Very interesting... on the P/L side I had a small loss for the week. However looking at the distribution of MFE's vs. profit I actually took, with a better exit strategy and the same entries, there'd be PLENTY of P and not much L! Keep it simple: 1st ctc: target +2; if hit, stops to b/e on remainder 2nd ctc: target +5: if hit, stops to +2 on remainder 3rd ctc (optional): discretionary close (trendline break, MA cross) Note: these exit rules correspond to my MFE distribution that comes from my discretionary entries. Applying them to another system might not work well at all. Again the difference was studying all my previous trades on the 10-tick chart-- I printed each one on a separate paper, and got to know what a winner vs. what a loser looked like. Applying this new knowledge really pumped up my MFE distribution, so now i'm changing my exit plan to take advantage of it. Other note: NQ closed under the 285/5min SMA, so now the "Trend Triumvirate" says SHORT SHORT SHORT. This will be something new since I haven't had many shorts in the past few weeks. I expect the setups on the 10-tick to be different, and i'll probably have to do the printout thing again after the week is over.
As we powered up from the gap filling the Trend Triumvirate (TT) switch to LONG LONG LONG so I was looking for longs all day. Marked on the chart. Yikes, as if to mock my new profit taking scheme, I had five losers in a row, and check out the MFE's: 0 (lost 1.5) 1.0 (lost 1) 1.5 (x3) (lost 1.5x2, lost 2) In other news, i've been working on the pullback method at the micro level, trying to identify entry points by market behavior rather than having the moving averages dictate my entry points. That last trade for a winner was a result of this. Basically I'm looking for tweezer bottoms with OBV divergence. If it continues to look promising i'll post some examples.
Reversals on the micro level... Underneath the chart is OBV for just the last 25 bars. Note the divergence with price, marked on the chart. This signalled the end of the run. Of course you still need some sort of price-based entry to stay out of trouble. Trendlines have been working ok for me. Also, on the time and sales, there was an absence of large orders around the last low.
Another thing i've been focusing on this week is "What's Happening Now". No, not that old TV show, rather AT THIS MOMENT, are we heading up or down. Here's a screen shot. I'm using T&S showing trades 10 or bigger, colored green for at hte ask, red for at the bid... plus, underneath are some of the bigger components of the Nasdaq 100, up/down for the day (red/green), and also the total up and down volume for each one.
Something important I learned this week: Trading like a Lawyer: This is a sure way to lose every time. Basically, it means interpreting data in such a way as to support your current position. If there are two things that support it, and 17 things that say 'get out', lawyer traders will stay in. Worse are things like chart patterns that require interpretation. The lawyer trader will only see what supports his position. So it doesn't matter if you're trading or fading the system, you will lose almost every time. Lawyer trader gives the market every possible chance to hit his initial stop for a loss. Lawyer trader rarely misses a good entry because he stretches the interpretive limits of the entry rules. He also picks up tons of bad entries. Trading like an inspecting drill instructor: The opposite of trading like a lawyer. These guys look for the slightest imperfection and bring it to the forefront. Good things are passed over, there are no compliments. Well, once I heard one of them say... "above average". There must have been something wrong with him that day. Drill instructor trader almost always has good entries, maybe only one or two trades per day, maybe none. Drill instructor trader has many small profits and not as many small losses. Rarely does he hit his initial stop. On the other hand, sometimes good ones get away. The only "home run" trades he has take off in his direction from the get-got, like the proverbial bat out of hell.
I really changed as a trader today, for the better. I just tried to be like "drill instructor trader" and not "lawyer trader". The result was my first profitable (sim) day in over a week. A little more to the story. Last couple of weeks I was overall losing consistently. I mean I could rack up 15 losing trades and maybe only 2-3 winners in a day, EVERY DAY. I faded my system. Same lousy results. I thought -- how the hell can I do that? The only answer: it's not the system, it's something about me that has to change, that leads to making almost every trade a loser. The result was "lawyer trader" and "DI Trader". What a difference. More about today's trades. I would say I was about 80% DI trades and 20% lawyer trades. I've marked for of the bad mistakes on the chart for today. My next focus is to eliminate these kinds of obviously stupid trades. One of them was the result of "winners intoxication" after three straight goodies. The others? I have no idea.
That first chart looks really bad. Here's a second try. By the way, green boxes denote buys, reds denote sells. So, my winners were just fine today, and still turned a small profit even with these mistakes. But once I get rid of even half of these mistakes, I'll be ready to switch back to real bucks and try this thing again for real. Until then i'm holding off on donations.
I've started trading a whole new way. I let the market show me where to get in, and get out, instead of imposing my method on the market. The steps are: [1] Look and see what's going on. [2] If I figure it out, I plan an entry and figure what the market should do after that entry. [3] Upon entry, I swtich to "What's Happening Now" mode. If it runs counter to my plans, even the slightest bit, i'm out, regardless of p/l. Step 1 involves swimming through different tick charts to find something that looks clean and makes sense. Step 2 means getting a good s/r level or trendline to lay into. Step 3 means watch the price action, OBV, T&S, and breadthalizer trends very carefully. I use these principles when selecting trades: [1] Price is king. [2] Drill instructor, not lawyer trader. [3] All thinking about what the market might do ends with trade entry. [4] Trade touches/bounces, not breakouts. [5] Trade with the trend(line). By the way, #5 is so often repeated it has become a meaningless cliche. That's why I added "line". My trades must sync up with some trendline in some time frame. After feeling lost for the last few weeks, i'm feeling pretty good now. We'll see how these trades play out this week.