Friday - Fool Me Once ...

3:55am Thought I'd post this early chart combination of the DAX market which reflects one of my favorite entries that stopped.

The trade is an early-day pullback entry in the direction of the prior day's closing trend support or most recent signifcant range break, and I've seen this pay nicely more times than not over the years. In this case, I shorted around the 6570 level with decent size, albeit I was still somewhat cautious since the 1 min 3 Line Break trend on the left never turned down. At my end, I do fade the market without confirmation on the lesser timeframe at times, especially on the 15 min charts. Yet the smaller timeframe still provides a caution light.

Anyway, the trade sequence of course didn't work out this time ... I stopped the probing short sequences at 6577 at 3:34am and have been doing some light scalping since to adjust to try to adjust to the subsequent action. Recovered about 1/2 the stop cost thus far, but not yet in my best rhythm this early in the day.

A good reminder that we can try to skew probability in our favor, yet that's all it is -- probability -- and as Grace will tell you, nicks and dings are going to happen when taking the car out of the garage.

Depending on how the U.S. opens, I may try a similar sequence there on the approach toward 1275, but will be ultra cautious as Europe may provide a clue.

4:35am Nap time.

6:23am Pretty sloppy Globex session. ES traded to 1274, but no clean shot. I suspect there may be only one shot post-open on the first sharp move either way.

10:22am Yup ... monkey see, monkey do. Complete carbon copy. Altered strategy again on the fly, this time thanks to a dress rehearsal. Want the first hard pullback long. 1277 area would be a gift ... doubt we'll get it. One this is clear ... there are a ton of stuck shorts that will have to cover on the first move down.

11:13am Not bad. Did pretty well adjusting and going with the flow. Pullbacks up here have been shallow, so been nibbling only. Funny, looking back at my 6:23am comment ... talk about another stampede 5 mins after open. Very little reaction time. Yea, it would have been nice to load the boat and ride the moonshot all the way ... then again, I'd like to win a bracelet at the World Series of Poker. Just trying to grind away like Michael Mizrachi.

11:22am Back in the midday summer nothing doin' mode.

12:07pm One interesting observation is that both of the planned DAX and ES pullback shorts would have worked for decent gains, but in their respective pre-market sessions (2am-3am ET for the DAX). The normal session simply didn't pay.

1:53pm Finally felt like shorting on that last spike on strong 1 min TICK vs. price divergence at 1:42pm. Had been sitting on the sidelines. Averaged into short to 9475 and covered into the TICK drop to zero.

Got a decent bite on that one.

2:03pm OK; major day and week income preservation mode now. Considering the cost of early short probing and stops, I'm OK with today's performance +$7K. A bit more scrambling over the last two days than I'd like, and I'll need to take a look at that. Keeping sizes relatively small in these whipsaws has kept me out of major trouble even when wrong ... and I've been wrong a lot this week.

I'll share some more thoughts on that last point over the weekend in terms of dealing with being far less than perfect and often downright wrong during parts of every day. Duh, today was a good example.

Lots of work left and miles to go before we sleep. Target remains 12/31/08.

Thursday Notes - Blinds, Antes & Patience

11:29am A bit choppy on the seas this morning as clean triggers have been few. Did OK in the Globex session but struggling a bit with the U.S. open as the best wholesale entries have fallen into what I call the "fade and wait" category, which is a blind fade on the extreme spikes and then a hold while the market takes its time to revert toward the mean or range end. Continuation triggers are tough since the market really isn't clearly trending on any decent timeframe and the trigger premiums eat into much of the profit potential, and even the 1 min charts have been sloppy. Pace and feel is incredibly important to me -- more so than chart patterns.

That early 8 point post-open plunge likely caught more than a few gap faders, although early and late day summer dogpiles shouldn't a surprise by now.

11:52am Bought a few tops and sold a few bottoms providing liquidity in this range ... not a good strategy :-). Laying low for a while. Don't have the personal rhythm today so shaping up to be a draw day. Goal for the rest of the day will be to keep today's antes and blinds cost manageable.

The 10am-3pm intraday opportunities continue to be almost non-existent as the summer gets late. September can't come soon enough. Having a hard time remembering the last time I had a 100-contract position on!

1:13pm VIX on the fence ... no help there.

This weekend, I'm going to think out loud about imperfection in the maketplace, and more importantly imperfection at the trader end.

2:16PM Looks like a blinds & antes round today at this end. Nicked up a bit ($4K) but not too bothered with attempts ... gotta get in the pool to swim. Tomorrow may not be much better in terms of volume and pace. Considering taking the day off if this keeps up.

2:47pm I want this pullback short! Sitting at 7525 and 7550.

2:50pm Took 7500 short. Cover orders in 73s. Stop on 1 min 3LB turn.

2:55pm Added 7550. Looking for a elevator drop. Lots of size spoofing and finally a range break. Shorted into a phony sized bid.

2:59pm Covering on the drop. Flat at 7250.

3:03pm Here we go again with the last hour. Careful Don ... not your strength. Not many market supports out there if this implodes. Watching.

3:10pm Doing some wholesale scalping; Strong 1 min TICK divergence last drop. Hmmm ... volume bars ... almost forgot what those looked like.

That might be it. Tough market when there's maybe just one or two meaty entries all day, and you have to be there and be ready to hit it hard. Could have sized larger, but tough when you've had chop all day. Very similar to yesterday in that regard.

3:22pm VIX sneaking up. Early Friday entries may not be bad after all. Flat and watching.

3:27pm Nice rhythm down here ... TICK very helpful on overextensions for short covers or quickie wholesale longs.

3:33pm Bottom falling out; VIX leading the way.

3:49pm OK; nice scalp sequences to end the day. Decided to trade when the market said to, despite the last hour. Who'd have thunk? Kept things tight though. Nice comeback to end slightly green.

Looking forward to the open.

Wednesday PM Charts

Here's a decent picture of what I was looking at for the PM trade sequence. The charts are 15 Min ES on top, 15 min VIX in middle, and 1 min 3 Line Break at bottom. Approximate time of entry is circled:

The three in combination seemed to indicate bias was up (especially the VIX which was poised for another leg down -- even at these extended levels), and I felt the 1-min 3 Line Break would be a decent stop trigger if it reversed back down ... which it of course could have.

Just thought I'd post a picture.

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.