Friday Notes - The End is in Sight

1:00pm It's been a relatively quiet day thus far (of course every time I say that the market goes nuts), and I haven't been particularly on my game today despite the normal morning-after-trend action as I've found the pace to a bit awkward. That's my excuse anyway.

Nevertheless, the day is a plus thus far with a modest +$9K chip gain due in part to some decent 3am-5am DAX and FESX sequences shorting off yesterday's resistance, and I'm officially in the "don't do anything stupid over the next 3 hours that would cause you to stew all weekend" mode. I can tell you some horror stories from early in my career about ruined weekends, but we'll leave that for another time.

Both Europe and the U.S. hit initial resistance at yesterday's key trendlines, although as is often the case the markets didn't make it particularly easy with some headfakes which required conviction to stay in the trades. Some stops and re-entries at this end are another partial cause for the modest day's gain. There was also a nice Europe opportunity around 7am ET, but the man has to shower some time, and that's about all I'll say on that.

The hourly downtrend remains in tact for now, and all I've been doing for the last hour or so is providing light liquidity with teeny 15 lot sizes, grabbing 1/2 point here and there. On the other hand, the 5 & 15 minute charts which were power houses yesterday have been pretty useless as is usually the case on the next day. The name of the game is always finding the market's pulse, and again day 2 is often the opposite of day 1 (in part because of poor traders who try to trade day 2 like day 1 after they're ticked at missing day 1 ... thus losing on both days!)

2:55pm Going to call it quits as I still can't quite match today's rhythm and things are getting a bit wild. Nudged the count to +$10K on the day and +$42K for the week, and am taking my chips off the table.

All in all, an acceptable start to this year's final table.

7 1/2 weeks to go, which will include a couple of Holiday weeks with suspect volume and opportunity. The end of the race is in clear sight and I'm now slightly ahead of the French guy to my right and ahead of record time as we sprint for the finish. The breathing is definitely labored and I continue to run largely on momentum and adrenaline. But I have to win. I have to outrace and outsmart him over the remaining laps.

No one ever said a 52-week million dollar race would be easy, and I've discovered a new found respect along the way for every self-made millionaire that's ever made it. It's work. At lot of work. A llllotttt of work. We want it to be easy, but it never is. You have to work harder than 99.99% of everyone else and want it even harder. In prior years, I didn't have the necessary sustained fortitude. This year, I committed to no excuses. Failure remains no option.

Who'd have thunk a 47-year old would be leading the race at this point.

But it's not over yet.

Not for another 7 1/2 weeks.

Thursday Notes - Monster Trends

3:11pm - OK, I've ordered my PC from Dell which should be here in about a week. I went that route as my TT trading platform runs on XP and Dell still provides that option. So I'm on my backup system.

Having said that, today was a monster trend day with the 5 & 15 minute trends in perfect play. I mean you rarely see both timeframes in almost perfect formation as noted in the posted charts (click to enlarge). At this end, I focused on contra-trend emotional extreme entries for the most part, and exiting on the snapbacks and put in a pretty decent day to grow the chip stack by a little over +$26K with the proceeds spilt about equally between Europe and U.S. markets. Eric: +$9K USD equivalent from FESX as I get used to that rhythm.

Which brings up three points. First, many years ago I would have gotten hammered on a day like today by doubling down on fades or going for reversals and stopping a hundred times (like many traders did today which results in the monster trend ... duh!). The key though if entering long on the four hour trend-a-thon is knowing such entries are only extreme contra-trend scalps with exits back toward trend support, and managing the trade and expectations accordingly. They are not intended to be trend reversal entries. I like these entries because trends rarely last as long as they did this morning -- and thus trend pullbacks grow more risky the longer the trend lasts -- and they're usually either profitable scalps or a bonus reversal entry on the latter ones.

Second, the blue and red lines on my charts reflect 15 & 20 period moving averages. Many have asked me over the years which is right? Duhhh, there's no such thing. The key is to have something that provides a reasonable view of trends. MAs, 3 Line Break, ADX ... they're all simply trying to provide a general backdrop in terms of trend action. Precision kills in this business. I simply like to view both as sometimes there are probes beyond the 15MA and it's easier to see the "trust trend until broken" principle with multiple lines.

Third, today again confirms that "stuff happens" in this business, and we simply move on. As I mentioned yesterday, Wednesday morning was a mini-horror show for me. I was off my game much of the morning, which then got worse when I lost my station when I was long about 15 DAX and 30 FESX right before support gave way. And no, I don't use auto-stops ... they're all manual as I again prefer to manage risk via size and manual stops using judgement. The point is we just move on. We don't fret, we don't curse (OK, I broke that one big-time, so let's forget about that one), we don't blame anyone, and we don't stop trading ... we simply keep moving. And to that point, I encourage you to re-read the red paragraph in Friday's post.

3:33pm Banking the chip gain and not even thinking about placing another trade. Will watch the market into close to set up the morning.

One thing I do know is that I'll need to catch up on my sleep this weekend big-time. Yet with Europe providing ample opportunity, you have to fish when they're biting.

Oh yea, almost forgot about the VIX chart ... not a bad indicator either. If you see longs for anything other than contra-trend scalps, you're looking at something else. Check out Tuesday's video for more on that.

Wednesday Notes - A Beautiful Draw

That's right. I'll sleep extremely well tonight with today's -$13K draw. Seems my old reliable trading station decided to blow a gasket right in the middle of a major trade in the Europe session where I was a bit early on the 60-min retracement, and I spent most of today clawing back from an early abyss.

Bottom line is it could have been (and was) a helluva lot worse, but I had a very strong performance in the afternoon U.S. session once the 5 and 15-minute trends kicked into gear, with the majority of profits coming on shorting pullbacks heavily.

As they say, stuff happens. No biggie and I'm going shopping for a new PC tonight. (So no PalTalk session while I sort things out.)

** VIDEO ** Poker, VIX & Mkt Rhythms

On this election night, I discuss some of my thoughts on how poker has strengthened my trading, the tremendous power of the VIX, and the market's evolving rhythms.

Tuesday Notes - A New Game?

1:47pm Just as we expected, there's a new game in town for the moment in terms of rhythm, pace, and price action. It's admittedly taking my eye some getting used to as the days of minute-by-minute emotional price spikes have subsided for the time being. Yet the VIX continues to provide a strong backdrop in terms of rhythm expectations, and I've done fairly well in seeing it and adapting -- although I need to keep an eye on my sizes which I haven't adjusted much from the past few months which is resulting in some profit suboptimization.

Many of the best patterns and pace came in the Europe session in terms of breaking Monday's logjam to the north, with several tradable pullbacks along the way. I found the U.S. gap up a bit tougher to trade, and as a result, about 1/2 of the day's +$12K chip gain has come from the DAX and FESX.

I again stress to myself and those looking over my shoulder that so long as volatility is subdued, I do not expect the $30K-$50K days of the past few months, simply because my trading style is more suited to volatile markets where trader emotions are at their peak. And while sizes can be adjusted to accomodate the changing winds, I'll be perfectly content with performance of the earlier months of 2008.

I've posted the 3am-6am (U.S. Eastern Time) DAX chart, which I suppose could be entitled "Anatomy of a U.S. Gap", or "While You Were Sleeping. Fortunately, we trade in a 24 by 5 global marketplace where there's no such thing as a "gap up or down". At this end, I was up around 4:30am and traded the patterns OK, although I left more on the table than I would have liked.

2:04pm VIX trying to cross up on the 15-min, and we're also stretched on the 60-min chart, so anything goes heading into the afternoon and there's the possibility this respite was short-lived, but time will tell.

2:19pm That's a bit more like it in terms of my preferred rhythm. Gotta love it when that 15-min VIX crosses to the north. Picked up a few extreme emotional scalps. (If only I could read other poker players as well.) Chip count now approaching +$13K.

Approaching my witching hour in terms of less-than-stellar results (much like my late night poker performance), so going into major gain preservation mode for the rest of the day.

2:29pm 992ish holding as interim support ... scalped a few longs off that. Got some "ping-pong" trade patterns here as short-term trends (1 & 5) are down and long-term trends (30 & 60) are up, so anything other than scalps questionable. Chip count now over $15K, and given the trend conflicts, that may be it for me.

3:00pm Calling it a day. I don't care to flip a coin heading into the last hour. Any run should set up the morning trade.

Monday Notes - Little Interest

3:10pm Simple post today. Little volume + little pace = little interest at this end. Volume has been incredibly light on this pre-election day Monday, and my primary goal today was to simply keep moving, albeit lightly. To that end, I've begun digging my way to the 11/30 surface with a baby step +3.5K chip gain, and am closing it down for the day.

As I said at the end of October, I'm not expecting the windfalls and volatility of the last few months, and it will undoubtedly take some time to adjust to the new rhythms and adjust my sizes and trade frequency accordingly. Fortunately, results of the last few months have bought me time (remember, that's the only thing trading profits/losses do ... allow us to gain or lose time) to either get used to the new rhythm or sit out if I simply choose to keep things light for a while. Such is the benefit of maximizing opportunity when volatility presented itself, which certainly makes it easier to sit out non-moving markets.

I imagine there may be some who appreciate the lull in volatility, and who may actually be able to trade these markets easier than the Sept/Oct monsters. For them, it may be their turn to shine now. At this end, I'll sit back a bit until we get at least some improvement in volume and pace before getting too interested in getting back into high gear.

As I mentioned last week, my main goals for these final two months are incremental gains balanced with chip protection. To that end, I'm satisfied with today's very modest "first hand" of the final table as I get a feel for the new game.

The Weekend Trader (Mohegan Sun Edition)

I suppose what goes around comes around, as I got back all of Saturday's Foxwoods loss and more by winning a $1K pot at Mohegan Sun with my quad Jacks beating out an Ace-High flush.

I was admittedly a bit lucky -- just as I was "unlucky" last night at Foxwoods, as here's how the hand played out:

I had pocket Jacks, raised to $12 pre-flop (we're playing $1/$2 no-limit Hold 'em), and got six callers ... to my chagrin. The flop came J, 8, 5 ... all diamonds. I checked, as did the guy with the flopped flush (of course I didn't know it at the time), and then one guy bet $25 (there's about $90 in the pot by then). I then raised to $150, not wanting anyone with a flush or straight draw to call, and the guy with the made nut flush goes all-in with his $800 stack. At that time, I had a $500 stack that I'd quickly built from the $300 buy-in.

It was a tough decision, but I figured he was likely on a draw and was doing a semi-bluff, which if true, had the odds slightly in my favor. Of course, he could have had (and ultimately did) a made flush and didn't want to risk losing to a full boat (which was what he was probably thinking), yet even if that was true, I at least still had some outs if the board paired. I wasn't figuring the case Jack would show. So I bit the bullet and called.

Thankfully, the case Jack came immediately on the turn, allowing me to take down the largest pot of my modest poker career of over $1K.

From that point, I only risked the amount over $1K for about two hours (aka "trailing stop"), before heading for home with exactly $1,005, or +$705 from my $300 buy-in. And yes, that's the actual chip stack pic taken about 15 minutes before I called it quits. Each stack is $100.

Grades? I'd say A for luck, an "Incomplete" for the decision to call (the call is likely highly debatable ... comments appreciated), but most importantly -- an A+ for putting the trailing stop in effect after the hand to lock in the net two-day gain and close the weekend on a high note. The trailing stop was of course "borrowed" from trading ... and is a concept I occasionally have trouble implementing in the last hour of both trading and poker nights ... so perhaps trading is helping my poker as much as poker has helped my trading.

Either way, the weekend's net efforts were good reinforcement of proper trading practices, including leaving Foxwoods Saturday night when I wasn't on my game and before I did any further damage, and starting today with a clean slate and shutting everything down shortly after I got back in the green. I also felt I read the other players' emotions well in today's session, which is another strong reminder that trading -- like poker -- is all about reading the other participants and taking the opposite side of the emotional play. Another good reminder for "chartists" who don't understand what charts truly reflect ... human emotion.

Plus I had a lot of fun.