Welcome to NexusFi: the best trading community on the planet, with over 150,000 members Sign Up Now for Free
Genuine reviews from real traders, not fake reviews from stealth vendors
Quality education from leading professional traders
We are a friendly, helpful, and positive community
We do not tolerate rude behavior, trolling, or vendors advertising in posts
We are here to help, just let us know what you need
You'll need to register in order to view the content of the threads and start contributing to our community. It's free for basic access, or support us by becoming an Elite Member -- see if you qualify for a discount below.
-- Big Mike, Site Administrator
(If you already have an account, login at the top of the page)
Thank you! Feel free to speak that way here too Salao. I won't take offense
You know, it might be that we developing traders do have what it takes technically to become profitable, it's just the fear that gets in the way of consistency. I've heard this again and again, but it's become a trader-psychology cliche. It's definitely true for me though. I'll crack it eventually.
Just like yesterday, there was a chance for a double top to completely develop at the open this morning. The difference was, this double top was/is way messier, and borrows an arch from the previous double top pattern (a conglomerate) so automatically, in my eyes, trading this becomes sketchy. I haven't tested conglomerate patterns, either. With that being said, I still set up and constantly readjusted my stop loss, entry and profit target, just in case things went my way. I knew that I didn't feel great about this potential trade especially after watching the erratic behavior of price at the open.
The ES was simply in a range. There were chances for both sentiments to be expressed at higher highs and lower lows but there was hardly any follow-through worth acting on in either direction. Knowing this, and after noticing a pocket of time that price wasn't being so erratic, I decided to go short to feed some already rolling bearish momentum. I was on high alert and had placed a tight stop of $100, and on top of that, allowed myself to exit if price immediately sold off after I entered. That's what happened, and I got out with a ~$30 loss. Not bad.
Really, I was intimidated by price action at the open. I remember thinking that I would rather trade in lower volume/lower volatility, and that thought still rings true. If price overwhelms me at the open, and I cannot think straight, there is no good reason why I would or should trade the open unless I can get used to it and become tolerant of the stress of fast action. If I'm relatively calm trading in lower volume scenarios, that's what I should be doing, at least experimentally. So yeah, trading earlier than 9:30am, and trading after 12:00pm doesn't seem like a bad idea, on top of pushing me past my trading comfort zone.
After I took that trade, I wrote down some idea that came to me, the first one being a seed, related to an older idea I posted about a week or so ago: "Valid discretionary judgment converted into an automated system." Possible trading process: I judge how I feel about trading right at the open, and that judgement has to do with my comfort with the markets current follow-through of a given trend. As I've stated a long time ago here, there's an implicit acceptance of a certain behavior of price that I feel ok with and compelled to trade. Today's price action is an example of what I don't like to see, and because I don't like trading it, I don't trade in those conditions as effectively. I like trading (discretionarily) when things are slower and obviously more consistent, almost as if every trader that day is trading in a discretionary manner and are in sync. I want low-moderate volume, and an open with clear evidence of trend follow-through, if I'm going to trade the open.
So through my judgment of price over a short of period of time, I would adjust my stop loss width and profit target accordingly. I wouldn't trade in high volatility/high volume situations because I don't have enough risk capital. In moderately volatile situations with moderate/high volume, my stop loss would be in the 4 pt. to 6 pt. range. In low volume situations, my stop loss would be 3 pts and under.
Redundant thoughts that are more in-depth:
List form of the idea:
High volatility/high volume: Don't do it.
Moderate volatility/moderate-high volume: Use a wide stop loss (4pts to 6 pts) and don't deviate from your edge.
Low volume: If present/actively trading, use a small stop loss (2pts to 3pts). When I become more experienced and familiar with certain market conditions, here I would be willing to stray a little bit from my edge.
Depending on the situation for a trade in moderate volatility/moderate-high volume, a mental/manual stop loss could be placed if a condition is met, for example: If price immediately goes against me after I enter, I will get out at -2p. The more things I see that I like to see, the more the process becomes automated. This implies that there are conditions in which I trust the probability of an event happening more than in other conditions.
Tier 1 Trade characteristics:
- Moderate volume and volatility.
- The development of a potential double top pattern is neat and orderly. Easily discernible.
- The open has passed and range-time is short and infrequent. Short and infrequent range-time
isn't bound to the open, it would be acceptable to trade these qualities before or after 9:30.
- Side 3 of the DT pattern meets height criteria of my automated strategy.
Tier 1 Trade range of responses:
- Completely automated/restricted. No room for moving the stop loss, entry, and profit target.
Tier 2 Trade characteristics:
- The development of a potential double top pattern is discernible in shape but asymmetrical comparing arch to arch, and messy (with long wicks and varying sizes of candle bodies) on a candle-to-candle basis. Range-y.
- The open has passed with price showing signs of skittishness. There is a clear lack of follow-through with trends. The possibility of the DT to be completed still exists, but price action is confusing and erratic.
Tier 2 Trade range of responses:
- Ability to deviate from set-scale-able stop loss, entry and exit schema to account for price "anomalies" (they would be treated as such).
> Small risk: Can set a manual/mental stop loss
> Small profit target: Can exit early given discretionary trigger
So I would analyze the ES, identify my pattern (it jumps out at you), then characterize it. I'll do this tomorrow morning. This layout reconciles my desire to trade discretionarily (tier 2) and letting good trades play out (tier 1).
- There might be some mistakes in here, don't have time to correct them rn
Thanks for your candor and honesty in your journal. You are not alone out there.
Just a suggestion: I don't know what browser you use or if you watch YouTube on a tablet/phone/TV, but I use the LeechBlock NG extension on Firefox to block websites that distract (or leech your time) throughout the day. You can block during specific times of the day, all day, weekends, or whatever you need. I have used it for years and it has saved me countless hours, so much that I contribute to the author of the extension. If you use Chrome or other browser, there may be similar tools available.
What is this, like the third day in a row that we've had a double top developing in the ES at the open? I noticed this one developing a little before 9am, and I was compelled to trade it at first glance. In the short moments I was contemplating entering this set-up, I remembered that in the past I restricted myself trading just the open and watched, many times, opportunities that were in my alley pass me by from 9-9:30. With that thought, on top of recognizing the neat-ness and close-enough symmetry of the pattern, I had absolutely no problems with entering just as I saw it. Because of the low volume and volatility, I treated this pattern as a Tier 2 pattern, except I did not establish a manual exit because I didn't want to or feel the need to- the stop loss was going to be tight enough, and even though it was a Tier 2 set-up, I had faith in it. I placed my custom fib levels and set my entry, exit and profit target. I entered without a doubt, which is a first this week.
Price switched back and forth over my entry line for half an hour. When the open came, price was already leaning towards stopping me out, and a quick bullish surge ended up doing the trick. I didn't get upset, in fact, I was more proud of myself for actually holding the trade. I was satisfied because I finally did the right thing, by not being overtly concerned with the outcome of this trade. There wasn't a sense of regret after losing because I knew what I did was what I thought was the best course of action at the time. Had this been a trade taken from an emotional, stressed out place, then yeah I would've felt regret.
On a related and much deeper note, I read this post from Salao this morning in Snax's journal after I had taken the trade I think, he stated something along the lines of that it's hard to differentiate reason from emotion while trading, and in my experience this is true. I've always believed that we are emotional beings before rational ones; that the limbic system is the older and more dominant intelligence in the average joe because it helped us evolve and come together in cooperation to survive. This rational and analytical mind, the PFC, is a relatively new addition to our biology- or more specifically, it's way more developed and dense than it was hundreds if not thousands of years ago, and we have to use it to survive as individuals in this current society. Things are much more complex and living is harder in different ways than it used to be. Trading properly is resource-intensive on the PFC (i'm speaking for myself) because everything about it is counter-intuitive. You can't stick it in the long-run in this game with a hot amygdala with a reactionary disposition. Not in my experience, and not in a lot of traders experiences.
I connected what Salao said with my positive experience in the market this morning. If I can replicate the attitude I had/have with this trade, I can only imagine my discretionary performance would improve. But, in order to understand how to replicate this experience, I have to find out why I felt the way I did. The first thing that comes to mind is the visual quality of the pattern. There wasn't a debate in my mind as to whether or not this was a pattern to act on. It just was. ~"That's my pattern that I back-tested, it looks great, conditions are good, I feel good, I have to trade it." It was all smooth. The thing is, I didn't even approach trading this morning with a fantastic attitude either, I was neutral. From my view right now, it was the recognition of the neat pattern itself that sparked this beneficial state of mind, and beneath that recognition is having already identified edge. Certainty breeds confidence and peace of mind.
I'd be interested to see my reaction to the next double top pattern, whatever the quality of it may be.. Anyways, what an interesting start to the day, I may keep exploring this sector of thought as I go about. In the mean time, I'll "cultivate" more faith and confidence by back-testing this current DT entry-exit schema variant.
Also, one more thing, I'm totally interested and excited about the new E-micros and I definitely will be trading them. Trading those markets would be a compromise between SIM and live trading the ES.
This is interesting! I've often thought about trading only 1 pattern, a pattern with good math, to see how well I can do. I think the benefit would be 3-fold (maybe more folds ). 1: Making money (as long as the chosen pattern did indeed have a positive expectation), and 2: Learn the pattern's nuances. As one became more specialized, or expert, I suspect the pattern would become even more profitable. 3: I suspect it would be easier to isolate bad habits if one is trading only one pattern. I feel like there would be fewer variables involved, maybe simplified in ways. Maybe bad habits would be easier to identify? If this is true it would allow you to eventually branch out to other patterns without the eliminated bad habits.
if you identify d/top and entry level on the big chart you can draw lines on them then observe how price behave around your level on a finer chart. Then you maybe able to tweak it some more to avoid the death spike or just skip the first 1 hour altogether.
I really like your posts. I know what you mean. In a way I think we need to experience these "emotional, stressed out" trades that lead to bad results so that in the future we learn to tell the difference between 1) behaviors that we need to eliminate or control vs 2) just failing an individual trade where the market behaved differently than anticiapated. Hopefully our system/awareness/experience over time give us an edge over the losses caused by 2, as long as we control 1.
Zach, I enjoy reading your journal. I notice on your charts that you are using 30%, 70% lines, etc. Have you used the regular Fibonacci retracements numbers (76.4, 61.8, 50, 38.2, etc.)? I'm curious because we have found them to be significant in a number of markets. I'm wondering if the numbers you use are more relevant.
Since it's been awhile and my b-day is coming up, I've decided to finally go out and do something besides trade and devour trading material. I'm partying tonight! To answer you really quickly vmodus, yes I've used regular Fib levels and they definitely do the trick. I'm testing these custom levels to see if they do me even better. I appreciate the insight, discussion and compliments from all of you, and I'll be back to respond fully tomorrow, as well as complete the journal I was supposed to finish today. Goodnight!
This is what I consider to be a mini DT (price went further down later on). Most of these are not as aesthetic or as easily discernible as their bigger counterparts, and the risk to reward will obviously always be small in my case, given the size of the pattern and the scale of my entry-exit fib levels (entry at 30% and close at 75%; fib level is from the base of the pattern to the very top of the second peaks last bull candles close) and because of this, these small-scaled DT's are always considered Tier 2 trades. This means I can enter and exit at different levels freely, but I've realized today while trading it, that maybe this isn't necessarily a good thing for small patterns.
The reason I thought of why more discretion is not a great idea in these small set-ups is because these patterns naturally entail small stop losses, and my discretionary exit would restrict the space in which price could move even more. I can't afford that and even at face value it seems wrong. So these small patterns with small stops shouldn't be tinkered with after entry. Tier 2 trades that are larger patterns are a different story, though.
But yeah, that was a small technical issue that just wasn't accounted for initially when I made the tier system and I'll have no problem implementing this idea- as long as I'm in the right state of mind to trade properly (duh). Contrasting my attitude today to yesterdays, I was in a great mood when I woke up this morning. I was actually excited to trade, I felt energetic because I had slept just enough. Yesterday I was feeling relatively neutral. My process yesterday was seamless, and today on the other hand, I fell back into my old ways of closing too early. So this means to me, that it doesn't matter what rules I set for myself or my strategy, if my state of mind (emotional) isn't conducive to trading the right way.
Yesterdays attitude made it so I was simply responsive and applied my process almost robotically, but that's not exactly the word that describes it. The word that comes to me right now is zen. I was carefree and just did what I had to do. Today I was running hot and I was ready to trade. I was on a different speed than the market, that's for sure. I wanted to get my shit and get out; I was essentially too hyper to trade effectively. No excuses- but clearly, had I had the attitude I had yesterday, I could've made 2 more points.
I've got some bro-science for you, and yes this is totally related. In personalities, theoretically there are sub-personalities that are pieces of the personality as a whole (I've read that the personality is ~generated~ or lies in the PFC). Arguably these sub-personalities are minutely the product of, and are greatly influenced by different brain regions or different interactions of certain brain regions that all have different functions, which are activated by certain stimuli in the environment. [To clarify real quick, I think of personality as the totality of the reactions and interactions of what's going on in the brain from the environment, so even primitive reactions constitute part of you as a person. What also constitutes personality is beliefs, thoughts, just everything that you are and experience on your side of the fence.] So the most basic understanding of biology most people have that might influence a person(ality) greatly is: If you're walking out in nature and you spot a dog running full-fledged ape-shit at you, your hypothalamus is going to release epinephrine and you're either going to fight the dog or freeze up. That's just one reaction to one stimuli (I'm simplifying greatly) that influenced your disposition drastically. But remember, the variability of reactions is incredibly large, because some personality would reactionarily grab that branch on the ground in self defense, others would be too scared to notice the branch or have worse eyesight. The fight or flight response has obvious and massive implications on behavior, and there are other more subtle activities we may do that have a different set of implications as well. Think of meditation, running, socializing with a great friend, listening to inspirational material- there is an effect at some level that changes your state of mind. With that being known, this must be taken advantage of.
My point is, there are many components to our individuality that makes us unique in response and in reaction to different stimuli. We have proclivities and inclinations to behave in different ways (read Behave by Robert Sapolsky). Some people seem to have "multiple personalities" and/or a wider range of expression. Some people are more consistent in their temperament. Different environments possibly bring out a different version of you, or activates a certain sub-personality or way of being. I felt fantastic before I started trading Friday and on top of that, had a big ol' cup of coffee. You mix that with some good music, and you're functioning at a different level that isn't necessarily optimal for trading (for me, at least). So naturally the idea would be, is to create a ritual that would enable you to trade as effectively as possible, and most of us know the common answer is meditation. Hell, there's other ways- you could go on YouTube and get on a stoicism kick, and that might influence you to some degree to hold your trade longer. The ways in which we could into that zone are endless. Anyways, so I realized I need a consistent process of getting my head straight before trading. I'm going to try genuinely meditating for an hour or so before trading this upcoming Monday. It seems like the most important thing for me to do.
). 1: Making money (as long as the chosen pattern did indeed have a positive expectation), and 2: Learn the pattern's nuances. As one became more specialized, or expert, I suspect the pattern would become even more profitable. 3: I suspect it would be easier to isolate bad habits if one is trading only one pattern. I feel like there would be fewer variables involved, maybe simplified in ways. Maybe bad habits would be easier to identify? If this is true it would allow you to eventually branch out to other patterns without the eliminated bad habits.
