Thursday, May 21, 2009

Thursday 05/21/09 - Good News/Bad News

The good news is my job interview from the other day went well and I have an offer on the table. The bad news is, taking this job would force me to take a break from trading. I would still continue following the markets, and mark up the charts every evening, but obviously, I wouldn't be able to trade the market in real-time. On the bright side, it's a contract position so I could come back to trading in 6 months (if I don't renew my contract). I view trading as a long-term career option and not a get-rich-quick scheme, and at this point, it makes sense to take the job, reduce/eliminate liabilities to the point where I can take at least one year off and dedicate that time to trading the markets. Most businesses fail due to lack of capital, and I don't want that to be the case with my trading (business). On the plus side, the project I'll be working on sounds pretty cool and it's for a very large company which would look good on the resume. This isn't an easy decision for me since I really want to trade full-time.

With that out of the way, on to today's results. I mainly traded the morning and had some sweet short entries at 892.25 and 892 but was too quick to move my stop-loss to break-even, so both of those shorts were scratched. I re-shorted at 889.50 but covered too soon at 887.50. Scalped it short again for a few ticks. My biggest problem at this point is patience. I'm not patient with my winners or losers; I cut my winners quickly, and my losers even more quickly which is probably why I'm still net positive, but I'm not taking full advantage of my entries. The entries are good for 3, 5, 8 points per trade and I'm usually exiting with just 1-2 pts, which is disappointing to say the least. It's a personal/psychological problem. I just hate losing, and try too hard to keep my losses to a bare minimum, which results in missing out on potential gains. So the question is, are my early exits saving me enough money on my losing trades to make up for the lost gains on the winning setups? One solution is to use a "set it and forget it" trade management approach, where I would enter a trade with a preset stop-loss and profit target and let the market hit one of those orders instead of manually exiting the trade. I could also systematically move my stop-loss to break-even; for example stop gets moved to break-even once the trade goes 2 pts in my favor, etc. That way it's not purely discretionary. I'll have next week to experiment with these ideas. If you guys have any ideas, please post them in the Comments section. Here's how today's Stats broke down:

# of Trades 8
Longs 1
Shorts 7
% Break-Even: 25.00
% Win 62.50
% Loss 12.50
Avg Win 0.95
Avg Loss -0.25
Largest Win (pts) 2.00
Largest Loss (pts) -0.25
Total Win (pts) 4.75
Total Loss (pts) -0.25
Net Gain/Loss (pts) 4.50
ES Daily Range 15.50
P/L as % of Daily Range 29.03

There was plenty of Daily support in the 875-880 area, which provided a nice bounce into the close. On the Daily chart, today marked a lower high and lower low, but keep in mind we need to see a series of lower highs and lower lows in order to accept a possible trend reversal. The way I see it, today's bearish price action was still contained within the bullish Daily candle from 5/18/09. Price tested the lower price area but rejected it, and Closed at 888.75, and the Close is much more important than the Low. A Close below 876 would suggest a major turn in the markets. In support of the bears, Price broke below the bullish channel; not sure how big of a deal that is though since the channel was hand drawn by yours truly :D All that being said, as traders, we need to approach each day with No Bias...easier said than done.

Markets close early tomorrow; expecting a low volume day. Might be best to sleep in :-) Enjoy the long weekend all!

ES/$TICK (5-Min) - Open Gap at 899.50

ES (Daily) - Zoomed in


  1. Congrats on the Job front. I agree you should take it and really try to build a cushion for when you eventually go fulltime. I'm in the same position, have a job and saving to eventually go full time well capitalized plus all living expenses for a while. What you don't want, as you mentioned, is to be undercapitalized and start making mistakes and be fearful because you may run out of cash. You have to be somewhat comfortable and keep a clear and confident attitude. Also use this time away to hit some books and further develop your strategy since we'll never know enough. I still believe full-time trading is the career to have. Good luck and good job on the posts.

  2. I am trading full time. I think many traders suffer from that "impatient" trading syndrome you mentioned. Luckily, I have a good cushion that allows me to trade large contract sizes so even my scalps are fairly lucrative to live on.


    1. Sometimes I set my stops and walk away from my pc. I have a stop watch which hangs around my neck. I will usually give 3-5 minutes to allow for usual retracement before I venture back into my office to see how the trade fared.

    2. While I enter trades at the 1 min timeframe, I then switch to a
    5 minute chart for exiting. The
    1 min timeframe is critical for my entries, however, the 5-min chart conceals the typical retracements and slows things down for me.

    3. Know the target exit price:
    I scale out of my positions by
    taking half-off at 2 points. 1/4 off at the first s/r level and I use fib tools to offer target ranges of -23.6 or 161.80 for 1/8 and the remaining 1/8 is set to b/e.

    4. Never look at the money or have dollar goals. A bad habit is to monitor daily balances and $ amounts this causes more impatience while trying to "end the day/week/month" on a profitable note. Instead, I concentrate on the trade itself knowing that end the end of the day, the money will come if I perform correctly.

    5. One of my acquaintances suffered so much from the inability to pull the trigger and trade mismanagement, that he partnered up with someone. He would monitor his software and call out the signals to his partner who would enter/exit robotically.

    6. Automate: my algorithm is about 11 months old and is going very well. However, the only way to insure proper execution is to automate with my broker. It may take me another year to work that out (or less for a semi-auto version).

    I hope that this helps.

  3. Thanks for the comments guys (or girls)! :)

  4. First of all, congrats, EP! It's good to have a job. I wish I am as motivated to look for one. Not having a job does something to your psychology. Trading with capital that's not growing is no fun.
    And I see that you bought Al Brooks :-) He's driving me nuts! Doctors have that effect on me LOL! Seriously, you'll keep having to refer to his "glossary" page for definitions of the terms he uses. And he tends to skip a few steps in his explanations so you keep having to go back to it for deeper understanding. And there are lots of typo with candle numbers e.g. when he would mention candle 3 when he actually meant candle 8, etc.
    But it's a good book :-)


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