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FuturesTrader99 Trading Journal

  #1 (permalink)
Vancouver, Canada
Posts: 31 since Mar 2010
Thanks Given: 5
Thanks Received: 28

My trading methodology has evolved to become a hybrid of different systems. I will document them here as time permits.

I am a pure 100% discretionary trader, but recognize the value of automated system trading. For now the first priority is to become a competent discretionary trader, then later to turn my attention to ATS development.

Principles and Philosophy
Successful speculation begins with objective observation
I believe that successfully anticipating the next move in the market begins with forming an opinion about the market response to the next news event or next technical level.
Since I may be wrong about my opinion, Wait for the market to confirm my opinion before initiating a trade.

Be fearful of an unprofitable position because that is the worst time to be greedy; reduce or remove your risk unless or until the market proves you right.
Do not be fearful of losing profits; instead you should be greedy and hopeful because those profits were not there before you initiated your trade. The criteria for taking profits is when the market stops acting right.

As a discretionary trader, I prefer high win rates over larger average win size because win rate promotes what I value most, which is trusting in my ability to perform. Working on consistency and the skill of projecting a conservative magnitude of the move/sequence/bias will compensate for the weakness of preferring a high win rate.

1. The first is understanding the relationship between price and time. What is the trend in the longer time frame and shorter time frame? Read the market and figure out what you are seeing. I subscribe to, and seek to determine the market bias for the morning / afternoon session.

2. Determine areas of potential action (areas to do business). What do you expect to happen in these areas? Some call this S and R but support is just an area where there is potential for the market to change direction. I use the following, to determine the areas of support/resistance confluence:
- prior day High/low/close - this includes gaps
- Fibonacci retracements
- Market Profile (POC, VPOC, composite VPOC, LVN, VAH, VAL).
- price action
- moving averages
- pivot points
- prior intraday swing high/low
None of these by itself is a reason to initiate a trade, however 3 or more of them at a particular area is a good confluence in my opinion.

3. Have a way to interpret what action is happening when the S/R confluence area is hit and what action if any you need to take. Look for the expected price action to happen at your expected area. At this point, I will look for block trades, TICK, NYAD and QStk divergences as criteria for taking the trade.
You must be able to read what the market is doing as it enters the area and how it is responding to the area. This is how you actually enter or exit the trade,set your stops etc. Many people complain that they get into trades to early or get stopped out etc. The reason is that they do not have a way to read what is happening at the S and R areas when they are entered. Eg. Just because price hit the support confluence area doesnt mean you go long.

4. Mental game - I plan to use this journal to teach me how to control fear, greed, hope, risk tolerance, and other emotions.

1a) Always analyze the chart to form an opinion the day before taking any positions
1b) Eliminate all outside influences (phone, web browser, IM, email client, etc.) prior to your first trade. The focus must be front and centre on the chart and DOM by 625 am PST.

2a) After entering a trade, physically exit the room for at least 1min.
2b) If exiting a position for a loss, take at least 5min. break before considering the next trade setup. I must be more picky on the next setup - is the market moving the way I expect? What am I expecting at that point? Is the market even moving at all?

3) Max daily loss is 3points.

4) If a setup is spotted that is not near one of my pre-determined areas to do business, then the safest choice is to pass on the setup. Use the information to help identify the next setup. If a next setup occurs near this area, and was spotted with the information gleaned from the prior passed setup, then it is allowable to take the trade.

5a) Do not trade the opening 5min. (I call this the 5IB). What's the rush? Instead, wait for the 5IB to tell you what the market is doing, and assess what it wants to do in relation to your area to do business.
5b) If the 5IB is completely directional, or if the 5IB is in the direction of the overnight bias, then look for a trade in the same direction or stand aside for at least another 5min.

6) Never initiate a long trade at the session high. Never initiate a short at the session low. Chances are, you've missed the low risk entry already. The only exception to this rule is if the session hi/low happens to be in one of your areas to do business. In this case, you need confirmation before initiating a trade.

Trade Management Rules:
1) If my position is showing loss but still not stopped out after 10min. trail stop in 1tick increments.
2) If my position is showing profit, identify the most recent retrace of the current move, lower the stop to 1 tick beyond that retrace, and start trailing the stop in 1tick increments beginning from that price level.
3) For all moves, identify an initial target for that move based on what you see in the chart.

1) Resistance/Support confluence. This should the first choice of setups, as there is a higher probability of getting a reaction at these S/R levels, as opposed to random noise at any other price level.

2a) Failed breakout. Failed breakouts yields high probability of searching for prior support.
2b) Failed breakdown. Failed breakdowns yields high probability of searching for prior resistance.
Criteria (from Tues 3/30 chart):
a) market breaks out above prior established resistance area
b) price consolidates, EMA's flatten out
c) Look at price action first, then TICK, QStk divergence and other indicators for confirmation of pending failure.
d) look for TICK extreme, increased volume as confirmation

3) Breakouts:
a) look for range bound consolidation, preferrably near a resistance/suport area
b) volatility contracts, EMA's flatten
c) sudden volume spike accompanied by exteme TICK value (ie. > +/-900)
d) 10/20/30 EMA's guide the way

4) Gaps:
Historically, of all gaps that do fill, 80% fill within the first 1.5 hrs of the session. Whether a gap fills or not will vary depending on how the market behaves at the open, seasonality, and current market structure. However, the smaller the gap, the better the probability of gap fill. Also, the previous close has a tendency to act as an area to do business, at least initially in the session. There are 3 setups based on gaps:
a) fade at least 1/2 the gap,
b) fade the gap fill.
c) trade in the direction of the gap.
Preference would obviously be an entry near one of the pre-determined areas to do business.

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  #3 (permalink)
Vancouver, Canada
Posts: 31 since Mar 2010
Thanks Given: 5
Thanks Received: 28

I am sim trading ES. The goal is to then go live as soon as I have established a track record of +ve expectancy in sim.

Here is my one and only trade in sim this morning.
Bright red line is my resistance area to do business
Bright green line is my support area to do business
dark green is previous day high
cyan is previous close.

Mkt opened with a gap up, overnight bias was up, then retraced 61.8% in the pre-Mkt.
Opening 5min. was flat then spiked up, indicated a desire to probe resistance.
Mkt broke above 1169, but retraced. subsequent moves could not reach my pre-determined 1170.5 resistance area. No TICk extremes yet. Failure to test resistance increases probability of a move the other way, so I decided to go short 1169, 2pt stop. Market went against me for almost 1pt before moving in my direction. I exited at 1167.

Market still remembers the 1165 breakout to New HoY from last week. I didn't. I will remember it now, because the market remembers it.

I was tempted to short again when it went back up to 1169 but was distracted at the time. Later I decided to stop trading for the day and just observe the markets for as long as i could stay focused. Bad idea, as the market went nowhere fast. There were really only too good moves for the day, and I am satisfied that I caught one of them.

PnL: +2pts

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  #4 (permalink)
benbrooke's Avatar
Experience: Advanced
Platform: Market Delta
Broker: Velocity /TT
Trading: ES
Posts: 430 since Aug 2009
Thanks Given: 216
Thanks Received: 490


I noticed you using values area in your setup ,
when you become elite member you can get trading ideas for using Market profile and values areas in this thread

Keep on sowing your seed, for you never know which will grow -- perhaps it all will.

-- Albert Einstein
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  #5 (permalink)
Vancouver, Canada
Posts: 31 since Mar 2010
Thanks Given: 5
Thanks Received: 28

Hi Benbrooke,

Thanks for the suggestion.
I will give some consider to becoming an elite member.

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  #6 (permalink)
Vancouver, Canada
Posts: 31 since Mar 2010
Thanks Given: 5
Thanks Received: 28

Tomorrow's plan (turnaround Tuesday?):

Market response to the 7am economic event will likely set the bias for the morning session. Today's VPOC(1168.75) > yesterday's VAH(1162) therefore, there should be some upside bias at 1167. Not as confident about this number because today's value area was so compressed.
Despite the fact that this market is overbought, all signs on the charts point towards more upside still. I will watch 1171-1172 for a (real or false) breakout to new HoY. This likely means 1.5pt - 2pt target initially, because it may be a false breakout. Price action will dictate final target.
A close below 1158 is still the criteria to confirm a short term top. I will watch 1165-1164 area for a potential breakdown (spike in sell volume).

Other areas to do business: 1155.5, 1158.5, 1160.5, 1163, 1176, 1179

Euro Futures (6EM10) consolidated between 1.35 and 1.3440, which is above the area of the past 3 days. It has appeared to absorb 1.3490 resistance. Euro left an unfilled gap at 1.3410. That is the area I will watch for going long.

Other areas to do business: 1.3435, 1.356

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  #7 (permalink)
Vancouver, Canada
Posts: 31 since Mar 2010
Thanks Given: 5
Thanks Received: 28

Chart legend:

red line is my resistance area to do business
green lines are: o/n low, previous 2-day high, previous hi
cyan is previous close.

Mkt opened with a gap up, overnight bias was up, then retraced a little in the pre-Mkt.
Opening 5min. was an "extend reverse down" indicating a desire to probe support.
Mkt broke above 1171.25, but retraced. subsequent moves could not reach my pre-determined 1171.25 resistance area. No TICk extremes yet. Failure to test resistance increases probability of a move the other way, so I decided to go short 1171, 2pt stop.
This time however, market acted strange on the re-test of 1171. I got shaken out 1171 before the market dropped in my favour.
I then realized too late that :
- price could not fill gap 1168.75-ish
- price rejected POC 1168.5
- price unable to probe o/n low

These were 3 reasons to go long and I had until 647am to do so, but I failed to realize it until 649am.
So I chased with a long 1173. After I entered I immediatlely realized it was a bad idea. Exited 1172.75.
I waited to see how price would behave at my pre-determined resistance 1171.75. Would it turn to support? 7am release came out. Market dropped but only mildly. I got long 1172.25 when TICK started going back up. Price made a higher high but TICK made a lower high - that should have been my warning to get out. This was one of my patterns that I should have recognized right away, but I didn't and instead waited for price to retrace back to 1172.25 before getting out. Took another stab at it, exited for -0.25 pt loss.
Then came the ambush selling (ambush because it happened so fast there was no way to take advantage). I got short 1170.25 but then realized that price is now in a congestion area. I got out 1170.5.

Called it day at that point, focus just wasn't there. Long 1170.25 on POC rejection and the failed breakout plays should have been the only two valid setups for me this the morning. Will add some rules in place to prevent these mistakes from happening again.

PnL: -0.75 pts
Performance: F

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  #8 (permalink)
Vancouver, Canada
Posts: 31 since Mar 2010
Thanks Given: 5
Thanks Received: 28

Wednesday's plan:

Sellers have been active 1169.5-1171 area for four consecutive sessions now. Buyers have not been able to take control of price > 1170. However, buyers are certainly in control of lower levels and are building value around 1168.5-ish. 5d MA of POC has been increasing for the majority of this month, and the gap at 1163 is still unfilled. Volatility has been contracting (2BNR day), indicating an imminent range expansion, especially given that it is Quarter end and month end tomorrow. Volatility contraction being resolved in favour of the daily trend is the path most would expect; however, a breakdown will also yield a strong reaction - fund managers will not hesitate to protect their profits tomorrow if the right conditions prevail. I will be monitoring the 1163-ish or 1173-ish area for a potential breakout or breakdown.

Areas to do business: 1160.5, 1163, 1165, 1173, 1175.5, 1179

I have observed that the Euro respects certain Market Profile concepts. I will try to use those concepts to see if I can extract a good trade next week. 1.3435 was a good area to scalp long on a bounce, and scalp short on the failure. However, I did not trade the Euro yesterday. I will monitor that area and 1.346 tonight to see if there is anything actionable.

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  #9 (permalink)
Vancouver, Canada
Posts: 31 since Mar 2010
Thanks Given: 5
Thanks Received: 28

Attached is a volume chart of the current evening session. Yesterday's low was 1.3418. Yesterday's VPOC was 1.3414. Note that is also a low volume node for current session.
Note also how 1.3414 acted as resistance once price broke below 1.34

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  #10 (permalink)
Vancouver, Canada
Posts: 31 since Mar 2010
Thanks Given: 5
Thanks Received: 28

Chart legend:

Red arrow was my trade
Orange arrows were my setups that i did not take.
green line is my resistance area to do business
dark red is previous session low
cyan is previous close.
not drawn was 1165, which was another one of my areas to do business.

overnight bias was down, Mkt opened with a gap down.
Opening 5min. was flat, then broke out in the 6th minute, indicating a desire to probe resistance.
Then came an old fashioned "take you out in the back alley and give you an ass-kickin'" ambush selling. 8000 contracts dropped the market 1.5 pts in 11 seconds. It paused long enough for me to get short 1165.5, 2pt stop.
Market wanted 1163; I targeted 1163.25.

Market reversed at 1161.5, which happened to be the 3-4day composite VPOC from last week. This told me to look for longs. The orange arrow (1165.5) was where I spotted the setup to go long, but a minute too late. The setup was:
- first thrust up from my 1163 support, then pullback which could not tag 1163 support.
- TICK trending up after the break back above 1163

The next setup came at 1168. Price had stalled just under the confluence of:
- yesterday's VPOC (1169.5)
- yesterday's close
- previous session close (1168.75)
- daily pivot 1169

I spotted it, but did not take the setup to go short because it was not my in my pre-planned area to do business.

Called it day at that point. Will need to amend my rules to account what setups I am allowed to take.

PnL: +2.25 pts
Cumulative PnL: +3.75pts.
Staying out of trouble: A
Pattern recognition: B-
Discipline (following rules/plan): B+
Patience: B+

If I have 4 consecutive weeks where the weekly PnL > last week's PnL, I will go live.

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Last Updated on April 13, 2010

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