HAPPY, HAPPY, HAPPY!!!

I'm happy, I'm happy, I'm happy!!!!!

1) Ad assignment next week.

2) A company asked for my resume (and I haven't had time to check my email for details!)

3) Finally got my hair straightened (hate those natural curls which D LOVES) - it's now long, silky smooth and shiny! Took 10 years off my face. Facelift can wait then.

4) And, I finally unlearn the TF crazy price chasing mode, and started to learn to WAIT for entry at specific zones (see trades below). Really tested my patience while waiting for price to fill (there's this thing about me that D complains about - if I want something, I want it NOW). But it's been GOOD. I mean, it's pre-market, and it's ES...makes me feel really stupid now when I think about all those times that I dashed about in TF mode....

5) And I'm finally taking breaks! D got me a stationary bike so I don't have to keep doing boring pushups and boxings (boring applies to pushups only - I love boxing, but D's banned it). Varieties in the other activities give me an incentive to leave my workstation. So he thought...

Am practising smiling like a lady (think Mona Lisa...). My nieces have been telling me that "yee yee is a boy" (and kids don't lie), and D definitely thinks I'm more boy than WOMAN.

Gotta do something about my laughing eyes. They make me look a tad too happy to be taken seriously.

I'm finally ready to get out of my cave! After 12 long months!!

Takes that long to mend a broken heart.

About Rules & Systems

I've been thinking a lot about trading rules and systems lately. But all the silent musings have failed to bring about any improvement in my trading behaviors. Until today that is (I wonder if the fear of having to call my blog Jules The Pig has anything to do with it....)...

In the past, when asked about my trading system, I could never paint a conrete picture...And that's coz I haven't the slightest inkling what it is like, if there's actually one at all. It just dawned on me today that the reason that I don't have a system is simply because I don't have RULEs to begin with.

And the reason that I don't have rules is because I hate them. And the reason I hate rules is because they feel like things that are shoved down my throat. If you're trading a particular system taught to you by your coach, your father/ grandfather/uncle etc, you'll adopt the rules that come with it. So you either take someone else's system and follow its rules, or you construct a system, then put in the rules that you read about on books, forums, and those you picked up in seminars or from your coach. In both cases, the rules are simply INSTRUCTIONS. I don't know about others, but I'm one who really sucks at following instructions. In fact, I have an innate ability to intimate people into NOT telling me what to do.

Despite my rule-less trading way, I've YET to have a negative month. I attribute that to A LOT of LUCK, and maybe a little to this thing called "intuition". I have a high winning rate, and after accounting for all the blowups, I would still have a tiny profit left at the end of each month. But what has really been bothering me is not the rate of growth in my account per se. It's the lack of growth as a trader that's frustrating me.

And when I'm frustrated, I get destructive. It's who I am. I have to destroy before I build.

So after an agonizingly ugly episode where I just sat and watched my trade go 25 points against me, I finally found the motivation to start doing something about my intractable trading style.

Owing My Rules
I started by setting BOUNDARIES within which I'd operate, boundaries that would have helped protected my account had they been there at the onset. So my rules are not made based on others' experiences or teachings. They are intimately MINE, coz I've personally suffered the consequences of excluding them from my trading activities.

The point I'm making here is that you have to OWN the rules you set for yourself for you to even want to pay any attention to them. Each rule that you have made should have a story behind it. Without a sob story to back it, chances are you won't follow it, until...well, you fall hard, and then you have a sob story to tell.

Now, granted that I'm a wilful, stubborn, dysfunctional person - bordering on being psychotic and destructive - BY NATURE (I blame my mother for the bad genes), I do want to live a normal - perhaps even a constructive and fulfilling - life. And if I can't even trade right, I can pretty much forget about living right. And vice-versa. You get the drift.

My Rule Making Exercise
So I started by making a list of all the imperdonable trading sins I've committed, and identifying the motivations behind those actions. Following that, I looked for patterns that trigger them, and paid special attention to the recurring ones.

For instance, I noticed that breakouts often cause me to chase (motivation: greed) - I'd end up going long at near the day's high. Lousy entries like this can be found in almost all my trading days. But once I'm deep enough in trouble, my brain starts functioning, and I almost always am able to get out unscathed, or losing less than what I could have lost had I gotten out in panic.

To avoid having to go through these episodes that cause a major blowup almost on at least a monthly basis, these are the rules that I've set for myself:
1) I'll not chase a breakout in a ranging, choppy environment
2) I'll accept that I've timed my entry wrongly, even if my direction is correct, and I will get out once the conditions supporting my entry are breached
3) I'll always stay in a "in position" mode - that is, I'll not let my hair down simply because I'm not in trade. I'll be in "imaginery" trades as long as I'm sitting at my workstation. This helps to keep my mind objective and alert at all times and helps me filter out false signals

Another example is the use of indicators. I will be covering this in a separate blog entry. But briefly, by identifying the trades that went wrong, I noticed how I've jumped the gun on the signals generated by certain indicators. Other times, mistakes which could have been readily avoided were made coz I had failed to pay attention to these tools that were supposed to be there to give me an extra edge. I've since made rules pertaining to when and how signals from indicators will be used.

A System, Finally
What surprised me about the whole rule making exercise is that after having made them, and starting adhering to them (er...today being DAY no. 1), for the first time, I felt like I have a system! And that I had taken a loss with not the slightest bit of emotion simply confirmed my suspicion.

The system will need some fine-tuning of course. I'm just glad that I finally have something that I can work on, something to fine-tune!

So do I still believe in trading another person's system?

ABSOLUTELY.

Coz that's probably the fastest way to learn the most important lesson in trading:
That it is a very personal and lonely JOURNEY. You'll get knocked about more often than you like/ expect, but that's inevitable - necessary in fact - so you know what to do and what NOT to do to avoid a death fall. Sure you can start by trading someone's holy grail - and that's darn good coz it will make you fall even harder and at a much higher frequency. Once you've wisen up, and zoom right into the root problem - those generic RULES (why the builder of the system had them there in the first place, are the reasons compatible with your objectives and needs) - you'll start making rules that are specific to your circumstances and trading style, rules that will facilitate instead of hinder your trading. You now OWN those rules. And before you know it, you'll be trading a system you can call your own too.

ES 2/19 - Daily Trading Plan

ES 10min & Hourly

GAME PLAN

For daytrades, I'll only go for LONGs. If ES manages to break above congestion zone (shaded in blue) as well as 800 resistance, my exit targets will be within the 805 - 819 zone.

All SHORTS will be scalps.

Go long only from base of channels; do NOT buy a breakout

Short a fake breakout

RULES

Scalping:
Get out of any open positions once the tape shows that the reason for getting in is no longer there
Daytrades:
Get out ONCE price closes above or below support & resistance

No more trading for the day once rules are broken twice in total - change my blog name to JULES THE PIG if I don't keep my word.

ES Trades 2/18

ES 10min, 5min, 1 Hour

Got out from this trade near the top, as usual. I'm beginning to suspect that maybe I DO have a system, and it's this: REALLY lousy entry, perfect exit (in-the-nick-of-time kind of perfect). If I do it often enough, I'll have to start thinking about giving it a name.

ES' doing something very similar to what it did on Fri ie. trading within a wide down sloping channel. And you really don't know from where it's gonna break out.

Not getting in anymore. Too risky to sell, equally scary to buy.

For today: USD 100

Buy, Pray & Wait

Stuck AGAIN!

Solfest is writing in his own comment section. And I have been talking to myself for the past 3, 4 hours now.

Traders sure are a lonely bunch.

I've managed to turn a scalp into a daytrade AGAIN. Am still in trade. I liked that thing there on the ES Hourly that is technically NOT a hammer (length of candle's shadow must be at least twice that of its body to qualify as a hammer), but looks like one. Anyway, it has closed above both support and wedge, and I think that's what I liked about it.

If ES visits 786 again and breaks below, I'm out. Targeting for 797 - 804.

ES Hourly

Yes, I'm trading against trend AGAIN. Not bottom picking though. I can't sell, and my charts and tape are telling me to buy, so I BUY.

Why am i justifying my trade???

ES 2/18 - Daily Trading Plan

ES Hourly

I can't for the life of me make out what it is that I'm looking at.

All I know is that I'm NOT selling.

I know that both SPX and DOW are not looking good. Even the XLF has fallen through support. But I just don't feel that market's going to plunge. This is the strangest thing for me to say, coz for the past 6 months, in everything that I've traded, I've asked for it to just PLUNGE for goodness sake. A decent market correction was way overdue then.

But where we are now - is this where we're supposed to land?

Whatever the case, I'm going with my charts.

Game Plan

If ES breaks above ceiling of falling wedge (blue trendlines), I'm long, and will set my exit target s at 797 - 804.

If it breaks below the wedge, I'll wait for a pull back and see if it goes back up into the wedge and breaks above it subsequently. With price at this level, it's difficult for me to trust a downward breakout from a falling wedge.

ES Trades 2/17 - Reset

ES 10min, 5min & 1 Hour

Yet another day of chart watching for more than 10 hours in anticipation of a bottom.

ES was moving down slowly in no definitive pattern during the Asian hours, making selling while waiting for the anticipated bounce from support extremely unfeasible.

When ES finally broke below 797.5, I made my first move going long. I expected ES to do at least a fib 38.2 retracement. That was 2 hours before US session started. I made a quick exit after taking 0.5 point, coz the tape wasn't doing what I expected it to do.

Entered a few more times subsequently, scratching 1 trade and taking very small profits for a few before hitting a micro homerun.

For my last entry (the micro homerun), I remember telling D that the bears are getting carried away, and I'm bailing out of my short position.

Bear trap, I said.

Shortly after, when I returned from my break, a perfect hammer with its tail touching 786.75 had formed on my 10min chart.

I decided to wrap up for the day. If there's anything that I've learnt in the past 2 really trying months, it's that if the market is my friend, it's the one taking the lead, and I'll avoid a lot of heartache if I'd just take in whatever information it's giving me and forget my own targets and wants. Today's a choppy day, and I'm not going to force any more trades.

My little experiment last week has caused me exceptional pain, but one that I needed to go through in order to eliminate the last trace of ego in me.

Prior to this costly USD1,250 lesson, I had been achieving consistent results - albeit not entirely impressive ones - and I had done that by staying nimble and humble.

I'm moving on by returning to my roots, and trusting my old scalping ways.

My charts are still roadmaps I can't do without, but I base my entries and exits strictly on the behavior of the tape. Once US session begins, I ditch my 10 min chart, and focus only on patterns on my 1min chart and the tape. I go long at offer and cover at bid, and sell short at bid and cover at offer. Once I'm in trade, I do not care about the entry point and focus on my exit instead.

I'm resetting the clock and making today the first day that I trade my usual discretionary method (which I have been doubting for the past 2 months, and I really want to kick myself!!), and I no longer doubt the wisdom of aiming for small, consistent daily gains in a chaotic market .

I believe now in letting the home runs come to me, and I know they eventually will, as long as I continue to focus on perfecting the way I trade.

I will continue to plan my trades, and trade my plans - which I'll need to improve on to include contingencies.

My exit targets will remain just targets - they do not determine when I get out.

Specifically, my exits will be based on momentum, as they've always been. That has proven to work for me time and again, and whenever I attempt to do something different (out of impatience and greed), I fall really hard.

My trades today: USD 125

Don Miller & Michael Woo

Don Miller was once on my blogroll. I removed him coz I couldn't figure him out.

He's not exactly positioned himself as an educator, but he's not your everyday trader either. I couldn't relate to his philosophy of starting everyday pretending that yesterday was a losing day (if I start a day like that, I would REALLY be demoralized), and I couldn't relate to the size of the contracts he's trading.

Having said that, one of his latest posts and videos showed a side of him that I find extremely pleasing. I can't explain what it is - well, I probably can, but it's for me to know and for the others to find out - just check out the above links if you haven't already heard about this million-dollar (pure annual profit) trader.

The Miller that I'm starting to like reminds me of Michael.

Like Miller, Michael is more a trader than a teacher. And he would tell you that himself.

And I definitely think that the only trading teacher that anyone should pay attention to is the kind that ACTUALLY TRADES the market on a daily basis, the type that shows you his daily ups and downs. Only a teacher who trades can effectively manage new traders' expectations towards trading and help them to put things in perspectives.

ES 2/17 - Daily Trading Plan

ES Hourly

Still playing a breakout of the DBW on the upside and pullback into the ABW.

If ES breaks below support at 804.75, the next support is at 799.75. Only when ES breaks 797.50 support will I consider the scenario that it is heading for floor of the DBW.

Game Plan For Today

- Trade between the range of 805 - 820, and be prepared for ES to trade below 805 (support at 799.75)

- Go LONG as and when ES:

1) Pierces white uptrend line on double bottom (if support at 804.75 holds), or Inverted Head and Shoulder (if the next support at 799.5 holds) patterns, AND

2) Breaks and closes above 819.5 resistance

Taget: 835. Entry will be on subsequent throwback to any where above 819.5. If throw back ends below 819.5, or below white uptrend line, abort plan and reassess.

Facebook - Constant Pain & Occasional Joy

I've hated facebook for giving me a lousy 2008, and for some time now, I've gone in only to accept friend requests and PLAY POKER.

Over the weekends, for reasons I can't even recall, I decided to change my profile from "single" to "it's complicated".

D opined that my status should be "married", and went ahead to do the editing for me. And after changing my profile to "married", he clicked "ok".

I said,"Wait, to whom am I married?"

D's response: "Just don't drag me into another saga"

Bad response.

Totally triggered my demonic mode, and caused me to say this: "ok, I'll change it to "widowed"".

"Fine!" D snapped back.

I searched, and couldn't find "widowed" on the list.

So I chose the next best option: "It's complicated".

Since that little episode, I've received a number of texts and mails from concerned friends (I have to say, I feel blessed that despite my aloofness, I do have really good friends)

I took a look at D's list of notifications, and saw the comic effect those changes have created. I had no idea that profile changes are being tracked so closely and published so quickly - almost the instant those changes were made - on the notification page of those on my friends list.

The 2 changes ("single" to "it's complicated; "married" to "it's complicated") were reflected one after the other, consecutively, and made me look like I'm either in a really bad situation, or merely highly confused.

What can I say?

I did say "it's complicated", didn't I?

LOL!

Contest Winners & The Lonely Trader's Musing

Thank you all, for responding to my post calling for views on where market's likely to be heading.

Regret that I am only given 2 books to award participants. I would have really liked to give them to all who have taken part.

I'm giving the 1st book to Eddie as a form of encouragement. Hope he continues to blog, and that in due course, will be able to see that the market is better treated as a teacher and a friend.

The 2nd book I'm giving to The Lonely Trader. He has done the impossible thing of confusing me even further on the first read of his "mini-book" (quoting Eddie). If I can't understand something, it has gotta be good. :-)

Below is his musing (in blue), which I have read over and over, and enjoyed it more each time I went over it. It contains a multitude of issues he could only briefly touch on (I believe he would have written 500 pages if only he had the time), and serves as a starting point for anyone who's interested in exploring further those topics being discussed.

I like what he stated in his opening - that "What we think depends on our time horizons and our objectives". I personally couldn't have agreed more. Time/investment horizon and objectives are factors that have always underpinned the framing of my arguments on such topics as whether daytrading, swing trading, or longer term investing is THE way to work our money. To me, each is a good timeframe, depending on one's needs and the resources at his/her disposal (time, energy, CAPITAL) - with the latter constraining the person to a specific investment horizon.

So, here goes The Lonely Trader's write-up that won him the book "Hedge Fund Trading Secrets Revealed" by Robert Dorfman:

I have to make my characteristic caveats here. What we think depends on our time horizons and our objectives. There is also the meta-question of where we choose to get our information. I don’t try to get too cute about it, preferring to get a broad view from mainstream media, bank research, and market commentary from a diverse range of folks in the know (excluding all speculators!). I think a lot of people go wrong in not caring enough about where they get their information.

My views are an amalgamation of what I have read – opinions, research and analysis, etc. – from other sources. Very little of the substance of my opinions is from original analysis. (And by analysis, I don’t mean the simple stuff the so-called blogosphere “experts” do every day. We can do most of that for ourselves. I’m talking about deep analysis here – the kind very smart people get paid a lot of money for.) So, very few of my opinions are original. Forgive me for any plagiarism, please. This will read like a confused rehash of what everyone else is saying, but I want the free book so here goes.

I have changed my mind since October/November when I said I was a long term buyer above 7500. The title of that post was “Rothschild would be a buyer here.” I was a bit too enthusiastic…. I don’t believe there will be the kind of turnaround everyone is hoping for in the latter half of 2009. There may be a brief respite, but that’s about it. In terms of the Dow, the odds are very good that the November 2008 low will crack – and very convincingly. Oil and gold will remain under pressure. Gold will not get much further above its highs of 2008 in the medium term, even with risk aversion increasing. I think the most popular position is and will be leaving everything in USD through much of 2009. On the macroeconomic front, I think deflation is not over. All the dollar-printing going on will not be inflationary – yet. Nobody will be spending any of that money. Inventories will collect dust, or be sold off at fire-sale prices. It won’t be enough to cover the bills. Factories and offices will close. Labor will stand pat on its unrealistic demands. Prices will fall across the board. Housing prices still have a lot more room to fall, and this won’t stop until well after 2009. I think that when this whole thing hits bottom, the peak to trough decline will exceed 10%. Real unemployment, not the crap that BLS puts out, will exceed 15% before the end of 2010. This will be what most thinking people – and most working people for that matter – call a depression.

Globally, I think 2009 will be growth-negative. Even if the IMF is right about 0.5%, in real terms I think this is a big net-negative. I think we have only seen roughly a third of the write downs from banks. In the US specifically, it is possible we could see a nationalized banking system. More banks will fail. Big banks. (Some are already insolvent.) States like California already are insolvent, and could be bankrupt before 2010. The US government will face a credit downgrade soon. Treasury flows will dry up as foreign buyers of US debt are forced to support their own collapsing economies. There will be defaults in Euroland – Spain, Italy and Greece are the top three contenders in the MSM, but who knows how many more will succumb to debt spirals. One or more could declare bankruptcy and abandon the monetary regime this year. This doesn’t mean I think the monetary union will dissolve, but as the larger economies of France, Germany and the Scandinavias build proverbial firewalls around their financial systems, weaker countries will be left to burn. Admittedly I’ve gone back and forth on the fate of the euro. I still think dissolution for the common currency is possible, but I wouldn’t bet money on it. (And I’m not, as you know.) The UK is already in serious trouble. At the beginning of 2008, insuring $10K in debt for five years cost $8. It now costs about $135. By comparison, the same debt in the US, which started out at roughly the same price in 2008, costs about $75 today. By the end of the year, EURUSD could be at parity, or close to it. GBPUSD could be at parity as well. (If you live in London now, try to get the hell out of there by 2010. Get your money out of there now.) In Asia, the picture is no better. Exports have all but ground to a halt. China needs to maintain a growth rate of 8%, according to its leaders, just to keep everyone happy. China has a very long and unhappy history with grumpy rural poor. I think its economy will be lucky to hit 5% and this will likely push rural poor from grumpy to froggy. China may have to “get military on their @$$es.” Demographics in China are fascinating – and under the circumstances, frightening in their contradictions and disparities. Unprecedented debt-financed overcapacity isn’t helping. I’m sure most of us already have an idea of what is at stake for those unfortunate people. There will be sovereign defaults in “Other Asia”. (My term.) Corporate default risk has been flagged for more than a year by rating agencies, particularly in shipping, property and technology. In an area not particularly known for transparency and robust institutions, the first big default will come as a surprise to the market. The result will probably be a cascade of panic. The general problem in Asia will only grow worse and it will be understated until a major dislocation occurs. Responses will be ineffectual. Protectionism in China and Japan, a typical reaction when they perceive any threat to their market shares and revenue streams, will only sink them further into the hole. India isn’t immune either. For many of the same reasons. And the fact that Asia’s financial systems are relatively insulated from the credit crisis is of marginal benefit when global contagion is peaking – not financial contagion, but the most basic kind of economic contagion among interdependent economies.

I could go on and on, but I’m starting to get depressed. Trading wise, stay very short term unless you can scale your bets to keep risk low. Long term, keep bet sizes miniscule. When things start to get crazy again, even those miniscule bets will start to look too big if the instrument rolls over on the trade. As far as specific ideas, my favorites are puts on Alt-A, Prime and commercial real estate. (Shorting any underlying instruments will probably seem too risky.) If you are long gold, hedge your position. There is something very fishy about gold right now. Unless $900 holds, I expect a deeper correction soon before heading higher. Same with Silver. Copper will depend on China – and demand looks like it will pick up a bit. But I don’t think the move will be sustained. While I think it is reasonable to be long oil, don’t hold your breath for a return to $100 and beyond anytime soon. Commodities will be unpredictable. Demand shouldn’t pick up too much for most, but even if it does don’t expect prices to spike. (Recall China’s recent announcement of a doubling of soybean imports – the underlying price actually fell afterward.) I hear of commodities going both ways, with talk about breakouts and inflation and all that. I think we’re a long way from the kind of inflation many pundits are expecting.

Currencies will continue to present opportunities for speculators with money to burn. Stay away from illiquid currencies unless you have a specific methodology that is suited to trading them. Stay away from pure yield plays until some semblance of "order" returns to the markets. As far as the majors go, there are some opportunites shaping up. Be careful on the crosses. Be careful with the CAD. Shorting GBP rallies might be an idea I can get behind. Shorting the yen as well, especially in relation to the USD. AUD should be supported well by gold for the time being. Look for relative strength to improve over the short term. I’m still betting on the EURUSD and the NZDJPY, but you know my bet sizes and time horizons are unique – and uniquely suited to large adverse movements. So those trades don’t really reflect my fundamental views.

These themes should remain with us well into 2010, barring some kind of unforeseen dislocation, like a major war. (Another topic for another time.) I’ve only touched on Japan because I’m still building my case, but it will figure prominently in our woes to come. (Or, if we’re lucky, merely “whoas”.) I’m sure I’ve missed some important points and I’ve probably contradicted myself somewhere, but there it is.

Daytrading - A Foolhardy Futile Venture?

Proprietary Trader has a very interesting post here.

I have a lot of respect for PT, but I'm still going to say what I have to say with regards to the topic in question.

Like I've mentioned more than once before, I trade patterns that I see, and they might not be what others see too, but that's not important. I need to have a pattern to work with so I know at which point I should exit my trade. I don't know how longer term traders use their patterns - I used to think that's exactly how they would use them, but now I'm not so sure anymore.

Besides charts, I believe many intraday traders follow market depth and other indicators like the TICK, TRIN and such. I personally NEED the market depth.

As a daytrader, my need to get into the market is really a NEED and not an emotional WANT. Daytraders trade for INCOME. I will trade for a living one day (right now I'm not living off my trading income). And when I do, I definitely won't want to sit on a losing position overnight. I'd be much better off cutting my loss quickly, and start afresh the following day.

Just a topic that I feel very strongly about.

Really wanting to hear from seasoned daytraders on their experience with daytrading - has it all been a waste of time for them?

SPX Charts Analysis & A CONTEST

(If you are curious about the contest bit, scroll right to the end of this posting)

SPX Weekly (1994 -2009)

SPX Weekly (Aug 2008 - Feb 13 2009)

I see:
- Price breaking and closing above trendline resistance the week before
- Price subsequently throwing back to yellow downtrend line and closing below it
- An Outside Bar
- A failed breakout above 1st triangle
- A failed pull back after price broke below 2nd triangle
- A partial rise on the 3rd triangle

SPX Daily

I see:
- A hammer (thurs) which didn't manage to drive price up to close above it the following day
- An evening star pattern that couldn't push price to close below trendline support

SPX Hourly

I see:
- Price closed below 827 support, and looking like it's going for trendline support
- A horizontal EMA200

SPX 30min

I see:
- A descending broadening formation, and price going for base of formation
- Trendline as well as 818 support right about where price should touch base of formation should it get there

SPX 10min

I see:
- An unconfirmed double top
- Trendline supports

Where I am going with this, I have no idea.

I'm stumped by what I'm seeing.

If you would like to share your view on where we MIGHT BE heading - just for the fun of it - please do so via the comment section. You stand a chance to receive a book from me (as far as I know, it's not hit the shelf yet).

I'm serious. Really.

The 300-page book's authored by a hedge fund manager (with 20 over years of experience) and talks about practices and strategies adopted by the industry that maybe some of you will be very curious to know.

I've gone over half the book in under an hour. So, it's an easy read. Author's rather child-like, and tells an interesting story. That's all I can say for now. Maybe the gem is in the remaining 150 pages...

I'm allowed to give out 2 copies of the ebook. So if you're not among those who have already been approached by the publisher, and are interested to take a look at the book, please email me. If no one responds to my dumb contest, I'd be happy to let you have the book. It will be great if you can give me your comments - if any - after you've finished the book. And you are most definitely welcome to post your review in my comment section if you choose to do so.

I Thought Once How Theocritus Had Sung

I thought once how Theocritus had sung
Of the sweet years, the dear and wished-for years,
Who each one in a gracious hand appears
To bear a gift for mortals, old or young:
And, as I mused it in his antique tongue,
I saw, in gradual vision through my tears,
The sweet, sad years, the melancholy years,
Those of my own life, who by turns had flung
A shadow across me. Straightway I was ’ware,
So weeping, how a mystic Shape did move
Behind me, and drew me backward by the hair;
And a voice said in mastery, while I strove,—
“Guess now who holds thee!”—“Death,” I said, But, there,
The silver answer rang, “Not Death, but Love.”

 Elizabeth Barrett Browning

Forgetting How To RUN

I am getting rusty at scalping. I don't run fast enough. Not as fast as I did when I was trading 5 contracts of ER2 and 2 contracts of NQ.

I vividly remember that few occasions when I made 3o over round trades on NQ within 45 mins. I had no time to check if I won or lost for each trade. I just went long when the bulls were apparently overpowering the bears, and sold when the bears were clearly clobbering the bulls. I get out when I sensed that I was better off on the other side. I didn't even care at what price I had entered. I just got out at market. It was when I wrapped up the day that I went over my trades, and noticed that out of 31, I had only 3 losing trades and all 3 were tiny tiny losses (for NQ, it was in the range of 1 - 3 point).

These days, even when I enter and exit based on the tape, I just don't run anymore, not even when I realize that I'm no longer on the right side.

To make things worse, these days, I find myself not wanting to enter at market. If I were to buy, I'll bid. And then I sit and watch. And when I realize that the bulls are no longer the ones calling the shots, and I want to cancel my order, I get filled. And I'll find myself cursing the market. The only reason that I got filled was that it was coming down! With my style of trading, entering at limit just takes away whatever edge I have.

That was exactly what happened on Friday when I traded the pre-US hours. So on the trade that I meant to cancel before it was filled, but was filled anyhow - I sat on it until it came 0.5 point to hitting the low of the day.

The battle between the bulls and the bears at that level was interesting to watch. It was so captivating it took my attention away from my trade. I was 7 to 8 points away from my entry, on the wrong side of course, and I knew that once that low's hit, the lowest support is 20 points away.

It's interesting to see the instantaneous exodus of bulls near support. I was looking at less than 100 offers, and all of a sudden, 600 offers. I really wish the bulls had been more resilient. What's the harm of sitting until the low is been breached?

If support's really broken, they could always run after that. At least they are giving themselves a chance - that kind of bounce from key support would have helped lessen the damage or even make them some money.

Yes they would be taking a risk of maybe an additional point or 2, but if they had bought at a level that's as high as mine, what's that extra 1 to 2 points?

Ok supposed they've bought just a couple of points above the low - then that's just reckless. So they are willing to take a rather stupid risk of buying near support before it's been tested, but they are not willing to take a calculated risk and stay put to see if price will bounce from there?

That said, given that it was market's 2nd attempt to punch through support, I guess I can't blame them for getting jittery.

Ok, so we eventually got off the low. But it was a narrow escape. 0.5 point away from point of no return. Market went back up again, I got out, taking 0.5 point with me. The previous trade had seen me chickening out after a 5-point loss, even though I knew that support's likely to hold given that it's the first time that ES is revisiting that level. I felt like a dumb bull for a good 30 mins.

For subsequent scalps, I ignored the point that I entered, and focused on the tape instead. I got out whenever I saw that I was going to be on the wrong side in the next second.

When I'm focusing on what the tape is doing and forgetting my entry price, I have no time nor the reason to rationalize. I just get out when I need to.

I have no time to ask myself if the momentum's too good to be true, that I'm making too much money on this one trade alone (when I think that, I get out prematurely).

I have no time to count the number of points I'm losing (which is really bad, coz after the trade has gone 2 points against me, I will SIT until I break even or get some profit to make up for the hours of duress the market has put me through).

I really need to put that string of losses in Dec/Jan behind me. Only by forgetting my failures will I start trading right again.

ES Trades 2/13 - Crossfire

Taking a small loss and staying out from this point on. Friday 13th CNBC day. This whole voting thing is getting really repulsive.

Loss: USD 88

ES 2/13 - Daily Trading Plan

ES Hourly

Pattern I'm looking to trade: Descending Broadening Wedge (DBW) & Pullback into Ascending Broadening Wedge (ABW)

ES pulled back steeply yesterday after breaking below the ABW (blue trendlines). If it continues to move up and closes above the floor of the ABW, I'll be very comfortable going long with my first target to be set at a point below the ceiling of the DBW.

If ES manages to break above 850 and stays above, I'll look for more longs. Targets: 866 - 873.

Game Plan For Today

- Trade between the range of 831 - 836.75, and be prepared for ES to trade below 831 (supports at 828, 826, 823.25, 819.5).

- Go LONG as and when ES pierces and closes above floor of ABW. ULTIMATE Target: 850.

ES 2/12 - About The DBW-ABW Setup

ES 1min

One of my favorite patterns combination: the Descending Broadening Wedge (DBW) followed by an Ascending Broadening Wedge (ABW).

This was the setup I've been trading for days on the hourly chart.

Briefly, this is how I trade the pattern:

I play a breakout of the DBW on the upside.

After the DBW has formed (meaning that price has broken above the 2 downtrend lines), I'll need to see a throw back to the DBW or a support line.

Then I'll draw a trendline that joins the 2 higher lows that are formed after the breakout. Next, I'll draw a trendline joining the joining the 2 peaks. This is my ABW.

Then I wait for price to hit the upper trendline. If the former breaks above the latter, I'll not chase. Only when price comes down and hit the lower trendline again (by now that would be the 3rd time price touches lower trendline) will I look for a signal to go long.

If price were to break below the lower trendline instead, I'll wait for a pull back. If during the pull back price were to pierce the lower trendline of the ABW, and close above it - that's a busted ABW. All the better. GO LONG.

My targets will be the levels where price TOUCHES the upper channel of the DBW.

I usually take profit at target 1, then wait to see what develops. If I see a partial rise, I'll abort any plans to enter another long.

A partial rise is a reliable warning of a break below the ABW, many times what comes after that is a measured move down. Good to sell short.

ES 2/12 - Still Staying Out

With ES at the current level, if I were to trade, I would probably be looking to BUY.

Since it's apparently not a good time to do that now, I'm staying out.

About Indicators

Slait asked in the comment section:

Shoul´d be possible to explain how you use the indicators you plot?

My reply:

I don't use the indicators. I have put them back on for the 100th time just to see if I will even take a look at them. I am still not watching them. Not even the basic one like the moving averages. I go long and sell short under them, and go long and sell short above them. So they are basically there for show only.

Pardon me for not being able to tell you something that I hardly use. I mean, I've used them in months of backtesting, and through that I came to accept that because good signals don't come often, I'll probably never be able to use them to trade successfully. Coz if I were to follow them faithfully, I'll not be able to scalp.

I'm a scalper. I watch very basic things like horizontal price lines and trendlines. I plan my trades based on chart patterns. And I keep tabs on whether the patterns still hold when I'm watching the market. I rely a lot on Fibonacci levels too, and I like to see that they coincide with major support and resistance.

The other thing I look at is market depth. I won't enter a trade without having observed it for a while first. On a daily basis, I stare at it for 12 hours minimum.

The only indicator that I've used a few times is the NYSE Tick. But I've stopped looking at that too. I have only one pair of eyes and a very small brain. I can only process so much data in matters of minutes and seconds :-)

Sorry I'm not able to help FOR NOW. I'm doing a forward testing on some of those indicators you see there. I'll do a posting whenever I have any findings.