My Chick Goslin "Intelligent Futures Trading" Journal

Hello,

My name is Ashan and this is will be a snippet of my daily trading journal, mainly the trades I make and why.

BACKGROUND

I am a swing trader who trades commodity futures. I started a couple days before December 07, which means I’ve been trading for about 7 months. I started with $20,000 exactly and have made about $70,000. I wish I could say I am a futures trading maverick but my early success was due to Chick Goslin and his book “Trading Day by Day.” Chick used to put out a daily market letter that was invaluable in learning the trading methodology and small details that went into his consideration of every trade he made. Having a professional to guide me is what allowed me to grow my account very fast. My risk/reward was very high in those days and the combination of chick’s guidance and a raging bull market in commodities gave me some early $20,000 months. My current balance after withdrawals is about $67,000.

Chick stopped his letter In early March. Since then my risk/reward has been reduced substantially. However I will not let it be that way forever. I devote a lot of time to reading the markets and writing in my journal each day. I would like to post my excel spreadsheets of my journals with full details but it is probably too much information to be of any interest and there isn’t a convenient way to do that here anyways (besides attachments which I don’t like)

MY METHOD

Position trading method with a timeframe of days to weeks, with most of my own trades falling in the 2-5 day range. I use some very bare bones technical indicators. This method is highly subjective. No black boxing here, it requires a brain to analyze what the indicators are saying.

I have 3 primary technical indicators I use:

The TL or trend line, which is a simple 10 week moving average (49 days to be exact, 49 vs 50 is not that significant and is more of a customary thing I got from my mentor than anything else) The trend line gives me the overall direction of the market.

The SL or short line. This line take the last 3 days of price average and compares it against the last 10 day average of price. If the 3 day average is higher, the line will be somewhere above 0 (depending on the magnitude of the difference) Vice versa if the 10 day average is higher. This is used to get an idea of short term price flow.

The ML, or middle line. This is a 16 day average of the SL. By averaging the short term price indicator we get a reasonable indicator or intermediate term price flow (in this setup, the flow of price over a couple weeks or so)

All the lines are imperfect indicators which are reasonably reliable, as Chick Goslin says, but far from perfect. Because of this a margin of error is used on each one. It is very acceptable to “drop” old values off of the ends of the lines to anticipate where they will head. Obviously we don’t want to over anticipate, but when done correctly, anticipating these lines will paint a reasonably reliable picture of where price flow is heading in the long, medium, and short term.

I could rewrite Chicks entire book explaining the decision making process for entering a trade, but the basic idea is this: Trend is the strongest indicator especially when steeply up or down. Intermediate term pressure (as seen through the ML) is the second most important, with short term pressure being the least important. To get a decent risk/reward move I want to try to get into trades that have the trend pointing the same way as the ML line, or anticipate such a move so that I get into before my lagging indicators reflect the price flow that has already happened. The short line is used mainly for timing dips and rallies, or overbought/oversold conditions.

Timing moves is much easier said than done. The market is a clever beast and likes to make spotting a pattern as difficult as possible. I’ll keep track of my trades here and we’ll see how well I do.

MY APPROACH

Trade the markets as best as I can by using and anticipating my technical indicators (which are merely indicators of price action over different spans of time) Any other indicator is acceptable to use, but must be weighted correctly in how much of a factor it is in the decision making process.

I follow several market groups: Stocks, financials, currencies, energies, metals, grains, and softs. About 20 markets total, although most markets are just variations of others in their group.

Trade on as little emotion as possible. Not doing much intraday trading helps enormously with this. I also only check my balance about every 2 weeks. I won’t check a balance for longer than that if I feel that my week was bad.

Be meager with withdrawals. Live like a broke shmoe until I hit my financial goal. My goal is $200,000 (conservative) to $500,000 (optimistic) after tax, by 2010, right about the time I believe will be a bottom in real estate. Real estate investment is my end goal. I don’t really seek the posh expensive lifestyle. I do want complete financial freedom, the ability to do as I please with my time. This means generating about $80,000 a year in income purely from real estate investments.

Ask any questions and I will answer. Of course any feedback is welcome, though I do try to watch out for what information I consider and what I have to filter to avoid analysis paralysis.

 

Hi AshanD,

How do you exit your trades?

How to you manage risk?

Can you post a screen shot?

I liked Goslin book but do not remember anyone discussing it on ET before.

Good trading! Looking forward to the journal!

 

I am currently holding long crude oil at a loss and short copper at a gain. I am trying to dump the crude oil contract, limit 124.49.

I have a limit order to short 4 bonds at 114.29. If it doesnt catch later today I will short at market. I am shortign this market because bot the trend and ML are down. The SL is up but because of a 3 day rally which I believe will be cut short soon.

I also went long 2 ES. This trade is a bit complicated and i would not have done it myself but after talking to Chick Goslin today I have decided this to be a good trade. Basically the trend supports this trade but the ML does not. However other indicators specific to the stock markets are pointing towards a good probability of an up move. First we are buying on a (possible) dip. Second the dow did much worse than the NQ today, and the NQ tends to lead against the dow. 3rd, the fear index (VIX) went up slightly, not in proportion to what it normally would on a down day of this size (this indicator gets only minor weight) 4th, and this is the tough one, Chick has anticipated that the SL will turn down based on recent action. Then assuming tomorrow shows any strength, the SL will turn up to create a higher low and a very positive line picture. So upside risk rewards is good here.

Despite price being on highs cocoa looks attractive for the long side. I am waiting for the price (and SL) to dip a little and then long it. A dramatic drop in price would change that strategy however.

In summary:

Short copper, trying to short bonds

Long stocks

Trying to dump crude oil at a loss.

 

Hi slacker,

I place stops based on resistance levels. Stops are usually fail safes to prevent against very sharp selloffs. The losses I "want" to have will not hit the stops but be exited manually by me the next day. (unless I feel like the trade deserves more time which is often the case, this is a judgement call)

Risk management I'm not too keen on. I definitely should be though, but taking larger losses is a necessary evil of position trading (trying to use anything close to day trading stops simply will not work) For the smaller contracts what I seem to do now is figure out how many positions are equal to One ES contract or one GCL contract (on the large side) and trade that many. Most day traders would probably balk at that.

I'll post a screenshot tomorrow.

Also my positions are on the heavy side right now. I usually don't trade that heavy. But I have an extra confidence after getting off the phone with Chick. We'll see what happens.

 

Outfreakinstanding!

Thanks for starting this journal.

I am a huge fan of Chick. I'd have to say he was a huge factor in my trading education. Between him, Don Jones and me working my ass off the past couple years I developed an excellent method.

Very glad to see this journal, and I agree, it was a shame to see Chick cancel his letter. The guy is a trader through and through.

I will try not to clutter up your journal, but I will most definitely follow along and maybe add a few comments here and there since we both share similar backgrounds as far as trading methods.

Best of luck.

P.S. Very cool idea on the goals, etc. I respect your goals and I think that is the way to go in this game. I don't care about private jets or trying to be some Donald Trump type...just complete financial freedom for me and my family....to spend time enjoying life. I also share a similar idea on the RE market...time that one right and you'll make a killing.

 

Goslin's book is one of the few trading books I own that actually are worth reading.

 

Thanks guys, feel free to post any time.

I got out of my crude contract for a loss at 124.49.

My limit order for cocoa did not hit. Cocoa held even today which Chick noted makes the picture even more positive. I may go in at market tonight.

ZB performed negatively today. After a 3 day rally it fell decently. I expect more on the downside. One contract has been cashed at 114.07 leaving 3 more on the short side.

Copper sank a little more but nothing eventful. This is a very volatile market which requires wider stops than normal. The line pattern still shows that pressure is to the downside, but the SL (short term pressure) is now coming up off of recent lows which means there could be some short term upside pressure at any time. I do not try to time these brief moves anymore, for all I know there may not even be one. Holding my GHG short with wide stops.

Yen is concurrent to the downside so I am going long, but only lightly because this market has a negative correlation to stocks and I am already heavily invested in stocks.

The stocks performed as planned for today. NQ was the most positive and Dow the least. NQ has a strong tendancy to lead the dow so this is a good upside sign. Additionally the ER2 was also positive and while this one is a bit more finicky, having the ER2 agree with the NQ is an extra positive. Chick says that the NQ is like the head of the stock market and the Dow is the tail, with the ES the body that gets dragged in between. My ES contracts didn’t do much today but I expect a good performance tomorrow. Any significant negative pressure tomorrow would be a solid negative warning sign. Only negative for today was the fear index (VIX) up a little on a sideways/up day. This is only one day so it’s not that significant.

Attached is a picture of the NQ. As expected, the SL turned down today. Any more upside tomorrow would once again turn the SL up and create a higher low in the SL. This would set up the picture to be quite positive because it could start a series of higher lows and highs in the SL (like a step ladder for short term price energy) as well as pull up the ML, which is the medium term price energy indicator. With the trend already solidly up this trade has good risk reward.

 

Correction: Yen is concurrent to the downside so I am going SHORT, not long, one contract.

 

Looking forward to your journal. Read the book and liked it as well.

 

This is about as good of a day as I can hope for. Stocks went up like I anticipated, bonds went down and cocoa held its ground (I entered 4 at 2808). Only issue is with copper which rallied a little bit today. I felt it coming so that makes things a little better, but it’s always uncomfortable to have a position go against you. I had to widen the stops on that up to 368 to guard against a sharp rally which this market likes to do sometimes.

I sold 2 contracts of bonds at 113.09 today. Good profits on those.

Yen did not catch my limit order yesterday but I shorted it today at 9.444.

I am shorting sugar today. The trend is strongly down in this market. I missed the whole down move namely because I kept trying to guess a bottom. It never came and now sugar has broken through the old resistance levels of about a year ago. My lines are very negative for this market. There could be a sharp rally any time so I am only shorting 3 contracts.

Often times there will be an explosive sudden rally in some of the more volatile markets. These rallies usually come off a sharp dip and seem to be a sort of “explosive correction.” This could be for many reasons but I think one reason is that it is harder for momentum traders to be able to time such explosive reversals so the market makes them valuable. I am seeing this in crude oil now.

I will be trying something I’ve never done before: I’m going to put in a buy stop at a price that I think would only hit if the explosive rally continues tomorrow, and a sell limit on top of it. The idea is to trigger the buy stop (effectively an entry order) only if the price momentum is shooting up and hopefully the momentum will be enough to catch the sell limit to exit with quick profits. If the sell limit doesn’t catch, hopefully the day will be positive enough that the market doesn’t reverse and cause a loss (though I’ll have a second stop for that) We will see if it works.