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!!

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.

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

Profits

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.

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.

Hilarious video

Funny shit.

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.

Roller coaster

This session was up, down, up, down, down, down, DOWN HORRIBLY, and back up up.. totally nutts. I took 29 trades, tons of scalps, and ended up basically flat. After commissions of course I would be down quite a bit. I was fortunate to catch several big winners, which is what saved me, however I made some terrible judgment early on and missed 3 good trades that could have earned me +$400.00, after that I was a bit emotional and think I over-traded and mismanaged some of my trades, still for 29 round turns I'd say my overall performance wasn't bad.

Results for this session
-------------------------

7 hours of data traded
29 trades
9 wins
20 losses!!
$700 gross profit
$750 gross loss
-$50.00 net

I need to tighten up my criteria slightly, stay focused and catch ALL the big winners, and manage my scalps a bit better so that I capture 3-4 ticks more consistently and tread water while I'm searching for the big winners. Easier said than done, but I feel my skill is improving.

Winning!!

As Charley sheen would say...

My latest session was a profitable one, I'm finally starting to win a bit more than I lose, and believe I'm making good progress. For whatever I can't stick to 1 setup, I scalp, trend trade, try to catch reversals by calling tops and bottoms, and sometimes invent crap on the fly it seems. I'd be up more money if I stuck to what I seem to do best, which is not fighting the trend, but whatever, I feel there is money to be made going counter trend sometimes, so I'm gonna keep trying it. After all someone eventually must be left holding the bag, those are the people who get screwed in the market, and someone must get screwed, the only question is when will it happen. I took 11 trades for 6 wins and 5 losses, netting me +$112.50, back in the day taking 11 trades usually resulted in a -$300.00++ loss due to my stubbornness and holding losing positions, one thing is for sure, taking 2 point gains and 5 point losses will only result in a down trending equity curve, I don't care how often you think you'll win.






Just found this song.. I believe maybe it helps focus with scalping!

The king of Breakeven

I continue to rock an atrocious win rate, however I'm down only 12 bucks after my last 12 trades. I had 8 losses and only 4 wins, yet managed to lose very little. I've gotten a lot better at taking a "setup" whenever it appears lately, even if I'd had 5 losses before it. Psychology is always working against traders, when your on a losing streak you can become very timid and afraid to place trades, so often times the trader ends up skipping setups that would have worked and that throws off the entire system. Not me however, I think I've finally beaten this flaw in my psychology, my previous wins/losses no longer affect me, I'm numb to them. Across these 12 trades I've spotted a couple setups that were garbage, and several trades that could have been managed better. I'll try to do a better job on my next sequence of trades, we'll see how I do.

Strength

I am feeling stronger lately, like I can accomplish things again. Where the fuck are these good feelings coming from I wonder. Not too long ago I was very depressed by my life, I'm 24 years old and work at McDonalds for minimum wage. I thought things were falling apart, but the charts have been making tons of sense to me, despite being breakeven across 60+ trades I am feeling filled with energy and positivity. I think my future looks very bright and feel confident I can and will beat this market. I think I finally understand price action and risk/reward, and I finally feel that I've got the necessary mindset to do what needs to be done, when it needs to be done. I think I will get more hours at work, and find another job, save my money, and continue to study the market. Once I've got about 2k to my name which won't take more than a few months of savings, I'll refund my account and begin trading the 6E 4-6 hours a day 5 days a week, I think I'll profit anywhere from $500.00 - $1000.00 a week on a single contract and very quickly be able to decrease my hours at my job so that I can devote more time to trading. Soon after that I think I'll quit my job and be making 3x-4x what I'd be making working a full time minimum wage job. My question is why am I feeling so good? I'm not sure, things have just been clicking lately, trading is making more and more sense, and life doesn't seem so hard, I used to mind going to work "o god this is boring and sucks"! I don't mind working as much as I used to. Years ago I was so lazy I would sleep in almost every day rather than watching/trading the market, tired from the previous night of video games and mindless entertainment. Now the wind has changed, colors have changed, my perception, the way I think, it's all becoming different, even my inhibitions and shyness are going away. This is a very good thing that is happening to me, but one thing in me remains constant, and that is was scares me, and that thing is my doubtful nature. I am not sure if these feelings will burn themselves out in time, or If I finally have changed and become something different. I can honestly tell you that I don't think there has been a day that has gone by in the last 3-4 years where I have not at least thought about success for a brief moment, usually it is constantly on my mind, no matter what I'm doing, sometimes I can only think of success. I find it difficult to hold a normal conversation with my friends for more than a few minutes, without mentioning something about trading,money, or self improvement and so on, maybe all that thinking has finally shaped my mentality to that of a more "successful" or "serious" person. I definitely think way different that I used to, I find things like clubbing, and going out to have fun as semi-pointless activities, at least for me and my current situation, I have no doubt that my likely success will change that to some degree, but I don't see myself becoming some club/bar Vegas manic who gets hammered and does lines of cocaine in the bathroom. That type of lifestyle doesn't appeal to me, I'd probably rather photograph an abandoned hospital or wander and unfamiliar city contemplating its history, there's something about the way time changes places, and many other subtleties that are hard to explain that has always fascinated me. I'd also like to do a great deal of traveling, see different people and clutures, there's so much to experience in the world that if I lived many lifetimes, I couldn't see it all, but I'd like to see as much as I can in this one, I feel that it's time to stop wasting time and get down to work so that I can be free of my useless menial minimum-wage work. Inspiration is such a mysterious thing, but I definitely feel it.

Comeback trail

My recent trading has been good, and I've managed to reclaim some of my losses. Right now the biggest drain on my account has been commissions, however I've implemented some changes to reduce transactions and select better entries that will yield bigger profits. Right now the account has just peaked into positive territory in terms of points earned, the only reason the balance is negative is due to commissions =(

63 trades
wins = 18
losses = 36
B/E = 9
Profit = +1.5pts / +$75.00
commissions = -$315.00
Total P&L = -$240.00

Original Account value = $5,000.00
Current Account value = $4760.00

The importance of stops

Been awhile since my last post, and the reason why is coz all my trading has been break-even. It's been dull and boring, and I've been doing things wrong. Still the damage to my account has been minimal. In the past I couldn't have placed 50 trades in the market and still have a single dollar in my account, it's easy to lose when your a beginner as you all know. I had rules like 2 point stops, but would hold assuming price was "over-extended" with the hopes that price would retrace to my entry, naturally price would run down another 2 or 3 points and I would be looking at a -$250.00 loss on a $5k account in a single trade. Placing just a few bad trades in a day would leave me down anywhere from -5% to -15% on my entire account in just a day! This was my years ago when I traded with real money, I lost almost everything in that account, and eventually withdrew the remaining balance for living expenses. Bottom line, stops protect your account, so adhere to your specific stop loss rules!


So after 56 trades the account is down 10% and half of that loss is due to commissions. I'm an expert at bleeding slowly.. however in all seriousness I think this data is telling me that I need to be more selective with my trades. As you can see I have over twice as many losing trades than winning trades, yet my gross loss on the account is only -4.00 points after 56 round turns, how have I managed this? For starters I cut my losses very quickly, as a result I tend to take losses frequently, the losses are mostly like mosquito bits to the account, small and annoying. My winning trades are typically 2x the size of a loss sometimes MORE, I'm constantly looking for big winning setups, sometimes I want to see them so much I imagine things that aren't there, this has led to some over trading on my part, but not by much, for the most part I've managed to keep myself in check. I'll be making some minor adjustments to my trading style attempting to manage my trades a bit better and avoid some of the noise, hopefully my next update will be a tale of profits. We'll see.


56 trades
wins = 15
losses = 34
B/E = 7
Profit = -4.25pts / -$212.50
commissions = -$280.00
Total P&L = -$492.50

Original Account value = $5,000.00
Current Account value = $4507.50

Sim Account Progress

So far these are my results with my simulation account. My win rate has been very low, but the account hasn't taken much damage, all thanks to the power of cutting loses quickly. My most recent session was a big win, and I've included a pic of the results. I finished that session with a net profit of $250.00 trading 1 contract of the 6E (all of this is done in market replay).

37 trades
wins = 11
losses = 23
B/E = 3
Profit = +1.25 / +$62.50
commissions = -$185.00
Total P&L = -$122.5

Original Account value = $5,000.00
Current Account value = $4877.50







Cut my loses quickly this session, and had the guts to hold my trades to initial target areas, did very well this session.

5k Sim account Updated results...

Total trades = 25

Wins = 8
Losses = 16
B/E = 1

P&L = -5.25pts / -$262.50
Commissions = -$125.00
Total P&L = -$387.50

Account Value = $4,612.50


After 25 trades I'm down close to $400 trading the 6E. I'm trying to make it a goal to trade 100+ times a month, most traders are trying to find ways to become more conservative and tighten up on criteria to filter out losses. That's always a good idea if your trying to protect your money and slowly grow your account with minimal risk. However since I'm in simulation mode, I think its ok to go a little crazy with my trading coz more experience is what I'm really after. Experience is king, and the faster you can rack it up the faster you will develop. Each trade I take has an idea behind it and I always go through a logical thought process, that's really what I am trying to develop, a faster thought process, so in real time I can make a decision in under 5 seconds, sometimes that's all the time you have. You can stalk trades and watch everything setting up, but in the past I've done this after planning a trade for maybe 30 mins or something, but when it came time to pull the trigger I would double check everything, and just sort of stare at my dom.. more than 5 seconds would pass and price would shoot up a point or something to a level where it would be retarded to chase it. You can't hesitate live, so build your confidence in sim.

5k Sim account

I started this project months ago, and am now reviving it. The idea is simple, start with 5k and see how much I can work that up into in a few months. This is totally simulation trading/market replay, but every trade is taken seriously, I'm not gambling or placing impulsive trades. I'm taking this as seriously as real money, I think a decent futures trader can make at least 2 points a day, if they have a decent win rate and place several trades a day, in my opinion, more trades is better, however that's a tricky topic and depends on the person and his experience, some day's I trade 10-15 times, just depends..


Definitions..
--------------

A point = 4 ticks
A tick = $12.50
(6E Market)
Commissions = $5.00 per round turn (made up figure, but in reality its usually lower)

Results so far..

Total trades = 17

Wins = 6
Losses = 11
B/E = 0

P&L = -1.25pts / -$62.50
Commissions = -$85.00
Total P&L = -$147.50

Account Value = $4,852.5

Note - the results so far are across 2 days of trading data, and so far I think the results are ok, not terrific, but not horrible, in the past 17 trades could have me down -$800.00 or more, but I cut losses faster now and believe me it is the right move to make, if you can't take a loss and cut it at the stop point you are burning money.