From poker player to Level 2/tape reading prop trader

today's journal intended to
A. point out what i could have missed during my trade 10/10 yesterday (short iag 1000 shares)
B. in general why short trades have been difficult (few ticks, tight entry, hard to exit) not so much profitable lately, with downmoves being limited.
C. i am trying to come up with a logical explanation for why we've seen so much upmoves (rapid) this week. there may be many reasons.

the following summarizes literature and numbers for the bulls, using symbol $iag as a case study just because there is relatively more info with the particular stock. i am not an analyst or a consultant. however iag is not to be viewed as a representative of gdx 2nd tier stocks (hmy hl gfi auq)

1. expert views, subjective
Michael Blair, Seekingalpha dot com, long $iag, 09/23/2013
provides an explanation (albeit biased) explanation on why $iag is more volatile as compared to other similarly priced 2nd tier $gdx portfolio stocks. his idea is
a. a break even miner (iag) with large reserves is highly leveraged both ways (thus the daily volatility)
b. if balance sheet is healthy to withstand any short term risks (gold price down, production costs up), and you believe gold prices will go up from here, iag is the right stock to hold.

"IAMGOLD (IAG) is one of my favorite gold stocks principally because it is a relatively high cost producer with long lived mines. That paradox arises since high cost producers have the most volatility when gold prices change. If they are operating close to break even, a relatively small rise in gold prices makes them quite profitable. Conversely, when prices fall they bleed all over the floor."

2. technicals, objective
eye balling the charts. GDX - 08/07/2013 low of 23.89 may still be acting as an entry point for longs+short covers. if $gdx does pop as it has been making effort to do so the last 2 days, next selling pressure levels are located above 26 and between 26.40 in the short term.

3. supply-demand structure
institutional buying has been picking up lately.

daily institutional trading of $iag shares, by Edward Connelly, Avafin, 10/08/2013
"Institutional trading of IAMGOLD shares yielded a bought/sold volume ratio of 2.82. A total of 25 block trades crossed the tape, resulting in 450,500 shares on the buy side vs. 159,897 shares on the sell side. From a cash flow perspective, this implies that there was a cash inflow of $2,072,313 and a cash outflow of $725,337. The net cash flow for IAG is $1,346,975, demonstrating that institutions may have positive outlook on the stock."

he also mentioned put/call ratios. On 10/08 the put to call ratio for iag was near 3. What does this mean? More puts are being bought which is in itself a bearish sentiment indicator; however, add this data to the fact that gdx is at a major support level/battle ground which the bulls need to defend, it may signal the start of smart short covering/profit taking by the bears.
 
pnl 10/10: -$60

relative strength/weakness of auy which I use as leading indicator shown on charts as compared to gdx may be evidence to consider it as an unreliable indicator for trading in the near future
consider abandoning usual signals for entry due to overwhelming news events technical levels options trading volume
keep an open mind and leave room for creativity
new rules: as gdx reaches its major support level on weekly time frame, consider taking shorts only on 2nd leg or when trend is confirmed by gld. look for large wicks to the upside. start consider shorts at shoulder area of h$s, not breakdowns. take small risk with short positions.
longs: consider taking larger risk with long positions when stock is about to breakout from tight range
 

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columbus day, markets open, debt ceiling issue has not been resolved over the weekend. meanwhile all major us indices track higher...

gold globex up to high 1280's
$gld @ 123.85 if bullish, i expect a test of 125.00 resistance area
$gdx at low volume node between 23.20 - 23.59 expect prices to fluctuate heavily around this area/facing resistance a bit above then low volume node from 23.60-23.80

bullish
kgc:if bullish, then 4.835 resistance as possible exit target
hmy:if bullish 3.21 major level as possible exit target

starts premarket on a bullish stance; will look to trade kgc/abx if so. if price is rejected above, i will be looking for shorts in relatively weaker stocks.
 
1015
I turned net positive to net negative today with -100 in losses.
first issue: greater than 300 shares in the first 2 hours will be discontinued.
second issue: main trade will be hmy, gfi, auq, hl
if positive, then i will trade: iag/auq/abx with some volume
third issue: loss of focus and sporting mentality. after turning positive, i became complacent. I lost objectivity; eg. looking back at the charts, I don't know if I would have taken that same trade. biased view of my own trades while in a position.

here is the trading summary for yesterday, 10/15/2013
 

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Pnl : +$18.50

Concerned about over-trading, putting in heavy volume. I told myself to significantly decrease volume when programs are running the show. This is usually AM hours. Stuck to my plan and only traded 200-300 shares at a time. Felt that I was able to better control risk. Decided to take ABX out of stocks to trade as it proves to be too volatile and a waste of mental energy. Stuck to the ones that I knew.

Market headed down after debt ceiling issue was looking to get resolved.
After announcing earnings, AUQ had a large buyer on level 2 for two consecutive days and became his actions became more conspicuous on day 2 from mid 3.80's to mid 90's. Seller stepped in late PM and played both ways.

1017 Premarket gold gdx short covering up 3% or more. 126.00 support for gld. gdx also at s/r level. in the recent past, this level got quickly rejected a few times and headed lower.
 

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4th month into trading, seeing improvements and areas for improvement.
pnl largely intact, looking for one or two good trades per day. avoid chops.

A.what is the big picture?
gld/gdx gapped up on 17th: gld retraced back to start of gap (low) and made attempts to breakdown, while gdx failing to make highs but holding support
B.what is happening with individual stocks
auq beat expectations however long term weak (ability to play both sides, buyer active during AM)
hmy less conspicuous buyer however once he comes in, bids stepping up and prolonged, bigger than normal upside rewards
C.which stocks are working?
1. hmy 2. auq 3. hl (hmy less so most recently, why: small intraday range, less prolonged directional moves, more hfts)
why are these stocks working for me?
moves are cleaner, well defined, so able to hold on for the real move
ex.recent trade in auq based on
two trades: gdx breakdown (short auq)
one trade: gdx find support then leg up, hft buyer, real buyer (long auq)
D.which are NOT working?
1. iag 2. abx
why? range too wide, whip saw too large to handle, moves initiated prior to gld/gdx entry signal thus reward limited. reconsider when gld/gdx is in a clear directional move
E.trading ideas?
a) kgc latent mover.(if 1st move missed, join kgc on 2nd leg)
b) avoid mental space on chops
-be more tight with entry criteria but aggressive when entering for: hl gfi auq, iag
c) why auq long trade on 18th worked and what can be improved
gld/gdx gld made attempt to go lower, but put in a large wick - thus intraday support may have been found, limited downside, potential for 2nd leg up
significant buying (reason to hold)
not hitting bids, bids holding and refreshing (reason to hold)
: consider holding on for second (or leaving some on) move if entry criteria has not been broken

E.goal for upcoming week
add and hold on to my winnings
work on getting size when moves are for real
Mondays prove critical for right mindset, % of winning weeks/pnl when starting out with good mondays is significantly higher. also note 7 of 7 positive on Fridays - reveals something about myself and what i think about trading but cannot define.

etc.
saw senior trader make $ on some solar/pharma stocks
ex. SOL
10/08
a. short on retrace/retest of ib low, spy making new weekly lows,short on 2nd leg down spy 5000 shares; profits cut short by exiting too fast.
 

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last few days I had to change the way I view the markets.
here are some initial thoughts:
1) learn how to play both forehand and backhand just like in tennis. you don't try to force a forehand when backhand is appropriate. By forcing a backhand you risk leaving the court wide open. likewise, don't go against the trend and try to short (or long) when the market is long (or short). that's my best analogy. that being said,when I started trading, gold was bearish, thus i learned how to short first. for the past week, gld/gdx has rallied quite a bit, shorts were not working. It was hard to hold on to long trades when they were not working immediately: longs need more time to develop than shorts I realized (fear is a more intense emotion than greed/hope)

2) manage emotions first before trading
do whatever is necessary to clear up your mental space for trading. any unresolved issues affect every aspect of trading: market bias, trade entry, risk:reward, profit target etc. although yesterday I ended positive day, I traded high volume and fees accounted for over 75% of my gross pl. That was so gross. Looking back at my trades,

A. entry criteria for shorts must be reconsidered, ie. the following is the order in which results prove to be best as of current
1) Failure to make higher highs confirmed by failed bullish pattern good risk reward as offers are no longer being taken out as aggressively as before. must have skills: great entry timing, seeing the big picture (gdx + 3 min individual)
how to use this entry criteria: each stock sees this differently. for example a weak stock like auq might view this as an OK sign to start a downward pattern until a reverse signal is not only given but confirmed. in a strong stock like iag traders might see this as an opportunity to load up on extra shares at lower prices. this is why knowing relative strength and intraday fundamentals are important.
2) first breakdown (breakdown = intraday low, first hour low)
this should also be played differently according to the individual stock. What I used to do: short weakest stock. Why this may not be the best decision: shorting has been taking place up until arrival to the breakdown point. i noticed that system buy programs activate when stocks reach their average true range sometimes; thus trades can easily be stopped out, messy. on the other side, strong stock like iag became a short at precisely the breakdown of gdx. before that all points were considered to be places to get long. consider such strong stocks for good reversal plays. not only do the reversals play fast due to short covering, but price usually reaches prior inflection point before continuing its downtrend. advanced play. consider only when confident and objective.
3) Third moves are not worth is sometimes.
What I need to be thinking is: are there any reasons to hold/cover your prior short position as gdx resumes its downtrend? if not, you may want to add more. were there any signs of buyer stepping up or rapid short covering in the first leg down? are there any sellers successfully knocking down bids? and how fast? usually you want to stop and reconsider taking any more shorts after the 2nd leg as risk of shorting.

Notes premarket 1024
gdx still in upward trend since last week although yesterday was a big down day. gdx may retest its prior support turned resistance
one at 25.40 one at 25.65-70. See particulars associated with the retest of this move if it occurs (if this occurs due to gld upward move, it may actually be a sign to get short) if it happens despite gld largely unchanged, then gdx is stronger.
next support is at 25.00 if this fails consider down-move towards 24.50 ballpark
 

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just by looking at the numbers, I ended the month of October slightly negative, at -100 dollars. Equal to past month's performance, but volume traded was twice more. Winning % was more or less equal. I did have more ECN rebates for adding liquidity.

Performance Summary
September
-$88/350k shares
October
-98/740k shares (370k one way)

So, volume traded increased twofold, while profit/loss remained the same. I made more, but I gave it back an equivalent amount. Scratch trades were of notice. This tells me that I am getting less bang for my buck.

Stocks
Numbers aside, gold has not been a particularly attractive asset to day trade. Issues were narrow ATR and algorithm trading, both of which negatively affected trading. This was pronounced especially in the morning hours. Avoid those annoying HTF's.

In the last week of October, I looked at gap up/gap down stocks with huge volume as an alternative. I had no immediate success. My stop losses must be kept tight which will both take away opportunities to get back into trades and also keep my losses to a minimum. In order to trade these, I should only be looking for the best setups. Some considerations are:

under $7, to keep it tight
huge volume, for follow through/good entries and exits
2nd day plays tend to be much cleaner
tight range formation just prior to dive, offers and bids stepping up/down, cleaner

On another note, I notice that I have begun to track my relative performance to other traders. I know this because, on the days I look up at daily PnL board constantly, I realized I tend to perform worse. So with that in mind, I am going to turn off leaderboards until late in the day. At this time, I will look at leaderboard to see which stocks might offer opportunities late in the afternoon.

Education
I recorded videos of my senior traders' trade. I realized that there is still much to learn, and maybe this process will take longer than hoped. November will be my 6th month. I will need to shift my energy into making the right decisions rather than PnL. I will not waste mental energy on results-oriented thinking.

Positivism
This game proves to be tougher than poker. I learned poker by playing in sit and goes. Sit and go or tournaments are different from cash games because they offer a better risk to reward ratio. There is a stop loss built into the game. So knowing that I perform better in a rule constricted environment, there are obviously issues that arise

What type of stocks/what type of trading is most fit to my personality?
On what days am I most vulnerable to tilt?
On what days do I feel most confident?

Thinking about these questions will not only restricted my losses, but I believe I can also become more self aware as well.
 
Quote from modifiedtype:

What type of stocks/what type of trading is most fit to my personality?
On what days am I most vulnerable to tilt?
On what days do I feel most confident?
More...

if i can jump in, i found the first question to be essential to my trading, and after that, the second.

i learned part of the third one - if i feel super confident on a trade(s), i'm on top of the world with a trade, it's like my internal clock is telling me to get out of at least half of it.

i don't think i replied before, but i use L2 for a significant part of my stocks. i don't use it all the time on these stocks, but it can provide key spots where the right thing happens, or if something should happen/doesn't, i use that as a springboard. but most of my trading is midcaps or smaller.
 
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