This is actually the time in my life Iâve attempted day trading (hence the title of this journal). The first time, frankly, I lost my ass. No plan, and undisciplined with lots of "revenge trading" and wishful thinking. Not this time. My plan: to trade the ES with small stops of 3 to 5 ticks, at least a 2.5:1 profit ratio on trades, and letting winning trades run until the trade premise is broken, opposing support/resistance is near, or a long trend appears to be beginning to reverse. Always flat at the end of the day, nothing held overnight. Why only the ES? Well, I seem to be overwhelmed easily with too many charts/tickers to watch, and feel that watching a single entity help one to learn how it moves over time. There is enough money to be made in just the ES to satisfy me. The goal is to build up account equity, and then to trade for income. I have other sources of income, so the pressure to perform is reduced in that respect. Right now Iâm using 133 and 510 tick and 5 minute charts, though I almost exclusively watch the 510 tick charts to enter/exit trades. A typically trade would be to buy the first pullback to trend support, using TradeStationâs OSO feature to enter both the entry limit price and the stop loss market price (pre-set to 5 ticks or 1.25 points). So if trend support is at 1312.50, I would set the system to buy at 1312.75, with a stop-loss at 1311.50 (1 point below trend support). When the trade moves +3 points in my favor, I move stop-loss to the entry price. When the trade moves +5 points in my favor, I pare out 1/2 the contracts (if >1) for profit, move my stop to at least entry +1 point and let it run until the trend is broken, or the pattern starts to get "toppy" after a big push up. Short trades, obviously are the exact opposite but the same trading rules apply. I never open up a stop to more than what was originally set. I will, however, tighten it up if the pattern starts looking "hinky". Currently Iâm dealing with mental jetsam from my last stint as a traderâ¦. Iâm too quick to take a small profit, especially after an earlier loss, or quitting the day early. Sometimes I donât pull the trigger on a good trade on miss out. I will paper trade each day afterwards to see what my system would have produced. Iâll try to post my trades here each day before the end of the day, feel free to comment or offer suggestions.
Too vulnerable in my opinion. You want to make sure you won't be stopped out unnecessarily once a trend is established. Your initial stops are simply too tight. If you buy support, why don't you wait it out until the bears created a new pullback for you to adjust the stop to the upside. Leave the stop below support in the meantime; the market won't shake you out anyway if you identified the area correctly. It's called "support" for a reason! And what's the justification for exiting after 5 points? You say you take profits too soon. Let winners run and keep adjusting the stop after each pullback. What could be easier than that?
Based on my paper-trading, while getting stopped out prematurely does happen, it doesn't happen enough to justify opening the stop up. If anything, I've considered tightening it. I generally use an 18MA as the support/resistance guide. So as the price goes up/down, the MA moves with it, allowing me to move the stop. The 5 pt exit is only for half the number of contracts held, so if I am long two I go ahead and sell one contract. This locks in profit, which would cover the losses of two other trades which were stopped out early. The remaining contract is held until trade premise is broken.
Monday, March 10, 2008 0944 Short ES 1291.50 at pullback 510T resistance Stop at 1292.75, lowered stop as price moved down. Covered 0951 @ 1289.50 (+2 pts) seeing a double bottom and strength divergence comparing 0942/0951. Low was 1287.75, so probably should've tightened stop rather than get out, and maybe scored another point. Also noted divergence 0943/0952, waiting on long signal -- which came at 0957. Tried to get in at 1290 but missed the entry and a 6 point climb. 1016 Long ES 1290 at pullback to bullish candle signal, but stopped out at 1288.75 at 1016. Only peaked at 1292, so didn't miss much here. 1029 Long ES 1289.25 at 510T support. Stop at 1288. Raised stop as price climbed over the next 6 minutes. Finally stopped out at 1291 @ 1035. Peak was 1293.75, but had a long red candle down at 1038 which would have taken out even a looser stop so an okay trade. At 1045 I note some chop and poor price action (at least to my eyes), so I may call it a day here as I've got other stuff to do. Up 2.5 points for the day.
Tuesday, March 11, 2008 Man, what a day. I over-traded, should have stayed out during the choppy periods but I didn't. I took a 2 hr break around lunch and missed one or two moves. At one time I was down about 6 points on the ES, but managed to recover back to -0.75 at end of day. Had I stayed in the final trade (+5 points) until 4pm, I would actually have been positive on the day, even after commissions. One problem is that I was experimenting with using an analytical tool by the Paint Bar factory called "The Squeeze". I was taking trades off the bias line, in some cases without regard to the underlying trend, which was a mistake. In the 23(!) trades below, I was again using the 510 tick charts 18MA as support/resistance, and also taking cues from the Squeeze's bias line: 1 Sell 09:35 1304.00 Buy 09:40 1304.00 0 2 Buy 09:41 1303.50 Sell 09:41 1302.25 -1.25 3 Sell 09:42 1302.25 Buy 09:43 1303.50 -1.25 4 Sell 09:45 1303.00 Buy 09:49 1301.50 1.5 5 Buy 09:59 1300.25 Sell 09:59 1299.00 -1.25 6 Buy 10:11 1298.00 Sell 10:28 1299.75 1.75 7 Buy 13:02 1290.75 Sell 13:03 1291.25 0.5 8 Sell 13:08 1291.25 Buy 13:11 1292.00 -0.75 9 Sell 13:18 1292.00 Buy 13:18 1293.25 -1.25 10 Buy 13:36 1296.75 Sell 13:37 1296.00 -0.75 11 Sell 13:40 1296.50 Buy 13:42 1296.25 0.25 12 Sell 13:53 1296.00 Buy 13:53 1297.25 -1.25 13 Buy 14:10 1300.50 Sell 14:13 1300.75 0.25 14 Sell 14:13 1300.50 Buy 14:16 1301.75 -1.25 15 Sell 14:27 1301.50 Buy 14:34 1302.25 -0.75 16 Buy 14:44 1305.00 Sell 14:49 1309.00 4 17 Sell 15:04 1309.50 Buy 15:04 1310.25 -0.75 18 Buy 15:11 1309.25 Sell 15:13 1308.50 -0.75 19 Sell 15:36 1312.50 Buy 15:37 1313.25 -0.75 20 Buy 15:40 1313.25 Sell 15:40 1313.50 0.25 21 Buy 15:43 1313.00 Sell 15:44 1311.75 -1.25 22 Buy 15:48 1313.25 Sell 15:48 1312.25 -1 23 Buy 15:49 1313.50 Sell 15:58 1318.50 5 -0.75 ES Points loss Here's to better - and fewer- trades tomorrow.
Another example why understanding the underlying theme and trading in this direction is more advantageous. Identify it and you won't get distracted with every tick up or down. Who is in control of the market? Is it visibly falling? Is it visibly rising? 23 trades and yet your are barely break-even? Whereas only one trade was necessary today. It was effortless, even too obvious to overlook, and you surely would have pulled a much bigger profit. http://www.elitetrader.com/vb/showthread.php?s=&postid=1829394#post1829394
Wednesday, March 12, 2008 Had to stop trading around 11am due to other commitments. So a light trading day today. Missed a move or two early on, but that's okay as was up 3.25 points for the day. 0940 Long ES 1324.50 @ 510T 18MA support. Stop hit 1323.75 as it broke support almost immediately afterwards. -0.75 points. 0959 Long ES 1320 @ 510T 18MA support, big green candle pushed well above support, then pulled back to support, where I bought. It popped up a bit again, enough for me to move the stop to entry price, but it ended up stopping me out for an even trade. +0 points. 1014 Short ES 1317.25 @ break 510T support then pullback to resistance. Stop hit 1318.25 for -1 points. 1017 Long ES 1319 @ 133 Tick chart cross and pullback (trying to time a decent entry here). I was anticipating a push up on the 5 minute ES chart to 1524-1524 to test yesterday's high at close. Was able to move stop-loss up enough so I was stopped out at breakeven on the trade. +0 points. 1031 Short ES 1319 broke 510T support. A bad trade, as it was trending up and I was anticipating a long at around 1324-1325 anyways.... Move stop so only took a -0.5 point loss. 1047 Long ES at 1323.50 and 510T big green candle up through 18MA, then pullback to 510T support. Finally in a decent long without getting stopped out, and it did indeed push up to 1324-1325, and beyond. I set a profit point at 1329 expecting congestion at that level which never really occurred. Should have kept my trailing stop instead but needed to stop trading and head out for an appt. Peaked at 1334, with the trade premise of the 510T 18MA being broken around 11:20am at 1331. So I only missed out on two points of the run up. +5.5 points. I think I traded well, except for the 1031 short. I kept stops small, should have let the 1047 long continue its run up but still did okay. +3.25 ES points for the day.
I'm going to try something a bit different with the next trading session, to try to go more with the major trend and avoid over-trading. Long trades - When ES price is well below (>6 points below) the 5 minute chart's 18MA resistance. - or - - When ES price is at 5 minute chart 18MA support. Long entry trigger: Green bias line on the PBF Squeeze indicator (wait for pullback in case of large candle) - or - Pullback to 510 tick chart 18MA support. Short trades - When ES price is well above (>6 points above) the 5 minute chart's 18MA support. - or - - When ES price is at 5 minute chart 18MA resistance. Short entry trigger: Red bias line on the PBF Squeeze indicator (wait for pullback in case of large candle) - or - Pullback to 510 tick chart 18MA resistance. I backtested using this method for the last three days (3/10 through 3/12). 26 trades total over three days, with a 40% success rate using 1.25 point stops. If you count scratched trades (breakeven) as "successes", then there was a 70% success rate.
Just realized that today is rollover day for the ES. My charts are out of kilter with regard to the MA's and I was probably only going to trade the morning anyway due to afternoon business appointments. So I get a day off One other thing regarding my revised trading system mentioned in my last post - while the 133 tick and 510 tick charts display the 24 hour trading period, the 5 minute chart only displays regular trading hours (9:30-4:15).