Sempai's YM Journal

Discussion in 'Journals' started by sempai, Aug 15, 2003.

  1. sempai

    sempai

    OK, thanks. I misunderstood the entry for the pullback trades - I thought you were saying to enter on the break of the pivot, rather than the break of the retracement bars (trader's trick entry). Do you use the low/high of the entry bar as your protective stop as well?

    Also, what kind of volume do you look for? Although it was pretty dismal in the afternoon, it seems like it was only slightly less than usual this morning (around 500-600 avg. per 5 min. bar).
     
    #11     Aug 15, 2003
  2. sempai

    sempai

    I'll keep this in mind. I noticed you said that you will wait until you have 10 pts. profit in a trade before you start to trail a stop. Do you keep the stop behind the prior pivot until then before you start to move it?

    Also, what do you consider an "exit signal"? Is it simply a signal to enter in the opposite direction, or are there other things you look for?

    I noticed on several trades, had I left my stop in place rather than taking a quick profit, that I would have lost on the trade. Also, I stopped out on several entry signals in the opposite direction, only to have the trade turn and continue in the original direction.
     
    #12     Aug 15, 2003
  3. I place a stop below the entry bar, but if that is only 2-3 points I will give it a few more. I look for volume of 150ish per 1 minute. The YM has low volume as is, a better way is to follow the ES as well. It gives you a better feel for what kind of day you are in for. Keep in mind I haven't traded much with this method, so I am not an expert by any means. And if you follow my journal you know to take what I say with a grain of salt. :)
     
    #13     Aug 15, 2003
  4. sempai

    sempai

    Thanks. I'll keep these things in mind when trying to trade this method.

    Also, yes, I've been reading your journal. It reminds me of a day I had near the end of last year. Here is my journal entry:



    Trading Journal: Monday Nov. 25th
    --------------------------------------------------------------------------------
    Total # of trades: 19
    Net Profit: -$2,331
    Number of winners: 5
    Number of losers: 14
    Percent winners: 26%
    Avg. winning trade: $160
    Avg. losing trade: -$224
    Avg. trade (win, loss): -$123


    I had some sort of emotional meltdown today. I just don't give a $hit anymore. Nothing works no matter how hard I try, so I figured I'd just push buttons and load up on positions. The funny thing is, I didn't get mad. I just sat there and laughed every time I got whipsawed. That's because I didn't really care what happened any more.

    At one point, I was back to "only" being down $300, but then I kept trading. After my winning long, I went long again at 930.50 at 2:23pm - it went against me until I bailed out at 927.75 at 2:34pm - exactly at the bottom!! Not only that, but I reversed and went short and then added on the way up! I was short 6 contracts at an average price of 928.25. I figured that everytime I reversed, it was at the wrong time, so I just held...and held...and watched it go up...and laughed...and watched it go up some more. Then I turned it into a game - to see how much I could lose in a day. But really, I wanted to see if it would come back, since I didn't care how much it went against me. Finally, the market topped at around 3:30pm and started to come down. Then, for whatever reason, I started to worry about losses again and exited the position at 933.50 at 3:56pm, just before it dropped hard, coming down to within 1 point of breakeven for that trade, so I laughed some more.
     
    #14     Aug 15, 2003
  5. That sounds almost exactly like what I did. When it was all over I just kind of laughed and called myself an idiot. Good times, good times...
     
    #15     Aug 15, 2003
  6. Sounds like a mad scenario. I can relate to the emotional state you were in as I've felt it myself... It's all part of the initiation into serious trading careers.

    TM Trader
     
    #16     Aug 15, 2003
  7. sempai

    sempai

    Here are the updated trading guidelines. I changed the entry for retracements since I had it incorrrect and added some stop placement rules to help me hold the trades longer.

    Chart Setup:

    1 minute chart
    34 eMA
    10 sMA of highs
    8 sMA of lows

    Pullbacks:

    Long: Wait for two consecutive bars completely above the HMA. Wait for a lower high and go long on the breakout of the high of the prior retracement bar.

    Short: Wait for two consecutive bars completely below the LMA. Wait for a higher low and go short on the breakout of the low of the prior retracement bar.


    Range Trades:

    Long: Wait for a bar completely below the LMA. Go long at the break of the high of this bar.

    Short: Wait for a bar completely above the HMA. Go short at the break of the low of this bar.


    Stops: For range trades, place a stop above/below the pivot that is formed prior to the entry. Similarly, for pullbacks, place a stop above/below the entry bar. Trail stop behind subsequent retracements until there is 10 points profit in the trade, then begin trailing stop 3 bars behind the current 1 min. bar.

    Profit targets: Take profits at key support/resistance levels, or tighten stops to behind previous 1 min. bar when approaching these levels. If trading multiple contracts, I can take profits on a portion at key sup/res, and leave some extra room for the remaining contract to run (since price can be expected to correct at these levels).

    For range trades, the range should be at least 15-20 points to leave enough room to make some money on the trade.

    Volume: Volume should be at least 150/minute. I'll measure this by using a 5 period sMA of the 1 minute volume.
     
    #17     Aug 16, 2003
  8. sempai

    sempai

    6 Trades: 2 winners, 4 losers
    Total: -10 pts.
    (Note: 1 missed trade that would have been +20)


    Another rough morning. There was one trade I shouldn’t have made at all in hindsight (#5), and #6 was also questionable. Other than that, I think the entries I took were ok. Ironically, I missed the one big winner of the day – just like in real life. I happened to be distracted with something else for a couple of minutes and missed the setup, so I didn’t record it as a trade I took. Of course, it ended up being the one big winner of the day.

    One problem I have is losing my perspective while concentrating on trying to see the signals, and also deciding which ones to take. For example, #5 was a poor candidate for a long entry because the 1 min. chart was in a downtrend and there was no support in that area to make a range trade. Also, I took #6 because price had just hit the 34eMA and I was thinking of it (mistakenly) as possible support. Between those two trades was a loss of 12 points, so not taking them would have made a big difference in the daily results.


    #1 Range (+5)
    9:33 -1 @ 9345
    9:38 +1 @ 9340 Gap up open, went short on first signal.

    #2 Retracement (+7)
    9:38 +1 @ 9340
    9:44 -1 @ 9347 Made pullback with bar completely below LMA.

    #3 Range (-7)
    9:44 -1 @ 9347
    9:45 +1 @ 9355 Price tested prior high at 9351, so I took the short signal in anticipation of a retest of lows at 9333 (range was greater than 15 pts.). Stopped out on next bar.

    #4 Retracement (-3)
    9:45 +1 @ 9355
    9: 54 -1 @ 9352 Valid retracement entry, while breaking earlier high. Didn’t quite get 10 points in the trade for stop placement purposes (due to some slippage on entry). I wasn’t quite sure whether to move stop up or leave it below the low of entry bar (also pivot low). I finally decided to use the 9:52 low at 9353 as a new pivot and was stopped out at 9252 a couple of minutes later.

    #5 Poor trade (-6)
    9:59 +1 @ 9350
    9:59 -1 @ 9344 As I said, I shouldn’t have taken this one.

    #6 Same thing (-6)
    10:02 +1 @ 9346
    10:09 -1 @ 9340

    #7 Missed Range trade (+20)
    10:17 +1 @ 9335
    10:34 -1@ 9355 Although I missed the entry, I still followed the trade with stop placement rules to see what would have happened. I placed my stop below each successive pivot and began using a 3 bar trailing stop once I had 10 pts. in the trade. In the 10:27 – 10:30 time frame, it looked like I would be stopped out based on this rule, but the trend held. Once the price hit 9360 (approaching prior high of 9364) I moved my trailing stop to behind the previous 1-min. bar and was stopped out at 9355 (took some slippage).

    I stopped trading at this time because I will have a new schedule soon and will only have one hour to trade on M,W&F for the foreseeable future. That will also mean that I won’t be posting results until the evenings. Of course, I’m not sure how long I’ll continue to post like this anyway, because it is very time consuming. Also, I have some reservations about the validity of this method (which I will post later).

    A couple of notes/lessons from today’s trading: I need to pay more attention to support/resistance levels in price and take range signals that occur at those levels. Also, I need to ignore the moving average as sup/res and only use it as a visual aid for trends.

    One other note for the day (just another real-life reminder): I lost my connection to the PATS system just a few minutes after the (missed) entry for #7 and it was out for about the next 20-30 minutes or so. Forgot about that stuff – of course, if it occurs during trading, it will usually work against you.
     
    #18     Aug 18, 2003
  9. sempai

    sempai

    A couple of notes about this morning: I missed a retracement trade at 10:07 am that probably would have been good for about 10 points. Also, there was technically another retracement entry at 10:17 am. However, this entry occurred right at support at 9333 that was established at 9:38 am. In addition, it was the second retracement in the series, and also occurred right after a long signal at the low of a range. This raises a couple of points regarding the method.

    On retracement entries, I will only take the first retracement entry in a series. This is because by the time a second retracement occurs, the trend has already gotten a little long in the tooth.

    The other modification I am going to make is for range trades. I will only take range/reversal trades if price has met or exceeded prior support or resistance on the 5-minute chart. For example, if the prior low on the 5-minute chart is 9330, then price must hit 9330 or lower before I will take a long entry signal for the trade. The reason for this is because there are often a lot of resting orders around these levels which act like a magnet, so there is a good probability of another push up or down to these levels if you try to anticipate the reversal and take a signal prior to them being taken out.

    Regarding changes to the method. I’ve found that in the past when trying to develop and improve a system, it’s easy to keep piling on new filters and indicators to try to correct for every shortfall and false entry signal that the system gives (over-optimizing). I’m trying to avoid using all kinds of derivative indicators and such, since that approach has never seemed to work for me. What it ends up doing is filtering out as many good signals as bad, and the system ends up having just as bad of an expectancy (or worse), than the one I started with. Therefore, I’m going to try to avoid adding too many new indicators (although I reserve the right to add one or two). For example, I’m considering something simple like a 3 period RSI on the 3 or 5 minute charts to help identify ob/os, but in general, I want to keep it simple, if for no other reason than I have a difficult time watching so many things at once. Rather than use additional indicators as filters, I prefer to use price criteria (such as testing or exceeding support/resistance in conjunction with the entry signal).

    As I mentioned in my earlier post, I have some issues, reservations, etc. that I am working on and thinking about.

    First of all, I realized that no backtesting has been done on this method, so I went back about a month and looked at some charts. A cursory visual exam revealed that from a mechanical trading point of view, this method sucks. There are a lot of false signals, whipsaws, etc. However, from the beginning (in Baggerlord’s post), it was presented as a discretionary system and the issue of mechanical vs. discretionary was discussed in another thread: Emini divergence journal

    Therefore, I’m going to make slight modifications as I go along based on what I’m seeing, and then go back and visually review historical data to see how these changes would have affected the performance, as well as forward testing them with paper trading.

    Also, I never really considered the question, “What is the theory behind this method?”

    Basically, the HMA and LMA serve as both a momentum, and as an overbought/oversold indicator. In a retracement trade, having two bars completely above/below the moving average is an indication of high momentum, and then we wait for a retracement to re-enter in the direction of the trend. In a range trade, a bar that is completely outside of the appropriate MA is indicative of an overbought/oversold condition (when occurring at prior support/resistance), theoretically giving you a slight edge on the entry. One thing that doesn’t make sense to me about the parameters is why the system uses a 10 sMA of the highs, but an 8 sMA of the lows for the signal moving averages. I suspect that what Mr. Bernstein did when he created the method (or copied it or whatever he did), was use odd-ball numbers like 34, 10 and 8, to make it look like there was some magical quality to the averages he chose to use. Perhaps if you believed there was a bias one way or the other you could use different averages, but I don’t see that the system would be affected one way or the other if I used a value of 8, 9 or 10 for both of the averages, so I may make that change in the near future.

    Another issue that I’m aware of is that the Mini-Dow futures is still very thin, relative to the ES and NQ, so I don’t have a realistic idea of just how bad my fills will really be. I tend to give myself fairly bad fills anyway, but it could be even worse in real life.

    Finally, because of the small point value, commissions are very high. At $5/rt, commissions equal 1 point/contract traded. That can really eat in to profits or add to losses. However, for purposes of this exercise, I want to use the YM because the small point size will make it easier for me to ignore my emotions if/when I eventually try to trade the method for real. If I can at least pay for commissions and maybe make a bit more besides (over a period of months), then I’ll feel that this exercise was a success. So, with all that said, here are the updated rules:


    Updated Rules as of 8/18/03

    Chart Setup:

    1 minute chart
    34 eMA
    10 sMA of highs (HMA)
    8 sMA of lows (LMA)

    Also, use a 3 or 5 minute chart to identify key intraday support/resistance levels.

    Pullbacks:

    Long: Wait for two consecutive bars completely above the HMA. Wait for a lower high and go long on the breakout of the high of the prior retracement bar.

    Short: Wait for two consecutive bars completely below the LMA. Wait for a higher low and go short on the breakout of the low of the prior retracement bar.


    Range Trades:

    Long: Wait for price to meet or exceed (go below) prior support level on the 5-minute chart. Wait for a bar completely below the LMA. Go long at the break of the high of this bar.

    Short: Wait for price to meet or exceed (go above) prior resistance level on the 5-minute chart. Wait for a bar completely above the HMA. Go short at the break of the low of this bar.


    Stops: For range trades, place a stop above/below the pivot that is formed prior to the entry. Similarly, for pullbacks, place a stop above/below the entry bar. Trail stop behind subsequent retracements until there is 10 points profit in the trade, then begin trailing stop 3 bars behind the current 1 min. bar.

    Profit targets: Take profits at key support/resistance levels, or tighten stops to behind previous 1 min. bar when approaching these levels. If trading multiple contracts, I can take profits on a portion at key sup/res, and leave some extra room for the remaining contract to run (since price can be expected to correct at these levels).

    For range trades, the range should be at least 15-20 points to leave enough room to make some money on the trade.

    Volume: Volume should be at least 150/minute. I'll measure this by using a 5 period sMA of the 1 minute volume.
     
    #19     Aug 18, 2003
  10. sempai

    sempai

    I didn’t paper trade in real time this morning because I was busy with some other things I had to do. Instead, I looked over the chart this afternoon and found all of the valid signals for the 9:30 – 10:30 am time frame. If I had tried to take the signals in real time, I probably would have missed some and taken others, so I’m not saying that this is how I would have done. However, it was a good exercise for me to locate the trades according to the guidelines I have set up so far.

    4 Trades: 3 winners, 1 loser
    Total: +18 points
    Commissions and slippage: 8 points (1 pt/trade commission and 1 pt/trade slippage)
    Net P&L: +10 pts.

    Trades for 8/19/03:
    http://www.ttrader.com/mycharts/display.php?p=14467&u=sempai2&a=Sempai's YM Charts&id=694

    Support/Resistance levels for 8/19/03:
    http://www.ttrader.com/mycharts/display.php?p=14468&u=sempai2&a=Sempai's YM Charts&id=694

    #1 Range trade

    9:33 am -1 @ 9411
    9:49 am +1 @ 9395 +16

    The market opened up slightly above the 9410 resistance level so there was an entry signal at the break of the low of the 9:32 am bar. Per stop placement rules, the stop should have been trailed above the corrections on the 1-min. chart until there was 10 points profit, then trail 3 bars behind. Stop was hit at 9:49 am.

    #2 Retracement

    9:43 am -1 @ 9399
    9:49 am +1 @ 9395 +5

    This was the first retracement setup in the trend. Stop placement rules would have an exit the same as trade #1.

    #3 Range trade

    10:02 am +1 @ 9379
    10:06 am -1 @ 9372 -7

    Price traded through the 9385 support level and a bar completely below the LMA formed at 10:02 giving a long signal. A stop placed below the pivot formed by the entry bar was taken out 4 minutes later.

    #4 Range trade

    10:08 am +1 @ 9375
    10:22 am -1 @ 9379

    Price traded through the 9372 support level and 2 bars completely below the LMA formed up at 10:06 and 10:07. A break above the high of the 10:07 am bar gave a long entry signal. Per stop placement rules, an exit signal occurred at 10:22 am.

    ----------------------------------------------------------------------------------

    One other thing I’ve been thinking about is using multiple contracts so that I can try and catch more of the larger moves. By trailing a stop further behind on a second contract, there would be a little more flexibility in the plan. For now, I’ll stick with one contract so I can focus on the entries and exits, but will start thinking about using multiple contracts in the future.

    I realize I haven’t been deducting for commissions although I have been figuring in slippage in my prior posts. Today I didn’t figure in slippage – I just used the stop prices that I would have used for the entry and exit orders, so that is why I deducted it from the gross number of points above. I think what I’ll start doing is posting my paper trading results like I’m doing today. I’ll list the total points and then I’ll deduct 2 points per round turn for slippage and commissions. I’m not sure if 1 point per round turn is realistic or not because I’ve never traded the YM before. If anyone who’s reading this trades the YM regularly please let me know if you think this is a realistic assumption. Once I get to a point that I’m fairly confident with the setups and the method seems to have a reasonable chance of profitability, then I will begin putting on trades to see how the fills are.

    That brings up another subject, which is the trading platform. I’m using J-Trader and have the hot keys set up so that I can pull up order tickets for stop orders with one keystroke and then type in the stop price and send the order. However, the latest version, which I downloaded last week, isn’t working correctly. I called their tech support and they think that this might be a glitch in the newest version, so I’m waiting to hear back from them.

    Also, something I realized I need to start doing is to find the key support and resistance levels and make a note of them prior to the start of trading, and also write down any new levels that form while I’m trading. Previously, I was just looking at the charts and making a mental note of where the key levels were, but I need to write them down and have them in front of me so I don’t miss them.

    To locate the levels, I’m using a 5-minute chart with day-only data. The key levels I noted on today’s chart were formed during yesterday afternoon’s trading. When trading the ES and NQ, I also use the Globex session’s high and low, as well as any significant levels that appear overnight for support/resistance. However, the YM Globex session is so thin, I’m not going to use it for now. Here is a chart of the support/resistance levels I used for today’s setups:

    Support/Resistance levels for 8/19/03
    http://www.ttrader.com/mycharts/display.php?p=14468&u=sempai2&a=Sempai's YM Charts&id=694

    In the next few days, when I paper-trade in real time, I’m going to try to post in real time as well, to see if I can apply the rules accurately and so others can follow along if they want.

    Fianlly, I’ve uploaded all of the charts for the journal to MyCharts so you can review them all here as well: Sempai’s YM Charts

    By the way, if anybody has any comments, questions, suggestions, etc., feel free to post and let me know what you think.


    Sempai.
     
    #20     Aug 19, 2003