DOW: Weekly & Daily Chart Analysis & Inverted Scallops

DOW WEEKLY

It appears to me that we are now in wave 4 - put another way, it simply means we have yet to see the bottom.

The bottom could be at 6975, which is DOW's previous low (formed in Oct 97), or at around 6000, which is the completion of the 2nd leg of a measured move down in the daily chart (refer to weekly chart above). Details under "DOW DAILY" below.

DOW DAILY

I see an Inverted Scallop developing (the arc in the above chart is the best arc that I can draw...do give it your best shot to visualize a smooth arc that joins the price peaks - that's the shape of a typical Inverted Scallop - although sometimes you will have to use the low, rather than the peak, of the candles to see the arc...you get the drift...)

I personally had found the Inverted Scallops comforting to see in a downtrend during those times that I had entered a LONG position prematurely. It's about the only other pattern that will successfully reverse price (the other pattern is the double/triple bottom that has either hammers or morning stars, or piercing patterns at the bottom - I personally don't trust the harami - but that's just me), especially on intraday basis. Again, that's my personal experience - if I want to see a scallop, I will see a scallop, and I set my stops and targets based on this particular pattern that I have identified.

And since according to Bulkowski (author of Encyclopedia of Chart Patterns), when Inverted Scallops form in a downtrend, it is usually found in the corrective phase of a measured move down (which is what we are seeing on the daily chart now), I know that my odds are getting better that the pattern forming is indeed an inverted scallop.

So, assuming that we are now indeed in wave 4, and assuming that wave 4 ends at 10,700 to 10,800 (refer to daily chart above - 10700 is derived from fib extension; 10800 is visually a resistance), the way it's going up could be via successive Inverted Scallops. A sign of exhaustion of this corrective wave up would be the narrowing of the width of each successive scallops (ie. it takes increasingly shorter time for scallop patterns to complete)

Assuming that price indeed turned back down from there, completing wave 5, which is also the 2nd leg of the measured move down, my target, if I was shorting, would be around 6975 (previous low in Oct 97), or 6000 (performance target for measured move down).

Random Thoughts: picking tops and bottoms & daytrading and swing trading

Having said all of the above, and truth be told, no one can say for sure where the bottom is going to be.

As far as I'm concerned, I'm going to go with the assumption that DOW's going to go as low as 6975, or 6000, or even lower, before it will make a solid bounce to reverse the downtrend that began in 07 (I'm just going to ignore - for now - the arguement that the downtrend actually began way before that and that the rally that we saw prior to Oct 07 was merely a bear rally).

That's the easier scenario - ie. DOW to confirm a bottom, and the market simply looks to trade up from that point until it touches its previous peak at 14200.

Should DOW punch through 6000, or 5000, I'll be prepared for a very difficult trading environment, not unlike the one I've experienced for the past few weeks. The reason is straightforward: prices would be too low to make selling comfortable or even natural for that matter, and the risk involved in going long without having seen an established bottom first is too high to buy - most are going to think like that, and that kind of collective sentiment could create some really freaky looking charts like the ones we've seen on the awfully choppy days lately.

All in all, as a daytrader, my concern is NOT so much about market's trends as it is about the SENTIMENTS surrounding surprises along these trends. Using the above as an illustration, should the majority expect DOW to plunge beneath 5000, then a rally -if it happened -could be a difficult one comprising choppy days and steep downward moves. In this case, taking the side of the bear, and getting aggressive on days plagued by bad news and econ data would be the way that I would go about trading the TF in particular (to use the analogy of poker, this will be the round where I'll go "ALL IN").

For now, it's clear that the market wants to go up. For how long, I don't quite care. I just know that no one knows for sure, everyone's guessing, and constantly looking for the more enlightened to provide some solid answers, and the smallest surprise will send the market drifting in all kinds of directions. Here I am, just scalping away daily - taking my few ticks per scalp - while watching for price to be stopped, turn around, and go back down to find its real bottom this time.

Again, the bottom could be 6000, or 5000, or maybe even 2500 - according to some seriously grisly bears (yup, that included me at one point) - and precisely because I don't have the SLIGHTEST inkling where price will stop nosediving, I'm going to continue to daytrade and scalp only, until I see that it makes sense for me to hold my trades longer. (It wouldn't make sense for me to take trades I'm not comfortable with. But it could make perfect sense for someone less risk averse/more aggressive/better capitalized to actually buy-and-hold, or sell-and-hold RIGHT NOW. There's really no one way to go about trading this market.)

For me to really believe that the market has bottomed, I would have to see successive bullish patterns developing above the 6000 to 6975 support. That's the only way I can be assured that the odds of DOW breaking above its high at 14200 have indeeed increased.

Since market's closed for holiday today, I'm going to take the chance to do something really terrible later - skate with a flu. If I keep believing that I'm sick, I will continue to be sick. That's the way my body works.

Reflections of 2008

With Chinese New Year just days away (Sea, when is it exactly?), I feel it's timely to reflect on the year that's come and gone...For what, I don't know; and really, I don't care. I just feel like doing it.

Well, ok, it's probably coz everyone's doing it, and I just want to see if I'll be a better person next year, after having done a year-end review of how I've lived my life this year.

As with all the years that came before it, 2008 was the best year of my life.

Why shouldn't it be? I mean, I've learnt more about myself, people, and, life in general - more than I ever did before - and I wasn't killed in the process! I'm living and breathing, and feel better about myself than I did the year before - which, like all the years before it, happened to have felt absolutely like the best year of my life!

I'm not being funny here. I couldn't have been more serious when I say that I always prefer the current to the past. Why anyone would prefer the past is simply beyond me. The past, to me, was a period when:

1) I most certainly was more ignorant (and I can most definitely understand that the same doesn't apply to someone who's stopped seeing, hearing, smelling, tasting, touching, or do any sort of sensing - well, yes, essentially, I'm refering to anyone that's NOT living, in the way that we've come to understand what living means);

2) The world was definitely more backward (Sea, don't ask me to elaborate on that, I'll knock your head);

3) ALL THE GOOD THINGS THAT CAME WITH IT ARE NOW GONE, FOREVER - I've experienced them much like the way I've enjoyed that piece of chocolate pistachio cake I had for desert tonight: it was scrumptious on my tongue, but once it's worked its way down my esophagous, the only place it's going to end up is my intestines...and the rest is just...well, I've had a sinful piece of rich, moist, nutty chocolate cake, which is probably going to add a fraction of a pound to my weight;

4) I was always uglier

Each year, I have 2 boxes that I would bring along to the following year:

A) People, Experiences and Lessons that I will remember or would want to remember for the rest of my life

B) AGENTS of life's lessons that don't matter

Contents in my box (A) for 2008

People

- Family;

- Friends I'm in contact with on both regular and occasional basis; all my old friends in Singapore, HK and Canada; all my ex colleagues, staff and superiors;

- Friends I've made via this space - all who have left comments here, and all those that I have been exchanging emails with

- Those who are reading this and who haven't at one point or another felt like slapping/sucker punching/kicking/killing me (please drop a note so I can put you in my box (A) for 2009!)

Experiences

- Trading, Trading, Trading!
-D, D, D!!

Lesson

- I'm NOT always right

Contents in my box (B)

-
-
-
-
-
-
-
-

Ok, it's empty.

For an obvious reason: the contents don't matter.

In due time, they'll be forgotten anyway, and excreted from my system like desert I've had for dinner that's gone through the final phase of digestion...


And that pretty much sums up how I've been moving on to the next year every year, knowing for a fact that the new year ahead will be the best year of my life.

TF Trades 1/16

3 trades, and that's it for today. Very comfortable trades. Exactly like this day.

What happened that day and today was that I had gone in without scrutinizing all my charts hours before market open. For today, I took a look at the 4 timeframes (1, 5, 15, 60 minutes) half an hour before the ringing bell, and went in during the "forbidden" time zone: first half hour of the session.

On the previous day, I had gone in after quickly taking a look at the 5 and 1 min.

I was mildly detached on both days, and was doing a fair bit of self-talk, asking if I am making up patterns and scenarios and guessing where price is going instead of focusing on what price is doing right at this moment.

At least for now, I do better going in WITHOUT an opinion of the market. I am aware that my weakness is that once I have a view, nothing will make me change it. And that has often caused me to sit on a losing trade, or missed all the good trades coz price was not doing what I thought it should be doing.

Without an opinion, I depend totally on momentum and the current price actions.

Am too tired to go into details of my trades. Briefly, I went short on the first trade and was ready to hold it for a ride down when I noticed that a hammer seemed to be forming at support on 5min chart. Got out with a few ticks and reversed the trade. Scratched it breakeven when I didn't feel comfortable with the jerky movement. Went long again upon confirmation of hammer on 5 mins. Got out after price starts pulling back after going up for around 8 ticks without stopping.

Totally took the path of least resistance for the first time in many, many days. Again justifying my NOT having any view. Coz whenever I have one, it's AGAINST the path of least resistance. I'm a born rebel, and love trouble too much for my own good.

So, 3 trades: 2 winning, 1 breakeven.

I'm really tired.

Andrew, now I can sleep :-)

Profit: USD 125

Sick, In Every Possible Sense

I am taking a break from trading.

That is, if I can stay away from the market.

Had only 3 shuteyes lasting a total of 7 hours in the past 72 hours. Yes, I'm keeping track. That's my beauty sleep I'm losing!!! I most absolutely need to SLEEP!!!!

Am down with flu AGAIN - I suspect it's the air I'm breathing. Migraine won't stop attacking me, and I've been coughing and wheezing for weeks now (I DO have something I can blame for my terrible trading results... WOOHOO!).

I absolutely want to have at least 4 hours of sleep a day. And I absolutely want to be able to wear my bikinis at home again without feeling like I'm going to freeze to death.

But I like my new husky voice.... And I'm going to lose it once I lose the sore throat...

I will absolutely treat myself to sinful helpings of triple chocolate cookies, cakes and ice-cream if I can stay away from my workstation today.

We'll see....

"IF"

Found this on A Canadian On Wall Street's blog, and love it:

If you can keep your head when all about you
Are losing theirs and blaming it on you,
If you can trust yourself when all men doubt you
But make allowance for their doubting too,
If you can wait and not be tired by waiting,
Or being lied about, don’t deal in lies,
Or being hated, don’t give way to hating,
And yet don’t look too good, nor talk too wise:

If you can dream — and not make dreams your master,
If you can think — and not make thoughts your aim;
If you can meet with Triumph and Disaster
And treat those two impostors just the same;
If you can bear to hear the truth you’ve spoken
Twisted by knaves to make a trap for fools,
Or watch the things you gave your life to, broken,
And stoop and build ‘em up with worn-out tools:

If you can make one heap of all your winnings
And risk it all on one turn of pitch-and-toss,
And lose, and start again at your beginnings
And never breath a word about your loss;
If you can force your heart and nerve and sinew
To serve your turn long after they are gone,
And so hold on when there is nothing in you
Except the Will which says to them: “Hold on!”

If you can talk with crowds and keep your virtue,
Or walk with kings — nor lose the common touch,
If neither foes nor loving friends can hurt you;
If all men count with you, but none too much,
If you can fill the unforgiving minute
With sixty seconds’ worth of distance run,
Yours is the Earth and everything that’s in it,
And — which is more — you’ll be a Man, my son!

Re: GS Options, A Whited Sepulcher, And Adios to 2008

DeTrader,

Thanks for your comment from moments ago. I am not going to publish it.

It isn't about pain, so you haven't done anything you need to apologize for.

I wish you success in your endeavors - both blogging and trading.

WT*!!!!!!!!!!!!!!!!!!!!!!!

!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!

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);

TF Trade 1/14

1 trade. Am calling it a day. I need sleep. Had only 3 hours of sleep in 48 hours. I don't want to start making stupid mistakes again (ya, like the one I made yesterday....).

Was pleasantly surprised to see the market behaving like it used to (ie. before end of 2008) when I returned home from a class reunion. Missed the opening bell, and hadn't the time to prepare for the market at all today. Thought I was going to have to give this session a miss.

TF continued trading down for an hour or so after market open. As usual, I didn't chase, and was looking to BUY. I had so many misses with picking bottom that I'm starting to recognize all the traps. It's not enough to see a higher low and higher peak. I need a strong bullish pattern to get in. And I definitely consider a busted bearish setup a very strong indication that the only way the market is going is UP.

It's not very common for me to get into a trade with a normal heartbeat. Today's a rare occurrence. I knew where exactly I was going to get out. In fact, my entry and exit reason is a common one - that everyone's eyeing on that resistance to be broken, where price is very often seen rushing towards, only to plunge back down when it gets smacked down by sellers who have already positioned themselves there to take out the weak bulls. Didn't happen today, but I'm not going to change my rule. For now, I just want to take profit when there's profit to be taken. Letting profit run is not a practical approach for me right now. Not when the market's so fickle about where it wants to go on intraday basis.

Today's report card:

Profit: USD 95

TF Trades 1/13 & Someone That Caught My Heart

Not going into the details of my trades. Am mentally drained.

A very close family friend called 2 hours before market open. She had lost a fortune in the stock market (so much for buy-and-hold approach!!!) , and had recently taken a loan to buy back the stocks. The stocks continued to drop, and it is time for the money to be repaid. And it has to be tonight. When she called, she had only 1 hour left to get the money.

I still don't have the facts, but I've known this lady since I was just a little girl, and she was more of a mother to me than my biological mother. I know she wouldn't have asked for help if it wasn't a life and death matter. I am not even sure that she was the one who needed the money. It's so NOT her. D commented that people do change. And I haven't really seen her since I returned home a decade ago. And of course when I was away the decade before, I wasn't in contact with her too. That makes up 20 years of us not having really interacted.

I told D that people don't change. Besides, when I was 12, I told her that when she grew old, I would look after her. She was unattached then, and had no desire to be attached. She spent most of her free time with me and my siblings. She was the only person my Dad trusted to take me out. For years, she was my only human companion. The other companion I had was my dog.

So I rushed out to pass her the cash. Couldn't find the place at first and was delayed by stupid drivers all over town. It was just crazy. My thoughts were crazy. I was afraid that I would be too late and it would be another big regret in my life.

But I made it to her in time.

Rushed home in time for opening bell.

D turned in really late, and I asked if he had stayed up to keep me company. He said he did. Really warmed my heart. The company he works for is once again in the limelight, and again for a very very bad reason, and I really hated to have to give him additional troubles and worries.

My Trades

The first entry was the most stupid mistake a trader could ever make. I messed up on Booktrader. Since it wasn't a trade that was entered as planned, I had no strategy for exit.

I sat on it until I could see that I would be taking on too much risk if I didn't get out with a small loss - 1.6 points.

Recovered 1.7 points in 2 subsequent trades.

Paid my broker for the 3 trades, and end up with a net loss of USD 4.

Even the losses are no longer spectacular.

Today's report card:

Net Loss: USD 4

An Illuminating Note from The Lonely Trader

Received an email from The Lonely Trader on my posting Dilemma, and am truly grateful for the insights he's offered. His questions are tough - typical of TLT LOL! My brain muscles are due for some serious workouts anyway....

I can't think of a better place to keep this treasure other than in my personal journal :

Jules, this doesn't seem like a dilemma at all. I don’t think this is a problem of the "commit murder or matrimony" variety. You've been at this for how long, now?...

Were you ever in a tactical situation where you were afraid, but you went ahead with the assignment anyway? And you performed well enough despite those feelings of uncertainty and doubt. You made decisions based on training and practice, right? Sometimes the decisions were sequential and based on conditional situations, and sometimes they were of a higher functional order. But they were part of a cohesive structure. You didn’t understand the nuances until you had enough time to work through them in different contexts. Then as you began to master the nuances, you gained insight into the contexts, and the higher functional analysis became second nature to you…although not every decision was the right one, most were functionally adequate.

In my own experience with this process, the intensity of feelings subsided but the feelings themselves -- uncertainty, doubt, and maybe a little fear -- never disappeared entirely. The more I practice, the easier it is to cope with emotions when making decisions required by the plan and the context.

Can you state clearly what the premises are in the plan and are they valid from an empirical standpoint? And have you defined what the criteria are for determining whether the plan has failed? And have you broken down your plan into component skills that you can practice and evaluate?

Perhaps these bits might help with the feelings of doubt. Perhaps not. In any case, they will help you decide what to *do* as you roll through your trading process, which is really all that matters, right?

Or maybe I'm missing something...?

But I’m not a trading coach, nor am I a professional trader. So there it is.

Cheers

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

TF Trades 1/12

2 Entries on TF 1min

Profit: USD 40

It's another small profit day, but I'm happy. For the first time in weeks, I didn't lose money on a Monday.

Market today's not exactly conducive for trading. Range was tight and this was obvious right after the first leg from 930 to 10am was formed. After that, market simply appeared undecided, and understandably so given that everyone's probably waiting for Alcoa's earnings release at the end of the day. Being the first among the industry to release its quarterly earnings, Alcoa's result is going to set the tone for the broader market in the days and possibly weeks to come.

Looking at the 2 trades that I've made, I realize the wisdom of being consistent in my exit decisions. In retrospect, I would have made a point more had I held on to the first trade despite the lack of momentum in the direction of my trade. But had I done the same (ie. holding on) for the 2nd trade, it would have severely affected my morale coz TF had gone against my trade a fair bit. In my default (undisciplined) mode, I would have ended up in the red for today. By sticking to my exit rule, I have instead made a tiny profit.

Daily Performance Scorecard

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.

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!!!!!