From a Hyperspaz, To a Zen Master

First, let's get this out of the way.  After the big loss yesterday, I'm happy to report that there was no big 2nd day meltdown.  But then again, this was no big monster game comeback, either...although that requires some explanation below.

Friday, November 4
Total gross profits:  $375.00 
Total trades:  10
Accuracy:  50.0%
Contracts per trade: 2

NOTES:  The employment report created the usual havoc for a few minutes, creating a nearly 15 point up and down move that went nowhere.  For whatever reasons, after the dust settled, it seems as though the levels today were in harmony with reality, and my ability to read the overall trend was also in sync with the outcome of the trades.  I was in the zone.

However, just because I was "right" doesn't mean I made money.  My fills were out in left field in the un-zone zone.  Either my entry limit orders or my target target limit orders were not filled.  I no longer get the benefit of SIM fantasy fills, can't easily utilize MIT orders in TradeStation, so my "missed opportunity costs" ended up being at least +6 to +8 ES points over 3-4 trades.  In other words, this day had the potential of being a very solid day.  But the realities of getting fills (or not) just goes with the business -- I'm never going consistently enter all the possible setups or execute all my orders perfectly.

Sure, I'm somewhat disappointed it wasn't a huge day.  But I'm actually satisfied that even with all the misses, I ended up having an "average" day.  Yet another example of the margin of error this system provides me.  I'm also relieved that what has worked in the past month has continued to work today.  Both Renato's DS alerts in the room (which went 5 for 5) as well as the scalp setups I take, were working as they normally do.

During the final hour, there were a few more signals that worked for +2 profits, but I was fatigued and thought it was best to stay on the sidelines.  However, my confidence is stronger because of this experience, and I can't wait until next week to keep moving forward.

* * * * *
Yesterday, a Hyperspaz -- Today, a Zen Master. 

Well, perhaps not so extreme on both sides, but I believe I've returned back to the pre-live account trading mindset, and it fees like I made a big journey.  I can safely say that I've gotten all the "what's trading the live account like" out of my system, so I was able to get back into the zone today.  But every day is a new learning experience, and I'm sure there will be something else I'll face as a challenge in the days ahead.

Based on the past week or so, here are a few random thoughts:

• An unexpected but very positive surprise has been all the great like-minded people I have met through this blog and the Diamond Setups room. Extremely valuable and very appreciative.
• Yes, fills really are different in SIM vs. live account.
• "Only $1.20 a side commissions!" from my broker is a typical marketing diversion tactic.  After exchange and other fees, it's essentially double that figure.  Much greater hidden fees vs. stock commissions.  At least they scale it down with volume.
• It's easier for me to enter a trade (and overtrade) on a live account vs. a SIM account -- because it's the real deal (call me strange).
  
• MIT orders seem very appealing (even more so since I can't easily use them) and would likely increase my profitability.
• When the markets are really in tune, the DS support and resistance levels work, I mean they can be REALLY accurate.  But without the proper trading rules, they don't mean much.
  
• Mind over matter - the biggest challenge to successful trading.
• When you're really in tune with your trading system, the challenge is not whether you can follow the rules with discipline.  It's whether you can properly execute your orders accurately and promptly.

My goal over this weekend will be to rest my mind and body.  I'll need to recover from whatever minor bug I've had over the past week as well as all the relentless learning my mind has endured, so that I can be well prepared for another challenging and exciting week. 

It has been a LOT of work getting to this point, but I'm really enjoying this journey and truly believe the best is yet to come.  Is it Monday yet?!?

OUCH! For real

An imaginary post-game interview with trader Grove Under...

Interviewer:  Grove, what happened today?

Grove Under:  I got crushed.

Interviewer:  Oh, I see. What would you say was the primary cause of getting crushed?

GU:  I had a bad day.

Interviewer:  Okay...any other specifics you can give to explain what happened?

GU:  After unintentionally trading my live account yesterday, I decided to intentionally start trading my live account today.  So I guess I was a little too "amped."

Interviewer:  Amped?  Well, any other particular insights you can offer?  Such as from your typical list of "excuses"?

GU:  Well, I actually felt good today mentally and physically and truly believed that I could get through this day with a solid performance, even after a tough start with a full stop loss.  And I'm still feeling generally positive, even with the mediocre outcome.

But since you asked about my excuses, I spent much of the morning pretty amped and trying to force trades, just so I can see how the fills are with the live vs. SIM account.  I also had some nervous energy from finally starting to play the real game.

And having a big loss on the first trade of the is also a weakness for me -- it usually triggers revenge type behavior.  All those factors cascaded into a mini-death spiral resulting in 33 trades, many that were not part of the system.  Yes,  rogue trades.

Interviewer:  Oh, it sounds like you sure did go overboard.  How did Renato's DS system and the trading room do?

GU:  The DS system had the first full stop loss in something like 16 or so trades.  Even Renato and others in the room said this was a tough market to trade today.  If you don't recognize a trend day early enough, you pay dearly in more ways than just money.

But Renato had less than a handful of calls that ended up being being slightly positive by the end of the day, even after the full stop loss.  He did a great job navigating the calls.  Many others in the room had a small loss to slight gains.

Interviewer:  And how did you specifically do?

GU:  Oh, I ended up, ummm.... [unintelligible]

Interviewer:  Excuse me, Grove, are you still there?

GU:  Yes, I'm here. 

Interviewer:  What was your performance today?

GU:  Uh...I was down -$950 gross.  Real money.  On the bright side, it was less than 10 points per contract [sarcasm].  And with 33 trades on 2 contracts, let's just say my broker is happy with their commissions.

Interviewer:  WHOOAH!  OUCH!!  Didn't you just have a big "solid day" on your fantasy SIM account to start off November?  And after yesterday's botch-up, weren't you going to "step up your game" during GAME TIME today?!?!

GU:  Easy...don't rub it in.

Interviewer:  OK, let's put it another way.  How are you going recover from this devastating setback on both your trading account as well as from all the pain from deep within the depths of your traumatized psyche?

GU:  Huh?  In the big scheme of things, this wasn't a disaster.  We're talking about a 6% loss on the portfolio, which is nothing to sneeze at, but it's far from blowing up the account.  I've definitely had worse days.

Now it's a matter of getting down to the basics and waiting for the markets to come to me, for the setups that I know work over time.  It's as simple as that.

One point that helps me to move on is recalling how Michael Jordan would usually recover and have a strong game after a mediocre one.  I truly believe it's the ability to recover from setbacks, such as this, that will help define how well I will succeed in the future. 

Interviewer:  Any other final thoughts?

GU:  Mistakes made, lessons learned.  This isn't the first bad day, and it won't be the last.  And now that I got all this "what will the fills from trading the live account be like" out of my system, it's another thing out of the way.

And yes, it's time once again for me to "step up my game." Let's do it!

* * * **
Thursday, November 3
Total gross profits:  -$950.00
Total trades:  33
Accuracy:  48.3% (excludes 4 scratch)
Contracts per trade: 2

NOTES: A tough, choppy, slowly creeping trend day that ended up being a chopfest for yours truly on the first day of intentionally trading the live account.  The ES opened gap up, went down to fill  the gap, and gradually stepped higher throughout the day.

In order to gain the sense of fills, there were many pressed trades that should not have been made, as well as many trades where I manually exited at breakeven or at a loss, when they eventually made their +2.00 targets had I just let them go.  If I had selected a profit target of 1.50, it would also have changed the outcome significantly in a positive direction.  And during the final hour, it's clearly evident on the P&L how I tried to force my way out of with less than favorable trade executions.

Is it SIM or is it LIVE?

One quick moral to the story I have to share, without even telling a story first is -- you should avoid operating heavy machinery (and especially trading) when under the weather or if your mind is scrambled and not feeling so clear.  OK.  Then add the FOMC announcement dimension to the mix, creating a FUD (Fear Uncertainty Doubt) loaded trading environment, and that makes for a dangerous combination. 

Therefore, I said to myself early that it's a good day to take it easy and be very cautious -- just sit back and watch unless a really great opportunity comes up (i.e. Renato gives an alert). 

Do I always listen to myself?  No, I'm still working on that, so moving on...

The other important item of discussion is that you should always be aware of how to log into your SIM account vs your LIVE account.  Tonight, when I went to download my trades to update my Tradervue trading journal (which by the way, now supports OpenECry), I realized that I was logged into my live account the entire day.  Oh.

I didn't even notice it during the day...Not even once...After 7 hours of starting at my screens...And even after executing a over half a dozen trades.  Did I already say how you should avoid trading when...

I still remember complaining to everyone about my first trade, which went up as high as +1.75 (not quite reaching my +2.00 target order), that it doesn't really count because I got a SIM fantasy fill.  My order was to buy was at 1235.00 limit and the price never broke below that bid (ensuring a fill on a limit order).  So I assumed this was yet another SIM ploy to make me feel good so that I finally start trading live and begin paying real commissions.

I knew I would feel a bit "dirty" telling other I booked profits on a fill that would not have been very likely, so I ended up raised my stop to b/e and let it get stopped out -- made my conscious feel better, at least at that time.  I also noticed some other limit orders taking a bit longer to fill and thought "Wow, they must have changed the SIM parameters to make it seem more real!"  Well, it sure wasn't "they" that did it.

Now the question I need to consider since the seal has been broken is...do I just move forward with trading live...is it GAME ON!?!  And if so, why couldn't I have started yesterday when I had a nice solid day?  I'm going to sleep on it and decide tomorrow, with hopefully a clear mind.

Wednesday, November 2
Total gross profits:  -$25.00
Total trades:  7
Accuracy:  40% (excludes 2 scratchs)
Contracts per trade: 2

NOTES:  FOMC days generally tend to raise a trader's FUD in anticipation of the news.  So I was being extra cautious and had 1 trade before lunch (as described above).  In the final 30 minutes, well past the FOMC hype, I had 4 trades (out of 7 total).  There were some great +2.00 scalp opportunities in addition to Rena's calls (I think he had 3 or 4 calls today, all positive assuming aggressive entry criteria) that I missed fills or botched during the morning and early afternoon due to being overly cautious.

So instead of being up +6 to +8 points by the afternoon, I was essentially flat.  In hindsight, I felt the pressure to press some trades in the late afternoon to "make up" lost ground, and was very fortunate that this incident didn't blow up and result in much damage.  The cumulative P&L curve in the afternoon speaks for itself.

Well, that's enough drama for a day that should have been quite uneventful!

A solid start to November

I'm still recovering from a slight bug, but I'm relieved to say I ended up having a solid start to November.  Started the day with a better sense of focus and purpose and maintained it until early afternoon.  Although by the end of the day, I admit my mind was a bit scrambled and I ended up missing some layup trades.   

Tuesday, November 1
Total gross profits:  $925.00
Total trades:  10
Accuracy:  87.5% (excludes 2 scratch)
Contracts per trade: 2

NOTES:  Yet another gap down day, although the price action today was not quite as narrow as yesterday.  It was still a challenging range-bound day, but the size of the range gave enough room for scalp trades to effectively work.  In addition to some selective aggressive scalp setups, I also remained focused on Renato's calls (and as expected, it paid off).

What's the best type of market for me?
Based on my performance today, it seems as if I do better in range-bound markets, although I will need to check my journal.  So a thought that comes to mind is, "Am I a better range-bound trader or a trend day trader?"  Since there are generally more range-bound days vs. trend days, one would think that this may be good trait to have.  Although conventional wisdom says that trend days have the potential of generating considerable profits.

For now, I'm not sure either way, because based on some of the analysis I've seen using DS for aggressive scalps, there are still great opportunities to generate respectable profits even in challenging range-bound days such as today.  Therefore, in addition to doing research on my limited historical data, time will eventually tell whether market conditions do make much of a difference in my performance.

Breaking the cycle
After a solid day (or week, or month, or...), it's common for many to let down their guard because they think they're Superman.  I've been guilty of that!  So my goal tomorrow is to break that cycle.  I will work to maintain the mindset I had today, which is to remain focused and constantly on guard for the next trade. And regardless of my ending P&L, I will consider myself successful if I minimize careless errors and take all trades that meet my criteria -- quality of execution will be key.

But first, I need a good nights sleep.

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!