My Path To Success

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Tough to call direction here. ES has weakened a bit.If RIMM hadn't missed then I'd say we'd go up for sure. But just not sure in this market.. I also seen more selling at the highs. ES has weakened overnight as I anticipated (called that move).

I would typically be long based on the 1 day delayed rally expectation. However with RIMM and the ES futures weaker then expected. Also there was a lot more selling yesterday then anticipated.

I don't think I can justify paying up in this market. We probably retest the lows. There is a different type of market participant active in the market today. This is a participant who wants out at any price. They aren't giving 2 way trade. Stocks are basically a commodity. Worthless.
But this participant must have some valuation model.

I don't know. The market seems bent on testing 1272, 1276, and maybe even 1282. Couldn't hit the 1272 though... Bears lost target
too.

My best guess is we have a fast range trade tomorrow.. maybe probe anywhere from 1250s to 1270s or we just keep selling off.
I wish I had better read on this market.

If I take any trades then it will probably be long but only from the 1250's. Careful with the entry.

Collapses don't come out of nowhere. This market has been signaling something bad wrong for a long time. The nice thing about trading spreads versus futures is that such tail risk is greatly reduced. Yeah good sell pressure hitting the market now.

When does averaging down work? I don't average down but when would it work? It works when the market is range bound. It fails when the market trends. When does buying weakness work? It works when the market ranges or bounces. It doesn't work when the market trends. When does selling a breakdown work? When the market trends. I tend to think of "trends" in the future sense, as to where it will trend too.

Market structure helps to guide the proper course of action. If I predict a trend day then I won't be stepping in to buy weakness simply because no price will be a good price.

I'm anticipating either a trend day down or a fast wide range day. Right now futures are selling off better.
 
P&L: +$430

I caught some of the move up today. My target was 1274 but I pulled really out early based on the way the market was functioning. I didn't know about the Fed meeting today? (or whatever it was) and I recognize that was a hole in my plan. Had I known, I would have held longer and then maybe sold out before the event.

I recognize this is a gap in my trading and my solution will be review events at least on a weekly basis. I know of a few event calendars. If anyone knows of a really good s&P 500 event service, prefer free then message to me or post here (if allowed). Ideally, I'd get a summary of all the reports and expected numbers emailed to me.
 
Interesting NADEX has introduced some new spreads and taken away some:

http://www.nadex.com/trade/markets-stock-indices.html#tab2

Prior to the new change, they had 3 narrow spreads and 1 master spread. Now they are offering:

# 1 daily expiry 'Master' Bull Spread contract (a single contract per day with a wide Floor/Ceiling range)
# 3 six-hour to 8.25-hour expiry Bull Spreads (3 contracts per expiry with overlapping moderate Floor/Ceiling ranges)
# 7 two-hour expiry Bull Spreads (each consisting of 3 overlapping narrow Floor/Ceiling range contracts); The two-hour expiry Bull spreads are not available for Japan 225 or Korea 200 markets

I like they are adding new spreads and new options. However, I'd like to see a 48 hour hour spread. Also, they took away the narrow overnight spreads.

The question is how much of a detriment will that pose to me? The reality is it was almost impossible to get decent pricing on most of the overnight spreads anyway due to excess premium and premium time decay. However, it does sorta affect me in that I can't place my limit orders overnight. This just kinda changes the way I have to work: i.e getting up in morning to place my limits. I'll still have the master spread for taking out measured moves overnight and the binaries for extremes. Still though, having a more moderate overnight spread would help with not having to watch the market when taking out measured moves.

In terms of what spreads I like, I like spreads with small premium. For example, I'm willing to pay a slight premium for a limited risk but not a large premium. The truth is that if you can pull out $100 per contact trading the ES then you're doing excellent. So, you don't have much too give up. Even gaining 1 point edge is worthwhile.

One idea I've been hitting on is actually selling premium for my scalps. In other words, I'll buy a contract that gives me a better entry and a higher risk. I expect market to move in my favor and I'll have 2 "winds at my back" so to speak: the time decay and my directional biass. I'll be gaining 1 or 2 points premium just from time decay. I am really leaning to use this strategy. Of course, I'll take more max risk on my trades but I like the idea of having 2 winds at my back. It may not work but this is one of my better ideas, I feel.

So for example, let's say market is at 1272, I'll take an asymetrical "risk/reward" and buy maybe get a fill at 1270. I've got 2 points of edge right there and if I'm right on direction then I may pick up more. The idea is to combine taking out small measured moves of 2-4 points with the premium of the spread.

The downside to this idea is the spread will have the premium built in. So, it may not work.. i.e if I hit my target right off the bat then I can't sell out and capture the premium immediately. I have to wait for the premium to decay which could work against me. Also, if the market moves strongly in my favor then I won't be able to take those profits. So, I don't know how this will work in practice. But, in my mind if I'm calling direction and you say I give you 2 points premium then its hard to see how that goes against me. It'd be like saying, you can buy below the market provided you set a larger stop. Okay.. thank you. I'll take that bet. Of course, the catch is I hit my target really quickly then the contract will still have a lot of premium built in: so I won't be able to sell out and capture all of the premium that I was payed on entry.


I'm always thinking though.We'll see.
 
Progress report:
It's been approximately 4 months since I started this journal. My model account has been approximately $3,000. Due to they moved my account and non market expenses, I actually have less in the account.

What it is, what it is

At peak, I was up $1500 net
Currently, I'm up $430
-------

Difficult to say that I will return by end-of-year but at this rate, a linear extrapolation from current balance would give 50% but that might be ungenerous given I'm at a low. If I take the median then I'm looking at around $2300. My primary system can return 70% to 120% per year. That would reasonable provided it continues to do well.

It is more difficult to estimate what my discretionary trading can return. I'd imagine a 1:1 r/r would be me in the 50% ballpark even at 2:1 the we are looking at 100%.

I'd like to do more then any of these figures obviously. But, I'm also running pretty close to a risk-of-ruin at current leverage rates. Giving back $1,000 in a week certainly hurt me.

I knew when I started that a 30% to 80% return on capital would be a good performance. Now, I am presented a question. Do I focus more on the capital return or just my trading and reduce the size? This a good question.

i want to say in the game. I can always add capital later. But, also, I need to be risking enough to be meaningful. If I get $100 gain then I'm like that' snot much, $100 loss hurts. A $300 or $400 gain is "thats okay" but a $300/$400 loss hurts worse. I think that part of my expectations are based on my sim account, I get used to seeing and wanting to see certain numbers. But, I'm not trading the same size account.

Ill have to think on this some more.. maybe I can meet both aspects by focusing on absolute return of my system and just staying in market flow for my discretionary trading.

In terms of holes, I've seen some fairly rough markets. I've found that my style exposes me to concentration risk. I've, also, seen very high serial correlation that I haven't seen in years past in my strategies. Whether concentration risk is something i need to mitigate, I'm not sure. But, I for sure do not like the serial correlation risk. I'm looking at adding on-line some new systems and using a mix of my systems and discretionary trading to mitigate some of these risks.. but takes time
 
Sorry, that wasn't me. That was EMG, I believe. I never said stops are for losing traders. I stated that stops are often the cause of losses. I'm trading spreads with defined risk/reward which means I have a "stop loss" built in that can't be taken out. Some of the early hits weren't really hits they were just worse case scenarios based on the max size of the contract. But, yes.. I agree very high volatility here. I'm trying to return more then 50% here. A 50% account loss would not take much to go wrong.

Quote from athlonmank8:

Wow...the same guy saying stops are for losing traders and are a negative thing.


Posting some pretty heavy hits at the start. No surprise.
More...
 
Currently short on a hypothesis market will sell off after the fed minutes? release

Not sure how good this trade is.. I'm using a binaries in this case because the risk. Smallish position but still don't want to lose.
 
It is time for me to go see my trading coach. He's myself. I'll let you sit in on the conversation.

Me:
I traded terribly today. I was looking for a rally and wanted to get long last night but my contracts change around and the market had ran up so far that I didn't feel I could get a good low risk entry. So, I try to place my orders by 11:00 AM or so cut off. That's my cut off. I was a hairs breadth from staying flat but shorted.

Coach:
Did you short based on "phony technical analysis" (i.e support resistance) or your expert market read and favorite patterns?

Me:
Well, the market had stalled at one of my targets. I was careful not to short just based on that. I did see a pattern though that I felt might have been indicative. The real problem is I've just been completely out of the market loop. I thought the fed was releasing report today and thought it would run until the report then sell off. I didn't know even it wasn't until tomorrow.

Coach:
I see. Anything else?

Me:
Yes, I knew it was a risky trade and decided to enter using a risk limited instrument (binary). I added slightly to my position later when I thought it was working out. I pulled out for the best price when I realized I was wrong.

Coach:
That's good you recognized you were wrong. Why didn't you reverse and try to capture some of the up move?

Me:
Yes, that's true. Well, it just just late in the day at that point.

Coach:
I want to get back to your shorting. You were shorting a market where institutions clearly weren't shorting or active on the short side. What made you decide to do that? Granted, you detect a pattern but you know shorting is a lower probability trade. You know that shorting off a bottom has a terrible risk/reward.

Me:
Well, this gets back to my account which only has $1,000 in it. It has less in it because they moved my accounts around and so it was only 1k in it. But, also, I've had a ton of non market related expenses and stress on me. So, I haven't replenished it. Anyway, I just felt I need to prove that I'm still in the game.

Coach:
You wanted to prove you were still in the game. But, you weren't willing to do whatever it took to win? You weren't really pushing the best trades or going for your absolute return were you?

Me:
Right, coach. I recognized I wasn't at my best and scaled down.

Coach:
Well, we have a few obvious things you need to work on. You need to start knowing what is going on with the market. You need to start pushing yourself to be on the right side of the trade and staying in flow. It makes sense until you prove this that you keep your position size down. We may want to put some more money in your account so you don't trade scared, either. I'll have more later.
 
Meeting part 2

Coach:
What's the real problem?

Me:
The real problem is I used to the master of the market. Now, I struggle..

Coach:
But what the deal you made yourself when you became the master of the market. What was the deal?

Me:
The deal was that I'd never mention it. Now, I spend more energy thinking about why I'm not recognized.. why I don't have more followers.. etc

Coach:
Exactly, instead of spending your time getting to Flow. You are spending your time spinning your wheels, worrying about money and recognition. Let me ask you a simple question, you claim you want to serve and to trade. Do you still want to trade?

Me:
Where are the crowds? Where are the cheering crowds when I'm winning?

Coach:
Exactly. There are no fans of successful traders like you must become. No fans. You must start to love the obscurity again.

Me:
Being in a state of Flow with a connection to the Source is most important to me. That is really what I want.
 
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