AbeSmith 7-23-07 YM

[AbeSmith]

Today’s trading was very bad for me. I spend much of the weekend reading and studying. I studied 6 different charts of YM, from 6 months charts to 2 day charts, trying to identify areas of support and resistance. I looked at the economic calendar to see if there are any upcoming events. I read news articles about how the coming week would be like. The articles I read painted a bearish picture for the week.

I also researched companies whose earnings were scheduled for today, but now I think I probably didn’t devote enough attention to these fundamentals. I heard an analyst on CNBC say today that fundamentals are the thing that moves the markets, and it made sense. So I’m thinking I should pay better attention to the major companies that move the Dow, especially if they are reporting earnings, because I think, I don’t know but I think that when a company reports earnings and there is major volume then it will have a significant impact on the YM. So shouldn’t I know which direction the volume is going? I’m wondering, and perhaps a fellow trader can tell me or lead me in the right direction, what is it exactly that moves the YM? How does my buys and sells of the YM affect the price? I know you might think that it is a stupid question, but if someone could at least point me to the right direction, like where I can go to find this out.

So, now I will go over my trades. I was ashamed to mention today’s trading here and mostly tired, but decided to go ahead and do it.

When the market opened I was feeling bearish given the articles and commentaries I read and heard. Psychologically I was feeling weak, as if something was in my mind and was pushing me towards failure, or rather, blocking me from success. As if my mind was not working the way I wanted it to. During the weekend I felt good, like a winner, because I had a winning day on Friday and so I felt really good about myself. I even showed off a bit to my family and said thinks like "A trader's life is not like everyone else because when other people go to work they know if they just do their job they will get paid. A trader goes to work and not only might he not make money, but he might lose money." So I was feeling successful, eventough I lost alot more money since I started trading then I won, after Friday I felt like I had made a major improvement on my trading, and ultimately my chance to make money. But the feeling of being successful soon faded as the market opened and I realized I have no clue where it was going to go. My trading plans seemed to have faded from my mind when the market opened. I had foreseen that this might happen, this forgetting of what I had planned. That’s why after I had once printed out charts and made plans and marked support and resistance areas, I went over the plans again Sunday night, and in the morning before the open I went over the papers again.

My first trade was a short on the YM at 8:34CT, at 13980, but then I chickened out and bought it back for a 2 point gain at 13978 at 8:35CT. Then I shorted again at 9:20CT at 13972, but it was a wrong move and the market went up. I bought back my short at 9:59CT, at 14017, a 39 point loss. Now that I look back I’m not sure what was going through my head. I think the reason I shorted was that I was looking at a minute chart, which made things look more dramatic, and there was a dip with a lower low than the previous dip’s low. But when it was not going in the direction I expected, I though about what I should do. Now that I look at the charts I should have never let it go past just above 14000. I think I was hoping that it would dip back so at least I could even out. Maybe I even though that I was invincible and it would come down below where I shorted, or that my self awareness depended on me sticking to my position. A lot of thoughts were going through my mind and I don’t remember all of them. When it went to 14017 I realized it was out of control and bought back the short. Now I see that the price came back to just below 14000 around noon E.T. But when I saw it go up to 14017 I didn’t know if it was even going to come down again and I was already above 2% down and though about never risk more than 2% and so I decided to get out of the trade. At that point I was not sad, but disappointed, and felt out of the loop. Although I already had a mental stop in place at just above 14000, which was just above the previous dips high, I did not follow it.

Then I shorted again at 10:03CT at 14020, but terminated the trade at 10:38CT on 14036. I though what if all these technical charts with support and resistance are worthless. What if it the market is moving simply because mom’s and pops are watching Mad Money and Fast Money and buying stocks. What if traders are simply watching individual companies and buying based on earning’s report and related news. Shouldn’t I be paying attention to these fundamentals that are moving the Dow?

The reset of my trades today were overall losing trades based on some technical area, emotion, and self discovery. In total I had 18 trades today, 9 roundtrips, with no major gains. A loss of 81 points. Overall profit loss, including commission, was $473. In the past I would relish about my winning day and show nicely labeled charts and details. But I’m not feeling good and will only show my executions summary, which probably you are not interested in. I guess I’m just too tired, ashamed perhaps.




I have read and heard from knowledgeable members here to place firm stops. But until now it did not register. I guess a man can only do what he thinks is best. Though I think that automatic stops might be good for some situations, I still plan on using mental stops, though firmer, because they are more flexible. I don’t mean to be a hard head and say my method is right and yours is wrong. Like you I’m searching for what works, and if your method works for you then it is right, and I’m always listening and open to new ideas about ways in which I can improve my trading and may one day adopt an automatic stop if my mind tells me to. But for now I feel more comfortable with this method.

[feb2865]

Abe

I've been reading your post. You had been given good advice but I can tell that you're still struggling. I would like to help. If you allow me, we can practice a simple yet powerful excercise using charts and price but I need your comfirmation first.

Awaiting response

Thanks

Raul

[Dogpile]

hi Abe,

man, you sound down. believe me, I have been there. we have all been there.

first off, I almost never turn on CNBC and I almost never care what the fundamental news is -- I only care when the news is coming out -- not what it is.

my belief is that short-term trading is best left independent of fundamentals. fundamental investing works -- but it works over longer-term periods. don't bother trying to trade short-term by interpreting fundamentals 'better' than others.

I quote my favorite trading book of all time:

"Your biggest enemy in trading is going to be a directional bias, an opinion... Learn to concentrate on the 'right-hand side' of the chart - in other words, on the pattern at hand."

re fundamental news: "Logical thinking will lead you right to the poor house.... There is no trading edge whatsoever in trying to base decision on what the market should logically be doing. In fact, the more logical something is, the more likely you will lose when the market is moving the opposite direction of the prevailing logic."

Street Smarts by Rashke

[walterw]

Hi Abe... dont worry be happy ¡¡ you are more near to become a good trader ¡¡¡ WOW ¡¡ you know this type of days DO build a trader... so be happy man ¡¡

My two cents here... cnbc forget about it... it want make you a penny and yes it will distract you...

Second : this frase "feeling" bearish.... nope... no feelings here, pure technicals, you can get very wrong feelings about the market and you are having BIAS to one of the most unbiased bussiness in the world ¡¡¡... markets can go anywhere ¡¡ so Technicals will tell you very easy straightforward trend directions...

Third: Entry vs Stop vs Exit = RRR... live or die ¡¡ so before opening ANY position you must know what is your RRR or you will not be able to manage properly a trade...

Happy for you man, you are more near too success, you had the balls to share your hard times, in some weeks or months you will be sharing your success... keep it up ¡¡ cheers Walter.

[TinGull]

Abe, some simple yet powerful things to keep you on your toes as far as a short term bias...watch for market phases. The market always ebbs and flows and you want to be watching for the signs of those directional changes so you know where the best placement of trades *can* be. I've attached a chart for you to check out.

I'll write about the points I've outlined in the chart.

1) Market is currently in a rising phase. We're seeing higher highs and higher lows, the 20sma is above the 200sma, all is well with the world. Note, however, that the arrow is pointing to some action occurring on nice volume BELOW the 20sma. This is a sign of weakness. Will the market follow through on that weakness? It possibly could, it possibly couldn't. But we now have a clue to watch for something next.

2) In this box is a topping phase. Its rangebound and directionless. This is a real difficult area for me to trade, so I tend to stay out UNLESS I see where the arrow is pointing. That is a breakout failure. Those failures can be and often are very powerful. Note the near 200 point drop from that breakout failure.

3) Again, we're seeing price on good volume trade below the 20sma with it being extended from the 200sma. That kind of price action mixed with seeing a possible topping phase would lead us think the market has a very high likelihood of going down. And down it went.

4) Price breaks out of a bottoming phase box on good volume and is now firmly above the 20sma. A rising phase should ensue. Note how when price tests the highs, we get another rangey box. The slow price action from before led it to stall out there. There was once business being conducted at those prices and it seems as though there was still more business to be conducted up there. Note how price begins to trade (with good volume) below the 20sma. Weakness is starting to enter the market with a topping phase that has formed.

5) The gap down confirmed the topping phase and we should've been looking at only short positions. Note the hard reversal in the blue circle.

6) Price just cruises higher, breaks the 15min pivot there around 13920 and then trades with volume above the 20sma.

7) Price gapped higher this morning, looking like it might've wanted to make a run to the highs again. Price was firmly above the 20sma, and the 20 is above the 200sma, so long positions should be initiated while acknowledging that we've got heavy resistance right above so price isn't likely to break through that too easily. Today, price traded in a sideways action topping out at the bottom of the previous topping phase boxes. Price is trading below the 20sma a little bit, but not on real nice volume....yet. So far we've got two clues of going lower...the topping phase box. We are also seeing lower highs and lower lows on this 15min chart. Taking a quick glance at the volume bars (with red being down bars and blue being up bars) you can see the red bars are usually bigger than the blue ones.

So...tomorrow I'm going in looking for a possible gap down. If price does in fact gap down I want to see the follow through. This will show itself to me if price price breaks below the first pivot of 13990ish. Any rally up to that and I'll look to put a marker lot out. And break of 13965 on confirming volume will be a great reason to add to the position, or get into one if the first trade never sets up.

So, going into today long positions only should've been watched for IMO.

[TinGull]

And also, to ditto what walter said. no feelings here. My coach said to me "You can't see to the right of the chart, correct? Then why worry about it?" Soooo true. We can see the left of the chart and thats all we have to go on. Never try and out-think the market. I've tried more times than I can count to do that and it never works.

[AbeSmith]

	Quote:	feb2865
	Abe I've been reading your post. You had been given good advice but I can tell that you're still struggling. I would like to help. If you allow me, we can practice a simple yet powerful excercise using charts and price but I need your comfirmation first. Awaiting response Thanks Raul

Thanks Raul. That's very nice of you. I would love to participate.

[AbeSmith]

	Quote:	Dogpile
	hi Abe, man, you sound down. believe me, I have been there. we have all been there. first off, I almost never turn on CNBC and I almost never care what the fundamental news is -- I only care when the news is coming out -- not what it is. my belief is that short-term trading is best left independent of fundamentals. fundamental investing works -- but it works over longer-term periods. don't bother trying to trade short-term by interpreting fundamentals 'better' than others. I quote my favorite trading book of all time: "Your biggest enemy in trading is going to be a directional bias, an opinion... Learn to concentrate on the 'right-hand side' of the chart - in other words, on the pattern at hand." re fundamental news: "Logical thinking will lead you right to the poor house.... There is no trading edge whatsoever in trying to base decision on what the market should logically be doing. In fact, the more logical something is, the more likely you will lose when the market is moving the opposite direction of the prevailing logic." Street Smarts by Rashke

Those are some awesome quotes. I think what you say about news and short term trading is true, because I've heard it before from other knowledgable people. But I can't help but to wonder, let's say I'm in a postion and then there is a huge move one way or another. What if that move is due to a major stock in the Dow reporting earnings? How will that stock affect the YM? If it has a significant impact on the YM then isn't it better for me to be aware of the timing of that earnings news and be prepared to not necessarily trade based on that news, but at least get out of a losing position before the stops are breached?

[AbeSmith]

	Quote:	walterw
	Hi Abe... dont worry be happy ¡¡ you are more near to become a good trader ¡¡¡ WOW ¡¡ you know this type of days DO build a trader... so be happy man ¡¡ My two cents here... cnbc forget about it... it want make you a penny and yes it will distract you... Second : this frase "feeling" bearish.... nope... no feelings here, pure technicals, you can get very wrong feelings about the market and you are having BIAS to one of the most unbiased bussiness in the world ¡¡¡... markets can go anywhere ¡¡ so Technicals will tell you very easy straightforward trend directions... Third: Entry vs Stop vs Exit = RRR... live or die ¡¡ so before opening ANY position you must know what is your RRR or you will not be able to manage properly a trade... Happy for you man, you are more near too success, you had the balls to share your hard times, in some weeks or months you will be sharing your success... keep it up ¡¡ cheers Walter.

Thanks Walter. It's very nice to hear you positive comments.

[AbeSmith]

	Quote:	TinGull
	Abe, some simple yet powerful things to keep you on your toes as far as a short term bias...watch for market phases. The market always ebbs and flows and you want to be watching for the signs of those directional changes so you know where the best placement of trades *can* be. I've attached a chart for you to check out. I'll write about the points I've outlined in the chart. 1) Market is currently in a rising phase. We're seeing higher highs and higher lows, the 20sma is above the 200sma, all is well with the world. Note, however, that the arrow is pointing to some action occurring on nice volume BELOW the 20sma. This is a sign of weakness. Will the market follow through on that weakness? It possibly could, it possibly couldn't. But we now have a clue to watch for something next. 2) In this box is a topping phase. Its rangebound and directionless. This is a real difficult area for me to trade, so I tend to stay out UNLESS I see where the arrow is pointing. That is a breakout failure. Those failures can be and often are very powerful. Note the near 200 point drop from that breakout failure. 3) Again, we're seeing price on good volume trade below the 20sma with it being extended from the 200sma. That kind of price action mixed with seeing a possible topping phase would lead us think the market has a very high likelihood of going down. And down it went. 4) Price breaks out of a bottoming phase box on good volume and is now firmly above the 20sma. A rising phase should ensue. Note how when price tests the highs, we get another rangey box. The slow price action from before led it to stall out there. There was once business being conducted at those prices and it seems as though there was still more business to be conducted up there. Note how price begins to trade (with good volume) below the 20sma. Weakness is starting to enter the market with a topping phase that has formed. 5) The gap down confirmed the topping phase and we should've been looking at only short positions. Note the hard reversal in the blue circle. 6) Price just cruises higher, breaks the 15min pivot there around 13920 and then trades with volume above the 20sma. 7) Price gapped higher this morning, looking like it might've wanted to make a run to the highs again. Price was firmly above the 20sma, and the 20 is above the 200sma, so long positions should be initiated while acknowledging that we've got heavy resistance right above so price isn't likely to break through that too easily. Today, price traded in a sideways action topping out at the bottom of the previous topping phase boxes. Price is trading below the 20sma a little bit, but not on real nice volume....yet. So far we've got two clues of going lower...the topping phase box. We are also seeing lower highs and lower lows on this 15min chart. Taking a quick glance at the volume bars (with red being down bars and blue being up bars) you can see the red bars are usually bigger than the blue ones. So...tomorrow I'm going in looking for a possible gap down. If price does in fact gap down I want to see the follow through. This will show itself to me if price price breaks below the first pivot of 13990ish. Any rally up to that and I'll look to put a marker lot out. And break of 13965 on confirming volume will be a great reason to add to the position, or get into one if the first trade never sets up. So, going into today long positions only should've been watched for IMO.

Thanks Tin for sharing your trading plan. I have printed it out and will study it carefully. You seem to be very knowledgable about trading. I know you're a beginner but I'm very impressed by your technical knowledge and dedication to rational trading.

	Quote:	TinGull
	And also, to ditto what walter said. no feelings here. My coach said to me "You can't see to the right of the chart, correct? Then why worry about it?" Soooo true. We can see the left of the chart and thats all we have to go on. Never try and out-think the market. I've tried more times than I can count to do that and it never works.

That's so true. Why worry? It is very irration to worry. And I find myself to be less worried than usual. I know I lost alot of money today, but I feel that worrying will only interfer with keeping a cool head. Thanks so much for the advice.