Sunday, May 6, 2012

Counter trend dangers

Was sick for a bit, now I'm better. A lot of new traders it seems like going counter trend, I guess the thinking is that they have missed the current move, but they can catch the reversal. There's a time and place for going counter trend, but I think only experienced traders who take there stops with discipline should attempt counter trend strategies. I think a big key to winning with counter trend strategies is using high risk vs reward profiles on each of your trades, your win rate will likely be low, so every time you win you want to make much more than your average losing trade. Try experimenting with different risk vs reward parameters, like maybe risk 2 points and aim for targets of 6 points, of course you should try sim trading any strategies before committing real capital and trying said ideas out in a live marketplace. However you can use similar risk vs reward profiles for with trend setups, so don't get too caught up with the idea of going counter trend, it's dangerous and not recommended for beginners. Below are a couple examples of what can happen, mostly losing trades / break-even trades every time the market looked like it was going to turn, and that's if you got in as early as possible (which is something you should strive to do when going counter trend, you must be early). So be careful when trying stuff like this or you might be looking at an account balance of $0.00 at the end of the session!!

Wednesday, April 11, 2012

Chop Zones

This post is gonna be my attempt at an educational type of thing, I'm no expert, but lets see how I do. I'm hoping to do some follow up educational posts, but I've been sick lately, and might not recover fully for several weeks, its pretty bad, so we'll see. Above is a screen shot of a chop zone, pretty standard stuff actually, they can occur at any time, but I'm always ready for them after big swings up or down. As you can see in the screen shot, trading breakouts, or breakdowns from congestion zones is very difficult and usually will result in a losing trade. I could provide more screen shots, but I think its unnecessary, load up as much data as you want, trading breakouts from chop zones results in losing trades, unless of course your using very large stops and smaller targets, but that is also a losing strategy and the day you take several losses in a row you will see the error of your ways.

So what do you do when your chop, and how do you identify chop in time to do something about it? To identify chop can be a bit tricky, but usually after a big swing up or down has exhausted itself and run into a major area of resistance, or support you are in chop, also watch to see if subsequent breakouts in the direction of the trend are failing, that is a sign you are in chop, or a reversal is on the way. The best way to play chop, is to sit out. It's called chop, coz it chops traders into bits, trying to trade chop is very difficult so its usually best to be patient and wait for better price action. Another option if you must trade is to fade the extremes of the range, this is the best strategy in my opinion for trading chop zones and its best to use tight stops and bigger targets. If you are trading multiple contracts taking some off as price goes your way is usually a good strategy, good exit points are the middle of the range and the other extreme, like buy the bottom, sell some in the mid area, and sell the rest near the top. Traders can go on tilt/lose control, just like craps players, or poker players, or anyone who gambles/speculates with money, so taking several losses in a row in a chop zone should be your signal to stop trading either for the remainder of the day, or until the zone has been properly broken out of and price has trended away. It's my opinion that chop zones can cause tilt/emotional damage more than any other kind of price action in traders and cause them to trade more impulsively and with "gut feelings", that kind of thing never works, so stay in control and disciplined when in chop zones. Of course you can always just skip trading these zones and wait for strong trends.

Wednesday, March 28, 2012

Kung fu

My winning ways have continued throughout each new session I plow my way across. Some rough statistics are, on my last 29 trades I'm up around 12 points or $600.00 across 5 days of data, this means for at least 1 week of trading data I have achieved my goal. Showing profits after a single trading day used to be quite difficult, but I've suspected for awhile that being more conservative and cutting out all of the whimsical on the spot trading would leave me with a higher win rate and thus profitability. Sort of the goal of my blog, if there is a goal, is to show that through discipline and a consistent work ethic profits can be made. Some of you will spend years trying to beat this game, and most of you will fail, sad but true. The market is a meat grinder of death and it will grind up a lot of you. Think about it, the market is filled with people who have better computers, knowledge, connections, technology, experience, and the ones who have survived the long haul have become fucking ninjas, the only way to survive is to learn excellent kung fu yourself, or avoid them by disguising yourself as a tree and robbing the newbies wandering down the road.

A recent session

Friday, March 16, 2012


This is a grand occasion, as is everyday I find myself alive and still breathing. I'm 1 step closer to consistent trading, 1 step closer to being able to refund my account and print money like a fucking printing press, 1 step closer to being able to tell my boss harold to fuck himself. Over my last 17 trades I have managed to squeak out a profit of +6.75pts, or +$337.50, this is across 3 days of data, that's powerful coz my ultimate short-term profit goal for trading is to consistently take in +$500.00 a week, and +$2k a month on 1 contract. I can accumulate those profits trading 1 contract and with only 1k to start in my account. I just gotta make sure not to encounter large swings in my equity curve, and that can be prevented by gaining hardcore skill in simulation. This puts my simulation account somewhere in the $3,900.00 area, which is a promising recovery so far. In total I've taken 169 trades in my little simulation experiment and I've become more conservative lately. I'm feeling pretty good right now, earlier I had losses, I reviewed them, pondered them, and came up with some solutions, then implemented those solutions and now I'm sitting on a decent profit after 17 round turns. Still looking over my recent trades I've noticed plenty of mistakes, and if I had been on my A game, I could have made anywhere from 2x - 3x what I actually made, mistakes seem to be inevitable and unavoidable, and there is still tons of room for improvement. My goal for my next 17 trades is to make fewer mistakes and maximize my gains, while trading like an ice cold robot, void of emotion. As long as variance is normal and I don't get super unlucky and I trade well, my next 17 trades should net me anywhere from +6 points to +20 points. Another thing I'm happy about is that my fear of the market continues to diminish, I've taken hundreds, and hundreds of trades throughout my trading adventures, I've always been nervous pulling the trigger, but that's finally starting to go away. I think one way to reduce fear is to trust yourself, you need to define your risk and trust that you won't move your stop no matter what happens, you also need confidence that your edge is real, those are probably the most important factors that reduce fear.

And now some dubstep.

Wednesday, March 14, 2012

Sara blakely

Here is a woman who took $5k and turned it into 1 billion. She started her company at age 29, and now at age 41 she is a billionaire. I thought this was a really interesting and inspiring video, she also talks about our paths in life and how originally she wanted to be a lawyer, and ended up deciding to go in a different direction. I think that's an interesting thing to consider, "our path in life", how many of us traders might be better off doing something else? I think if it feels right you should do it, but a lot of us would do well to do some self reflection and decide if trading really is for us. Personally I'm still unsure, but will keep at it for awhile. I also like what she said about money, she has a very positive view on the subject and how it can used for positive things, and doesn't have to be this corrupting influence on us, still I believe it depends on the individual, money will affect us all in different ways. Anyway here's the video, very inspiring woman and I am very happy for her success.

Saturday, March 3, 2012

Whimsical scalps

Lost my ass during this session. One good thing I can say about all of this though is that I remained pretty calm and continued to trade without getting emotional, I just kept getting stopped out. I'm sure some of this is just bad variance, but most of these trades were not valid setups, I kept trying to pick the exact spots where I thought price should turn, and I kept getting run over by the train. I knew what I was getting into trying to go counter-trend and this is what happened.

Session stats

4 hours of data traded
29 trades
5 wins
24 losses
+$300.00 gross
-$962.50 gross
-$662.50 net

one of my worst performances ever. I can only remember 1 other time when I lost -$500.00+ in a single session, of course I'm more aggressive now than I used to be. Also even though this is all simulation, the losses still hurt me emotionally, coz if I can't win here, there's no way I'll be able to win with real money, however I don't let my emotions affect my decisions, I can be upset yet still remain in control and let my stops/targets get hit without moving them in the hopes of getting more profit, or getting back to even on a losing position, that kind of crap only adds to losses in the long run. I only got 4 hours into this trading day, and I'll be finishing it tonight, once I hit the -$600.00 mark I had to leave the computer. Hopefully my next session can recover some of these losses.

Overall Simulation account stats

144 trades taken
P&L = -14.00pts / -$700.00
Commissions = -$720.00 (@ $5.00 per commission)
Total P&L = -$1,420.00

Original Account Balance: $5,000.00
Current Balance: $3,580.00

144 trades taken and just a slow grind down on the account balance means my edge is pretty much non-existent, at least I have statistical evidence that shows I am not ready for live trading. Until I can turn this around and push the account into positive territory and then some, I cannot trade live. Maybe by trade 200 I will have recovered, or maybe it will be trade 500, we'll see.