm going for a long break and will post again over the weekend.

12:34pm Hang on ... this is getting silly now ... was about ready to hit post and caught a "would be stupid not to take it" 33.75 short, taking it out on the drop back ... best cover 31.75. Small size though. 15-minute trend no longer in play as it hands the baton off to the 30-minute. This triggers some more thoughts that I'll post over the weekend as in, "When they're handing out free donuts ..."

12:39pm One more sequence ... short from 33.25 ... that 30-min should kick in, but I'll take 2 pts.

12:45pm Flat ... best cover 30.25. $27K net on the day.

Unreal ... too bad the market's closed tomorrow. Will definitely need to eat several helpings of humble pie over the weekend as I almost caught myself laughing.

Need to find that chart ... here it is:

I'll need to come back from this fall on Monday. Damn.

Thursday Notes - In the Zone

11:00am OK, this is getting scary. Very much in rhythm today on ES and the volume is a welcome return. I have no clue what my P&L is and won't look until the next sequence is complete, which will either be a short of an approach toward 1260, or a buy of the next capitulation. Got a couple of two-pointers with decent size thus far, especially on the 10:42am third-push barf where I picked up ES on sale for 52.75, took it out on the approach toward 54.75, and then repeated it again at 10:50am picking it up at 52.25 - 52.75 on lesser size.

We could stay rangebound down here for a bit, but clear initial resistance at 1260 on any attempt back up today or tomorrow and I want that trade.

11:22pm Long ... best price 48.25 ... 45 contracts. Will let it float a bit. Target exits north of 50.

11:28am Flat all but 5 ... took 49.75 & 50.00 on most. Sitting at 50.75 on final.

11:31am What the hell, added at 49.00 ... should get north of 50 easy. If we break 50, should approach 52ish. Sitting at 50.75 and 51s for exits.

11:42am 50.75 exits taken out; back to small position and final exit sitting at 51.50. Definitely in the zone and feeling it today.

Man, an approach toward 1260 would be an absolute gift short.

11:49am Ding, ding, ding ... 51.50 taken out. Next entry a short on any surge north and high TICK reading.

11:54am Shorted 52.50 small size ... 5 min trend in play and should get one more push for 1-2 pts.

11:57am Ding, ding, ding ... covered final 50.75.

EXCEPTIONAL MARKET PACE TODAY ... BEST I'VE SEEN IN MONTHS!!

Noontime P&L check ... $23K on only 681 x 2 contracts. That's a ridiculous Dustin Pedroia type efficiency ratio. Get over it Don ... plenty of day left with ample opportunity.

12:05pm Any strong push north from here should be shortable ... problem is most everyone knows that and it could take a day or some really stupid shorts who forgot to cover in the gift plunge. ES rangebound now, but not leaving my workstation until 4:15:01!


12:22pm Got 1260ish marked on every relevant chart I can find. Don't want to lose sight of it. Trusting until broken (Click charts to enlarge.) ES in no-man's land though for now.

12:35pm Adapting my post-draw comeback mentality to the rest of the day, I need to view the PM trade as if my morning was a large draw (which it has been for many stuck longs).

Step up your focus Don and don't do any more damage by getting sloppy or forcing trades! Push yourself.

12:58pm VIX poised for another leg up and ES another leg down. Watching only for now. No buyers in sight. Looks like Sept will be a bear for long-term investors ... huge resistance to overcome.

1:42pm Little bit of a tricky bottoming attempt ... been dipping some toes in, scratching, re-entering, etc. Holding long core position from 42.00 looking for a PM squeeze attempt.

1:56pm Added long 43.75. 1 min 3LB is now long and this thing is stretched. Sensed exhaustion on last push down. Stop is 41.50 or a 3LB turn south. Room to squeeze hard if we can clear 45.

2:04pm Scratched for now 42.75.

2:06pm No "oomph" (technical term) at all to that last lift attempt. Couldn't clear 45 to trigger panic short covering.

2:10pm Helluva scratch Don. Markets getting ugly. Dow -310.

2:15pm Back in the "buy the panic extreme" scalp mode ... similar to morning barf. Tried for the reversal but was no go. Scalping extremes now.

2:40pm Tricky down here. On sidelines.

3:05pm Not in sync down here. Tough to read. In gain preservation mode for now.

3:50pm No trades.

OK, only a few trades in the afternoon, and nothing with size. Closing the book on a decent and highly efficient $25K day. Clearly, a very painful day for investors. The key at this end is to make today feel painful for me as well.

Today is history ... tomorrow matters.

Wednesday Notes - Classic Post-Trend Day

3:25pm OK, we got pretty much what we expected with some magnificent, multiple-opportunity oscillation market moves -- on both the DAX and ES -- on this classic post-trend day. As I gather my thoughts, I'm actually a bit surprised that I closed my last trade at 12:58pm and haven't traded since, yet I was reluctant to do much with anything but Aces after a strong morning performance. Interestingly, my Globex ES trading was slightly negative and I also passed on buying the first ES dip, but I traded the DAX well during its main session and then had the ES motor purring nicely on a number of subsequent swings in its main session to grow the day's chip count by $16K.

Did pretty well on nailing high-probability shorts on the 10:05am and 10:45am moves toward Tuesday's resistance, and the increased volume has been a nice blessing with trade entries often moving immediately into profit status upon entry, allowing for some risk-reducing scaling down and free-riding. Welcome September!

Adjusting to the increased volume and more predictable pace has admittedly taken a bit of effort, yet for the most part it's felt like getting off the August tricycle and hopping on the September 10-speed ... as it should.

Having said all that, I did get sloppy a bit during the Globex session and also passed on a couple of decent probability afternoon swings which may have suboptimized the day's results somewhat. That should give me something to improve on heading into Thursday, and hopefully we'll get a market push into the mid-1280 resistance area (trusting until broken) to do the dance all over again.

Overall, I'll grade today an A for market reads (not too difficult as it was aided by the classic post-trend day rhythm ... and this time with volume!), B for executions, and a A- for not exposing the morning's chip gain to less predictable PM action.

Yet the only test that ever counts is tomorrow's ... as today's test and every quiz ever taken in the past is now history and completely irrelevant.

The final grade gets released on December 31.

Stay the course Don.

Tuesday Notes - Staying Out of Trouble

3:49pm ES is set to close as an outside day as morning post-Holiday shoppers (the "buy & hold" kind) got absolutely torched. As I suspected, I had a bit a rough time getting the motor running after the three-day hiatus, so I looked at today as more of a stay-out-of-trouble day to get a feel for the new season's rhythms. Given the 30 point top-to-bottom move with few midday corrections, it may not have been a bad ploy.

I did manage to close modestly green -- nothing major though -- by providing liquidity for much of the day with the bulk of my profits coming on shorting the 1:40pm and 3:40pm retracements which helped offset other sequences that scratched or were negative.

Definite interim resistance in the mid to upper 1280s heading into Wednesday, with perhaps the classic day-after-trend scenario shaping up. Should that occur, I'll need to be on my toes in the A.M. to maximize opportunity.

Looking forward to tomorrow.

Monday Notes - Resting Up

10:45am Just a quick entry in today's journal as we have a beautiful day in the Northeast today and I'm thoroughly enjoying a long weekend. And even though the Eurex and Globex sessions have been open, I've chosen to take this extra day as R&R to gear up for what will be my most important September to December run ever. (Two small sequences to avoid trigger-lock and keep the blood flowing.)

The only downside to the weekend was that I lost an all-in hand in a Foxwoods cash game Sunday AM ... losing an Ace-High flush to a Full House where the guy caught runner-runner 5s to pair the board and turn his trips (which I figured he had) into the dreaded FH. Nothing like starting with AQ suited, catching the flush, getting the other guy to bet and even curse when we showed the hands before the turn, and then drowning on a river suck-out. Granted, it was only about $200, but for a $1/$2 cash game it was a decent size $400+ pot.

That hand was the end to one of those frustrating sessions where I laid down (1) pocket Qs pre-flop, (2) two straights at the river, and (3) three two-pairs ... one of which was Aces and Queens ... all of which ended up being the right call. And the one hand were I made the correct decision to not fold pre-river, I lost to the much lower probability. Seven strong hands and all were second-best. Go figure.

At that point, I called it an early day, drove the 2+ hours back home, and spent the rest of the day taking my wife to the beach and then a nice dinner on a simply gorgeous evening. It was the best $200 loss I'd ever experienced. Correct decisions all day long. Let's hope that carries forward into the next few months.