Matcha's Dow E-mini Journal

[Bolimomo]

Quote from Matcha:

So, "Oh, Sifu..."
Do you also play premarket?

I do (or should say "used to"). But from my recent experiences, it is only a 50-50 game. When it goes against me, it goes really fast (thin volume) and hard. A couple weeks ago I have decided not to pursue it. I don't like the odds. But I do watch pre-market activities intensely. They clue me in to how to trade the first 1-2 minutes.

Gaps are very hard to master. Because you may be right 80% of the time. But when you are wrong that 20% of the time, the market kills you. Fast.

Someone on ET recently asked about how to trade the gap. I wish there is a simple answer. There are so many things to consider. e.g. The recent 3-5 sessions' activities. How big is the gap? Did the gap break above recent resistance or below support? How's the stock gapping compared to the S&P? Gapping more? Or gapping less? How did the pre-market price go? A gradually buy-up/sell-down? Or gapping big (from last night) right from 08:00 am EST? How did price run into the closing in prior session? How is the price gapping compared to today's pivot levels (PP, S1, R1, etc.). You see, there are many things to consider.

There is a self-proclaimed "The Gap Guy" Scott Andrews who had written a book on trading the gaps. I had bought and read his book. (Which I regret. ) His approach was taking statistics out of the X number of stocks that gapped up, how many of them had the gap filled. Over time. Z z z. "Trading by statistics". A bunch of non-sense. Let's say statistically 70% of the stocks that gap up will fill the gap. This morning there are 30 stocks gapping up. Are you going to short all 30 stocks with equal dollar amount and hope to collect some gains from 21 of those stocks that may, MAY, close the up-gap?

Anyway, ranted too far. I will rant some more in a new chapter of my new trading book "Trading The Gap".

 

[Bolimomo]

Quote from Matcha:

Prior session you mean, overnight, premarket, 3-5 days all together?

If you trade something like the S&P e-mini (ES), definitely. For ES there is no "overnight" or "premarket". The market is always open, for 24x5. You should look at the ES chart 24x5 as one continuous curve to do your analysis.

Hmmmm... for YM... doesn't it trade 24x5? I haven't traded that and don't have access to the chart. (Didn't pay). If so, yes.

If YM doesn't trade overnight, you then should look at the ES's price run overnight. Because it dictates so much how the US markets will open at 9:30 am EST. Dow e-mini, S&P, Nasdaq (NQ) and Russell (ER)... they all move together and giggle like teenage girls. Any given day they may differ in their movements by a few percentage points. But usually negligible.

 

[Bolimomo]

Quote from ~~~:

Oooh Boli ... i'd loved to hear how you imitate my "Sweet" voice
it would be Hilarious lol

Ha! Nice of you to drop by! I can only imitate a voice by typing! LOL!

 

[~~~]

Quote from Bolimomo:

Ha! Nice of you to drop by! I can only imitate a voice by typing! LOL!

All my favorite and nice people are in this journal... i love to admire you guys n gals from far~ far~ away.

 

[PatientOperator]

Quote from Matcha:

I hope you traded in SIM?

I think your last "could have been a good trade" failed due to lots of exhaustion from trading range bound. You weren't thinking clearly when you hold to it untill it turned to a loss. I have same problem too... And when it turned to a loss(from winning), it became more contagious. The emotion and loss were carried to follow up trades. over and over again...

I do this all the time... We are all human, it's hard not to repeat this habbit I guess... That;s why we all need a limit loss per day...And we have to do our best abandon this habbit so we can have enough capital to stay play...

Even though this kind of bad day happened, remember not to carry the emotion to next trading day... focus on individual trade.

You are not alone, dont feel too bad. Besides, we can always remind each other not to take bad trades. It's easier to complete the mission when we have so much support from everyone here.

Hi Matcha,

Well, unfortunately I was doing LIVE trading on Tuesday and Wednesday. Both were losing days and my only LIVE trading days in July!!! Sifu Boli and Sis ~~~ are right, the mind set in LIVE and SIM is quite different.

I am back to SIM trading today and probably for a little while longer. I need to work on my discipline a bit more. Today, I limit myself to 9 trades (9 lives) and I am more careful with my bullets to use them on the best and clearer setup I can find.

Thanks for the encouragement and your support. This is a great thread with many nice and talented people.

Hopefully I will keep learning from everyone here and improve my daytrading skill.

Quote from Matcha:


Stopped out trade: -8Pts loss
Trade A: 33Pts

I found that I have some problems trading at the opening; I had a lot of uncertainties. Probably because I just started to pay attention to opening trades. I feel like it’s hard for me to find the direction of the market at the opening. Like today, I kept thinking of going long while market is collapse. Not that I am doing a great job at the late session, but I have a little bit more confidence.

Today’s PnL: +$120 2 trades, 50% winrate

You did great today in your risk:reward ratio. 50% winrate and you come out way ahead. Way to go to become a profitable day trader!!!! I always admire the way you take smaller losses. Do you have a set limit for your daily loss and then call the day off? Like on Wednesday, I should not have allowed myself to keep losing big for 4 straight trades.

I still don't have confidence to trade the 1st half hour to an hour. I used to take the "Best Trade" advice from Al Brooks to trade his first hour failed breakout patterns (pg. 374 to pg. 379) I studied his failed breakout pattern charts on page 378 but could not master any of his methods in any great confidence. I have stopped trading those morning patterns for now. I think Boli is right that trading the morning gap is not easy, it should be reserved for advanced traders. On the other hand, Marcel Link has an opposite advice, on pg. 226, he said trading the opening of the market is LOW probability trading. On pg. 326, one of his rules is to trade light in the morning until he get a feel for the market's trend. He also has another rule - "don't trade the news".

Best of trading on Friday!

--po

 

[PatientOperator]

Quote from Bolimomo:

Oh. Thank you PO.


Do I trade in tight range? Well... "Sweetie" ... trading is the only source of my income. I need to trade in all environments. But trading the opening and the chaotic markets are my favorites.

You are welcome Boli!

So you do the high wire act often to pick quarters on the highway???

You sure are the master!

--po

 

[Bolimomo]

Quote from PatientOperator:


.....
On the other hand, Marcel Link has an opposite advice, on pg. 226, he said trading the opening of the market is LOW probability trading. On pg. 326, one of his rules is to trade light in the morning until he get a feel for the market's trend. He also has another rule - "don't trade the news".

PO: Trading the opening can be highly profitable but it takes experience and quick reactions to deal with it. I used to trade the opening with an Internet browser and an Ameritrade account. You know... you need to click through 3 pages to place an order (#1 - get to the order page, #2 - fill in the number of shares, stock symbol, order types, etc.. #3 - another page for the read back confirmation. SUBMIT. The keep clicking the refresh, refresh, refresh.... was it filled? Was it filled? Was it filled??? If not... go through the same 3-step pages to change the price (or cancel)...

Laughing out loud... looking back... No wonder I lost my shirt trading the opening!

The nice real move usually starts to emerge after 15 minutes (9:45 am EST) to 45 minutes (10:15 am EST). If you don't start trading, it may be late.

Anyway... your skill will come. You will be successful at it! Meanwhile, train hard!

 

[Bolimomo]

Quote from PatientOperator:


.....
So you do the high wire act often to pick quarters on the highway???
.....

You set up the safety net first before you pick up the quarters.

e.g. Let's say AAPL looks like it's in range ripping up and down $1.00. It's at the range low. $256.50. You want to long to scalp 20-30 cents. First set an order to short at $256.30 (20 cents below). Then put in another to long 256.50. (Or use some of the bracket order types, which I don't like... too cumbersome...). So once you are filled, you already are protected for 20 cents shall AAPL suddenly tank (hopefully the slippage is acceptable). Then you scale out at 256.70/80. Or bet to traverse the entire range.

It may be a 50/50 R:R from straightly a price ratio standpoint - 20 cents risk, 20 cents gain. But if you can win more than 60-70% of the time, you can still be ahead with a 1:1 RR ratio.


Again, the priorities should be:
#1) Follow the trend - try to get in early.
#2) Fade the trend - try NOT to get in too early.
#3) Trade range bound, tight market, or chaotic markets (e.g. Diamond but not a triangle), or the sudden spikes (e.g. May 6, 2010 - flash crash)... those don't come often enough.

 

[~~~]

Quote from PatientOperator:


Well, unfortunately I was doing LIVE trading on Tuesday and Wednesday. Both were losing days and my only LIVE trading days in July!!! Sifu Boli and Sis ~~~ are right, the mind set in LIVE and SIM is quite different.

..................

--po

Hi PO.

Yeah...the mind set in "LIVE" and "SIM" is quite different.
like being a driver(LIVE) or a passenger sitting beside a driver learning how to drive(SIM)... the different is BIG!

the driver has to control his speed, turning left/right, side parking, reverse parking, driving in a freeway or big city...etc, etc.
you can read all the books in the world but...
a passenger will NEVER learn to drive if he's Not put into the driver's seat.

same principles in trading ... all you learn from the books are only theory and techical ... but you need practical actions in trading.

Before you go "Live" first you have to be mentally prepared to have
"Strong Discipline".. like a soldier fighting in the war ... you want to win and take only "Calculated Risks".. like how many bullets you have and don't simply shoot your bullets into the air (what a waste!) and must retrace if the opponent is too strong or be "Flexible" join/follow the opponent to get to your "TARGET".

now come to the more difficult part, how to control your emotions ...
PO...i am not going to teach/ask you to be a Robot coz you're a human.
Yes ... we're all humans and we have plenty of emotions...
PO... use all your emotions on people or dogs/cats or arts or poems but never, never be emotional when trading in the "Market". You must treat the "Market" as a "Money Making Machine" only and you are the Engineer trying to understand "the Machine" ..how the "Machine" works & benefits you.

~Remember PO: You're not the Robot but the Engineer who fixes/gets the "Machine" to make $$$ for you.

 

[Matcha]

Tried not to pay too much attention to the news today. Turned off the CNBC volume. Only left my Pandora radio station on. Techno music!

Market overnight reaction: broke up the consolidation zone, then sold off. When market opened up it retraced back up 50%, then sold off. I took a quick short position, 6:40 bar, the extra long body. It worked well in the first 50 second, then it was hit by the next long green body bar. By the time, I realized market formed a double bottom pattern, trend is turning to the upside, price has run up 50 Points. Then I waited for a second leg pull back to enter. It was Trade A.

TRADE A: Long. 3 leg on a strong rally. Just because it was a 3rd wave, I took profit very quickly, too quick…

20 Pts

8:30 bar, Took a short position. Market broke down from the wedge pattern on top of the rally. Up trend line was broken. Reversal is mostly like happening. I took a short here, but the candle quickly turned in to a long up tail spinning top candle, it ran my stop. I reentered to continue short, stop out again.

8:45 bar, Took a long trade. Stopped out by the next outside bar with no real body. Then market started to form a triangle pattern.

Total 3 losing trades: -21 Pts, gave back the gains from Trade A

10:15 market finally broke to the down side without me.

11:32 bar , took a short position, price retraced back to 50% of the down move. So I took short trade to bet the price continued to head down. But it rallied back up.

Trade B: Long. Price broke the small triangle pattern; long large green candle ignites the move. A classic first pullback trade. I finally participated it..

Took profit a bit quick, but at least nailed the 80% of the move.
33 pts.

In general, today I wasted too many trades on triangle patters… Too bad by the time I can recognize it was a consolidated pattern, I have already wasted too many bullets…

Today’s PnL: +$123, 33% win rate, 9 trades( didn’t realize I went over my maxi. Trades per day)

Weekly Recap:
PnL: -$19.8
Winrate: 47%
# of trades per day: 5
Comments: look at bigger pictures, 3-5 sessions. No trade in tight trading range. Not too attached to the news.


Have a great weekend everyone! Happy trading next week!