Wednesday, January 18, 2012

Will it be a trend day or not?

Total gross profits:  $-62.50 -1.25 ES points
Total trades:  7  [0 scratch]
Accuracy:  57.1%
Execution score: 100.0%
Opportunity cost: +$0  +0 ES points

It used to love trend days

Trend days don't happen often, I believe around 10%, give or take, depending on who you talk to and how they define a trend day.  But if you catch the right day, and you enter a  trade using something as simple as a 30 minute opening range breakout, then hold on to your position and exit market on close, a day such as today would have produced decent results with minimal effort.

That was then, this is now:  Be aware (or beware?) of trend days

However, when trading based on key support and resistance levels, there's a possibility that you might get stuck trying to continuously short in an uptrend day (or vice versa).  I fell a little into this trap today, was down about 6 ES points at one point, but was able to scramble and dig myself out to almost b/e.

So now I find myself trying more frequently to identify whether the day is developing into a trend day or not, so that I don't get chopped up and waste emotional capital fighting the trend.  I'm getting better at:

  1. Identifying the possibility of a trend day sooner rather than later, BUT...
  2. Incorporating that bias to adjust my trading plan is something I need to work on 
Other area for improvement:  Tracking missed trades?

Another area for improvement is to track missed trades.  For example, today, I had at least 4 trades that I missed, either because I was not around to take them (time limitations), I simply missed them (was not prepared), or I avoided them (couldn't pull the trigger or decided to pass). 

In the past, I didn't give missed trades much weight.  But to know that I could have been up +6.00 by the time the NY session opened, does raise a lot of questions.  There was also another trade or two that I missed during the day, so all told, let's just say that I had "Missed Trade Costs" of at least +8 ES points.

Since my discipline of executing against my plan has improved significantly, once I maintain this level of discipline for this week and next, I will begin tracking the "Missed Trade Costs" so that I can better determine if there was anything I could have done to capture a greater % of those trades.  Just based on past anecdotal evidence, I believe that missed trades can account for a very large % of a day's potential profits.

Bottom line:  I'm going make sure I leave as little as possible on the table by the end of the day. 


Tomross58 said...

Hey Grove,

This is something that if we trade in this manner looking to short RES and buy SUP will take away the last few days or week of profits. Trend days. Buy the dip. Being able to recognize we are in an up / down trend day is going to be very important. I have an 8x12 piece of paper in a plastic stand just behind my keyboard and in front of my main monitor that says ,,,TREND DAY OR RANGE DAY.
I am so focused on the set-ups and making sure my charts line up I didnt pay attention to it. I still dont know how to tell its a trend day or not early on. As you say if we just bought after the 15 or 30 min opening range it would be an easy day until close. As it was it put us in the hole early.
I know what I will do,,,I will write the words in thick Magic Marker,,,lol,,,,But seriously this can be something that will stunt our progress unless we are prepared for trend days.


Grove Under said...

Hi Tom,

I agree, I think the trend day or range day question is a big challenge for nearly all day traders.

Now that I have a pretty good grasp of how I want to trade DS, I'm starting to expand slightly by listening a bit more to "Rogue Grove's" view of the markets (especially with regards to trend vs. range day), but that's still very early work in progress.

Great idea about signs, if it's not working, use thicker marker or print out in bigger font, LOL! Thanks for the comment!