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.

TF Trade 1/9

1 trade (screenshot below shows 4 trades - the first 3 were from yesterday) : 1 Point

Profit: USD 95

Still staying out of trouble.

Yes, I went long. But who wouldn't, after that death fall right at market open?

It seems folks in US are not liking their job data as much as the Europeans.....Well, am not going to ponder on this. I've gotten quite accustomed to ignoring news anyway...It's a crazy enough time, no need to tax my brains further.

That 15-point drop in the first 30min actually lifted my spirit - a little - and gave me a teeny weeny bit of hope that TF will soon be itself again. I am glad I managed my expectation. TF crawled for the most part of the post 10am session. Will see what happens after lunch. Am going to stick to my plan (not force a trade only to give back my profit) of course. Will just be chart watching (D, see? I do have more discipline than you. Muahahahahha!!!)

TF Trades 1/8

Profit: USD 125

Trading The Emini Russell 2000 (Part 1)

Am documenting how I have been trading emini futures for the period spanning July 2008 and the present.

Dec 2008 to Present

Each day, after the market opening bell, I'll wait for confirmation of trend - is it down or up as I thought it to be. If it's choppy, like yesterday's, I wait for a trend to emerge.

Unless I'm using market depth (Booktrader for IB users), I hardly go in right at market open. I used to enter based on pre-market conditions, but these days, I'm not going to trust anything that doesn't happen real-time.

I have to confess that whenever TF slides or rallies without retracing after market open, I'm always tempted to enter after the completion of each long bearish/bullish candle. D loves catching these moves. And I know a trader who had only 2 years of trading experience (but has trained hundreds of beginners in the region - and getting an obscene income from teaching) who trades only the opening bell and the last hour of the day.

The fairly-new-trader-cum-trainer is probably a lot more intuitive than me, and so are the others who trade the opening bell. To me, to trade the opening bell using just charts - if you haven't 20 years of trading experience under your belt - is no different from pure betting. I'm fully aware that I have missed a lot of opportunities by skipping the first 30min of the session, given that it offers the best momentum and hence a real money window, and many times, I kicked myself for being such a fraidy-cat.

But I'm a stubborn person.

Day after day for the past weeks, I sat and watched the only part of the day where there was momentum, and I did nothing.

Reason?

I'm not a gambler.

Have never been, and never will be.

If TF, for the rest of the session after the first half hour, simply refuses to give me that same momentum it used to give me in Aug and Sept last year, I'll just have to find another way to trade it.

Newbie

Over the course of 6 months of trading, I learnt that I do not do well having a concoction of indicators.

During those times that I was trading 5 ER2 contracts, I had MACD, SS, and 3 moving averages on, and I was monitoring 2 timeframes - and for the different timeframes, I have different periods for each of the 3 moving averages. Waiting for the perfect setup where every indicator says "BUY" or "SELL" was something I could never do. I will have to admit that I've in fact never once entered and exited based on those setups.

I was looking at chart patterns instead, without knowing that they were chart patterns.

On days that I made decent profits with just one or two entries, I had entered short on Head and Shoulder and tiple top patterns, without being aware that there were actually names given to such price actions. I just knew that if price keeps aiming for a certain resistance - and it doesn't matter that it's making peaks and valleys that are higher than the previous ones - it will plunge after a number of such failed attempts, at the time before everyone goes for lunch, or after they return from lunch.

I watch the 1min chart for that 3 to 5 point drop in seconds, after prices have consolidated for a while (forming triangles and wedges and what nots). I catch that move, and I'm done for the day.

With 5 contracts, 1 point will give me 500; 3 points, 1500.

Precision is key. I can't be wrong. And in the event that I'm wrong, I'll have to know that I am wrong within nano-seconds. I get out if price is not immediately moving in my direction.

On the days that I have to sit through the entire session for my trade to come back - those were the days I got impatient, and traded on patterns that I was not actually entirely comfortable with.

I do really badly picking bottoms and tops. Whenever I do that, I'll end up having to sit for hours to break even. Those happened to be times I didn't run fast enough. Once I'm losing 1 or 2 points in seconds, I will not run after that.

It's a rule that I don't take a 1 or 2 point loss.

I was ready to take a 10point loss in a worst case scenario, or I sit on my trade til I no longer have enough reasons to believe that the head and shoulder or triple or double top is actually going to happen.

This was how I traded the ER2 back in Aug and Sept.

Those were definitely easier months to trade than now.

Tapereading

In the months that followed ie. after ER2 went to I.C.E, I had traded the ES and NQ.

ES was a plague.

NQ was not bad actually, but I could never get the contract size right, and I coudn't settle on a way to trade it.

I was always tempted to tape-read and go in 30 times in 45 minutes. But it was an awfully tiring thing to do, and I started having difficulty with my vision.

My eyes couldn't focus on anything other than my charts.

I couldn't even read.

And that was enough to stop me from contiuing with a very profitable method of trading - by simply betting alongside traders who can move the market (they do so by luring sellers with big contracts when they want to buy, and luring buyers when they want to sell).

The challenging part is in telling the sincere buyers/sellers from those that are putting in bids and offers only to pull them the second the market took the bait.

Moving Forward: How I Plan to Trade the TF

I do best relying on just simple trend and price lines, charts and candlestick patterns. I'm still not great at reading volume, but am catching up. I am most comfortable looking at a clean chart with NIL indicator. I have a busy mind that wants to absorb everything. In order for me to focus on what I do best - reading price actions - I have to keep everything else out of sight, out of mind. Once I'm able to get my state right again (concentration plus CONFIDENCE), then I'll add just one indicator: the Keltner Channel.

I've only seen it being used by a forex trader months ago. I can't even recall on which site I had found it. Was playing around with the indicator the past few days, and noticed that it works wonderfully well on both forex and TF (don't know if it works on the other emini futures - will do some backtesting when I'm free).

I had totally forgotten how the forex trader had used the indicator, and I had no idea what parameters to key in. But after a few hours of playing around with it, I settled on 3 different sets of parameters - 1 for TF3min, 1 for TF hourly, and 1 for GBP crosses (Hourly).

I had to set my own guidelines and conditions for using the indicator (No, I didn't bother googling it. I decided that if it works perfectly the way I made it to, why bother about HOW IT WAS MEANT TO BE USED). I'm aware that if I publish them (which I will, after this post, and after I have had lunch and a good smoke break with Seabloke), I risk becoming the biggest clown in the blogosphere.

But I'm doing it anyway.

Coz THIS IS MY PERSONAL DIARY.

Which means I can write whatever I want. Hur hur hur...

Keltner Channel

The reason that I like the Keltner Channel is that it caters to what I need (with the other indicators, I feel LED by them, and had to make compromises so that I could use them).

I was looking for something to hem in prices (without the MACD, SS, and RSI, it takes a lot of work to gauge if price is overly extended). Bollinger band was something I keep adding to my charts only to discard it after a few weeks, coz it distorts my candles and I get really frustrated when I can't read my candlestick patterns accurately.

Keltner channels enclose prices but do not distort candles. The best thing about the KC is that instead of distracting me, like the other indicators do, it actually helps my reading of price actions.

It's like finally finding a mate that doesn't annoy you (sorry, Pilot, I took your script - and congrats on finally finding Seabloke and me a sister-in-law!! LOL!!!).

Ok, it's Seabloke time!!!

FX Trade - 1/7 (Update)

+208 pips.

Moved stop up, but am certainly considering closing position.
Reason: None. Besides wanting to take profit.

I love GBP!

TF Trades 1/7

2 trades. Done for the day. TF is still slow. And range is still pathetic. But I'm adapting. Will keep doing this until market returns to normal, hopefully, by Feb...

Profit: USD 90

Poker time!!!

FX Trade - 1/7

Long GBPJPY
Entry at 6amEST

GBPJPY (Hr)

Holding for a while. Daily chart shows a GBPJPY that has bottomed for now. That's the way I see it. But am prepared for a wash and rinse scenario to unfold.

TF Trades 1/6

Back to basics. Cleared everything I don't need, leaving just my moving average. So far, so good.

I'm thinking that TF will likely go back up to test 514.3 or at least 512.9 later today ie. it's probably going to move back into the broadening formation (pink lines). What I'm seeing now is a perfect bear trap - lower high, TF broke out on the down side of pink trendlines - in any case, Ascending Broadening Formations are generally not patterns I would use to look for selling opportunities. I'm definitely not expecting TF to punch through support at 504.6. On both hourly and daily charts, TF is looking all bullish.

Having said all the above, I'm going to be a good girl and stop at 2 trades today.

Profit: $50

Learning to take small victories.

TF Trades 1/5

I traded last night (is it just me, or that actually came out sounding like a confession of sorts???).

It was bad.

It was good at first. Then I forgot/ignored (more like the latter) D's advice, and went on a scalping spree!

No, I did not lose my mind.

I was merely pissed. Very, very pissed.

With what?

I don't know.

I can't possibly be mad with the market - I know it's organic and vibrant and all, but does it care that I'm mad?? And really, why would I be mad with a market that doesn't seem to have clear winners? All the buyings and sellings look more like coverings than anything. It's a market full of players that bail faster than you can curse "DAMN!" (yes, I'm absolutely one of them - both in bailing and in cursing).

So I couldn't go long, then sit; or sell, then sit, coz I couldn't know for sure who (bulls or bears) was going to make a dash (albeit in a totally orderly fashion ie. tick by tick, or 1 step forward 2 steps back $*#%*#*$8$!!!) for the exit, totally reversing the trend without warning. Professionals call this a ranging day, I suppose - you buy and sell as price touches the channel lines. And I suppose that had I put on my stochastics and/or RSI, I might just have gotten in on some perfect trades. Too bad that I had decided that the SS and RSI are not my type.

Now, at least I know that I trade only trends. And I definitely trade just breakouts - that is, if I am using a chart at all. I'm convinced that I can't trade pull backs and throw backs. Unless they come after a breakout from a major support/resistance.

But too bad for me, REAL breakouts on TF have become somewhat of a strange sighting. For instance, if it looks like it's broken up, someone's likely to come in to smack it down. So I'm actually much better off looking to sell.

Totally explains why I've been fading trends every damn day!!

Now, let me see, is there anything else I can blame?......

..........................................

Well, not for now. But I'm sure I'll find some after today's session.

From yesterday:

Didn't help at all that the last 15 to 16 trades were mostly winners (losses were few, and in ticks). The first few losers were too big (let's face it, a 1 to 2 point gainer or loser in a matter of seconds or minutes is big by today's standards) and I simply didn't have the spirit to chase anymore.

LOSS: $240

Letters And Notes

I am a broken record. I have been repeating the same complaint about the market for days now.

And I certainly am not going to stop now!! LOL!

Thanks, Andrew, for your lovely note.

Proprietary Trader, thanks, again, for your email. Your posting on your earliest trading experience is a gem.

And now, a rehash of my gripe over my recent predicament in the form of an email reply to Jane:

It's good to hear that things are looking up for you and your boyfriend as far as trading is concerned. Yes, I think girls/women tend to analyze too much.

What I learnt about trading is that if I'm not willing to take any risk, I'm likely to lose in the long run. What I'm losing is the opportunity to learn and grow.

It's like learning to skate or ride a bicycle. Had I been afraid of falling and getting a few scratches, it would have taken me much longer to learn them.

I remember the day my Dad bought me a bicycle - think I was about 5 or 6 - he had wanted to put in those 2 extra wheels to help get me started but didn't have the time to do it. The moment he left for work, I took my new toy out to the road, wanting to see if I could actually do without those aids. I fell many times, but each time I fell, I got back up immediately to attempt to ride again. By the time Dad got home, I was all bruised, but I had learnt how to ride a bicycle! Same thing happened when he got me a pair of skates. I started by taking the slope. Really dumb thing to do - I could have broken my neck - but I learnt how to skate in one day after falling a zillion times. Guess I mastered the art of falling so I was never so badly hurt (yes, I landed on my bum most of the time) that I couldn't get back up to try again.

I often compare how I learnt to ride a bicycle, to skate, to swim, and to drive like a maniac with trading. Sadly, such comparisons are of no use now coz I think I have simply lost that spirit I had as a kid. And part of the reason, I gather, is that back then, whenever I fell, I was the only one that was hurt.. As long as I was determined enough to show my Dad I could do it WITHIN A DAY, WITHOUT HELP, and as long as I could put up with pain, I would just keep trying, UNTIL I GET IT.

With trading, it didn't feel like I am the only one in it. There're constantly 2 persons in the picture, and I feel restricted and ACCOUNTABLE. It's not that D has been hard on me. It's just me needing to show him that I am not a failure, that at least there's something that I can do better than him. I am AFRAID TO FALL when it comes to trading.

I figured that what's been happening to my trading in the past few weeks is simply the result of analysis paralysis. I haven't a clue when it started, I just simply lost my edge: my decisiveness in entering and exiting a trade.

D is actually doing better these days. He doesn't know half the patterns I know (yes, I do a lot of what you do - looking out for all the formations that are developing, and where price is going etc,etc :-) ), but he's doing better.

And I wonder why!!! LOL!!

FX - GBPCHF, CHFJPY, AUDJPY

GBPCHF

Looking to close SHORT position for the following reasons:

1. Pair has hit 1.5355 - which is the target for a measured move down on GBPCHF weekly chart - and gone back up to close above 1.5355
2. Wave 5 looks completed, and given that price has moved so far away from 62EMA, I'm thinking a correction is due
3. MORNING STAR at price bottom!!!

CHFJPY

Looking to close LONG position for the following reasons:

1. Am seeing a Double-top in the making. Although a close below the low at 74.66 would be needed to confirm the formation, I have no desire to take that risk and the ride down should the pair decide to test that low.
2. Pair looks very much like it's going to make a measured move down
3. SHOOTING STAR!!!
   

Given the steepness of the drop down from July's peak, it's likely that the pair could use 78.72 or 74.66 supports to bounce back up to 98 in the next few months. Either that, or it could go straight back up there in 2 measured moves up in the next 2 to 3 weeks. Fact is, I'm clueless as to where the pair will end up end of next week, let alone weeks and months later. Since I have 3 reasons to close my trade - with profit - that's what I will do for now.

AUDJPY

Keeping Long AUDJPY position as uptrend is still intact, and there's still some room for the pair to move beneath its 70.05 resistance.

Essentially, I'm bearish on CHF and bullish on AUD for now, as far as fundamentals are concerned. Can't quite figure out where GBP is heading - and am not going to dwell on it. Fact is, GBP has completed a full measured move down on the GBPCHF weekly chart, and against the EURO, it has hit historic low. If anything,price is likely to go sideways or pull back for a while.

FX Update

Positions opened on Dec 18

Long : NZDUSD, EURJPY, CHFJPY, AUDJPY, AUDUSD, CADJPY

Short: GBPCHF

Update (Dec 31)

Stopped out (4 positions):

Long NZDUSD (209 pips), EURJPY (230 pips), AUDUSD (219 pips), CADJPY (224 pips)

Realized Loss: 882 pips

In trade (3 positions) :

Long CHFJPY (299 pips) and AUDJPY (169 pips); Short GBPCHF (974 pips)

Unrealized gains: 1442 pips

Pot

$4000 - yesterday
$1000 - an hour ago

Winnings (NOT real) from online poker. Hur hur hur.....


TF's LACK OF MOMENTUM continues to drive me up the wall.

Playing poker (while chart watching) definitely helps to take the edge off my frustration. It's also a perfect place to learn about striking only when you have a very high probability of winning the pot. Am starting to even enjoy folding once crazy players raise crazy amounts before the first community card is even dealt. I don't care if I'm holding two "A"s - if someone raises 500, I'm out. Without a single community card out there, I have no idea what my probability of winning is, and I'm not going to give my money to bullies and bluffs.

Best part about playing poker while trading is that it gives me something to do other than staring at my charts. Taking my eyes off charts has actually helped me to read them better whenever I return to them.

If only I had stopped staring at my charts after consecutive wins, my last 2 losing days could have been winning days (2 points and 1.1 point respectively). Staring led to chasing. So, instead of 3 losing days followed by 2 winning days, I ended up with 5 consecutive losing days.

Totally killed my spirit.

D came to my rescue. He suggested that I aim for just one winning day -regardless of how pathetic the winning is for the day, I will call it quits once I have a winning trade.

So here goes, my trades today:

What I saw while stealing quick glances at my charts was an Inverted Scallop in the making. Did a quick calculation and gathered that price could move up to 495 should it break above 490.4.

Went LONG after TF broke above 490.4, and got out at breakeven after price stalled right after I entered.

Entered again, and got out after price went up a few ticks and then started stalling . TF's break above its 491.6 resistance was at decreasing volume anyway - a sign that it was not likely to hit the targetd 495. Add SLOW and COMPLETE STALL to the picture, and I was looking at the familiar setup that started my 2 weeks of heartache!!

And good that I ran. Highest TF climbed to was 492.2. I had covered my long at 492.1. I don't care if TF tests that again in the remaining hour. I'm happy I have my first winning day in a long long time!! Even though it's just 3 ticks!

I CAN'T STAND LOSING.

Can't help it. That's me. CONSECUTIVE losing days destroy my state. And I have to find a way to get my state right - by hook or by crook.

D knows me well.

But he knows poker much, much better! LOL!!!

I'm having a happy new year!

Totally made up for a lousy xmas!!!!!

TF Trades 12/29 - Stopped Out

Stopped out.

Total Damage: Max. Pain (daily)

Will I ever get to see my familiar charts and momentum again???

Never in my 6 months of trading have I had 4 consecutive losing days. I'm an idiot to not have noticed that I can no longer trade the morning session. I should have taken note of my recent pattern of recovering losses in the afternoon and simply avoided the morning session altogether. DAMN!

Soul-searching is definitely in order.

Doesn't mean I'm going to stop BUYING - I'm sticking to my bullish view. Yes, I'm bias. One has got to have a view to trade. But I need speed. And I need people to stop messing up my chart! It looks monstrous!!!

3 consecutive days of hitting max pain means it's time I stay out for at least 3 days. Playing online poker instead!!

Way past bedtime. Can't afford to have sunken eyes and cheeks for my interview.

Stupid TF 3min

TF Trades 12/29

I've had it. Crazy market.

Am SWINGING this.

Turning in. Need my beauty sleep.

Interview tomorrow!

Daytrading Instrument: Forex or Emini Futures?

Received this from a fellow course mate:

Thank you for sharing with me so much through the few days of knowing only each other for such a short while. I kind of admire you that you have become a full-time trader, and I truly want to be in the footsteps of you and Michael Woo.

As I see myself having similar interests with you trading both the futures and forex, I was just wondering if you can help me with some queries which I have in mind.

Currently, I am trading in the Spot Forex, which in time I will be moving to the futures market once I have enough dough to open an IB account. I do have 2 questions, hope you can help me.

Are there are periods of time which you shun away or avoid trading big units due to low volatility or news such as FOMC.

Also, I am highly curious who you have learnt forex trading from. Will you be able to recommend the person who taught you forex trading? Whilst I am fully committed to Michael Woo's teachings, my aim is to build capital from trading forex as it is the only way that could lead me to the E-MINI trading eventually.

My reply (which I've decided to put on my blog because I realized it is something I can refer to whenever I feel lost myself) is going to offend forex scalpers I'm afraid, and I want to state that this is purely my opinion, and opinions and facts are not the same:

You mentioned you would like to use profits from forex trading to start a futures trading account with IB. I'm not sure that's the easiest path, or even a correct one for that matter. Personally, I would do the opposite, and here's why: it is easier to generate "income" from trading futures than forex. The futures market is where all the actions are on intraday basis. You can find trading opportunities virtually everyday in the futures market. With forex, there tend to be long periods of price congestions (where price is going nowhere), and the only way to make quick profits is if you scalp the 1-min charts. Add spreads and commissions into the picture and you'll be left with very meager profits. That is provided you're right most of the time. And even if you are, trading off 1min charts will take you ages to accumulate what you need to start an account in IB.

Since I know nothing about your financial status and why you are rushing into making money from trading, I'll just give you my general opinion: it's more feasible and realistic to SAVE up to start a 10K account to trade the eminis, and build your account SLOWLY. By that time, you'll not want to go back to forex, except to SWING trade it.

If I remember correctly, you're now pusuing a tertiary education? Do you work part-time? If you do, then start saving. Depending on your income, it might take you a year or 2 to reach USD10k. Meanwhile, open a paper trading account (with Options Express perhaps) and start paper trading the e-minis to get in syn with the market and get familiar with e mini futures. When you are finally able to fund an IB account, it's advisable to paper trade on the IB platform for a week or two to get used to it. After that, you can start trading real money, since you'd have had done a lot of paper trading by then.

As and when you start paper trading, start a trading journal as well. Document how you plan your trade, document your entries and exits and include details like whether you have followed your plan (which would include the REASONS for entries and exits), document your thinking process (aka decision making process), your moods, and finally, document what the broader market sentiment is like for that day.

By the time you complete your own "coaching" program, you'll have enough notes and real data to assess what type of trader you are (are you a scalper or a daytrader? what chart patterns are you inclined to recognize and profit from? what is your risk tolerence - which will determine where you place your stops, etc), which timeframe suits you (some people can trade the 1st 2 hours, and some can't), and what kind of market is more profitable for you (some people can't make money from a market that's too volatile, some flourish in a wild market - both groups make money).

Having all this info gives you the confidence to enter a trade and see it through, and also the experience to know when you should take profit or get out of a losing trade.

What I'm telling you might not sit well with you. But I have to tell you that PATIENCE is a trait that if you don't already have right now, you'll have to start acquiring. Trading really tests your patience. Much like fishing. Am sure you know what I'm getting at.

There's always plenty of opportunity to make money once you've acquired both knowledge about the market and ABOUT YOURSELF. Right now, it's important for you to focus on your studies and not be distracted by losses (as you can see, I'm stating it as if it is a fact. It is. Losses are part of the game. You will most definitely lose money in the first few months or even years that you begin trading). It's ok to paper trade to gain knowledge about the instrument you're trading, about the market, and about yourself as a trader. Even taking time out to work to save up for your capital is ok, as long as your work doesn't take your focus away from your studies.

Trading real money requires full concentration and a GOOD state. If you're worrying about a test, an assignment or an exam, it's not possible to trade well. So you're looking at a situation where both your trading and your studies are going to be affected.

If you must earn quick money, I suggest you take up a sales job. The hours are usually flexible, and if you're a people person, you'll most likely even have fun at work :-)

Just don't put your hope on making money from trading. Not now. Not even in the next few months. Trading is like any other profession. It takes years of practice and being with the market DAILY to become good at it. You don't have to start counting from the day you have the capital to start trading. You can start now by paper trading. That is experience too. And you don't lose any money.

Just make sure that when you paper trade, you treat it like it's real trading. Which means you don't trade 10 contracts and wipe out your 100k paper trading account in a month. You trade on paper the way you'll trade with real money. It will make the transition to real money trading much much faster. When you finally start trading with real money, just be prepared that there'll be a learning curve too. The psychology will be different, no matter how prepared you are. But having the confidence that you actually know what you're doing will give you a lot of edge.

Now, to answer your question on forex - I can't point you to anyone, coz I've never had a teacher. I'm self-taught. There isn't even a good forex book on the market that I can recommend you. The best forex books are the manuals that banks write for their traders. These are the professional traders who look at a multitude of things that will overwhelm you at this point if I were to tell you what they are.

In anycase, it's pointless to know how they work, coz we belong to the group called "retail" traders. We are at their mercy. There's just no way that you can daytrade forex to consistently make money. With forex, you'll have to take a buy/sell and hold approach. Trend recognition becomes an important skill you must develop. Once you figure out what the short to intermediate trend is, you'll trade in that direction until there're signs to tell you to get out. These signs are mostly fundamental; charts will not be useful.

I was telling you the other day about patterns being useful on even intraday charts - I was speaking in the context of an established trend. When I do intraday trade, I'll need charts to time my entry. But I already have an idea where the pair is heading so I trade only in that direction. But the reason I'm trading FX is so that I don't lose touch with the FX market. Not to make money. Not that I can't, it's just that daytrading FX is not at all lucrative. Swing trading or postition trading (where you hold your trades for weeks to months) is the only way to make money from the FX market. But in order to do that, you'll have to have MORE money than what you need to start trading the eminis.

Now, do you see why I said I would do the opposite of what you're planning to do ie. to trade FX first then trade the eminis?

Will let you digest the above before I say more :-)

Feel free to write to me. If I've confused you in any way, do let me know. If you need further clarification to the above, just give me a shout.

You know, the internet offers a wealth of info on trading all kinds of instruments, free of charge. You are already familiar with the basics of trading, so I won't suggest that you read more books. You don't appear to be the reading kind to me :-)

If action is what you want, start by OBSERVING others in action. Visit forums and blogs. NEVER trade others' views and opinions. Just WATCH what they do, and take note of the outcome of their trading decisions. They provide good info on general market sentiments, and sometimes offer very good insights regarding the market and regarding trading. Observe how they develop those insights, and how they use them in their decision making process.

What you want to learn from them is HOW THEY EVOLVE from a novice to a fairly competent trader. The exercise will help you to write comprehensive journal entries. More importantly, as a start, these blogs and forums will tell you things that you should know, which you can't go about finding out if you're clueless as to what you don't know :-)

Go to my blog (www.juzjules.blogspot.com) and focus on the list on the right - my blogroll. Those are good blogs. Most are forex and stock traders. Check out Traderfeed - Dr Brett's archive is a treasure. Take a look and you'll know what I'm talking about.

TF Trades 12/26

A few changes that I've made:

- Got rid of the PnL column AGAIN. It's bad for me. Proven.

- Took out some indicators. Indicators have been proven to be bad for me too. I started out 6 months ago having some, got distracted, removed them and did much better, and then for unknown reasons, I started to put them back again...and got totally distracted AGAIN

- Started tapereading after trade no. 3 today. Felt much better.

Whenever I feel like I'm totally lost, the first thing I do is to strip my charts of non-essentials. When my charts are almost naked, I'm happy.

For today, I'm bent on blaming indicators, and totally giving myself a pat on my shoulder that I'm losing less - USD 18.80.

Taking into account the 28.80 I've paid my broker, I actually made 1 tick.

Not bad. LOL!!!!

There's always another day.

DOW, S&P500, Nasdaq100, RUT - Anyone Wants To Go UP??

DOW

I have no idea what to make of these:

1) Index is looking dangerously like it's going to be making a measured move down to around 6822

2) That said, it looks like it could break out of the downsloping channel on the upside

3) An Inverted Scallop is taking shape, and if completed, could send DOW up to around 9650 to 9700

4) But...wait...is that a Triple Top in the making???

5) Indicators are all pointing to the index going south

Having said all the above, I'm still IMAGINING that a Diamond Bottom is in the making, and DOW is going to break out of it on the UPSIDE. Hey, everyone's entitled to HOPE....

SPX

DOW's twin...

NDX

Bear Flag plus Partial Rise.

Disastrous.

RUT

If I really want to get calculative, RUT is at least making higher peaks and higher valleys within the upsloping channel.

But Partial Rise looks set to ruin my bullish dream.

Sigh.

TF 30min

Bullish Picture:

TF makes a measured move up to red dotted line (477), then pulls back to blue dotted line (470), bounces up from there towards red solid line (485), then pulls back to red dotted line (477) before going for 495.9.

Ok, that's crap

CLOSER TO REALITY:

TF either:

1) makes a measured move up to red dotted line (477), then reverses, and tumbles all the way to black solid line at 444 (in Cantonese - a chinese dialect, and D's mother tongue - it's pronounced DIE, DIE, DIE - not exactly, but very, very close), or

2) fails to make another close above blue dotted line (470), and tumbles all the way to black solid line at 444.

TF 3min

Ascending Broadening Formation housing a Partial Rise.

SIGH.

Break

Am in a very bad state, and taking a break from trading.

TF Trades 12/23

Damage: USD 147.20

PLAY AGAIN TOMORROW!!

Swimming Against The Tide For No Good Reason

TF 3min

I know that everyone has gone on a vacation, and I'm among those that stayed behind to trade a pathetic market like this because we have nothing else better to do.

The market is hopeless. TF is hopeless. And I'm hopeless. The market can continue to torture me, and I'll still wake up everyday waiting for it to open.

Seabloke commented that I have no life.

But trading IS MY LIFE. And right now, it's not treating me very well. After a dozen rounds of getting 1 point and giving back 2, I'm 1.2 point in the red for now. And the only one I'm making happy is, as always, my broker.

2 consecutive losing days has become a norm for me lately. This really must be bad. I've either attracted bad karma by wrapping up the year 1 week too soon, or simply run out of beginner's luck.

I haven't a clue why I'm trading this market. It stumps me. Nothing that I've used before work now. Not that I've been consistently deploying specific set of strategies that I can call my own - but I DO use my brain. And the market's making me feel like I've been sitting on it the entire month. #$$%*(#!

Maybe I need a break. Maybe there really is a time that the smarter folks stay away. I gather that since I'm here trading, I must be an idiot.

My neighbors have been killing me the whole night with their horrific rendition of Silent Night, Oh Come All Ye Faithful and a few other Christmas carols that I love. The very evil part of me have been so tempted to gatecrash, take away their dinner, and watch them cry.

TF is tricking me to go long again. I might seem an easy target (who else would go long the whole time the market was clearly trending downward? For 2 days??) for now, and that's just coz I'm totally losing my mind. "SLOW" KILLS ME!

Am fighting to my last breath. I have 2 more hours, and if I can't find a way to get/break even by then, I'm going to wake up my neighbors singing Auld Lang Syne the way I sang it when I was in preschool.

I hate Christmas.

TF Trades 12/22

Definitely a terrible way to start the week.

Price crawled throughout, the range for each move so tight that all the hammers and stars just can't make you buy or sell.

At the point that I got out after an 8-point loss, it would have been foolish to chase the downward move, and senseless to go long...

TF is moving so slow it's driving me absolutely nuts!!

In my current state, turning off my computer would be the wisest thing to do.

Damage for the day: 8 Points

Daytrading Performance Review 2008 (July - December)

Started in early July with USD 28,000.

Total profits earned in 6 months (July - Dec): USD 27,700.

OBSERVATIONS:
- Not having any stop strategy resulted in the largest single trade losses

- Volatility stops are most comfortable for me

- Trading 5 ER2 contracts was highly profitable but highly stressful

- Trading 3 TF contracts is profitable 3 out of 4 days; extremely damaging 1 out of 4 (3k loss in Nov) - which is bad enough for me

- Most comfortable month is the one that has no significant winning days/trades and losing days/trades (this month)

- Tapereading (reading market depth) is the most profitable but produces the least consistent results

- NQ (per contract basis) is the most profitable instrument to play - for me - but I couldn't seem to find a better way to trade it than using the tape (which is highly stressful for me and highly profitable for my broker)

- Trading the full session (from market open to market close) is profitable for me

- Not setting a daily target, or target of any kind, is better for me

- As far as TF is concerned, trading 1 contract is right for me now (NOT 5, NOT 3, JUST 1!!!!)

- ES sucks

- Options suck BIG TIME (ie. not my friend)

Will leave soul-searching for another day. whenever the need arises.

TF Trades 12/19

Annoying market that had me playing intra-candles candle by candle.

ANNOYING!

Crawling in. I'd rather get a good rest and stay wide awake during class tomorrow.

Stupid FOMC, expiration, holidays and everything else that's made the week a pain FOR ME.

Total for the day: +2.5 Points

About Overbought & Oversold Situations and Selling & Buying Opportunities

Something from personal observations and for my future reference:

Overbought (an indication that I can start LOOKING OUT for opportunity to SELL) and Oversold (an indication that I can start LOOKING OUT for opportunity to BUY) situations happen across all market sentiments - Bullish, Bearish and Neutral.
_________________________________________
In A Market Where Sentiment is BULLISH (Fast MA above Slow MA; Slow MA pointing up), and when TICK is at:

-150 :
Oversold; Buy

+150 :
Throwback due (40 to 60% of previous move up); Sell

+250 to +500 :
Overbought; Reversal likely; Sell only when MA10 has come down to 200 from 500.

_________________________________________
In A Market Where Sentiment is BEARISH (Fast MA below Slow MA; Slow MA pointing down). and when TICK is at:

+150 :
Overbought; Sell

-150 :
Pullback due (40 to 60% of previous move down); Buy

-350 to -500 :
Oversold; Reversal likely; Buy

__________________________________________
In A Market Where Sentiment is NEUTRAL (Fast and Slow MAs intertwine; Slow MA almost horizontal), and when TICK is at:

-150 : Oversold

+150 : Overbought

TF Trades 12/18

On TF 3min now: hammers and shooting stars are having a little fun at my expense.

On TF 10 min: Double top + Evening Star formations are not going to fool me into believing that TF is just going to take a nosedive. Uptrendline is probably going to be able to support price today.

I'm turning in. Haven't slept for 48 hours. Whenever I start talking to myself, I know it's time I get sleep.

Total for the day: +1.2 point

FX Trades 12/18 & TF

FX

7 positions:


Long: EUR, NZD, CHF, AUD, CAD

Short: USD, JPY, GBP

Am giving the pairs some room to move.

Update (adjusted stop for GBP/CHF...what blunder):



TF


Hopelessly slow.

Doesn't really matter that it looks as if it's attempting to make a 2nd measured move up. Slow sucks.

Resistance at yesterday's high and the generally flat market is keeping me from BUYING. Flat MA needs to stop staying flat.



Hammer on 10min chart.

I always trust a hammer.

But I trust speed more.

RUT has been showing relative strength over DOW, SPX, and NDX consistently for 3 sessions now.

Is that a good thing? I don't know. Maybe not. It's not lifting the others up, and they can't bring it down. Actually, it looks more like a case of lack of leadership. DOW's not leading, and RUT can't decide if it wants to be a sheep or a shepherd.

Is everyone just going to sit back and wait for expiration?

If that's the case then I'm much better off hitting the sack now.

TF Trades 12/17

At 3pm EST:


Granted TF was crawling up the whole session, I had found it difficult to go long (ok, that was silly and redundant - I did mention CRAWLING...). Couldn't hold a short position for long either, coz RUT has been showing relative strength over the other indices.

Another day that really tested my patience.

TF 10min's showing a bull flag of sorts with a rising broadening formation (ie. even if it breaks out of the formation on the upside, it's not likely to go too far):


At this point, I'm looking at a situation where:
1) it's not worth risking what I have already made going long, and
2) unless what's forming within the broadening channel now is a partial rise, it's just reckless to enter short

Definitely time to crawl in.

Total for the day: + 4 points

TF 12/17 - Yawn....

Watching paint dry....

Market looking awfully neutral today; volume, pathetic.

MICHAEL In E-Mini Daytrading Land

Today is one of those rare days in my life that I woke up feeling good about myself, and that the world is going to my own little Disneyland. For some strange reasons, I got out of bed with a clear blueprint, in my head, of how I'm going to go about trading from now on. Santa dropped by last night perhaps...

Yesterday's result was certainly a tad disappointing; the day before, frustrating. But I hadn't felt defeated. And that is what matters to me - to actually feel good about not getting my way, because I had learnt a little more about myself in the process.

Lord Tedders commented once that what I really need at this point is not as much about finding a method to trade as it is about knowing who I am and what I want.

So very zen, and so plainly filled with wisdom.

While I might not have immediately grasped the essence of that statement LT made, I most definitely have experienced enough frustrations to date to finally appreciate the message he was wanting to drive home.

And because of that, what happened yesterday was actually GOOD. I am now ready to say that I have a plan, after having made all sorts of trading blunders - a result of not having listened to my own inner voice in the first place, and denying what really makes me tick.

But this posting is NOT about me.

This posting is about Michael's E-mini Daytrading class - a 3-day course that began last Saturday and ended on Monday.

See, the one thing about Michael that makes me so fond of him is that he doesn't look like an intraday trader at all, and definitely doesn't fit the description of those that trade the full 9:30 am to 4 pm session (by full I mean he stays throughout, no lunch - supper here for us - break, or tea break). He is always relaxed, calm, and tastefully humorous. I don't know about the others, but I am always looking forward to his stories and jokes everytime I see him.

Even his jokes teach you something.

And that was what his class was about - a concoction of "serious" material and anecdotes, thrown in with a lot of wit and wisdom that kept me captivated from 9am to 5pm on each of the 2-day session.

On the 3rd day, which was a live-trading session, I got to see Michael in action, and confirm my suspicion that the man basically treats the market as his personal playground.

While most novice traders, and many seasoned ones who are FIGHTING the market everyday, clearly see the market as a warzone, Michael probably sees it as a casino.

Fact is, barring the addicts, most go to the casinos for fun. Here in Singapore, we are calling our casinos (under construction now) the Integrated "RESORT". Would anyone actually call a battlefield by that name? Maybe Anfiteatro Flavio, or Colosseum would have been more apt, wouldn't it? And really, why don't we just call the market that, and ourselves gladiators? We have been, afterall, imprisoned in our thick skull, and enslaved by systems, opinions of the experts, and our own greed and fear.

I haven't thought much about Monday's session until this morning. It was when I played it again in my mind that I realized I had somehow anchored the state, and the mood, from that night. That really helped keep me sane during yesterday's session. You see, on Monday night, as we were "watching paint dry" - as Michael had put it - Michael started sharing some Jay Leno one-liners, which I've got to say, were simply hilariously clever. Every other 10 minutes, he would be looking for something to lighten everyone up as we sit watching his 6-point loss. At one point, he asked if anyone brought cards to play! This genius who makes up to 150% per month trading JUST the ES and TF, is simply INSOUCIANT!

And by that I certainly am not implying that Michael is arrogant, or reckless. As a matter of fact, Michael is the most down-to-earth trading coach I've come across. One has to sit with him for 5 months to know that about him - coz 5 months is the duration of his basic trading course.

All who attended his eminis course were graduates from this basic course - during which they were barraged with lectures on the importance of exercising discipline and adhering to rules when trading - certainly the first things that any beginner would have to know and become accustomed to doing.

In his eminis class he shows you how the professionals trade. He shares a great deal about "Intuition". But I'm not going to go further than this on the topic. There's no way I can come close to Michael in expounding the subject in a way that enlightens rather than confuse and mislead.

And if anyone in class did not fully grasp the crux of his message through his "lecture", he or she would certainly have gotten a glimpse,at the very least, of the wisdom of his teachings via the interesting stories he shared - the most engaging ones, i believe, being those containing characters he had met at casinos. And Michael has very cleverly chosen the right stories to tell to the right audience.

One story that stuck was about this Taiwanese tycoon who came to the table with 14 100k-chips and was playing 2 tables simultaneously. He went from one table to the other playing bets of 100k each time and was unflustered whenever his 100k was taken away from him in a blink of an eye. He ended up walking away with one-million in winnings. 100% ROI. Brilliant man who was skilled in the game, and clearly endowed with an edge lacking in many equally skillful players: NERVES. Granted that he's clearly loaded, it doesn't mean that all who have what he has - obscene wealth - are by default, COOL. Many wealthy gamblers are sore losers and would literally lose it once they start losing, and whether they are proficient in the game to begin with is almost of no significance at the point that they let their emotions take the helm.

And that's all I have for spoilers. I have lots to say about the course, but I will stop here. I'm SO glad I have his entire course audio-taped. Heaps of wise sayings there that I can use should I decide to write a book on "how to trade the emins". Hur Hur....And if I'm lazy, I can always just auction the tape on ebay. LOL!!!

Just something to add before I go, something I picked up from the class which is impoartant TO ME, and it's this: one has to know that trading stocks and options is different from trading the futures, and you can't apply the approach you use in trading stocks in trading the futures . To be consistently profitable in trading the futures, you'll have to do some adjustments with respect to the approaches advocated in many old-school teachings - in particular those concerning risk-to-reward ratios. Daytrading the emini futures is unlike daytrading a stock, and vastly different from Swing trading stocks and options. Once you get that, and the idiocyncracies of the futures market, you'll see that using the tradional methods to gauge where your stops should be placed will at best make you a break-even trader.

With instruments as volatile as the TF, ES, and NQ, a saner, if not more sensible and logical way is to use VOLATILITY stops. By using volatility stops instead of fixed stops or stops placed at key resistances and supports, you're always in sync with the market, which is getting ever more erratic, thanks to the ease with which one could access the market and exchanges directly as trading technology makes new fronts ever more frequently.

Michael's class definitely has an artistic touch. Yes, you'll still get the blueprint of his mechanical system (sadly, that's still what most are after - the GURU's holy grail), but if your focus is on that, you'll miss the breathtaking landscape that shapes Michael's PERSONAL trading style, which is, in my opinion, a roadmap that most certainly can be adopted by anyone looking for a trading methodology that he/she could call his/ her OWN someday.

I'm not sure Michael is actually aware that his class is worth many, many times more than the fees he's charging. His stories - real life accounts you have no access to - about those making real money are priceless. His up-to-date (to the last time he entered a trade, which was last Friday) trading account statement (showing a humble $25k initial investment, and a winning rate of 70 - 80%) left on the projection screen for all to see is nothing short of inspirational and phenomenal.

NO ONE, to the best of my knowledge, who teaches trading here, would ever show you this/her entire UPDATED statement spanning months.

What impresses me most is that the reason Michael had started with $25k instead of his usual 6-figure amount was to show his students that one could still make 100% PER MONTH with a $10k to $25k start-up. He's averaged 130% per month over the past 4 to 5 months and it was right there on the screen for us to see.

Michael does stress time and again that you have to have at least USD$10k to trade 1 TF (Russell 2000 e mini futures) contract to give yourself a reasonable buffer.

Brokers offering USD$500 margins are setting their clients up for downfalls. If one hasn't 10k, DON'T trade the eminis YET, until you have the money, the knowledge, and the right attitude. If one has 10K, but hasn't the mettle to use it to work for him/her, DON'T trade the emini futures, for it surely isn't for the faint-hearted.

It's blunt. But it's the only way to get the message across.

You have to be able to afford to lose the 10k in the event that you do something stupid.

The Taiwanese tycoon who walked in with a million and thought nothing about losing a 100k per bet - this is someone who can afford to lose the entire million, and won't lose sleep over it. THAT is the nub of trading. If you're constantly AFRAID to lose, you'll just keep losing.

I'm speaking from personal experience: fear clouds your judgement.

And FEAR breeds GREED. Worth taking a moment to ponder on that.

The 3-days spent with Michael, and seeing him trade live, have brought about a paradigm shift in the way I look at trading. Simply precious.

I highly recommend those in Singapore who're battling it out in the eminis market to check out Michael's class. At the end of the course, you'll definitely have a clearer picture of the instruments you're trading (the emini futures), and a deeper understanding of the concept that trading is ultimately about KNOWING YOURSELF.

Above all, you'll learn from Michael, and see with your own eyes, that trading can be, and SHOULD BE, fun.

And of course, you get his proprietary trading system.

Michael can be contacted at mw@shoyun.com

TF Trades 12/16

Loss: 2 points

You're a plague, FOMC.