Monday Notes - Turn Up the Volume

6:15pm Will someone please turn up the volume? It seems that both the market and my personal trading volume (446 contracts -- both sides!) have slowed to an absolute crawl. In fact today may be my second lightest trading day of the year. I had about zero interest on the day, except for probing a few shorts on the 1:20pm and 3:15pm breakdown attempts, stopping on both for a -$4K day's scratch.

The main comment I have about the market's recent pace -- or more accurately lack thereof -- is that it reminds me of early September when the pace changed drastically, and it took many of us (those that survived) a few days of realizing what was going on to adjust. Normally, all we can do is minimize the losses until the adjustments are made.

And while market changes can frustrate discretionary (vs. system) traders, I suppose we can't feel too bad as it actually has a similar effect on systems which often aren't able to adapt, and thus get stuck with setups that worked in earlier times but not the present. As has often been said, when you find the key, they change the lock. At least discretionary traders can put the brakes on once we realize what's happening.

At this end, I'm truly looking at the week as a single "trade" ... which for all intents and purposes will likely be my final trade of the year as I mentioned over the weekend. Today I paid for some blinds and a few feeler bets. Yet I need to start seeing Jacks or better if I'm to put much more of my hard earned 2008 capital at risk.

The Weekend Trader - Foxwoods Poker Wrap

Ironically, after one of my poorer trading weeks in memory, I seem to have played some of my most disciplined and focused poker today -- having gotten to Foxwoods at about 11am, playing the $1/$2 no-limit cash game until 4pm, more than doubling my $300 buy-in to $652, and walking away on my "equity" high.

In the five hours, it was three hands that made most of the gains: A full boat taking down an Ace-High flush, and getting dealt pocket Aces twice where I purposely varied my play by slow playing them once and pushing the second time. I still struggle with how to play pocket rockets in a low stakes cash game, as you'll typically get many callers on small raises who can easily beat you on the flop, or else there isn't much of a pot to take pre-flop if you push hard if there's not much betting action. I pushed the second time because it was my last hand and one guy bet $15 with two subsequent callers before me, so I pushed hard, told them it was obvious what I had, and they all laid down.

Yea, I know it's only small stakes. But I still strongly believe the games have helped sharpen my trading and was what the doctor ordered after this past week. There's nothing like a two hour drive, several hours at the table, and a two hour drive back home to think about some of last week's donkey trading moves. Elements I'll try to carry forward into next week include choosing not to post as soon as I sat down, getting in the mega-patient mode, and making several decent laydowns of "good", but second-best hands.

Btw, my current favorite poker player is Mike Baxter, who (surprise) is a hedge fund manager in his "real" job. He's been on Poker After Dark lately, and despite what Phil Helmuth says, is a pretty decent cash player. I'm going to try to meet him personally.

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P.S. If you're looking for Part 2 of the TradingMarkets.com interview, David Penn told me today they've moved it to next weekend, and both Part 1 and 2 will be linked together. In it, I'll discuss poker, betting sizes, and the impact the blog has had on my trading.

The Weekend Trader - 2008 Wish List

Some tidbits on a Saturday Morning.

Hockey or Trading? -Here's a quote from the Eastern Conference Leading (I can't believe I just typed that) Boston Bruins' coach Claude Julien, in referencing last night's sloppy 7-3 win over Atlanta: "Maybe we didn't make the strong plays all the time," said coach Claude Julien. "We're trying to work ourselves out of a little bit of a funk. You're going to say it's 7-3 and we're still doing some good things. The way we played the month of November, I guess the expectations are high for everybody. I think that's why we have a tendency to look for all those sloppy plays at times. There's still a lot of good things going on, but we have to kind of settle ourselves down a little bit to make some stronger plays at times."

Hmm .... you'd think he was describing my recent trading. Just goes to prove once again that trading is indeed a sport ... game, set, match.

2008 Win-Loss Ratio - OK, here's something for the stats folks. Through 11/30, my daily win-loss ratio for the year was 4.15. Keep in mind I define a net gain at the end of the day as a "win" and a net loss at the end of the day as a "loss" ... regardless of the results of specific trades. And you know my feelings on stats ... they're simply an interesting after-the-fact anecdote, and I don't do anything to "manage" to get to a certain number. Doing so would be like a pitcher saying he's planning to throw 80 strikes and 20 balls in the next game.

I can't draw many conclusions from the 4.15 figure, other than perhaps that I screw up about 20% of the time.

Christmas Wish List for the Industry - It's a short list: (1) Either full regulation or abolishment of free and subscription trading-based chatrooms, and (2) Full disclosure of performance results for anyone providing trading or investment results/advice, including "mentors" and chatroom "gurus".

Make a stock or futures "call"?, I want to know if you're trading it, your exact entry and exit fill (missed fills alone would eliminate 90%+ from room "calls"), and your result with full audit rights. If you're not trading it, why the hell not?? And don't give me the "First Amendment", "we can't legally disclose our client's trades", "we're precluded from trading what we advise", "it's simply entertainment", "I'm not really providing advice", "buyer beware", or "I'm a mentor, not a trader" arguments -- all of which are self-serving either for subscription revenues or their own front-running purposes.

As for the last point re: mentoring/teaching, sorry, I wouldn't want to learn to stop smoking from a coughing doctor, learn to lose weight from the hot dog eating champion, or learn to fly a plane from someone who's a "good teacher" but has never flown extensively and successfully. Frankly, I want to see the detailed records of Suze Orman, Jim Cramer, Mario Gabelli, every interviewee on CNBC with a recommendation, and every chatroom "leader". This will of course all but seal I never get invited again to a chatroom interview.

Sorry folks, but we're talking money here and accountability should be first priority. The gig should be up and it's time the curtain is fully opened. If you're legit and can comply with ramped up regs, you'll have no problems. And yes, everything I've posted in this blog would withstand a 100% audit. You can take away my exchange seat if it didn't.


Heading to Foxwoods for a day of poker cash games and to take the mind off trading. Enjoy the weekend.

** VIDEO ** Slowing It Down

Tonight I reflect on this week's draw and plans for next week's final full week of 2008 trading.

(btw, YouTube's servers seem a little slow tonight if you experience slight pauses during streaming.)

Friday Notes - The Week That Was

4:00pm Well, no streak lasts forever and the consecutive weeks of chip gains ended today at 21 due largely to an aggressive overnight position right before the no-bailout news hit that had bids completely disappearing and futures dropping another 20+ points from immediate overnight support and 40+ points from yesterday's closing barf. Shades of my early October sequence, although I have no problem with the entry ... not much you can do when bids disappear and one has to somehow find a way to manage a stop on large size (was probably around 5-6 pts or so ... still beats the full 20 points though). On the comical side, I was only twelve hours early with a rock solid entry.

From there, it was on to some very aggressive intraday scalping (> 8,000 contracts) on the expected "morning-after-trend" oscillations, which I traded OK but not great.

And so we put the cap on an interesting week that in my view was full of difficult rhythms, patterns, and -- most importantly -- market pace given the lengthy market indecision at times and cross-currents with respect to the on-again off-again bailout news. Add to that a week that I frankly didn't trade very well (I'd undoubtedly rate it my poorest week of the year from a skill-performance perspective, and that's all this business will ever be about), and I'm scratching my head wondering how I ended down only -$10K for the week. Then again, it goes to show that the scorecard often doesn't reflect one's performance.

And so ends the week that was. It's now history and irrelevant.

On Monday, all focus is on the week that is.

19 days to go.

Look for Part 2 of my interview with David Penn at TradingMarkets.com tonight. I'll post a direct link shortly when it's up.

Thursday Notes - Order Restored

12:57pm Shortly after 11:30am ET, I wrote the following ADX figures down:

60-Min 14.10; 30-Min 11.36; 15 Min 8.83; 5-Min 9.30.

Can you say rangebound? ES continues to be completely trendless on all key timeframes in what could be the tightest and longest lasting range trade of the year.

The goal for today is simple: Be sharp, patient, and make damn sure you book a gain at end-of-day. And while this might seem a stark contrast from my "I don't care about the daily score" mantra, it's a required circuit breaker at this end whose intent is simply to prevent daily performance momentum from building up on the downside. So far, I don't recall a 3-day consecutive draw this year but you can verify by checking the Jan-Nov daily equity graphic in the left-hand margin to confirm. Point being, it's rare and would be a large warning sign for me.

The day started with two successful scalp sequences shortly before 4am on an unsustainable FESX cliff drop (going long the extension and then shorting the first pullback to the 5-min), before going back to bed. Ironically, I simply "woke up" at about 3:45am after not sleeping well (I wonder why), saw the opportunity, and took it. Then at the U.S. normal session open, I chose to take it slow in light of the Dec-to-Mar contract rollover which often creates an early chopfest, although ES clearly held the 885 area yet again, and continues to trade north of it -- albeit in the tight range.

So as we get ready to head into the afternoon, I'm holding on to just under a slight +$6K chip gain having traded only 240 FESX and 490 ES (total buys & sells), and am relying on this blog discipline to keep it north of +$5K that by the end of the day's trade.

Perhaps the best way to describe the market is "You First", as many are simply waiting for the breakout attempt pawns to stop getting captured before moving their rooks and knights into battle. (OK, it's been a long while since I played chess, but I think I got the terminology right.)

The VIX still suggests upward is possible, although so far, it's been more of "no further downward movement" than anything and has kept me away from shorting any perceived short-term break to the south. In any event, this can't last forever, although clearly we're not in Kansas (Sept-Nov) any more Auntie Em.

1:08pm Yet another feeble attempt at breaking to the north. This is starting to get very old. Tapping the right side of my monitor to see if that will help. Of course once that last frustrated trader gives it up, the break will occur.

1:23pm That might be it for the upside attempts, looking for PM short bias on pullbacks. Sticking short toe in water 895.50 small size (15 lot). Would be a helluva lot easier if the pace and volume picked up! Could be air pocket to the south if momentum builds. Will stop on a sustained trade over 897 ... also the 1-Min 3LB turn price.

1:30pm Added 896.50; Avg price 896.00 30 contracts. Not going any heavier in this pace.

1:38pm Scratched 1/2 on non-movement and 1-min 3LB turn; Back to 15 lot.

1:39pm Scratched rest; can always reenter. Slight negative on sequence, but irrelevant aside from making sure today's "circuit breaker" stays in place. Thought we might get a plunge similar to yesterday's -- which I butchered at the time -- but was probably too apparent. Pace sucketh and market depth thin as can be. 15-min ADX 8.18. That's sick. Maybe we rolled to the June '09 contract and I didn't know it!

1:51pm zzzzzzzzzzzz. Will the 2pm express show up today?

1:56pm ES air pocket down ... hard not to laugh. Right idea, but didn't want my capital in the market with no movement. Looking to short next pullback.

2:10pm Better; got back short in 893-894; out most on the drop. Missed the Express, but got the Local.

2:17pm Added small on drop and took it off, flattened on approach to 890 and low TICK.

2:20pm 2 point ES pop; good decision.

2:28pm Man, this pace is terrible. No flow to me is riskier as we can air pocket up or down at any time. Next high % short a pullback to the 5-min now. Sitting in 893s.

2:38pm Nice ... shorted 893s to 890-892 ... best cover 890.25. Small sizes still. The 5-min bias is there, but 'tis choppy.

2:44pm Not going to stew over profits left on table today. Also not too interested in fading this drop yet in case the range finally gives way as it could get ugly when it finally blows.

2:47pm Short 886.75 on TICK pop for small change. Respecting 885ish still on covers until broken.

2:54pm Shorted 884.75 to 881.00 on last push. Took most out for 1-2 pts and covered final 881.00. Strong read for someone who sucks on breakouts, but I just "felt" it. VIX also supportive of shorts on the 15-min cross up.

2:57pm This could get ugly ... buh-bye long supports. Will watch for a while. Market finally finding some rhythm. See if I can remember how to match it, but will be conservative. NOT giving away day's gains in the last hour.

3:06pm Might consider fading a further barf or shorting a sharp pullback, but the entry has to be pocket Jacks or higher. Day's initial objective remains very clear. Also already thinking to possible morning setups if the trend holds.

3:28pm Been doing some very light probe scalping with 15 lots, but not getting cute. Only entry I want for size is shorting an approach toward the former 885ish support ... unlikely we'll get there today as there has to be a ton of stuck longs now bailing on any upticks, but you never know.

For new folks, I don't typically trade much in the last hour, and especially strong trends into the close. Rather, I prefer the next day's more predictable oscillations. Just one person's style of course ... the preceding link to the July post pretty much covers why.

3:35pm Passed on that last short attempt as I wanted something closer to 880.

Decent reads today and nudged the modest chip gain up to a little over +$10K on a fairly low and efficient 1,630 contract trading (both sides, which is what I'll quote going forward). Essentially, a "grind-it-out" day.

3:55pm Shutting it down. Did pretty much what I had to today to restore order and will plan for the morning.

One last note is that I purposely stepped up the blog notes in the afternoon so as not to lose sight of what was happening ... there's the clear benefit of the journal and activating Dr. Brett's Internal Observer.

Wednesday Notes - Pointing the Finger

4:00pm It's been quite some time since I've had close to a five figure draw and have been really pi$$ed off with my trading, but I did and I am. Despite the overall larger range (breakout traders have been getting absolutely hammered), today's ES market was extremely tradable and yet I again for some ridiculous and unknown reason was pressing just enough to be out of tune enough on a day where precision was absolutely mandatory.

Sure, I'm not a great range trader, but bluntly, I sucked ... and I can't blame the market action that currently has little conviction/emotion and that's reacting to every on-again off-again bailout rumor. In fact the market action can never be blamed ... it's our job to adapt and the accusatory finger always points backward as this game is solely about competing against oneself. The only impact the current market rhythms have on my trading is that it simply requires more precision.

As I've preached for years and throughout this diary, trading is a mental sport ... period ... and I'm not sharp. Oh there were hints of strong performance, but it was spotty at best. And believe me, the -$9K draw doesn't bother me as the only number that matters is the one unveiled on December 31 ... it's the performance that does. I frankly don't care if I'm +$20K on the day ... if the performance isn't there, it would still be an atrocious day.

If there's any good news, it's that I've avoided significant damage and am in that mega-frustrated mode that often proceeds the next strong run.

Yet that will only happen if I quickly get my s*** together and right the ship.

4:45pm Postscript - Per Briefing.com, today was the first time since September that the Dow had two consecutive days with swings of less than 300 points.