The Journey of Making a Living as a Professional Trader
- Thread starter Wingz
- Start date
The Context
The last couple of weeks I've been building up positions in 12+ longer term FLYs, Condors and COMBOs. As it's mean reverting me 'building a position' basically means I'm steadily going offside. I was down for the month , I had a few positions that were going well so the loss was maybe only half what it could have been, once my onside positions had finished their move and I was out, I was stuck in a situation that I haven't been in during my FLY trading this year - where every single position was going offside. A deer in the headlights moment for a bit :eek:
First Steps
After reading your last post KDASFTG, it clicked to me that I needed to start being a bit more 'present' in my trading instead of suppressing emotions, embracing them and being able to handle them more effectively. Whilst becoming aware of the beliefs that allow me to execute trades.
I started reading a book, Tradermind by Steve Ward. It's about being present and mindful with regard to improving trading performance. I've read a few other books on the subject of being present, Inner Voice of Trading by Michael Martin, The Power of Now and A New Earth both by Eckhart Tolle and 8 Minute Meditation by Victor Davish.
A couple of others that I've read before spring to mind and I'll go over them again in the next couple of weeks. Mastery - George Leonard and of course Trading in the Zone by Mark Douglas.
Observations on the process of becoming present
I wrote the above on Wednesday, with a couple more trading days under my belt. I was better able to handle some of the my most volatile intra day swings on Thurs and Fri.
During my mental rehearsals from Monday to Wednesday I listened to a Spotify Opera playlist - one of the songs was especially helpful. Especially when the voice goes up into crazy opera mode - I imagined my positions all spiking against me at the same time and then buying into the down move. This process and the song massively helped as I had already seen it coming.
Monday through to Wednesday all my positions were going well and I sat back and essentially meditated and mentally rehearsed.
Thursday was completely wild, something happened between 6-8 GMT (Brent settlement is at 730).
My 6 month long term FLY DecJunDec initially came off to -1.08s ish and I pulled the trigger and bought more - (mental rehearsal). I got out of the additional position around -0.98s. Price went up to -0.88s, I got out of a small piece of my core position at 90s (last breakout point) but held the rest.
That may not sound like a lot, but I had quite a few lots on and I'm essentially that way round in most of my positions, long the front and short the back - all of my positions went at least an extra tick onside. I hadn't prepared for it in my head, so I took a step back and chilled out.
What was the best unrealized profit I'd ever seen on my screen in a day then took a sharp turn down. The DecJunDec got slammed down to -1.05s or something and all my other positions suffered, leaving me down around half the amount I was up on the day.
So I bought some more DecJunDec, this time doubling my core position (mental rehearsal). The settlement loss all came back after an hour or so, so I was essentially break even for the day.
Friday was basically the same story, up in the morning equal to settlement, this was then steadily climbing, close to pre Thursday crash levels. Then smacked down again, going up over settlement this time, making up for about half the loss on Thursday.
Completely wild swings with numbers I'm not used to, it's a shakeout I say! As long as I can trade the mini ranges intra day and job the price around I'll be able to come out of it on top even if everything starts going against me.
Anyway regardless of the actual trades I took I was able to deal with the swings effectively and job the movements better than I ever have. Remaining in control and not feeling exhausted at the end of the day.
I will keep practising being present and mindful, with live mental rehearsals and not let my opinions or fleeting emotions hold much sway over me as I take this next step on my journey.
Thanks guys!
The last couple of weeks I've been building up positions in 12+ longer term FLYs, Condors and COMBOs. As it's mean reverting me 'building a position' basically means I'm steadily going offside. I was down for the month , I had a few positions that were going well so the loss was maybe only half what it could have been, once my onside positions had finished their move and I was out, I was stuck in a situation that I haven't been in during my FLY trading this year - where every single position was going offside. A deer in the headlights moment for a bit :eek:
First Steps
After reading your last post KDASFTG, it clicked to me that I needed to start being a bit more 'present' in my trading instead of suppressing emotions, embracing them and being able to handle them more effectively. Whilst becoming aware of the beliefs that allow me to execute trades.
I started reading a book, Tradermind by Steve Ward. It's about being present and mindful with regard to improving trading performance. I've read a few other books on the subject of being present, Inner Voice of Trading by Michael Martin, The Power of Now and A New Earth both by Eckhart Tolle and 8 Minute Meditation by Victor Davish.
A couple of others that I've read before spring to mind and I'll go over them again in the next couple of weeks. Mastery - George Leonard and of course Trading in the Zone by Mark Douglas.
Observations on the process of becoming present
- Use of opera music to get present - I usually use some form of mood altering music, rap, rock or dubstep for aggressive trading, chillout for when I need to calm down, find new artists when I'm bored etc - I never listen to opera, but I found that the modulations in voice and sound were the most fitting to stay present whilst still being somewhat similar to the movements in prices. It was very helpful during mental rehearsals, when the voice went up into a high… I don’t know 'opera crescendo?' it coincided with me mentally rehearsing unexpected price swings
- Taking a mindful approach - mindful walking- no longer the fastest guy down the street, making coffee, walking to the toilets aware of the feel of the ground and in a slow chilled out way in the office rather than rushing off as fast as possible. I basically try to be more aware of the environment around me and the thoughts I was having.
- Mental rehearsal during trading - visualizing as many permutations and swings in the path to my target as I could (most people can handle a straight line move, but one that’s all over the place is a lot trickier psychologically), I was aware of the emotions and confident I could handle most situations if they came up.
- This paid off in a big way when the DECJUNDEC all of a sudden spiked down 10 ticks after the brent outright broke some levels on the daily chart (along with most of my other positions, albeit by smaller amounts). It shook my emotions maybe 5-10%, I held steady and it all went back up and made new highs. I almost bought some more but as I hadn't really rehearsed it I had less confidence and when I didn't get the bid for the DECJUN leg I didn’t lift the offer. I was basically willing to get a cheeky fill, but not be aggressive in the execution.
- I found I had more of a third party 'observer' perspective.
- People in the office seemed to notice - as I wasn't being 'reactive' to those around me compared to before and was listening properly rather than nodding my head smiling and trying to suppress emotions in the market and in social situations to maintain focus - I found I could shoot the shit and get back in the zone more efficiently
- I focused on the process of trading and improving my edge
- Printing off some Jesse Livermore quotes and sticking them to the edges of my monitors.
- Looking over all the chart permutations of the FLYs continuously and writing down potential entries for opportunities
- Reading books - finding I could focus on them more effectively
- From Wednesday I periodically hid my P/L from my screen as I become aware of my over-attention to it - it feels like I probably looked at that for 30% of the time, it forced me to be less reactive to random P/L fluctuations and I'd bring it up every now and again, but only after taking a guess at if it had changed up or down - making me focus more on the price moves and interrelationships and what was actually happening in the market rather than taking the easy route of looking at the P/L and 'wondering why' it had moved rustling up anxious emotions in the process.
- There was a point where I had a couple of small intraday winners and was able to execute flawlessly without indecision (you know those moments where you think something has an edge but something stops you) - it seems my ego became aware of this and slipped me out of the present moment replacing it with the attitude that 'this present moment stuff is the shit, I can do anything' I quickly become aware of my ego (some Eckhart Tolle reading, hidden in my subconscious popping up) and scratched the ridiculous trade I had just put on. I chilled out after that.
- It was fun, exciting, epic even - whilst I still maintained more control than I usually would - this will provide a good reference example for the building of beliefs around trading and the process of trading
I wrote the above on Wednesday, with a couple more trading days under my belt. I was better able to handle some of the my most volatile intra day swings on Thurs and Fri.
During my mental rehearsals from Monday to Wednesday I listened to a Spotify Opera playlist - one of the songs was especially helpful. Especially when the voice goes up into crazy opera mode - I imagined my positions all spiking against me at the same time and then buying into the down move. This process and the song massively helped as I had already seen it coming.
Monday through to Wednesday all my positions were going well and I sat back and essentially meditated and mentally rehearsed.
Thursday was completely wild, something happened between 6-8 GMT (Brent settlement is at 730).
My 6 month long term FLY DecJunDec initially came off to -1.08s ish and I pulled the trigger and bought more - (mental rehearsal). I got out of the additional position around -0.98s. Price went up to -0.88s, I got out of a small piece of my core position at 90s (last breakout point) but held the rest.
That may not sound like a lot, but I had quite a few lots on and I'm essentially that way round in most of my positions, long the front and short the back - all of my positions went at least an extra tick onside. I hadn't prepared for it in my head, so I took a step back and chilled out.
What was the best unrealized profit I'd ever seen on my screen in a day then took a sharp turn down. The DecJunDec got slammed down to -1.05s or something and all my other positions suffered, leaving me down around half the amount I was up on the day.
So I bought some more DecJunDec, this time doubling my core position (mental rehearsal). The settlement loss all came back after an hour or so, so I was essentially break even for the day.
Friday was basically the same story, up in the morning equal to settlement, this was then steadily climbing, close to pre Thursday crash levels. Then smacked down again, going up over settlement this time, making up for about half the loss on Thursday.
Completely wild swings with numbers I'm not used to, it's a shakeout I say! As long as I can trade the mini ranges intra day and job the price around I'll be able to come out of it on top even if everything starts going against me.
Anyway regardless of the actual trades I took I was able to deal with the swings effectively and job the movements better than I ever have. Remaining in control and not feeling exhausted at the end of the day.
I will keep practising being present and mindful, with live mental rehearsals and not let my opinions or fleeting emotions hold much sway over me as I take this next step on my journey.
Thanks guys!
Well it's been quite an adventure this month. My initial trade ideas were completely wrong.
In the process I've learnt a lot about 'jobbing', 'execution trading' and just general emotional riff raff.
To put it simply in my most indicative trade - the DECJUNDEC, I bought initially with conviction at -0.90s --- its now at -1.50s. In my head I thought 20 ticks would be the absolute worst case scenario - so I put on my biggest trade in that area!
In terms of the absolute mathematics, these are numbers I have no idea about how to deal with. The deposit for a house could swing before me over the course of a couple of hours. The numbers are less emotionally meaningful now, I started off thinking about the day to day P/L as a 'night out', that's now completely irrelevant. What really pushes me is whether I'm getting in or out at the best price given my plan.
It's been completely crazy recently. By that I mean I've learnt loads and things have not gone to plan.
I'll post up a some charts and a few snippets of my emotions shortly to give more context.
But damn.... this trading shit is tough. It's always the case as soon as you think
In the process I've learnt a lot about 'jobbing', 'execution trading' and just general emotional riff raff.
To put it simply in my most indicative trade - the DECJUNDEC, I bought initially with conviction at -0.90s --- its now at -1.50s. In my head I thought 20 ticks would be the absolute worst case scenario - so I put on my biggest trade in that area!
In terms of the absolute mathematics, these are numbers I have no idea about how to deal with. The deposit for a house could swing before me over the course of a couple of hours. The numbers are less emotionally meaningful now, I started off thinking about the day to day P/L as a 'night out', that's now completely irrelevant. What really pushes me is whether I'm getting in or out at the best price given my plan.
It's been completely crazy recently. By that I mean I've learnt loads and things have not gone to plan.
I'll post up a some charts and a few snippets of my emotions shortly to give more context.
But damn.... this trading shit is tough. It's always the case as soon as you think
Last edited:
In making this more interactive, can any chart readers objectively define the best trade setups running forward?
And here's the daily chart
So I initially went long around -0.90s - its been a fun journey.
I thought it would be a quick aggressive bounce up to 0s! Evidently not - there have been lots of intraday opportunities during this time and I'm currently flat, abandoning my initial position, taking the loss but more than making up for it with the jobbing (it took a massive amount of reflection and self awareness to put on my first short).
What's coming next guys - I'm gearing up for a reversal! It's getting pretty close to expiry though so anything could happen. Exciting times ahead!
And here's the daily chart
So I initially went long around -0.90s - its been a fun journey.
I thought it would be a quick aggressive bounce up to 0s! Evidently not - there have been lots of intraday opportunities during this time and I'm currently flat, abandoning my initial position, taking the loss but more than making up for it with the jobbing (it took a massive amount of reflection and self awareness to put on my first short).
What's coming next guys - I'm gearing up for a reversal! It's getting pretty close to expiry though so anything could happen. Exciting times ahead!
Last edited:
Developing an edge
I'll copy over a few things from my journal that describe the process of developing an edge. I write to myself every so often to get thoughts out of my head to properly analyse and review later. Here are a few bits and bobs that might be relevant.
It's the continual refinement of ideas and improving that keeps me focused on what really matters in my trading and less focused on the emotional aspects - I get my validation from improving my approach more than random P/L fluctuations.
I often write down lists of things I've done well with and areas I need to improve, here's an example from a few months ago -
Areas developed
Areas to work on
- Dealing with large P/L swings
- Holding offside and onside positions with indifference
- Psychological P/L Hedging through diversifying into multiple FLY and COMBO strategies
- Patience
- Basics of Averaging
- Use of leading/lagging correlated spreads
- Momentum based legging into FLYS
A small section of my FLY Guide - which is essentially a short book I'm writing for myself with things I've noticed or developed - I find that writing something that I would call a 'book' pushes me to improve the quality of what I say and focuses my thoughts. I look back on what I've written when times are tough in the markets to tap back into the clarity of thought I had when writing it
- Understanding my positions on the matrix and alternative more efficient entry/exits – (currently looking at each position independently)
- Entry efficiency – scaling in appropriately at good levels
- Exit efficiency – leaving money on the table, execution errors or emotions
- Trade some new markets, such as WTI and Cocoa
- Continue increasing size
- Average more at better prices given a mean reversion trade
- Improve flip and reverse trades, trade ranges from both sides more effectively
- Study into automating setups with an algorithm
- Set targets and goals for trading and work towards them
- Increase turnover – trade more
- Find more spread permutations that not currently looking at, 2v2 condors, 2 vs 6 month
Intro
This is a guide I'm continually adding to and adapting to as I improve my FLY trading.
Inherent spread market edge
There are two main inherent edges in the spread market for an intraday trader.
I think the second edge is more significant in my opinion as it's more scalable and you get to pick your levels rather than reacting in the moment to other traders in the middle of the range.
- Providing liquidity for price insensitive traders (intraday, 'execution' edge), fractions of a tick but sometimes multiple ticks. i.e a price insensitive or forced player needs to get out of a position and they're either providing a free onside position to do it or just throwing out free money that can immediately be hedged or taken for a profit.
- Providing liquidity for longer term hedgers/traders indirectly in the outright markets that cause spread relationships to diverge from the mean range temporarily as their volume is absorbed. To return to more 'normal' or fundamental levels over time.
In the spread markets it generally doesn't matter who you're against as they usually aren't in the market for the same reasons. A spread is a market within a market, FLYs are another market within that and any inventive combinations or permutations are even more insulated from competition and capable of providing a low risk - trader defined set of profitable strategies.
Different FLY trade examples
- Relative value
- 6*1Month vs 1*6Month
- 3*1Month vs 1*3Month
- Etc..
- FLYs
- 1month vs 1month
- 3month vs 3month
- 6month vs 6month
- Condors
- Flys in non-consecutive months
- Equivalently putting on multiple flys
Basic strategy
The basic strategy given the above inherent edge is a ranging strategy, buy low sell high.
Ranges generally offer 80% probability trades.
The risk can be equal to reward, but given the extreme ranging properties of the spreads, a larger edge is offered when the risk is higher than the reward and averaging comes into play.
Developing Edges
Historic spread ranges
The Brent 1 month FLYs generally range +/- 10 from 0.
Three months usually 30 ticks or so, but more open to higher standard deviation moves.
Support and resistance magnets
When price spikes within the range and rushes to the highs or lows, the S&R acts as a magnet, this sets up a trade with a good probability of coming back into the range and the breakout failing. On the flip side if price stays at highs or lows for an extended time and is edging out of the range it is more likely to be a successful breakout.
Mini spike - elastic snap band effect
These occur when a price insensitive or desperate trader needs to get out of a position. They will distort the price relationships in some way. Most of the time the market will correct this inefficiency relatively quickly, it's someone 'giving away edge'. Worth going against in most cases intraday - the inherent edge #1.
Breakout pullbacks
Most of the time when a range breaks out it will test its initial breakout point and bounce from there offering up the potential for a scratch. The psychology of this is pretty simple, anyone trading against the breakout sees a scratch made available and exits making the bounce aggressive and the breakout a self-fulfilling prophecy.
Also there's the possibility to trade the break of the range and reverse the initial range trade with a measured move target equal to the previous range.
Measured moves
Almost every time a range has genuinely broken out it will make a measured move equal to the range it broke out from. I see this ALL the time.
For example if the clear range is between 0 and 10s, if 0s are broken to the downside then it's likely that -10s will at some point be tested.
This offers high edge averaging points and provides a bit more structure to an offside trade and clarity for the areas to average positions with the highest edge. This makes more sense than averaging excessively at every price and getting squeezed out of positions.
Of course it's never this clean in practice and can get a little messy when the break extends the measured move. It's generally less likely in the spread markets to have a double measured move given the mean reversion properties. This can however be negated in the case of a fundamental move or in FLYs that are closer to expiry.
Correlated leading/lagging spread indicators
If the front 3 month FLY SEPDECMAR has broken to the upside, then the next consecutive FLY DECMARJUN is correlated and likely to also break up - at some point - its lagging while the front FLY leads the charge.
------------------------------------
What I've written will probably have no relevance to most people reading it but its the continual process of going through and refining my ideas that I think gives me an edge. It's not like I have any secrets that no one else knows, I just find what works for me and continually try to improve it.
I really like your thread and specifically the post I have quoted. Your trading 'style' is very similar to @s0mmi, creator of this another great thread: http://www.elitetrader.com/et/index...make-over-1-million-a-year-at-my-firm.280041/
Greetings from Spain!
Thanks traderdemarket69,
Absolutely brilliant thread you've linked me to - I think @s0mmi went through a lot of the realisations that I am now very early on in his trading journey.
I've read through half the thread so far, some of the insights he's brought up mirror my own and others I hadn't quite been able to express. I'll carry on reading and see what he's up to these days.
Thanks again
So back after a couple of weeks. I managed to call the reversal almost smack on, there was a little ranging in the meantime and I didn't have on as much size as I wanted when it finally broke, but I'm happy with my trades. I exited all the position at the 20 period EMA around -1.16 today.
I was thinking of a reversal due to the 'JUNDEC' settlement buyer (who's been pushing this fly down for a while) not being able to push the price down as much without massive size. One of my big trades was during the 16th - 17th Sep, I started very small around -1.38s long - kept averaging, mainly at -1.60s which was around the settlement price for an average price of -1.54s, I managed to get out the next day for an average of 14 ticks.
The settlement JUNDEC buyer kept coming in over the next few days so I kept buying around that time and exiting around 3-5 pm the next day for between 5-10 ticks of confident profit (I say confident because I was confident to size up in it without feeling any anxiety). I lost that confidence when price was lower than previous settlement around 6pm - I cut that trade for a small loss and reassessed the situation.
Settlement buying had less of an allure over the next few days as the seller wasn't there so I took a more cautious approach to my position sizing.
The 25th of Sep was a little trickier for me (from the chart below), I had on a long overnight with an average price around -1.41s - I could have gotten out at -1.33s but this happened in the morning session, so obviously in my head I was following the pattern of getting out a couple hours into the american session. That profit soon turned into a loss as the market spiked down pretty aggressively into the -1.46 area - I didn't average. Over settlement it was trading around -1.38s so I exited half and ran off to the pub (Friday night).
Damn! I got out at the worst time as on Monday and Tuesday it rocketed out of its range. I still managed to make a decent amount from -1.
41s to -1.16s - but it was half size and I got shaken out of my full clip.
------------------
Anyway - enough over detailed rambling - I'm currently long again - the settlement guy seems to be back. I managed to put some long around -1.23s (which also happens to be pretty close to the 60m EMA), I plan to exit in the afternoon session tomorrow. We'll see how it goes.
One thing anyone reading needs to remember about the spread markets - you need to be dynamic - take advantage of time of day patterns - be patient, but realise when you can make more money trading against your initial bias. I started this DECJUNDEC trade thinking -0.90s were incredible and I'd see an instant bounce to 0s. In the process I've learnt so much about my psychology, scalping and jobbing, correlated spreads - what was initially a textbook failure has taught me massively about how to adapt and look at markets objectively. My initial loss (from -0.90s) was somewhere around $15k in this spread but I've more than made that back by taking a step back and allowing myself to objectively find edges.
------------------
I'm going on and on about DECJUNDEC... I've only picked it because it moves the most and I guess is the most exciting for an observer, most of the spreads I trade are pretty boring, moving a tick or two per day (they make the most money over time though). In brent I usually have on between 8-14 FLY positions.
I was thinking of a reversal due to the 'JUNDEC' settlement buyer (who's been pushing this fly down for a while) not being able to push the price down as much without massive size. One of my big trades was during the 16th - 17th Sep, I started very small around -1.38s long - kept averaging, mainly at -1.60s which was around the settlement price for an average price of -1.54s, I managed to get out the next day for an average of 14 ticks.
The settlement JUNDEC buyer kept coming in over the next few days so I kept buying around that time and exiting around 3-5 pm the next day for between 5-10 ticks of confident profit (I say confident because I was confident to size up in it without feeling any anxiety). I lost that confidence when price was lower than previous settlement around 6pm - I cut that trade for a small loss and reassessed the situation.
Settlement buying had less of an allure over the next few days as the seller wasn't there so I took a more cautious approach to my position sizing.
The 25th of Sep was a little trickier for me (from the chart below), I had on a long overnight with an average price around -1.41s - I could have gotten out at -1.33s but this happened in the morning session, so obviously in my head I was following the pattern of getting out a couple hours into the american session. That profit soon turned into a loss as the market spiked down pretty aggressively into the -1.46 area - I didn't average. Over settlement it was trading around -1.38s so I exited half and ran off to the pub (Friday night
).Damn! I got out at the worst time as on Monday and Tuesday it rocketed out of its range. I still managed to make a decent amount from -1.
41s to -1.16s - but it was half size and I got shaken out of my full clip.
------------------
Anyway - enough over detailed rambling - I'm currently long again - the settlement guy seems to be back. I managed to put some long around -1.23s (which also happens to be pretty close to the 60m EMA), I plan to exit in the afternoon session tomorrow. We'll see how it goes.
One thing anyone reading needs to remember about the spread markets - you need to be dynamic - take advantage of time of day patterns - be patient, but realise when you can make more money trading against your initial bias. I started this DECJUNDEC trade thinking -0.90s were incredible and I'd see an instant bounce to 0s. In the process I've learnt so much about my psychology, scalping and jobbing, correlated spreads - what was initially a textbook failure has taught me massively about how to adapt and look at markets objectively. My initial loss (from -0.90s) was somewhere around $15k in this spread but I've more than made that back by taking a step back and allowing myself to objectively find edges.
------------------
I'm going on and on about DECJUNDEC... I've only picked it because it moves the most and I guess is the most exciting for an observer, most of the spreads I trade are pretty boring, moving a tick or two per day (they make the most money over time though). In brent I usually have on between 8-14 FLY positions.
Hey Chubbly,
What are CL options?
I did a google search but only came up with compiler options? Is it some sort of algo?
Thanks