E-mini Rookie Trading Journal

Originally posted by bronks



I really don't know how else to even BEGIN to develop a method without actually getting in and mixing it up with everyone else. Foolhardy, probably, but it is all I know. During my time so far I certainly found out what NOT to do. So maybe a method will crystallize as my list of no-no's grow (or shrink?).

I agree calling the market is worthless, especially for a newbie. Nevertheless, it was the reason for my last trade.

This is what I'm concentrating on now: Breakouts or downs from the 50 sma on a 3 min chart, hopefully along with some kinda wedgie formation.

comments on this are more than welcome
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Bronks, I have been reading your journal everyday and find it very interesting. You have been getting a lot of good advice about finding an edge or setup rather than trading on hunches or what you think the market is going to do.

You stated you don't know how to develop a method. Here is how I develop methods or set-ups that I am comfortable trading. You said that you are trading breakouts and breakdowns from the 50 SMA. Here is how I would go about setting up a strategy to trade breakouts:

1. Determine what your entry rule is. You need a well defined entry rule that you can follow every time there is a breakout that meets your criteria.

2. Determine a profit target. In this case, I am assuming you are only trading one contract. So you need to have a set profit target, unless you are going to use a trailing stop. Whatever you find works for you.

3. Determine what your stop loss is going to be.


4. Papertrade the set-up and determine your percentage of winners over time. When I get ideas for trade set-ups I will spend a lot of time going to historical charts and scrolling forward one bar at a time to test my ideas and to see whether it is a good set-up or not. Then I will usually paper trade the set-up in real time for several months before actually trading it with real money.

You need to find a combination with your entry rule, profit target and stop loss that has a positive expectancy over time.

An example might be that using your breakout method you find that 50% of your trades are winners. In that case, it is obvious that you need to have a profit target greater than your stop loss.

If you have a scalping system in which you find your entry method provides winners 75% of the time. You could have a profit target of 2.0 points and a stop loss of 2.0 points and be very profitable.

The point is to find a set-up which you feel has a positive expectancy over time that you can use over and over again.

Hope this helps!
 
Woody--

I appreciate the time you took to help me out. I have printed your post and intend to come up with something more viable over the weekend.

EC-- That's just my way of calling a wedge. No I didn't learn it from a room. It's actually one of the first patterns I recognized after starting to trade, after probably hearing or reading about somewhere.
 
Some advice from a trader thats been around the block a few times..

#1. Do not trade if you have no strategy. Period! (I don't care about your excuses for not wanting to paper trade, unless you don't care about your money.) I am talking about a rulebook. Write down everything on paper. It will be called your trading plan. If you can't write down your plan in sentences then you dont have one. Follow it as if you were catholic and you are now the Pope.

Did you every hear of someone starting a furniture business by just randomly making different types of furniture? You charge people random prices.. whatever you feel at the moment or read on message boards. Your profit margins are random and have no basis behind them. Then you tell yourself.. I will just do all this until a green light shows up and I start making money and everything works itself out.

I heard of someone who first focuses on a target market. Learns their customers inside out. Understands the industry and figures out what type of furniture they are best at making. Then they calculate a consistent profit margin. As their business develops to the better or worse.. they tweak their strategy to stay ahead and base it on experience. Why is trading no different than any other type of business?

#2. Do not ONLY focus on entry but more on exit. Breakouts, wedges, bases, whatever... are all talking about entries.. how come you don't talk about exiting??? You are looking for a pattern based entry and using a random based exit. Why is that no different than using a random entry and a pattern based exit? Get the point!

#3. Only trade a strategy you feel comfortable with- and you believe in. This means you will follow it in good times and in bad. It should match your personality and style of character. If you don't know any of the above.. than it means you are not ready to trade.

#4. As far as details... only buy when a 10 day moving avg crosses over the 50 and you have an RSI divergence and an oversold stochastic. Just kidding. There is no holly grail. There is no one formula or one pattern that will make you money consistently. The secret is in money management and patience. Take one simple pattern or indicator that you like. Familiarize yourself with it as if it has now become your wife. Only trade that one pattern and have a specific exit plan.

Stalk the market everyday for hours until you are 100% convinced that the setup is there and you can convince 10 six year olds that there is a pattern. Learn to be patient and wait for the exact pitch. You should avg no more than a few trades a week. Then learn a new setup and do the same. Until you slowly have a full arsenal of setups and exits. But learn to be patient and wait for the right pitch.. if not you will strike out easily. Of course.. if you plan on just scalping by the seat of your pants.. then nothing I say relates to you. Honestly.. my personal belief of trying to scalp the emini's is like pushing the buy and sell button on your trading platform simply when your finger starts to itch.

#5. If you do not follow my advice in my opinion which can be worth something or nothing to you--- I believe you are no better off going to Vegas and spending whats left of your $5k in the casino. At least you will lose the $ in class and have a great time at it.


Traders lets keep this business for real.
--- MIKE
 
Trend Fader--

I will be printing your post also. And Nihaba's, and a whole bunch of others that have been giving me some very good advice. Then I'll try to extract the concurrent themes that seem to circulate amongst all of them. Then I will add a dash of myself into the mix and hopefully I can come up with some kind of plan without hurting myself. I've got a lot to work with so I better get busy. Thanks once again.
 
Good to hear this Bronks and Tony, you are on your way to becoming a successful trader if you are serious about your game plan.

One more piece of advise. When you formulate your plan... test it for a while, until you are confident and believe in it. This way you will stick with it. Ask questions and study now before you implement your plan. I have to stress now is the time to brain storm. Once you start trading the plan it will be too late to change it. Its like school, study hard for the exam.. when you are performing the exam do not cheat!!

Give your plan time to prove itself out. The only time to change and tweak your plan is after X amount of time or X amount of loss (or whatever time you feel comfortable assigning). Never ask traders for their opinions while you trade your strategy. You ask 10 traders they will surely give you 10 different answers. Then you will be back to square one.. consistently changing your mind and subject to information overload.

keep it simple..
--MIKE
 
Originally posted by Trend Fader


#2. Do not ONLY focus on entry but more on exit. Breakouts, wedges, bases, whatever... are all talking about entries.. how come you don't talk about exiting??? You are looking for a pattern based entry and using a random based exit. Why is that no different than using a random entry and a pattern based exit? Get the point!
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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.
 
A good trader can be randomly thrown into the market,
and then by choosing his/her exits, still be profitable overall.

A newbie can be given a perfect entry, and allowed to
choose the exit, and will continue to lose money overall.

Thats the difference.
Both count, but exits a bit more.

Every perfect entry can end up a loser if you wait long enough.
But some randrom entries with calculated exits
can end up winners.

axeman



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...
 
Originally posted by axeman
A good trader can be randomly thrown into the market,
and then by choosing his/her exits, still be profitable overall.

A newbie can be given a perfect entry, and allowed to
choose the exit, and will continue to lose money overall.

Thats the difference.
Both count, but exits a bit more.

Every perfect entry can end up a loser if you wait long enough.
But some randrom entries with calculated exits
can end up winners.

axeman
More...

but it's just a question of the right stop - again.
 
hello bronks,

you did ask for it, you get it :)

beside the great advise you did get, just 1 small thing on rules.

if you try to trade a pattern related setup like "retracement" or "flag" or "wedge" or "breakout", you always trade the anticipation of it. think about it, it is not possible to trade "breakouts", because they are not yet "there" by the time you have to decide to enter or not.

its always that element of uncertainty involved. you cant realy overcome it, but RULES help you to manage it.

you never can predict the distribution of your winner/looser. to manage this uncertainty, especialy when you have 10 losing trades in a row, you need RULES.

:) trading
 
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