For The Umpteenth Time: I'm A Scalper

Total: 3.5 Points

I entered the 1st trade at 9:33am, and wrapped up at 9:54am.

25 trades: 4 losing (highlighted above)

I realized that I've been using all the wrong time frames to trade the TF (maybe even the ES too.... On NQ, I used the tape and 1min last year and it was pretty darn good).

I used to be good at running, and that was because I wasn't using 3, 5, or 10min charts (actually, NEVER 10 min, as I recall)!

I'm doing this for maybe another day on sim.

Then I'm going live.

Afterall, this was exactly how I traded when I first started ie. it's nothing new.

Why I switched to 10min yesterday, I really haven't the slightest idea.

My most educated guess is that I woke up yesterday morning feeling OLD.

I forgot that D said that I'm a 16-year-old trapped in the body of a 37-year-old.

Really, 10min charts kill my brain cells.

So do 3 and 5 min charts.

I can understand using 5min for forex futures, but for TF during active hours, opting out of 1min chart last year was the single biggest mistake I made.

D has always thought that I'm an extremely extreme person.

I guess I'm just wired that way.

Can't learn any other way.

Definitely no baby steps.

Update:
I was chatting with J and told him I was in and out of the market 25 times in less than 30 mins (20, to be precise, and I totally forgot the Chicago PMI data release!). J said that's a lot of work. I said it's the easiest day for me in the longest time. Really, I'd rather focus intensely on my chart for half an hour than to stare at it for 8, 12 or 16 hours. Looking at my charts for too long makes me see things that are not there, and overlook things that are there!

TF - Posting Of PnL

TF Sim Trading

TF 3min

Giving up 6J and all the other forex futures for now. I like to trade something that I can trade almost everyday and forex futures are just not in that category.

So I'm back trading TF, and have finally settled on a method of trading it. The method is still highly discretionary, but I'm comfortable coz I know TF and am working within a familiar structure. There are certain rules that I observe now and setups that I stick to. I'll trade a few of my preferred setups once the context allows me to trade them, and am giving up the ones that call for wider stops.

It's been a long break for me. Much of it I spent doing some meaningless soul-searching (biggest achievement: buying USD 100k of URE at 4.80 for my aunt, and selling it 2 weeks later ie. last Thurs right at market open, at 6.66 helping her earn more than USD 32k - URE follows TF's trend and is easy for me to monitor - before market started to go into a range, and this had D suggesting that maybe I should really swing trade coz I tend to get a sense of where market's going....ha ha). Some good came out of it though. I shan't say more. Let's say I finally decided that NOW is the time that I quit berating myself for a past that I cannot change, and start doing what's necessary to move on.

I owe a big THANK YOU to those in my circle of trust (just a handful of you and you know who you are). It's strange that while I find cyberspace a highly dangerous place, I've shared with my trading/blogging community the most intimate details of what's been eating me. For the first time, I have 3rd opinions, and I am receptive (SURPRISE!). I haven't the slightest clue on how I'm going to go about expressing my gratitude now. But I'll know what to do when the time comes.

Thank you Ed, Cory, PT, EJ, JK, James, MVW, Jack (J), MM, Solfest, JE, Jimmy, De'Trader, UF (I know you really meant to say something LOL!), Sage, Lonely, Leon, Daytrader, Jaya, my coach Michael, my broker Anthony, for having listened to my rants for the past days/weeks/months and given me a shoulder to cry on.

JE, have you gone private?

I'm posting my TF results (live trading) starting tmrw.

Trading Is NOT About Winning...

...neither is it about losing per se.

Trading's just business - at the end of the day, all that matters is the bottom line.

Yes, you definitely need to LOVE this business - almost as much as you love your kids, your shoe-chewing puppy, your annoying girlfriend, etc,etc. Anyone who's considering- even albeit very remotely - TRADING (as opposed to INVESTING, and in reference to very short-term trading only) seriously, or is already a serious trader, will know what I'm talking about.

A post on the topic in question (by Ivanhoff , who writes for the Trading Goddess) that I like very much.

While there are heaps of articles and books out there that touch on the topic of "cutting losses" that I've always just outright ignored, this particular article strikes a chord.

Something to do with timing, I reckon.

Yes, I believe in using a stop loss now.

I've traded without it before, and while at first it was good to not have it (means you won't ever be stopped out - you get out on your own terms and in a losing trade, that's always based on how much PAIN you can take; and since I can take A LOT, the "big ticket" losses I've had in the past have been catastrophically disastrous for me - not so much in the monetary sense, but they definitely nearly broke my spirit), a series of good, hard lessons taught me that if I want to do this (trade for a living) for the long haul, I'd have to accept - perhaps even learn to embrace - small losses.

Moving On

Been going over my trades and given a lot of thoughts about the progress I'm making with the current way that I trade. The conclusion is that trading 1 contract just doesn't do it for me as far as practising scalping is concerned. I end up taking sloppy entries (which include scalping during the non-active hours and putting up with ridiculous slippage), holding my trades and losing sight of my exit plans.

I've paid very dearly for abandoning what had worked for me. The past 4 months have been a living hell and I'm just glad that after having blown away nearly half my account (trading just 1 contract!!), I still love to trade. I've been irresponsible with my money, and that's the only reason that I've lost it. Simply put, I have only myself to blame. The market's still the way it is - it didn't scare me before, and it shouldn't now.

My account at Infinity Futures has been funded but I'm not going to go live until I can start scalping the way I used to. So instead of continuing to practise using my LIVE IB account (where I'm restricted to trading 1 contract during pre-US session and 3 contracts during US session), I'm going to simulate trade on Infinity with 3 - 5 contracts/trade. My focus would be on "perfect" entries and I'll scratch if price doesn't immediately move in my direction. I won't hold any trades for more than a point. Instead, I'll look for re-entry in the same direction based on how and where (in relation to S & R) a candle has closed.

I'll most probably go back to trading the active US hours and give up the pre-US session altogether. Following the quieter hours tick by tick has been draining me of energy I desperately need to trade the active session. The earliest I'll go into the market would be at 8 - 9am N.Y. time from now on.

D will be glad. He's been out of clean shirts, socks, and basically everything else that he need to look the way he wants. I'll resume the routine of driving him to work (which actually makes me happy....coz driving makes me happy LOL!!), and picking him up daily, and running my errands in between (so D can rest over the weekend instead of having to run errands!).

Ok, I'm happier now.

After Action Review - I Need To Trust And Trade MY WAY

Yesterday (Apr 20) was a bad day for me, simply because I had lost it again. When I could have taken a net USD 100 gain, I ended the day with a USD 737 loss. The first trade messed up my psychology and things spiralled down from there.

My first trade - I was experimenting with an entry that I wasn't familiar with, and because of that, I had a hard time managing my trade, and exited at a place I usually wouldn't have. Took a 140 loss. Got back in again, using the alien method. While I could have taken a USD 120 gain on the 2nd trade (had I used my own familiar approach, I would have recognized the loss of momentum and gotten out), I ended up getting out at where I've placed my protective stop and took a USD 300 loss.

I could have stopped there. But unlike last week, I refused to accept a losing day. I went in again to fade the down move during the US lunchtime session. It started out fine - I caught the hammer and the move went at least 2 points in my direction promptly. On any other days, I would have taken my profit given that it was just a scalp. I didn't. When I had gone in with the intention of simply fading a trend, at some point during the trade, I had assumed that that was going to be a major 6 point retracement at least. After all, a hammer had formed on the hourly chart, and there were piercing patterns, hammerS, bullish engulfing patterns and all on the 5min. So I stayed. And let a 2 point profit turn into a 6 point loss.

All because I got emotional again. I had traded with a different appraoch (when will I ever learn to just TRUST my own method???), and because of that I couldn't own the loss.

Consecutive losing trades on any given day is an indication that the tone of the market has changed - and I could either take a loss while it's still small (yes, like last week), or deploy a different strategy (I scalp on trending days, and "swing" on other days). Last week was week of chops and range-bound moves, and I did ok with my "swing approach" from tuesday to friday. Yesterday was clearly a trend day, and I made the mistake of using a loose stop, and then of overstaying in a counter-trend move.

Mistake number 3: staying with ES on a trending day. I can't handle ES on trending days. I'm used to TF's nice 3 - 6 long-bodied bearish candles down with 38.2% retracement on a trend day. With ES, I love the choppy days, coz I just somehow grasp ES' choppy moves.

It's a day full of mistakes that I can either learn by heart and move on, or get grumpy and all and take a break for the next few days. The latter is clearly out - I don't remember having really taken a break even when I felt ,at my lowest point ,that I simply couldn't go on anymore. I don't know if that's a virtue or a vice - that I don't know when to STOP. What I do know is that I'm not easily defeated. And that's an understatement. Maybe things would have been better had I learnt to back off sometimes. But I don't stand down. I can't. I would have to be a different person to do that.

So I'm going back in today. Not doing any analysis of any sort. I'm not going to guess where the market's heading. It could move up higher than its previous high, or it could reverse to look for 660, it doesn't matter. What matters is the price action within the day - you can never know for sure if the bears or the bulls are going to win until the battle's over, so you take cover when your side is clearly no longer in the upper hand. Don't hang around and become a casualty. Know that something's NOT looking right, and bail before the ultimate worst happens. That's what I always aim to do.

I'm going to be scalping mostly - I seem to have lost touch and apparently need a lot of practice to learn how to RUN again - coz as soon as my application to Infinity Futures is approved and my funds wired, I'm going to be trading multiple contracts. I have to accept that every individual is different - with me, I can never trick my own brain into thinking that a 100 loss is a 1k loss. When I'm faced with a situation that I can easily lose my shirt, I WILL run. Otherwise, I won't. Just me.

Again, I won't post my P&L for yesterday until end of this week. All reds pisses me off. And I can't trade when I'm angry with myself.

Changing Broker

Am officially looking for a different broker. Tired of being restricted by IB's margin requirement during the pre-market hours.

I'm getting increasingly frustrated with the non-scalping style of trading. It isn't that I'm not giving time to test out the new method. It's just that it feels all wrong for me.

Scalping is intense and tiring - but it suits my personality.

To make scalping worthwhile for me, I need to put on bigger positions. I don't add to winning positions - if I'm trading 5 contracts, I'll put all 5 on at the same time, and get out with 5. It's worked for me.

Started screwing up only after I started scalping on single contract. It's always to do with overstaying - I don't scratch a trade that doesn't work immediately fast enough, and I don't take profit (too small!) fast enough before it becomes a loss.

So, no more IB for me. Its margin structure is ultra complicated, and gives me no peace when I trade.

Am exploring Global Futures. In the process of applying for a demo account.

Trader Personality Quiz (By The Lonely Trader's Favorite Dr. B)

I'm revisiting the following from Toni Turner's "Short-term Trading In The New Stock Market" (which I read ages ago and have forgotten totally!):

Dr Brett's Three Dimensions Trader Personality Quiz
by Dr Brett N. Steenbarger
When traders run into emotional difficulties with their trading, they often assume that they have deep, dark, underlying personality conflicts that require therapy. Sometimes this is true, but very often, the source of the problems is different. Often there is a mismatch between the method or system that a trader is using and the trader's needs and personality.

Instead of beating themselves for a lack of "discipline", traders need to ask whether their challenges in following a methodology might be because the methods aren't right for them. Finding the proper fit between who are and how you trade is a big part of finding success in trading.

The following questions are designed to help you assess facets of your personality that are related to the kinds of trading approaches that are likely to work for you. Please remember, there are no right or wrong answers. None of the questions are designed to evaluate your emotional stability or mental health. Rather, we are trying to find out your personal style, so that you can match it to your trading style. Each item consists of 2 statements.

Choose the statement that best describes you:

1a) I often arrive early for appointments and events to make sure I'm not late.
1b) I'm not very time-oriented and often show up late to appointments and events.

1a)

2a) When a problem occurs in my trading, I first feel frustrated and vent my feelings either outwardly or at myself
2b) When a problem occurs in my trading, I first try to focus on what went wrong and what I can do to fix it

2b)

3a) When I go out to eat, I generally go to my favorite restaurants and order my favorite foods
3b) When I go out to eat, I like to try new and unfamiliar restaurants and foods

3a)

4a) I tend to be detail-oriented and try to get each aspect of a job done as well as I can
4b) I focus on the big picture instead of details and don't sweat the small aspects of a job

4a)

5a) If you could hear the thoughts in my head as I'm trading, you'd hear worried or negative thoughts
5b If you could hear the thoughts in my head as I'm trading, you'd hear me analyzing the market action

5b)

6a) If I had a choice of car to drive, I would choose one that is comfortable and quiet
6b) If I had a choice of car to drive, I would choose one that is fast and handles well

6b)

7a) I would be good at following a diet or exercise program
7b) I would often cheat on a diet or exercise program

WHAT PROGRAM??

8a) It is hard for me to shake off setbacks in the market
8b) I take market setbacks as a cost of doing business

8b)

9a) I like vacations that are peaceful and relaxing
9b) I like vacations where you see and do a lot of different things

9b)

10a) I get routine maintenance done on my car when it is scheduled
10b) I don't follow deadlines for routine maintenance on my car

10a)

11a) Sometimes when I'm trading, I feel on top of the world; other times, I feel depressed, or down on myself
11b) I don't have any emotional ups or downs in the market

11a)

12a) I would like a job with a stable company that pays a guaranteed salary and benefits, even if I might not get rich
12b) I would like a job with a startup company that offers me a chance to get rich, even if I might get laid off if things don't work out

12b)

13a) I try to eat healthy foods and get a good amount of exercise and rest
13b) I'm very busy and don't always eat, exercise and sleep as I should

13b)

14a) I trade by my gut
14b) I trade with my head

14b)

15a) I avoid arguments and conflict
15b) I like to argue and hash things out

15a)

Dr Brett's Scoring
Items 1,4,7,10 and 13 measures a personality trait called "conscientiousness". A conscientious person is someone who has a high degree of self-control and perseverance. If you scored mostly a) responses for these items, you are high in conscientiousness. Conscientious traders are good rule-followers, and they often do well trading mechanical systems. Traders who are low in conscientiousness will have difficulty following explicit rules and often trade more discretionarily. Ideally, you want a style of trading that is more structured and detailed-oriented if you are more conscientious. Trying to trade a highly structured manner will frustrate a trader who is low in conscientiousness. Such a trader would do better with big-pictures trades that do not require detailed rules and analysis. Similarly, very active trading with rigid loss control will come easier to the conscientious trader; less frequent trades with wider risk parameters will come easier to the trader lower in conscientiousness.

Items 2,5,8,11 and 14 measure a personality trait called "neuroticism". Neuroticism is the tendency to experience negative emotions. If you scored mostly a) responses for these items, you are relatively high in neuroticism. The trader prone to neuroticism tends to experience more emotional interference in his or her trading. Wins can create overconfidence; losses can create fear and hesitation. The trader who is low in neuroticism is more likely to react to trading problems with efforts at problem solving and analysis. He or she will not take wins or losses particularly personally.

Neuroticism is a mixed bag when it comes to trading. Often the person who is high in neuroticism is emotionally sensitive and can use this sensitivity to obtain a gut feel for market action. The trader who is low in neuroticism may experience little emotional disruption with trading, but may also be closed off to subtle, intuitive cues when a trade starts to go sour.

In my recent expereince, I have been surprised at how successful gut traders are often relatively neurotic traders. Very active trading methods are particularly challenging for such traders, as they don't allow much time for regaining emotional equilibrium after losses. This can lead to cascades of losses and significant drawdowns of equity. It is much easier for the non-neurotic trader to turn losses around, since these are less likely to be tied to self-esteem.

Items 3,6,9,12 and 15 measure a trader's risk aversion. A risk-averse trader is one who cannot tolerate the possibility of large losses and who would prefer smaller, more frequent wins with controlled losses to larger wins with greater drawdowns. If you scored mostly a) responses for these items, you are relatively risk-averse trader. Trading with careful stops and money management, and trading smaller time-frames where risk can be controlled with the holding period, will come most naturally for the risk-averse trader.

The risk-seeking trader is one who enjoys stimulation and challenge. Larger positions and longer holding periods are easier to tolerate for the risk-seeking trader.

Very often, the risk-seeking trader will be impulsive in entering trades and will have difficulty trading during periods of boredom (low volatility). The risk-averse trader often experiences difficulty hanging onto winning trades, and will cut profits short to avoid reversals. This trader will be challenged during periods of high market-volatility. Position sizing is key and often overlooked as a trading variable. Trading too small will bore the risk-seeking trader, who will then lose focus. Trading too large will overwhelm the risk-averse trader, who will also then lose focus.

Ultimately, it is the blending of these 3 dimensions of trader personality, and not any one in isolation, that is most important in shaping trading outcomes. In my experience as a psychologist, the traders who are most poorly suited to trading are those that are risk-seeking and who are low in conscientiousness and high in neuroticism. Such traders often take large gambles on impulse, and very often these impulses are driven by emotional frustrations. An example would be a trader who gets frustrated after a loss and doubles his position size on the next trade just to make the money back quickly.

Conversely, I have seen very few successful traders who were highly risk-averse. The risk-averse trader, particularly one who is high in neuroticism, is motivated more by a fear of loss than a desire for gain. this makes it difficult to sustain meaningful position sizes during promising trades. Often such traders berate themselves for being self-defeating or sabotaging, but the reality is that they might be better suited for investing than trading.

If I had to identify an ideal personality pattern for traders, I would say that such a person would be risk-tolerant, low in neuroticism, and high in conscientiousness. Such traders are generally good at following trading rules (entries, exits, money management) and disciplined in their preparation. They don't take losses personally, which gives them the perserverance to weather losing periods. When they see a good trade, they are comfortable trading in size, so that the average size of their wins exceeds that of their losses.

Finally, let me mention one other important dimension that is related to neuroticism and emotionality. I strongly suspect that cognitive style is just as important as personality style in trading. Some people process information intuitively, relying on gut cues and subtle, nonverbal information. Other people process information explicitly, through reasoning and analysis. Both cognitive styles can make traders money in the markets, but it is essential that one's cognitive style match one's trading methodology.

As one trades shorter and shorter time frames, moving from swinging to scalping, it is less practical to expect explicit analytical routines to guide trading. Very short-term trading is more about pattern recognition than historical research. Conversely, long-term trades often benefit from modelling and statistical analysis that informs traders where the edge might lie. How traders process information most effectively is a neglected variable in selecting proper time frames to trade.

Under each pair of question for the quiz is my answer. Yet to tally my scores - sure gives me something meaningful to do today! Feel free to share yours, if you're game. It will be fun!! LOL!

Reply to Lord Tedders & Emini Player

In reference to my post on ES Trades 3/24,

Emini Player asked:
How tight/wide are your stops?
How much paper profit did you have before the trade turned against you?

and

Lord Tedders commented:
Jules,

You seriously think that a mechanical system will be good for you? I guarantee it won't take the stress away. I've walked down that road many times. It might work for some, but it won't help us "emotional" traders control our emotions.

I think your last sentence is truth, not sarcasm.

Best of luck finding your seed.

Emini Player:
The stop for my first trade was 2 points. It was based on the first candle that closed above my 25ema. Price went in my direction for 1.7 points before changing direction. I should have gotten out at 1.7, but I didn't coz I had overridden my system and gone in before it gave a signal. I was right in my direction, it's just that I got in too early, and obeyed one part of the system. Had I stuck to the entry signal, I wouldn't have been stopped out, coz the signal came AFTER price went up above the ema. Totally my fault here. I should have just taken 1.7, and counted myself lucky.

For the 2nd trade, my stop was the same - a close above the ema. But price was already trading very far away from ema when I entered. It was near the close of the market, TF was rather crazy with candles turning readily from bullish to bearish and vice-versa. I had 1 point before trade turned the other way - I was looking at a 4 point paper loss. I got out after the loss came down to 1.3 points, although TF has never closed above the ema before trade went back in my direction again.

In between the 1st and the 2nd, I actually had a winning trade - 1 point. This one went immediately in my direction. I took the 1 point - totally didn't wait for my system to give an exit signal.

I saw where my problem was after getting 3 hours of very good sleep :-)


LT:
To be perfectly honest, I think a mechanical system is good for me only if I let it take over completely. I have to trust it enough to get in and out based solely on its signal. But you know me, I can't let some signals take over my trading for me.

So what happened was that I obeyed an aspect of it, and override the others. No, it totally didn't take the stress away. I felt like throwing up everytime I saw a move that I would have otherwise taken a scalp on, and had to let it go coz my system says "NO".

For Mar 24's session, I actually ignored my system once, and went in before it gave a signal. Trade went 1.7 points in my direction immediately. I was too surprised to act, and let the trade go against me, and I ended up having to get out at a loss coz my exit signal was triggered (which was meant to be a stop signal - best part was that it wasn't supposed to be a stop signal, given that there was no ENTRY signal to start with. It was absolutely imbecilic - ME, I was the dumb ass!)

I think ther's a possibility that I MIGHT never trust any system enough to let it work for me. Mine is a very, very simple one that uses candle stick pattern, MAs and Bollinger band. And Fib of course. And I'm looking at just 1 chart (ie. 1 timeframe, coz I have the higher timeframe's MA on the same chart, allowing me to know its trend at all times). I think part of the reason that I don't trust it is that I was the one that came up with the way to deploy it. I just kind of put together all the things that I've used before that I haven't thrown out in disgust, tweaked the parameters in accordance to the prevailing market volatility, and used it in a way that I haven't seen any one using.

I'm a broken record, but I'm still going to say it - my mind's constantly in a jumble, and I keep getting caught in a situation where I trust the "Me" in real time, and not the "Me" a second ago.

I've resorted to recording my thoughts as I trade. So I've been talking to my pc a lot. But I don't play back at all now, coz I always find the person I'm hearing super ODD, so NOT me.

No wonder my doctor has been persuading me to get a brain scan (I have very painful headaches)....

Casing Spun Of Silk

Thanks to all who have left your footprints here in the past few days. I apologize for not having responded to each and everyone. But I hear you, and I'm really grateful that you took the time to write.

I have been doing a little more thinking after my posting on Saturday, and asking myself if I've really had a moment of epiphany, or is this simply just me being fickle. I ruled out the latter, but I can't be sure about the former either.

The thing about epiphany is that you can have as many as a dozen of them in a single day. I have heaps of them everyday - as I look at my charts, as I see price moving a certain way, and even when D says something seemingly trivial, I can extract patterns and draw lessons from them and form brand new conclusions to add to my very massive (not at all sophisticated, not even organized, just a HUGE and MESSY one) trading framework.

But no, this is not about me realizing all of a sudden that I've been doing it all wrong. As a matter of fact, I know without a doubt that the only way I'll ever get to find out what is right for me and what is not is by LOOKING BACK.

So what's important for me now is to stick to a general PLAN, or system, or method, whatever you call it - in my years with the public sector, I've gotten used to the terms "Framework" and "Standard Operating Procedures".

As far as trading goes, my framework will include such elements as my vision, goals and objectives; my values, beliefs and assumptions - simply put, my personality; my limitations - financially, physically, mentally, emotionally; my other obligations and commitments ; etc, etc.

My Standard Operating Procedures (SOP) - which is pending completion - will include a myriad of factors and parameters (just like I've done it before at work - I've written a 30 page long one for a single policy when I was with police (just the main body, EXLUDING the 19 annexes) that literally gave my superior a nightmare...she slept TERRIBLY after going over the first draft that night), and will be reviewed and revised as and when the market changes its pace and mood, and in accordance with changes in my life.

Unless I have the above, no after action reviews or the deepest reflections will help me pinpoint my problem and improve my trading. In fact, without the above, after action review is simply a joke. I can write a thesis on why it is, but I'll spare myself the agony.

It's a relief to know that all my past AARs are simply garbage. It would be a real pain to have to go over them, and I'm glad that now that I've satisfied myself that they are junk, I won't ever have to read them again.

I've whined too many times about not having a proper trading system, while actually preferring the whole time to trade the very discretionary way. I scalped and took scalp profits coz I had hated to lose (there are other reasons - good ones - to take scalp profits of course). In order to have perpetually winning days, I couldn't afford to get aggressive. I must take what was offered in that few seconds to a minute or at most 3 mins. I've always said I had based my exits on momentum. I had indeed. If price was going in my direction too fast, I'd get out. If price was going too slow, I get out too. So, I was always looking to get out.

While this is probably widely practised on the floor by those who trade huge contracts and enjoy better commission rates, I've come to realize that even if I had had plans to substantially increase my contract size over time, that this way of trading is simply NOT for me, for the one and only reason that my emotional makeup is simply not suitable for this kind of play.

I've read too many times about the consistency of many scalpers, and I don't doubt they make money on daily basis, and I don't doubt that some have an entire year of NIL losing months, weeks, and even days. I have no doubt that these are people have gotten to where they are because they have gotten - above all other things - so good with protecting their capital that it's near impossible for the market to take it away from them.

Well, I've learned, gradually, that I am lousy at protecting my money. I don't like losing, and I certainly don't enjoy having my money taken away from me. But I don't actively protect it. I have a tendency to protect my ego first, then my capital.

I make a dreadful scalper. Dyed-in-the-wool horrendous.

I am going on and on simply coz I need to convince one single person that this change that's going to happen is necessary. That person is ME.

My approach from now on will be radically different - not just in terms of how I execute my trades, but also in how I prepare for them. I will no longer come up with scenarios on where the market's likely to be heading today, the following day, this week, or even a few hours later. After the initial overhaul, there'll be minimal planning and preparation on a daily basis.

The time that I'll start looking at charts to see if there's a play is when the US market opens at 930am est.

I will no longer be trading one single instrument. I'm still trading purely futures, but I'll be trading both indices and currency futures (No energies, soft/hard metals, grains - all in all, no commodities at all). This is the way I've been trading forex (I don't have a bread-and-butter pair). So far I have no complaint when it comes to trading forex. I have decided to trade futures on a long term basis only because the futures market is regulated. I prefer to trade a market that's regulated, and instruments that can't be manipulated by market makers or a few huge players.

I should resume trading today, unless something cropped up. E.g. if my pc crashes on me before D gets home - I've been overloading it.

Don Miller's Video, The Chinese Bamboo Tree, & My Turning Point

I have the habit of playing Don Miller's weekend videos as I study my charts. A moment ago, I was doing just that, except that I was really focusing on making out the price patterns on yen futures during pre-US market open, and then I heard my name mentioned. D, who was playing online poker, turned to look at me, with his usual now-what-have-you-done-this-time expression written all over his face.

Anyway, here's Don's video for this weekend: VIDEO - The Weekend Trader

God works in mysterious ways indeed. I was telling Lord Tedders how I felt like I've hit the wall, and I've been fretting over not being able to find my centre. I looked everywhere for an answer, without really knowing what the question was in the first place. I thought maybe I needed to see more of how others trade. I would visit a forum, and I would get right out by the first page of a thread. I revisited my books, and would feel like throwing up whenever I come across a trading "receipe" with step-by-step instructions on how and where to get in and out, and the indicators to use.

I got so sick of reading the technical stuff, I went looking for what I call "pleasure reads". The first thing that came to mind was a "bamboo tree" that Don mentioned a couple of days back. Got curious, and went to check out his posting on the "Chinese Bamboo Tree".

I can't describe the impact this posting has on me. Words getting in the way.

All I can say is that it gave me my questions and the answers to them.

Earlier, I talked about going back to my older postings to find out what I had done differently last year. The assumption was that what I did back then was the best that I could have done. But here's exactly where I get all confused, over and over: if it was so good, why did it feel so wrong the whole time?

After reading the bamboo tree story, it hit me that I had grossly under-estimated the magnitude of my predicament. I hadn't a seed to plant. While others have theirs and are simply always either looking for more fertile grounds to plant it, or looking to change it for another, I've never had a seed to start with- never thought about it, never understood it. I have nothing to put my faith in. I haven't a systematic way of going about trading - sure I make plans and I have an idea where I would buy and sell, but I never know exactly where I would get out. I basically have been exiting as and when I feel I'm no longer comfortable staying in the trade. Trading has always been all about my FEELINGS. And my feelings is about the last thing that I'll put my faith in.

To cut a very long story short, I realized that the way I had traded last year was the worst way to trade. I've fooled myself into believing that a net postive year means that I must have been doing things right. But in trading, as in many other things in life, early successes have proven time and again to impede further growth, at best. The absolute worst that comes from small victories in the beginning is the laying of a path for very painful, if not fatal, falls in the journey ahead.

What I can say about my result last year is that it's consistent with the outcome of almost everything else that I've undertaken. I have very competitive blood. I must win. And I'll do whatever it takes to win. Sometimes, all I need to do is to believe that I WILL win, and I would. So far, so good.

But I'm cursed with an extremely short attention span. How that affects my ability to continually perform needs no elaboration.

The method with which I had used to achieve a certain ratio of winning to losing trades is not even a strategy within a systematic business plan. I hadn't the patience to come up with the latter before I got started. My approach was purely tactical. There is no blueprint, no roadmaps, not even the simplest of plans. My "plan" was simply to "GET IN".

Without something that I could, and was willing to trust, almost every trade has been placed at my discretion, and getting out has of course always been at my discretion and based totally on my very fallible emotions.

I personally know a few discretionary traders that are doing very well, consistently. These folks have little emotions when it comes to trading. It could have taken them years to get there. Maybe some are just blessed with extraordinarily tough minds. In any case, I'm certainly not one of them. I might NEVER become anything like them.

If I want to start getting on the track that I've never been on in the first place, I have to totally change the way I trade. It can no longer be discretionary. It's going to feel ALL wrong I have no doubt about that. I'll start asking myself again why I'm even doing this. I'll start thinking about all the floor traders who had made it by scalping, or by any other ways they can't explain in words coz so much of it is about trader's instinct.

But I'm determined to see this through. I will trade only in a way that I can actually describe in plain English.

For weeks now I have been comtemplating deploying a very simple trading plan, which I've never gotten down to executing. Short-sightedness is the main obstacle.

But I've made up my mind to either do it, or stop trading entirely. Monday on, I will trade a very different way. It's a way that no longer has its focus on achieving consistently winning days. High winning rates is going to be totally irrelevant. Thanks to Don - whose complaint about having no losing days finally made sense to me earlier TODAY - I now realize that I had gotten my focus all wrong. The questions I have been asking were all wrong, and had gotten me no where near to where my heart really wants to go.

Don mentioned both in his comment and his video that I had brought up the word "strong" in my comment. So I have had "strong", "Bamboo Tree", "Faith" ringing in my head the whole day. And I had to end the para before this with a "heart" in it....

I get your message, my Mighty One up there.

A Classic Example Of How NOT To Trade

I don't know how and when it all began, along the way, I developed a really bad habit of waiting for confirmation to get out of a losing position, rather than getting out at the first sign of trouble.

Below is a classic example.

ES 3min

First, a little background on the trade that I entered on Mar 17: this was an overnight position, where I shorted the ES at 750. Price went up making HH and HL of course throughout the afternoon session of Mar 17, closing at day high at 777. I woke up the morning of Mar 18 here (Mar 17, 7pm EST), expecting some profit taking to happen in the asian and european trading hours.

ES went south throughout the pre-US market open session, and continued to go down in the first hour after the US market opened.

At around 1035 EST Mar 18, a gapped down doji formed at the low of the day, followed by a gravestone doji. Right up to this point, ES has traded under the 3 MAs which were in their perfect bearish setup (50SMA over 50EMA and both were over the 21EMA). So I was happy. Until I saw the 2 dojis (I don't like to see them at day's low when I'm shorting, especially when the low is a full 261.8 Fib target).

That was when I asked D what Citi's doing (D has been monitoring Citi for reasons I haven't the liberty to reveal). D said Citi was wildly bullish, having gone up throughout. I asked him how the others were doing, and he said GS had been going down and so had the other giants in the industry. D said Citi was apparently not following the main trend. I told him that it is NOT following, coz it's LEADING, and I said the market is going to turn wildly bullish later. He laughed. I ignored his teasings, as usual, and checked the XLF, and noticed that no trend had developed yet.

At this point, a perfect bullish marubozu has formed after the 2 dojis. Morning star! This was my 2nd chance to cover my short position. I didn't, of course. Although sixth sense was telling me that the day's done being bearish, my rational mind was screaming "it's not easy to reverse a downtrending day!". So I decided to hang in there to see what was going to happen next.

Bad decision. It would have been a good and prudent one had I been LOOKING to get into a LONG POSITION. What I was waiting for, essentially, was a confirmation that market's reversing. But when you're in a losing position, you don't wait for confirmation that you're going to be slaughtered. If you're a bear, you run when you see bulls sharpening their knives. A morning star at extreme price low, and at a level like Fib 261.8, that's a damn good reason to run for your life.

So I made the bad choice of continuing to sit. Saw the 2nd warning, then the 3rd (all shown on chart above). Now, like I said, I usually don't care about what my indicators were doing. Coz they all lag. But my 21EMA was acting strange and I noticed. It didn't stop turning up even when price was coming down. I was thinking to myself that all it needs to do is to turn all the way up to the top, sit on top of the other 2 MAs, and that would be the perfect bullish crossover for the first time in the day.

All that was left to see was if the support at Fib 211.8 was going to hold. It looked very much like it wasn't, coz if you look to the left, there's really nothing there that was acting as support. But 211.8 has been a rather common level that stops the ES (the "invisible" support/resistance), so I was wary. Lo and behold, a bullish candle closed on top of it!

The candle that opened after it would have been a perfect entry to go long. And that was exactly the point that the perfect bullish MA crossover took place.

But I was still waiting to see if the candle after the 1st hammer on the Hourly (chart below) was going to become a hammer too (classic example of a habit that no one should ever develop - to look to a higher timeframe for reasons to stay in a losing position). And it did turn out to be a hammer of course.

ES Hourly

Then I thought, "wait, this hammer might fail again, and ES WILL break below that channel". So I waited (typical psychology of a trader that's totally lost it - WAITING, HOPING and all). The candle after the 2nd hammer opened right at the latter's close and moved UP. That was clear as hell that the 2nd hammer was working! Simultaneously, on the 3min, ES was breaking above a very strong Fib 138.2 resistance, after the MAs have done a bullish crossover, following that was ES piercing the top of the Keltner channel.

"Damn it!" I said. D turned and looked at me. I hadn't the time to explain, and went on to hit the button to get out at market. This time, without hesitation.

While I could have taken a small loss of USD 500, I ended up taking twice that amount - a price I paid for waiting for confirmation.

I have to put this down in black and white so D can use it to kick my ass the next time I wait for confirmation to get out of a LOSING position.

Like I mentioned above, this is actually the best practice for ENTERING a position. Confimation, confirmation, confirmation.

So far, I've managed to do just the opposite. I enter a trade too early (without confirmation), get out of a profitable trade too fast (which I think I'll continue to do - profit in hand is always much better than profit in sight), and get out of a losing one too slow (waiting for confirmation that I am indeed wrong...something that a person who's aggressively PROTECTING his capital wouldn't dream of doing).

This is the last time I want to commit a blunder like this. I don't ever want to have to write about how I've NOT cut loss at the earliest opportunity to do so. I don't ever want to catch myself rationalizing (I talk to myself A LOT, and whenever I asked myself why I'm rationalizing, that was a sign that I should get out immediately - which I heed most times, but outright ignore when I'm in a wilful mode).

I don't ever want to lose an amount that's WAY above my max pain, for whatever reason. There is simply no good reason for getting myself into that kind of situation. Only excuses.

Update:

Whenever I've done something bad, I get super sensitive about postings like this: Lord Tedders' latest posting.

LT, talking about moi?? :-P

I Want Out

Nursing a scalp gone really bad. My focus now is on exit. Not planning anything else until I've closed my position. And I definitely will close it today. Even a gapped up star on daily chart will not make me hold the short position. We're no where near price top. An evening star only works there (price peaks). What I'm seeing on both daily and hourly charts are telling me a rather bullish story (now, that sounds really familiar....did I say that a couple of days back??? why the hell did I keep selling then???)

I've mismanaged my trade big time. And I've broken my number one rule about not keeping a trade overnight.

I can continue to hold the trade and HOPE for the best - and if the best happened, I would have learned nothing. Or I could bail now, take a USD1k loss, and resume practice on scalping the way I did before. It's been 6 months now, and I still can't repeat what I did in Sept/Oct last year. Back then, running was my forte. Probably has something to do with the fact that I was entering on 5 contracts (ER2) each trade. I remember saying back then that I had wanted to reduce to trading just 1 contract so I can learn to HOLD a position, but was wary of a very likely consequence ie. that I'll get sloppy and not run when I'm wrong. 6 monts later, I'm living that very nightmare. Self-fulfilling prophesy, maybe. But it's looking more like I actually DID know myself very well then.

Now, I'm simply baffled. I don't know for sure why I had to fix what isn't broken. Perhaps it was the profit amount that freaked me out. It's extremely unproductive to think that if you can earn that much, you can also lose that much, coz I hadn't gotten there by gambling. I acknowledge that the market needs to be willing to move in the first place, but the rest is really just pure money management and focus. I was so willing to scratch whenever price didn't move in my direction immediately, or when it went against me by ticks! I was also willing to take ticks for profits. On rare occasions, I got a few points in under a minute. I always depended on the market to give me whatever it wanted to give within that single 3 or 5 min candle, and I was out.

Maybe what I really need to do is to go back and take a look at how I traded then. My style was certainly a lot less complicated. I look at chart patterns and only trade 2 to 3 of them, and I kept my eyes on the key S & R levels. And with the ER2 (TF now), I would use fib to buy/sell on retracement on a trending day. That was all. Nothing else. I didn't care about pivot points. And I didn't care about previous days' highs and lows. As far as I was concerned, they would have been key S & R on the higher timeframe, which I would plot on my 3 or 5 minute chart. Entries were ususally based on 1 min. I was able to focus on the "NOW" - no prediction on whether support or resistance was going to hold coz price was at historical high/low and such, or that it had gone up/down for days so it ought to be retracing, etc, etc.

Seriously, are other human minds able to process that much in a matter of minutes or even seconds? Am I the only one that has a brain that can only focus on ONE thing at a time? In scalping, for me, it would be on what price is doing NOW (eg. price is at support, and has formed a hammer; the next candle opens below the open of the hammer and is moving down - so the only thing I'll be thinking is that price is behaving oddly, and that I should just wait to see what happens next).

I really want to get out of this confused state. I have a very short attention span (I can't even stay depressed for more than 24 hours for crying out loud), and I'm wondering why I haven't gotten sick of being confused yet!!

TF Trades 1/29

Profit: USD 140

Shorted TF 8 mins after market open, meant to hold it for a while, but the lack of momentum made me cover at a 9 tick gain. Honestly, I wasn't upset when it finally ended up at 459, which was my exit target #1.

Coz I was already thinking about my 2nd trade.

I expected TF to bounce at 459 (which was why that was my target #1 in the first place), and saw no reason not to do something about it.

Both on 30 min and 1 hour, a hammer was forming. When it was completed, I figured that on 1min, what I was seeing could very well be an inverted head and shoulder. I gathered that both hammer and HS were bullish enough to send TF back up to at least 466, from where it should start plunging back down.

So I entered a bracket order, but got really clumsy (coz I usually use the booktrader, or simply enter at market), and watch a 2-point profit evaporate as I was keying in my order. Anyway, I entered a buy limit at 463.7, a stop at 461.5, and a sell limit at 466, and then just sat and watched.

At one point, I was looking at a profit of $200.

And then profit started shrinking.

By then, my finger was already on the sell at market button. But I decided that I had to at least make an effort at sitting...

I continued to watch profit shrink.

My heart ached so bad that I needed aspirin. It was definitely more unbearable than looking at a 10 point loss.

It just doesn't make sense not to take profit. It also doesn't make any sense to take a 10-point, or a 5-point loss when you know that just like profit, it will get smaller with time, if you're basically right about market's direction.

So, I hit the sell button at 140. The head and shoulder pattern is almost busted (resistance above), and what was forming then was something that looked like a bull flag of sort. Since there's no telling if it's indeed going to be a flag, I decided to do what any sane person staring at the screen would do - I grabbed my profit and bolted.

I'm not thrilled to have given up my initial profits, but I'm glad I didn't give the market a chance to take out my stop.

When I returned from a brief smoke break, I saw that TF had indeed gone up to near 466 (I had covered at 464.2). And again, I felt nothing. I have no attachment to things that I've never owned. But for me to give up what was once in my hand - that's painful.

I'm most comfortable taking trades that have a potential profit of 4 to 5 points and I'm just aiming for whatever momentum offers - sometimes it's 2 points, sometimes 3, sometimes a few ticks. Bottom line is, I have a lot of buffer.

As far as stops are concerned, I'm still comfortable with mental stops. I trade a small contract size, and I'm getting consistent with blowups - they are almost always 7 points. On those occasions, I usually manage to recover my loss. Except on FOMC days!

What I really need to work on is my entry - I just have to be really patient and not rush into trades. Forcing myself to identify a pattern before getting in is how I'm keeping my itchy fingers away from my keyboard.

My Not-So-Sophisticated Trading Methodology

Extracted from an email from Sam:

The reason I am writing is that I am a beginner trader and still papertrading US equities with losses most of the time. I would like to learn your techniques and methodology as they seems very sophisticated. Could you please give me a background on how you got started on trading, your reading material, and how you developed your skills.

Sam, my response is going to disappoint you.

First, I don't have a sophisticated trading technique or method. In fact, I don't have any technique, let alone a sophisticated one.

Whatever that I do to prepare for each trading session, I've documented them on this blog. You can look for the entries under the label "How I Trade The ER2" and "Premarket Analysis". Whatever that I do after market open, I've also documented them, and you can find the entries under the labels "Trades (wins)", "Trades (losses)", "AAR", "Emini Futures".

After you've gone through what I've written, you'll notice that I don't really have a system or method on which I depend to make my trading decisions.

Perhaps my interpretation of "technique" and "methodology" differs from yours. But having been asked on numerous occasions similar questions, I assume your definition of these words is what I think it is.

If you're looking for trading systems, you'll find a lot being offered on trading forums. You'll be given a set of indicators with specific parameters, and step-by-step instructions that you'll be told that you have to follow EXACTLY if you wish to replicate the success of the person who's shared the system. And most are very sophisticated.

I'm a chart reader, and that's all I am. Day in day out, I feel like I'm trading not just the market but my own psychology as well.

I read the news daily, but individual events that are reported do not have any bearing on the preparation of my trading day. I've written a fair bit on that on my postings that you'll find under "How I Trade The ER2".

I check the market internals prior to market open, and during the trading session, but I don't care about statistics like the following (because I have yet to appreciate their relevance):

"......During the month of December and January, Nikkei hit a closing high of 8760 never going above the 9000 level while the S&P had 4 days in December and 5 days in January (the first 5) above 900. The correlation between the daily changes in the S&P and the change in the dollar versus yen, over the last year has been about 70%, with hardly a contemporaneous day with the dollar down big and the S&P up, or the dollar up big with the S&P down...."

HOW I GOT STARTED

You asked how I got started on trading. I don't really know where you want me to begin, and I'm going to assume that what you really want to know is a) if it's a push or pull factor, and b) the journey I took to make a switch from working for someone to trading for a living.

Re a)
I was never interested in investment and trading related matters when I was with the public sector. Before that I was with a local bank selling investment-related products, and I hated my job (which makes me wonder why I chose to go back to banking after I quit the public sector....)

To cut a long story short:
I was to sit for several exams for this new banking job. I was a relationship manager and my customers were those that got to wait in nice lounges sipping lattes while waiting for their transactions to go through. The part I loved in my very short stint there was the studying for the exams bit. I really thought that whatever that I was supposed to know before I stepped into my new role, I was going to get a lot of hands-on experience through serving my customers. Little did I know that what I had liked about my job was actually handled by the bank's Investment Analysts, and what I was hired to do was simply to sell. I quit after a couple of months, coz I didn't want to spend the rest of my life doing something I hated.

Re b)
My trading journey began when I took a 4-session trading course after I left the bank, and I paid USD2500 for the course. The one thing I'm still benefitting from that class til today is a friend I got to know there. Ken and I spent many afternoons sharing information and ideas about trading, and it was Ken that introduced me to the concept of price actions. It was through him that I came to know about Elliot Waves, chart patterns, trading the futures and forex market, and the importance of staying the course and managing my emotions. I was paper-trading on and off, and Ken was always the one that gently nudge me to start getting serious with trading. In a nutshell, when I think "trading", Ken will always be the first person to come to mind. He was both my trading buddy and my mentor, coz he had started trading years before and was always ready to share his experiences. Most of the books that I read were recommended by Ken. And I read A LOT of books (not cover-to-cover for every one of them of course).

9 months after I first knew anything about trading, I started trading real money. A few months ago, I attended a course that Michael was conducting, and through his course, I learnt things that I was never taught before - coz I had totally skipped the "beginner"'s phase when I first started out. To know more about Michael's course, please go to the label "Trading Coaches and Courses" and check out my entries there.

To be fair to Michael, my lack of a disciplined approach and system is not the result of his teachings. I learnt what I had to know about trading from him, but I made a choice to seek my own path, coz I knew from the bottom of my heart that THAT's the only way that I would make it to where Michael is today. There is no short cut for me. I can't simply take his system, trade it, and expect to get his result, coz I'm not him. There might be many who are more like him, who can trade his way, and those are the really fortunate ones.

All in all, I've paid $3700 for the 2 courses (Michael's was a 5-month course that cost about USD1200), read too many books (which I will be posting on a separate blog entry), spent nothing on hardwares (the PCs, monitors, and laptops that I'm using have been around for the longest time coz D is a systems network fanatic and we always have TOO MANY of these stuff - my studies occupies the biggest space in my home), spent nothing on softwares (I use a free charting service - Think or Swim; my only trading expense is commision to my broker - IB - which is USD 4.80 per TF contract per round trade), going to be spending nothing for subscription to vendors (I've cancelled my briefing.com subscription coz I don't use the service at all) and I don't pay for others to give me advice on what to trade and when to push the buttons.

It's a very long-winded response to your question, and not the least bit direct. My apologies. I don't know how else to describe how I ventured into this strange arena called daytrading.

And after making you read such a lengthy note, I'm actually not sure that I am the right person to answer your question. Because I really don't think I have developed the skills that I need to be successful in trading. I am still very much a student of the market. The learning could take years, maybe decades. And really, how does one even go about defining "success" when it comes to trading? How much do I have to be making per week/month/year for me to feel "successful"? What are the other factors, other than those measured in monetary terms, do I have to consider when deciding what constitutes "success"? And the list goes on. Very basic questions that typical novices ask. And I'm just another novice in the field of trading.

If you're still reading this, I have this to say to you: don't go looking for a sophisticated methodology. You might want to enrol in a reasonably priced course that teaches you the basics of trading. Better still, first read books like "Come into my trading room" by Alexander Elder, and "Stock Market Wizards" by Jack Schwager. Dr Brett's blog (on my blogroll) has a lot of valuable advice on money management, and you should really check them out. Being able to keep and grow their trading capital is what separates the successful traders from those who are not. Then read a lot of good blogs to get a sense of what to expect when you're trading with real money.

After you've done the above, and if you think you still want to attend classes, look for credible trainers like Michael.

Again, I'm sorry if I made you feel like you've wasted your time reading this. Fact is, if you're like the majority of those who think that trading is like learning how to ride a bicycle ie. once you can balance on 2 instead of 4 wheels, you can look forward to many hours of joyous rides in the woods forever (you'll never FORGET how to cycle and how to balance), you're going to be sorely disappointed when you go into the market. The market is ever-changing, and no systems or methods will work forever in it. But as a living breathing entity, YOU can make the necessary adjustments to stay in the game, PROVIDED that you have a solid foundation: sound knowledge of the market and yourself, and of what trading is about.

Based on the questions that you asked me, I figure you've not read beyond the last few entries I posted. My answers are actually all over my blog. :-)

Sick of Single-Contract Trades

Was going through my past posts again (something I've kept doing since Dec 08 - not coz I like my own writing, but really coz I need desperately to know what lessons I'm missing...), and couldn't help but notice AGAIN that I did do a lot better trading multiple contracts.

It's a fact I can't run away from. Trading multiple contracts is perfect for me coz it's perfect for my appetite. Trading single contract is a drag. And I can't emphasize this enough: I HATE SLOW!

FAST rouses my senses and makes my brain work doubly fast. I was better at bolting at the right time, and I was much, much more willling to quit trading after the morning momentum is over, and much, much more willing to wait til after lunch to resume trading.

I'm sure all these have something to do with my having set a target that has become so ingrained that even if I were to remove the P&L column from my trading platform, I'm mentally keeping scores in absolute dollar amount after having them mentally converted from ticks and points...

The reason that I started trading single contract was so that I could give the market a bit more room to move...but I've not been able to do that, and the only thing I'm giving up is good profits.

I'm a control freak, and I've resigned to the fact that I'll never change. I'm never going to be able to consistently put in a stop and a profit target and then just let my trade run. And if that's the case, why bother with trading 1 contract???

As a matter of fact, the only thing that was bad about trading multiple contracts - for me - was that it was stressful. But not having this stress is detrimental to my trading. I either got complacent (about cutting losses), or greedy (overstaying and seeing profit turn to loss) , or both...I have no idea what kind of freak I am, but I just do better when I'm really stretched. Depression is what hurts my trading. Not stress.

D's eyes are going to roll when he sees this....

DeTrader's Questions

DeTrader asked in the comment section these 2 questions:

1) Would you kindly tell how to setup your chart with TICK below it.
2) Why do you hate scalping options?

To answer your 2nd question first, DeTrader : the reason I hate GS options (To use the word "HATE" on all other options is a tad strong; I hate GS, and GS ONLY) is a really personal one (besides having lost money trading it...I mean, I've lost more on the emini futures...but there's really another reason - which is the KEY reason, and a rather illogical one...), and I don't know enough about options to say that it's necessarily bad for scalping, so I'm going to keep the answer to myself for now :-)

Re your question 1): D was the one who wrote the script and I simply had it imported to TOS. What you can do, DeTrader, is to go to "Studies" on TOS, click on "New Study", and then simply paste the script below (in blue) in the space provided for scripts. Then give it a name, and you'll find the study where you see it on my chart :-)

Here's the script:

declare lower;

plot TICK = close("$TICK");

plot SMA = Average(close("$TICK"), 10);

plot ZeroLine = 0;
plot Pos500Line = 500;
plot Pos350Line = 350;
plot Pos150Line = 150;
plot Neg500Line = -500;
plot Neg350Line = -350;
plot Neg150Line = -150;


TICK.SetDefaultColor(Color.YELLOW);
# TICK.SetPaintingStrategy(PaintingStrategy.POINTS);

SMA.SetDefaultColor(Color.BLACK);
SMA.SetLineWeight(3);

ZeroLine.SetDefaultColor(Color.GRAY);
ZeroLine.SetLineWeight(3);


Pos500Line.SetDefaultColor(Color.RED);
Pos500Line.SetLineWeight(2);
Pos500Line.SetStyle(Curve.LONG_DASH);

Pos350Line.SetDefaultColor(Color.RED);
Pos350Line.SetLineWeight(2);
Pos350Line.SetStyle(Curve.SHORT_DASH);

Pos150Line.SetDefaultColor(Color.RED);
Pos150Line.SetLineWeight(2);

Neg500Line.SetDefaultColor(Color.BLUE);
Neg500Line.SetLineWeight(2);
Neg500Line.SetStyle(Curve.LONG_DASH);

Neg350Line.SetDefaultColor(Color.BLUE);
Neg350Line.SetLineWeight(2);
Neg350Line.SetStyle(Curve.SHORT_DASH);

Neg150Line.SetDefaultColor(Color.BLUE);
Neg150Line.SetLineWeight(2);

Indicators: NYSE TICK + Keltner Channel

The following describes how I would personally use the NYSE TICK and the Keltner Channel as indicators when I'm daytrading the TF FOR NOW.
_________________________________________________________________

On a generally BULLISH day

Signal: BUY

(When Tick is turning up from 0 or +150)

Conditions:

A) At Price Top

1) When all candles of the previous peak have moved back into the KC from outside the upper channel, and prices are confined within the lower channel, AND

2) When Tick's previous peak was above +500, then it came down to +150, and is now turning back up

B) At Price Bottom

1)When ALL candles of the valley have moved back into the KC from outside the lower channel, AND

2) When Tick's previous valley was below 0, and has turned up, and has now reached +150

(When Tick is turning up from +350)

Conditions:

1) When candles are seen bouncing off the KC centreline, or upper band of the the KC - after an impulse move up where prices had moved out of upper channel of KC, AND

2) When tick's previous peak was at +500 or above, came back down to +350, and turning back up towards +500 again

- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -

Signal: Sell

(When Tick is turning down after having gone beyond +500)

Conditions:

1) When All the candles of the previous peaks are confined within the KC channel, and prices have been bouncing back and forth from KC ceiling to its centreline, AND

2) When Tick has gone above +500, then came back down to +350 - once price closed below KC centreline, and if it happens to be the breakout point of a trendline, that's a signal to SELL

_______________________________________________________________

On a generally BEARISH day

Signal: SELL

(When Tick is turning down at + 150)

Conditions:

1) When candles have gone back into the KC after having moved out of its upper channel, and when all the candles of the current peak are completely contained within the channel, AND

2) When Tick's previous peak was at +150, then it moved down, and then turned back up to +150, and is now turning back down

(When Tick is turning down at - 150)

Conditions:

1) When candles are bouncing between floor of KC and its centreline, and no bullish candles close above the centreline, AND

2) When Tick's previous peak was at -150, then it went down to -350, and then turned back up to -150

(NOTE: Do NOT sell after tick dropped beyond -350 and turned back from its valley - that's an oversold situation and the likelihood is that price will reverse from there)

- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -

Signal: BUY

(When Tick is turning up at -350 or -500)

Conditions:

A)
1) When candles are seen bouncing off the floor of the KC channel and the MA (KC centreline), and when candles land again on the floor of the channel, AND

2) When Tick's previous peak was at 0 or -150, then it came all the way down to hit -350 or -500, and is now turning back up

B)
1) When candles are seen moving from the upper KC all the way down to the floor of the KC (NOTE: Candles must NEVER have gone out of the lower channel of the KC - that is an indication of a continuation of a downtrend), AND

2) When Tick's previous peaks are either in the positive region (0 to +150), or hovering between 0 and -150, from where it went down to -350 or -500, and is now turning back up

Dilemma!

I'm definitely going through something that's feeling a tad like "buyer's regret". I'm regretting buying into the idea that I can actually follow any rules!

So now that I've set myself up to think like a disciplined trader, I haven't the slightest inkling how I'm going to go about pushing the buttons! Was watching some forex charts the whole day, and noticed that I couldn't trade at all once I put on the "disciplined trader" hat!

That got me thinking about how I made money consistently in the months preceding Dec 08. I noticed that although I did go into the market with a general plan, I hadn't a plan for individual trades. And for the most part of those months, trading was STRESSFUL. Then came Dec when I decided that I wanted to go for stress-LESS trading, and that was when things started getting messy. I started looking for confirmation (while previously I traded on the assumption that a pattern was going to develop) of patterns, and had become less willing to sit on a losing trade even though the pattern I went in on was not busted yet.

I'm really starting to believe that trading profit is very hard earned money! Granted that trading is definitely not a laborious activity, it is by no means an easy job! Once I want my life to get a little cushier, I get punished!!

I'm caught in a very difficult situation now. I've not even really begun to follow my new trading plan, and I'm already doubting that it'll work for me.

Will see how it goes today.

Trading The Emini Russell 2000 (Part 2) - Correction, & About "Monitoring of Daily Performance"

Below shows the correct chart for my previous post (shows the trades I would have made had I stuck to my plan about entering on grade A patterns and setups that give me maximum edge).

I have also added a few more - ok, many more - paragraphs to the section "monitoring of daily performance" on that posting.

On second thought, I'm just going to transfer those ramblings to this post. So, here goes:

Monitoring of Daily Performance

I've always been the kind of person that hates to keep scores. I like details only when I'm looking for clues and finding answers to questions. I hate details linked to post-events. I'm a lousy book-keeper (little wonder that D's the one managing our finances and diligently keeping track of daily expenses and monthly and yearly budget...so it's baffled me for a long time why I was tasked to look after the department's budget for over 2 years when I was at my previous job)

But, after series of losing days (something I'm definitely not accustomed to), I'm adamant about doing just about anything to get back on the right track. As I've said many times before, I don't like to lose. That's a gross understatement of course. I am fully aware that the only certainty in the market is that it will open and close. I am also fully prepared for a seemingly perfect trade to turn bad due to factors that are beyond my control - which makes cutting loss as soon as the trade is no longer going as I've planned so critical. But I utterly hate multiple losing days. It tells me that something's very wrong with my psychology, or the market. But I can't do anything about the market, even if it's to be blamed. But I can do something about myself.

My best month has been the one where I traded more contracts than I should. For someone who started out with merely 28k, and who's never traded the futures market, that was more than rash. At that point, it didn't occur to me that it was an atrocious thing to do, coz I had been trading 10 GS options contracts and was used to the big swings. What's worth mentioning again here is that I was very good at running back then, and the market was not as uncertain and haphazard as today, so I managed to escape a blowup.

On the months that follow, my monthly average profit was around 2 to 3 k. Not impressive for a full-time trader. I couldn't get any better, coz my daily gains have been pretty consistent - they were capped at 1 to 2 points, sometimes 3 (which was enough to make trading 5 contracts very lucrative though). Because I scalped, I was paying a lot to my broker, and on days that I started out losing, I have to make many more trades to make up my loses, and in the process, paying more towards commission. It's like you take a loan from a loan shark, and each time you pay him back, you're just paying interest.

I'm done getting in and out of the market like a maniac. Unless the day is perfect for discarding charts for the tape, I am going to be disciplined about only entering on the setups that give me the best edge.

As I've mentioned before, I have never entered and exited (especially the exit!) a trade based on any systems or after having walked through a checklist to qualify that trade. What I did, on the days that I was more "disciplined", was to wait for my favorite setups, then get in at "market" (very stupid thing to do) when I see that price is going to break, and I get out usually before the completion of a single 5 min candle. On the days that I get a 4 to 5 point gain, I had simply gone to bed after putting on the trade. Which actually didn't happen more than 3 times, I think. And those were the days I had to be dragged away from my computer. Sometimes, D will just turn it off and literally force me to go to bed, after making sure that I've put in my stop loss and profit target of course.

Since Dec 08, I have gotten so lost that I started to wonder if I actually knew how to trade properly. What I know for a fact is that I don't have a penchant for gambling. If that's the case, I must be working towards something. And I can't know what it is if I don't document my thoughts that lead to the specific decisions I made for each of my entries and exits. What patterns have been giving me windfalls, and what are the ones that have been screwing me. What behaviorial and thinking patterns have been guiding my losing and winning days - if I make it a point to keep tabs, I could find out things about ME that I didn't know before. If I continue to be blind to who I am, I'm going to continue to let the part of me that sabotages my trading continue to sabotage my trading.

So, I'm keeping scores. I've developed a very primitive scorecard to get things started. Overtime, and with more data generated from trading, I will refine it to capture even more data.

It's time that I find out what is it about me that's hampering my progress in trading. I don't care what the market does - if it sucks, and I choose to trade, then I suck even more than the market.

The template for my scorecard can be found in the post from where the above paras were hijacked.

Trading The Emini Russell 2000 (Part 2)

On Keltner Channel:

I'm not good at explaining ideas and processes, so am going to use illustrations to share what I'm doing. I'll show all my trades from now on. Here are 2 examples for starters (one is my real trade, the other one shows what I ought to have done had I followed my rules):

My Actual Trade on Jan 09:

Better Entries Would Look Like These:

Update: this is the chart I meant to use to show the better entries, those I ought to have made:


On Using the NYSE TICK as an indicator (based on my personal observation, and is originally meant for my own reference):

Update: I've done some changes to the original draft, and the revised write-up can be found in this later post.

On Stop Loss & Profit Taking

Stop Loss:
I let my losses run until I know the tide has clearly turned against me -
e.g 1) if I'm shorting, I don't want to see a bull flag or the completion of the first leg of a measured move up forming - but this is the last resort
e.g 2) if I've gone in LONG at the high of a hammer, I don't want to see price moving down to below the low of the hammer - this is definitely a lower-risk trade in the first place

Profit Taking:
I cut my profit when the pattern I'm trading shows sign that it is failing, or as soon as momentum runs out.

Chart Setup

Below are the charts that I'm monitoring during trades. These charts also show the S & R that I'll be needing for Monday's trades.I would be more inclined to BUY when the longer term charts are showing an uptrend. However, if I see on a higher timeframe that price is a distance away from support, from where it will likely bounce up after the correction, I will still look to SELL in a lower timeframe.

TF Daily & TF Hourly

TF 5min & TF 1min

Monitoring of Daily Performance

The first template below is my Master Scorecard, (showing data from my trading on Friday Jan 9, 2009). The one below it is the template I will be using to record the patterns I have identified that justify the entries I have made, for every single trade that I make. Then I would take the average score and add it to the master scorecard under the factor "Quality of Trades Based on Patterns". Doing this will keep me from going on a trading spree. Yes, I'm sick of paying my broker $125 after having lost about that same amount to the market! (happened last Monday - out of the $200 loss, $125 was for commission!!)

The 3rd screenshot below shows the gradings I give to various patterns. I have graded them based on my experience in trading them, and on the performance of each pattern (in terms of how many points TF moved on successful completion of patterns). I have always loved the hammers and shooting starts although many think that the morning and evening stars, or island formation, are the most reliable. Somehow, I expect a hammer to fail the first time it appears, and I'm prepared for that. But price usually goes up a few candles after the hammer, should it fail to go up immediately. On occasions when an army of hammers cannot drive price up, that's a very clear sign that the bears are very determined and it's best to stay on the sideline - unless it's a clear bearish day. More often than not, what turns out is usually a wildly choppy market, where both the bears and the bulls are not letting up, and yet not making any aggressive counter attacks - the kind of market that i hate the most ie. when everyone is on the defensive. Lots of desperate coverings, no real buying or selling.

Enough of rattling (a big chunk has been removed and transferred to the posting that follows this posting), here are the templates I use to keep track of my daily trading performance - not in terms of P&L, but strictly for collection of information about me, about whether my trading method is helping or screwing me, and about the progress I made overtime in catching the beat of the market, and in tuning in to the music it's making that's masked by the sounds of gongs and cymbals created by of the likes of CNBC!!!

Performance Scorecard

Quality of Patterns Identified for Trading

Grading of Patterns

Anything that I've missed out I will put it in Part 3.