Summary
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I had previously talked about buying Mastercard (NYSE:MA) for a swing trade. Unfortunately, I did not have the courage to do what I said I was going to do. I deserve to get a tar and feathering for passing up on a $40 opportunity. I know that I shouldn't be trading ahead of an earnings report, but with proper planning and position sizing, it wouldn't have been a problem, especially if I were planning a scaled swing. Anyways, coulda, woulda, shoulda, it's all water under the bridge now. blllecccchhhh...
Wednesday, October 31, 2007
Lamentation
Trading Results for Wednesday
I couldn't help myself, and traded the afternoon session today.
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I went into today's afternoon session with a model/hypothesis in my head. Many stocks have a nice little run-up ahead of earnings, and then sell off once the earnings report is released. Well, the S&P500 eMini Futures market seemed to be following the same pattern in my mind - for the past week, it trended up towards resistance, and once today's "earnings" report (via the FOMC interest rate announcement) was released, there was a knee-jerk sell off in response to the news. But this was a selloff amidst an uptrend with bullish bias intact, so I thought it would be just a temporary pullback, and not a real bearish, sentiment-changing selloff. I watched the tape for confirmation of my hypothesis, and saw the First-Thrust-Pullback pattern unfold before my eyes. The initial reversal from 1534 occurred very quick. It took just over 5minutes to drop from 1542 down to 1535, and just under 5minutes to run from 1536 up to 1542, which doesn't sound very fast, but I perceived time to pass by very quickly while I was watching the tape. The trade rate must have been five or six thousand contracts per minute, some institution was dumping their positions at a furious rate, and another institution must have been just waiting for that dumping to finish so that they could kick off their buy programs. In any case, when the trade rate spikes up like that, it must be a pivotal moment. When it ran up to 1542, I tried to enter a long trade. I had thought that the pullback was from 1543 down to 1540, but it turns out I was obviously too early, and the pullback was deeper than I expected. I estimated a 50% retrace from 1534 to 1542 would be somewhere around 1538, so that was where I placed my initial stop. I did a double take and shook my head in disbelief to see the market come down to the EXACT tick just to take my stop out. But I've had this happen to me so many times now (watching the market take my stop out before continuing on in my expected direction), that I was unfazed by my initial 3pt loss. I knew it was just a pullback. I continued to watch the tape chop around at 1539-1540. When it tried to challenge previous mini-resistance @1542, I knew that this was "it." I immediately entered a limit buy @1540. I didn't have time to setup a bracket order, so I entered my stop after I was filled. I then proceeded to do some other "stuff", and only checked in on the markets every 5min. to move up my stop as per the 20bar EMA trendline. When the market peaked @1558 and started coming back down, I had a decision to make - should I play for a possible second leg up, or take profits now? Since we were nearing the last hour of the session, and thoughts of a last hour reversal popped into my head, I decided to play for a possible second leg up, and moved my stop up to 1551.25, and left it there. If the market dropped down to 1551, I thought there would be a low probability of a second leg up.
Anyways, the key to success for today's trading was being able to recognize the First-Thrust-Pullback pattern in real-time. Though my initial attempt to play this pattern was not successful, that did not imply that the pattern had failed, rather it just meant that I had to re-adjust my trading and use better stop placement.
The funny thing was that the market again retraced 50% of the move up before reversing to end up @1552-ish for the day.
Daily Numbers for Thursday, Nov. 1/07
Summary
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ES Resistance @1548-1552, 1558-1561, 1574-1578
ES support @1535-1538, 1527-1530, 1515-1519, 1495-1500
VAH=1552.75
POC=1546.75
VAL=1541.75
Weekly Pivot @1426.25
Open gap: 1525 (10/26)
The low volume prior to the FOMC meeting indicated not too much institutional participation in today's morning session in the S&P500 eMini Futures market. However, things got interesting pretty quick once the FOMC announced the 25bps cut just as I had previously predicted.
One interesting thing from today's afternoon session was that ES filled yesterday's gap down, and this morning's gap up, all in one fell swoop. The gap up from last Friday's session still remains unfilled, and I will interpret that as bullish sentiment. Just from looking at the futures market in the past 2 weeks, there is an underlying bullish bias pushing the market higher bit by bit. Today the market managed to close above the double top resistance @1550, so this clears the way for a continued bullish bias into November.
And with tomorrow being the first of the month, and also the beginning of the most bullish month of the year, I will be looking for a rally. Probably a buy somewhere in the mid 1540's
Sunday, October 28, 2007
Daily Numbers for Monday, October 29, 2007
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ES Resistance @1548-1552, 1558-1561, 1574-1578
ES support @1527-1531, 1516-1520
VAH=1538.25
POC=1531.25 (2-day uptrend)
VAL=1529.25
Weekly Pivot @1426.25
It's interesting to note that the big drop from 2 Fridays ago closed two gaps - one from Oct 4/07, and the other from Sept 25/07.
Based upon the October 26 market close, the 30-Day Federal Funds futures contract for the November 2007 expiration is currently pricing in a 100 percent probability that the FOMC will decrease the target rate by at least 25 basis points from 4-3/4 percent to 4-1/2 percent at the FOMC meeting on October 31.
Markets are actually trending up in the overnight session (so far), and is close to resistance. If it breaks above resistance (@1550-ish) in the overnight session, then I think would set a bullish tone for tomorrow. I also think the chances are good that we will gap up to open the session tomorrow.
In the bullish scenario, the gap does not fill, so I will watch closely for a long play near the reversal of the pullback.
In the less bullish scenario, the gap does fill (and possibly drops even more), so I will look for a long play near support.
Basically, so long as ES can stay above 1520, then the current uptrend will be intact and buying the dips should be the more profitable strategy.
Friday, October 26, 2007
Random Musings
Summary
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Work sucks. I was swamped with a bunch of programming design tasks in just my second week on the job, so I only had time to glance at Mastercard (NYSE: MA) pop up $10 this afternoon. This was one of my swing trade candidates, but I didn't even get around to putting in an order to buy MA. Crap.
Well, maybe I should not try to shift the blame elsewhere. I actually traded the Forex futures in the overnight session yesterday night, and the night before that, so I didn't have time to review the chart on MA. All that just so I could make an overwhelming 5points on the Euro. Were those few trades worth it to pass up on an opportunity to participate in the $10 pop in MA in the past 2 days?
It seems like I want to trade futures and swing trade, but I probably don't have enough time to do both, either that or I'm just not organized enough to do both yet.
I've noticed for the past session or two that the 7am reversal seems to be working again. This is something I will watch out for in the next few trading sessions.
Time permitting, I think I will bring back the nightly numbers again, since I think I can use it to help me place bracket trades for the day.
Anyways, how about that Loonie, eh?
I'm reading everywhere from every guru to short the Loonie. There's even one newsletter flogger (I won't name this guy) who's been recommending to short the Loonie as far back as Sept. 23/07. I can only imagine the frustration of trying to follow this recommendation for the past month. I would probably want to get a refund on the price paid for the newsletter.
Media pundits are yammering on about how the rise in the Loonie (and the Euro and Cable) is directly attributed to the fall in the USD$. Hence, everyone is trying to pick a bottom in the USD$, just like how they are trying to call the top in the Loonie.
There is no indicator more powerfully compelling than a broken trendline. Sure, it looks like the momentum might be decreasing but realistically, until that trend is broken, the benefit of the doubt has to be given to the buyers. The Loonie will experience profit taking from time to time (like how it did this past Monday Oct 22), but new sellers have to enter the market in order to break the trend, and I don't see that happening thus far in the charts.
Monday, October 22, 2007
Hammer Time
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I saw lots of hammers across different sectors today:
So, take a stock in a healthy uptrend, throw in the uncertainty of the latest pullback, out pops a hammer formation, and what do you think will happen tomorrow? I think we will gap up. Both AAPL and the futures are currently pointing towards a gap up as well. But I also think that gap up will get filled. What happens after that is anyone's guess.
But I am watching MA, AKAM and GROW with interest, and tomorrow's market action just might get me into a swing trade (finally).
Euro Trade - Update
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Ok, so I logged in just before my lunch hour break and decided to close off my Euro short, mainly because I didn't know how to manage the trade and didn't want to have to worry about it for the remainder of the afternoon.
Short @1.4321, stop=1.4331, exited @1.4170, profit=151, R-profit=15.1R
Though I shouldn't complain about 15R profit, there is much to be done to improve how I managed the trade in order to avoid leaving 30points on the table.
First order of business is to learn to get more comfortable with using Bracket Trader to manage the trade with trailing stops.
Also having a plan in place to deal with these situations the next time it occurs will help out too.
Euro Trade
Summary
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I put a short in the Euro last night. With my stop in place, I reviewed what I just did to ensure that I was comfortable with and accepting of how much I was risking (that is the only way for me to sleep through the night with a futures trade in place). This morning, I woke up to find that I am still short and sitting on a nice gain.
Yes, I fluked out, and pretty much timed the top in the Euro. But now I am not sure what to do. Hold through the inevitable retrace and try to make this a real swing trade, or take my profits now ?
Regardless, I moved my stop down to 1.422 while I contemplate my options.
Wednesday, October 17, 2007
Swing Trade Update - Generating a Watchlist
Summary
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After looking around and watching how other traders are swing trading, it would seem that one good approach is to look at the hot sectors and from there, search for some good long candidates.
For example, here are some strong sectors with some interesting stocks within that sector:
Agricultural chemicals - MOS, TRA, CF, AGU, POT, MON
Shipping - EXM, DRYS, GNK
Technical Services - VSEC, JEC, KBR, SXC, WNG, URS
It is no coincidence that these are also amongst the favoured and top daytrading stocks in the past week or two. I don't have a specific plan with these particular stocks though, so I will be mainly watching them in the next week or so.
Of course, then there are those stocks that don't belong to a strong sector, but still looks interesting.
For example:
The the above 3 stocks, I will set alerts at the aforementioned levels, and after that, it becomes a waiting game.
My eMini Setups, Part II - The Time of Day
Even though I am not able to use this for the next little while, I will finish off this post that I had started last week.
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Like all human beings, traders are creatures of habit. Because of this, there is a tendency for certain actions to occur at about the same time period in each trading session.
I like to call this the "Time Of Day" Pattern. This is not something I created nor invented. Also, a discussion about the validity of this pattern is beyond the scope of this article. It is simply something that I read about and observed it occurring often enough that I do use it in my trading. I can't even point you to any scientific study that investigates how often this pattern occurs. But even with a 40% occurrence rate, this makes it significant enough to be trade-able, in my opinion, simply because it is very easy to look for.
The two key time of day patterns that I have used are the 7am reversal and Last hour reversal time periods. There is also a mini-reversal time period in the last half hour of trading, but that does not occur as consistently as the other two.
One of the reasons why the 7am (PST - that's 10am for those of you on New York time) reversal time period works better than a random time period (like 1037am) is because this is one of the three time slots when economic reports are released to the public. The other two times are 530am and 11am. 530am is pre-market, so it is hard for me to trade during that period. In the 11am time period, I do usually notice an increase in volume, but reversals are not as consistent.
Here is a good example of a 7am reversal and the last hour reversal in the S&P500 eMini futures that occurred on Aug 30/07:
The 7am reversal does not always occur specifically at 7am, but rather more of a time period. I usually look for reversals anywhere from 7am to 710am. Beyond that, the pattern gives way to random noise and the typical neurotic behaviour of the eMini.
Here is one textbook 7am reversal for Cable which occurred on Oct 4/07:
The setup is as follows:
- between 645 and 7am, check the index to see whether there is an easily identifiable trend in place. After all, it can only reverse if there is a pre-existing trend in place. And believe me, this step is important, because I have been caught on more than one occasion trying to look for a 7am reversal when the market was flat and trendless to begin with!
- draw a manual trendline to clearly identify the trend, and also to identify the point where the trend will be broken.
- at 7am, start watching the index in question. If it crosses the manual trendline, then enter a trade. If you get good enough at watching the tape and/or the chart, you will be able to tell whether it will cross the manual trendline before it even happens, in which case, enter before the trendline break to minimize risk.
- stops are a bit more of an art form. The 7am reversal either works right away, or it doesn't. I have alternated between using a fixed point stop (eg. 1 or 1.5 points), or the low of the previous candle.
Here is a 7am reversal that occurred on Sept 11/07:
To improve upon the probability of success of this setup, I also usually look for other additional technical indicators and signals to get me into the trade during that time.
I have traded this setup successfully several times, and have documented at least one of those times.
Friday, October 12, 2007
All Good Things Must Come to a Pause Button
'Tis better to have loved and lost, than to never have loved at all.
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It's been just over a year since I started this blog to document my journey in trading. The original goal was to use this blog as a trading journal to help progress me to the point where I can trade for a Living.
I originally started out swing trading, since that was all that I knew how to do at the time. Then I expanded my knowledge base to swing trading options. The options trading went a long way to help me understand risk management.
Then I started daytrading equities, and eventually moved to daytrading Futures. I originally switched over to trading Futures because I thought it would help me improve upon my discipline and patience issues. Unfortunately, time has run out on me.
As I previously alluded to last month, I haven't been able to generate income on a consistent basis. Given enough time, I am confident that I could increase my consistency. It sounds naive now, but I thought 6months to 1 year would have been enough time for me to get to the stage where I can trade consistently. But I no longer have the luxury of time, so, I have decided to accept an offer of full-time employment with a high tech company. I suppose that this setback could be interpreted as a failure to achieve my objectives. However, how could I have possibly known whether or not I would succeed at this vocation without giving it my best shot and trying it out?
Trading Futures has been without a doubt the most challenging thing that I have ever tackled so far in my life. The challenge was good and bad. Dealing with mental challenges can be very draining, but at the same time, I think it is something I need in order to improve myself as a person. It was really an opportunity for me to discover in a personal way how much I have to learn about patience and discipline. I have no hesitation in saying that it was, is, and will be my vocation of choice - if money were not an issue.
So, this is not a goodbye, but more of a journey that has been put on hold - until the time is right to re-visit daytrading Futures.
I still plan to swing Trade stocks, since that can be done minimal interference with my full-time job. Blogging might be a bit sporadic until I settle into the routine of the 9-to-5 full-time job.
Thursday, October 11, 2007
Improving my Approach to Swing Trading
Summary
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I will be taking what I've learned so far from Futures trading and see what can be applied to swing trading.
One of them includes investigating how Swing Trading looks from a volume chart perspective.
Couple of stocks I am looking at today include: AGU, GROW, AKAM
VDSI might be a good study tool in the different approaches to swinging a stock. Chart to come as time permits.
I haven't given up on Futures Trading by any means, but with volatility decreasing in the S&P500 eMini Futures (only a 7point range in ES today, less than 1/3rd of what it was back in August), I figure that it's time to diversify.
UPDATE: Of course, while I was writing this post, ES goes ahead and drops 16points, the biggest range expansion that we've had since the FOMC breakout. Go Figure.
Tuesday, October 09, 2007
Plan for Wednesday Oct 10, 2007
Summary
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ES Resistance = ????
ES support @1570-1573, 1559-1562, 1542-1546, 1529-1534, 1516-1520
VAH=1570
POC=1567 (2-day uptrend)
VAL=1563
Open gap @1552.5 (10/4)
The trail of open gaps since September presents compelling evidence that this market is doing what everyone least expects it to do - rally. Sure, we have oversold conditions, but it has been like that ever since the FOMC breakout and there are no signs yet of a break in trend.
Today was yet another breakout to all-time highs in the cash index. I think we will see a test of today's afternoon breakout. The 1570-1573 support level that I've identified isn't a true support level, since there has been no test of this level yet, and I have a hunch that tomorrow we will see that test. The 7am reversal might be a good way to play the test of the breakout.
The afternoon session could go either way. The only way to play it would be to look for the volume spikes - a second volume spike in the same direction would be the tell.
Is it Time to Start Swing Trading Stocks Again?
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I'm beginning to see more and more stocks breakout and run like AKAM. Not sure how long this run-up will last, but it looks like it might be time to start looking for some stocks to swing trade again.
I missed out on the AKAM breakout, but it's looking good on any pullback that doesn't break below 32, although with AKAM's earnings due out on the 24th, yesterday might have been the last chance for a low risk swing entry for AKAM (at least until after earnings).
Trading Results for Turnaround Tuesday
Things are starting to pick up finally in the S&P500 eMini Futures market.
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I made a couple of 2 and 3 tick scalps of wheat and Cable, neither of which are worth reviewing here.
In the first trade, I was a little bit early and did not wait for my DMI paintbar to signal short, so I was lucky not to get stopped out. Same case for the second trade.
In the third trade, I thought I did everything I was supposed to: wait for my DMI paintbar to signal short, saw the whoosh down on the tape, and entered on a partial retrace. As it turns out, I got stopped out. I became frustrated, as this was the second day in a row that I got stopped out prior to my profit target being hit. I kept wondering that there must be some sort of conspiracy out there, just waiting for me to move my stop so that they can hit it. My frustration prevented me from taking any more trades for the remainder of the afternoon.
Of course, in reality, I either timed my entry wrong, or my stop was too tight, or probably a bit of both. You would think that I have learned that lesson by now, but apparently today's results show that I still haven't yet learned that lesson.
Okay, time to erase this frustration out of my head so that I can prepare for tomorrow's action.
Monday, October 08, 2007
My chart setup
This is in response to the anonymous poster who inquired about why my charts had bars that were not "normal."
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I have been unable to get CamStudio to run properly on my WinVista platform, so I have resorted to using a hosted service to produce my videos.
I'm reluctant to produce more videos using Jing, because I don't know when they will start charging for their hosting service.
Anyways, here is the video describing my chart setup. I've been using this setup for a while now, and feel quite comfortable with it.
Let me know if there are any questions.
Plan for Turnaround Tuesday, Oct 9, 2007
Tech is leading the charge in this latest run-up, but force of habit still leads me to trade the S&P500 eMini Futures market.
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ES Resistance @1571-1575
ES support @1559-1562, 1542-1546, 1529-1534, 1516-1520
VAH=1564
POC=1562
VAL=1560.5
Weekly Pivot = 1559.75 (touched today)
Open gap @1571 (10/5)
Open gap @1552.5 (10/4)
I've left out all of the open gaps from September, since it is unlikely that they will be filled, and therefore, the information is old and no longer useful.
ES is going to have to break above the congestion @1566-1568 in order to have any shot at making new highs for the week. If it can sustain a move above 1568, I will look for a gap fill play.
But on the flip side, 1560 has held up as support twice now, and there's going to have to be more volume than the anemic display put in today in order to break below 1560. If it can sustain a move below 1560, I will look for a gap fill play.
If volume is lacking, then mean reversion plays will become the order of the day, and the usual scalping will be my plan (but this time targets will be the less ambitious 1 or 2points at a time).
I'm not anticipating any trades in these other two markets, but will be monitoring them tonight, and will set my alerts to appropriate levels.
Cable:
Wheat:
Trading Results for Monday
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Today I felt I was in synch with the S&P500. I should have pushed my edge more, but instead, I was nonchalant with my trading. It really came back to bite me with the last trade, 2points left on the table. I went to take a nap after that last trade, and missed out on some subsequent trading opportunities.
I am beginning to sense that volatility is declining in Cable, so I am not sure whether I will continue trading it or not.
Sunday, October 07, 2007
Weekends are for Random Ramblings
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I finally crossed the $100 threshold in AdSense revenue this past week. Unfortunately, that celebration came to grinding halt when I found out that Google will shaft me for one more month before paying me out. Their policy is to pay out at the ***END*** of the month after the month you reach your threshold point. I reached my C note on October 2/07, so I won't get paid until Nov. 30/07. Man, what a con job, it almost makes me want to buy some GOOG shares, knowing how much money they are raking in from this shafting of the Mom 'n Pop bloggers like me.
I've been watching other trader's videos lately, and the desire to keep up with the Jones's has left me with thoughts of mulling over buying a decent video capture program like Camtasia. It's definitely much more efficient to record a video to review the trades that I made for the day. I tried some of the free screen recorders out there like CamStudio, but unfortunately, the encoder does not work on Windows Vista. The CamStudio blog lists a possible workaround, but I just found out about it, and will need to find a free time slot to try it out in a day or two.
I've got a couple of posts just half baked in the oven which I haven't yet found time to finish off. I'm trying to gather my thoughts more so that the posts will sound at least half coherent.
Friday, October 05, 2007
Trading Results for Friday
Summary
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Traded ES and lost 1point. I went long @1560.5 around 705am(PST), but exited just before the market made its run-up an hour later. Even though I held this for over 30 minutes, I would have to say that I exited mostly due to a lack of patience again, as I didn't want to wait to see whether price would come back to my entry point. ES was very slow and range bound at two different times today. I will have to start using alerts again so I won't be bored to death watching the market.
Traded Cable and lost 10ticks, as I did not wait for confirmation before entering my trades.
Wheat was pretty choppy, and I forgot to refer to the hourly chart for overall trend. Wound up breakeven.
It felt like another wasted effort today. I'm tired. Going to get some rest.
Thursday, October 04, 2007
Trading Results for Thursday
Summary
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Cable:
Trade1: long@2.0274, stopped out @2.0264
Trade2: long@2.0256, stopped out @2.0250
Trade3: short@2.0390, stop=2.0397, exit@2.0365
Trade2 was the last trade I made before I went to bed. I was trying to hold it overnight, and (hopefully) wake up in the morning to some profits. But it was not meant to be - I had used to tight a stop.
Cable displayed a pretty textbook 7am reversal setup today. At the time of the 7am reversal, I was flipping between Natty gas, ES, NQ and the Euro, so I was unprepared for the reversal when it happened. It was a US economic report that moved the currencies today, and you pretty much had to be stalking it in advance and anticipating in order to catch the move.
There were many more trading opportunities in cable, but I did not take them, mostly due to a lack of patience.
Gas:
Trade1: long@7.20, stop=7.19, exited @7.26
Trade2: long@7.32, stop=7.3, exited @7.32
Anyone who has been watching Natty Gas knows that this market is more than capable, and even more than willing to swing around wildly with no rhyme nor reason at times. Knowing how volatile it is, I approach it with lots of respect and a quick trigger finger. In trade1, I was tracking the trade with my manually drawn trendline. When it broke below my manual trendline, I decided to exit. Price action even looked like it wanted to start the cliff dive. But lo and behold, some buyers came out of nowhere to take it up beyond the previous swing high @7.33. When I saw that happen, I entered on the next pullback. But again, it was the same story - after the breakout to new highs it looked like it wanted to drop big time. I decided to move my stop to breakeven, and it was hit a few minutes later.
Of course, in hindsight, I should have held onto my first trade, and would have been rewarded with a 20cent gain. But it became a decision of risk - how much was I willing to risk? Given the reputation of Natty Gas, I just wasn't willing to risk a lot. My main criteria for it to prove me right was to NOT violate my manually drawn trendline. When it violated the manual trendline, for sure, it wasn't proving me wrong, but the more important point was that it was no longer proving me correct. But in retrospect, what I should have done was take profits on the first impulse push up to 7.33, since I am a scalper by nature. Once I was out, that would have allowed me to observe it more objectively. Every trade starts out as a scalp, gotta remember that.
Wheat:
All trades are shorts.
Trade1: 921.25, stopped out @922.5
Trade2: 921.25, stop=922.5, exited@918
Trade3: 913, stop@914, exited@912
Trade4: 911.25, stopped out @913.25
Trade5: 913, stop=915, exited @905
In addition to the trades highlighted in the above chart, I made some losing impulse trades last night in wheat (not shown in chart), which left me frustrated and down on myself a bit. But the market was kind today, and provided a trend day to allow me to redeem myself.
Wednesday, October 03, 2007
Trading Results for Wednesday
Summary
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I traded Cable last night and lost a few ticks, then I traded the Euro and gained a few ticks, then I traded ES and lost a point, and finally, I scalped Natty Gas for a few ticks.
It felt like a lot of wasted effort with nothing to show for it.
I also feel like a broken record in saying that I once again lacked patience. With Cable, had I waited a little longer before making my trade, and had I held onto the trade a little longer, I would have been profitable today.
Since I said I would document my losing trades, here are the losing trades in Cable in all its ugliness:
Trade1: Long @2.0373, stopped out @2.0365
Trade2: Long @2.0383, stopped out @2.0373
Trade3: Short @2.0365, initial stop = 2.0375, exited @2.0355
My ADX paintbar was showing red, and I only drew the Fib retracements after I made the first two trades. Before making any trades, I should have drawn the Fib retracements (indicating a 50% Fib RT at the time I made the first two trades), and that knowledge combined with the ADX paintbar being red would have told me not to go long on the first two trades, that was the mistake.
Ok, tonight I will work on being more patient with my trades.
Tuesday, October 02, 2007
Plan for Wednesday Oct 2, 2007
Plans are useless, but planning is useful.
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ES Resistance @1559-1562
ES support @1542-1546, 1529-1534, 1516-1520
VAH=1557
POC=1555.5
VAL=1553
Weekly Pivot = 1534
Open gap @1529 (9/25)
Open gap @1490 (9/17)
Open gap @1467 (9/10)
Open gap @1450 (8/28)
So, it looks like the SnP500 eMini (ES) did turnaround on Tuesday just like how I mentioned yesterday. One other interesting statistic that I've noticed is that the 1st trading session of the month tend to be up days. In fact, the past 6 consecutive months have been like that. Even the 1st trading session in the month of August, when all that carnage from the SubPrime Credit Crisis was happening, the session ended closing up for the day.
Anyways, ES put in a harami pattern, or an inside day down. Though that does not mean a reversal is imminent, it does indicate that another big breakout day like Monday is unlikely to happen. I haven't played ES for a few days now due to the lack of volatility, but I might try and short near resistance tomorrow if I see a reversal occurring.
Other markets that I will be watching:
British Pound Futures:
Wheat:
Natty Gas:
My e-Mini Setups, part I
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So far I have collected about 6 or 7 setups that I am comfortable with using when trading the eMini stock index futures (ES, NQ, ER2, YM). To reinforce my discipline, I am writing these setups out as a part of my way of internalizing them. I describe them in this first of a series of posts.
These setups may or may not be applicable to the equity markets, but that will not the focus of this discussion.
This first setup is what I call the First Thrust Pullback reversal. I am basically borrowing Dave Landry's favourite swing trading pattern and applying it to daytrading the eMini's.
I use a volume chart (usually 6000 for each candlestick, and a period of 120bars, but it should be adjusted to your own comfort level), and the setup is as follows:
- market runs for 10pts or more
- TTM Trend changes colour and MACD crosses zero within 2 bars of each other (highlighted by the first blue arrow)
- break above either the 10 or 20 bar MA and sustained for more than 2 bars
- pullback does not violate original reversal point (highlighted by the second blue arrow).
- wait for the pullback to finish (draw manual trendline if necessary and wait for the break of the trendline) and enter on the second break above the MA's.
I have recently programmed the ADX indicator in QuoteTracker to give me a green paintbar if the trend is up, or a red paintbar if the trend is down. A change in colour is the key part of this indicator, so for instance, a change from red to green would signal the start of an uptrend. The ADX indicator is sometimes late, ie. the trend has started before the ADX signals an uptrend. So if I enter a trade before the ADX indicator changes colour, I would look for the impending change in colour, and if I don't get one, that also serves as a strong warning for me to get out of the trade.
The probability of success with using this setup increases if the reversal occurs near a previously identified support/resistance level.
Stop would be placed just below the low of the original reversal point (first blue arrow). Profit target is a minimum of 2points, but beyond that, it depends on the market situation at the time, and will require a bit of discretion.
The key part here is to wait for the shallow pullback to tell you that it is indeed a reversal. This goes a long way to define your risk.
In terms of market psychology, I think what what I am observing here is that the traders are exiting their positions (taking profits or covering shorts), then there is a pause to see if there are new participants entering. If there are new traders (ie. buyers in the example of the above chart) entering, then I want to be a part of that.
I played this setup successfully on a couple of occasions, including the one on July 20/07. One of the reasons that I don't play it more often is probably because I don't always remember to look for this setup, hence I am writing it down here in hopes of internalizing it. The other problem is that it is not that easy to spot in real-time. It does require a lot of screen time and practice. And then once I do spot one, there is always some second guessing and hesitation in pulling the trigger. But most of the hesitation can be eliminated with defining your risk, and trusting in the high probability of this setup.
I find it useful to help me to distinguish reversals from retraces.
Trading Results for Turnaround Tuesday
Summary
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One of my best performances in the past 3 weeks.
The above results were all accomplished with one contract in every trade. Now does that mean I am ready to bump up my size? Heck no. My account equity will tell me when I am ready to double my size.
As I discussed previously, I am still making mistakes and lacking patience in holding my trades long enough to let it develop. But fortunately, today at least, the market forgave my mistakes.
Volatility in the stock index futures (ES, NQ) has dried up. The only trading opp. availabe was a short in the first half hour of the session. I missed out on that, and as a result did not trade ES. But I did make a couple 2 and 3 tick scalps of NQ, for a measly profit as you can see.
The trade in CAD futures was an impulse trade, and I deservedly got burned for it. 
I shorted at pretty close to the bottom of the move in CAD. Price was dropping all morning, and I ignored the signs of capitulation (price action got real jumpy and choppy right around the time that I shorted it). You never want to short after price has dropped ..... 90points !!!
For some reason, CAD futures seems harder to trade. Not sure why that is, but for sure it behaves different from Cable.
I've talked about my trade in Natty Gas, British Pound Futures and Wheat, so the last one is the soybeans trade:
There were a ton of trading opportunities in soybeans today, but I got fixated with looking at those big sizes on the ask in the wheat market, which ground the wheat market down to a virtual halt (I talked about them in Wallstreak, but Wallstreak seems to be down at the time of this writing, so I cannot provide a link). And Yes, obviously I should have held onto the second short longer - the market was proving me correct (and never proved me incorrect), so there was no technical reason to exit. I'm working on it, okay???
The important thing was I got off to a good and profitable start today, and as a result, I did not push for trades, did not overtrade (which makes it easier to review the trades that I did make), and did not get frustrated at missing my setups. I was mindful of assessing risk in each scalp that I made, and documented most of the trades that I made today.
A good day all in all.
Natural Gas Trade
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This morning, I went long QGX7 @7.175, stop = 7.15, target 7.25
If all goes well, and in tonight's overnight session, NG behaves like it did in yesterday night's overnight session, then I may hold NG for another swing trade attempt. Yes, it swings around randomly and madly at times, but right now, it is behaving as expected, and that is what matters.
I've mentioned before that I am bullish on Natty Gas. I have been studying it for a few weeks now, and had made a previous swing trade on it (or at least attempted one).
So long as it behaves in an orderly fashion and according to my expectations, then I will continue to trade it. And the immediate plan is to hold it for as long as possible.
UPDATE: I am out of QGX7 @7.23. It stalled @7.245 previously, and so when it couldn't blast right through that level, I decided to exit, no questions asked.
Yeah, it's hard to hold a futures position, let alone a Natty Gas futures position, for any decent length of time.
LOL, now as I type this, Natty gas decides to blast off to new intraday highs. But that is ok since I am following my new rule - everything starts out as a scalp, and I only hold longer if the market proves me correct. I'm not interested in the market proving me wrong before proving me correct (which is what Natty Gas did here), risk control dictates that the market prove me correct first.I will look to see if there is another trading opp.
Anywyas, here is the chart recording my trade for posterity:
Monday, October 01, 2007
Night Time Futures Trades
Trading the overnight session is not as bad as it sounds....
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This is my 3rd time trading the overnight session in certain futures markets. The perception that low volume in the overnight session leads to wide spreads is not always the case. In Natty Gas, that is the case for sure, but in wheat and the majority of the Forex Futures markets, the spread is 1 or 2 ticks and the low volume does not lessen the volatility. In fact, everything seems to occur in slow motion, which gives me enough time to assess my position in real-time, but the volatility still remains pretty good to me.
Anyways, I went short the British Pound Futures at around 940pm (PST):
Trade1: Short B6Z7 @2.0382, stopped out @2.039,
Trade2: short @2.0385, stopped out @2.0392
Trade3: short @2.0374, initial stop = 2.038, exit @2.0358
In trade1, I used too tight a stop. In trade2, the entry was good, but I had not learned my lesson from trade1. After trade2, I took a break. I knew that the main volume would not come in until after 11pm (PST), so there was no point forcing a trade. So I waited until I began to see the other currencies start to drop (which is what I should have been doing in the first place), and then I entered my 3rd short.
I'm glad that I was able to recover from the mistakes of the first two trades, and with the profitable wheat trade that I made, I probably will not be looking for a fourth trade in Cable.
I also made 2 trades in Wheat:
The first trade was short @950, initial stop=951.5, exited @947.75.
The second trade was short @947.25, initial stop=948.5, exited @945.
I exited the second trade @945 when I saw 200 contracts show up at the bid @944.25. That pretty much meant the end of any further downside for the next couple of hours.
The second trade reflects the lack of patience in holding the first trade longer for larger profit; I really should have held from 950 all the way down to 945. In fact, the second trade was a bit of a mistake, and I got lucky that price did not retrace to stop me out.
Plan for Turnaround Tuesday Oct 2, 2007
Summary
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ES Resistance @1560-1563
ES support @1542-1546, 1529-1534, 1516-1520
VAH=1561
POC=1558
VAL=1548.5
Weekly Pivot = 1534
Open gap @1529 (9/25)
Open gap @1490 (9/17)
Open gap @1467 (9/10)
Open gap @1450 (8/28)
Because tomorrow is turnaround Tuesday, I will be on the lookout for a reversal in the high 50's area.
I will look for another overnight trade in the British Pound Futures:
Wheat looks like it needs a little pullback before continuing its relentless run up to $10.
Natural Gas is so thinly traded in the overnight session that I won't touch it tonight, but the chart is sure looking encouraging. There may be a trading opportunity tomorrow if it can get above 7.1:
Review of September
Summary
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I made just over $1500 for September. I'm not making enough obviously. It's the same old same old reasons which are preventing me from making triple that amount.
I continue to lack the patience to either let my trade properly develop, or hold on longer for larger profits.
On the discipline aspect, I have fortunately gotten into the habit of planning out many of my trades. Now I just need to reinforce that habit by planning out all of my trades. I overtraded I think about three times this month, so that is actually an improvement for me. However, sometimes, I lack the confidence in pulling the trigger. On more than a several occasions last month, I have seen the market tag my support/resistance numbers and bounce from it. I'm not sure why I lack the confidence in pulling the trigger to enter the trade. Could it be the prior mistakes that are feeding my fear of making a trade? Could it be that I am starting to trust less in my ability to perform? I don't know the answer myself.
Obviously the dollar figure of my profits is very inadequate to make ends meet. If I am unable to improve upon these results soon, I may have to put this dream of mine on hold.
The biggest thing for me to work on is to reduce the number of mistakes that I make. Sometimes I just lose focus and don't think often enough about measuring the risk of a trade. Obviously I should be assessing the risk of a trade at all times, but sometimes I just forget to do so, and I wind up entering into a high risk, or a low probability trade.
So, the three process goals for October:
1. Always be mindful of assessing the risk of a given trade. The majority of my overtrading problems could be reduced from constantly assessing risk.
2. I am a scalper by nature. Many of my trades are usually 5min. or less. I may as well start working with that reality. If I work from the assumption that every one of my trades will start off as a scalp (even though it could develop into something more), then that would go a long way in improving my consistency.
3. Document the losing trades. I've noticed a recent tendency to sweep my losing trades under the carpet. But I should be doing just the opposite, and shine a bigger spotlight on them so that I can learn from those losses and use it to improve my trading.
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