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)

Monday 06/01/09 - Break Out

I'll start today's post with the Stats, and then briefly go over some of today's good and bad points:

# of Trades	17
Longs	15
Shorts	2
% Break-Even:	11.76
% Win	47.06
% Loss	41.18
Avg Win	1.38
Avg Loss	-0.86
Largest Win (pts)	2.50
Largest Loss (pts)	-1.50
Total Win (pts)	11.00
Total Loss (pts)	-6.00
Net Gain/Loss (pts)	5.00
ES Daily Range	17.75
P/L as % of Daily Range	28.17

I'll go over the good points first: Avg Win was greater than Avg Loss, Largest Win was greater than Largest Loss, and finally almost 90% of today's traders were in direction of Trend. It was also nice seeing price hit 943 since that's been the expected target on this up swing for a few weeks now (refer to the Daily price charts posted over the last few weeks).

Now to the mistakes:

I entered Long at 943.25 on a Buy Stop at 10:59 AM (central); price moved up to 943.75, and then retraced down to 941.75, stopping me out at a -1 pt loss in the process. I wasn't monitoring the sectors or might have noticed the lack of participation from XLF. The monitoring of sectors resulted in a lot of missed trades over the last couple of weeks, so I figured I'd keep it simple today and was just using the 610 tick and 5-min chart. I think I should probably keep an eye on the key sectors such as XLF and XLE, but not utilize them to base specific entries/exits. It was also close to lunch time so perhaps I should've been more careful. Regardless, no big deal, it was just a -1 pt loss.

I then bought the break out again around 11:35 AM using a Buy Stop at 844.25. The 5-min chart printed a couple of dojis, and I had a couple of opportunities to exit at break-even, but I kept holding. I wasn't watching the 1-min NYSE $TICK or would have noticed the very obvious negative divergence when price retraced a bit and then moved back up to 944.50 (price moved higher while $TICK printed a lower high). The multiple dojis should also have served as a warning sign to get out at break-even when the market gave me the chance. I took this same trade later in the afternoon, and exited for a +2 pt profit but the difference was HOW price moved into that 944 area the second time around. The first time, it moved up on weak momentum, whereas, the second time around, the momentum was fairly strong, and the trade worked out. Momentum is Key for short term trading, IMHO.

All in all, an educational day (like every other trading day), and at least I was able to end it in the black. I have two of my friends coming over tomorrow for some group trading education/mentoring, so that will be tomorrow's focus.

Pending Home Sales Index out at 9:00 AM (central) tomorrow. Expecting support at 928.25-932.00; resistance at 947.25 and 955.50. At this point, looking for 916.50 to hold on a closing basis for up-trend to continue. Also need to be aware of open gap at 918.00

I'll end today's post with the following image highlighting Chuck's mantra (refer to comments from Thursday's post, definitely worth a read)

Thursday 05/21/09 - Good News/Bad News

The good news is my job interview from the other day went well and I have an offer on the table. The bad news is, taking this job would force me to take a break from trading. I would still continue following the markets, and mark up the charts every evening, but obviously, I wouldn't be able to trade the market in real-time. On the bright side, it's a contract position so I could come back to trading in 6 months (if I don't renew my contract). I view trading as a long-term career option and not a get-rich-quick scheme, and at this point, it makes sense to take the job, reduce/eliminate liabilities to the point where I can take at least one year off and dedicate that time to trading the markets. Most businesses fail due to lack of capital, and I don't want that to be the case with my trading (business). On the plus side, the project I'll be working on sounds pretty cool and it's for a very large company which would look good on the resume. This isn't an easy decision for me since I really want to trade full-time.

With that out of the way, on to today's results. I mainly traded the morning and had some sweet short entries at 892.25 and 892 but was too quick to move my stop-loss to break-even, so both of those shorts were scratched. I re-shorted at 889.50 but covered too soon at 887.50. Scalped it short again for a few ticks. My biggest problem at this point is patience. I'm not patient with my winners or losers; I cut my winners quickly, and my losers even more quickly which is probably why I'm still net positive, but I'm not taking full advantage of my entries. The entries are good for 3, 5, 8 points per trade and I'm usually exiting with just 1-2 pts, which is disappointing to say the least. It's a personal/psychological problem. I just hate losing, and try too hard to keep my losses to a bare minimum, which results in missing out on potential gains. So the question is, are my early exits saving me enough money on my losing trades to make up for the lost gains on the winning setups? One solution is to use a "set it and forget it" trade management approach, where I would enter a trade with a preset stop-loss and profit target and let the market hit one of those orders instead of manually exiting the trade. I could also systematically move my stop-loss to break-even; for example stop gets moved to break-even once the trade goes 2 pts in my favor, etc. That way it's not purely discretionary. I'll have next week to experiment with these ideas. If you guys have any ideas, please post them in the Comments section. Here's how today's Stats broke down:

# of Trades	8
Longs	1
Shorts	7
% Break-Even:	25.00
% Win	62.50
% Loss	12.50
Avg Win	0.95
Avg Loss	-0.25
Largest Win (pts)	2.00
Largest Loss (pts)	-0.25
Total Win (pts)	4.75
Total Loss (pts)	-0.25
Net Gain/Loss (pts)	4.50
ES Daily Range	15.50
P/L as % of Daily Range	29.03

There was plenty of Daily support in the 875-880 area, which provided a nice bounce into the close. On the Daily chart, today marked a lower high and lower low, but keep in mind we need to see a series of lower highs and lower lows in order to accept a possible trend reversal. The way I see it, today's bearish price action was still contained within the bullish Daily candle from 5/18/09. Price tested the lower price area but rejected it, and Closed at 888.75, and the Close is much more important than the Low. A Close below 876 would suggest a major turn in the markets. In support of the bears, Price broke below the bullish channel; not sure how big of a deal that is though since the channel was hand drawn by yours truly :D All that being said, as traders, we need to approach each day with No Bias...easier said than done.

Markets close early tomorrow; expecting a low volume day. Might be best to sleep in :-) Enjoy the long weekend all!

ES/$TICK (5-Min) - Open Gap at 899.50


ES (Daily) - Zoomed in

Wed. 05/20/09 - Last Minute Trade

As noted in yesterday's post, I had a job interview this morning which went pretty well, IMO, but you never know until they present an offer in writing. I got back home around 2:30 PM (central), and immediately fired up the trading PC to check the market...and wow, quite a nice reversal there. Saw a short setting up on the 5-min chart, waited for a couple of minutes, then jumped in short at 905; exited at 901 for +4 pts. Had a couple of small scalps in between and ended with a +5.00 pt gain, which took a whole 10 minutes. For tomorrow, looking for the 888-892 area to hold as support. Here's how the Stats broke down on my 10 minutes of trading:

# of Trades	3
Longs	0
Shorts	3
% Break-Even:	0.00
% Win	100.00
% Loss	0.00
Avg Win	1.67
Avg Loss	0.00
Largest Win (pts)	4.00
Largest Loss (pts)	0.00
Total Win (pts)	5.00
Total Loss (pts)	0.00
Net Gain/Loss (pts)	5.00
ES Daily Range	24.25
P/L as % of Daily Range	20.62

On another note, wanted to give provide an update on my friend who I'm currently teaching how to trade. This is his 4th week trading the ES with 1 contract, and currently his Net P&L is at +$4,363.20 after commissions (87.25+ ES Points Net!) and he still has 2 more days to go in the week. I'm rooting for him and shooting for a +$5K net gain which would mean a 100% return on an initial $5K account within 1 month. And please keep in mind that the simulated fills on the Infinity Sim are technically worst than realistic fills since the Sim doesn't fill your Sell order until the Bid moves to that price and doesn't fill your Buy order until that price is offered at the Ask. The gain was accomplished using 6-8 tick stops, and price action charts only (No Indicators, Moving Averages, Fibonacci, etc). He's proof that simpler is better.

Jobless Claims at 7:30 AM (central), Leading Indicators at 9:00 AM tomorrow morning.

ES/$TICK (5-Min)


ES (Daily) - Watching 888-892 for support

Monday 05/18/09 - Knowledge Alone is Insufficient

Execution is key. Simply "knowing" what to do is not enough. For example, I've been anticipating the 876 level to serve as support and noted the following in Friday's post: "Price still within bullish channel, and 876 low from 05/04/09 was held today." I also recognized that the trend was clearly up today, and that I should be buying the dips, yet when it came time to execute, I continued entering short positions all day, which resulted in a -5.50 pt loss. I was confused with the price action for better part of the day since price would shoot up, and then consolidate for what seemed like an eternity. Most of my break-even trades went 5-7 ticks in my favor but I tried being patient and holding for larger gains, but that didn't work out for me. I realized I was taking counter-trend trades, and that I should just bail for +6 ticks but again, even though I knew what I "should" be doing, I failed to act on the information and continued holding for larger gains which never materialized. Not much else to say except I'll try to do better tomorrow. Stats:

# of Trades	24
Longs	4
Shorts	20
% Break-Even:	41.67
% Win	8.33
% Loss	50.00
Avg Win	2.00
Avg Loss	-0.79
Largest Win (pts)	3.00
Largest Loss (pts)	-1.75
Total Win (pts)	4.00
Total Loss (pts)	-9.50
Net Gain/Loss (pts)	-5.50
ES Daily Range	19.75
P/L as % of Daily Range	-27.85

Housing Starts data released at 7:30 AM (central) tomorrow, along with Redbook at 7:55 AM. Looking for the 887-895 area to hold as support; 910-915 as resistance.

ES/$TICK (3-Min) - Open Gap at 882.50


ES (Daily) - 876 level held as support. Price still within bullish channel.

Thursday 05/14/09 - Easy reads today

Today was an easy day to trade, IMO. I wasn't able to trade the afternoon, but netted +10.00 pts in the first half of the day. Today could also have been a 15+ pt day but I got low ticked out of a Long at 885.25 in the morning; my stop was at 883.50, and that turned out to be the swing low at 9:51 AM (central), after which price headed straight up to 888+. I jumped back in at 884.50 but exited too soon at 886. My exits need a LOT of work. Aside from that, was busy finishing up the web development project I've been working on for most of the week (didn't trade or post yesterday since almost all day was spent on web dev). Here's how the Stats broke down today:

# of Trades	16
% Break-Even:	0.00
% Win	75.00
% Loss	25.00
Avg Win	1.21
Avg Loss	-1.13
Largest Win (pts)	3.50
Largest Loss (pts)	-2.25
Total Win (pts)	14.50
Total Loss (pts)	-4.50
Net Gain/Loss (pts)	10.00
ES Daily Range	15.50
P/L as % of Daily Range	64.52

Turning 26 in a couple of hours here, while Matt's turning 23 at the same time (yes, we have the same b-day). Lets see if he changes his Blog title to "By Age 24" :D

I'm not sure whether I'll be trading tomorrow, but if I do, I'll be keeping an eye on 887 as support and 898 as resistance. It's options expiration so I'm expecting some see-saw price action. According to the Max Pain Theory, the S&P should be around 870 tomorrow. Consumer Price Index out at 7:30 AM, Industrial Production out at 8:15 AM, and Consumer Sentiment out at 8:55 AM (central).

ES/$TICK (3-Min)


ES (Daily) - Price still within bullish channel

Tuesday 05/12/09 - Never Be Satisfied

I'll never be 100% satisfied with my results as there's always room for improvement, but I'm particularly disappointed in today's results (+7.00 pts) because of the (easy) opportunities available today. For example, I was short at 911.75 during the open, and exited for ONE point at 910.75 even though the charts gave me absolutely no indication to exit. I was also Long at 899 and 901.50 in the afternoon before ES rocketed back up, and on both occasions I exited for 2-3 ticks. Both of these sequences were "no heat" sequences, meaning price never really went against me so I took no heat on the positions. The quick exits would be fine if my style was closer to Don Miller's or if I was trading his size (30-100+ lots); but neither of those apply to me. I trade 1-2 contracts, and risk 5-8 ticks to make 3-5 Points. The method supports it, and today the market supported it. My style of trading doesn't work too well on narrow range days (working on improving there too btw), which means I need to push the accelerator when the market sets itself up to be in sync with my method. The only excuse I can fall back on today is that I was busy coding an e-Business website enhancement for one of my clients, so I wasn't 100% focused on the market (or the coding for that matter). But deep down I know that's all it is; an excuse, because I should have nailed the opening sequence. I also made the mistake of trying to catch a falling knife which cost me -5.00 pts.

As an intraday trader, I believe I should be able to capture at least 50% of the day's range, so I've added the ES Daily Range and P/L as % of Daily Range to my metrics to track how much of that daily range I'm able to capture. Here's how the Stats broke down for today:

# of Trades	36
% Break-Even:	30.56
% Win	50.00
% Loss	19.44
Avg Win	0.79
Avg Loss	-1.04
Largest Win (pts)	2.00
Largest Loss (pts)	-2.00
Total Win (pts)	14.25
Total Loss (pts)	-7.25
Net Gain/Loss (pts)	7.00
ES Daily Range	19.50
P/L as % of Daily Range	35.90

Looking ahead, bullish bias still intact, in my opinion. Yes, we've moved lower but price was unable to take out the 893.50 low from 05/05/09, and closed above 900. 887-891 area is important. I'll also be watching the 901-904.50 area for support; 910 and 918 areas for resistance. Retail Sales data out at 7:30 AM (central) tomorrow.

ES/$TICK (3-Min) - Gap filled in the first 10 minutes


ES (Daily) - Perspective

Monday 05/11/09 - Forward Testing

Initially, I manually back-test new ideas on past charts, but to develop faith and confidence in the method, it must prove itself in real-time (forward-testing), and I certainly place more emphasis on real-time testing. I added the S&P 500 Adv-Decl Issues Diff ($ADSPD), the NYSE Adv-Decl Issues Diff ($ADD), the NYSE Up-Down Volume Diff ($VOLD) to my charts to more closely monitor market breadth so today was spent experimenting in real-time. The morning was spent exlusively on experimenting with different setups and resulted in a -6.75 pt loss. In the afternoon, I switched gears back to my existing method and banked +7.00 pts to end the day in the green by 1 tick (minus commissions). I will continue studying the newly added market breadth indicators to get familiar with them. I didn't expect to make much off the added information on the very first day so I'm not at all disapponted. It was good to see that I could make it all back trading the way I already do, in a narrow range market which isn't condusive to my style of trading since I look for trend continuation, range extensions and break outs. Here's how the Stats broke down for today:

# of Trades	31
% Break-Even:	12.90
% Win	51.61
% Loss	35.48
Avg Win	0.95
Avg Loss	-1.36
Largest Win (pts)	3.00
Largest Loss (pts)	-1.75
Total Win (pts)	15.25
Total Loss (pts)	-15.00
Net Gain/Loss (pts)	0.25

A pullback is not only normal, but healthy after a rally, so today's down move is fine by me. We also filled the open gap at 907.75 from last Friday. I just hope it turns out to be bulls re-fueling, rather than a total reversal in trend. I trade short-term so it really doesn't affect me whether the market moves up or down, so long as it MOVES, but I'd like to see further upside movement to at least the 940 area on the S&P. I'll be watching the 901 area for support, then 898, 894.75, 891, 887 and 881. On the upside, I'll be watching the 910 and 914-918 area for resistance. We also have an open gap above at 924.25.

ES/$TICK (3-Min) - Open Gap above at 924.25

Friday 05/08/09 - Focus on 3-min Chart

I missed the first 45 minutes, but then managed to put on a couple of good trade sequences between 9:30 AM and 11:00 AM resulting in a net gain of +10.25 points (half of that was from one trade). I stopped trading at 11:00 AM due to errands in downtown. I focused on the 3-minute chart today, which produces very nice setups but requires a slightly wider stop-loss (3 pts), which so far has produced decent results. I'll continue experimenting with it next week while I improve my execution. Here's how the stats broke down today over 7 trades:

% Break-Even:	28.57
% Win	57.14
% Loss	14.29
Avg Win	2.69
Avg Loss	-0.5
Largest Win (pts)	5.00
Largest Loss (pts)	-0.50
Total Win (pts)	10.75
Total Loss (pts)	-0.50
Net Gain/Loss (pts)	10.25

No losing days this week, and a weekly gain of +38.75 points.

Going into next week, we have open gaps below at 907.75 and 876.50. Still looking for ES to hit 940; but trading what I see (momentum). Looking at the 60-min chart, I'm noticing an exhaustion in this up move and 927 is proving to be resistance. I'd like to see a 60-min candle CLOSE above 927 for continued upside action. Have a good weekend all!

ES/$TICK (3-Min) - Open Gap below at 907.75


ES (Daily) - Perspective

Thursday 05/07/09 - Pullback on Profit Taking

I was busy with web development again today, and wasn't around to trade the first hour. I placed a few small trades during the course of the day ending up with a net gain of +6.75 points. I had some solid entries but left a lot of profit on the table so I would have to grade my performance as a B- today. This could have easily been a +10-15 pt day. Here's how the stats broke down today:

% Break-Even:	9.09
% Win	72.73
% Loss	18.18
Avg Win	1.16
Avg Loss	-1.25
Largest Win (pts)	2.00
Largest Loss (pts)	-1.50
Total Win (pts)	9.25
Total Loss (pts)	-2.50
Net Gain/Loss (pts)	6.75

A pullback on profit taking was expected so no surprises today. 898 area held support. I'll be keeping an eye at the 894, 887, and 879 areas for support if we head lower tomorrow. On the upside, I would love to see 940! Not really much else to report except that my schedule is working out really well for me and keeping me out of trouble. An update on my friend who's learning how to trade from me: he has been averaging +5 pts per day for the past two weeks, and ended today with a +8 pt gain. Just want to reiterate that I taught him only the basics on price action/trend, and did not put even one indicator on his chart. The results have exceeded my expectations. He has been trading on Infinity's Sim, and will be funding his account in the next month or so. I'm looking forward to this real $ results, and am confident they will be similar to his Sim results since he has the proper mindset, and is using tight risk management in his Sim trading (6-8 tick max stop-loss).

Employment Situation (Nonfarm Payrolls, Unemployment Rate, Avg Hourly Earnings, Avg Workweek) released tomorrow morning at 7:30 AM (central)

On to the charts...

ES/$TICK (3-Min) - Gap filled by 9:06 AM.


ES (Daily) - Perspective

Tuesday 05/05/09 - Minor Pullback

Narrow range day today (11.25 pts). 887-890 was solid support in the ES, but we did get several opportunities to short at the mid-point. With the big up-trend day yesterday, consolidation in this area was expected. But typically when price is below the 1st hour low in the afternoon, it tends to close at or near the lows so I was expecting a break of 894, which we got but without any follow through. Instead, price hit 893.50, and then quickly re-bounded back up. The NYSE $TICK moving averages also hovered close to the zero-line most of the day which is usually a recipe for choppy price action. On the 60 min chart, today's pullback was very minor (23.6% retrace of 862.50-904.75), so the bias is still bullish but everyone and their mother can see that price is getting over-extended to the up-side here. But maybe that's the problem: everyone's expecting a pullback, which is a good reason for price to continue moving up.

I was able to scalp for +6.25 points. I didn't have time to markup the trades on my chart today but gains were split pretty evenly among Long and Short trades.

This brings me to a question; do you adjust size and risk management parameters on consolidation days (day after big trend)? If so, what kind of adjustments do you make? For example, reviewing today's price action, there were several areas where you could be in a trade, and ADD to your position even if it went against you by a few ticks, and still have manageable risk on the trade since the support/resistance areas were clearly defined, and a big up/down move wasn't expected.

On to the price action charts...

ES 610-Tick Bar Chart (Open and Morning Price Action)


ES 610-Tick Bar Chart (Afternoon Price Action)


ES/$TICK (3-Min) - Notice where $TICK MAs spent most of their time

Monday 05/04/09 - ES Over 900 (Finally!)

I've been expecting (hoping for) a break above 900 for a while, so it's good to see it finally materialize. Unfortunately, price didn't pullback much so it was tough finding a good area to buy. If you didn't buy on the pullback to 889, you were left trading consolidation chop. My problem is, after ES makes a big up move, I have a hard time entering Long because I feel like price is "too high" and will reverse on me. Price has reversed hard so many times off the intraday high in the past few weeks, that it's a little scary buying above the first hour high; especially when price is so close to 900, which a lot of people perceive as a psychological barrier or resistance zone. Bottom line is, I need to set my biases aside and trade price. As day traders, we don't buy/sell value so the specific price shouldn't matter. We trade momentum. So as long as momentum is supporting the direction of my trade, I shouldn't be afraid to get in. Here's how today broke down in terms of performance across 18 trades:

% Break-Even:	31.58%
% Win	47.37%
% Loss	21.05%
Avg Win	1.00
Avg Loss	-0.425
Largest Win (pts)	2.00
Largest Loss (pts)	-1.50
Total Win (pts)	9.00
Total Loss (pts)	-4.25
Net Gain/Loss (pts)	+4.75

At this point, I'm looking for 879 to hold as support on a pullback.

I'll post a marked up 610 tick bar trade chart; it doesn't have all of my trades, just the ones I had time to mark in real-time. I'm using Infinity's execution platform so the trades aren't auto-plotted on my TradeStation charts now.

ES 610 Tick Bar Chart (Morning Trades)


ES 610 Tick Bar Chart (Afternoon Trades)


ES/$TICK (3-Min) - Open Gap at 876.50


ES (60 Min) - Looking for 879-886.75 as an area of support on a pullback

Friday 05/01/09 - Positive Day

I only traded for a couple of hours today (10:30 AM - 12:30 PM central) since I was at the condo in the morning, and busy with other errands in the afternoon, and although today's P&L reads +$212.50, I'm much more satisfied with my trading today (grade of B-) compared to yesterday's +$1,100 gain, which I graded as a C-. My discipline was better today, although there's still room for a ton of improvement. You can check the Trade Chart to get an idea of my primary trades for the day, but basically, scalped long at a support level; scalped short at trend-line resistance, and then scalped long again once trend-continuation was confirmed, and exited on the stop-run that ensued once ES broke to a new high of day. That's it...pretty simple and straight forward trades today.

ES 610-Tick bar Chart (Trades)


My bias continues to be to the upside. At this point, if ES breaks below 850, bias switches to neutral. A break below 830 and the bears are back in control. That's all for today folks! Have a nice weekend :)

ES/$TICK (3-Min) - Gap filled within the first 20 minutes of market open. Over 100,000 contracts traded at the close with an 8 point up-move; I'm guessing that was mostly Shorts covering their position.


ES 60-Min - Bounce off the 50% retracement; Close above the 23.6%. Lookin good for the Bulls

Thursday 04/30/09 - Caught up in the DOM

I'm still waiting for that one day when I'll have no distractions or technical problems throughout the trading day, and I'll be able to focus on just the market. I got up pretty early this morning to head to the condo (as mentioned in yesterday's post), and a few minutes after I left, I got a call from my contractor saying he will need to reschedule due to weather (did I mention how glad I am to NOT be in the construction business). I was actually glad since I could now spend the day trading. I was at the screens at 8:15 AM, and started placing trades around 8:40 AM. Unfortunately, TradeStation started having problems right from the open. Charts froze for a few minutes at the open. Then later on, I lost my tick-bar charts altogether. After that, the NYSE TICK data froze up. Then I lost data on XLF, the financial ETF. In the middle of all this, I received 7-8 phone calls regarding a property I'm selling, which is a good thing for the property sale, but a huge distraction for trading. So basically just problem after problem, and an extremely frustrating day. I was trading just off the 1 and 3 minute charts, and was up +$187.50 in the morning; missed a lot of trades, and took some bad ones since I didn't have the 610 tick chart, which is my primary execution chart. I kicked up the size a bit in the PM session and began trading 1-3 contracts. Ended the day up +$1,100 but I'm not really counting it since it wasn't on my typical 1-lot trade size. For the record, I hate trading 1-lots but I have to prove I can be profitable on 1 contract before I increase size (have traded up to 12 contracts in my real $ account in the past, but want to "earn" the size this time around).

As the title suggests, I lost discipline and got caught up in the action on the DOM (depth of market), and began scalping for quick 1-2 pt profits; at times just 2-3 ticks of profits. Perhaps this was because my charts were barely functioning today, or maybe I just got caught up in price moving so quickly on the price ladder (Infinity's platform is super fast!), and started going for quick momentum trades. I don't know. Whatever the reason, it's not how I normally trade, and despite the gain today, I would grade my trading as a "C-" since I didn't stick to my plan in the afternoon, cut too many winners short, and scalped way too much (40+ trades today).

As of now, looks like I'll be at the condo tomorrow morning at 8:30 AM, unless it rains again, so no trading for tomorrow. A one-day break is probably a good thing on this end.

ES/$TICK (3-Min) - Negative $TICK divergence into the push up to 885.75. Gap filled by 12:14 PM (central).

Wed. 04/29/09 - Bullishness Continues

I'm having some work done at my condo in downtown Chicago and was busy meeting with contractors most of the day (thank God I'm not in the construction business). But from the looks of it, I didn't really miss much.

Market rally on bad or mediocre news is indicative of a bull (or at least bullish) market. Everyone is looking for a retrace; no, wishing and praying for a retrace, and it hasn't materialized yet. I've looked over several time-frame charts (15-min, 60-min, 240-min, and Daily) and they're all bullish. I'm not saying I won't short, but I will be cautious on the short side. This market is not letting up and the more bears that pile in on the short side, the stronger the next leg up will be. At the rate this market is moving, breaking above 900 shouldn't take a lot of effort. We've developed substantial support in the 830 area, and now in the 850 area. A pullback to 850 is within reason. My only concern at this point is the weakness in NQ.

On this end, I won't be able to trade tomorrow either since I have to be at the condo at 8:30 AM sharp to get the contractor going on the work. Hopefully I can trade the afternoon session. Personal Income and Outlays at 7:30 AM (central), Jobless Claims at 7:30 AM (central), Chicago PMI at 8:45 AM (central) tomorrow.

I'll leave you with the Daily chart of the S&P Cash Index and the ES. Let me know your thoughts and/or market outlook for the coming days/weeks.

ES - Daily


$SPX.X - Daily


ES/$TICK (3-Min) - Negative $TICK divergence on the push up 879.25. Open gap at 851.25.

Monday 04/27/09 - One for the bears

I used the Infinity AT platform for my trades today so I won't be posting the usual TradeStation trade execution chart. I manually marked some of the morning trades, and will post that chart below. The net gain on the day was +$300, mostly due to a Long entry at 858 off a pullback, which netted +5 points. I was trading 1 to 2 contracts today; although majority of the trades were with a 1-lot. The net gain would have been higher but I tried trading the open, and lost some money during that time period. I was long at 851.50 right off the open, but was too quick to move my stop-loss to break-even! I'm not used to trading the open and need to adjust my risk management to handle the volatility during the opening range. Of course I always have the option to just sit out during that time, but some of the best entries over the past few days have been very close to the open. Plus, I was expecting gap-fill, so wanted to enter Long at the best available price. I also had limited screen time since I was on the phone with recruiters, etc. Here's a 610 tick bar chart showing a few of the morning trades; there were a couple of losers during the opening range which aren't marked on the chart.



My friend who's learning how to trade the ES, ended the day with a net gain of +$350, and his trades were all based on the simple price action method I taught him last week. I'll keep you guys posted on his progress over the coming days/weeks.

Redbook out at 7:55 AM (central) and Consumer Confidence at 9:00 AM (central) tomorrow morning. I'll probably sit out the first hour. Trend is down at the moment; lets see if tomorrow's data can shake things up :-)


ES/$TICK (3-Min) - Came within 3 ticks of gap-fill; close enough to be considered filled.

Friday 04/24/09 - Be aware of Market Moving News

Started a bit late on Friday morning due to the economic data being released in the morning. It's safer to let the market digest the data, and then enter trades based on some fresh support/resistance levels. I essentially had two trading ideas/sequences on Friday. The first trade was entering Long at the 857 area with an expected initial target of 860.75. That worked out OK for me and then I sat on my hands for the next move. The next area in-play was 860-865.25. My plan was to short a break of 860 (I had a sell stop order in at 859.75) or to buy a break-out of 865.25 with a 3-4 point target in either scenario. I was aware that some "stress-test" related news was going to be out at 1:00 PM (central), and based on price action (trend was up), I was long at 861 with a reversal-stop at 859.75. Seemed like a safe play at the time. Once the news came out, I got stopped out of my Long position, and entered into a Short position, but the move came in so fats & furious, that my short position got stopped out for a 2 point loss on that swing up. I entered long again expecting the up-side to continue since we were in an up-trend prior to the news. But, I got stopped out yet again, so I again, entered short around 860 and exited around 855 (853 was a support level). I ended my trading day there at 1:15 PM (central) with a net gain of +$425.10 with a win rate of 38.4% and an average profit factor of 1.64 (the profit factor on my short trades was 8.85!). I could have certainly handled the situation better by NOT entering Long simply because price reversed after that break of 860. That would have saved me a few hundred in losses. The better play would have been to remain flat into the news, and then enter short on break of 860 with a tight stop or enter long on a break-out of 865.25. Lesson learned! Here's a snapshot of my 610 Tick bar chart from Friday. It should give you an idea of what I look for, and how I read price action:



Looking at this past week's results in TradeStation, my net gain on the week was +$897.40 with a win rate of 39% and an average profit factor of 1.53. This number doesn't include the gains from Tuesday, when I was experiencing technical problems with TradeStation (caused unnecessary losses), and used the Infinity AT trading platform. If I count those trades, the weekly gain would probably be around +$1,600.

Going forward, I'll be looking at 868.75, 872, 878 and 883 as possible areas of resistance. I'll be looking at 860, 850, 848.75 (OPEN GAP) and 833 as areas of support. Hoping for continued upside action!

On to the regular charts...

ES/$TICK (3-Min) - Open Gap at 848.75 Below


ES 15-Minute - Price above 34 and 200 EMA. 850 level held support.

See One, Do One, Teach One

"See One, Do One, Teach One" - I first came across this phrase in Dr.Brett Steenbarger's book, and upon doing a quick Google search, here's a definition I found for this phrase: "A traditional format for acquiring medical skills, based on a 3-step process: visualize, perform, regurgitate". If this form of learning can be applied to something as critical and difficult as medicine, then why not apply it to trading? I bring this up because one of my friends recently asked if I could teach him how to trade, so I spent an afternoon with him going over the price action charts I post on my Blog, and then handed him a copy of Reminiscences of a Stock Operator, which he has almost finished reading. Today he came over to watch/trade the market in real-time at my place, and he performed really well! He was able to net +$112.50 in 2 hours trading the ES. Now keep in mind, today was the first time he ever saw a chart of the ES in real-time, and he got these results armed just with Reminiscences of a Stock Operator and the basics I covered with him in one afternoon (support/resistance, trend, reading price action and identifying higher-highs/higher-lows/lower-highs/lower-lows, and the definition of a candle-stick). That's IT! Going over the charts with him in real-time further enforced the trading principles in my own mind. Dr.Brett recommends saying your thoughts aloud because listening to yourself forces the mind to re-analyze the idea, and some ideas "sound" incredibly stupid once you say them aloud. Now he also placed some bad trades, which I recommended him to stay out of, but he wanted to get into them anyway, so for the sake of education (learning from mistakes), I entered him into the trades on Sim, and we promptly lost -$225.00. If we discount the two bad trades, the net profit on the day would be +$337.50.

My point is, teaching someone else how to trade will probably make you a better trader (+1 for karma, I suppose). So lets share knowledge and become better traders.

Durable Goods Orders out at 7:30 AM (central) and New Home Sales data out at 9:00 AM (central) tomorrow morning. Aside from that, the 830 level held today so that's a good sign for the bulls. I'm hoping for continued movement to the up-side.

ES 610-Tick bar Chart (Trades)


ES/$TICK (3-Min) - Gap filled by 9:03 AM (Central)


ES 15-Minute - Price above 34 and 200 EMA. 830 level held.

Wed. 04/22/09 - Sorta getting a hang of this

Trading with price action is proving to be a life saver here. Much less stress and doesn't require you to be glued to every tick. I wasn't expecting much today since my alarm didn't go off, and I missed watching the open. I got to the screens around 9:25 AM (central), noticed that I missed the entire up-move, which kinda sucked since I was anticipating an up-move. I stuck with using TradeStation for order execution today since it's very convenient to see the trades automatically plotted on the charts; makes for good post-market analysis. Today's trades were mainly quick scalps since my internet was down for about 45 minutes (Comcast came over to check some connectivity issues I've been experiencing). I also closed down pretty early today since I had scheduled a lunch. Despite all that (or maybe Because of all that), I ended the day with a net gain of +$516.40, with a 8.46 profit factor and a win rate of 43%. The win rate TradeStation produces is a bit misleading since it classifies a break-even/scratch trade as a Loss. Going over the trade list, I see a total of 14 trades, with 1 loss (-1 pt) and 7 break-even/scratch trades. I'm keeping my risk management fairly tight, so the # of scratched trades is pretty high. Other than that, check the marked up trade charts below for details.

Looking for 830 to hold as support. If we get a break of 830, I think we'll break the prior swing low at 823 and head down to 815. I really hope that doesn't happen. Would be nice to see the ES climb to 900+. Watch out for Jobless Claims at 7:30 AM (central) and Existing Home Sales data at 9:00 AM (central). I'll most likely be sitting out the first hour tomorrow morning.

ES 610-Tick bar Chart (Overnight/Market Open Price Action & Trades)


ES 610-Tick bar Chart (Morning/Early Afternoon Price Action & Trades)


ES 610-Tick bar Chart (Late Afternoon Price Action)


ES/$TICK (3-Min) - Gap filled by 9:15 AM (Central)


ES 15-Minute - Price below 34 and 200 EMA