June 13, 2024 entry.

Lots of changes since I started this journal in 2022 and hence re-wrote this introduction.

I have been trading part-time for more than 10 years now but mostly for fun and learning until covid in 2020. I have a medical background and hence financially secure. I got fascinated with economics first after the 2008 crash and eventually with trading. I went through the usual traders' journey over the first 6 years. Excitement, dejection, euphoria, frustration etc. Probabilistic mindset started post-covid due to my interest in statistics and access to past data. Then I became a breakeven trader for 2 years. I also became more humble and respectful of Mr. Market. To reflect that, I also changed my profile name here! SInce 2022, I'm profitable trader but just a little. It's nothing compared to my regular income but I'm encouraged that I could have a passive income source post retirement, in addition to my savings and investment. My current goal is to size up. I'm quite risk averse which hindered my progress, but also kept me in the game. I'm hoping to increase my max loss to 2000 USD/day so that my profitablility can increase too. I don't paper trade.

Now to my system and process.

1. I use Sierrachart with Denali data.
2. I trade Emini S&P. I also trade DAX mini when I'm in Asia. I used to trade SPY ETF and recently graduated from MES to ES.
3. I used to hold trades from RTH open to close but after after I developed confidence in my system, I'm a discretionary trader now. I still hold trade for several hours but no overnight carry.
4. I no longer add to my loser. NEVER.
5. I always add to my winner before taking partial profits. ALWAYS.
6. My entries are based on combination of the results of past statisctical data and the current EMA crossover trend.
7. My exits are still a work in progress. I tried all-in all-out strategy for a while with limited success. It suits me when I work full-time but I have flexible working condition now. Hence, I'm currently trying various other trade managment strategies. Scale-in and scale-out seemed easy and straight forward but quite difficult in practice.
8. I goal is to try and capture 70% of daily ATR. I do not have a monetary daily goal.

The way I approach the market now is like this. I see it like a sports match between two equally strong teams. I have the data for the last 20 years of daily match between them. I categorise them into certain market conditions like bull vs bear, seasons etc. With that historical stats, I know who had better success in the PAST. Then I look at the recent trend of the last 24 to 48 hours. If they both are in alignment, then my job is easy to bet on that team. For instance, options expiration day tends to be bearish and if the EMA trend is down @ RTH open, then I MUST take short. Once I have placed my bet, then I closely follow the strength of my team to decide whether to add more money or bail out. I use volume data, quite a lot, for this process. If the data and trend are not aligned, then I have a process in deciding my entry and exit criteria.

The key for me is to be dispassionate about the teams playing the match so that I have no emotional interest in either of them winning.

My trading focus is similar to Linda Raschke's 'what's the play today'. i.e. To identify the main direction of market movement intra-day and stay with it till the end of the day or the trend.

The more common way of doing this is to wait for the initial swing or 5 mins or 30 mins, find some clues and then execute. FT71 is a good example here.

However, I found myself too wrapped up in the initial market gyrations and often my pre-market prep gets muddled with poor execution. Hence I chose the less common path of entering the market @ the open. I get my signs from previous day and overnight price action.

My workflow

1. PreMarket Prep - 30 mins. Review Y-day PA and calculate the odds of bullish/bearish day playing out. Entry into tradervue.

five potential signals (Strong Bull, Weak bull, Strong Bear, weak bear, neutral)

2. Market Open - My entry size depends on the signal strength. ( 2 for strong, 1 for weak and 0 for none). Initial entry must stay till EOD. No stops! (Don't worry. My size is small and I have deep pockets. I will use Max adverse excursion data after few weeks to optimise my stop level)

3. Scaling. I can scale in only after 30 mins. Ideally to a winner but if if it's a losing position, this must be at a predetermined support level like Y-C/Y-H.

4. Must have a clear stop & target for my scaled in position. Usually 40% ATR.

5. Exit - Automatic EOD exit by IB presets. No specific target for now but will likely use 80% ATR after getting some MFE data.

6. Post Market - Import IB data to tradervue and complete my journaling.

NO change of direction of trade intraday, for now. My hope is to keep the losing day sizes small and increase the winners size and run.

My goal is to have 40 to 60% win rate with profit factor of at-least 2. (Though it may sound too ambitious I was able to achieve this for the last 2 years but few big losers held over a week ruined all the hardwork by the 65%intraday winners. Fairly typical story for breakeven traders, I understand. Hence I am changing things a bit to break bad old habits.

Yesterday was a good example of how well the system works. Not a very profitable day but perfect in terms of execution.

Signal was Weekly Bullish yesterday @ RTH Open.

Hence Long 1/3 size on open. (Used RIA ETF 50 instead of 1 YM micro as it's easy to close EOD in IB)

Plan was to scale in 1/3 at Y-H support and another 1/3 at Y-C.

My 1st scale @ the planned location with a tight stop and failed. My second scale in was not executed as price didn't go down to Y-C. My original 1/3 long was auto squared off @ close for a small profit.

Overall a flat day but more importantly no stress or second guessing. Despite all the wild swings and Powell etc.

After 30 to 50 days, I will look at the data to see where I can over-ride the rules (e.g. Fed day, Opex etc) or adjust parameters.

It's a new feeling compared to my shooting from the hip for the first few years of trading and I'm loving it.

May 18 2022 Wednesday.

Probabilities favoured shorts on Gap down open.

Execution - 1/2 size short @ open. (Ideally 2/3 as signal was strong but still in the testing phase and hence my confidence in this system is still limited but growing)

Aim was to scale in 1/2 size during the rebound to Y-L once the direction was clear after 30 mins.

However, the rebound / retest Y-L never happened and any further bounces later in the day was very shallow.

Exit - as per plan - End of the day.

I had no idea that it will turn out to be a monster day but I am happy that I got that 90% albeit at half size.

Journey of a trader - 6 stages.

I am transitioning from stage 4 to 5 ( yesterday's chart is a good example)

Funs stats

I am going to post some stats intermittently with a focus on my past mistakes and learning points.

3% down days.

In the last 20 years, 3% down days happened more than 100 times.

However, if the market is in a strong bull market, defined by price above 20 and 200 moving averages, it happened ....... just ONCE. In a strong Bear Market, it happened more than 80 times!

Bear in mind that market has been in a Bull trend far longer than Bear trend. Impressive stats. Why is it relevant to me?

I was a permabear for the first few years of my trading and often expected a big trend down day like yesterday after a bearish start in a strong bull market. Those Shorts alone probably accounted for half of my losses!

Market Prep. May 19 2022 Thursday

After a big down day, probability is for a positive close the following day.

There were 80 days in the past with similar market conditions i.e 3% loss in a Bear Market. If we gap up @ open, then it's even better odds for longs but currently we are below Y-Low. It's still mildly bullish but I expect back and forth buying and selling and likely a doji like scenario.

Since it's weak Bullish stats, I will go long with 1/3 @ open and then scale in 1/3 around ONL. If we take out ONH, then I will consider adding the final 1/3.

My previous avatar would have been tempted to short expecting a follow through.

No shorting today for sure.

Trade going as per plan. 1/3 Long from open with exit EOD

Buyers holding ONL so far but Sellers still in-charge until we negotiate Y-L which is the current resistance.

Tried scaling in 1/3 but got out for a small loss. Will try again if new HOD is made.

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I have also been dabbling with gold micro futures but the stats seem less reliable compared to YM. May be it's because of the wild swings outside RTH.

I am making a public resolution to stop trading gold until I prove my consistency in YM for the next 30 days.

Though the trade from yesterday was a small loser, I was actually executing well as per my plan i.e shorting the bounce and then bailed out during the retrace if higher high made. However, currently I'm not ready to handle two markets with equal intensity.

May 19 2022 Summary

Followed my plan. Long @ Open and scaled in but at poor locations. I expected Bulls to be stronger and hence bough PB. If I had scaled out at Resistance levels like Y-L and Y-C, trade would have worked out better. Noting these potential optimisation to adjust my strategy after 30 days.

Slight +ve / Breakeven-ish day. My running profit explains the chop well. It also indicates scaling out targets.

P.S. My goal is to scale-in to winning position, like today. It doesn't matter if they don't work out but the aim is to not let that into a loser and hence happy with the execution.

May 20 2022 Friday Prep

Odds favor a Lower close tomorrow.

Opex closing day bearishness stat is hard to ignore. And it's friday!

My tentative plan is short the open and scale-in @ Y-H and ONH.
Scale out targets will be Y-L and ONL. Pretty obvious stuff but it's amazing how I forget when I'm in the trade.

The main objective of this 30 day test is to decide whether to execute @ RTH open & exit @ RTH close, regardless of trend/momentum status as indicated by EMAs. Next goal is to identify targets for scaling in/out. Finally, I will decide on my stop loss and final target based on MAE MFE stats.

I define Bullish trend as 34 EMA above 50 and Bullish momentum as EMA 8 above 13. These numbers don't mean much for me. Just a visual guide.