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Got a lesson on not going too crazy while trading today. Market was thinner, which added some pressure I guess.
First two trades were according to the plan. Direction was clear, management was trickier. Both trades were based on volume clusters break on the way up.
Trade1:
Trade2:
Now, the third trade was a mistake. I got angry after the second loss (happens) and chucked my mouse (also happens) both breaking it and accidentally putting myself into a new short. I didn't have a shortcut key set up to flatten the position, so while I was struggling to fix the mouse my stop got hit.
Normally, when I see that my exit wasn't optimal (second trade) I re-enter around the same price. So should have been a close to scratch day.
Definitely disappointed, but it is just one day. I set my daily stop limit at around 15 ticks (which I reached), and considering the circumstances, decided to just watch the rest of action.
This was the first time my physical reaction actually affected my PnL. Mistake noted, another learning experience.
Well, if yesterday I felt some pressure because of slightly thinner market, today I actually felt a bit scared
Not much volume in the DOM required some adjustments to trade selection and, more importantly, high degree of alertness in trade management.
After my exit, I started thinking that today will be, what I call, a thin market/small range day. Relative volume turned lower and there weren't many participants in the DOM. To me it means unfavourable trading conditions and I just stay out.
Essentially this type of trading is characterized by low volatility. Since May I've been testing a possible short trade in VIX on days like this, because I noticed that this behaviour persists sometimes for hours. Looks promising, but the sample size is very small so far.
Wanted to quote this post from iqgod's journal. Thought it will be useful for me (and maybe for someone else) to have it here. Many great points I can relate to.
While there is no escape from uncertainty of outcomes in the markets, a trader should try to eliminate/reduce uncertainty in his own reasoning and actions. Preparation and repetition are tools that enable strengthening of one's views. But this post is for people who, for any reason, don't feel comfortable about what they've been doing and are willing to try something new.
There are two sides to trading: one is your method, and the second one is you as a performer. At the same time, psychological problems that affect trading performance can be roughly divided into two categories: discipline problems and trust problems. While interconnected, these causes of frustration have their own peculiarities. Discipline, in my view, can be mastered by observing own behaviors and reactions, and working towards eliminating harmful habits. The goal is clear, or becomes clear after a period of keeping a trading journal. Trust or belief in your method, on the other hand, is a bit trickier I think.
I want to approach this question not just from an abstract point of view, but would like you to really think about what would make you feel confident about your decision making process in the markets. For some it may be statistically significant back-tested data. Some get into methods that have wide following on forums and keep their faith while they see other people's success. I would like to share my view.
This post is not intended to be negative or even critical about other methods and practices. Anyone is more than welcome to point out mistakes in my judgement.
I believe that any trading idea should make sense in order to be trusted. I never really got into trying indicators, because I think they have no causality with future price development. I struggled a lot with implementing price action principles, and while I agree that context is extremely important, I don't agree with predicting the context. Market is in a trend/trading range/trending trading range until it's not. Price action reading (as I see it) suggests a story based on subjective notions of context and signal patterns. It is useful to think about trapped traders, but I couldn't convince myself/find supporting evidence of a chart helping me to see these situations.
I'm sure that majority of people who will read this post have some understanding of market structure, how liquidity and volume move the price. If you look at the DOM and see 10 lots five levels deep on both bids and offers, there is no argument your 2 ticks stop will be of no use (talking about liquid futures here). At the same time, if average volume of a bid and offer is in thousands, playing for a 50 ticks move is a low probability trade to say the least. It's not about possibilities and statistics, it's about aligning your expectations with events which are normal to your market.
At the same time, when you see volume trading at a price, you see exactly how many people are entering/exiting their positions. If this volume is exceptional, you can be sure other people will be paying attention to that price/prices.
The basic idea behind watching the DOM, volume and order flow is this: if you bought, you want to see more buying, you want prices to progress upwards, you don't want sellers stepping in and absorbing buyers (which may accumulate trapped traders). When momentum is out it is reasonable to become cautious and to look for reasons to exit. Market is not giving you any supportive information to stick to your original position, so be alert. (Opposite is true for short trades). Trade management is as important as trade selection. It's all about being in the NOW. Overall, the process itself must bring clarity and induce confidence in one's actions.
This kind of reasoning, even though oversimplified, once made sense to me and I hope someone can take it as a starting point for own research. There is loads of more detailed information on jigsawtrading website (I have no connection to them).
To be totally honest, not sure I would have gotten filled on my last trade if it was live. I know that at least a couple of hundred contracts traded there, but then I refreshed traded quantities on my DOM. Well, it is what it is:
Trade1: momentum volume cluster break.
Trade2: will skip similar setups in the future. We traded some volume at 1940.50 on the initial bounce off the lows and I thought it may cap the upside. Location was worse because of a possible climax after Trade1.
Trade3: same idea as Trade2.
Trade4: same as Trade2 and Trade3. Volume at 1946.75 and 1947.00 as resistance.
Quite a sticky day for my style of trading. Moves were slow but market was thick, so there was some volume to lean on.
After relative volume dropped to current levels I decided to wrap it up:
Both trades were attempts to front-run a breakout. ES was too slow to take off hence the results.
This is why I got into the first trade:
We ticked through the previous high and pulled back to the POC at 72.75. Then we pushed into highs again but stopped at 73.50. You can see that bid absorbed over a thousand contracts and one of the sell orders was 105 lots. I tried to bid 73.50 but they didn't trade much so I hit into 73.75s. Had my sell limit at 75.25 but got out when sellers came in.
Trade1: 1 point pullback after selling momentum at the open. Was aiming for 4t but didn't get a fill and then my OCOs got executed at the same second when I was exiting, so had an additional scratch.
Trade2, Trade3: front-running a BO. I thought ES may stay in a narrow range, so switched to SIM to try out some new ideas and forgot to switch back to the Combine account. Noticed only after my exit. A bit silly.
Trade4: minor reversal. Trading range day, we broke out but many people got stuck around 1982.75 area.
"...As Angela Duckworth's research attests, sheer grit--the ability to persevere under adverse conditions--is a central element of success across career fields and performance domains.
The notion of grit has so captured the interest and attention of students of success that Duckworth's second factor has gone largely unnoticed: self-control. Duckworth explains: "Self-control is the voluntary regulation of behavioral, emotional, and attentional impulses in the presence of momentarily gratifying temptations or diversions." Grit refers to the ability to persevere over time. Self-control is more of a moment-to-moment, day-to-day phenomenon: the ability to resist temptation and distraction and stay focused on bigger picture goals.
Indeed, Duckworth's review finds that self-control is as central to positive life outcomes as such variables as general intelligence or socioeconomic status. Interestingly, not all who possess self-control also display grit and not all gritty people exhibit strong self-control. It is the two in concert--the ability to weather temptations in the short run and setbacks in the long run--that appear to predict success.
When you see how grit and self-control work together, you can appreciate why so many successful traders are process-driven traders. By focusing on the process of good trading rather than the daily outcomes, traders rehearse both self-control *and* grit. In other words, a process orientation to trading is daily training in the dynamics of success, a kind of behavioral priming. By defining and following a robust process during good times and bad, we literally train ourselves in grit and self-control."