E-mini Rookie Trading Journal

Trend Fader,

From someone else who's been around the block a couple of times, that was some great advice you posted. Look forward to more from you.

Bronks,

You're getting some really great advice here, better advice in fact than you would get from thousands in seminar fees. I concur with Fader that you absolutely must have a bread and butter set-up. The human brain is wired by evolution to make you do the exact wrong thing when trading. There are numerous books, such as Mark Douglas and Van Tharp, that document this. I also highly recommendMarty Schwarz' book "Pit Bull".

It can be tough to come up with set-ups. Keep examing charts with various indicators, various timeframes and S and R levels and see what would have worked. Eventually, you will see patterns. Until then, live by the basic rules of trading: cut losers, let winners run, never let a profit go to a loss, get out when you can not whne you have to. Take quick profits to combat a losing streak. And stop trading so much. Are you in this to make money or for the excitement?
 
gerry875,

You have to remember the exit is the function of the profit or loss not the entry. This is why I focus more upon exiting.

For newbies exiting is much more difficult because before you enter the market or right before you click long or short on your trading platform-- you are generally calm and relaxed. THe second the trade is on you transform into a different state of being. Much more difficult to control yourself during the trade then before or after it. Thus you need an exit plan.

There have been dozens of studys showing how using certain types of exit on random entries will yield profitable results. I think Van Tharp did this test using a volatility based exit.

When I trade the emini's I always assume my entry is random to the market, yet consistent to my plan. Its how I exit the trade is what makes the difference.

I challenge any trader to just enter the NQ/ES randomly and work on their exits. Whether its purely systematic, volatility based, trailing, whatever. Test out all these different exit strategies in real trading. After this experiment, I will bet you that the exit plan that works best for your random entries will work best for your entries that are not supposed to be random based ( ie. pattern based).

This is what I have done, and its one of the best lessons I can provide my friends.

--MIKE
 
8 pts on 5 trades is great trading. I would agree that you could not consistently do that without a "concise and pinpointed" system, that eliminates all emotion and bias from a trade. Thats what i think, what i see is Bronks make consistent profits. His results suggest some sort of edge.

The problem with a simple mechanical system is you have to take all the trades. In a small account you may not be able to afford the drawdown. I also wonder how effective a less frequent higher probability system can be with tight stops.

I failed recently because (1) I tried to use too many strategies. I used so many strategies because I believed my success would come from being able to use the right strategy given a specific circumstance. Reason (2), I was always tweaking the system while i was trading it. I believed in the setup, but still continued to make minor changes to make it better. (3) Taking every trade instead of sticking to my daily loss limit also hurt me. But thats mostly due to trading to many setups, like 25 trades a day. So your system has to be designed to take every trade and remain within your daily loss limit.

The question of mechanical vs discretion is a tough one. Can you watch the action of the market and get into a rhythm that no system could identify? Can you trade momentum, reversals and pullbacks on different time frames, all at the same time? I really screwed up Friday, it was the final blow to my account. When I come back I plan to go single,simple mechanical setup, basically following all the advice given here on your thread. I need to completely eliminate my emotions from trading. Its hard to say thats what Bronks should do because he seems to be doing something right. Even if it is totally discretionary.

Is the general theme here: There should be no instinctive selection of trades or setups.
 
Originally posted by Trend Fader
...You have to remember the exit is the function of the profit or loss not the entry. This is why I focus more upon exiting...

I will bet you that the exit plan that works best for your random entries will work best for your entries that are not supposed to be random based ( ie. pattern based).

This is what I have done, and its one of the best lessons I can provide my friends.

--MIKE
More...

Hey Trend...well said!!!

I trade the Emini Futures and most new traders I've met in the past few years to these financial instruments...don't have a trading plan prior to the trade.

A few new traders do have a trading plan prior to each trade but a trading plan that lacks an exit strategy.

Those that have been in the trading business for many years, profitably, know how critical it is to know their profit-targets, loss-targets, trailing-stop targets, what to do if their broker system goes down, what to do if their own computer crashes and so on prior to the trade...

and when such targets are reached...they execute their plan without hesitation.

I will often see traders be up several points on a trade and freeze...do nothing when the trade goes against them...forcing them out with a loss.

This is crazy. What's scary...it's common practice.

I see so many traders with good price entry and fail as traders because they don't know how to manage the trade after the entry.

Just as important...I've seen a few traders with poor price entry and succeed as traders because they knew how to manage the trade after the entry even if a few trades results as a loss.

Trading is not a vacation...we cannot just be spontaneous and jump in the car...drive from point A to point B and say I'll figure out something once I get there.

Simply...it must be planned from start to finish.

I love these journals and hope more seasoned veterans or successful newbie traders provide thoughts...

on why many fail and why so few do succeed.

NihabaAshi
 
redzuk,

This is a favorite subject of my...Mechanical vs Discretionary Trading.

I myself am a discretionary trader. I've met more traders that succeed at discretionary and have only met a few that succeed via a mechanical system.

You said..."Can you trade momentum, reversals and pullbacks on different time frames, all at the same time?"

I always wonder why a trader would want to trade so many types of trade setups on multiple or different time frames?

I often ask many new traders the following question:

What's wrong with having one good trade setup (that's repetitive) and applying it to one time frame...regardless if its discretionary or mechanical?

They will often reply..."I don't want to miss anything."

Who cares if that one bread-n-butter trade setup appears 1-3 times per day or a few times per week. The purpose is to develop building blocks (after being profitable with one...you add another trade setup) regardless if its a mechanical or discretionary system.

This is something I think all new traders or traders that have blown out their accounts should consider starting with...just one strategy.

This also helps to eliminate emotions from trades...just one strategy.

NihabaAshi
 
redzuk,

Read over some of my posts on this thread, along with some others regarding the reasons you failed.

Nihabashi is in vogue with what I am saying. Notice, how the traders that can really do this for a living, frequently have the same methodology.. yet their techniques can be different.

I am mostly a mechanical trader; however, sometimes I override the setups my system gives me. Yet, I never override my exit parameters under any circumstances. And the only setups I take are the one's signaled by my system.

To each (trader) their own (strategy)!


--MIKE
 
Originally posted by Trend Fader
redzuk,
Read over some of my posts on this thread, along with some others regarding the reasons you failed.

--MIKE
More...
I thought your posts were great. I'm pretty much a poster child for the suggestions you outlined. Thats why I gave my experience, to agree with what you were saying. But I have been impressed with Bronks trading, and the fact that its mostly discretionary.
 
Originally posted by gerry875


i can't see the big difficulty about those exits. just use a predetermined trailing stop (x points from peak profit) - and that's it. so where's the point? the right entry is by far the more important part. if your entry is screwed - the entire trade might be screwed right from the start.
More...


This is a totally flawed perception of trading. I am glad you made a remark like this because all of the newbies can learn from this. My objective is not to personally insult you, but to help the newbies out there avoid being another failure statistic.

Always assume that you are never smarter than the markets and often the most unexpected happens. For example, very very few people would believe the Nasdaq would be trading where it is back in March 2000. Imagine if we break into triple digits? If I said this back then, 90% of the gurus would laugh at me. Thus I assume the market is fluid and anything can happen. I am a slave to the actions of the markets. They rule me, I can never control them, however, I can still be profitable.

The point is that I like to think of the markets as a function of randomness that still can be played to make money. Test some random entries into the NQ with strategical exits (ie. S/R, volatility, whatever). Then test some strategic entries with random exits. Then please let us all know what happens. I almost guarantee you that after a few years of trading your account will be wiped out on random exits.

Thus, how is it logical for one to claim trading is all about the entry? You are trying to say that if you don't have an ideal entry than your exit will automatically be poor. I say nonsense. What is an ideal entry? I have seen traders that were up 20 points in the less than 5 min give away all the profits and take a loss. At the same time.. My entry was later then there's yet I managed to make a tidy profit?

Now, setups are important don't get me wrong. They play part in giving you the edge and consistency. However, don't be fooled to think the entry is more important.

Build an exit plan that allows you to cut losers short and run out your winners out. Then apply it to random entries. Then use a systematic approach for entries and use that same exit plan. See what happens? After doing this for a few years you will probably get profitable results for both.


--MIKE
 
Originally posted by NihabaAshi
redzuk,
This also helps to eliminate emotions from trades...just one strategy.
NihabaAshi
More...
Thats my next step, just one strategy. When the index trades to a support or resistance level I just start thinking fade a breakout, join a breakout, trade the range, or wait for a pullback. Trading only one strategy seems like a weird way to approach trading.
 
Some really nice stuff going on in this thread. I'd like to thank all involved.


---------My Trading Plan---------

1. SETUP:
* 3 min. chart time frame
* Falling or rising wedge pattern @ S/R level around the 50 SMA

2. ENTRY:
* Here's the tricky part because entry on the NQ can be very important for it has the tendency to run a few price levels very quickly. Thereby, obliterating your entry with the blink of an eye. Worse still if your acct. is tiny.
* Usually as the wedge develops, there will be an extreme compression area. Of course everyone on this board and all other Johnny traders will be looking at that also so---------> Entry will be in this area dependant upon price action at that time and place.

3. EXIT:
* No more than a 2.5 - 3.5 point loss on any trade. Usually, not always, the pattern has failed if I have to take a 3 point hit.
* Target-- 5 points

4. TRADE MANAGEMENT:
* This kinda coincides with the exit. All depends on price action. If it starts getting weird, I'm outta the trade no questions asked. By the same token, I will stay if it's looking strong.
* Since I am only trading 1 contract, I don't have the luxury of scaling (good or bad) so my management's gotta be tight.
* $250.00 loss cap for the day.


CAVEAT

As I stated before, I'm about as much of a discretionary trader as they come. For better or worse, I WILL take a trade if I feel it's warranted, hence, deviating from my plan. I have no reservations doing this as I feel it is an integral part of MY trading style and my development as a trader. I don't want to choke off this aspect with too much of a hard stance. Eddie Van Halen once said, "If it sounds good, it is good." If it looks good to me, I'm taking it.

Thanks to all, and much credit to Mike for kicking me in the ass to write a plan.


As always, comments are more than welcome.
 
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