Monday, May 11, 2009

Monday 05/11/09 - Forward Testing

Initially, I manually back-test new ideas on past charts, but to develop faith and confidence in the method, it must prove itself in real-time (forward-testing), and I certainly place more emphasis on real-time testing. I added the S&P 500 Adv-Decl Issues Diff ($ADSPD), the NYSE Adv-Decl Issues Diff ($ADD), the NYSE Up-Down Volume Diff ($VOLD) to my charts to more closely monitor market breadth so today was spent experimenting in real-time. The morning was spent exlusively on experimenting with different setups and resulted in a -6.75 pt loss. In the afternoon, I switched gears back to my existing method and banked +7.00 pts to end the day in the green by 1 tick (minus commissions). I will continue studying the newly added market breadth indicators to get familiar with them. I didn't expect to make much off the added information on the very first day so I'm not at all disapponted. It was good to see that I could make it all back trading the way I already do, in a narrow range market which isn't condusive to my style of trading since I look for trend continuation, range extensions and break outs. Here's how the Stats broke down for today:

# of Trades 31
% Break-Even: 12.90
% Win 51.61
% Loss 35.48
Avg Win 0.95
Avg Loss -1.36
Largest Win (pts) 3.00
Largest Loss (pts) -1.75
Total Win (pts) 15.25
Total Loss (pts) -15.00
Net Gain/Loss (pts) 0.25

A pullback is not only normal, but healthy after a rally, so today's down move is fine by me. We also filled the open gap at 907.75 from last Friday. I just hope it turns out to be bulls re-fueling, rather than a total reversal in trend. I trade short-term so it really doesn't affect me whether the market moves up or down, so long as it MOVES, but I'd like to see further upside movement to at least the 940 area on the S&P. I'll be watching the 901 area for support, then 898, 894.75, 891, 887 and 881. On the upside, I'll be watching the 910 and 914-918 area for resistance. We also have an open gap above at 924.25.

ES/$TICK (3-Min) - Open Gap above at 924.25


  1. Damn son! When you gonna stop making me look so bad? ;)

    I tried getting on yahoo today but it wouldn't connect? I don't know... that update futzed something up I think. I'll try again tomorrow!

    Great trading man.

  2. Thanks bud! Lets chat soon. I think both of us are making it harder than it really is. Focus on momentum and trade in direction of momentum :)

  3. Hey EP - I think it is a good idea to add the internals to your screen. I've done that recently and it helps a bit. Plus, you really only need to glance at them to get a sense on market strength so I don't think it over complicates anything. If you don't already, using the Put/Call ratio, TRIN and NYSE TICK are great too. I've also tried a sector list. Again, all just for glances except for the TICK, which I find very useful for specific trading signals.

    Anyway, just thought I'd pass along some ideas in case you hadn't already considered. Keep up the good trading brotha!


  4. Stan, I haven't looked at the Put/Call ratio or the TRIN. I've been using the NYSE TICK for a while. I also keep an eye on the 3-min chart of Financial and Energy sectors, as well as YM and NQ.

  5. Awais,
    Several good ideas are already mentioned, like "Don't fix what isn't broken". Tweaking is fine, but when you do 31 trades its 95%about momentum IMHO. Step in front of the freight train. I watch TICK and $ADD and only look for general readings, and that's just to find 4-5 scalp setups a day in the YM, would be even more generalized for you I'd think. Anything more than those 2 is overkill for me, too much to look at and think about. The more thought we feel we have to put into a particular setup (as scalpers) probably the less likely it is to succeed. As analytical types, we are all prone to screwing up perfectly workable plans while chasing near perfection...all to avoid the realities of trading which we openly claim to understand, but too often try to hide from. Don Miller says it well when he says he loses on trades consistently every day. But yet he doesn't quit because he gets pin-pricked constantly. And neither do you apparently in looking at your stats. I'd say just keep on doing the same thing, as you play a numbers game based on "good enough" setups, and don't blow any head gaskets looking for that holy grail. Yea, always easier said than done.

  6. Chuck, your comments are always insightful; I really appreciate you stopping by and going over my results.

  7. Thanks Awais,
    I know I can say things better if I put more time into it. That's why I tend to not have short responses to anything. I tend to think about my own situation and experiences and want to type in the response I'd like to receive myself. There is so much involved in this mental exercise we call trading. And much of it is in trying to find that perfect compromise (that is, perfect for each of us individually) between "knowing enough" and "knowing too much", which can become a burden if we don't handle it right. I suspect that Don Miller's trading plan is relatively simple, but yet is executed using thousands of contracts per day. Most people would be frozen in fear and demand to "know more" before they put on a trade with that size. Whereas many "guru's" will sell trading plans that are more complicated but marketed to people still learning the differences between types of movng averages. Which is better? I continue to mull over the answer to that every day and try to come to one more bit of the answer a day at a time.


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