Return of Daybreak Trading

swansjr · #1 11-09-2009, 10:06 PM

Return of Daybreak Trading

My first attempt at day trading was based on the Watts Method. Dissatisfied with my performance I've since abandoned that technique in favor of what I consider a simpler approach. Because it's "simple" I feel I'll be less prone to paralysis-by-over-analysis. This was a problem I had with my previous system. I also find the techniques make a lot of sense because they jive with how I believe markets work. The methods and techniques I'll be structuring my trading around is entirely based upon Al Brook's methods as described in his book, Reading Price Charts Bar by Bar.

Let's start.

I've been rather poor at keeping a trading journal in the past. So I've decided to keep a journal here. I hope by posting daily updates (or nearly daily updates since I most likely won't post if I don't trade) I will feel more compelled to trade well. Hell, everyone can see my trades (the good, the bad and the ugly), right? So I better do this well. So, my hope is with this new accountability of showing my trades to fellow traders on this site, I may become more strict when executing trades against my trading plan. I've been also toying with the idea of recording my trades with a video screen capture program and a microphone. But that's another story.

I'm trading the EC market with real money in my TradeStation account.

I execute trades on two basic setups:

1) Trend Continuation Pattern
2) Trend Reversal Pattern.

Trend continuation patters are just that. Entering the market in the direction of the intermediate trend as determined by trend lines. This often means entering long on H1, or H2 pullbacks. Or, entering on the short side on L1 or L2 pullbacks.

Trend reversal patterns are a great opportunity to catch a good sized move. These consists of the intermediate trend reversing. Brooks has a specific setup for this which consits of a intermediate or major trendline break and a retest of the extreme. I would like to explain these more in detail soon. Perhaps a video would be best.

Below are a few descriptions of my trading environment and money management rules which will most likely will evolve over time.

Trading Times: 5:00am - 830am central.
Screens: 610-tick chart with a 20 period exponential moving moving average.
Position Size: 1 contract.
Scalp Target: 8 ticks from entry
Open Target: discretionary. Often break of trendline or a previous resistance area.

Risk Per Trade:
The maximum to risk is 12 ticks (12 ticks * $12.50 per tick = $150). Many of the setups will risk far less per trade.

When to Stop Trading:

After two consecutive losing trades, stop trading for the day.
After three consecutive winning trades, stop trading for the day.
Maximum Day Loss: $200.

Again, my goal is to trade well. That means executing against my trading plan without deviation. It also means to show consistency over the days, weeks and months. Emotional reactions are the enemy. Its fine to be emotional, but don't let it affect your trading decisions. When emotions bubble up, walk away from the computer. Cool off.

Now it's time to get down to business.

daedalus · #2 11-10-2009, 11:24 AM

Can't wait to see what you come up with!

swansjr · #3 11-10-2009, 02:21 PM

Day 1
November 6, 2009

P&L: $430 on 3 trades.

I've been trading my new method for a few weeks now. I've been experimenting with which size tick chart to use, target levels and just getting an over all feel. Thursday (November 5th) I made a few mistakes as I noticed I was getting sloppy. I set a commitment to myself to begin this journal Friday, November 6th. I studied my setups the night before and reminded myself that I should be only taking the very clear signals. In short, if in doubt about a signal simply wait for another signals. Things really could not have worked out much better for my first day.

Trade #1 Trend Continuation - Entry on H2 pullback. While my first trade was a great entry I got spooked and exited at break even. Naturally, the trade would have worked out fine. This was my first trade of this new thread and I got spooked.

This turned out to be my only mistake for the day.

Trade#2 Trend Continuation - After the trendline broke I was still looking for a trend continuation trade (short) as I was anticipating a test of the previous lows.

Trade #3 Counter Trend - After a test of the lows I was now expecting the market to reverse. I was planning on holding this as a runner. Price did make a new lower low and I entered a H2 after the the market created a lower low above the EMA. I played this one safe! Attempting to determine when to get out was another story. I immediately noticed a former trend line from days before that extended into my chart. I placed a sell order just below it.

I could not be happier with today. Outside of my first mistake I executed everything very well. The market made it "easy" as it moved in textbook fashion. Trendline break followed by a retest of the extreme where I can enter counter trend. Beautiful! I really felt good today.

Attached is a video review of my trades:

Trading_Review_2009-11-06.swf

swansjr · #4 11-10-2009, 02:30 PM

Day 2
November 9, 2009

P&L: $97 on 1 trade.

Today I woke-up to find the market made a huge bullish move in the overnight session. I drew what I thought was a major trendline. In short order price action broke the trendline which put me in a counter trend mode. I waited for a re-test of the highs before going short. Price proceeded to slowly meander for hours. It was not until around 8:30 (nearly three hours later) did the market retest the overnight highs. I shorted at the first sign of weakness which was an L2 entry after a bearish bar broke though a support line. Because it was so late in the morning (I needed to get to work) I only took a 8-tick scalp.

Attached is a review of today's trade:
Trade_Review_2009-11-09.swf

In summary, I waited for three hours to get my setup. Nice job as I stuck to the plan!

swansjr · #5 11-10-2009, 02:37 PM

Day 3
November 9, 2009

P&L: $147 on 1 trade.

Today's video is a live trade! Check it out below.

Today I woke-up to find the market in a bullish mode. I had two bullish trendlines on my chart. One was a short-term and the other, which extended over a day, was a longer-term trendline. The market came down and testing the short-term trendline and I was looking to go long at a H2. I was never filled as the marked moved down to test the longer-term trendline. Once again no setup. So, here I had two broken trendlines and I started to watch for a good L2 entry near the newly formed bear trendline or the EMA. But I noticed the downward action was weak and not very convincing. I thought to myself I will sit this out to see what happens.

Some time later the market broke the bearish trendliing and I waited to see a test of the lows. In fact I was anticipating the market to create a lower low as it tested a former support level. In short order the market came down and tested the very level I was watching. I planned on going long at a H2 after the test of the support line. I did enter but it was a bad fill. The market was moving swiftly and I had to do a little chasing. This did not make me feel very well. My stop was $150 and I adjusted my target to $150 as well. I did not use a scalp target because I was playing this as a reversal trade (which it was) and the potential for a sizable move was real. Since I had to go to work I could not use an open discretionary target.

Then my Internet connection went down! This has never happened with an open order. My connection is very reliable. I called TradeStation and in a very short time I was speaking with a representative. He told my my target was hit and my stop loss was cancelled. I was told that when I enter my trades on the "matrix" the orders are sent directly to the exchange. At least, that was my understanding after his explanation. So, target it.

This is five good trades trades in a row. Well, the fist one was a scratch. So, lets call it four good trades in a row. I'm very pleased with myself. The last two trades were entered after I watched the market for over 2 or 3 hours. I'm patiently waiting to for clear setups and entering. This may be beginners luck, but I'll take it.

Attached are two videos of today's live trade.

Live_Trade_2009-11-10_Part_1.swf
Live_Trade_2009-11-10_Part_2.swf