NoDoji's Day Trading Log

I read Mark Douglas' "Trading in the Zone" quite some time ago and thought it was a great read. A couple days ago, I started to read it again. It was like reading a whole new book. I realize why he seems to say the same thing over and over in the book in slightly different ways: It's very difficult to truly "get it".

Yesterday I was reading the part where he tries to get across the concept of the unique state of mind known as "a trader's mentality": perceiving the market as presenting an unending stream of opportunities and, most importantly, truly believing that anything can happen.

I believe the following paragraph is the most important concept in the entire book and states exactly what you say above, Hog:

"The best traders have evolved to the point where they believe, without a shred of doubt or internal conflict, that 'anything can happen'. They don't just suspect that anything can happen or give lip service to the idea. Their belief in uncertainty is so powerful that it actually prevents their minds from associating the 'now moment' situation and circumstance with the outcomes of their most recent trades."

What are my biggest problems at this point? Hesitation and letting winners run. Why do I hesitate? I start thinking of what price might do, or what it did in the past, and my opportunity train leaves the station without me. Why do I cut winners short? If I've had some scratch trades or some losers, I allow those past trades to influence my next trade and I want to grab any green I can get before it, too, vanishes like last time.

Hog, you try to tell me again and again that those little losses and scratch trades are just a cost of catching the real move. The only way to take advantage of the full move once you catch it is to TRULY BELIEVE THIS IS A WHOLE NEW TRADE WHERE ANYTHING CAN HAPPEN AND IT HAS NOTHING TO DO WITH ANYTHING THAT HAPPENED BEFORE IT.

This state of mind will eliminate my self-sabotage: Perceiving the market as presenting an unending stream of opportunities and, most importantly, truly believing that anything can happen.

All I have to do is get to the point that I believe it, "without a shred of doubt or internal conflict".

 

I'd like to add to my last post:

What is the greatest cause of large losses and blowups?

I believe it's the polar opposite of the trader's mentality that Mark Douglas describes. It's personal bias. The belief that you KNOW what will happen next because of what may have happened 95% of the time in the past. It's the overconfidence that comes from a strong probabilistic edge working most of the time.

Say a stock's price goes up in straight trajectory one day and you short it because price always retraces when it's overextended to that degree. Then it keeps going and you keep adding to the position because when it finally retraces, you'll have a big fat position to profit from, and it always retraces.

Your confidence and conviction is now your undoing.

Your planned exit on the trade was "upon retracement to profitability", but now you're underwater further by the minute and suddenly your confidence is shaken a bit because price is still going strong and you're way oversize now, and price is still going up and finally you bail at the worst possible moment, usually just before that retracement you were waiting for.

When I practiced averaging down vs. stopping out and re-entering a trade in my sim account, the stop-out method was more tedious and taking several small losses that are adding up is frustrating. But if you truly have the trader's mentality you'll recognize when you caught the move and you'll let it run because whatever happened before is totally irrelevant now.

A couple bad average-down trades can quickly wipe out many days or weeks of profits because averaging down is actually another way of saying "This HAS to happen eventually".

 

I just can't find words to describe how true your last post is-to quote an example that's firmly embedded in my head and my journal- CTSH was trading around $74-75 back in 2007 and I decided to short 200 shares it rallied all the way up another 5-6$ and I kept on adding every $2 and finally reached my uncle point .50 from eventual top for that day- funny thing is once it topped out I shorted it again and just couldn't hold it long enough cause of the mindset from previous trade- and it went into a tailspin after that and was eventually down $8 from the top- loss on the whole day was about$1500 - only if I hadn't had that bad trades in morning I probably wouldn't have lost 1500$ rather made some money- hindsight is 20/20 but bad trading can always be avoided

 

and Nod, if you have profits and are worried they will go away..........Hit the mouse and book the even small profits. Forget trail stops, book it. Then after booking small wins ( they also help to wash away those small losers we all must deal with) and watching the move continue on without you...........that is good training, very good training. That training will get inside your head and intuitively force you to read the price action to answer questions you will be asking yourself........."is this move slowing down" "should i book this puppy?" "i will book this and reenter a couple ticks better because my bait is bobbing up and down but i smell the trend to continue on once they regroup with more dry powder, i am simply chicken with this price action so i am gonna save this few ticks, ..................all those and more questions are answered in a flash after years of doing the same stuff over and over.

I assure you, i have made some good handles in a single day, but, ask me how often do i book 10 handle moves and i will say very rarely, how often do i take 5 handle moves, i will say i book almost all of them... (unless i took sooner, it is always subjective decision)..To do trend trading does not mean we ride the entire trend all the way, most often we get pieces, some times we get more then the entire move but that is only when we are working the retraces and the mkt likes us that day. HA

Point being: Do not be so hard on yourself, perfection is not doable. Riding a trend is more about "WORKING" the trend instead of catching the trend itself. The main deal about working trends is knowing how to read the price action itself, reading that price action is actually getting into the heads of the players. Thats the way to win in a game of chance.

Professional sports people know their craft because they practice over and over. Michael Jordan was poetry in motion to watch in person at the United Center. He looked foolish trying to hit a baseball. I nerve witnessed the baseball
part, ha.

OK, time fgor the end of this race. It was a TERRIFIC race.

 

NOD,

(btw way the below are two discrete thoughts of mine)


Your confidence and conviction is now your undoing.


You’ve obviously peered into my head – confidence is good, too much and it turns to ego/ opinion





This state of mind will eliminate my self-sabotage: Perceiving the market as presenting an unending stream of opportunities and, most importantly, truly believing that anything can happen.

All I have to do is get to the point that I believe it, "without a shred of doubt or internal conflict".


Now prove it to yourself – as no other can or is able…. Then you’ll believe in and follow it – come hell & high water / the inevitable profit….




Aside to the newer traders

This is exactly why we each must become our own mentor, teacher, guru (call it whatever you like)… And it is also why trading successfully is a journey, not a destination….

We (each of us) create our own reality, and that reality defines us/ our trading throughout our entire life/ career

For no matter how far we progress, no matter how successful we become – we forever remain tethered to the truths we’ve created (be they a help or hindrance)


No other human can create another human’s reality….

Example (of the many I could cite)….

Ever hear the saying – Learn for the past or be doomed to repeat it – This is why humans repeat the same mistakes over and over and over, and over….. It is also why the same truths that held true for the market a hundred years ago, hold true today…..

AND (another example)

It is also the reason parents can not teach their kids the hard knock lessons of life by simply telling them of their (the parents) mistakes.

Kids must experience those mistakes by repeating them – in the process creating and solidifying the truths which make up their (the kids) own individual and unique realties…

I call it the human condition – a condition which I feel we (as a species) shall never evolve past… But I also believe it is not a condition which, should we each decide, be allowed to hold us back either


Okay so I’ve just allowed my mind to expand a bit and share it with you… now back to my main point


The market is just the market – it only exists as a place to buy and sell – no one can predict it, no one can control it, no one can explain why it does why it does… But because of the human condition we can anticipate and profit from it….

Ultimately it is your perception, interpretation, and subsequent action – that will either make or break you – period


Learn how you learn – then teach yourself what you must to take advantage of – the human condition…


RN

 

+ $124

ES on watch for the opening range b/o because the market seemed due for at least a dead cat bounce here. Pulled back quickly at the ORB long trigger, so I sat on my hands. Retest broke out on news and also sold off quickly, so I decided to let ES tell me more as the day went on. It had the price action look of a weary climber and I don't have the patience for those kinds of trades.

While watching ES, I’d missed AAPL’s early long signal off support, so I looked for counter-trend entries. Short @ 194.45, stopped out @ 194.29 for +$14 when the breakdown found high support. (I moved my stop in quickly on this one, because I was top-picking.)

Short AAPL @ 195.36, pullback off new high, stopped out @ 195.28 for +$6, same as above, tightened stop because of top-picking.

Stepped away from my desk and missed the next counter-trend entry.

Short AAPL @ 194.86, pullback from lower high, chased for a late entry, then out of habit and a distaste for the large stop loss placement as a result of chasing, I tightened my stop, hit @ 194.82. I smacked myself for that one, because this was a confirmed setup (lower high) and I was supposed to trust the trade, leave my initial stop and take profits no sooner than oversold.

I re-entered this same trade in mid-trajectory @ 194.30, on a failure to thrive, and this time sat on my hands until price was oversold where I exited @ 193.41 by trailing a LIMIT order instead of a stop for +$87. I was very pleased with this last trade, but left $50 on the table by not trusting my initial entry on this nicely confirmed setup.

While trading AAPL I saw HANS on the hi ticker, brought up a chart, thought about a top-picking scalp with large size, small move, decided to wait, then looked away a few seconds too long and missed a very nice .35 cent drop off a lower high.

Missed a solid AAPL setup (lower high in a range) while watching HANS and decided I needed to narrow my focus again. That confirmed setup resulted in an even better move than the earlier one. Trading AAPL requires very intense focus because the moves occur so quickly, you’ll lose half of it if you look away for a minute or two.

Short AAPL @ 192.91, pullback from internal double top (1-min chart), but price was very oversold on the 5-min chart and because this was not a confluent trade, I exited too soon @ 192.58 for +$31, which was disappointing because there was a lot more down move in this one before it was oversold in the shorter time frame. This was a case of thinking too much and if I allowed price to become oversold on the 1-min chart before taking profits, I would’ve caught most of that nice move.

Got whipped out of X three times, 2 shorts and a long, for a net +$13. X sure trades with a lot of backwash for a mid-priced stock.

Then I took an AMZN short way too soon. AMZN wasn’t on my watch today (sadly). It had really sold off when I noticed it and had finally established support and I shorted at the initial overbought zone, but the first rally from a selloff like always bounces significantly higher than usual, and generally signals a trend reversal. The 10-period MA had turned up and I needed to wait until price pulled a good distance above the 20 before counter-trend trading. I lost a quick $29, got a little pissed at myself for a just plain stupid trade, and decided this was my signal to take a break. Had a great time with the dog at the park and returned later to check out the action.

ES testing 1084 and failing time after time, but not failing hard, no sir, coming right back again each time, and failing again. Days like this must cause ES breakout traders to tear their hair out. I had no interest in trading it with this action.

Watching X break out thru the HOD and placed a limit @ 47.26 looking for a counter-trend scalp and possible reversal. I initially thought to get in at 47.20, but X tends to push a bit extra before reversing. Well, it pushed about .03 cents extra, missed me by .03 cents and pulled back to the 20 EMA as expected. So I missed a nice .30 or cent scalp.

Not a bad day considering I only traded half size (100 shares). I missed quite a few trades by not being more aggressive on every setup, for example I hesitated on an AMZN long when finally a lower high was put in, and then instead of joining the new trend on the next dip, I took a break.

Tomorrow is a brand new river of opportunity and I look forward to it!

 

are you finished attempting to trade the ES??

just wondering as it doesn't look like you've been at it for a bit, then again I don't follow your journal everyday either..

 

Seems you have a short bias for example you hesitate on your long trade. I have a bit of a long bias which meant I hesitated on a short trade a few days back and decided not to chase it.

I had a long in Friday that was still in play when the market closed. I removed my hard stop losses for overnight trades since from my experience they just cause me to lose money. Instead I watched it and to reduce risk had 1/2 my position set to get me out at BE which occurred the other 1/2 got me out a profit on Sunday.

I guess having worked so hard marking money on this trade caused me to hesitate on another long trade Monday. I guess this is what you refer to as having the last trade affect your thinking. I was thinking I took a lot of heat on my prior trade, and now the market is much higher than it was when I was long, so this time, I am going to assume the market wants to give me heat, so I will set my limit order to get in at a lower price where I am pretty sure I will make money. Of course, this time the setup I use did not take any heat not even 1 tick, and I missed being in the trade as the market went higher. However, I chose not to chase, and even though I would have made money chasing, I feel this is a better strategy for me. I don't mind paying up 1 tick, but not 4 ticks.

I bet bighog made 4 to 5 handles today while I sat on my hands. I wish more people would post on the es forum, a good edge that is gone was to fade their trades. After starting to trade like a professional its hard to think like a moron anymore.

 

I haven't traded ES for a while, but it's back on my daily radar. I was looking for a breakout this morning based on a rebound from a very oversold state, but it didn't transpire. I'm actually pretty good at trading ES in a range like today's in my sim account, but decided to focus mainly on AAPL today rather than risk getting chopped.

 

I was lucky in the morning, had some issues to handle so missed the opening stuff.

Witnessed the KEY bar at 1025 est but did not go short and saved a small loss as price opened on the following bar and went up to test the opening tick of the preceeding bar without going above it but closed on the high side of that bar at 1082.75. The next bar did go higher than the small key bars top and closed at the lower end of the bar, i went short at 1081.00 and caught 2 handles. Did not take the up reversal at 1100 est bar, should have. The rest of the day was hit and miss elcrappo stuff..................so i adjusted to range trading and made just 2 1/4 more handles on 6 trades. Called it a Monday and went to Tim Hortons for a cup of coffee and a Boston cream donut, bowl of soup. Sitting there thinking i am ready for a trip to Florida, was only 8 degrees this morning.

I consider today a good day considering the conditions. We adjust as the mkt changes. Think of a fighter pilot seeing enemy plane coming at him where neither guy has the advantage...........assume they both engage in a fight.........both will use their favorite tactic to start the fight.........after a couple of high "G"turns you will get a real fast read on the other pilots ability.....................you quickly change your own tactics to how you feel the contest is going................maybe you even take your own best chance and bug out. But the main deal is, you adjust to how you read the conditions as they are at the moment.

PS: There are 2 ways to handle crap like today. You either adjust to range stuff (which i used to always pass up on) or you ride a low angle trand line and take a lot of heat for small rewards. Range stuff is better, what the hell, run up some commissions.