Ideas about the different markets I watch and trade...How I use the tools I've presented
on this blog to further develop and adjust my feel for the trade.
************************************************
Why I've chosen very short term trading
Trading is all about the numbers...
I began to migrate towards day trading in the early 2000's after experiencing an incredibly profitable time towards the end of the dot-com bubble...in particular, the last 3-4 months into March of that year...Anything technology related was running up - you could throw darts at the Nasdaq Index listings for entries and then take out excellent gains within a few days or weeks...
That period caused me to do some serious thinking about time and the markets - IE how long I had to wait to see if my trades became successful. I also considered the amount of cash that I had to tie up in order to continue my participation in the markets. Previous to the dot-com experience I had been swing trading individual stocks (3-6 month hold times) and doing stock and stock option Buy/Writes (6-12 month holds)...Often I would utilize margin to enable larger positions. As I shortened my trade hold times I began to run afoul of Pattern Day Trading Rules which in my opinion do not benefit the small trader in the least.
Looking at my market experiences and in particular my statistical results for the very long term, I came to the conclusion that the longer I was involved in this vocation, the closer my trade results tended to move towards the center - IE toward a 50-50 win/loss medium.
After 40 odd years of observations on and participation in the markets, you might think that by now I would have discovered a way to greatly improve upon this statistic. But it seems as if the law of averages is against my doing so...This is not for the lack of trying ...If it were possible for me to find a methodology or develop the skills that would increase my win/loss percentage, I would jump at the chance to do so.
Since this was (and still is) the case, the main thing that kept me profitable was the fact that my winners brought in an average of 2 to 3 times as much as my losers took away...This is an area that I may be able to improve upon going forward.
So I reasoned (or perhaps rationalized) that the more often I traded, the more I could add to my bottom line profitability. Thus my move away from 'investing' and swing trading toward day trading. I discuss some other reasons toward the bottom of page 7......Discretionary Trading....
Originally, I thought that YM and NQ were the better e-minis to trade in terms of taking 4 or 5 tick stop–outs. At only $5 per tick per contract, getting stopped in the YM or NQ was not as hard to take as was getting stopped in the ES ($12,50 per tick) and the RLM ($10.00 per tick)...
As stand alone entries, it is a bit more obvious to determine when MOF's or slingshots are failing...I use them mainly as trend change confirmations...when my primary divergence signals are not working as expected, I'm less likely to see MOF's or to take potential Slingshot trades.
Be aware that you most assuredly will encounter times when you are slightly off or not completely "with it".
This is an inevitable circumstance associated with this vocation.
A temporary loss of feel happens on occasion...how you deal with this certainty makes a big difference in your success rates and your bottom line.
Since this was (and still is) the case, the main thing that kept me profitable was the fact that my winners brought in an average of 2 to 3 times as much as my losers took away...This is an area that I may be able to improve upon going forward.
So I reasoned (or perhaps rationalized) that the more often I traded, the more I could add to my bottom line profitability. Thus my move away from 'investing' and swing trading toward day trading. I discuss some other reasons toward the bottom of page 7......Discretionary Trading....
Picking a Trading Vehicle
Low maintenance requirements, No Pattern-Day-Trading rules with few trading restrictions, wide depth to
the markets and high potential profitability = the e-mini futures
Originally, I thought that YM and NQ were the better e-minis to trade in terms of taking 4 or 5 tick stop–outs. At only $5 per tick per contract, getting stopped in the YM or NQ was not as hard to take as was getting stopped in the ES ($12,50 per tick) and the RLM ($10.00 per tick)...
I “cut my teeth” trading e-mini futures with the YM and NQ mainly because I thought I could best limit my risk exposure due to their smaller tick increments vs. the ES and RLM.
After accruing and analyzing my actual Trading Statistics, then plugging the numbers into the Projection Workbook, I discovered major advantages could be had by trading the RLM, but especially the ES over the others...
This Link to the Projection Worksheets with RLM and ES vs NQ-YM explains the advantage.
BUT you also need to consider other costs!
Things like commissions, computer/software upgrades, rent etc...to be profitable in the long term you must average a $-Won to $-Lost ratio of better than 2.5-to-1... AND/OR have a methodology that will consistently give you a win/loss ratio that is greater than 50%.
My range has consistently been between 54% to 60% per month.
My range has consistently been between 54% to 60% per month.
You will run into times of multiple, unprofitable trades.
There are days, sometimes a string of days when my signals are failing to produce winning trades...especially divergence signal fails.
By failing I mean that I get stopped out after taking a signal based position – either:
- the market “re-tests” lows before moving up(my protective stop-loss gets triggered)
- the market keeps going down as if ignoring perfectly 'good'divergence signals used for an entry(my protective stop-loss gets triggered)
- the market moves up after the signal but doesn't run(not enough of a bounce to get a 2.5-to-1 profit from)
Other "reasons" for a string of unprofitable trades
Be aware that you most assuredly will encounter times when you are slightly off or not completely "with it".
This is an inevitable circumstance associated with this vocation.
A temporary loss of feel happens on occasion...how you deal with this certainty makes a big difference in your success rates and your bottom line.
I'm trying to develop a better “tell” to alert me of the times when my feel or my signals are failing rather than actually having to take several trades that "fail" or get stopped out before I'm aware that my 'Feel" may be off...So far, the best I have come up with is to take several TEST trades (paper trades) to get a feel for the current market environment before committing with cash.
ZERO-ing in using Time Frames and Chart Templates...
this very much helps with "feel" for trading
Very short term tick charts:
Intermediate short term tick charts:
Long term minute based - the entire session and the major market open thru close:
My Four Horsemen...Daily charts of the markets I trade:
It helps to have multiple monitors so that you need not be constantly fiddle-ling with your layout
Hopefully, more ideas to come...
