Discretionary Trading by Tiras

Tiras

Tiras

Purpose of the journal – to share my trading results, analyze mistakes, and to enforce discipline.
Trading method – 100% discretionary, based on technical analysis of price action. Fundamentals and news are taken into consideration under the following conditions:
  • When prices behavior is directly driven by fundamentals. Such conditions are rare, but provide good trading opportunities. Recent examples are last leg of 2008 crisis, 2009 recovery, multiple subsequent declines due to European crisis, Dec 2012 fiscal cliff
  • During major news releases I plan to be either out of the market or have minimal positions
Trading instrument – futures, mostly ES.
Trading timeframe – short-term, but not limited to day trading. Positions will be held overnight if warranted.
Prior trading experience – several years of break-even results with high volatility in between
Broker – Interactive Brokers.
Starting balance – ~$15k (risk capital that I can afford to lose)
Start of trading – Tuesday, February 12 (deposit is on hold at IB)
Structure of the journal:
  • Morning view – to document my thoughts and strategy for the upcoming day
  • Evening recap – to analyze daily activity
  • Weekly summary – quantitative analysis of weekly results
 
My trading approach can be summarized as trading swings in intermediate-term trends. I trade both in the direction of the trend and countertrend. Even through trend definition is an art, not a science, I feel that I have to put basic rules in order to keep trading structured and disciplined. I define intermediate trend as:

- Trends lasting from days to weeks
- Visually best seen on 30 – 60 min charts
- Succession of higher highs / higher lows for uptrend and lower lows and lower highs for downtrend
- Trendlines can be useful to warn of potential change in trend and/or transition of the trend to the consolidation phase. I usually do not use trendlines as sole triggers for trades, they are just one of the tools, that’s all.
- When analyzing intermediate term trend for SP500, I prefer using cash market charts (SPY), not futures to define key points. I do keep an eye on 30 – 60 min futures charts, but feel that under current market conditions overnight trading adds noise to the picture. This is a personal preference, nothing else.

Once intermediate-term trend is defined as uptrend, downtrend or consolidation, I switch to signal chart to time the trades. Signal chart is either range (for ES it is 2-4 ticks) chart or short-term chart with timeframe between 1 and 5 min. Signal charts are always based on futures, not cash. I give myself 100% discretion on what kind of short-term chart to use – it is function of where I feel most comfortable with visual interpretation of price action.
 
Morning Update 2013.02.13

Current intermediate term trend is uptrend that started in the beginning of the year. As the trend is getting old, the market started going through swings in the beginning of February that are tradable from both long and short sides. The plan for today / tomorrow is to catch a portion of the correction on the short side that may go to the solid trandline below (SPY 150.50 - 150.75), and may be to the support level (SPY 150).

Break of SPY 150 will constitute a change in intermediate trend to downtrend.
 

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Evening Update 2013.02.12

No trades today. As mentioned in the morning review, I was looking for a good entry point to short ES, but saw no opportunity during the day.
 
Morning Update 2013.02.13

There is no change in intermediate term trend view -- market is in the advanced stages of the strong uptrend. My view is that best risk/reward for a short-term trade is fading the trend for a possible correction to trendline or support level at SPY 150 (see attached image in the next post). Trading against the prevailing trend is difficult; therefore, timing is key. I already shorted the market this morning and the trade is already in red. Recap of daily trading will be provided in the evening update.
 
Chart for the post above ...

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Evening Update 2013.02.13 - Part2

Trades for today are indicated on the chart with arrows, trade keys are in the footnote below. I had short-term bearish bias going into today (see today’s morning update), but only managed to extract 1.75 ES points profit. Mistakes are as follows:

- Intermediate-term analysis that I did this morning created short bias. I made myself pre-wired to see sell signals in every down tick on the short-term chart. To remind, I use 30-60 min SPY chart to define intermediate term trend, and current location in the trend (correction, primary swing, oversold, overbought etc). I had a strong view that there was a high probability of correction within intermediate term trend, which impaired my ability to read price action on the short term chart. This resulted in early entry, late exit and missed profit opportunity
- I used wrong short-term chart to read price action – 4 tick range bar for ES (image below). I need to see more granularity when trading countertrend; therefore, 2 tick range chart in hindsight was more appropriate.

My intermediate term view did not change – I am short-term bearish – however I exited trade for a small profit for two reasons:

- when trading countertrend, I prefer not to give trades too much rope, and grab profits when available. The longer I stay with countertrend trade, the worse are the odds of profit.
- Jobless claims report is tomorrow. I have no idea how the market will react to either positive or negative surprise in the report, but because current path of least resistance is up, staying short did not make sense

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[size=1.5]Trade Keys:
Magenta arrow down – open short trade
Magenta arrow up – close short trade
Green arrow up – open long trade
Green arrow down – close long trade[/size]
 

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Morning Update 2013.02.14

Intermediate term trend is UP, but in the process of correction. Target for correction is trendline on the chart below or support at SPY 150. I started scaling back into a short position this morning that I closed yesterday.

attachment.php
 

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