This will be a better trading week than last week
Chris Curran’s excellent thoughts on managing the "inner self" or a trader,
performance slumps, what it takes to succeed over time, etc is must-read
material for all traders. You can read his post right
here, and I’d like to expound on those thoughts leading you on a personal
journey thru my own intraday swing trading this week past, rife with personal
struggles, blunders and miscues along the way.
Warts And All
It is said that we learn much more from adverse experiences than triumphs, and
this forum exists for educational purpose. With that in mind, please join me for
a review at the week past and see what we can collectively glean from it:
(1/2 position = one emini
contract | full position = two emini contracts)
Monday
09/19
-$100
ER per 1/2 position (-$500 per 10-lot)
-$200
ER per full position (-$1,000 per 10-lot)
-$100 ER per full position (-$500
per 10-lot)
-$100 ES per
1/2 position (-$500 per 10-lot)
+$100 ES per full position (+$500
per 10-lot)*
*went to +$500 per position / +$2,500 per 10-lot after early exit
Net for Monday 9/19:
-$2,000 per 10-lot ER and ES position
This was a frustrating day. The Russell refused to get out of its own way…
probably due to vaunted FOMC session tomorrow. After getting stopped out of
three successive Russell 2000 entries, I folded up shop and stopped out an open
ES short trade as well. The result was -$2,000 on each 10-lot batch of
contracts, no big deal inside a "nothing" day.
However, I choked out said ES short on a tight stop right after ER failed and I
feared the ES would also hit its original trailed stop at entry for par results.
Had I left that stop alone and given the trade room to breathe, price action
eventually went past +5 index points from entry. A little bit of patience and
faith in the method would have resulted in +$500 for the day instead of -$2,000
overall. Chalk that one up to operator’s error and let’s get to the FOMC event.
Tuesday 9/20
-$0
per full position ER long 673.30
-$0
per full position ES long 1239.50
+$200
per 1/2 position ER
short | +$1,000
+$100
per 1/2 position ES short | +$500
-$50 per 1/2 position ER long |
-$250
+$600
per full position ES short 1237.125 | +$3,000
+$0 per full position ER
short 670*
*chart feed freeze and reboot, missed the entry, went to 661.10 lows
Net for Tuesday 9/20:
+$4,250
per 10-lot ER and ES positions
Running Total For Week:
+$2,250
per 10-lot ER and ES positions
I stepped into long positions for ES and ER off the open that dribbled upward,
stalled and returned back to stop out at entry. No big deal… break time until
the afternoon news release.
We had sell signals in both the ES and ER ahead of FOMC news break, but I
ignored those and waited for Hampton Pearson to give us the good word. Rates
rose, price action dropped and lifted into retracement resistance as planned. We
shorted ER and ES that stopped out for modest gains in a second retracement to
layers of resistance.
I did a stop & reverse on the ER to go net long, and waited for resistance
levels to be tested for potential shorts again. If the ER gained momentum and
rocketed upward, I was along for that ride as well. Used to be a time where
initial move after FOMC news was a fake-out to be faded, but that pattern ceased
working awhile ago.
ES lifted into resistance above 1237 and we shorted a full position in there. ER
held lower levels of resistance, and my M.I.T. short orders were not hit to
fill… missed by two ticks off the high. Just as I saw price action sinking
lower, my chart service froze like a possum in the road. Oh no!
Had I to do this sequence over again, I would have simply hit "sell" at ER
670.00 and left it at that. Wanting to see the charts, I quickly booted up an
older version of the service on secondary computer and had my second look. You
probably guessed the rest… prices were tanking and never looked back from
there. ES eventually traded to xx and ER to 661 before closing bells rang. What
turned out to be a decent day’s gain could have easily been double or triple
that. Chalk this one up to random fate and technology glitch along with poor
decision process.
Wednesday 9/21
-$100 per 1/2 position ER
| (-$500 per 10-lot)
-$200 per full position ES
long 1223.75 | (-$1,000 per
10-lot)
*-$190 per full position
ER long 659.15 | (-$950 per
10-lot)*
*went to +$500 per position /
+$2,500 per 10-lot before stop-out loss
-$100 per 1/2 position ER
| (-$500 per 10-lot)
-$100 per 1/2 position ES
| (-$500 per 10-lot)
Net for Wednesday 9/21:
-$3,450 per 10-lot ER and ES position
Running Total For Week:
-$1,200 per 10-lot ER and ES positions
This session was rife with personal mistakes on my part… I literally stunk it
up with one poor decision after another!
First of all, I had on a full position in the ER that went +2.5
points or +$250 per mini contract in favor of my entry. It hit that high while
pressing into clear resistance, while ES had momentarily popped above similar
overhead congestion. At the time I had a trailed stop in place for -$50 per
contract exit. The market gave me a couple minutes to ponder trailing my stop up
to +$200 per contract, and I passed.
That swing turned out to be high for the day, and of course the market came back
in my face post haste. Taking one mistake and adding another to it, I decided to
back off the trailed stop from -$50 to -$100 per contract for technical reasons.
There was some semblance of support one tick above my trailed stop, and price
action held several attempts to break down right there. I gave the trade a
little more wiggle room to breathe, and it promptly proceeded to breathe fire on
my trade.
Instead of a +$2,000 per 10-lot gain, I sat on a -$1,000 net loss instead. Not a
tragedy, not a real big deal, but definitely two poor decisions of trade
management on my part. Seeing the index hitting clear resistance early in the
day was enough reason to get defensive and protect modest gains. I didn’t this
time, but will make different choices next time around.
Just Sell, Stupid!
For similar long-winded reasons, I passed up two different sell signals in both
symbols that went on to work very well without me. A late-day attempt to catch
apparent short squeeze was merely a bull trap set by bears. Overall, I passed up
significant profits on the short side thru little more than poor trade
decisions. As Don Miller has told us for years now, sometimes we are in synch
with the market and sometimes we are not. This was definitely an out-of-step
session for me, no two ways about that.
Thursday 9/22
-$100 per 1/2 position ER
| (-$500 per 10-lot)
-$100 per 1/2 position ES
| (-$500 per 10-lot)
*+$100 per 1/2 position ER
| (+$500 per 10-lot)*
*went to +$300 per position /
+$1,500 per 10-lot before exit
Switched
to shorter-term charts for sideways action: solid potential gains in ER/ES
Net for Thursday 9/22:
-$500 per 10-lot ER and ES position
Running Total For Week: -$1,700
per 10-lot ER and ES positions
Thursday was a
roller-coaster session with price action flying all over the place. There was no
trend structure, no directional bias one way or the other until late afternoon.
Trendlines drawn intraday were breaking left & right, or better said "up and
down."
It was soon apparent that
this session was going to be an volatile, emotional, gyrational one. We switched
from intraday swing trade attempts to shorter-term 3min charts and enjoyed solid
success.
Long prior to Wednesday, I
had been working between 3min charts in aggressive reversal mode and 8min charts
in more deliberate swing trade mode. Recent tweaking and testing backwards and
real-time showed that using a 5min chart (or similar timeframe) and blending
logic of both offers the best overall speed for most market conditions.
This week’s highly active
program slams and quick swings up & down on high volume was pretty fast action
at times. Behind us and ahead of us lie more small-range, low volatility
conditions. I hate to think it and dread saying it, but VIX levels are still
near decade lows. No reason to expect a return of "normal" volatility enjoyed,
although it would be most welcome indeed.
Trading backwards thru the
week using 5min chart logic and benefit of hindsight showed different
trade signals = potential decisions. Backward research is vital, but forward
trading is always where rubber meets the proverbial road. The plan is to take
our 5min chart into Friday, trade earlier signals more aggressively than
previous sessions this week and see what happens from there.
Friday 9/23
+$100 per
full position ES short | +$1,000 (per
10-lot)
+$200
per 1/2 position ER
long 650.10* | +$1,000 (per 10-lot)
-$100 per 1/2 position ES long |
-$500
+$410
per full position ER long | +$2,050
$0
per full position ES long
+$200
per 1/2 position ER long | +$1,000 (per
10-lot)
+$150
per 1/2 position ES long | +$1,500 (per
10-lot)
-$50 per 1/2 position ER short |
-$250
Net for Friday 9/23:
+$5,050
per 10-lot ER and ES positions
Cumulative For Week: +$2,350
per 10-lot ER and ES positions
The final long trades for
this session each went a few index points higher than exits. Could have hung in
on the ER long to expected price objectives +3pts (+$300 per contract) higher,
but trailed out at light resistance with memories of Wednesday fresh in mind.
Other than that, we played it
pretty much textbook fashion… no real mistakes were made in my opinion. We did
use the 5min chart logic = sequence as planned, caught most of the signaled
moves (not all… one never does catch everything). Definitely sticking with the
5min chart settings and overall approach from here.
Looking Forward In Hindsight
The week just passed offered honest potential for +$15K to +$20k per
$100K balance traded in my estimation, benefit of hindsight looking backward in
time. Regardless of how we’d like to trade each session over again, the results
in our trading account remain unchanged. I don’t know about yours, but my broker
doesn’t care to listen how I shoulda done this and coulda done that. Such
lamenting does not affect the black (or red) ledger balance in trading account
run sheets next day. Decisions made (or missed) in real time are all that matter
to this point in time.
Likewise, there is
absolutely no benefit to stewing, brooding or obsessing over mistakes made in
trading. That type of hindsight dwelling will only poison future results from
there. However, we can use hindsight results for valuable lessons to be applied
forward.
A few of the lessons I (re)learned
this week:
1. Never move stop-loss orders away from price action. We can always enter again
if stopped.
2. Trade the trend first, worry about reversal setups afterward.
3. Treat each symbol traded separately from the other. Do not exit one early for
sake of other.
4. When price objective targets on a chart are visible, give the trade
reasonable room to work.
5. When price action trades at clear resistance or support AND unrealized
profits are at least 2x initial risk, crowd the stop or exit and look to
re-enter later.
Definite Plan
In Friday’s action you will see one trade of 1/2 position long ER at 650.10
level. That happened to be a few ticks off the days’ low. If added to on the way
up and held into highs, one trade would have outperformed all other efforts. We
can see that clearly when the closing bell has rung. Hanging with swing trades
covering that type of ground all session is a different method unto itself.
Defining one’s approach and sticking to that individual plan is paramount for
success.
I could probably make more
money per contract trading pure 3min charts taking every signal that comes
along. However, my own personal plan involves operating a private equity fund
trading significant contract size. There will soon come a time when turning 400
ES and 100 ER contracts per trade is the norm. That doesn’t allow hitting every
wiggle in the market and trying to crowd stops = scalp out +$100 per contract
without significant slippage on entry and exit.
Other traders have
different personal goals. Some are content to trade smaller (or larger) contract
size for quick scalps. I prefer to trade for moderate = bigger intraday swings.
All of us collectively make the market. Each of our personal plans is indeed
ideal for us. That said, there is usually room for improvement, refinement and
enhanced efficiency of operation.
When it comes right down to
it, trading a pattern-based methodology via personal decisions or trading a
thoughtless, 100% mechanical model is no different. Working thru the tough
mental stretches of method trading OR taking the next trade signal of a
mechanical model diving deep into new equity drawdowns in never easy. Neither is
our profession. Like it or not, there is a lot more involved to consistently
profitable trading success than most would prefer to acknowledge. But… that is
the truth, and the truth shall set us free.
Summation
I hope this brief stroll thru part of my trading week past offers some
degree of valuable lessons for you. Experience is the result of making one’s own
mistakes, wisdom is the art of learning from other’s mistakes. Here’s hoping you
are much wiser for heeding the words of "experienced" traders and the price we
paid for such.
Please feel free to join me
in the weekend Market Outlook section of our website
here
with fresh content updated by 8:00pm EST of Friday. Have a great weekend!
Trade To Win
Austin P
(free pivot point calculator, much more inside)
Austin Passamonte is a full-time
professional trader who specializes in E-mini stock index futures, equity
options and commodity markets.
Mr. Passamonte’s trading approach uses proprietary chart patterns found on an
intraday basis. Austin trades privately in the Finger Lakes region of New York.