Wed. 06/10/09 - A lot harder than it looks

A lot of newbies jump into the markets in hopes of "easy money". They read about the (very few) successful traders, their high roller life-styles, ability to work from anywhere in the world, etc. and jump into the market with dreams of grandeur: making thousands or millions while sipping a cocktail on a sandy beach. Trading is so NOT like that. It's an extremely challenging and difficult way to earn a living. It tests you mentally, physically and psychologically all at once. Right when you think you've got it figured out, the market proves you wrong and tests your confidence. The charts are also VERY deceiving since they make it look so EASY in hindsight. Show any newbie a 5-min chart, and they'll be quick to point out how much money you could make (ironically self-acclaimed gurus also use this trick). To cut it short, this shit ain't easy so think more than twice before you jump in, and even then, don't do it for the money.



I made around $80 bucks today, and they were probably the hardest $80 I've made in my life. I was talking to Matt on Yahoo IM when I placed and exited a trade for a profit, and I told him "I've never been so happy making so little" LOL - and trust me, it wasn't because I made a few bucks, I was happy because I finally executed a trade according to plan, and was rewarded for it. I was acting like a bitch most of the day; hesitating on all my setups, not entering the market when I should, etc. I'll go over a few trade setups that I would have taken on Sim but for some reason, did not take now that I'm Live. Here's how my day went...

ES (5-Min) - Pre-Market Short-Sell Setup

I really wanted to short at 950 in pre-market, but hesitated thinking "I should wait till market opens and let the opening range get set". I then thought "I should place a sell stop 2 ticks below the 848.50 level in case we get a sell off at the open"...and even put in the order, but later pulled it out thinking "946.50-947 is support - why short so close to support?". Missed some nice down-side action. Lets move on to the next area...

ES (5-Min) - 9:00 AM Central - Trade #1

Over here, I see that the 944.25 area held and is a potential double-bottom from the over-night price action, and I think we'll rally back up now so I hit it Long at 944.75 with a 1-pt stop-loss; a "low-risk" trade in my mind. Price moved so fast against me, I got 1 tick slippage on my stop taking a 5-tick loss. In hindsight, I should have waited for a bullish candle to close above 947.25 and then looked to perhaps buy a pullback. That should have been an indication that price was set on heading lower, but we've had such choppy price action leading up to today, that the possibility of a strong trend down day didn't really cross my mind. Moving on...

ES (5-Min) - 9:45 AM Central - Not Going Long Now

Plenty of support at 939.50, but after taking that prior loss, I decided to stay away from the Long side. Was looking to enter short on a retracement back up to the 944 area but price didn't get there.

ES (5-Min) - 12:00 PM Central - Treasury Auction Coming Up

At this point, I'm glad I stayed out of Longs and am shocked that ES is testing the 936 area. This was a pretty solid area. I look at the consolidation heading into the treasury auction and place a buy stop at 941.50 and a short-sell stop at 935.50 to catch the move in either direction. At the last minute, I bitch out, and pull my sell-stop order thinking "934.50 is support so why risk 6 ticks just to make 4 ticks".

ES (5-Min) - 12:55 PM Central - WHY did I pull my sell-stop at 935.50?!?

Frustrated as all hell now - Wondering if I'll ever make it in this business. Will 932.00 hold? Holy sh*t! How low can this market go? Don't you shorts eventually have to COVER? Come on!

ES (5-Min) - 1:40 PM Central - Trade #2

OK - finally seeing some signs of a bottom. Would like to short if price gets back to mid-point and/or VWAP but for now, this could be a nice scalp to the Long side. Hammer at the lows followed by a strong bullish candle. Should try a Long at the mid-point of the bull candle. Was tired of missing so many trades, so manned up at entered Long at 930.25 with a 6-tick stop. Price moved up fast to my target 933.25. I was actually expecting price to get back to 935.50 area but I didn't want to over-stay since this was a counter-trend setup. At this point, I was too emotionally and mentally drained so called it a day.

ES (5-Min) - I can't believe price retraced back up to over 940 this late in the day!


What a day! Glad it's over.

ES (Daily) - Bull Flag?


The Daily chart is still looking bullish to me. Looks like a bull flag on the daily, and we now have 4 dojis in a row, and we're at the low end of the up channel. Will we get a break-out tomorrow? Who knows. I certainly don't! Retail Sales and Jobless Claims data out at 7:30 AM (central) tomorrow morning. Trade well!

Tuesday 06/09/09 - Live on the Real $ Acct

I switched over to the Live/Real $ account yesterday. No matter how much time you've spent on the Sim, the transition to the Real $ account always brings about some psychological hurdles that one has to work through. That may not be the case with a new trader who starts on Sim, and then switches over to real $, but for someone who's made hundreds of trades with dollars on the line (me), it brings back some old memories and fears. I traded piss poor yesterday placing 3 scalp trades for +1 tick each because for some weird psychological reason, I really wanted my first day on Live trading to be positive.

After realizing that this was a big problem, I looked back at my journal from late 2003 and noticed that "early exits" were a problem even back then. To help solve the problem, I figured I would be more patient and give my trades time to work. Problem is, when you're entering fundamentally bad trades, the additional time only works against you. And that's what happened today. I gave my trades time to work; and that resulted in me taking full stop-outs on almost ALL of my trades today (-1.5 pts per trade). Ironically, I gave all the losers time to work, while cutting the good trades short at break-even.

ES (1-Min) - Morning Trades


I went Long in the morning after it looked like price wasn't going for gap fill and was stopped out for -1.5 pts. After seeing the momentum shift to the downside, I entered short at 942.00 except this time, I was quick to move my stop-loss to break-even, so I got stopped out at break-even on a good entry. After that, the gap filled, and I figured we were ready to resume the up move and began hitting it Long and giving it time (to hit my stop-loss). The three Long trades that followed were fundamentally poor trades from the get go, and didn't even go with my method. I guess those could be classified as "revenge" trades :-/ After being down -5.75 pts, I figured it was best that I stop and come back in the PM session.

ES (1-Min) - Afternoon Trades


My friend who I'm teaching was sitting right next to me, trading his own real $ account, and he entered Long at 945.50 area on the break-out of the first hour high. I told him that 946.50 was resistance from yesterday's high so it's probably best that he stay out until we get a confirmed break-out above that area, and then he can enter Long on a pullback. It'd be sweet if I followed that advice myself. Instead, I got caught up in the price action, and hit it Long at 946.25 and was stopped out a minute later. I then immediately entered short at 944.50. That trade went a point or so in favor and then retraced back up...I had already moved my stop-loss to break-even and missed the down-side action that followed.

So to summarize, I traded like an idiot today and did the complete opposite of what I should have been doing. I held the losers and cut winners at break-even. Now I can either beat myself up over an almost $400 loss, or I can try to learn from my mistakes and make a better effort later in the week. I'll go with the latter. Plus, no one day should make/break a trader. I'm just glad I didn't do too much damage.

Any comments/advice appreciated. I'm not posting the stats because they're obvious from the trade chart (5 losers, 2 scratch trades, -7 pts).

ES (60-Min)