HIGH PROBABILITY TRADE SETUPS

In this post I will be going over my typical trading day from the night before, to premarket, and to market close. I will discuss how I use the bond futures, the VIX, NYSE advance/decline line, NYSE tick, and block trades as a way to trade in conjuction with my volume based market profiling.

Volume based market profiliing-
First and foremost I look for trade signals in relation to the market profile. When price is away from the Point of control POC(highest volume area of the day) I look to take trades that would move back to the POC(like a mean reversion approach). To become familiar with market profile I suggest checking out Trading Naked's large number of educational links found at the bottom of his main page. Here are a couple charts which show what a market profiler looks for on a range bound day and a breakout day.(courtesy IOAMT.com)





My Trading methodology-
I look for short trade signals more so when price is above VAH(Value Area High), and I look to go long when the long signal is below VAL(Value Area Low). When trade entries are made with regard to volume profile on a range day, profit targets should be set to the POC, VWAP, or an exit based on a tick extreme. Entry points are based around block trades seen in IWM and SPY, with the prefered entry made at a tick extreme. When trade entries are made with regard to volume profile on a breakout day then I look to exit when there is heavy volume at a tick extreme.

The Night before the trading day-
What happened yesterday? Did we have a breakout trend day or a range bound day? If the previous day was a bullish breakout day, then I would have a bias to take trades based off my trading method that would be buying VAL and vice versa if the previous day was a bearish trend day. If the previous day was a range bound day, then I would be looking to short VAH and buying VAL normally; however I will also be looking for breakout trend days driven by catalysts such as economic news and in some cases breakouts based on technical analysis like having a 3-7 day narrow trading range(NR3-7). Below is an example of how I charted my volume market profile forecast for the next day.
(NOTE: All of my charts are set to Pacific Time, because that is the time zone I live in.)



Also in my research the night before I like to look at the daily, weekly, and monthly volume profile for the markets I follow by going to Chart-ex.com. By checking out the volume profile on a weekly and monthly chart, you can see volume gaps; which are areas that I typically expect to be filled. Here is an example of the volume profile charts from chart-ex on ER2 taken February 23, 2007. In the chart you can see price is trading at VAH on the weekly and monthly time frame, with a volume gap to the downside.



The start of the trading day-
Premarket: What is the news for the day? What could be the catalyst for a breakout trend day? In order to be prepared for pending news events I checkout the forex factory calendar, which gives pending news events for not only the US, but for all of the world; with regards to the currencies, bonds, and stock markets of the world. Rueters market calendar and Econoday,
are good as well for tracking US specific pending news.

Market open: Is there a gap up/down at market open, and if so, why? Most of the time the gaps in the morning are due to economic news being released before the morning bell around 8:30am EST. Most traders know that morning gaps are good trading opportunities because they have a high probability of being filled or at least partially filled within the first hour of trading. Here is an example from March 29, 2007 of a morning gap due to the GDP # being released before premarket, with the result of a 9pt gap on ES being filled with the first 2 hours of trading.



I will now discuss how I use the bond futures, the VIX, NYSE advance/decline line, NYSE TICK, and block trades as a way to trade in conjuction with my volume based market profiling.

Bond Futures-
Starting during premarket of the stock market I track ZN, which is the most heavily traded bond futures contract(I also track ZF and ZB contracts as well). When watching ZN I look to see if there is heavy volume being traded and if there are any correlations or inverse correlations between ZN and ES. Some days you can see an inverse relationship between ZN and ES and other days you will see no relationship at all. The relationship between ZN and ES is a more advanced trading method that should be used in conjunction with other intraday market breadth indicators as a way to help confirm your trading signals. Here are some examples of the inverse relationship seen between the bond futures and ES, ER2, and SPY.







Sometimes you can see a positive correlation between ZN and the VIX, seen more so during the first 2 hours of trading. Here's an example.



The VIX-
Sometimes you can see divergences between ES and the VIX. Here are some chart examples.






NYSE Advance/Decline line-
By watching the NYSE A/D chart you can stay on the right side of the trend and see where possible breakouts in volatility may be placed. Here are some chart examples compared with ES and SPY.






NYSE TICK-
The NYSE TICK is one of the best intraday market breadth indicators for gauging short term price movements as noted by the NYSE TICK expert Dr. Brett Steenbarger. Some of Dr. Steenbargers articles on trading with the NYSE TICK can be found at Traderfeed. Here are some of my chart examples using NYSE TICK.



ER2 example.



YM example.



This tick chart of SPY highlights block trades as red dots compared to NYSE TICK.



Here is an example of NYSE TICK compared to NYSE A/D.




Block Trades-
I filter for block trades(50-200,00 shares) on the ETF's of the underlying stock indices as a way to track large traders. I particularly look for these block trades around NYSE TICK extremes as signals for short term scalping opportunities and places to exit if I'm already in a trade. I do this because I don't have software like marketdelta, and I like looking for large volume trades in the ETF's because these block trades are seen as better signals when compared to ES and ER2 block trades. Here is a great article from Traderfeed on Tracking Large Traders. Here are some chart examples showing block trades highlighted as red and green dots on the ETF's I follow.





Here is a chart of ER2, NYSE TICK, and IWM showing block trades near NYSE TICK extremes.



Trade examples-
Here are a couple of my trading days taken from my journal that show my trade executions posted above the chart.

Here is an example of one of my trading days where I used a tick chart of SPY showing block trades for guidance in trading ER2 and YM. I looked for short signals because we were trading near VAH and there was no sign of a catalyst to turn the day into a breakout trend day.




On this day I saw a double top on NASDAQ A/D and NYSE A/D, with the NASDAQ A/D line being the more bearish of the 2 charts. Also we were trading in the VAH, so based on my volume profile trading methodology I used this as a way to confirm my short trade signal.

Time to reflect

I've got to go to work early the next 2 days, so I won't be trading. This will give me the opportunity to reflect on my trading and my setups.

March 28 Trade Summary

Last night I stayed up till 1am trading the Euro and british pound on the simulator. I got up late, still feeling crappy from the flu, and wasted the morning watching the currencies and tried trading the swiss franc (CHF) by doing some correlation analysis between oil, gold, and the euro. I then watched oil and placed trades mentally.

I should have been trading ER2 this morning instead, because I have more experience trading it and there was easy money to be made this morning. I just didn't feel in the grove and was hesitant to take my trade signals this morning.

Market Observations:
It seems like we get a pop in the bond futures and JPY every morning and then you just see them getting faded for the rest of the day. Today I watched the morning initial balance, went back to sleep, came back and shorted VAH on ER2, and then took profits too soon as usual.

My thoughts on my Trading performance:
I'm bored and don't feel like trading or doing anything related to the stock market right now. I'm starting to worry because it's been over a month since I've had a losing day and each day the market seems like it is getting easier to read. I've had 2 or 3 losing days this year, with 2 of those days being big losing days. I'm starting to wonder when that next big losing day is going to come. I'm feeling a little hesitant lately and I think I know what it is. The problem is still there. My biggest problem of all. The "P/L". I wish this option on my trading workstation would just go away, as well as the account balance. I believe this is the problem that is holding me back from making more money. If I could go one day without looking at my P/L it would be a miracle. I'm deleting these features from my workstation right now. I don't know if I can hold out without knowing my daily P/L, but I'm going to make it my goal to try to do this for the next week. I tried this last month and I failed. I don't know if I'm the only person affected by this problem, but it is a major psychological barrier for me that is holding me back from becoming a better trader.

I feel like I've been in front of this computer for days. I actually look forward to having to go to work sometimes to take my mind off the market. If I'm not at work or the gym, I'm in front of this computer doing something related to the stock market, whether its trading or research. I know I need to post some charts on my favorite setups, but I really feel like going outside and getting away from the market for a bit. I'm gonna go rent that movie with Will Smith, "The pursuit of happiness", and maybe that will give me some motivation to work harder and become a better trader.

Quote of the day:
During the journey we commonly forget its goal. Almost every profession is chosen as a means to an end but continued as an end in itself. Forgetting our objectives is the most frequent act of stupidity.
-Friedrich Nietzsche

March 27 trade summary

I didn't do much today because I've got the flu. I placed a lot of scalp trades mentally and did some research while watching the market. I'm going to spend some time today and focus on posting my favorite trade setups. This has been something that I've been wanting to do, but I keep getting side-tracked by reading and learning about other things. Today we had a nice reversal setup at 11:30am EST (key reversal time) and there was confirmation by JPY (trading inversally) reversing at the same time. Obviously tommorow is the big day with Bernanke speaking, and if you hadn't noticed we have a volume gap to the downside for all the indices due to last wedensdays FOMC announcement.

Then bond and stock market inverse relationship showed up again today. Bonds were relatively oversold and vice verse with equities, it just took a catalyst from new home sales for the balancing to take place.

I waited for the reversal, and I cut my profits short. I should have held 1 contract open for my target of 811, but I got spooked from a fake pop up in ZN and the Euro. At least I got a little bit of the wave by shorting YM when 811 was hit on ER.

Market observations:
Before the news even occured there was weakness in YM and strength in the EURO and the bonds were showing support. Even Rick Santelli on CNBC was pesimistic that equities would go up. Out of all the commentators, I happen to like Rick the best, because he knows his stuff when it comes to analyzing the fundamentals and technicals, while the other reports at CNBC seem to just read the headlines and don't seem to be into the game.(I also like mark faber). It's 8:20am my time, and the currencies and bonds have lost steam since 7:30am, and now the stock indices seem to be just chopping around. I'm done for the day.

Open interest and intermarket relationships

I'm doing my homework on open interet for options and futures between the stock indices, bond market, and forex market. I found a CBOT headline from last May about how the 2year note hit an all time record in open interest on May 10th, the same date the Dow was at its high for the year. The next day, May 11th, the dow began its correction for the year.






Also noted recently by many blogs such as Tradersfeed and the Vix blog was the extremely high put/call ratio seen in the equities market at the beginning of this last week. I'm sure all the shorts know what happened this week and are starting to look into how open interest and put/call ratios may be a good indicator of where future price may go.

When the fed decided not to cut rates, I should have shorted the spike up in bonds, and played the reversion to mean, because if interest rates are unchanged, then there really is no reason for bonds to be that high just based on a comment of a possible tightening of rates in the future, and the same goes for the pop up seen in JPY. This is another reason why education in bonds, forex, and economics will help me in my trading in understanding the fundamental reasons behind the moves I see in my charts, instead of going on the false assumption that a price movement is because of a technical indicator or trend line.

March 23 Trade summary

The only good setup this morning was the reversal on YM/ES after the pop from the news this morning. I missed that move, and then decided to try to get a reversal setup on JPY based on what I was seeing in ZN and the EURO. The trade took forever for just a small scalp and I didn't feel like waiting all day for the trade to work out because today looks like it's going to be a chop fest and I have other stuff to do today.

Overall this week was a little tougher to trade because of the effect the FOMC announcement had on the markets. I did ok for the time I traded and I'm starting to learn a little about bonds and forex to progress my trading.

Yaser Anwar made a recent post on how he trades Futures, Equities, and Forex- I like his style of trading, and I have a similiar approach. I believe that looking at other markets such as the Forex market and the futures for stock indices and bonds will make you see the market as a whole and you will start to see patterns develop on how all these markets interact with one another. For instance the pattern that we have seen for some time now is the inverse relationship between the Yen and the US stock indices, which is due to the affect of the Yen carry trade.
Also, the bond market and the Yen have shown a close correlation between one another as well.

I found a small article that explains the basics of the carry trade:
Yen carry trade - implies borrowing Japanese yen at low interest rates (0.5%) to finance purchases of high-yielding assets. The investor earns the interest rate spread or "carry" as long as interest rates in Japan do not rise (increases borrowing cost) and exchange rates are stable (exchange rate risk if the yen appreciates).

To briefly explain the process, Japanese yen is borrowed at very low interest rates. The yen are sold to buy a stronger currency. The new currency can be used to purchase a high-yielding asset. At the time of unwinding the trade, the asset is sold to obtain the principal and interest in the underlying currency, which in turn is sold to buy yen and repay the yen denominated loan.

Such a trade can be hedged at about a 100bp (1%), so if an investor borrows from Japan (@ 0.5%) and invests in US treasuries at 4.5%, he clearly earns 300bp (3%). The yen carry trade has been like a continuous money generating opportunity for big investors. Trillions of dollars are estimated to be in this trade, which has indeed been profitable for investors.(Yen Carry trade article, courtesy Poonam Bhana)

March 22 2007, No Trading today

No Trading for me today. I'm waiting to see where the market moves in the next few days and I'm working on my trading strategy.

Life can throw some real curve balls right when you think life couldn't get any better.
Check-out this video of a Darwin Award winner- He was probably in a euphoric state after doing some real cool car tricks, but then he did something stupid while in his euphoric state and the Murphy law took affect.

FOMC update

In my last post I said that I went long JPY, and ER2 as a hedge before the FOMC minutes on the simulator. I honestly didn't expect both to go up. I thought JPY would go up and ER2 would go down. The inverse relationship between the bonds and the stock market hasn't worked at all this week. I will continue to watch the relationship between the two, but will focus primarily on NYSE A/D and NYSE TICK applied to my volume profile trading methodology as my main staple for taking trade signals. It will be interesting to see where bonds and JPY are in 2 days. If they both continue up, I would expect today's action in the stock market to be a bear trap setup, where all the shorts from the last 2 weeks got severly burnt and are now covering, setting up a nice place to short for continuation to the downside for next week.

Market observations from today:
1.I can't tell you how many times I've seen 3pm EST reversals on big trend days like today. First JPY rolled over, then bonds, then the stock market rolled at 3pm EST.
2.Instead of an inverse pair trade between the bonds and the stock market, I'm seeing that the YEN, Euro, and bonds are showing similiar trading patterns in which one may lead the other and give clues to where the future price may be for the lagging instrument at the time.
3.NYSE A/D line topped out at 3:02pm EST, where price reversed on all the stock indices.

Today I burnt some time youtube surfing and found a video that I thought was funny and ironic.

March 21 Trade Summary

I decided to scalp the first hour and now I'm going to sit back and watch. My scalping skills kinda sucked, but I still came away with some profit with the small opening range on ER2. If I would have held my short on YM from that weak short covering rally at the close yesterday I would have made a profit. I'm not too mad about that though because I hate having to stress about holding positions overnight, and If I wanted to I could have shorted at the open to hold true to my confictions.

I think the market is going to go down. The Yen and bonds are on support, and the stock indices have overhead resistance. The best trade right now is probably buying vix calls. I honestly don't think there is anything new that Bernanke could say that the smart money isn't already aware of. I'm going to try to do an inverse pair strategy on the simulator by going long JPY and long ER2 as a hedge.

March 20 Trade Summary

Well today I was trying out a mean reversion strategy. It didn't work too well, given the trending we had most the day and the lack of volatility in the bonds. I entered too soon on my initial YM trade, but found the better entry on ER2 for a short reversal, and decided to scale into my ER2 short. I looked for 2pts on ER2, on got close to that by scaling out on the way down. I should have exited my YM short trade when I covered my ER2 short, however, I was greedy, and it ended up getting me later in the day.
I added to my YM short on the 12pm pop, looking for a reversal. I got 5pts, but it didn't retrace to my target. I ended up getting stuck in the trade and watched scared shorts cover YM to new highs for the day. I coverd my short right before YM closed for trading today and took a loss. I would have made 2x as much money today if I wasn't so greedy and took a small loss on my YM trade.

Bad things today:
1.Didn't trade the wave.
2.Didn't take partial profits on YM on my scalp.
3.Failed to accept that the trend had changed because I was greedy and wanted my YM position to turn positive.

Good things today:
1.Added to ER2 short when the signal became clear, and exited when the signal was clear.
2.Traded ZF for the first time and exited at the correct time.

Market observations:
1.I was actually watching Time and Sales when ER2 hit around my target of 796, and saw a huge wave of buying at 796.2, giving me the sign that shorts were covering. I was a little late to join the crowd, but still got out at a decent price.
The bonds and JPY have been pretty lack luster this week, and haven't gave me signals quite as strong as last week. I've heard that my strategy of trading the inverse realtionship between the bonds and stock indices only works sometimes. You can see the inverse relationship much better when there is news and high emotions. I'm guessing things will be very volatile tommorow and the signals will be better.

FOR TOMMOROW:
I'm not sure if I'm trading tommorow or not. In the past I have sucked becuase the volatility can be too great for me to handle and I'm still not very good at taking my stops, so there is potential that I will have a big blow up day. Also, my computer has been running really slow these last few days, having my charts freeze for a few minutes at times. My computer's speed may be due to overloading my hard drive with all the videos I've been recording lately. I may just record tommorows trading action and go and enjoy the weather outside.

Good luck to all those brave enough to trade tommorow!

March 19 Trade Summary

Well I waited 3 hours for a good setup to occur, where all my markets that I watch lined up giving me a good signal. I went short at the correct time with an average price of 795.5, looking for a downside target of 793, however, I didn't exit after the prefered time frame of 3min when the market gave me a quick 1pt, and thus saw the price reverse on me, mainly due to continued heavy selling in JPY. I should have taken partial profits, but I decided to wait through -0.5pts of heat and look for a closer target around 794, and then when the market told me to, I coverd at 794.2. As I type this right now, it turns out my target of 793 would have been hit. However I would have had to hold on through some choppy trading action. With more experience in my trade execution and timing I should be able to scalp in the direction of the trend; however, I'm not yet ready. The markets look pretty choppy now, and I've made a good trade today, so I'm leaving on a good note.

Bad things today:
1.Didn't take partial profits on 3min volatility spike.
2.Didn't scalp in the wave.
3.Should have left 1 contract open at breakeven for profit target(actually no I shouldn't have, I should have scalped in the wave, because there is more profit potential).

Good things today:
1.Was patient and took a good setup based on my trading methodology.

I traded on the simulator this morning, using more of a mean reversion technique trading the inverse relationship between bonds, JPY, and the US stock market. Bonds have been fairly quiet today, and JPY has seen more selling with the US markets posting a small rally in response. The bond market looks like it is on heavy support, and we have FOMC minutes on Wedensday. I think the trend is still bearish even with todays rally; however, I will do as I always do and just wait for my trading signals to appear.

Learning about the bond market and the forex market I believe will help me in my trading. I'm starting to pay more attention and read about the other economies of the world and how interest rates and currencies affect the markets I trade. I listen to CNBC in the background while I trade, and I like to read and watch news videos on Bloomberg.
Other economic and market related websites I like to check out are:
Bill Cara
hamzeianalytics
headlinecharts
seekingalpha

Market outlook for march 19 2007

It's Sunday night and the US futures are up big, about 6pts on ES, 4.5pts on ER2, and 42pts on YM. Why? JPY and US bonds sold off to reaction to China's interest rate hike and the Asian market is trading up. The chart for the last month tells a different story of where things look like they are headed.

The market looks setup for a selloff. Vix and bonds on support, JPY has a bull flag, and tommorow is the day after option expiration. I will wait for my signals, but things don't look good for the bulls.

I'm a little scared of this next week, but I think I have to face my fears to become a better trader. Good luck to all those trading next week, unless of course, your the one taking the bet against me.

March 15 Weekly recap

Trade summary:
There is more money to be made and I'm planning on doing more homework in order to make it.
Bad things this week:
1.I could have made probably 2x as much money if I was more active scalping. Instead I would cash out as soon as I had my profit targets hit. If I'm covering, then I need to also buy and play the bounce, and after the bounce I need to short again and try to ride the wave for as long as possible, because once you get into the rhythm that the market is trading in, then the money will start flowing to you and not away from you.
2.I didn't take any losing trades. I did this last week and this is difenitily a problem. This means I'm either the best trader in the world, or that I'm averaging in to loser trades and then exiting when the trade turns positive. I had YM go 50pts against me on Wedensday, and 14pts on Friday. I held through this negative heat and still came out ahead, sounds good right. Well it isn't. I lost 50pts of potential profit on Wedensday and 14 pts of potential profit on Friday. Although my current trading method is allowing drawdowns of this sort based on the market volatility, I'm thinking I may need to change up my trading strategy and start scalping more based on a few indicators that I've been watching. This will prevent me from having trades with a negative drift as some of mine do.
3.I exited to soon. This goes back to the negative drift study that I've been finding happening to me. I take 50pts of heat, and only take 30pts of profit. You need to have a positive drift of lets say 2:1, not 3:5, or else your going to lose over time.(risk/size management does play an important part in this and that's why I've been able to still come out ahead; moreover, I scale into trades which helps the drift factor)

Good things this week:
1.I got rid of my intraday unrealized P/L. I noticed in the past that I would just be watching this number to turn positive during the times I was in a bad trade. This has got to be the worst thing you could watch. It just adds so much stress and euphoric states that it can screw up your emotions and trading and turn you into a big loser that is revenge trading out of anger from losing so much, or to a greedy trader that is going to lose it all from focusing on getting the P/L back to the high number you had for a split second of the day. I'm thinking about getting rid of my account balance and only looking at it at the end of the week. It sounds easy, but if I have a big drawdown day I'm going to want to know how much I lost. But, knowing this isn't going to help me is it?
2.I watched my recordings. My only observations and things learned is the inverse relationship between ZN and ES. You can see this on the charts. However, there is still more to be learned from my recordings. Today I was thinking about a new trading strategy, in which case these recording well be of more use.
3.I wasn't afraid to take trades and add to loser trades. This is kinda a tricky one. Basically I held true to my reading of the market and my scaling into some trades worked out. However, I'm thinking of becoming a more active scalper due to the negative drift that some of my trades incur.

Homework for next week:
1.Study new trade strategy by recording the stock market as you've been doing, but pay more attention to how your strategy would have worked out by making notes.

March 17 Weekend Video

I recorded Fridays premarket reaction to the CPI number to be able to study how to trade econonmic news better. In the video I recorded ZN (on top) and ES (on bottom). Also there is a time and sales shown for ZN, and there is also a time and sales shown for ES underneath, however I had a filter on ES that would only show trades larger than 200 contracts, so the ES T/S doesn't look like it's moving.
This is a great video to be able to see the inverse relationship between these to futures contracts as I recently noted this week as being a new key indicator to my trading.

Click here to watch 'march-16-CPI--part-1'

Click here to watch 'march-16-CPI--part-2'

March 16 Trade summary

I'm done early today because I have to leave for work in 30min and I don't like to have to manage positions when I have a deadline to be at in a short time period, it just adds more stress to trying to rush your trades, and has cost me money in the past.
Trade summary:
I initially warmed up trading on the simulator, trading the CPI number, and then later I traded the open to get a feel for price action. I then logged on to my real account when I saw a trade setup. I started shorting YM and ER2 when they were near there VAH and also when ZN was near its VAL, and also the time was 7:15-7:25 (A key reversal time), I took partial profits on ER2 and held 1 contract for my target. Both trades were initially good for about 2-3 tick scalps, but instead I held out through a little heat for my intended target.

Bad things today:
1.Shouldn't have added to ym short near NYSE TICK low. I should have only added unless the price was lower and the NYSE TICK was near its high area.
2.Should have taken partial profits on YM before the trade reversed on me, when considering the amount of time the trade was taking to hit my target.(trade should have been in the black by 8pts in 3-6min, however it only went 5pts at the most with very choppy price action before reversing).
2.Should have waited for block trade signals on ER2 before entering first position.

Good things today:
1.Added to ER2 trade near HOD when block trade signal appeared.
2.Took partial profits and left 1 contract open on ER2 for my profit target.
3.Didn't get really stressed from the amount of heat taken.

Observations:
1.The idea of putting on a short trade when ZN is trading at its VAL and ES is trading at its VAH, or vice versa may be a good strategy on "range days", and particularly when placed around "key reversal times".

2.I traded the CPI number on the simulator this morning, and it seemed very easy to see where the reversals were by watching the relationship and volume between ES and ZN.However, ER2 did not follow very well to what ES was doing in relation to ZN. ER2 lacked volume and was much choppier. When there is high volatility during premarket or during regular market hours, ES has the best liquidity and seems to trade in a direct motion from point A to point B with little chop, where as ER2 sometimes chops around before reaching the same destination point.

Look for a weekly recap and a Video this weekend!

March 15 Trade Summary

Trade Summary:
Well I slept in the this morning, so I missed the morning pop, and now I have to leave to tend to other things, so I only traded for about an hour. Overall, I took good setups today but didn't exit when there was block trades and extreme ticks. I was holding out for the bigger move, but price action was a little choppy and wouldn't give me my profit target that easily. We didn't have the volatility this morning like yesterday, so I should have taken scalps on the 3-6min volatility spikes and especially when there was block trades and extreme tick readings. Yen/US dollar was hard to read this morning.

Bad things today:
1.Didn't exit at extreme tick and block trade signal.
2.Hesistated to go long ZN because of inexperience trading it.
3.Moved profit target for bigger target, which would have been hit, however, the given market conditions were favorable to scalping in the 0.7-1.1pt range as opposed to my target of 2pts.
4.Should have given my YM reversal trade more time.(I took 6pts, when it ran 20pts, I didn't expect a reversal, I was just taking a small scalp on short covering)

Good things today:
1.Took good setups.

Observations:
NYSE A/D chart was a good indicator for todays morning trading.

Volume GAP up

I'm looking at the volume gap on YM for todays (3/14/07) close of 12250 for the march contract and there is a volume gap between 12250 to 12350, about 100pts upside potential if the momentum keeps up. Lets see what the PPI does tommorow morning. Would it be a shocker to see the dow rally 300pts tommorow? Scary, considering fridays option expiration and the huge increase in open interest for puts and VIX calls.
Wouldn't just make all the retailers go crazy to see a morning gap lower, then have them all go short again, saying, "I knew I was right", then bam, more pain to the upside, except they hold it longer and the carnage continues. That would be crazy, yet probable given the volatility.
As always trade your signals and don't overleverage yourself.

March 14 Trade Summary

Well this morning showed some great volatility and I was in the zone. I had no fear or flight or fight responses today when trading, it was all gravy. What happened, and what made the difference today??
In one word: BONDS
I've been missing out on the the best indicator of all that I just recently started watching this last week, and today it was a beauty. The reverse correlation between the stock indices and ZN/ZF is the best indicator for spotting reversals "CURRENTLY", especially when you see volume piling up in opposite directions. If you also watch Yen/US dollar, you can see the same pattern, with the yen/us dollar being a leading indicator for some of todays action.
I'm done trading today, I'm not in the zone any longer, so I'm not getting back in. I'm taking the money and running.
I made a video from this morning, which is going to be great to watch.
I also made the decision last night to do away with all of my indicators. The only indicators I need is price and volume. So, I'm still using volume profile and VWAP, everything else I see no use for.
I noticed today my eyes were glued to ZN, ES, JPY, and ER2. I occasionally glanced at NYSE A/D and my SPY chart which shows block trades.
What did I do wrong today:
1.I bought YM and didn't exit for a quick loser, instead I let the trade take a large negative drift of 50pts, only to later make 30pts in profit, it ended up going 120pts my way.
2.I bought ER2 1 tick away from the low at 667.8, and put in a quick scalp profit and exited for only +0.7pt in about 30seconds, Sounds good right,,,NOPE,,,,,,, it ran 14pts. That is really hard to think about. I missed the forest for the tree leaf so to speak.
3.I should have gunned my ER2 long trade, instead I just kept my YM long(I was thinking I didn't want to be leveraged up to much in one direction)
4.I exited my biggest winner for the day on ER2 for $300 less because I moved my profit target, I admit, I got shaken out. When My original target was hit, the price reversed and made a new low.
What did I do right:
1.I was focused on what mattered, I didn't hesistate, and I stayed true to my conviction on my loser ym trade turned winner(ZN was putting in a double top, that's when I got my quick scalp long on ER2 and new I had to ride out YM).
2.I made money.
3.I stopped trading because I started feeling happy.


Observations:
We had a double top in ZN and a double bottom in ES at 9:57 PFT. ZN was leading indicator for the big reversal.

Final thoughts:
You gotta love todays Volume and Volatility because it is scalpers dream.

Edit: Upon further analysis I could have traded better today. I should have stayed focused on trading the setups instead of my P/L. I missed out on making more money by looking at my account and felt that todays profit was good. I need to stay focused and trade the setups. Get rid of the P/L and unrealized P/L. Use your stops, accept small loses, and keep trading and look for potential runners when you got momentum.

March 13 trade summary

I got one good scalp in the morning after waiting for a pullback from the new tick high for the day, then my computer locked up due to my video recording software, so I missed the big down move. I traded on the simulator and made around $1300 before I started trading again in the afternoon with my real account; however I used much greater position sizing in the simulator, so I cheated, and the P/L is a false indication of my trading skills. I came back online during the afternoon and got a small 8 second scalp on NQ, and took a bad YM trade in which the drift factor went negative, letting the trade take 20pts of heat only to end up making a 9pt profit, when I could have gotten 40pts. I was going to add to the YM position, but my rule is to not add to loser positions until I become a better trader.

I wish I had recorded the afternoon because there was much more to learn from the price action and volume, but I only recorded the first hour and a half. This last week I've started to see a great inverse relationship between the bonds and the stock market indices which has been a great indicator for reversals when looking at the volume between the two, especially during the first 2 hours of trading and the last 2 hours of trading.


I just cleared my chart data for the day on ES and ER2 because of missed data, and then I re-backfilled the charts, and now the charts look totally different. If I were to place the same trades I did today, they wouldn't correspond to the chart at all. I still had good data for IWM from the day, so I compared IWM and ER2 and you can see a big difference between the charts. YAHOO finance is showing that my backfill is messed up too, so I may need to get the newest version of quotetracker which was released yesterday.


Edit: I updated to the latest version of quotetracker and the data backfill is good now.

Great post by Dr. Steenbarger

Checkout Dr.B's new post- Disgust Yourself: A Framework For Rapid Behavior Change

"What is the basis for the anorexic person's motivation? Not positive self-statements and goal-setting, that's for sure! Rather, the anorexic individual is motivated by disgust. Quite literally, the patient is disgusted by anything that feels or looks overweight--and that disgust is so strong that it keeps food at bay." (traderfeed.com)


Here's my response to the post-
The same disgust occurs with bodybuilders afflected with bigorexia. I had it badly as a teenager, and it is truly a never ending addiction that you think about constantly. It can screw up your life, but to you, it is the only thing that matters. For some individuals it takes an extreme mind set to be the best at something. You can call it bigorexia, but I still see that I'm small when there is someone more muscular than me at the gym or as long as Ronnie Coleman is alive I will never big enough.(Visually seeing more muscular people than you makes you jealous and disgusted and makes you more determined and motivated to eat more and lift harder). As a trader, I'm still not good enough if I lost money today or someone made more money than me today, I could have made more, I did something wrong and I need to put in the time to learn and correct what I did wrong. With trading, the gym is reviewing your charts and recorded videos of the trading day.

As far as the IV drip induced naseua idea goes, I have a problem everyday. I experience the flight or fight response everyday during my trading, most of the time I get the adrenaline rush before I even enter the trade. My heart rate increases, I sweat, and the most annoying thing of all is having to piss 3 times in an hour. My adrenal glands are going to be wasted in a few years if I keep this up. When I first started trading over a year ago I never had this problem, but now my trading has become a fight everyday, where I worry about even a few ticks that go against me. It isn't a matter of position sizing either, because I get the same response trading 1 contract or even trading on the simulator. It's going to take time and practice to build up my confidence to correct this.

And now for Ronnie Coleman- If this Video doesn't motivate you to lift,,,,then your crazy!

March 12 trade summary

Today I lacked confidence because of the lack of volume and choppiness the markets displayed the majority of the day. I got a good signal right after the preferred key time of 8:30am PFT for a long signal below VAL. The trade went 0.8pts my way and I thought it would run right to my target, so I put in a trailing stop 3 ticks above my entry for protection only to be stopped out and see the price then rally and hit my target 1 minute later. I should have exited at the tick high and I would have gotten a 0.8pt winner instead of a 0.3 winner. Also, I wanted to go long at 793 for a low risk entry right before the afternoon breakout based on what I was seeing in the NYSE A/D chart, however, I kept thinking that it was a bad trade because the last few days the market rolled over during this time period because of the action in the bonds, so I ended up missing the upside afternoon breakout because I wasn't quick enough to get a good entry and I thought it wasn't worth chasing a long entry when price was above VAH. I made a reversal trade on NQ, but that was more of a wash trade in which as soon as I exited my short I went for a long scalp on ER2 and made 0.2pts(could've made 0.5pt but adjusted price target lower because I was impatient).

Overall, I didn't do well today because I failed to realize that given the lack of volume and choppy price action that I should have taken quicker scalps, instead of trying to hold for big winners.

I'm beginning to see that following the NYSE and NASDAQ A/D chart is great. I'm beginning to think that this market internal for the exchanges may be a better indicator for short term setups then NYSE TICK.



I'm going to checkout Ninja trader and Trader DNA software as discussed in Dr. B's book, because realtime analysis of my trading metrics may be helpful in evaluating and learning to improve my trading in relation to the type of trade, position size, and the time of day the trade was taken.