Monday, October 31, 2011

A solid month that ends on a whimper

Just a little over 3 weeks ago on October 6th was when I first started trading the Diamond Setups system via my SIM account.  And as October comes to an end today, Renato closed out the month in spectacular fashion, gaining over 20 points in the ES.  Very well, then what about my performance? 

Monday, October 31
Total gross profits:  $25.00
Total trades:  15
Accuracy:  60%
Contracts per trade: 2

NOTES: I ended the month of October on a whimper.  After a gap down open, the ES had a relatively flat morning, with some minor sign of life early afternoon. Then the final jungle hour punished the bulls with a 20 point decline.  I'm usually capitalizing on those final hour moves. 

But this turned out to be a day when I was "right" often, but either lost money or the train left without me, usually due to careless errors.  Today was also the day that I stopped scaling out as a test, and exited my entire position at the first target, usually +2.00 or +1.50. 

Playing catch up
I missed some of the morning session when there were some good setups, and some people in the room had booked 6-8+ points before lunch.  Unfortunately, I was playing catch up in the morning after my late start, and that lead to some sloppy trades, which then lead to more, which then lead to more...  Feeling a bit under the weather should also be a sign that I need to take extreme caution.  The markets have no mercy for the weak minded!

Due to my schedule, there will be more days in the future when I will be starting an hour after the market opens.  So I'll need to be better prepared for playing catch-up and not let it impact my performance.  Once I was out of sync with Renato's call, it was a mental challenge trying to restore balance.  I thought I was going to be back on track since I nearly caught the sharp move down in the final hour based on Renato's call, but a careless error on my part botched those plans.

Totals: October 2011
Total gross profits:  $3512.50
Total trades:  142
Accuracy:  67%
Contracts per trade: 2

What happened over the past week?
After evaluating my equity curve for the entire month, it's clear that my P&L has flatted out over the past week, while the system continued to generate steady profits. 

In hindsight, I believe it's relatively clear what has happened.  After having a great start over the first few weeks, I thought I knew how to trade this system and began trying to "make it my own."  The alerts that Renato provides, which I initially traded with discipline, became less important. 

Other examples include:  I wanted to become a rapid fire scalper, but also hold a runner for a those big wins.  I wanted to trade aggressively, but yet in a conservative way.  I wanted to incorporate some of my biases and methods from the past, but yet still trade the new system as is.  I wanted to tighten the stops even more, but that's not a part of the rules of the system.  And so on.

Lack of discipline, chasing success, overconfidence, lack of a focused strategy, you name it.  And all long, the system continues to chug along, banking $'s.

So what do I do now?
I signed up with Diamond Setups to learn the system, but I recently strayed off the optimal path.  I'm very fortunate that the system has enough margin for error so that the damage to me was basically lost opportunities -- I essentially had a breakeven week.  It's now time to get back on track and continue to pay attention to Renato's calls, and continue to test and analyze the best trade management strategy for 2 contracts.

We're now down to the final 2 months of the year.  It's time to raise the bar and start November on a great note!

Sunday, October 30, 2011

To scale, or not to scale out?

After trade reviews of the challenging narrow range day in ES on Friday posted here, I did a "what-if" type analysis on my trades with regards to scaling out.  Renato mentions in his blog post here the advantages of scaling out and an example how.  I also believe this is a great way to potentially reduce risk and increase profits, *IF* you're starting with the adequate number of contracts and scaling out properly. 

My current scaling out strategy
Instead of using units of 4 contracts as Renato recommends, my current trade management of scaling out usually involves starting with 2 contracts, exiting 1 car at +1.50, and letting the other run after bringing up the stop loss to +.25.

As you could imagine, nearly most of the time the 2nd car is stopped out at breakeven.  So from the pure mathematical perspective, unless you occasionally have a monster runner, the #'s just don't seem to add up for the scaling out method I use. 

The reason to dig deeper?  Because I had to climb so far
My gross profit on Friday was $50, and that's after going into aggressive scalp mode about 1.5 hours before the close and climbing myself out of a $600 loss on 12 trades.  That type of P&L curve doesn't sit well with me so it was time to do some further analysis. 

One point was clear, I was not patient enough and entered some non-strategy (i.e. rogue) trades that contributed to the drawdown.  That was was got me into trouble for most of the day.  But there was also something about my scaling out strategy that I wanted to explore.

The what-if scenario I modeled
"What if I did NOT scale out and instead, simply exited my entire position at +1.50 when the 1st target was hit?"

Here are the results
Instead of ending Friday with +1.00 gross, I would have had an incremental:

  • +13.75 if I used this method the entire day
  • +9.25 if I used this method only during the final 1.5 hours of aggressive scalping
Crazy.  The few bad non-strategy/rogue trades I took earlier in the day were NOT filtered out of my analysis, so the results could have been even better. 

During the final 1.5 hours, the range of the ES was about  6.50 points, so these results are difficult for me to believe (but remember, they're simply based on the actual executions I took from scaling out of the 1st contract). 

What's also interesting is that when the trades were profitable, nearly all took only 1-3 ticks of heat.  So there's a possibility that the stop loss could be tightened up -- however, this requires further research and a much bigger sample size.

But can it be replicated?
A part of me wonders whether the aggressive scalping performance was due to luck and therefore, can not be consistently replicated in the future.  On the other hand, I have enough evidence over the past 3 weeks to believe that this type of performance can be more than possible. 

The real challenge is whether I or anyone can have the mental stamina to maintain this rapid-fire method of trading both intraday, as well as over days/weeks/months/quarters/years.  It's difficult being a human trying to keep up with the HFT algo-bots!

The bottom line
Renato mentioned this in his chatroom last week, and the bottom line is that you really need to be able to enter a trade with the appropriate number of contracts to effectively scale out.  So if you can't enter with at least 4 contracts, then you need to chip away and build up your account so that you can.  And only then can you take advantage of the powerful benefits that scaling out can offer.

Therefore, my new strategy starting this week will be to exit out of my entire position at +1.50 or +2.00, based on market conditions.  No more scaling out, since I will not likely be using that method when I start trading live.

Friday, October 28, 2011

A choppy day to remember

Today, the markets took a break after a powerful uptrend day yesterday.  It was a boring, choppy, narrow range type of day.  So does that mean my day was also boring?  Not quite.  Here's how my day broke down:

Early morning: Was patient, but only for so long.  I then entered a sub-optimal trade (it was NOT a formal Diamond Setups alert) about an hour after the open likely due to impatience.  It ended up being a full stop out.  Yuck.  Not a good way to start the day, since that usually triggers more losses.  And it did.

Lunchtime Although I was down for the day primarily due to my first losing trade, I had confidence that I could come back, even if it remained a choppy narrow range day.  After a few short scalps working on the resistance levels at the highs of the day, I entered yet another short position and scaled out half.  That gave me an opportunity to let the 2nd contract run with little risk and go to lunch.

While I was out, the trade got as much as +7.50 in the money.  When I returned, it was still about +5.00.  However, I did the unthinkable and let it stop me out at b/e!  It was obvious I did not have a strategy in place for this trade and treated it as a gamble.  This type of rogue trade usually gets me out of sync with my strategy and triggers more losses.  And it did.

Early afternoon: I continued to be out of sync with both the markets and Renato's calls.  He had about 3 calls today, all winners.  He clearly stated that the conditions are very difficult and that only those who are profitable for the week and aggressive traders should be trading.  I took another full stop loss trade based on a non-strategy (a rogue "why did I take that in hindsight?") trade in addition to other trades that took me even further down the into loss territory.  I can't keep making the same mistakes, so it was time to make a change.

Late afternoon
:  I was not expecting nor did I wish for another "one lucky miracle trade" to get me out of my loss.  That would make me look lucky, yet again, assuming the markets even produced such a move on a day like today.  I decided it was time to regroup and focus only on a scalping strategy due to the choppy and narrow range conditions, and because there was one particular timeframe that continued to work very well even in these challenging market conditions.

I wanted to chip my way out of this the loss with small consistent wins, but unlike my prior crazy attempts to scalp, I had a solid trading strategy and methodology on my side.  Time to put it to the test!

Bottom line results: I took a nearly $600 loss and worked it up to b/e in the final 1.5 hours with 12 trades.  That's about +12 ES points.  And based on what I learned, next time my execution should be more effective which should lead to better utilization of potential profits.

* * * * *
Friday, October 28
Total gross profits:  $50.00
Total trades:  22
Accuracy:  65%
Contracts per trade: 2

NOTES:  Check out that crazy cumulative P&L.  Even though this is "only" a SIM account, it was still a tough experience.  As far as I'm concerned, I'm trading real money.

No big trend to fight today, only choppy narrow range conditions and my usual mental challenges.  These types of market conditions really bring out my propensity to be impatient with entries.  Which leads to rogue trades.  Which leads to losses.  Which leads to more rogue trades....  But the late afternoon was a test of my ability to regroup and refocus.  To best capitalize on these market conditions, I chose to aggressively scalp trade using the Diamond Setups system and made +12 over 1.5 hours with 12 trades.  Now I'm very tired!

* * * * *
The weekend is here, and after an intense week trading and studying the Diamond Setups system, I'm going to do my best to rest my mind.  I can honestly say that I was mentally fatigued by the middle of this week.  I will need to do my best to incorporate a way to protect my emotional and mental state of mind, as well as maintain my physical health through continued exercise.

But as tired as I am, I can't wait for Monday!

Thursday, October 27, 2011

How to save your emotional capital

How can you help save your emotional capital while trading?

Simple...Do NOT fight the trend!

And so what did I do today?...I fought the trend! 

My natural preference is to trade with the trend, usually on a breakout or on a pullback in the direction of the trend.  But for some reason, I kept trying to short this big uptrending market today.  The trades I took were NOT a part of the Diamond Setups chatroom, just me trying to be "smart", and I ended up wasting a lot of emotional capital.  Didn't I just say yesterday that I was going to listen better? 

@RenaTrader said around lunch time that this will likely be a trend day up, so he was only looking for long trades (unlike me).  Then near the final half hour, he made this call to short, but only for aggressive traders (I was already selling on the way up, so hey, what's another short attempt!):

     [Oct 27, 2011 3:25:05 PM EDT] RenaTrader 1289-91 is key

But I didn't listen...again. 

I thought the market couldn't get up there, so I entered my short at a much more aggressive level at 1286.50.  Once again, not a great decision.  If I had listed to Renato, my entry would have been 1288.75, which would have entered me 2 ticks below the high of the day.  That would have only been a couple ticks of heat instead of the -2.75 points I had to endure.

My exit was based on a decent confluence of vwap and other levels at 1274.50, which was the exact swing low before it rebounded sharply.  There was also some SIM related fantasy fills on this final trade that may not have been so lenient in a live account.  Luck was on my side, and total profits on my final trade was +13.50 points. 
ESZ11 5min 2011-10-27
Because of that final trade, I ended the day $-20.10 net after commissions, vs. having quite an ugly day.  After the markets closed, instead of feeling a sigh of relief that I scratched after being down so much, I was quite disappointed with my performance.  And knowing that it was a single unusually good trade (ironically against the trend) that recovered all my losses also gave me a clear message that this kind of miraculous recovery can not and will not be repeated very often.

On the plus side, I was able to stay focused and continue to execute without getting rattled, and my emotional state was definitely in the heightened end of the normal range, but far from the tilt zone.  However, I would much rather have preferred saving my emotional and mental capital so that I'm not so exhausted at the end of the trading day. 

But that's the past, the deal is done, lessons learned...Don't Fight The Trend!

See this trade on Tradervue:

* * * * *
Thursday, October 27
Total gross profits:  $37.50
Total trades:  11
Accuracy:  55%
Contracts per trade: 2

NOTES:  I fought the trend, and gave myself a few extra gray hairs.  And if it were not for the final trade, the day would have been quite ugly.

Wednesday, October 26, 2011

Ouch! My "excuses" for today

Doesn't it always turn out this way?  I write about how well it looks like things are going, and then the next day, one of my wheels falls off?  No, it wasn't a "crash and burn" dream come true or "I blew up my account" type of day, but it was a losing day that was much worse than it should have been.  And as is usually the case, it wasn't the system -- it was essentially all my fault.

But before we get to my excuses, here were the stats (on SIM) for the day:

Wednesday, October 26
Total gross profits:  -$237.50
Total trades:  14
Accuracy:  57%
Contracts per trade: 2

NOTES: After a disorienting morning, I had 2 trades prior to lunch.  It then looked like another steady trading day ahead.  However, in the afternoon and especially the final hour, I had 12 trades.  Some issues and delays with my order execution system threw me off, as well as sloppy errors on my part. The trading system itself worked fine, but the I had some "challenging" moments.  It could have been worse, since I was down as much as $500 (open P&L) at one point.

And Now, Here Are My Excuses!
  • I was disoriented.  Since the chat room was offline in the morning due to technical issues from the web service provider, so I felt like I was flying blind (probably because I was!).  So I was out of sync during the morning, and had to try and get my rhythm back throughout late morning and early afternoon.
  • I was frustrated.  There were a few trades I was sure would work, especially the short at the high at the opening -- and they worked.  But I was not sure whether they were part of the system or not.  This created a slight level of frustration.  Letting a profitable trade that was several points in the money get stopped out at breakeven didn't help, either.
  • I was impatient.  The slow morning tested my patience in the afternoon.  As the markets approached the highs of the day in addition to some critical resistance levels, I was not patient to wait for the best setups.  I've only been following this system for a few weeks, don't try and "make it my own" just yet!  I need to do a better job of following Renato.
  • I was sloppy.  These markets can be quite thin and shoved around quite easily, especially with the European rumors.  This requires total concentration and proper preparation to understand what your next move should be.  Some of my analysis was done incorrectly and resulted in trading off of improper data.  The ES can move very quickly, so if I'm too slow or sloppy, I'll get steamrolled.
  • It's the brokers fault!  As surges in trading volume took place, my DOM/order execution system took up to 30 seconds or so to return fills or cancel/replace confirmations.  I really haven't really experienced this before and resulted in some trades getting botched up.  I admit, I'm used to instant fills, so when nothing happened, I kept pressing the send and cancel and reverse and whatever other buttons I could to "help it", instead of just pressing it once and waiting.  So all my orders and cancellations ended up getting stacked up in the queue, further confusing the system and myself. 
All of these are pretty weak excuses.  And here's something else I saw as I reviewed my trades -- I noticed an old nemesis that may have made a return...The Revenge Trade!  [SHREEEK!!!]  If you see the trade records below (start reading from the bottom), you'll see that a loss is usually followed by another loss within minutes.
Now I do admit that some of these losses (and winners) were due to the botched job I did with the frozen order execution system/DOM.  But still, you can't really hide some of the intent behind these actions. 

The Bottom Line
  • I was lucky, this could have been a much worse day.  On the plus side, even with all the challenges, my emotional state (although slightly heightened) was actually well within my normal range.
  • Focus on following and understanding Renato.  That's why I'm there.
  • In doubt with my state of mind?  Then don't trade -- take a walk, or take the day off.
  • The broker's order execution system is acting up?  Well then don't trade!  And setup a backup contingency account at another broker.
  • Just got hit with a full stop out?  Get up and take a little break.  I know that there WILL be another HIGH PROBABILITY trade around the corner, IF I am patient.
I've very fortunate to be involved with an occupation where even after a difficult day, I just can't wait for the next day to begin.  It's time to continue to capitalize on the moment and keep pushing it to the next level.  Let's do it!

Tuesday, October 25, 2011

Is this for real?

Today happened to be an interesting day where the ES market felt a little different from the prior couple weeks.  The "usual" market rattling news out of Europe seemed to put the thinly traded intraday morning session into a "psudo-psychotic-I-might-go-postal-on-you" mode. 

In hindsight, the Diamond Setups (DS) system still worked, and it's the usual operator error (my errors) that didn't either pull the trigger properly (using the excuse of how something's "strange" with the price action) or by not properly analyzing or being prepared for the trade (sloppy mistakes).

I'm a believer that it's good to experience as many adverse market conditions as possible, since that's one of the key ways to learn how to get through the tough times.  The next time I sense these "unusual" market conditions, I'll be much better prepared to adapt accordingly (in other words, stick to the plan).

As usual, I still had a great time today learning in the chatroom -- lots of good vibes and support from Renato (@RenaTrader) and the other members.  But since I made "only" $150 gross today (Tuesday, October 25) which was much less than what was possible, I experienced a slight letdown.  That's when I produced a report from my trading journal to see how well I have done since I started learning, and I began thinking.....Is this for real?

So for the sake of full disclosure, here are the caveats before the excerpt of the report from Tradervue:

  • From the "Is this statistically significant?" perspective, one could argue that there isn't enough data, and that this is mostly noise, dumb luck, etc.
  • Remember, these are SIM (simulation) results, so they include a fair number of fantasy fills.  Since I use limit orders for entry and profit targets that are usually near the swing high/low extremes, it's not likely that you will be able to buy on the bid or sell on the offer with any meaningful frequency.  And my stop orders on SIM do not usually include any slippage.
  • There are 3 days missing from results.  I've written about this, how I went off my rocker for 3 days trading a majority of non-DS setups, so I've excluded it from this report.  I still feel the shame, and rightly so.
  • The gap between plan vs. actual is still quite large, believe it or not.  If I was scored against my ability to execute against the system, I'd be close to getting fired.  But for my personality and trading style, this particular system seems to provide a good margin for error.  However, time will tell once I'm trading a live account.
Regardless of the caveats, the numbers are respectable (especially for me), and seeing the P&L curve over the past 2+ weeks gave me a sense of confidence that "Hey, maybe, just maybe, I have a real decent shot at this." 

* * * * *

Here are my results from the past couple days. 

Monday, October 24
Total gross profits:  $487.50
Total trades:  6
Accuracy:  67%
Contracts per trade: 2

NOTES: Missed some good trades in the pre-market as well as some during he regular session, and also cancelled an order (from fear) that would have filled a few ticks from the high of the day.

Tuesday, October 25
Total gross profits:  $150
Total trades:  5
Accuracy:  80%
Contracts per trade: 2

NOTES: Thinly traded morning impacted by news out of Europe shook up the markets (me) for a bit.  Took a very cautious stance, missed some trades, and scratched a couple that would have been profitable.  Reminder, just stick with the plan.

Friday, October 21, 2011

Is today the day I crash and burn?

I admit, every day, I hear a little voice somewhere in my mind that asks, "Is today the day I crash and burn?"  Some days in the past, especially when I started off with a few losses in a row, the voice is quite loud.  But on other days, it's just a fleeting thought, triggered usually after getting stopped out of a trade.

It seems like all traders, including those that have survived long enough to become consistently profitable, have been traumatized in one way or another.  Trading sure can be a mentally brutal business.  I'm not consistently profitable yet, but I'd be the first to admit that I've had my fair share of traumatic moments.  I assume those voices I hear are permanent scars from those highly charged and emotional moments.

It's similar to a pro athlete -- it's highly likely they will be injured at one point or another in their career.  The lucky few will recover quickly with minimal to no side effects.  Most will have some level of permanent physical damage that will impact their game (and life) to some degree.  And for the unfortunate, the injury will be career ending.  It's all a risk of playing the game.

Thankfully, my risk management over the past 6 months has been good enough to keep me in the game while I continue up the steep learning curve.  Sure, I've had "injuries" along the way, but it hasn't been career ending.  However, I will forever have some lingering after effects -- like those voices I hear.

Today was a day where those voices were a little louder than the past couple weeks.  I've experienced some disbelief in how well I've done trading the system from and Renato's chatroom over the past 2 weeks, and try to constantly temper it with reminders that it's all executed on SIM.  It's not real money yet, it's just a fantasy.

The market conditions over the past couple days seems to have been a little choppier or more difficult to read and trade.  It's likely just me distorted perception.   Since my performance both yesterday and today were not as impressive as some of the other days, I feel as though I am slipping.  Both days have been net profitable, but I wonder, am I fooling myself?  When will this all come crashing down?

Then I look at my numbers today and realize that we can only take from the markets what the markets will give us.  And today just wasn't the day to hit it out of the park, or even have an upward trending P&L chart.  Thankfully, I ended the day profitable, and my final P&L did not reflect how less than stellar I felt at the end of the day.

Friday, October 21
Total gross profits:  $187.50
Total trades:  8
Accuracy:  62.5%
Contracts per trade: 2

NOTES: Treading water all day long.  Could not gain traction on any series of trades.  Missed a few good trades, and took a rogue one.

Well, the bottom line is that I did NOT crash and burn today.  I can't help but recall the title of the book, "Only the Paranoid Survive", so maybe all this mental chatter is OK.  And I just can't wait until Monday so that I can once again prove the voices wrong...

Thursday, October 20, 2011

Good opportunity, bad execution

The choppy and boring markets during the morning session today tested my patience and I lost.  I looked for trades that weren't really there, or simply had operator error.  I'd say I would score a D with regards to trade selection and execution today -- in other words, my trade selection on a few key trades plain stunk.  Not a stellar day, since the gap between actual vs. "should have" was large. 

The DS system itself, had I followed it properly, did just fine.  But once I found myself in some erroneous trades, I decided to let most of them ride instead of closing them out.  Or, I flat out selected a rogue non-strategy trade.  And yes, they ended up getting stopped out.  Happened at least 3 times, and the losses totaled over $700.

I thought this was going to be a losing day, but as Tom mentioned under the comments of the prior post, knowing that there will likely be another winning trade around the corner gave me a sense of relief and a sense of patience.  As a result of knowing this about the DS system, it has reduced the possibility for me to go on a revenge trade rampage -- that's a HUGE benefit to my P&L.

I felt pretty bad at the end of the day today, as if I had gotten beaten up bad.  But I was somewhat reassured to see that I made $139 net.  In the past, I would be down big for the day after feeling this way.  My initial interpretation -- the DS system, at least for my personality and style, has a good margin for error to minimize my mistakes.

After every loss, you can see in my cumulative P&L that I was able to chip away back into the green -- only to take yet another bad trade.  Had I been more disciplined, perhaps I could have ended the day $700 higher.  Regardless, it's reassuring to know that my theoretical "what could have been" was respectable.

Today is over, lessons have been learned, and now I'm looking forward to tomorrow, just a little bit wiser.

Wednesday, October 19, 2011

Update: 2 Weeks with Diamond Setups

[Edit: Jan 8, 2012 - see my 3 month review of DS]

As of today, it has been 2 weeks since I started learning from Renato (@RenaTrader) at (DS).  And so far, Renato's service continues to meet or exceed my expectations.  Since the last time I wrote about my initial impressions, there's nothing that has materially changed. 

Am I Making Money? 
No, I'm not trading real money, yet.  I'm trading my SIM (simulation) account as I learn the ropes, so no actual money has been involved to date.  But the results have been quite promising.  Yes, yes, yes, it's results from a "perfect fills" SIM world, but I believe there's something significant about these results.  Even with all my rookie errors, they are close to what Renato explains is possible, and also seem to be in the ballpark with what a few others in the DS trading room are experiencing.

To better understand my performance, I have imported my SIM trades into for further analysis.  For those who don't already have an established trading journal, is a FREE service and provides very powerful reporting and analysis capabilities.  They now support futures in addition to stocks -- good timing since I've also made the switch.

And as of this week, Tradervue now includes a chart of your running P&L for each individual trade, as well as your entire trading day (as you'll see below).  This online trading journal keeps getting better and better all the time.

My General Trading Plan
Here's a general overview of my trading plan:
  • Number of contracts per trade: 2 contracts. 
    • I will initially allocate $20k to my futures account -- $10k per ES (S&P e-mini) contract.  
    • Based on the performance results of the Diamond Setups system, it may appear that I'm on the conservative side.  
    • But I'd rather be safe and I expect many errors as I begin trading live.  I'm in this for the long haul and will do whatever I can to survive the learning curve.
  • Risk per trade: Approximately 1% of total trading capital. 
    • My initial max stop loss is $350 (-3.50) on 2 contracts, although my average loss to date has been $162.50 (both are gross figures).
  • Trade Management
    • 1st contract: Profit target at +1.50, bring stop of 2nd to +.25 (b/e).  Initial stop at -3.50.
    • 2nd contract: Profit target based on next significant support/resistance (still needs to be further clarified).
    • In the future, I would like to have an initial position in units of 4 contracts:
      • Scale 50% at +1.50, raise stop of remaining to -2.25 (still to be determined, but at least lock in some profits)
      • Scale 25% at +3.00, raise stop remaining to to b/e
      • Final contract, let it run.  It will be stopped at b/e most of the time, but every once in a while, the market might throw me a bone.
  • Trading approach:
    • Aggressive.  Diamond Setups allows you to chose a trading style that best fits your personality, so I've chosen a more aggressive approach that generates around a dozen trades a day.  
    • Some might consider this on the verge of scalping, but it's all relative.  I've heard others trade several hundred round trips in the ES a day for an average of a tick or two -- I think that's scalping.  
    • You also have the option of being conservative and choosing only 1-2 trades a day, or perhaps only a few trades a week or month via swing trading.  You decide what's best for you.

The Performance Figures (again, it's SIM)
Based on my Tradervue journal, here are the gross (excluding commissions) performance figures from 10/6/2011 to 10/19/2011:
  • Total Profits: $1,762.50  (significantly underperformed potential outcome)
  • Total Trades:  67 trades (a trade generally consists of 3 entries -- one to enter and two to scale out)
  • Accuracy: 66% winners 
  • Average Win: $132
  • Average Loss: $162
  • Trade expectation: $32
NOTE: I have excluded results from 10/11/2011-10/13/2011, since I lost my mind and had a momentary (3 day) lapse of reason.  The chatroom made money, but the majority of the my trades were rogue and revenge and silly overnight trades that did not reflect DS based setups.  I lost big.  Shame on me!

Even with many execution and trade selection errors (where I missed many profitable trades or took losing rogue/revenge trades) the performance figures are still respectable.  I believe the accuracy of my wins will eventually be in the 70%+ range (I honestly believe 80%+ is possible if you take a more conservative vs. aggressive approach).  In addition, I believe my average $ win will eventually be around or slightly higher than my average loss. 

Those used to trading on a longer timeframe may have concerns with results that produce a 1:1 risk/reward ratio, but that's one of the tradeoffs that I made to trade the DS system aggressively at a shorter timeframe (more signals) with a higher winning accuracy.  You get a lot of base hits, and rarely get to hit one out of the park.  But as I've experienced, those little crumbs sure do add up.  The option does exist to trade a longer timeframe (I've started to review forex setups for swing trades), so that's another possibility.

Intraday Cumulative P&L Charts
Here are some intraday cumulative P&L charts from  Notice how the equity curves generally trend smoothly in the "right" direction:

Thursday, October 6
Total gross profits:  $612.50
Total trades:  3
Accuracy:  100%

NOTE:  Started off with a little heat on my first trade, but it closed green.  Learning to understand the terms and flow of the chatroom started became easier.

Friday, October 7
Total gross profits: $625.00
Total trades: 6
Accuracy:  83.3%

NOTE:  Just trust Renato's calls.

Monday, October 10
Shame on me.
 Tuesday, October 11
Shame on me.
 Wednesday, October 12

Shame on me.

Thursday, October 13
Total gross profits:  $475
Total trades: 10
Accuracy:  80%

NOTE: Finally gained my senses and realized that I need to have the discipline to just learn, follow and trade DS as religiously as possible. 

Just grinded out small crumbs, and ended up with a loaf of bread.

Friday, October 14
Total gross profits: $87.50
Total trades: 1
Accuracy:  100%

NOTE:  I've learned that if you're not feeling well, you should take it easy.  Only had one trade, and realized it would be financially dangerous for me to continue trading.

Monday, October 17
Total gross profits: $550.00
Total trades:  4
Accuracy:  75%

NOTE:  I'll take these types of trades all the time.  Only 4 trades, 3 made money, and total profits were pretty good.

Tuesday, October 18
Total gross profits:  ($275)
Total trades:  13
Accuracy: 61.5%

NOTE:  OOPS!  Was on track for another $500+ day, but that last hour Euro bailout "news" steamrolled a trade with a full size stop.  Trading fast market conditions requires caution.  And I also had rogue/revenge trades after the first full stopout that ended badly.  Shame on me.

Wednesday, October 19
Total gross profits:  $512.50
Total trades:  9
Accuracy:  66.7%

NOTE:  Slow rangebound morning, was out of sync, didn't get a few trades that made a few points.   But market woke up in the afternoon, and I had a nice +7 runner.

Call of the Siren?
I'm in some state of disbelief with these results.  Another student from the room has been tracking numbers from an even more aggressive scalping strategy, and even with 50% of his theoretical results, it would absolute crush my results above.  He's also in some disbelief.

In the past, I've always tried to bridge the gap between a system's signals vs. my execution, it's an endless task.  To date, I know my gap with trading the DS system has been quite large -- it has a fair share of missed opportunities and rogue/revenge trades.  There are days when I felt like my gap was wide, but yet I still got what I consider respectable numbers.

For me, I believe the real advantage of this system is that I know that there will always be another signal right around the corner.  Even if I miss an hour here or an hour there of trading, there will always be another signal soon with odds that are very high that it will be a winner.

And with Renato leading the chatroom with a steady hand, guiding us through the chaos of the markets, patiently answering a never ending stream of questions from his students, he's like a reassuring lighthouse as you travel the stormy seas.

Are my results only the Siren's call from trading via SIM?  Or is there really substance there as my gut is telling me?  We'll soon find out once I'm trading live in the near future.  I'm expecting somewhat challenging results during my switchover, so my expectations are in check. 

However, you better believe I'm going to give this all that got.  It's time to stop chasing success, and start capturing success!

Friday, October 14, 2011

New Beginning - New Adjustments

As expected, my new beginning has required some new adjustments.  This is the end of my first full week with @RenaTrader and his chatroom at and the bottom line is that I've been very satisfied with his service.  Both Renato and my fellow students in the chatroom have been great -- he provides a collegial and supportive environment where you can learn based on the style that works best for you, as well as being alerted with enough actionable information in advance to make profitable trades.

Last Thursday and Friday when I first started and didn't know much as I do now (which is still limited), I made about 12 points net of commissions trading the ES on each of the days -- even while missing some trades.  This also included taking some questionable ones and using less than optimal trade management for 2 contracts.  Still, my accuracy was around 70%.  Partially beginners luck from favorable market conditions.

For the first few days this week, I wasn't following along as I should have and had mostly rogue trades (old bad habits die hard).  But as soon as I regained focus by yesterday, I made about 8 points net of commissions trading units of 2 contracts during a pretty choppy and what I thought was relatively difficult trading conditions.

Today, I only made 1.75 pts, although there were some good setups I missed getting a fill by a tick or two, or just flat out passed.  I was having one of those days where my mind is in a fog, so I was being extra cautious. 

One of the members said he tracked 14 potential scalp trades each making a +2 profit target, 1 scratch, and 0 full stops, all before lunch.  That's 24 points!  Before lunch!  Under chopfest conditions!  He didn't take all of them, but that's what was theoretically possible if you followed the aggressive and short term/scalping approach to Renato's methodology.  Using real dollars, I'd be happy with profits 1/3 of that amount for the entire day.

So from the performance perspective, it's looking quite promising.  But since I'm still trading on a SIM account, I know these performance figures could be a huge distortion from reality.  Therefore, I'm taking as many steps as well as time to minimize the gap between plan vs. actual execution before switching to the live account.

For now, here are some of the key adjustments I've had to make from my previous method of trading:

Charting & Securities Traded
Instead of flipping through dozens or even hundreds of charts/securities a day generated by my stock screens, I now generally flip between just a few workspaces on my charting platform.  ES is the my primary focus, and I'll keep an occasional eye on EURUSD, USDCAD, and AUDUSD (my current personal favorite which he doesn't follow).  One advantage of all this is that I get to know these particular markets pretty well, and understand their particular behaviors.

Another advantage is that the ES and forex both trade actively overnight, except obviously over the weekend.  In many instances, there has been greater volatility during the London session vs. the NY session.  So if you're holding a position overnight, you're not likely to get a gap open go against you.  A disadvantage is also the same as advantage, the ES and forex trade overnight.  With all this recent volatility in the middle of the night, it's difficult to truly have restful sleep!

Another change is with drawing and updating the Fibonacci levels.  The prior method involved drawing them over the opening range just once during the day for each potential stock on my watchlist.  Now I'm updating the Fib levels (mostly on the lower timeframes) multiple times as significant new price swings are completed.  There are about a half dozen or so different timeframes to monitor, but only a few timeframes need constant monitoring throughout the day.  However, a lot of this updating depends on what level of trading activity you prefer.  Those who focus on weekly and daily charts do not update their Fib levels very often.

Order Entry and Trigger
I'm used to entering trades based on buy stop or market order, in the direction of the intended move.  Now I generally enter with limit order, in front of the market.  There are times when I feel like I'm standing in the middle of the road while a semi-truck is coming straight at me full speed.  Funny thing, when you get a confluence of various factors for a price level, it's like magic and the truck usually DOES stop before hitting you, AND it also happens to magically do a u-turn back the other way, on a dime.

The setup trigger is also different.  Since key levels are known in advance, I don't have to constantly look for a hammer candle pattern for an entry trigger, thereby passing up profitable trades that ended up doing what I had anticipated.  In addition, the ES bars can have a lot of messy wicks due to all the HFT/algos, so I never thought they could be traded very frequently based on 5 minute candle patterns -- or in other words, generate candle signals at the level of frequency I was seeking. 

Therefore, knowing a potentially significant price level and having confidence with those levels makes it easier to place your orders well in advance and letting the markets come to you.  Only downside is that there have been many instances when the market have come within 1 or 2 ticks from my limit order, and then shot back the other way without me.  With my prior method, it's similar to discovering a perfect hammer setup, but finding it a minute too late after it had already moved $0.25 away.  Regardless of the method, there will always be missed opportunities. 

Trade Management
The scaling out method @RenaTrader uses is one of the big "secrets" to making consistent profits.  I've experimented with scaling out in stocks, but never had a solid method that I was comfortable with using consistently.  Renato teaches a method that works, and I have seen others on the Twitter feeds scale out in similar ways.  After using it with 2 contracts (3 or 4 cars per trading unit is even better), I'm sold.

Community and Social Interactions
When I first started trading full time over 6 months ago, the primary interaction I had with other traders was essentially via the comments of the  It's a great site with a gold mine of great setups, and while Trader-X was actively posting, a great community for traders to share ideas via the comments.  Other than using that site, I felt I was pretty much on my own, trying to find my own way.

I began to branch out to Twitter/Stocktwits, but still don't interact very much with that community for whatever reasons.  I also started this blog, which is more of an outlet for my thoughts and ideas.  But I was missing a more real time interaction with a community, as well as some sort of mentor to help guide me on a path to consistent profitability. 

This is where the chatroom has helped to fill the void.  Having @RenaTrader as the great natured and patient instructor, as well as others similar to me who are eager to learn how to be consistently profitable, results in a great environment -- it feels like I'm a part of a team where we all share the same goals.  And even better, we all help each other out. 

I no longer feel as alone on my journey.  I'm looking forward to next week.

Monday, October 10, 2011

A New Beginning

I survived nearly 2 weeks of back to back family visitors, then being a single parent of my very young children for 5 days while my wife was out of town.  And as luck would have it, shortly after she left, we all became sick to various degrees.  All I can say is that it's over and that it was a "character building experience." 

Repeating the Same Mistakes, Again and Again...
During the past couple weeks, I did manage to find a few hours here and there to watch the markets and to trade.  But this is when I realized that things have really gone astray.  I was repeating some of the same patterns over and over again, until finally, I tried to really change things up and went to TNA/TZA once again, and overtraded even more than usual (if that's even possible for me to say) again

Unlike most of the other times I was able to trade TNA/TZA to recover from a loss, this time I ended up with a relatively bad loss in very short time.  In many ways, I was using trading/overtrading as an outlet for my frustrations in life, and my limited time to trade was also an incentive to try and force a killer trade before time ran out. 

Absolutely the wrong frame of mind for trading and absolutely the wrong way to trade.  Yes, this time I really changed things up, but for the worse.  Addictive, vindictive, and gambling behavior at its finest.  Sickening.

Chasing Success and Finding My Niche
As I began to try and understand what's going on in the middle of all this turmoil, I listened to an interview Trader-X gave to back in May of 2007.  One of the points he spoke about was "Chasing Success", which was also a classic post he wrote in September and again in November of 2006.  The message is essentially to focus on a single method, stick with it, and don't expand on it until you get good at it.  And oh yeah, don't overtrade.

I also read Dr. Brett's book on Enhancing Trader Performance, and a key point he made was that we all need to find our niche in trading.  If you're naturally inclined to be a swing trader using a mechanical system, it's likely that you're not going to do well as a scalp trader reading the tape no matter how hard you try and stick with it.  And vice versa.  A trader has to find the method that works best for their personality and strengths.  In some cases, it takes years of "Chasing Success" before someone finds their niche.  But sadly, most will lose all their money before they find their niche.

In Need of More Change
I refuse to become another losing trader that quits.  I know passion and hard work alone won't get me there.  I know I have the technical knowledge to be successful.  I know what needs to be done to be successful.  But I need more structure and discipline.  I need someone to help guide me.  I need an even bigger change with what I've been doing, because it isn't working.

I realized that I needed some sort of mentor or maybe join some sort of chat room that would help me to focus.  I would loved to have joined the great training program at SMB Capital, but I just can't commit the time at this stage in life, perhaps another time.  I was very close to signing up with one of several chatrooms that focus on stocks, but the only problem was, they focus on stocks.  My rationale was, perhaps it would be too easy for me to get back to my old ways if I continued to trade stocks.  I've been traumatized by stocks, so I needed to get away for a while and focus on a single or very limited number of non-stock securities.

Last month, I made a 10% return on my small forex trading portfolio, so I thought about sticking with that asset class.  My methods there seem to work well, so why not stay with it and size up?  But I felt that's not the area I needed or wanted help. 

I also know some traders do quite well focusing on just the SPY or ES minis and make 7 figures a year.  But SPY's are executed just like stocks, and that isn't a good idea since I needed to prevent the temptation to trade some other stock while waiting for a setup.  However, I was open to studying the e-mini after watching several folks on Twitter do well week after week trading only that security.

Discovered Through Serendipity
As I was surfing through Twitter, I randomly came across @RenaTrader mentioned as a must follow by someone who is generally quite blunt about what he thinks of others.  I had never heard of @RenaTrader, but since he was included with must follows of other people I respected, this carried weight.  The key point made was that @RenaTrader was one of the most transparent on the stream with his ES trades, and that he is one of the few that made their subscribers money. 

So I went to Renato's website, as well as his blog, looked around, liked what I saw and signed up.  I really liked his story as a prior diamond dealer, entrepreneur, and how open he was about his experience chasing success for several years -- losing considerable money (6+ figures) before he found his winning ways.  I also liked his track record of being consistently profitable (indication of discipline) over the past year with a high winning percentage rate.  He also makes it quite clear that he DOES have losing trades, which is something most other services don't seem to make as explicit.

Renato primarily covers the ES, USDCAD, EURUSD, and CL, so that was another match on my search criteria -- he didn't trade individual stocks.  The cost is a one time $345 to learn his entire system and to join his chatroom, which seemed a little inexpensive to me (also mentioned by many others in his testimonials).  He also appeared to be a positive person (without being over the top bubbly) with patience -- good signs of a teacher, and has several thousand followers on Twitter.  So with my recent trading challenges and what I was seeking, why not try it out? 

Going Well So Far
I joined Wednesday mid-day last week, began studying his setups and rules, and got the feel for his chatroom.  The voice that you read on his blog, website, and Twitter is essentially what you get in his chatroom.  No bait and switch there, so that's another big thumbs up. 

I then spent a full day Thursday and Friday in the chatroom and made some trades on my sim account based on his calls.  It will likely take a few more weeks of intense studying to really get the hang of it.  But so far, I have nothing but really good vibes from both Renato and the chatroom.

With regards to the learning curve, I believe I have a big advantage -- Renato's method of using Fib levels is similar to a method I used to trade Swiss Franc and Deutsche Mark futures back in the '90.  So it's something I have always believed in.  But my method never evolved to a point where it turned into a sound trading system.  If it was successful way back then, I probably wouldn't be writing this blog today!

However, Renato's methodology is much more explicit with regards to rules around risk management and trade management -- that is key.  Just because you know a certain level is significant doesn't mean you can make consistent money.  You need a tactic around it, and this is where Rena's system helps significantly.

Oh, and my performance on Thursday and Friday on the sim account?  Trading 2 contracts, scaling out half after 1.5 pts, I made about 12 pts each day.  Even including some mistakes as well as missing some good trades, I was about 60-70% accurate.  And I left a LOT of money on the table. 

Those were somewhat extraordinary days with regards to volatility, so I'm not counting my chickens yet.  Two days is nothing, so we'll see in two weeks or two months how everything is progressing.  It's still very early in my journey and I have a lot of studying to do. 

What Next?
I'm feeling much more positive as my New Beginning starts and in some ways, I feel as if I've returned to my roots and my niche with Renato's system.  I'm not abandoning stocks -- I'll continue to track setups, but I'm taking a break from trading them.  So my focus over the next month will be to learn as much as I can from Renato, see whether his system fits my personality, and then evaluate whether I can finally stop "Chasing Success."

More updates soon as I settle back to a "normal" trading life.