Prop Trader Journal

My magic hindsight ball actually sees that 2nd trade as a short setup.

First, it is the 3rd push up from the 11 AM low, forming a rising wedge. This is an Al Brooks concept that a 3rd push tends to lead to a correction. I've found it to be useful foward testing it, especially on a chop day like this. The 3rd push was enough for a pretty weak breakout, but the pullback took it back inside the range, which would tend to be a breakout failure.

It also broke the trend line on the pullback, another sign of possible reversal.

1. The red inside bar looks like a good short to me given the context above(short below on the next bar).

2. 2nd entry, same type.

This is also what Brooks calls a failed final flag. I'll annotate that in a minute.
 

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The first two flags broke out and then the 3rd never really broke out. It even pulled back into the 2nd flag which is too far to represent any strong bullish order flow.

The key concept here is that you were in a chop day as evidenced by all the long tails and overlapping bars. On days like these you want to fade the breakouts (with confirmation of course) until shown that it is no longer choppy.

I've looked at volume in the past and honestly never found it to be of any use. I'll have to look at it again though.

And I am afraid of divergences because I see them everywhere in every trend when I am watching in real time. This was my biggest source of losing trades for a while.
 

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Quote from baggerlord:

The first two flags broke out and then the 3rd never really broke out. It even pulled back into the 2nd flag which is too far to represent any strong bullish order flow.

The key concept here is that you were in a chop day as evidenced by all the long tails and overlapping bars. On days like these you want to fade the breakouts (with confirmation of course) until shown that it is no longer choppy.

I've looked at volume in the past and honestly never found it to be of any use. I'll have to look at it again though.

And I am afraid of divergences because I see them everywhere in every trend when I am watching in real time. This was my biggest source of losing trades for a while.
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Hmmm...I see interesting stuff! Im not talking about regular divergence but volume divergence. Found it in one of anekdokten's threads. FYI Two of the head traders in my room both trade with techincals(pa etc.) and both use volume. One has had multiple 7+fig years
 
7/13/11

-$40.00
Shares Traded=-1,400

Another not so good day. Pretty much didn't do well with anything I put my hands on. Today again I had a similar problem to yesterday...focus was not on one thing at a time and missed some trades in the SPY. Dabbled in some other things. Bought and sold some breaks in some catalyst driven stocks that were unchanged on the day.

ERTS, ASML:

These were the stocks that I played the breaks on...I found today it was a better idea to watch for a close below the range when playing these! Entries were lousy and left too early in both cases. Also stop placement could've have been better. Lesson learned...put the stops in the the correct area if that can be done. Don't Chase!

SPY:

A shit show in the SPY's today! One BE and two losers. First trade was off of the pullback midday...looked like a stop run as there was no volume on the break, had a small loser as a result. Second Trade, Came back to my desk after getting lunch. Missed the reversal off of the pullback midday...didnt get filled by one tick and bought higher in expectation of it going higher...paused with no follow through...got out. The next trade was a short in the downmove towards the close. Got short and was stopped out in the SPY's...the ES held at that level. Stop run FTW! lol this has happened many times to me, need to watch the ES for the break of the level and just swipe out so that I dont get shaken out in the SPY.

Also the blue circles are the areas where I tried to inititiate a trade...first one was busy with a stock off of the open...second trade just never came back to the level I was looking for.
 

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I like your first long, and very nice exit.

2nd buy looks bad to me. Price had just put in a lower high and then taken out a trend line. This creates a triangle pattern and I wouldn't consider any further longs until there is a breakout of the upper triangle line.

Then at bar 1 there is a bullish outside bar that some traders would place stops under. When that low gets taken out, stop losses get triggered. It also happened to be a breakdown of the triangle, which is one of the more reliable patterns IMO.

This set up the most obvious and best trade of the day the way I see it, the short under the inside bar 2, on the first pullback from the triangle breakdown.

Your 3rd trade my thoughts are that you are shorting on a pause, but the momentum is up. That is a doji type bar, but it is green which means that buyers are still slightly in control at the moment. For this reason I think you would be better off using a looser stop, or waiting for downward momentum to take you into the trade.



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Quote from baggerlord:

I like your first long, and very nice exit.

2nd buy looks bad to me. Price had just put in a lower high and then taken out a trend line. This creates a triangle pattern and I wouldn't consider any further longs until there is a breakout of the upper triangle line.

Then at bar 1 there is a bullish outside bar that some traders would place stops under. When that low gets taken out, stop losses get triggered. It also happened to be a breakdown of the triangle, which is one of the more reliable patterns IMO.

This set up the most obvious and best trade of the day the way I see it, the short under the inside bar 2, on the first pullback from the triangle breakdown.

Your 3rd trade my thoughts are that you are shorting on a pause, but the momentum is up. That is a doji type bar, but it is green which means that buyers are still slightly in control at the moment. For this reason I think you would be better off using a looser stop, or waiting for downward momentum to take you into the trade.



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one setup/pattern that I am noticing is an inside bar after a momentum move occurs...obviously within the correct context. I will start looking into it starting tomorow, any ideas on the use of the inside bar in momentum situations?
 
Yes it has always been my favorite entry setup in the right place like you said. Mostly because it gives such a great RR ratio. Obviously it is never as good as it looks on a chart after slippage but it still makes for a great RR.

Honestly I think I would have done a lot better when I was trading prop if I had only taken inside bar entries. There are more than enough every day you could trade nothing but them if desired.
 
7/14/11

P&L=-$81

So I was down close to my loss limit today($100). Traded YUM off of the open and did not do too well. I should've stopped trading after having three consecutive losers, but that level 2 can be mesmerizing and lure one in. I will stick to this rule going forward. Also Traded the SPY today had one winner and one small loser scratch. I have attached both in the screenshot. The first trade I should've waited until I got some bullish action before entering. The second trade was botched because I was hoping to make up for some of my losses. At one point I was .40 cents in the money and let it come back to my entry. Should've took my out as it was originally near the lows of the day.

YUM

-57.00

SPY

-16.00

Plan for Tom:

-No more trades after three consecutive losers. Get back in flow by paper trading.

-Have an out and target for every trade and execute them!

-No scalping/order flow trading tomorrow...just watch.

Focus on the SPY trading...feel like I might even be profitable right now if I only focused on that. I also feel like I can move forward and eventually scale up as much as I want there, rather than scalping 500-600 shares in momentum and in play stocks. I will continue working on the order flow trading, but will focus on what I am doing well with! A trader recommended me to wait for the best setups and only take those I will start doing this and limit myself to 1-1.5 tickets a day. Focus on learning and observing the rest of the time.
 

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Every succesful trader I know recommends trading only one market until profitable. Sounds like a solid plan to me.

Suggestion:

Focus on identifying as quickly as possible if the market is trending or choppy.

If you don't know, don't trade.
 
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