Trade to Last . com

The Strategy Incubator

I had a good week of trading this week and overall, I am feeling on top of my game at the moment. I just need to keep reminding myself not to get overly confident but instead, simply continue doing more of the same.

This has also been a good week because I may have developed a new strategy that is showing a lot of promise. I am still back testing a few different scenarios but so far, it is looking very promising. For my impatient side, I am working on a scalping strategy that trades relatively conservatively but only targets a handful of ticks in a period of 3 minutes or less. 

Perhaps it would be interesting to share the rules behind the strategy on the blog to see if others could help me make it better and then we could all share in it's glory. The biggest downside to this would be the few who don't think for themselves and simply trade it blindly. I'm not a fan of that type of collaboration. Now that I think of it though, it would be interesting to share strategies with a small or even large group of traders with the purpose of developing strategies together; call it a strategy incubator. I have a few strategies that have hit a dead end but maybe a fresh perspective or two could add some tweaks to make them work out and then everyone could benefit by it. I'm sure many of us have partial ideas that could use some outside thinking so it could turn into a trading think tank for the purpose of creating a small portfolio of trading strategies. Maybe this could be done in a private blog to keep all the dead weight out? I don't know, just a random thought...

In the meantime, here is an equity curve for this week's trading:

 

Have a good weekend!

$

Proof I Still Trade...

If only I had a dime for every time I thought about blogging a new post - I'd be a rich man and could trade for the love and not so much the necessity.

The good news is that I am a better trader than blogger but not by much. And to prove that I actually do trade, here is my latest equity curve for the last month of trading. You may note however that the first day of November is included and that's because I cheated to make the objects in the mirror appear closer than they really are (or something like that). I like this trajectory but in reality this only means one thing: disaster looming!

Cheers!

$

Then Don't Trade

I've been reading a lot of blogs lately and the common theme I am hearing has to do with confusion. People are unsure of what is going on in the market, are we in for a deep correction, will the market continue to climb, is the recession over, etc. For many there seems to be more questions than answers.

Unfortunately, I've also noticed that many people continue to trade even though they have so much uncertainty about what is going on with the market and many are losing money as the result. Some even continue to hold on to long positions even though the market seems weak and prices are continuing to fall as the result. Now is the time when poor investors and traders alike are prone to get poleaxed. Smart and unemotional traders are doing three things right now:

1) Closing out of weak positions, regardless of their P&L. Based on technicals and/or fundamentals, some positions need to be liquidated if they are not working out as originally planned. I am not saying to jump ship too early but if your original thesis for entering the market is no longer valid based on current indications then only a fool would keep the position on. In other words, cut your losses short.

2) The brave and equally intelligent traders are taking small positions in strong names that have a high probability of taking off should this turn out to be a mild pull back from recent highs. However the wise are not building their positions at once. Instead, they are carefully scaling in to their positions little by little, as per their PLAN while remaining willing to quickly admit if they are wrong by selling said positions before taking any large losses.

3) Many traders are simply sitting on the sidelines until they get a better sense for what is going on.  There is nothing wrong with not doing anything when you are unsure of yourself and/or the market. Protect your capital and simply don't trade; just wait it out a while.

The following chart of the VIX will suggest that while fear and volatility are increasing, there is still more room for it to get worse before it gets better. Again, perhaps it is worth waiting it out a little bit before putting any money at risk

As for me and my day trading, I am trading cautiously by trading light. As an intra-day trader focusing on a 3 and 15 minute chart, I am not all that concerned with the big picture. I am aware of it of course but I am not overly concerned by it since it does not directly impact my trading time frame. However I am trading light and conservative in the event I enter a trade that goes hard against me. 

My longer-term portfolio is in cash at the moment other than a few option trades that I am taking that can turn a profit regardless of market direction.  I just need enough volatility in price to get through my break-even zone but I am willing to take that risk in this environment. Otherwise, I am not choosing a direction at the moment because I am personally unsure of what might happen. But this is just me.

$

Buying Dips & Shorting Bounces

At this point in my trading career, I believe one of the best things I have learned so far is the virtue of buying dips and shorting bounces. This obviously is not the only way to trade but it certainly is very effective once you learn how to do it properly.

I think many traders, especially new traders fall in to the temptation of buying on new highs or shorting on new lows after a lot of momentum has already been pushing price to those points. This is different from break-out trading, which I also think is very effective. But with breakout trading, you are buying at a point where momentum and volume are just starting to take off once price has pushed through a meaningful support or resistance area. But entering the market after price has already asserted iteself in a particular direction is not the best strategy.

I think a great example for this was this past Thursday and Friday when the DOW was passing through 10,000. There was already a lot of momentum and volume in the market, and a lot of emotion and I am sure many people, again, especially novice traders were jumping on board when the pros had been entering in the weeks before while price was dipping again. Friday as we know, was a down day, so some people instantly lost money by getting into the market too late. Perhaps there is still some more gusto left in the short-term but from a probability standpoint, I believe the odds are higher that we will see a temporary pull back before another push higher by any meaningful amount.

This said, waiting for those dips in this current run up is a better strategy for entry. This takes some patience and fortitude but can certainly pay off in the long run.

I see this time and time again in my own trading where I almost excllusively focus on buying on the short-term pull backs away from the prevailing trend. Or as they say, buying the dips and selling the rips. I find it much more profitable to be trying to exit a trade when the masses are placing their market orders to enter. And it is much easier to get in to a trade when fear is high and people are willing to take anything just to get out of a trade.

Just like any strategy however, there is always a risk for loss so that is why proper money management strategies come in to play and this where I am currently focusing most of my efforts. I feel like once I master my money management and risk control, I will be in a position to make big and consistent gains. I can feel it getting closer and I am excited but not impatient.

It will be interesting to see what the market decides to do in the next few weeks but hopefully, it will present some great opportunities to enter on some nice dips that will take our profits even higher.

Ending Daily Tally

Just a quick update to say that I believe this market looks quite over-extended to the upside, so keep an eye out for a short-term pull back as people look to take some profits. Once we see said pull back, enter positions like a brokeback cowboy and ride the wave of good fortune to higher planes. With the DOW approaching 10,000, I think perhaps we could get a day or two of profit taking before we hit the magic number. That's just my guess.

As for me and my trading, today was a mild day and I missed a few really good set-ups while I was picking my nose and making paper airplanes. I still managed to pull out 4.7 TF points on 7 trades and zero losers. I like those odds. 

Stay tuned for a "serious" post at some point soon.

$

Too Busy, Too Much

I have to take an official break from my blog for a week or two. I'm just too busy at work right now and I'm working on another project that is taking even more time at the moment. As the result, I'm turning into a lame blogger so I should just tap out temporarily and come back a little later when I have more time to say something meaningful. I am still trading but that too continues to get interrupted due to having too many things on my plate and unfortunately I can't de-clutter just yet.

On Friday, I didn't make any live trades. We had the gap on the open and my strategies were in conflict so I didn't like my probabilities.  Instead, I turned over to the simulator just to see what would have happened and I would have lost money, so it is good I knew when to stay out of the market with my own money. At one point I was down about $2,000 as I made several mistakes and didn't manage a few trades appropriately.  But I ended the day down just $300 on a stellar comeback. I was trading slightly bigger than I would have in "real life" but not so big that it couldn't have been realistic. I just wanted to get some practice with multiple contracts since I'm getting to a point with my cash account that would justify taking on a little more size without skewing my risk management guidelines. It felt a little weird at first but once I started to get more comfortable managing my intra-day P&L with the bigger size, I drastically improved and cut my losses back significantly. It's clear however that before I trade with more size, I need to spend some time on the simulator just to get accustomed to it as bizarre as that may sound.

Today I made one trade that netted me one tick.  It's really quite overwhelming but I'll keep the excitement in check. I entered on a great set-up but had to exit prematurely as I was called away from my desk...when I got back price had moved in my favor by a sizeable amount and it simply made me want to quit my day job so I can simply focus on my trading so I can actually make me some serious cash. Not yet, but the day is coming soon...

I have to travel for business this week and I will not be able to trade Wednesday through Friday so again, just another reason why I should call an official time-out on the blog. No reason to keep checking my posts only to find the same old stuff.

I'll be back in a week or two.  So until then....carry on.

Fake Money Profits

I finally had some time to trade in a legitimate fashion today. Though I'm not quite sure what illegitimate trading would look like but regardless, today was legit. However this is said with one caveat in place: I traded the first part of the session live and the second part on the simulator.

Why?

Well because TradeStation has been pissing me off lately and I would like to replace it with a different execution platform that isn't so slow. So I had to spend some time testing out some other platforms, which I did. However not before I at least took a couple trades live. I ended up taking two live trades for just under 1 TF point. Nothing too exciting but still, a gain is a gain so I'll gladly pocket the change and move on.

Volatility in my opinion was a bit wild this morning so that caused me to sit on the sidelines for a while and then pretty much scalp out once I got in just to be safe. On my first trade, I scalped a few ticks perfectly as price quickly turned for the worse once I got out.  On the second trade I left a size-able chunk of coin on the table due to the scalping strategy but at least I followed through on my original intention, which is always most important. Right?

By the time I got on the simulator, which happened to be during the afternoon session, price had settled down a little bit and I was much more comfortable with the direction and I was able to use the pivots to help me time my entries and exits. I thought about going live to take advantage of the situation but I had just spent 30 minutes setting everything up so I figured I should just follow through and worry about the big picture instead. Besides, the market could've changed...

15 trades and $1,080 fake money profits later, I exited my last trade and turned to other obligations. I DID NOT break any rules while trading on the simulator because that does not offer any benefit. I entered only when my strategy indicated and I also got out when I was supposed to.  So that offers a bit of good news and bad news. The good news is that my strategy worked very well and I only took two losing trades out of 15 and they were small losses - near break-even small. The bad news was that I was on the damn simulator so all that "should've been" coin wasn't. Such is life, but still.

And here's the even worse news, I didn't like the platform I was simming on but at least now I know...

Missing Opportunities

Today was another busy day yet again but I did manage to get in on a few trades. I specifically took three of them, which all worked out for 2.8 TF points. I did however miss a few other solid opportunities while I was away from my desk but that's just how it goes right now.  The fact of the matter is that for the time being, I have another full-time job so I just don't always have the opportunity to sit in front of the screens to do my thing. Hopefully that will change soon.

All three of my trades were long.  I entered my first two between 10:45 and 10:55 MST as price was retracing a bit. The TICK wasn't giving a super clear reading but RSI was so I took my chances and things turned out however I ended up getting out right as price took off to the upside where it peaked around 510. So it goes.

My third trade entered at 12:54 MST at 505.90 and the timing was impeccable because right after I entered price shot up. I exited at 506.80, which nearly took me out right at the top of the run. So all-in-all, I am happy with the outcome on the day even though it wasn't quite what I had in mind in terms of trade frequency.

I am targeting to get some more trades in tomorrow because as it stands right now, I have an open schedule and I hope it stays that way!

Cheers...

No Trades...

No trades on Friday. No trades on Monday. And no trades today.  I am getting really irritated by it but I've been away from my office during trading hours and simply haven't had a chance to trade. However I'll be back at it tomorrow and I look forward to getting after it again.

Until then...

Today's Trades

Once again I was very busy today at work but I was able to take five trades, all for profit and for a net gain of $660. All of my trades met my criteria as I had outlined in today's previous post.

I currently have to run but I thought I'd leave a quick update along with my equity curve. I'll post some charts when I have more time.