FirstDegree and Crude Oil

F

FirstDegree

*This first post became quite long so if you don't care to read it all, just scroll down to where it says TRADING.

So what do we have here? Another journal in the Journals Forum.

I've been thinking about doing this for a couple weeks, but haven't really come around to doing it because I wasn't really sure what I wanted to get out of doing something like this. I normally keep my own journal, but it has slowly evolved into me just writing out my thoughts for the day in a Word document, adding the day's chart, and then closing it. Lately it has come down to pretty much forgetting about it until much later because I am off doing something else when the NYMEX closes.

So why am I doing this? I want to hold myself accountable to my trading. I'm feeling discouraged. Trading on my own and reviewing my own trades only causes me to see things in hindsight. If I make a profitable trade then it is always, "yes, I made a correct trade." If I make a losing trade then it is, "well, I guess that was a higher low," or "well, there is some strong buying coming in so I shouldn't have shorted there," etc. Then the loop comes in that I start to try to refine my strategy and tell myself that I won't do that again, only to do it again!

And who am I? I'm 27 from Pennsylvania and I still live at home with my parents. I largely have no idea what I want to do with my life and so I tend to not want to pay rent to someone when I don't really plan on staying in the area that I grew up in. I save as much money as I can, but right now I don't have an income. My savings is not a problem so the whole "go out and get a job to support your trading" really doesn't need to be an issue. I have more money in savings and investments than I'm using for my trading account. I believe that my trading account is sufficiently funded.

2003 was the first year that I really got myself into the stock market. I was on a military deployment and during our training I somehow got involved into talking with a guy in my Company who was into business and investing. It was around that time that I started buying my first companies, such as Intel, Penn National Gaming, Boyd (the casino), Coca-Cola Bottling. I had no idea what I was doing. I pretty much just went off of what he said.

In 2004 I did some foreign exchange trading for a short time, and in 2005 I did some more foreign exchange trading where one day I decided to trade some news only to have a huge drawdown of around $8,000 before it came back and I got out for maybe a $100 loss. I'm surprised I didn't get a margin call.

I hung that up for awhile while I was in college where I went from Criminology to Finance (after I got back from my deployment) to Economics where I have a BA in Economics. I was a Police Officer for almost 4 years, following my dream, only to have those dreams turn into misery when I ended up hating every day that I had to work. My secondary dream was to live in California so in September of 2008, I quit my job, packed up my car, and drove out to San Diego where I lived with my friend and his g/f for about 3 weeks and then moved to my aunt and uncle's for about another month or so. I applied to 54 jobs not having a clue what I wanted to do, got a sales job in Los Angeles that was a pyramid scheme and quit the first day, and then had an interview with a large government defense contractor, but didn't get selected. I decided it was too expensive to live out there without an income and so I moved back home to live with my parents having a full-time job with the police waiting for me. I worked for about a year and a half full-time before I started to hate it again.

I went out and took some risk and resigned from my job this past May and in August I started trading a live account again.

**I can honestly say that my trading would not be where it's at today without the help from NoDoji. Thanks again!**

This is getting to be quite long so I am just going to cut the introduction about me and get onto my trading.

TRADING

I strictly trade Price Action with a 20 EMA on the 5 minute chart and stay out of any trades around any news. I try to not look at anything else other than the Crude Oil chart. Sometimes I'll look at the ES just to see if I can make any sense out of it, but most of the time I don't have it on my screen.

Over the last month or so I have reduced my trading time from the NYMEX open, 9:00am, until 12:00pm (noon) EST since that seems to be the best time to trade. I then go off and do other things.

Just to clarify how to read my chart:

Big Red Arrow - NYMEX open
Horizontal Dashed Line - Previous Day's Close
Turquoise Line - 20 EMA
Small Green "Up" Arrow - Long Trades
Small Red "Down" Arrow - Short Trades

I don't want to cluster up the chart so I will only be posting a screen shot of the period that I trade with maybe some bars from pre-market. I then plan to talk about my trades and why I took them. I'm hoping that I can get some direct feedback on my trading to accelerate my learning curve.

My strategy currently goes with 10 tick stops and 11 tick targets. I did this because there seems to be common moves of 10-11 ticks in a direction if the trade is a high probability trade. I often give up taking a larger move, but in the beginning when I went for the larger moves I often ended up giving up those 11 ticks to get 1 tick at breakeven, while not being completely confident in my trading. I am very aware of this and do want to take larger moves, but I'm also just trying to be profitable while gaining confidence and the understanding of trading. I have missed or not taken a lot of trades only to watch them go in my favor. I would be doing very well right now if I could just get over my hesitation to take trades. I have been vigorously working on that since September, having read Trading in the Zone 3 times now.

So let's get on with the show. Entries after this one will get to the point and not be so long-winded. Please stay with me! There seems to be some color distortion on the charts, but I will work on that.

clj101810.jpg


Trade 1: Long at 82.35. Price had gone through the EMA and came all the way back. I also had Friday's close right near the bottom there, which was previous support. I went long at one tick above the high of the green hammer bar. On this trade I went to put in my stop, but accidently did it with a Limit and I was taken out immediately at -4 ticks. Total -4.

Trade 2: Long at 82.30. CL was in a small range back and forth finding support on the EMA several times. The previous red hammer-like bar did not extend all the way up and so I was effectively going long at a lower part of the range. I've seen patterns like this happen often where the bar to enter on when it gets ready to make its move tends to find support like this without extending all the way back up. Two bars later it made its move, but since it was not having any follow through on the current bar I ended up getting out at +1 before it closed on the lows of that bar. Total -3.

Trade 3: Short at 83.06. For some reason I kept having this idea that price was too high and there was going to be some kind of pullback to the EMA. I had a short-bias. I kept looking for some kind of weak, failed break out. The one red bar felt like it was getting weak and so I entered on 1 tick below the low only to have it turn around against me immediately. Yes, I sold that bottom tick. In hindsight it actually looks like a good long trade, but with my short-bias I failed to see that. My stop was 10 ticks, but I ended up getting slippage and got out at -11. Total -14. End Total of -15.5 (added commissions).

I then watched the rest of the morning not knowing what to do. I figured I took 2 losses today so I'd just hang it up for the day and walk away. The first trade that I screwed up put me in a negative state of mind. I was pretty frustrated with myself. I thought about going long on the first big green bar after it bounced off the EMA, but with so much downward pullback previously I wasn't sure where the market was headed.

So I'm going to end this here. This is quite long. If you read all the way, thanks. I hope you still have some energy to provide any advice.
 
Quote from DimoDD1:

Hello !
I read it. My advice to you is to see what you can learn from "Al Brooks - reading charts bar by bar".
More...

I should have mentioned, I did read that book. I started on it a 2nd time, but didn't get through it all the way because I started reading Trading in the Zone again. I suppose it should help me if I finish reading it again. It's one of those books that I will probably casually pick up and keep reading. My 2nd time through I really focused on the charts until my eyes started to cross. I think that is a big reason why I haven't fully finished it again because concentrating on the charts, flipping back and forth, and trying to comprehend all of that Brooksian language is exhausting.

Each time I think about a book I take another one of my shelf because I want to read that.

Finished Trading in the Zone last night for the 3rd time.

Currently reading The Black Swan and eventually going to get into reading The Poker Face of Wall Street and a book called Your Money & Your Brain by Jason Zweig while also wanting to read Intermarket Technical Analysis by John Murphy.

So much to read that I usually read 2 or 3 books at the same time. I really should just focus on one book so I can get through them faster.
 
Today, I ended up with 0 trades. Not because I didn't see any signals, but because I kept talking myself out of trades. I wouldn't say it was so much that I was afraid of putting on a losing trade, but more that I just talked myself out of my trades. It really comes down to the "just take every signal." There was a little bit of fear involved here. I need to get over that problem.

I still would like to talk about what I saw. I used letters today to differentiate between trades I took and trades I didn't take and/or trades I want to talk about.

clj101910.jpg


Trade A: I saw this reversal bar and said "there's a trade." Then, I started to think of every reason why I shouldn't take it. I thought about the last two trading days where these signals didn't work after a strong push into them, shown with the big green bar prior to this. As soon as the bar closed it popped down under the low by 1 tick before reversing back to what would have been -9 and then eventually turning around and going to my 11 tick target. It would have been tough to hold, but it would have been good if I just took it either on the first hit or a second entry when it came back down.

Trade B: Here I had an uptrend channel line where the top of that bar made an "overshoot." I put in an order to sell, but then I took it off. This was more of a, "This 'might' be a signal." Those are ones that don't feel good and should stay away from always. I stayed out of trouble there. It really isn't something I look for.

Trade C: This could have been a signal here, but the fact that it was butting its head right against the EMA made me stay away from it. These are the signals that I stay away from because I'm better off staying away from these.

Trade D: This looked like a good reversal, but again it was butting its head against the EMA. Even if I would have tried taking this trade I would not have been entered.

Trade E: This was a trade that I wanted to take. As soon as it closed I put in an order to short. Price went right to the low and then bounced a little bit. I took the trade off out of hesitation or just being afraid that maybe it wasn't such a good signal. The reason I liked it was because you had a big red bar two bars prior and then there was a higher low in a green bar. Then signal E showed some bulls and bears fighting, but the bulls were not able to continue a reversal. I saw it going down to touch that low, at least and wanted the trade because there was room for me to get something out of it. It would have went to my target.

Trade F: This was another trade I wanted, quickly after not taking the previous trade. It was a 2 tick low reversal, which acts like a failed breakout when you know how to find the times that they are good. This was one of them. There wasn't enough pressure to bring it down to continue going lower so now we are seeing a second entry to go higher, bulls are stepping in now so we should see some kind of strengthening reversal. I didn't take it, but it would have been a great trade and went to my target.

I'm still trying to get over my hesitation and just to take all of my signals that say "This is a trade, trade it!!!!" I have to just remember there are probabilities involved and I can't expect to be right on every trade. In the case of today, I would have been 3 for 3.

Starting today I am going to keep track of my actual trades and what I'm missing out on. Now this isn't a "hindsight" issue where I would only take the trades that I eventually know worked, but rather trades that I told myself at the time that are trades, but then didn't take. I will attempt to be completely honest. mTotal will be what I missed and I will try to deduct commissions correctly to make it more real.

Total: -15.5
mTotal: +31.5

I like to read and every now and then I read something that jumps out to me with a strong message. When this happens I will try to remember to add them to my posts. Some are inspirational, some are just things that tend to make sense.

Today's message comes from The Black Swan by Nassim Nicholas Taleb:

"We cannot truly plan, because we do not understand the future..."
 
First,
you seem like one of the more earnest people here on ET. I'd like to help you.

My advice is very simple, which you may assimilate or ignore.

REMOVE the moving averages and volume studies from your 5-minute chart.

Focus on highs, lows; and occasionally open/closes.

Look to buy support, sell resistances, and use stops for protection.

See how you do for a while; sim trade if you need to.

Good luck
 
Quote from Chicago_CTA:

First,
you seem like one of the more earnest people here on ET. I'd like to help you.

My advice is very simple, which you may assimilate or ignore.

REMOVE the moving averages and volume studies from your 5-minute chart.

Focus on highs, lows; and occasionally open/closes.

Look to buy support, sell resistances, and use stops for protection.

See how you do for a while; sim trade if you need to.

Good luck
More...

I think that is a compliment, so thanks.

I do not use volume studies and they are not on my chart. I'm not sure where you got that at.

I like the EMA as it tends to be a magnet. I have tried taking it off my screen and I absolutely felt helpless. To me, it is like a transition of power. There have been times where price has gone through the EMA and pulled back to it and then continued.

As far as support and resistance, that is what I try to do. Sometimes I don't always do that because I try to think objectively, which causes me to think, "this might be a trade." Those are usually the ones that don't totally make a lot of sense and I don't have a valid reason why I should take the trade.

I also do use stops on all of my trades.

Thanks for your advice!
 
Quote from Picaso:

One question, FirstDegree, do you - and if so, why - stop trading for the day at noon?
More...

Yes, I do stop trading at noon. When I first started I would trade the entire NYMEX session, but my problem was that a lot of the trades that came after noon didn't seem to ever have any extension or follow through and I attributed that to lack of volume. At the time when I started to make that realization I was noticing that the mid-day bar volume was only something like 600-800. The patterns didn't seem like they were really working.

Some of my biggest losing trades came after noon. I was also beginning to notice that I rarely ever took trades after noon because there just weren't any setups as far as what I look for and what made sense to me. Some of my losing trades were mistakes and I can think of at least one that was a big revenge trade turned loser.

So with all of that I just decided that the best moves, best setups that make sense to me come before noon time and I don't see the point in sitting here after that.

2pm seems to be the time when it picks up again, but I have yet to figure out a way to trade that on most days, although I have seen some days where there were a few good signals right at the close.

I have had thoughts that I wish there was more I could do, but I just don't know what that is. Trading and focusing on the charts for only 3 hours makes me feel like I'm being lazy, but in reality I'm just trying to stay disciplined and not force any trades later in the day.
 
Today was another 0 trade day. There weren't too many signals, and the first signal I saw was just missed out of hesitation.

*I'm testing a way to use elitetrader for my pictures so hopefully I did this right.*
attachment.php


Trade A: Absolutely beautiful. This was a "That is a signal" trade and I missed it. I was kicking myself for a little bit. We had a steep drop into the open, then a small bull bar doji that, to me, looked like indecision and that the bulls really weren't that strong. Then you get the A signal that was just the motherload of all of my signals. Easy trade, no heat, and I missed it.

Trade B: This really wasn't a trade, but the bar came down and touched yesterday's close to the tick and bounced off. With such a steep drop I was thinking that it would retest or make a higher low. Instead it decided to just keep going up.

Trade C: This one I wasn't sure about so it's always good to just watch what happens. I added the downtrend line here to show that C made an "overshoot" and failed to keep the new high above the downtrend line. This is a failure and a short signal. Price afterwards confirms that. I've only ever taken a couple of these overshoots when they are obvious, but this one I didn't take.

Trade D: This is a similar setup, but is not as good. We have a huge run after the Crude Inventories, but this pattern is not as strong because there is no trend lines or resistance to contain price. Also, bulls are not just going to give up easily after such a move and most likely going to go into a range as it looked more like the bulls were slowing down.

So really I would have only taken Trade A in this case. Trade C was a good signal, but it's not one that I kicked myself over for not taking.

Total: -15.5
mTotal: +42

I also want to note that I'm rounding the totals to the nearest .5.

And, I was looking at my first post and at the time I was looking at it I noticed the chart was not working. I usually have that problem with the hosting service. I am not sure how to use elitetrader to host my pictures.

Today I have two quotes and they come from "The Poker Face of Wall Street" by Aaron Brown:

"You must avoid unnecessary risks and, just as important, avoid taking risks blindly when they can be calculated. In traders' terms, you must take risk only when you're getting paid enough for it."

"As Dickson Watts wrote in his nineteenth-century classic Speculation as a Fine Art, risk taking requires 'Prudence and Courage; Prudence in contemplation, Courage in execution.' If you do decide to act, act quickly and decisively. Go for maximum success, not minimum risk."
 

Attachments

First Degree,

I agree with you regarding after lunch trading. During lunch I don't trade and after lunch (13:00 EST) I trade with half-size stops and targets and only for 45 minutes (if I have a trade on after 13:45 I'll keep it, but I won't start news ones because of the usually chaotic closes).

If you feel you're being lazy, try replaying today's session or, better yet, random sessions from the past few months, that way you'll get extra screen time without forcing trades in substandard conditions.

You may want to keep an eye on intraday HOD, LOD, etc. they tend to provide good signals (as when we broke above 81.20-ish which was the overnight high and particularly when in the pullback we wouldn't go below .20) and that's still pure price action.

Best trading to you.
 
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