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As per my rules, I did make two setup-specific trading mistakes. Done for the day as a result. I knew I was breaking the rule, which had instructions for me to switch to a higher timeframe to look for an entry, but it just didn't feel right. Whether that was a subconscious signal to stay flat, or an irrational fear-driven response (or both) I'm not sure, but it did make me realize that I need to re-evaluate this particular rule.
Daily Grade: F
Things I did right:
- I was more efficient with my time this morning and got everything done with time to spare.
- I took a second to calm down and just look at the price action as if I wasn't looking for a trade when I got a bit confused.
- I told myself "I start the trading day when I start the trading day," and didn't feel as rushed as a result. I didn't make as many general mistakes either.
- I didn't forget any rules today.
- I watched the Intermediate and Minor timeframes simultaneously, watching for trouble, as per the setup's rules.
- I kept my distractions minimal, as per my plan.
Things I got wrong:
- I intentionally ignored a rule.
- I didn't print out my updated plan from yesterday. On the one hand, I know that I'm going to be learning and correcting things as I move forward, and I don't want to waste the printer paper. On the other hand, it would be a lot harder to erase or edit a rule during the trading day if it was printed and in front of me. A compromise may be adding a written rule that prevents me from altering my trading plan while the trading day is active. Only when I'm done for the day, and the charting software is closed, can I then edit a rule if necessary. Something like that should work. Edit: Rewrote this section because the formatting ended up looking weird. I'm pretty sure I didn't alter the text though, so it should still say the same things as before.
- I didn't let my wife know that I was about to be in a trade (over text) when I should have, which is a rule I made. I thought it might be nice to do that out of courtesy, in case we're in the middle of a conversation and then there's radio silence on my end.
I feel like there should be more in this section, but I'm currently drawing a blank. I'll think about it throughout the day and add things if I think of anything.
General Thoughts, Things to Do, Etc.:
Figure out which areas to watch on the Primary timeframe and create rules for those areas.
Study past strong trend days on the Primary timeframe and zoom in with lower timeframes.
Create a rule that prevents plan editing while the trading day is still active.
Think about what motivated me to ignore my rule today and revise the rule if necessary.
I didn't trade today. Didn't feel like it. I'm going get an early start on the weekend and work on my to-do list.
Daily Grade: N/A
Weekly Grade: F
General Thoughts, Things to Do, Etc.:
Figure out which areas to watch on the Primary timeframe and create rules for those areas.
Study past strong trend days on the Primary timeframe and zoom in with lower timeframes.
Some quotes from Carl Sagan that I feel can apply to trading:
"Our perceptions are fallible. We sometimes see what isn't there. We are prey to optical illusions. Occasionally we hallucinate. We are error-prone."
"Wisdom lies in understanding our limitations."
"If we resolutely refuse to acknowledge where we are liable to fall into error, then we can confidently expect that error--even serious error, profound mistakes--will be our companion forever. But if we are capable of a little courageous self-assessment, whatever rueful reflections they may engender, our chances improve enormously."
I've tried to write out a basic idea of what I look for, and it's been challenging. Essentially, I trade the 30-minute chart by entering on the 1-minute or 200-tick charts. There are four market states that I look for: trend reversing, trend continuing, trend uncertain, and counter-trend. When I determine what the market is doing on the 30, I mark up the areas on the chart that look like the most likely places for price to react. I exclusively look at price and volume.
Some backstory: I've spent a good part of the last year or so studying market tops and bottoms. I did this because I read that reversals are some of the lowest-risk trading opportunities and that they can result in large gains relative to risk. What I've learned, or deluded myself into thinking, is that markets reverse in the same ways, over and over again, regardless of the timeframe. Rectangles, Double-Tops/Bottoms, Head-and-Shoulders, Broadening patterns, Three-Push patterns. I'm sure there are more, but these are the ones that I've memorized so far. Price gets high enough, and people sell. Price gets low enough, and people buy. Sometimes price ranges, and sometimes it reverses. Slow accumulation/distribution, and rapid accumulation/distribution.
Visually, market behavior is fractal-like when viewed on a price chart. What you see on a 5-minute chart, you'll see on a weekly chart.
Timing entries into 30-minute chart trades has worked in the past. The irony is that I started looking into other strategies because I didn't see setups as often as I wanted. I stopped looking into a strategy that had shown me a profit because I was impatient (some might argue stupid) and wanted to trade more frequently. Unsurprisingly, that didn't pan out.
So now I'm back to this strategy idea.
And I realized I was wrong.
Potential Modifications
As much as I like the number three, I don't think relying on three charts is going to work. I need a fourth chart. The Daily chart. Part of the meat on my strategy's skeleton involves determining when a bunch of people made the wrong decision. When did people accumulate, followed by a price decline significantly out of their favor? The more they accumulated, and the further price moved against them, the stronger the reaction when price returns to their purchase price.
I thought that 30-minutes was ample time for trading, but I was too short-sighted. The amount of market participation that the Daily chart represents is staggeringly greater than a 30 chart. Who cares what people did in a couple of hours? I want to know what people did all day long. I'll be surfing a tsunami instead of a wave.
So, four charts.
What did price do when it was at this level in the past? Look left on the Daily timeframe. Zoom in with the 30-minute chart. Zoom in with the 1-minute chart. Zoom in with the 200-tick chart. Which prices had the most activity? When did more-than-average volume take place? It's not always possible to do all of this with my current data provider, as the amount of historical data I have access to through them is limited.
Changing the basic structure of my trading environment (3 charts to 4) through adding the Daily timeframe, means that a good portion of trading plan has to be rethought out, changed, and then refined.
Children of the Mind*:
Trading is great. Self-reflection and change are requirements, and despite how difficult it can be to honestly engage with those behaviors, it's always rewarding in some way or another.
Next Thought
Whiskey.
*"Children of the Mind" is an obscure reference to Orson Scott Card's Ender Saga series. I thought that thoughts were like literal children of the mind, and thought I'd make a joke about it by making it the title of a new section. #ExplainingJokesThatAren'tFunny
"A stock carries the earmarks of its chief sponsors. Its action usually indicates the character, methods and ability of those who operate heaviest in it. (Sect. 14M, Pg. 12, Pars. 2-4 and Pg. 13, Pars. 1-3).
Like individuals, stocks have certain characteristics with which one becomes more and more familiar as he studies intensively their past and current movements. The market is made by the minds of men, and all the fluctuations in the market and in all the various stocks should be studied as if they were the result of one man's operations.
Let us call him the Composite Man, who, in theory, sits behind the scenes and manipulates the stocks to your disadvantage if you do not understand the game as he plays it; and to your great profit if you do understand it.
Not all of the manipulators’ moves can be detected. Not all of the moves are made by manipulators. In fact it does not matter to the tape reader or the chart reader whether the moves are real or artificial; that is, the result of actual buying and selling by the public and bona fide investors or artificial buying and selling by large operators. Most of the important, moves in the market are prepared, executed and concluded, and it is my business to show you how a large number of these trading and investment opportunities may be spotted in time to take advantage of them."
- Richard D. Wyckoff, The Richard D. Wyckoff Method of Trading and Investing in Stocks
Thoughts:
Alright, so hopefully my understanding is better this time. I think what he's saying, is that the Composite Man is just a way to refer to those traders/investors whose coin dungeons are large enough to require them to operate more carefully in the market. Wyckoff goes on to explain that these people can't just buy stocks in enormous quantities because it would tip the market off to their plans and they wouldn't be able to accumulate their full line.
To @deaddog's point in his post (#66), about how the Composite Man's operations are just how he does business, that makes more sense now after re-reading the section of the book above.
More Thoughts:
Recently, I've been thinking about Newton's first law of motion, and how it applies to trading.
"An object at rest remains at rest, and an object in motion remains in motion at constant speed and in a straight line unless acted on by an unbalanced force."
Prices will continue to fall (downtrend) until someone(s) buys enough that the structure of the market changes. Downtrends are a series of lower highs and lower lows, so when the market makes higher highs and/or higher lows, that means that something has changed. It doesn't always mean that the downtrend is over. It could just be a retracement after all. But the point is prices don't go up unless there is a buyer. No buyer, no higher.
So, "...an object in motion remains in motion at constant speed and in a straight line..." = The trend.
"...unless acted on by an unbalanced force." = Buyers and sellers, demand and supply, accumulation and distribution.
If price stops going down, someone(s) is buying. If price stops going up, someone(s) is selling. If the buying or selling is strong enough, or if you're fast enough to catch the ripples, you can ride the wave. In theory anyway. In practice, it gets a little messy though, haha.
I've been in a kind of haze the last few days. It's been a blur of figuring out which patterns to focus on with the daily chart, figuring out the best way to trade those areas (which patterns, what timeframe), how to determine profit targets and Stop-Loss management, and then getting all of that written down.
Before, I would've based my profit targets on the highs and lows of the 30-minute chart, but the timeframe hierarchy is changing since I'm incorporating the Daily chart. There's always the possibility of fixed profit targets, but I don't like the idea of mechanically exiting a position without taking the market's behavior into account, at least while I trade a single contract. I'm open to having a fixed profit target for a contract or two when I trade multiple contracts, but it depends on whether or not scaling-out ends up being the most optimal exit strategy for my setups.
I know that some people don't like the idea of chart patterns, because of how subjective the interpretation can be when different traders look at a chart. I can't deny that that's an issue! I think about that a lot, and about whether or not what I see is real, or just my brain seeing structure in structureless randomness. While I don't think that markets are random, and it seems like price reacts to areas that make sense and in ways that seem to repeat, it's still totally realistic that I could be making constellations out of stars that don't exist. Either way, I've got nothing to lose right now since all of my trading will take place in SIM. Besides, even if I get to the point where I can follow my strategy with enough discipline to get a passing grade, which would allow me to trade with the Live account, I'm not gonna' go Live with an unprofitable strategy. It would be more productive to piss in the wind.
So... yeah. A lot of work to do.
I started skimming through Stan Weinstein's Secrets for Profiting in Bull and Bear Markets yesterday, because it's on my to-read list. I was thinking about market cycles as defined by Weinstein and Wyckoff, and I can't help but wonder if their writings are almost like really in-depth analyses of ranges and range breakouts? It seems like the idea is: Stage 1, Accumulation (range); Stage 2, Markup (successful breakout, uptrend); Stage 3, Distribution (range); Stage 4, Markdown (successful breakdown, downtrend). I don't know, maybe that's an obvious concept that everyone else already has a grasp on, or maybe it's off the mark. I dunno'. Just something I've been thinking about.
I'm gonna' try to start journaling on here as if I'm the only one that can read it, that way I can hopefully get past the on-camera effect (where you know you're on camera, so you act differently than you normally would), and maybe that'll help curb some of my pretentiousness, haha. I've got self-worth issues and have an ego attachment to coming across as intelligent, which just makes me end up sounding like an a**hole sometimes. It's like that thing where you're anxious, and you don't want anyone to think that you're acting weird, so you try to act normal, and in the process, you act weird as hell. You create what you're trying to prevent. It's great.
Finally got around to scrolling through a chart bar by bar. It's something that's been recommended to other people before, but I've just been too lazy to do it. The upside is that if this helps to deepen my understanding of the markets, I'll have learned something valuable, and as a bonus, I'll use this as a lesson to stop being so damn lazy.
Something that's been pretty neat has been taking a bit of a THC gummy and looking at various charts to see what my brain comes up with while being in an altered state. Not too much THC though, because I don't want to get to the point where I'm incapacitated anymore. I still struggle with the amount of alcohol I drink, but, I do drink less than I used to. Small progress.
Anyway, it's been a helpful exercise most of the time (THC charting). You start looking at each bar like: Where did the last bar close? Where was the high? Where was the low? Where did this bar open? Did it move lower from the open, or higher? Then what happened? Where did it happen in relation to the prior bar(s)? The gummies 100% aren't necessary, they just make it more fun, and maybe a little easier to tap into the creative areas of my brain by dampening that pesky anxiety.
Trading Stuff:
The basic idea for trading moving forward will be to use the Daily timeframe as my north star and zoom in on lower timeframes to time my entries. I don't think I'm going to fool with the "Primary, Intermediate, Minor" stuff anymore. Only using three timeframes seems like it'll end up being too restrictive.
It may be the wrong way to look at it, but I view zooming in and out of the market with different timeframes almost like adjusting the zoom function (don't know what it's called) of a microscope. So, if I only use three timeframes to get a deeper look into the Daily chart, then I may miss the opportunity of getting a clearer picture by looking at a timeframe other than those three. Not sure which timeframes I'll start with yet.
I'm still trying to figure out profit targets. I'm going to try to keep Stops at two points or less, and ideally never more than three. I'll gauge the initial risk prior to entering the trade. It's worked in the past from a risk-management perspective, but some aspects of my strategy will be different now, so it may not continue to work to keep Stops that small.
Self-Work:
Ego. William O'Neil said to leave your ego at the door. Mark Weinstein said not to be arrogant. Getting cocky leads to blowing up. Sustained losses eat at your self-confidence. I need to work on humility, and not taking things personally. I need to use every criticism as an opportunity to learn something new about myself, or to reinforce the need to change if the issue is something I already know.
Like everyone, I have blind spots. There are things about myself, about the way that I act, come across, speak, that I'm totally oblivious to. It sucks. It's weird knowing that every day I do things, and then I don't know that I do them. Body language is a good example. Maybe you choose not to say something in anger, but your body language is still saying "I'm fecking mad as hell!", and people pick up on that.
So, I guess a goal for now and possibly indefinitely, is to become humbler, care less about what people think in the self-worth sense, care more about what people think in the learning-about-myself sense, changing what needs to be changed about myself, and working on getting that cycle of adaptation up to plaid speeds.
I want to be ruled by reason, not emotion. I'm not a robot though, so I know it's not feasible to go full Vulcan (not that they're robots either). However, every time I experience a heightened emotional state is an opportunity to work towards the goal of being a more rational person. Small gains compound over time.
God, the teenage me would hate me now. I was super into that Fight-Club-esque, self-destructive nihilism back then. Throw in an unhealthy blend of a misunderstanding of everything, conspiracy theories galore, and a pull towards anarchism, and the teenage caricature is complete. Glad to be in a better place now.
