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!


Tomross58 said...

Hey Grove,,
I just sent a comment but dont see it,,,,if it didnt show I will re-send,,,so testing testing,,,


Tomross58 said...

Ok guess it didnt send so here goes.
First of all I think your post was a very honest and a well written account of your first 2 weeks and very easy to read. I remember one of the first things I read when I started to trade was to concentrate on making good trades and profits will come. I believe this.
You wrote something that really stuck out and that was "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". This to me is Day Traders Gold. How many times have we placed a trade according to our plan and for whatever reason it didnt work, or we screwed up and added to the position instead of exiting, or any of the many reasons we can have to "revenge" trade? Now you can step back, grab a soda and know you will have another trade coming soon. I am just begining to understand this. I have simplified things to just trading the SPY and not going over chart after chart of different stocks only to try and MAKE something happen. I know another set-up is coming and I wait for the market to come to me.
Everyday we get an education and make progress so keep up the good work as will I .


Grove Under said...

Hi Tom:
That was strange, I did get an email notice regarding your first comment, but it didn't show up anywhere on the blog. But I'm glad you had a backup!

Along the lines of your comment, today was a great example about knowing there's another good trade right around the corner.

Probably easier if I post an entry, so stay tuned... Thanks for the great comment!