Matcha's Dow E-mini Journal

Bolimomo · Jul 17, 2010

Quote from Matcha:

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I always have a question about this mechanical system trading vs discretionary trading. Aka, the HFT nowadays. I don't have too much knowledge about how they do trading. But I know that they are all rely on the techinals. They(quants) build the trading systems by using FIB. Stochastics. Pivot point , etc. all the indicators. They can watch all the markets and watch the correlations of them. Lots of hedge fund companie generate huge %of returns per year. Does that mean that discretionary trading will not work one day?

RE: Does that mean that discretionary trading will not work one day?

Grasshopper... the one who had read Sun Tsu's Art Of War at 5 (was that right?)...

Sun Tsu said: Know your enemy, and know yourself. Your enemy is 10 times bigger than you... does not mean you have no chance of winning. You think that with all the resources that USA has, winning at Vietnam should be easy, right? (Or the Soviet over Afghanistan (or now the USA over Afghanistan)) There are always strategies that may work for the small guys.

Mechanical trading systems... I don't think it's all that simple... trading with Fib, pivots or what not. They may not need any of that. Imagine if your machines can be co-located with the exchange's servers to reduce latency, and that you pay someone the privilege of peeking at customers' buy/sell orders for a fraction of a second before the rest of the world has a chance to, and the virtually unlimited capital to take advantage of any opportunity no matter how small the profit on each, and the supercomputer which can do it all day long on thousands and thousands of equities that can be exploited, repeated for thousands of times over...

Bolimomo · Jul 17, 2010

Quote from ~~~:

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if "heads" i buy you a bowl of hot & yummy clam chowder at fisherman's wharf...

if 'tails" you buy me the a sumptuous san francisco fresh seafoods with a bottle of red wine in sausalito

what you think? boss!

No problem! I will bring my 2-head coin to meet you...

~~~ · Jul 17, 2010

Quote from Bolimomo:

No problem! I will bring my 2-head coin to meet you...

haha... no problem then i buy you clam chowder at fisherman's wharf lol

but i've a secret weapon.. i am a fun person to be with and i am sure we have many topics to talk about, especially trading etc, etc, etc ... like what Albert Einstein's famous saying..."When you sit with a nice gal for two hours, you think it's only a minute! But when you sit on a hot stove for a mintue, you think its two hours! That's relativity!!!

so after hours and hours of talking, we'll be hungry again (don't forget we're foodies lol) and you will automatically suggest we go for dinner coz you're also very, very hungry but i have a big problem coz i spent my last nickel buying the claim chowder for you and i am sure by then you would think buying me dinner in sausalito is not a bad deal at all coz we can continue talking & have nice dinner lol.

To Matcha & PO... it's a good lesson of "Relativity"... hehe

Bolimomo · Jul 17, 2010

Quote from ~~~:

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so after hours and hours of talking, we'll be hungry again (don't forget we're foodies lol) and you will automatically suggest we go for dinner coz you're also very, very hungry but i have a big problem coz i spent my last nickel buying the claim chowder for you and i am sure by then you would think buying me dinner in sausalito is not a bad deal at all coz we can continue talking & have nice dinner lol.

To Matcha & PO... it's a good lesson of "Relativity"... hehe

No problem. I know exactly where the Mc'Donald's is in Sausalito.

They sell Filet O'Fish and I will bring a $2 bottle of Merlot sold at Food's Co.

Yes, relativity...

~~~ · Jul 17, 2010

Quote from Bolimomo:

No problem. I know exactly where the Mc'Donald's is in Sausalito. They sell Filet O'Fish and I will bring a $2 bottle of Merlot sold at Food's Co.

Yes, relativity...

okie no problem boss.. i wanna a filet o'fish and a big mac too, large fries, apple pie, large coke and ice-cream. ( it's fun to eat junk food once in a blue moon )

we can't bring outside food & drink into Mc'Donald's ... so we can only drink your $2 bottle of Merlot outdoor lol . isn't it special huh?

NoDoji · Jul 17, 2010

Quote from Matcha:

The biggest challenge for me is really to identify trending day, big range days and tight range days as early as possible after the market opens.

That's the biggest challenge for everyone, because to be able to do that would indicate you're psychic, and if you were psychic you'd own the market.

By the time you identify what kind of day it will be, the best part of the trading day is mostly over. We've seen big opening moves completely reverse. We've seen small opening ranges break out. We've seen price trend all day and reverse violently in the last hour; we've seen price make a strong opening move and drift painfully in the same direction the rest of the day (like yesterday).

The way to rise to the challenge is to keep yourself positioned well when there's clarity and on the sidelines when there's lack of clarity. When there's lack of clarity (narrow range), rather than guess where price will go, be prepared to play the breakout, which places you in the direction of price movement.

NoDoji · Jul 17, 2010

Quote from PatientOperator:

I like your method of "stopping" into a trade to join an ongoing strong trend. I will try that next time. I do like STOP orders to get into a trade. I look at today's chart, your method works great for the 5-min chart. 1, 2 and 3 min charts have too many gyrations to take advantage of the bar relays. It got stopped out too soon.

I read about this method of entry in Al Brooks' book (it's a favorite trade entry method of his). I've only used it with a 5-min chart or with a breakout through a major high/low. Brooks also trades a 5-min chart.

It took me a while to start using it regularly, because it's human nature to want to get the "best deal". When we take that mentality into trading it costs us dearly. Our desire to get the "best deal" is what causes us to try picking tops and bottoms, whether it's the top/bottom of a move or the top/bottom of a price bar. When we try to pick a top/bottom in order to get the best entry price possible, we often get stopped out, or we're tempted to average down, or we hold losers too long because we're certain price will reverse, then when price comes back to us and confirms the direction we wanted in the first place, we cut our winners short!

How much easier to wait for price itself to confirm its direction, by entering a trade with a stop order that places us in the direction of price movement. OK, so we didn't get the best entry price, but now it's so much easier to let our winner run because we didn't take all that heat on the trade trying to pick a top/bottom and then thank the market gods for getting us back to break even at which point we exit only to see price move hugely in our favor without us.

Quote from Went Fishing:

I like to test things to death. For instance, what is the average pull back into the previous bar? If the new bar makes a new low first what are the chances of a pull back into the previous bar? and how deep? And how far is "to deep"? Knowing the answers to these questions (and more) will give you the confidence to take the trade, every time.

How long is "to death"? Because I test every day and still talk myself out of taking the trade half the time. When do you get to that point where you stop thinking about all kinds of random extraneous crap instead of just whacking the bid or the ask??

Picaso · Jul 17, 2010

Quote from NoDoji:

... How long is "to death"? Because I test every day and still talk myself out of taking the trade half the time. When do you get to that point where you stop thinking about all kinds of random extraneous crap instead of just whacking the bid or the ask??

Nodoji, without meaning to be a smart aleck or to tell you how to trade (which you clearly already know) and after a careful analysis of the syntax and lexis in your trading journal, I think I can say that I've identified what's holding you back in your trading, the "bottleneck" in your system, if you will.

You trade with a plan, you have clearly defined objective signals, conservative money management, have extensively backtested your system, know yourself and your risk tolerance, can isolate price action and have proven to be able to read the market in real time - not in hindsight or just on a static chart. Therefore, based on my deep knowledge of human psychology and tech expertise, I am positive 100%, pinky swear, that your problem resides in the technical part of order entry.

See, when you analyze the market (real time, bar-by-bar after the close, whatever) you only have to **think** "long here" or "short here", no actual physical action is required on your part. However, when you are actually trading (live or demo, that's not the crux of the matter, since you're a seasoned trader and can take small losses without blinking and, as I've said, trade [very] conservative size), you have to go from that moment of clarity while you're in the zone where in your mind you "see" that long or short signal crystal clear to fumble with your RadioShack mouse and/or 80's keyboard and shift your line of sight from chart to keyboard to DOM ladder, etc., all of which, while it may only take a couple of seconds or even half a second, kicks you out of the zone where there was no hesitation, no conflict, not what-ifs, no "extraneous crap", nothing but a crystal clear signal to pick up your money.

Therefore, if you forgive me the condescension, what you need to do is to stop using the crappy order entry methods and equipment of retail wannabe traders and use what the pros use. Based on what I know about your trading at the moment, I would recommend specifically this order entry system (see attached picture), but do not hesitate to contact me to fine tune it to your exact specifications (for a fee, indeed).

No more second thoughts. You see it, you trade it. Period.

You'll thank me later

Bolimomo · Jul 17, 2010

Quote from Matcha:

Wow, a bearish trending day. TRIN and TICK help me get out of troubles. No long positions to day saved me lots of money and energy.

I am very proud of you applying the concepts on Friday!

I want to make 2 points today:

1) Matcha you use TradeStation. Take advantage of the large set of chart types. Play with some non time-based charts (RangeBar, Renko, Kagi and Line Break). Those charts are composed based on price movements without consideration of time. They show trends better. And they show a bigger picture than the 1-min charts. Enclosed is a Line Break chart on @ES (3 LB, 3 min).

2) The market moved down big starting at 06:30 am. Some economic report induced thing. Note that the market had gone up quite a bit in the past 2 weeks, so it is prone for a little bit of pull back. That's hint #1. In the past 2 sessions, the market could not break above the recent range high. (Neutral/Bearish) That's hint #2. Note the morning low yesterday... ES around 1077... This morning when the market moved, it cut the "support" like a knife. For this kind of "cut", it is most likely a break down. So short is the side to stay with.

How far will it go? (This is your homework. Due Monday.)

Picaso · Jul 17, 2010

Quote from Bolimomo:

I want to leave you all with this thought. A quote from the Rocky Balboa movie. But I have paraphrased it as I can't recall the exact line:

Balboa: It is not how many punches you can throw at your opponent. It is how many times you can get back up after you've gotten punched in the face...

Trading... how many times can you pull yourself back up after getting a series of punches from the market?

Matcha's Dow E-mini Journal

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