Eye-hand "discoordination"

Total gross profits:  $175.00  +3.50 ES points
Total trades:  5 [1 scratch]
Accuracy:  75.0%
Execution score: 40%
Opportunity cost: $+37.50  +0.75 ES point

I started the day with some trades that missed getting filled by a tick or two, which of course turned out profitable.  And that got under my skin.  I had to regroup and throughout the day, I continued to have some execution issues.

It was a case of eye-hand "discoordination"

I could see pretty clearly what the markets were going to be do, so I was generally in tune with the markets.  However, I couldn't make my hand click what I saw, and then put it into appropriate action in the form of a trade.  Not sure why, but it'll be something I need to continue working on. 

And then there were the conflicting signals

I actually did well today when faced with a conflicting signal by standing aside.  However, the problem with a conflicting signal is that regardless of the outcome, one of your signals will be correct.  And it's so easy to assume that gosh darn it, you know you would have picked the trade that would have worked, right?!?  So then comes the feelings of missing out of a good trade.

Perhaps there are too many conflicting voices in my mind? 

So maybe I need to fire everyone in my mind and start with a new streamlined staff for more direct communications from mind to hand.  Or in more realistic terms, start to focus on a limited number of setups, continue hitting singles, and then start expanding.  But on the other hand, my mind seems to crave trying to make a simple buy/sell/wait decision from complexity.

On the bright side, it was nice to feel as though I was generally in the "zone" and that even with some mishaps, I ended the day positive.  I can only hope that all my "discoordinated" days end profitable!

UPDATE: $AUDUSD - possible short exit and reverse signal

Will watch $AUDUSD closely today to see if the lows of the day hold.  This might be a signal to exit the short from 1.0521, and possibly go long.

UPDATE: $AUDUSD at +150 // $ES_F pivots respected!

Update on $AUDUSD:

$AUDUSD daily

• The swing short trade on 3/26 from 1.0521 has gone around 4R (R=initial stop of about 40 pips) for a profit of over +150 pips.
• Stop loss: I'm now moving the stop loss just above the downtrend line, so that I also lock in a small profit.
• Target: Initial profit target is currently around 1.0250 (the bottom channel of the downtrend line), at which time I'll reevaluate the target, assuming I'm not stopped out.  Ultimately, the 1.0000 (and lower) still seems possible over the next month.

* * * * *
ESM2 and the pivot levels today:

ESM2 - 5 minute

It was interesting how well the regular trading hours (RTH) pivot levels were "in tune" and respected today. 

On some days, the 24hr pivot level calculations are in tune, so I actually track both. 

However, I don't usually see days like this where every level touched was respected in a meaningful and actionable way.

It's just too bad I did not take as much advantage of this.  But this is yet another example that will go into my memory bank of experiences deep within my subconscious mind.  So that next time, I'll be better prepared.

Wheels went wobble wobble

Total gross profits:  $-125.00  -2.50 ES points
Total trades:  11 [4 scratch]
Accuracy:  42.9%
Execution score: TBD%  [but it was low]
Opportunity cost: $tbd

Sounds like our kids are a little sick, so it's a quick update today.  Read the markets pretty well, but execution was lacking.  

Early on, had multiple +1.50 trades which didn't get +2.00, so that created some anxiety.
A couple of full stop losses then triggered the anti-discipline mode.  Tisk tisk.  

And the trades following the stop outs were all closed out at breakeven since they went at least +1.50, that is, until the last one (trade #11).

I was short most of the day, thinking it was going to be a trend day down.  But for whatever reason, I could see that the double bottom was going to hold around 14:30, and that there was going to be a sharp move to hurt the bears.  

So I bought at 1394 and held as long as I could.  It was a rogue trade, one that my subconscious told me to take.


 My target was initially 1399 area.  Placed a tight trailing stop, which got tagged just under 1397. It eventually hit 1401.  Pretty much worked according to plan, but didn't execute well, since I was just trying to protect profits, vs. going for big gains.

Another day to think about what I did today, and why I did what I did.  Maybe my trading plan is not suited to my personality and needs to be further adjusted?  Tomorrow will be another day to improve.

Back to basics

Total gross profits:  $300  +6.00 ES points
Total trades:  3 [0 scratch]
Accuracy:  100.0%
Execution score: 100%
Opportunity cost: $0

Perhaps an "ugly" chop-filled-narrow-ranged-low-volume-day like today was a good one to get back to live trading, a blessing in disguise.  No crazy movements (at least until the of the day), to potentially get my head spinning.

Renato is also teaching scalping methods this week on the ES, so it was good to see him make scalping calls in the morning that aligned well with what I was seeing. 

There was a clean and distinct downward sloping trendline that worked well during the morning, so I used it to my advantage to short against it every opportunity I got.  Missed a couple other successful trades by a tick or two, but that goes with the territory.
 

So in summary, 3 winning trades, and I stuck with the +2.00 target, just as I did the last time I went on a good run earlier this month.  I then called it a day before lunchtime to protect my profits.  

And more importantly, to conserve my mental capital.  I'm getting back to basics.

Short $AUDUSD from 1.0521

Not sure why I enter these forex trades at night, right before I go to sleep.  Maybe it's when the setups just tend to happen?  Or maybe it's a just a twisted game my subconscious plays on me to see how well I can sleep with overnight positions?  Or maybe it's just a way to get me to wake up in the morning to see how the trade went?

Short $AUDUSD from 1.0521 due to:

• Downtrend line acting as resistance on daily chart
• Fast stoch (8, 3, 3) turning down (although it didn't get as high as I would like)
• 38% retracement from high to recent swing low on daily chart 
• 20 ema acting as resistance

Stop placed at 1.0555, just above the psychological 1.0550 level, as well as the 1.0545 high of the trigger bar.  However, this might be a bit low based on any fakeout breakout stop runs above the 1.0550 level, and might be adjusted.

Target is still TBD.  But assuming I don't get stopped out over the next 2-3 days (odds are relatively high that I will get stopped out):

• Could be based on the extension of the Oct 2011 + Dec 2011 swing low trendline (currently around 1.0300 and rising), as well as a Diamond Setups based level
• Could be the lower downtrend line on daily chart (currently around 1.0265 and declining)
• Could be .9950 area, based on some DS based levels
• Could be...

$AUDUSD daily chart

$AUDUSD 2 hour chart

What's more important than risk management of your capital?

No trades today, still taking it easy.  I did have some SIM trades on Friday for about +8 ES points.  Although I treat SIM trades the same as live, there's still a difference with fills, so I'm not really counting those at this time.

EURJPY update
And from the hindsight trading perspective, the original $EURJPY long trade on 3/23 from 109.01, had I not placed the initial stop so close and brought up the stop so close, which then stopped me out the next day, the trade would be looking pretty good right now (up over +150 pips).  Lesson learned -- make sure I keep the stop below the trigger bar, and don't touch it for at least 2-3 days.

* * * * *
Managing your psychological capital is MORE IMPORTANT than managing your capital risk

Over the weekend, I happen to watch a video from Denise Shull, who has recently released a trading psychology book called "Market Mind Games."  It has received some strong reviews, so I'm looking forward to reading it soon.

Her message created one of those a-ha! moments that hit home, especially due to my mini-meltdown last week.  The information wasn't anything groundbreaking, but based on the timing of the message and how Denise presented the message, it really got through my thick skull and rang some bells.

One of the studies she references in the video is from Seo and Barrett, which in summary, says "investors who were both the most emotional, but also the most aware of their emotions were the most successful."

Here is a partial transcript from the video clip.

If you manage your psychological capital better than than you manage your cash capital, you will have a better year than last year. 

Research shows that when you are tired, you will mis-perceive risk. You think you will see one scenario, and it's not what you're looking for.  And the research is overwhelming convincing on this.

So if you get a lousy nights sleep, and you're tired...have a fight with your spouse, your best risk management tool is not to trade.  I also know it's the hardest thing to do.  But this is really a hard business.  And you gotta learn to do some hard things. 

The place to have the discipline is managing your psychological capital. 

So instead of trying to apply discipline to not having the emotions, and just doing the trade and taking every trade, apply the discipline to understanding where you are on your psychological capital scale.  And if you're tired, or if you're sick, or if you're aggravated at your wife, child, or dog...

DO NOT turn on your order entry system.  It is a very simple risk management tool. 

Now everybody wants to trade.  But there are always other things you can do.  You can review last months performance, you can read a book that you've been meaning to read related to trading, you can practice something in simulation. 

But DO NOT turn on your real account.

And just think, if you just take that one tip, at the end of the year, how many of those trades that you wished you wouldn't have taken last year, would you not have traded? 

And imagine psychological capital. If you don't take that trade, because you were tired, and so you don't have a crummy day where you lost a $1k, or $5k, or half million dollars...you don't have that crummy day, where are you going to be the next day? 

You'll going to be better off in every way! 

First of all, you're not going to be so mad at yourself for taking the crummy trade, beating yourself up, why did I do that again.  So you won't have the psychological capital deficit that  you just gotta recover from mentally and emotionally, you also won't have the cash deficit.

So the next day, you're going to be like, you know what, I actually handled that well.  I did what I was supposed to, like an athlete, or a singer who preserves their voice, or preserves their body.

It's the same thing, you're preserving your mental, psychological capital.  And when you do that for a day, you're going to come back the next day with much higher odds of making better decisions.

The point about taking trades when you're tired, angry, annoyed, etc., is so true.  Those "oh this little loss from this mediocre setup won't hurt me..." really does starts to add up, and does hurt your P&L over time.  Death by a thousand cuts.

Today, I didn't log into my live account.  Little by little, I'm learning to build up self-control and self-awareness over my actions and my emotions.  Step by step, I'll continue to make small improvements every day.

Entered $EURJPY long at 109.01

Entered EURJPY long swing trade tonight at 109.01, due to the trendline setup on the daily chart. 

• Exit is whenever the market tells me it's not going up anymore.  
• But if I'm super super lucky, 117.00 area is the hallelujah stretch goal target in 5 weeks or so.
• Stop is currently at 108.72, although since the trade has gone nearly 2 times the stop loss amount, I will raise it to near breakeven and go to sleep.

$EURJPY daily

$EURJPY 15m

Almost down 10% = TIME OUT

Since today would have been my mom's birthday, there are some family obligations I have to attend.  So this update will be quick and simple.

My account is now down nearly 10%, so I'm calling a time out.  It's back to SIM, because if I continue trading like I have been recently, where I don't have much respect for my trading plan or what I'm doing, it's financial suicide. 

Ever since I was up over 7% in the 2nd week of this month, due primarily to the great execution of my plan, I have since lost around 15% from that peak.  It's not the necessarily the loss itself that has been the primary trigger for my time out, it's the drastic and consistent decline in my execution score.  Had I continued to trade with discipline and maintained a high execution score, I would consider this drawdown much more acceptable.

On the bright side, at least I'm at the point now where I'm self-aware enough to understand what is going on, and to stop trading before things really get out of control.  It's time to reevaluate what I'm doing and to try and understand what is causing this self-sabotage type behavior.

My moment is still here, and I'm going to use this next phase to take all the pieces that I have learned to date, then rebuild an even stronger foundation upon which to grow.  I believe how a person reacts in the face of adversity is a true reflection of their character.  So let's do it.

Mental meltdown in the final minutes

Total gross profits:  $-250.00  -5.00 ES points
Total trades:  11 [0 scratch]
Accuracy:  36.4%
Execution score: 45%
Opportunity cost: $+275  +5.50 ES points

Up until the final minutes of the close, it was going to essentially be a breakeven day.  I had some sloppy execution errors earlier, but all in all, it could have been a little better or worse.

Then I went long about 10 minutes prior to the close, thinking that we'll see a nice surge into the close, primarily due to a upward trendline that had worked well earlier.  But instead, a sharp selloff took place slicing right through the trendline.  I ended up taking a full loss.  The full stop loss was a perfectly valid trade.

Snap!

For whatever reason, I decided that I had to make it up, with only 5 minutes remaining until the cash close.  But wait, there's still 20 minutes before the futures close.  Revenge trading, here we go.

In a span of less than 15 minutes, I took 5 trades.  To put things into perspective, I usually take one every 30 minutes.  I continued to fight the trend, trying to buy as it went lower, then getting stopped out.  Rinse, repeat.  Again.  And again...

When conviction trumps discipline, we know how that usually ends -- I ended down -5.00 in less than 15 minutes.

What were the triggers?

On the trade review today, it's also easy to see that when I have a full stop loss, the following trade has a propensity of being a rogue or revenge trade.  In general, this is not uncommon for me. 

3/21/2012 VanKar Trade Analyzer output

There were also some cracks in my discipline forming, when I decided to go for more than +2 on some earlier trades.  Why on a relatively narrow range day, when the odds of a runner are much lower?  Again, it started happening after a full stop loss.

As an example, after trade #3 in the VanKar Trade Analyzer chart to the right turned into a full stop loss, I went for the big redemption trade with trade #4, and only closed out with a +0.50 after it went well over +2.00.  Cracks in the discipline.

After my full stop loss on trade #7 was closed out at 3:55 PM, "the meltdown" of 4 more trades took place.  On the bright side, at least the size of my losses on each successive trade kept going down.

And from the personal side, I had extra childcare pickup and dropoff duties come up at the last minute, which created a higher level of stress.  My available time shrunk considerably, and this stress was easily spilled over to the trading side, especially when luck was not on my side.  

I've mentioned it many times that some of my worst performances are when I'm in single parent mode.  The week when I lost 25% of my account back in November quickly comes to mind on a day like today.  At least the losses today were minimized, and the backstop of the market closing helped to prevent a long term meltdown.

Back to basics, again

So this is yet another reminder for me to handle these types of days differently and with extra caution.  Either learn to take these days off or just trade on SIM.  Time to get back to the basics, again.  Forget about the P&L, it's all about following the plan by executing my process as flawlessly as possible.

Setup: Connect 2 and Extend

I didn't expect to write anything tonight, but I saw a setup today that compelled me enough to put forth the effort.  I usually don't go into much details with trades generated from Diamond Setups, out of respect for the fact that it's a proprietary system.  And I don't take many non-Diamond Setups trades.  But there are a few setups that I still take on the rare occasions when they do come up.

I just can't help it, I usually pull the trigger on those non-DS setups, knowing that I'll get dinged on my execution score -- simply because they are based on setups I've researched or taken over time and they just call out to me.  Perhaps I should just update my trading plan to include these types of setups so they're not considered an exception?

I didn't have a formal name for this setup, but I'll just call it "Connect 2 and Extend", since it's based primarily on connecting two points and extending the trendline.  It's relatively simple, although like nearly all setups, there is some "art" associated with it.

Here's basic recipe (generally works on all timeframes):

• Connect 2 significant swing highs/lows and extend the trendline to the right
• Look for points where the extended trendline intersects with another point of interest, such as a moving average, vwap, Fib, another trendline, etc.
• When the fast stochastics (8,3,3) is above 80 or below 30, and price is hitting the confluence of the extended trendline and at least one other support/resistance, enter at a price as close to the trendline as possible
• The stop is generally placed a tick above/below the trigger bar
• Profit target for ES would be +2.00 for the first target (or use whatever scaling out method that works for your style)

Here's an example of the setup that took place today.  I did *NOT* take this trade today, since I was not trading this afternoon.  At the time of the trigger, here's what the screen looked like:

ESM2 - 3/20/2012 - Setup view

And after the fact, you can see how well both the support/resistance level right around 1398 was respected, as well as the upward sloping trendline.  Depending on your level of aggressiveness, there were multiples places to enter trades today based on the trendline, although the only one that meets the criteria for this setup is identified in the chart above as well as the blue arrow in the chart below.

ESM2 - 3/20/2012 - Results view

I also use to this method to enter trades based on the 15 min or daily forex charts, and it has also worked with stocks.  What's really great is when this setup lines up with the Diamond Setups once in a blue moon on the ES -- then the outcome is usually quite magical.

Family time trumps trading

Total gross profits:  $162.50  +3.25 ES points
Total trades:  4
Accuracy:  75.0%
Execution score: 50.00%
Opportunity cost: $37.50  +0.75 ES points


Another choppy morning session, at least based on the timeframe I primarily monitor.  I also took or managed some trades based on setups that are not yet formally a part of my trading plan.  

So to be honest with myself, I dinged myself on the execution score.  But I also exited a trade early so that I can head out early, thereby further dinging myself on the execution score.


Today is my son's 4th birthday and it's such an important day for him.  So that's the reason why I'm closing up shop early, to help get his birthday party setup for later tonight.  I also see this as a test, to prove to myself through action that I live up to my priorities in life -- family time trumps trading.  

Sure, it makes it easier to leave since I'm up for the day, and I wonder if I could have left as easily if I was down for the day (probably not).  But at this point, it really doesn't matter.  I now have more important matters to address.  :)  

Brick by brick

Total gross profits:  $87.50  +1.75 ES points
Total trades:  2 [0 scratch]
Accuracy:  50.0%
Execution score: 100%
Opportunity cost: $0

One of the examples Renato makes in his Diamond Setups trading room is that he's like a bricklayer -- focusing on building a wall, brick by brick.  And before you know it, you look up and realize you've built a big wall.  

From the trading perspective, he's just following his trading plan, patiently waiting for one good setup, and pulling the trigger.  His goal is to take small little bites every day, and over time, those little bites really do add up to some sizable profits. 

So starting this week, I decided to start making small little changes, not necessarily directly trading related, but activities outside of trading that have a direct impact my trading.  As I was spending time on the mental game this past weekend, I coincidentally received a link from "H" to a FT71 webinar regarding meditation.  In that webinar, FT71 identified 3 key activities of life that impact your ability as a trader:

1) Meditation
Meditation is something I haven't worked on, although I have purchased a biofeedback device called the Stress Eraser with limited usage to date.  I'll need to dust it off and put it to use.  Trader-X also had a great post regarding meditation about a year ago.

2) Diet
My diet is pretty good, although I can always work on cutting back on sugar, which generally wipes me out. 

3) Exercise
I used to work out at least 3 times a week (minimum 1 hour), but that has fallen to about once a week.  This is an area I can work on immediately.  So for at least 2 days a during the workweek, I will dedicate an hour of exercise prior to trading.

Today, I went to go exercise in the morning before trading, thinking that I could work out any impulsive energy that has been building up over the weekend.  I felt the positive impact of the exercise.  My mind was clearer, and there wasn't as much need to trade, for the sake of trading.  I only had 2 trades the entire day, so perhaps this will help minimize revenge/rogue/boredom trading.

I am serious about improving my performance as a trader, and will continue to evaluate and implement changes to my life that will positively impact my ability to trade.  It won't be a drastic change, but something that I will work on brick by brick, bite by bite, with clear goal and objectives in mind. 

Someday in the near future, I expect to look back and see great progress in many areas of my life -- not just trading.

The trials and tribulations of my blue funk days

Friday, March 16

Total gross profits:  $-50.00  -1.00 ES points
Total trades:  5 [1 scratch]
Accuracy:  50.0%
Execution score: 20%  [ughhhh...]
Opportunity cost: $75.00  +1.50 ES points  [minimal due to limited range day?]
 
I spent this weekend reading up about and thinking of ways to improve my mental game.  It's pretty clear that for whatever reasons, the discipline that worked so well for me nearly the first couple weeks of this month, all of a sudden vanished earlier last week and the blue funk days quickly appeared.  In some ways, perhaps I was lucky that we only had a +4.75 range during RTH on Friday, which may have slowed down my trading.

So I tried to brainstorm an introspective, root cause type analysis, to determine what may have triggered the recent lapse in discipline:

• I might do better when I have a swing trade position, since it makes me feel like I'm already involved/participating in something -- I'm less likely to impulse/revenge trade
• Less sleep means I'm less likely to remain alert and disciplined.  At least my little kids are finally starting to sleep all through the night [FINGERS CROSSED]
  
• I haven't been exercising as much -- this is a big factor for my mental well
  
• Diet -- too much sugar wipes me out.  I need to have a breakfast and lunch "tuned" to keep me mentally sharp
  
• I still have moments of profound sadness about my mom passing away last month
  
• Over the past 5 months since trading futures, it feel like I've been treading water...
  
• ...so I want that "breakaway" where I'm "making the turn", and I end up forcing trades/going for home runs
  
• There are times when I think my "subconscious trader" wants a chance at proving itself, but that also opens up the door for "Gambler Grove"
• When the first trade is a loss, and especially after first 2 in a row, revenge mentality sets in
• Something else I'm blocking deep within my subconscious?

Even if I know knew the exact trigger(s), I'm sure it'll still be quite the challenge to get it under control.  Just like the time the doctor told me to cut the coffee for a while...oh how I failed.  I didn't even seriously attempt it.  

If I specifically knew what factor was the root cause of my trading issues, you better believe I'd be giving it 110% effort to crush it so that I gain consistent self-control.  I realize I'm still getting started on my journey, but I believe more than ever that with every day of experience I gain, it only makes me stronger.

Another comeback day

Total gross profits:  $37.50  +0.75 ES points
Total trades:  7 [1 scratch]
Accuracy:  50.0%
Execution score: tbd %
Opportunity cost: $ tbd

Another day where it started with a losing trade, and I said to myself that I won't make the same mistake again as yesterday.

2nd trade - almost stopped out, but I got out at b/e. 

3rd trade - I scratched.  Maybe it's getting better.

4th and 5th trades - full stops.  Uh oh...

I was down about -8.00 ES points.  Ouch!  Oh no, not again.

Comeback time.

Deep breath.  Here we go again. Let's do it.

An ascending triangle was forming, and the infamous (at least to me) 1391.00 came up as a buying opportunity, again.  I have mis-traded this 1391.00 level for the past couple days with quite the negative outcome.

7th trade - So I tried it again, went long at 1391.00, and went back to my phone conversation.  I eventually exited at 1396.75, one tick below the first 1397.00 high of the day. 

Final tally?  
I'm up a few ticks gross -- net breakeven.

Time for a late lunch.  I'm done.  Game over.  My mind is not in sync, it's time to walk away.  Not going to let Gambler Grove come in this time to go for the big kill, or get killed.

My read on the market was better today than yesterday, but my execution and patience was not.  I was on a phone call for most of the morning dealing with some family matters, and took many of these trades while multi-tasking.

Probably very ill advised to do this, but then again, maybe it gave my subconscious time to quickly analyze the charts without the monkey getting in the way.

Back to SIM?
I'm starting to think of going back to SIM trading for a while.  The fact that I even thought of that, should be taken as a warning sign.  And the inability to calculate my execution score and opportunity costs, my most important metrics, is an even bigger concern.

I need to remember Rule #1, protect your capital.  I'll be back with a much better focus tomorrow!

2 day loss = 2 week gain

Total gross profits:  $-325.00  -6.50 ES points
Total trades:  11 [1 scratch]
Accuracy:  20.0%
Execution score: tbd %
Opportunity cost: $ tbd

Even with 1 hour less sleep than usual, extra family duty this morning, I was still feeling confident, even with the yesterday's performance hanging over me.  I was ready.

The first trade looked like a decent setup, and something I would take again and again.  But it went +1.25, just one tick shy of being able to bring my stop up to breakeven, and got a full stop out.

The yellow flag comes out
Uh oh, first trade that's a full loss -- that's when I should pull out a yellow flag and put it on my monitor.

Then the dreaded double clicking of the DOM took place, which entered me into a extra position.  At least this time, I was able to gracefully exit.  But still, another stop loss. 

This was followed by more sloppy and rogue trading, more losses.  Downward spiral.  Discipline was thrown out of the window, I was totally out of sync.  I was in a different world, in a not so good way.

This chart, from VanKar's Trade Analyzer, also shows that my entries were terrible, and rarely went much in the money before getting stopped out.  And you can see how I even let trade #5 get to +2.00 profitable, and yet I still booked a loss.  Shame.

Rogue Grove comes off the bench after lunch
During lunch, I tried to take a nap, but as exhausted as I was, I couldn't sleep.  So I made a decision to let Rogue Grove out to play.  The day was shot, the execution score was not even worth it tracking. 

I fully realized, this decision was dangerous.  Whether it was my fatigue that allowed it, or some part of my subconscious, I don't know.  It's almost a lose/lose situation -- if I made a good P&L comeback, then it reinforced potentially bad behavior.  If I really let things go, then the protection of my capital, my priority #1, was unnecessarily risk. 

"That Voice"
But on the flip side, there's a certain point where you need to start listening that "that voice" in your head, you know, the solid and reliable one that starts whispering to you what's about to happen, and is usually right.  Probably based on the culmination of hours/years of screen time experience, it's a voice easily confused with "Gambler Grove's" voice.  But I really believe that over time, it's becoming a little easier to tell them apart.

So I wanted to test it out.  To see if I'm getting to the point where I'm able to start operating at the level of an "unconscious trader."  You can absolutely argue the point that I wasn't of sound mind to make that decision at that moment in time, but it you know what, it still seems justified after the dust settled.  Chalk it up to a self discovery experiment.

The "almost" comeback
I was down about -10.00 ES points and got the P&L back to less than -1.00.  Not bad, a "typical" 9 point comeback.

But overconfidence took over, and I didn't want another one of those "almost got back to breakeven" days.  I wanted to close solidly green.  So "Gambler Grove" took the wheel from "Rogue Grove", and went for the gusto to CRUSH IT -- anticipating a big selloff into the close. 

Didn't happen.  Strike out.
Ended up going from -1.00, to -6.50 points, working 2 contracts around a short position.  But at least I didn't end up trading like I traded $TNA on this day. 

Back to where I started
The losses from the past 2 days have just about offset the gains from the past 2 weeks.  So essentially, I'm back where I started on March 1st. 

Gluttony took over today, and now I feel the effects.  Luckily, the damage was minimal.  Now it's time to regroup, refocus on the fundamentals, and get back on track. 

But first, I need a really good nights sleep.

Click click click...dohhhhh!

Total gross profits:  $-262.50  -5.25 ES points
Total trades:  4
Accuracy:  25.0%
Execution score: 50.00%
Opportunity cost: $50.00

First losing day since the beginning of the month.

It seemed like everyone was waiting for the FOMC news to be released, so that "real" trading can resume.  I was being so patient, too.

And for the most part, post-FOMC-release, it was a thud.  Resumption of the choppy action, but with a bigger chop.  That is, until the financials started rippin' higher based on banks raising dividends, passing the stress test, blah blah blah.  So the bulls made a run to everything in sight, so goes the rationale. 

News is out!  Hey, where am I?  I feel like I'm at the Bellagio's all you can eat buffet!!
After all the talk about being on a diet yesterday, once the news was released this afternoon and the market started to move, it was as if I was in Las Vegas right in the middle of Bellagio's all you can eat buffet -- after eating only bread and water for a couple weeks.  Will I be able to maintain my composure, resist temptation, and maintain my diet?

Looking like a trend day UP
All day long, I thought it was "so obvious" that it's looking like a trend day -- gap up open, the R2 pivot held, higher swing highs, higher swing lows, upward sloping moving averages, etc.  The FOMC news shook things up a bit, but from the bigger picture perspective, the overall trend was still up.

Then why are all my trades today, SHORTS?!?!
I really don't know.  After getting stopped out of my first short in (I believe a record) 19 seconds and quickly made a new HOD, it was a warning sign that there is significant strength, PERIOD.  No more shorts allowed, stand back.

And what did I do next?
I tried to short again about 3 minutes later.  But I accidentally pressed the DOM after my initial entry, and added an additional contract.  OK, let me fix that.

Click....

Uh oh.  I tried to offset the position by via the market order button, but I entered it on the wrong side, so I now had 3 contracts short.  I forgot to turn off my bracket orders, so they're stacking up all over the DOM now, messing things up.  What the...

Click...click..clickclickclick...

Semi-panic set in, DOHHHH!  And since I was very fortunate to have it go a few ticks in my favor, I pressed the EJECT "Exit at Mkt & Cxl" button and just flatten to start over.  This was the first time I actually felt some emotions in quite some time.  In hindsight, this impacted my future trade decisions.

Time to chill out
4 minutes later (it seemed a lot longer), thinking I regained my clarity of thought, I tried to short...again.  I'll just reenter the prior trade I messed up at a slightly better price, why not?  WRONG.  Nearly 4 minutes later, I was stopped out again.  I said, that's it, I'm done for the day.

But...another?!?
But about 20 minutes later (I'm really back to normal by now, right?), there was "another opportunity that I couldn't pass up."  Although that opportunity went +1.25 (not quite enough to move my stop to breakeven), it didn't look good and I moved my stop down to -1.00.  It eventually went -2.25, so at least my instincts proved correct.  But unfortunately, I couldn't resist temptation to avoid the trade.

Therapy session over
OK, I've had enough of re-experiencing this, and I'm sure many of you have experienced similar situations before.  And I'm sure I'll experience something like this again in the future.  The purpose of me writing about this is to help me understand and remember what I did, so that if I see "this story" developing again in the future, then I'll be able to put a stop to it before it gets out of hand.

What did I learn?

• Don't fight the trend, especially when news driven
• Know your DOM well...
• ...so that you can exit positions gracefully, under adverse conditions
• If you get out of sync, just walk away (after a loss, this is the most difficult action for me to take)
• Obey your account risk management rules to know when to quit for the day  (i.e. 3 stops and you're done, x% loss of account, etc.)
  

An airline pilot regularly trains under various adverse conditions, to the point where if they experience an emergency situation in real life, they are conditioned to react in a specific manner with a high level of confidence.  If you know exactly what you're supposed to do when things start hitting the fan, you will not experience the panic that will cripple you from taking appropriate action.

Therefore, I need to experience more adverse trading conditions...under the SIM/demo account.

Self-review of my actions
In the end, I did not do as well as I could to manage my risk, but I did handle an adverse situation well without panic (fat fingered trade); I put the brakes on my trading after 2 losses in a row (I let a 3rd slip by slightly); and ultimately, I limited the overall losses on my account (< 3%)

Therefore, my frame of mind is still sound, my account received only a mild hit, and I'm ready to face tomorrow from a position of strength and confidence.

Disciplined trading is like...being on a diet

Total gross profits:  $100.00  +2.00 ES points
Total trades:  1
Accuracy:  100.0%
Execution score: 100.00%
Opportunity cost: $0.00

One and done, all before lunch.  

Had a signal line up with Renato's DS alert, got my +2.00, and ran since I couldn't really make much sense of the choppy charts today.  Went out to lunch, hoping that when I returned, volatility would have returned.  No luck.  

But I had one new discovery, Taco Bell's new Doritos tacos are pretty good, although a bit gimmicky.  And it really made me feel like buying a bag of Doritos, so their marketing plan must be working.  

And to cap off the trading day, I actually fell asleep for a bit around the market close.  Yes, it was just that kinda day.

Disciplined trading vs. being on a diet
Speaking of junk food, I made somewhat of a realization today that trading well with discipline is almost like successfully being on a strict diet.  It's very clear what you need to do in order to maintain your diet, but very difficult to "stay on the wagon."

When I've tried to diet in the past:

• I've always felt a bit hungry all the time (need action, trade more!)
• Or craved certain fried/sweet/salty foods you're not supposed to eat (rogue trades!)
• Or just decided at 11:00 PM that you're just going "F" the diet and finish a pint of Ben and Jerry's Chunky Monkey ice cream (go on TILT!).  

For the record, I've never finished a pint of ice cream in one sitting.

Probably because I'm not quite there yet with my trading discipline, I admit there are times when I feel a certain sense of missing out or very restricted when I'm trading according to my plan.  Sometimes, it seems like everyone around me is making great trades with money falling onto them from the skies, while I'm sitting on my hands, waiting while eating plain tofu and water.  

Or, I feel like I'm watching profitable trades go by that I've deliberately avoided, since they didn't quite meet the criteria for a valid setup.  And of course, I conveniently forget about all those trades I decided to pass on that ended up losing money.

But I realize that it's not about "others vs. me."  I am my own worst enemy.  So having a trading plan and being disciplined to that trading plan is essential for me, as I have just experienced over the past 25 trades with good results.  

Over time, I need to recognize that maintaining this level of focus and discipline is the nature of a successful trading business; this is what "normal" should feel with regards to the level of sacrifice I need to make in order to maintain the highest levels of discipline; this is one of the biggest challenges I have to overcome in order to become a consistently profitable trader.  

I'm getting there, slowly but surely.

Checkpoint: Review of 25 trades

Time Period:  March 1 to March 9

Total gross profits/per contract*:  $987.50  +19.75 ES points 
Total trades:  25
Accuracy:  60.0% if scratch=losses   [68.2% if scratch excluded; 72% if scratch=wins]
Execution score: 86%
Opportunity cost: $-62.50  -1.25 ES [execution errors have been net-favorable]

I lost my focus, I went astray, I was wandering somewhat aimlessly.  Gambler Grove started to come around, with influential whispers of "Hey, going for just +2.00 targets is a drag, man. Go for the big runners!  Feel that +10.00 trade!!"  And when I was weak, Mr. Revenge came for a visit.

Luckily, I've met some great people on my trading journey, and they helped me to get back on track.  I made a commitment on March 1st to take 20 trades and be consistent and disciplined to my trading plan, using +2.00 as the profit target and going for singles (forget about swinging for home runs).

This past Friday ended with 25 trades since the beginning of the month, so I've decided to base my evaluation on a slightly bigger sample of trades.  Overall, not a bad execution score, which led to a respectable P&L, especially given the market conditions this week -- which wasn't the most favorable based on my methodology and time frame.  The execution score started to slip slightly on Wednesday and got worse up through Friday.

Report from Tradervue: March 1 - 9th results

Breakdown of trades

Wins = 15  (12 full +2.00 ES target wins = 48%) * 
Scratches = 3
Losses = 7  (3 full stops = 12%)

Max drawdown = $-225.00  -4.50 ES

* Note: There were 3 trades, all +2.00 winners, that were taken simultaneously in 2 separate accounts, and the total profits for all accounts are included in the results.  However, they were still counted as one trade.

Execution Score
The letdown in my execution score over the past few trading days concerns me, especially since that's the metric of most significance: Am I following the plan, or not?

Could the execution score slippage be a sign of mental fatigue?  Getting temporarily worn down by the market conditions?  Or something else?  Not sure, I'm still evaluating.

On the bright side, I have deliberately passed on many setups over the recent days, to my benefit.  And as I have noted before, my current execution score and opportunity cost metrics do not penalize me for missing or passing up trades. For now, I'm fine with that.

Risk per trade
This is one metric I hold very sacred, my risk per trade.  My current risk per trade is currently around 1% of my portfolio, which equates to about $10k per ES contract.  But if my performance continues to support a relatively stable P&L curve/drawdown, I may start to explore the opportunity of adding additional contracts, assuming my overall risk per trade is <= 1.50 or maybe up to 2% of my portfolio. 

In the future
An objective I've kept in mind is to utilize a trading method that can scale up to 20 to 50+ ES contracts per trade.  I believe this current trading methodology, based on a variation recommended by Renato for his Diamond Setups method, and further refined with other DS members, has created a solid foundation that (in my opinion) can achieve that objective.

But what now?
I believe the best course of action is to continue trading on the current trading plan, based upon this exercise of evaluating a group of trades.  Take one good trade at a time, for 20 more trades, and reevaluate.  And then perhaps 20 more after that.  And so on.  I want to see how well the current trading plan works, under various market conditions.

Ultimately, my goal is to steadily build up the discipline to execute per my trading plan (whatever it is at the time) and burn it into a long term habit.

Yet another day that required patience

NOTE:  A reader pointed out the other day that the math ($'s vs. ES points) on many of my recent summary updates were wrong (thank again, "k").  They have been corrected.  Long days and late nights...


Friday, March 9

Total gross profits:  $50.00  +1.00 ES points
Total trades:  4
Accuracy:  50.0%
Execution score: 50.00%
Opportunity cost: $-75.00  -1.50 ES points  [my mistakes benefited me]

The title of the post a few days ago was, "A day that tested patience", but this time, I really mean it...really!  Over 4 hours of a 2 point or less range, which created many opportunities to get chopped up.  So if you didn't catch the morning run up, or the drop just prior to 3:00 PM Eastern, you were generally out of luck.

Execution errors came out
I had more execution errors than normal -- a silly "DOM" errors, one silly "dumb" error, and finally one error that was deliberate.  DOM and deliberate trades ended being favorable for the opportunity cost, but dumb was not.  Mental fatigue from trying hard to stick to the plan?  Unfavorable market conditions wearing on me?  Both?  Or something else?

Warning signs
This week, especially the last 2-3 trading days, were exceptionally difficult, so I'm looking forward to some better trading conditions, at least for my particular trading style.  But with the daylight savings time change this weekend causing sleep disruptions, as well being in single-parent mode for the first few days of next week, I'll be extra cautious and may not actively trade until mid-week.

To be able to step away
I need to develop greater discipline to step away when I know the odds are against me -- I need to stop being so "clingy" and "infatuated" by the markets, especially when I know it's not acting good to me.  Because one thing is for sure, the markets will always be there. 

The week is over, and I've completed 20 trades, as I committed to do earlier this month.  That evaluation will be posted next.

Breaking trading rules

Total gross profits:  $75.00  +1.50 ES points
Total trades:  7  [1 scratch]
Accuracy:  50.0%
Execution score: 85.7%
Opportunity cost: $-100.00  -2.00 ES points

Tough day today, due to some misreads.  And the Execution Score indicates some penalties, which were based on two trades.

First tisk-tisk trade
The first was due to my decision to override a "go flat" signal on a long trade and continue to hold it.  I ended up making a +2 on what would  have been a breakeven trade, and have noted that on my execution score. 
  
Second tisk-tisk trade
The second trade penalty was due to moving my stop loss up to break prior to the trade reaching +1.50.  I knew it was my final trade of the day, and with the 70F degree weather outside and a grill that needed to come out of storage so that it can be cleaned up and ready for dinner, I didn't want to end the day on a losing note.  

Sure, I gave myself some dings based on a ticky-tack technicality, but I need to be completely honest with myself.  In the end, the b/e stop barely missed getting tagged by a tick, and I ended up getting the +2.  Therefore, no impact to the opportunity cost.

Rules are meant to be broken
I've spoken about this in the past, but there are certain times that I believe rules are meant to be broken.  Another example where I should have overridden my rules was the following:  

I was in a short trade from 1360.75 that started to show unusual "held offer" type behavior on the tape.  There was a big iceberg (hidden) order that protected 1361.00 for several minutes over many thousands of contracts, all the while the Euro continued to move higher.  

The price action was getting "jiggy", so I knew something was different and that it was a perfect opportunity exit the short trade with only a 1-2 tick loss.  However, my desire to stick with the execution won that time, and I ended up taking a full stop loss.

How I'll know breaking the rules is OK
I'll continue to track the opportunity costs, and as long as they remain negative, that's a good sign that my judgement to override my trading rules have some justification.  I believe my "inner voice" is starting to get more reliable, but I'd be the first to say that it's not yet ready for prime time.

It's not a sprint, it's a marathon.

$EURUSD closed +300 pips

Ended up closing the EURUSD trade today that I entered on 2/24.  When it made a new low under my original 1st target of 1.3100 before revising it, I moved the stop just below 1.3150 to lock in +300 pips, which is about a 5:1 reward/risk ratio.  The trailing stop was triggered today, closing out my position.

$EURUSD - 240m - 3/7/2011

I admit, after the fakeout breakout above the obvious 1.3150-60 level earlier today failed (1), and a new swing low below 1.3100 was printed (2), I didn't expect the 1.3150 area to get retested. 

But in this rumor driven market, 50-60 pips can take place within minutes, and my trailing stop was triggered relatively quickly (3).

In hindsight, I should have kept the trailing stop loss order well above the prior day's high, which means I would still be in the short position right now. 

But once I realized that my original target of 1.3100 was retested and failed, I probably got too aggressive with my trailing stop.

Live and learn, but at least this ended up being a respectable swing trade...NEXT!

A day that tested patience

Total gross profits:  $12.50  +0.25 ES points
Total trades:  3
Accuracy:  66.7%
Execution score: 66.7%
Opportunity cost: $112.50  +2.00 ES points

I had the first real lapse of execution today in about a week, and I didn't even know it was an error until I reviewed my notes and trades tonight.  

If I would have followed even half of my usual criteria to enter a trade, thereby resulting in at a more favorable price, I would have been able to capture a +2 move instead of having a full stop loss.  

Part of the reason I took the trade was due to the narrow and choppy market conditions today, which forced me to be extra patient.  That requires considerable mental effort for me, and as a result, made me search too hard for setups, rather than letting the setups come to me.  In many ways, I pulled the trigger after seeing my own shadow.


And what I wrote yesterday about coasting vs. not coasting at the end of the day came into effect today.  Had I not been in a losing position, I probably would not have taken my final trade, which was entered with < 15 minutes from the cash close.  But the criteria and confluence I saw looked good enough to short at RTH R3, got a fill 1 tick from the high of the day, and it fortunately banked my +2 profit target within minutes of the cash close.


Today was a lesson in patience -- to keep myself from simply tripping over myself out of boredom and mental exhaustion from waiting.  There will be many more trading days like this in my future, and next time, I will be better prepared.

To coast, or not to coast...

Total gross profits:  $225.00  +4.50 ES points
Total trades:  3
Accuracy:  66.7%
Execution score: 100.00%
Opportunity cost: $0.00

I wouldn't categorize today as a true or very strong trend day, since the moves during the regular trading hours were more of a stair step or grind lower.  

Most of the "trend day" took place during the overnight Asia session, as well as just about an hour prior to the NY cash open.  That's good, because in general, I don't do as well on trend days.

Coasting...
I was fortunate to catch a few moves today during the morning session.  I exited my 3rd and last trade of the day by 10:30 AM, and ended up with an "average" profitable day.  But as I look back, I can't help but wonder if I'm limiting my upside, since I seem to go into a "coasting" mode after I reach about +4 in profits. 

...or not coasting
However, if I was down for the day, I probably would have continued to be on watch, and would have continued to pull the trigger, taking trades until the final minutes of the day.  This is the type of attitude that really helps to create those "comeback" days, where I dig myself out from -8 ES point days over the afternoon.

But...
There's "that voice" in my head which says, "Hey, you're up a solid +4 [or whatever] today, don't risk it.  Just take it easy.  Those little crumbs add up by the end of the week and month!"

But then again, on a day like today when I'm reading the markets relatively well, I can't help but wonder if I shouldn't really continue to push the petal to the metal and fight until the end, just like those comeback days.

...for now
Starting on March 1st, for the next 20 trades, my goal is to reestablish my discipline by going for singles (i.e. all out at +2 profit targets).  I'm about 12 trades into my goal, and most importantly, my execution score is currently 100%, which means I'm following my plan.  Right now, execution score is my top priority, nothing else matters.

Eventually...
Ultimately, my goal is to maintain rock solid discipline and continue to execute per my trading plan, so that it turns it into a habit that will be very difficult to break.  Sure, my trading plan will change and evolve over time, but to know that I have the ability to properly execute what's in my trading plan will give me the confidence to scale up.

I consider this 20 trade exercise as part of the ongoing process where I am earning my right to trade bigger.  Once I get through the 20 trades, I will evaluate my performance in greater detail, and will address other concerns -- such as whether I am leaving a profits on the table after reaching a certain profits for the day.  And also, help to determine when I should start scaling up.

Until then, I will continue to do my very best to execute my trading plan well -- full speed ahead!

Mentally Challenging Day

Total gross profits:  $25.00  +0.50 ES points
Total trades:  2 [1 scratch]
Accuracy:  100.0%
Execution score: 100.00%
Opportunity cost: $0.00

This was one of those days where if you weren't prepared to get on board one of the ES's "big" moves, one in the morning and one in the afternoon, I could have easily fallen asleep, or would have been susceptible to being chopped to bits trying to squeeze water out of rocks.

Today, the high of the day was 1367.25 and @RenaTrader had a Diamond Setups short call at 1367.50, which means getting a fill for the HOD trade was missed by just 1 to 2 ticks.  And if you were awake earlier at 4:00 AM Eastern time, his "Asia & London Levels" would have gotten you long on the move down to 1360.50.  I missed both of those.

There were a couple trades where I did get some fills, and both went at least +1.50 to +2.00 (without a fill), so by following my trade management rules, they ended up getting stopped out at b/e or with a +2 tick profit.  However, both of the trades ended up going +2.00 and beyond after I was out. 

And after I missed those +2.00 target opportunities, I admit, I felt the ego get bruised slightly.  So I started to look even harder for setups.  Probably too hard.

Not a good idea for a day with hours of a relatively tight, range bound price action.  Although I would have made +2.00 on at least two additional trades where I actually placed a live order (but just a few seconds too late to get a fill), it just wasn't worth the mental capital drain, in hindsight.  There are better days to trade, and it's worth waiting for them.

On the bright side, even with all the conflicts and angst in my mind of trying to find decent setups, while even bending some rules slightly so that I can justify them against my trading plan (yellow flag!), the orders that I did place ended up being good calls.  So maybe my subconscious is learning something after all.

But the bottom line is that I didn't overtrade, and most importantly, I followed my plans and executed against my plan 100%.

UPDATE: $EURUSD - thoughts about 1.3150

I read the $EURUSD stream for a few minutes last night on Twitter/StockTwits, and was surprised to see how many people were saying the 1.3150 area was good support, and/or a place to buy on a retacement to go higher.

Not sure why, but it made me think the following:

• We'll never get down to 1.3150, and the EURUSD will head back up  (I was wrong)
  
• If we do get a bounce, it won't hold for very long  (So far it bounced from 1.3160)
  

The first option has already failed, so I'm thinking that the bounce from 1.3160 won't hold for very long. 

Today, the daily 20ema is starting to slope down, and also provided resistance.  The stock market also appears to be potentially slowing down.  Since the dollar and stock market are generally conjoined more often than not, if one tanks, the other will generally follow. 

Tomorrow will be an interesting day, and should help me determine whether I bring my stop loss level down closer to the current action.

$EURUSD daily 3/5/2012

UPDATE: $EURUSD swing short & the neglected indicator

Here's an update on the EURUSD short I entered on 2/24 at 1.3448:

• Original stop was 1.3510
• Original 1st target area was 1.3100, and 2nd target was 1.2800

 Updates since entry:

• On Friday, it hit nearly 4.50:1, reward/risk
• Stop was lowered to 1.3360 (above Thursday's high), locking in some profits
• Revised targets: 1st target area 1.3170-1.3150, 2nd target 1.2800-1.2775
• However, the trend still appears to be up, with a upward trendline support around 1.3150

The neglected indicator - time

I wasn't very aware of why I felt the timing was right to enter the EURUSD short, other than the resistance areas mentioned.  But after digging into my subconscious a bit more, the answer was clear: time. Most of the analysis you see is generally based on price or some derivative of price, as well as volume.  But I don't usually see as many people calling out confluences specifically in cycles and/or time.

This study of time and cycles isn't an area of study that I have pursued much, although I still recall the book I read in the early '90s called Geometry of Markets by Bryce Gilmore.  Not the easiest book to read, but one of the first books that taught me in depth on Fibonacci ratios.  Way back in those days, the 127% and 78.6% levels were still considered a big secret!

Through the years, I've noticed that there's a certain rhythm, cadence, or flow, that each market has under various conditions.  It's like someone you have known for a while, you get to know how they are when they're normal or angry, predict their next action or words, as well as be able to tell when something's bugging them.  Sometimes, you can't necessarily put your finger on it, but we humans can become quite perceptive when something's slightly out of whack with someone.

Same applies to watching the markets and getting to know its personality.  So at the time the EURUSD started to hit the recent resistance levels around 1.3450 last week, I noticed the following tendencies with regards to time for some of the recent moves:

• I went long on 1/13/2012 about 30 pips from the low, and that move lasted about 9 trading days.  I exited a day too late, but still caught 436 pips of that move.
• When I was evaluating the most recent short entry as it was hitting a confluence of resistance levels, I realized that it was about 7 trading days since the swing low -- close enough.
• By nature, I'm usually early to enter a trade and am totally fine taking some heat.  So I knew the next 3-4 trading days after entry might be a bit tough.
• And yes, Renato had his Diamond Setups overnight "Asia and London Levels" with higher resistance around the 1.3470ish area for that day.  He says his overnight levels are generally for daytrades, but if you have a longer perspective I will admit it's very valuable for entry zones.  I truly believe the overnight levels alone are worth the price of his service.
• After the fact, I went in and applied some cycles, and it looks like the EURUSD generally likes cycles based on a factor of 4 trading days.  You'll see the waves generally move over 4/8/12 trading days...at least for now.

EURUSD daily chart 3/3/2012

My current inclination is to possibly take profits if it gets down to the 1.3150 area, since that will be the 4th day of a pullback, with support from the uptrend line and support levels.  But, time will tell.  Yes, pun intended.  :)