Interesting Internals

Thursday July 12th, 2007 ES Futures

A real Gap and Go higher day. The NYSE Tick started strong but quickly fell back into a weak posture producing levels that would normally occur during a down trend in price. Not the case though, as the ES price kept powering higher for the majority of the day.

I found the market internals interesting today as well. My CAT Indicator was "Out-of-Synch" again for most of today. Similarly, the Advancing issues (ADV) and Declining Issues (DECL) in the chart below did not seem to match the ES futures price behavior either.

The Advancing Issues were relatively flat for the first 4 hours of trading while the Declining Issues kept increasing and increasing for the first 5 hours or trading.

The biggest decline of the day happened when price tested twice the first hours price range. The mystical 2X price of 1549 held initially and price retraced just below 1545. Then the ADV and DECL got in synch with the price action and produced a beautiful uptrend move. I caught the first half of this move. I knew I should have just walked away until near the close of the session, but I had to get cute with my stop and get chopped out (to the Tick) before price continued higher into the close.

Trade Wise, Trade Well
John

Here We Go Again? Maybe...

Wednesday July 11, 2007 ES Futures

I did not trade today. Took some family time to to go see the new Harry Potter and the Order of the Phoenix movie at the local IMAX theater. I have liked other IMAX movies, but I left thinking I would have liked seeing this movie from a "normal" theater instead. I still would recommend the movie either way.

Back to the Charts - I found it interesting when I looked at the charts after the fact. Today would have been another "Out of Synch" day. To me, this means my CAT Indicator keeps telling me one thing (today to take short trades), but price is trending better in the opposite direction (today price was up more than down.

Since the July 4th Holiday, it seems to me that the NYSE Tick has been notably weaker. In the chart above, the Tick rarely touches the Green line. In a sustained up trend, the Tick will normally touch and produce extremes above this 1000 level frequently.

I can not wait until tomorrow to see what happens. Will we have a Gap down, will the NYSE Tick still remain weak, will it be a down day, or will price continue higher to the top of the channel we are currently trading in?

Time will tell.

Trade Wise, Trade Well
John

Makes More Sense Now - Delayed Post

Tuesday July 10th, 2007

The NYSE Tick started out extremely weak. It took about 20 minutes for the Tick to get noticeably above the zero line. This weakness is not normal. Price did a "Gap and Go" lower. It was not obvious early in the day as price chop mostly sideways.

Combine today's weakness with yesterday's weak CAT Indicator readings and I started expecting a big down move was highly lickely and that price would not close the Gap. It took a ling time, but Price finally caught up to the CAT Indicator.

Trade Wise, Trade Well
John

Did It Again

Thursday June 28th, 2007 ES Futures - FOMC Day

Today the CAT Indicator kept driving higher up until the FOMC Meeting, but price was choppy and driving sideways for the majority of this time. This is another case of price having to "catch up" to what the CAT Indicator is predicting to be happening. An earlier posts shows this happening to the short side and today was a good long play example.


I still need to do some more research to verify that this is not just a recent phenonmenon. But I find this a very interesting and so far a reliable clue towards price action produced from the CAT Indicator.

Trade Well, Trade Wise
John

Buy, Buy, Buy

Wednesday June 27th, 2007 ES Futures

Buy, Buy, Buy is what the CAT indicator said most all day today. There was an initial dip below zero off the open. It is hard to see in the compressed 1-minute chart, but it was all up from that early CAT low. Every dip in price high showed a higher low in the CAT indicator.

Now if I just listened better, I would have had a much better day. I must figure out why I end up fighting the trend as much as I do.

Trade Wise, Trade Well

John

Late Post

This is a late post since I found some issues with on of my new filter indicators, the Mini ADV. I believe I have my indicator fixed now and I wanted to point out what the CAT indicator showed for Friday.

Friday the 22nd of June, 2007 ES Futures

I found it interesting that the NYSE Tick was very weak Friday. This weakness showed in my CAT indicator as it just kept driving lower all morning. Notice in the following 1-minute chart how the purple line for the CAT stayed much closer to it's down trend line than did either the ES price or Mini ADV indicator.

At the low of the day, all the values were back around their respective trend line drawn off of the lows mad early in the morning.

How Did it Go

I'm still taking too many trades "late" in the move. If I pass on a signal or just miss a trade opportunity I have a really bad tendency to just enter a trade "hoping" the move keeps going. First of all - there is the "Hope" word using to describe my trading. I must get the "Hope" out of my trading. These are not "signalled trades" but I'm having a hard time eliminating this trade for some reason.

Need to Keep Score

50% cost me 1 - 2 points
25% scratched out at break even (still cost commission)
25% profited 1 or more Ticks with one (only one) profiting 1 point

Need I say this put a big dent in profits for the day.

If I entered a counter trend scalp trade and traded the opposite direction of these trades, I think every one of these would have held an initial 1 point stop and hit a 1 point target. I'm not planning on trying this, but I can show this over and over again, but still have troubles not taking this trade. This will change.

Trade Wise, Trade Well
John

Not Enticed to Trade Today

Monday 5/7/2007 ES Futures

How it went

Pretty boring today. I was definitely cautious today. The last “pre-FOMC” trading I was too quick to get aggressive an took some signals that caught me in some less favorable entries within the middle of the day’s small range. So when I saw we did not have any volume coming in today I played it safe.

Trade Log of My Trades

Trade Pos. Entry Exit Entry Time Exit Time Result

NONE

My Take

Kept all my account to trade another day. :-)

Trade Narrative and thoughts about My Trades

My signals were mixed today… The NYSE Tick seemed weak with lower highs than I’d like to see for movement to the up side. Price opened relatively flat from Friday’s close, but the Advance and Decline lines had a spread that would normally have me leaning toward a long trade.

Then with the weak volume levels I was loosing interest fast. With the FOMC announcement Wednesday, I was suspecting muted price action. I just hope the entire day is not flat sideways price movement.

Passed on the first one - Could have jumped short on 1515.25 a little before 9:30 CT. This lethargic price action has me just evaluating and trying to pick the setups in real time, but not risking capital yet for today. This trade would have worked. This was definitely the best trade from my entry signals for today. That said, only 2 points could be harvested if I placed a target to take profits right there. Price action only went 1 tick beyond.

I have passed on a few more signals. I was almost tempted to try one because the first trade could have yielded 2 points. Well… all of the following signals since then would have only been 1 point scalp trades or break-even trades if I tried to hold for more profits.

Done for the day.

Thoughts About Today

I think I should be willing to trust the first few signals. Then if price action dies out like today did, along with profits in the trades I tried, then I can stop trading for the day.

The other option would be to go into a scalp mode and close the position after 1 – 2 points. That would not allow any trades to run for bigger profits, but could get some profits on the quieter days. I’ll have to do some more research on this one.

Lessons Learned - Or still needing to reinforce

With no action today there is not much for lessons. I’d have to say that I seem to have learned to be more patient and wait for good entries. Too often in my past, I’d try to “make something happen” and get into more traders. On a day like today that is not always good.

I also did a good job at resisting the feeling that price action may roll over and that I should get short. These would have been bad entry points near the low side of the range. Overall I'm probably better off just watching today's action and not trading.

Trade Well, Trade Wise

John

Better - But Room to Grow

Friday 5/4/2007 ES Futures

How it went

Got off to a good start today. I felt much better about today. Felt in-synch for the most part with the market. I focused much better today and did a much better job at my trade selection. I had one issue with my charts. Something seems to cause my Volume based Investor/RT chart to recalculate and redraw. And when that happens I lose all volume breakdown indicator data for the current day. The indicators continue working on new data, but I have to re-download tick date to “rebuild” the indicators prior values. I hope Linnsoft can figure that out for me real soon.

It has been a while since I have had a day where the price action was this active and I took this few trades. All the other times I can think of were dead flat days that went nowhere.

I’m changing my format slightly. To try and save me some layout headaches, I’m going to list the trades all together in a single block and then have my thoughts and comments on each trade referenced below in a new Narrative section.

Trade Log of My Trades.

Trade Pos. Entry Exit Entry Time Exit Time Result
1A Long 1512.25 1513.25 5/4/2007 9:05 5/4/2007 9:11 +1
1B Long 1512.25 1514.25 5/4/2007 9:05 5/4/2007 9:30 +2
2A Long 1513.25 1514.25 5/4/2007 9:41 5/4/2007 9:50 +1
2B Long 1513.25 1513.25 5/4/2007 9:41 5/4/2007 10:08 +0

My Take Today

Captured Points +1, +2, +1, +0 = 4 Points

By simply managing these trades better and not taking any more trades, I had the option to double my profits. I managed too lose today and let some paper profits get away uncaptured.

Could have had +2, +3, +2, +1

Trade Narrative and thoughts about My Trades

Woulda Coulda Shoulda - Felt like just blindly buying 1509. We opened above this price and dropped down to it. This was such a strong level yesterday I figured we would at least get a tradable bounce there. Not really part of the plan right now so I passed. But I hate it when I’m right and pass up a good trade. May very well be the low of the day. :-( Have to trust your instincts sometimes.

Trade 1: A Good entry – As I watched some “high Risk” long entries go by my feelings of “Missing out” started trying to come back. I played some music, to sooth the savage beast, and just told myself to wait for the NEXT entry. Look, a good entry was provided. Price action made me sweat the entry for longer than I would have liked. But as I reviewed everything I was still confident I was in a good trade. It just needs to work. :-) I think I took the 1st half off too soon because of how long I had to wait for the trade to start moving. Then I tried to play lose on the second half to “let it run” and got stopped out at +2.

Trade 2: Houston we have reentry – I waited patiently for the next entry. There was a “weak” entry signal right after I got stopped out. The Volume Break down indicator tried to tease me into taking this one, but it really was not a good enough signal. I'll wait. Then there was a decent entry around 1513.75 or so. But wait… The last entry gave a secondary entry before it worked. I'll wait for one more push and take that entry. I got my entry, but I did it again. As soon as price stalled around +1 I took half off. I would have been better off if I just parked the stop “prematurely” at Break Even and let this trade work for better profits. After all, we are in a perpetual up trend and I have not been letting my longs run and I have been forcing too many short entries. Would have filled at +2 if I held. I hate to tell you this. Now I tried to let the 2nd half run and did not manage it close enough. Out at +0. :-

Hey Navigator, did we just miss our turn back there – Who is driving this thing anyway. Really messed up the last trade. Out too early and too late on the same trade. Missed all 4 of the clues.

1. We put in what could turn into a “lower top” just before 10:00 CT. Ideally this should have been a higher high if we were going to keep trading higher.
2. The Advance Decline is weakening and also not making a “Higher High.” The difference of the Advances and Declines has been trending lower for some time.
3. The NYSE Tick made a “lower low” thus far.
4. Volume started declining from 9:45 Ct until the 10:00 CT "Lower High."

Should I let this long trade try to run? You may be surprised, the answer is YES! But make sure it has a short leash with all of the above going against the trade. Always watch for the warning signs. I used too long of a leash and that one got away from me. At least I saw the clues before I tried getting long at 1513.25, but I need to get back in synch now.

Making Blog notes is helping me after I put on a trade with what I feel is a good entry signal. Typing notes helps keep me from second guessing the trade and actually makes me give the trade time to work. But I’d have to say it is hurting some as I’m not managing my trades as good (or close) as I should. I got caught thinking, let the market run to the “up side” when I should have managed the trades.

Flip a coin – A little after 10:30 CT and we are either trying to put in a turn back higher or we are trying to build up some steam to push lower. I have weak signals for both a long and a short in the 1513 area. I think I’ll pass and wait for the good signals and take them. No definite signs of a turn, so if anything I should be short. I had to say that to myself because I think I was starting to get to the point where I may have “forced” a long trade.

What did I miss – A lot! Technically it started when I passed up the short signal at what turned out to be the peak of my second long trade. You know the place where I should have protected some of the profits. The next few short signals were weak at best. There was a "should try" short signal just above 1511 that I missed in real time. Now I'm looking at a potential long at 1507.50 not ready to risk my (self minimized) profits yet.

You calling me short – I may not be real tall, but I should be short at 1509 or maybe 1509.25 for the entry at 11:45 CT. Step back; take a deep breath and focus. Now I spooked myself out of the last short thinking about the long I passed on. That long trade that is working so far. The 1509 area was troubling me too. It was so strong yesterday and now we are chopping back and forth around it trying to decide the direction. Now it looks like passing on that short trade was for the better.

Am I looking long now? – It’s getting close to noon, I’m leaning long again but the signals are saying be careful right now. I’d like to see the NYSE Tick press higher if we return to the upside. The last few NYSE Tick tops have been lower than I like to see for good sustained movement higher. So far there are no entries I like yet. Just a long under 1509 that should have had me protecting the short trade. (if I had traded it) Looking closer (a little late now) that long signal was at a re-test of yesterday’s Market Profile Value Area High (VAH). I think I missed a Long entry. :-(

Luke, Trust the Force – Just past noon. Price pushed back to 1509 again. What to do…. Feels like the market is trying to tempt me into a trade here. I passed. :-( It was a signal I should have taken. I’m having problems taking signals at these Market Profile levels. I don't know why. I should pass on other signals and wait for and take every signal at the Market Profile levels. In general, I need to trust my signals better. Especially signals in the direction of the trend.

Thoughts About Today

Reflecting back on today, while I felt in-synch, I did not act on enough of my signals. I started out good with the first two signals. Then I found myself starting to question the signals more and more and I’d have to say I started having feelings about not "giving back" what I have already made.

There were many more signals that I wanted to take and did not even list above. The worst signal would have produced a break even trade. Most entries had 2 or more points potential. I also lost focus or “checked out” this after noon a little early. When we were in the afternoon grind higher, I decided for the market that it was going to finish the afternoon too flat to trade. I prefer a bigger move or pull back to enter on and find these bigger moves to be more reliable at delivering profitable entries.

Lessons Learned - Or still needing to reinforce

Almost feels now like there are too many lessons to list. Well here goes:

1. Take each day and that day’s signals with the market action they produce.
2. Don’t let thoughts of mistakes already made, especially mistakes on prior days, take away from your focus on the market.
3. Every entry will not be perfect. Take more continuation entry signals in the direction of the last trend.
4. Trust the signals you see and consistently take the signals as presented.
5. Maintain focus, or let go of any trades that you “could have” taken.

The Biggest lesson today – My biggest take away today is combining focus and trust. I let myself get distracted with Blog notes and did not maintain enough focus on “what trade would you put on right now if you have to make a trade.” With good focus, I should have the anticipated trade direction "of the moment" in my head and just be waiting for confirmation to enter a trade or invalidation to pass on the trade and look for the next signal. This may be in my words, but this comes from reading the TraderFeed blog. Brett Steenbarger does an awesome job with his blog and Weblog. I think there is something there every trader needs to help them with their trading.

I’m not sure I found the blog entry I was thinking about. But in my search I was reviewing many of the great posts on the TraderFeed blog site. Here are several that I ran across, remember, and highly recommend every trader review, then review again. I'll go back through them.

Three Relentless Steps You Can Take Now Toward Becoming A Better Trader

Four Overlooked Qualities of Successful Traders

Five Guiding Principles of Trading Psychology

Six Keys to Trading Success: Lessons From a Successful Trader

Back to today. I think I started filtering out trades because I wanted to protect the profits I already earned. While I did not make any really bad mistakes today, I did not manage my trades well. I did not protect my paper profits in these first trades. I “Hoped” the market would just keep going in this perpetual up trend mode. As noted above, I could have doubled my take today just by managing these first trades better. We better not talk about the trades I did not take that would have worked. I have all weekend to try and forget.

On the positive side - I did not trade in the choppier part of the afternoon. It is too easy in these periods to “think” you need to jump on a more “before it gets away” when you should be waiting for your entry price or pass on the trade and wait for the next entry.

Trade Well, Trade Wise
John

My Start

Well this is my first post. Not sure why I'm starting a blog now, but somehow I feel it will help me become more accountable and internally strive to prefect my trading. I know I can be successful trading and that trading will provide me the life style and freedom I want for my family.

I have been trying to discover my trading style for too long now. I have purchased a few systems to "jump start" my trading. Like a lot of new traders, I wanted a system that just worked, was consistently profitable, and I would just follow the rules and make money. Not much to ask right?

Well.... I wish trading was that easy. I think many traders fail with that type of attitude. Just wanting to blindly follow a prescribed system and not really discover it the trading system "fits them." I have lost who to give credit to now, but I remember reading somewhere that the "Holy Grail" of trading is discovered in yourself, not in a magical indicator that tells you when to trade. That may sound crazy to some people.

I'm a firm believer that everyone is unique and has personality traits that may help or probably will hurt them in trading. We just have to find the right style of trading to fit our personality and not try to force our trading to work in an existing system. In other words, we need to understand the system and make it our own. We must trade what makes sense to us and work through issues like:

Markets to Trade

• Stocks, Indexes, Currencies, Options, ...

Time frames

• Can I trade all day or do I still work?
• Can I stay focused on the charts for the entire day?
• Can I only trade part time or do I want just a few hours to trade to enjoy my freedom and life.
• Do I like fast charts with a lot of decision points or should I slow it down and have fewer trade decisions.

Risk Reward

• Do I want to take on little risk, but I'm willing to harvest smaller relative rewards.
• Can I risk more and try for fewer but larger winning trades.

And more...

When I started trading stocks many years ago. I always had a short term focus and only wanted to hold a position for 1 - 2 weeks. I did not like what I felt was the roller coaster ride in buy and hold. I wanted to capture the swings in stocks I felt were cycling and make "more" than just holding on to a good stock.

When I was able to get into full time trading, I was interested in capturing the intraday swings available in the markets. My focus shifted into the Index Futures markets not liking the "hit" that I could receive when Stock earnings or other big news came out. I did not want to do a lot of research or to have to worry about how the market would interpret the news. My favorite was - Earning are up, above company predictions, but.... not above the analysts expectations.

Don't get me wrong. Trading the Stock Indexes, I still need to know when major reports are being released. I either avoid trading in front of the news or I may try to enter a position if I expect that I can "protect" the trade and only risk giving back some paper profits in hopes of getting an additional launch off of the report. I have long given up trying to interpret or anticipate the news. I just trade the price action that results.

I'm sure I have worked through most of the problems that new traders run into.

Over confidence - Jumping right into trading with some size before trading in simulation to get the feel of the market in real time. Let alone being able to "learn" how I interpret the system in real time while only risking paper money. If I had only one do-over, I would have started with "Sim Trading" and not "burned while I learned" at first.

Scared money - While I did not have any large losses per contract. I was just slowly whittling down my account more than I was building it up in the beginning. Then the overconfidence fades and one starts questioning if this is the right trade only to end up chase the trade once it is obvious that the trade is working. Now I'm in the market at worse entry price and will have a harder time defending the position in the normal market gyrations. Do I try to hold this "bad entry" for larger profits or will the market come back and test my entry and I should just take profits now while I have them..... The right answer is take the trade at the signal or wait for the next one.

Early success - One of my early success was letting my losses run and cutting profits short. err. wait. That is not right. For some perverse reason, I could let a trade go against me right away and hold (Hope) for the trade to turn around. But if the trade started working right away, I had a harder time when the market "tested my entry price" before continuing in the direction of my trade. And the ES loves to "back and fill" or back and test your entry more often than not.

I learned not to chase or jump on those sudden moves and expect them to keep going. Often sudden surge moves are fake outs to draw traders into a trade. If you are trading the ES, let it come back and fill at your entry or wait for the next signal.

Pulling the Trigger - I can say I have never had trouble pulling the trigger and putting on a trade. Actually I had the opposite problem. I was over trading and not filtering the signals and taking only the best signals. Remember - I want to captures those intraday swings. I must get everyone of them. Can't miss any.... err wait... Look what is happening, I'll get some good trades and turn around and give too much of it back trying to capture more moves in the chop.

I'm sure I have more bad habits and new trader problems that will come out in future blog postings.

It is time to actually make my trading start working for me. Otherwise.... well lets not go there yet.

So for now I plan to post most week days. Don't know for how much longer, just for now. I'm not into posting trades as they happen. Right now I don't want the distraction factor. Maybe latter I'll want to be distracted from the trade so I can "let the trade work" and not cut that winning trade short.

That is it for this post.

Trade Wise, Trade Well.

John