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Day 43

September 9, 2009

 

Three trades. One winner. One loser. One break even.

 

Today was basically another break-even day. Price was contained within a channel and I was looking to take trades on my higher timeframe. As price was coming off the top of the channel I shorted, twice. Both did not work out. Later price would break through the channel and I went long.

 

Attached is a video of my first two trades (shorts) where the first trade is stopped out after missing my profit target by a tick. I then entered my second trade and did not like how the action was taking so long to move in my favor, so I closed it early for a tiny profit. Yeah, that's not in my rules but in this case it helped me out as price did move against me. My last trade (long) hit its profit target but I did not record it simply because the setup cam so quick I did not have time. This was due to me being away from my computer as I was taking my daughter to school today. In retrospect the price break above the channel was a great place to use my runner methodology. That is, let it run and don't scalp!

 

Anyway, I'm feeling good because I was taking trades without much, if any, hesitation.

 

 

P&L: $20

 

Live_Trading_2009-09-09.swf

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Day 44

September 10, 2009

 

One trade. One winner.

 

I did not have a lot of time to trade this morning but a setup occurred right away. Price was in a downtrend and I waited for price to retrace to the trendline on the 445-tick chart. Most breakouts or trendline tests fail thus, I was planning to go short. On my 89-tick I took the first Watts setup once price reached the trendline. It was a textbook trade. Attached is the video.

 

P&L: $100

 

Live_Trade_2009-09-10.swf

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Trading Summary

 

No trading on Friday. The price action was just not looking very tradable so I did some other stuff. Below are my horrible trading statistics. I now have 69 trades recorded since starting this thread. You will notice, I'm just holding above my break even point. This tells me a couple of things. First, I'm not making a lot of stupid mistakes that are going to blow out my account. That is, my risk management is working, I'm not over trading and I'm largely sticking to my plan. However, I'm not taking every signal and I'm still not comfortable with taking larger swings or runners. To make money scalping I have to take my signals and get my %wins well above 60%. However, if I can sprinkle a few runners within my trades that will help a lot - bring that average dollar/trade up! :cool: ah, in time!

 

I still need to document my trading setups that I have informally bouncing around my head. I've found the 445-tick chart a big help when I use Al Brook's principals to help pin-point where to take my trades. I've defined several scalp locations and reversal locations. Trendlines on the 445-tick also seem to be a great method to determine when to exit swing trades. In other words, hold a trade until the trendline is broke. Makes sense, right? Anyway, I'm happy because I'm surviving this game and determined to get this equity curve moving up, up and away! Come to think of it, this was a week of winning days. Ok there was only three days I traded but they were all positive.

 

5aa70f22e68ea_Picture2.png.7e1df9d2030e0e09d481f65459e2b687.png

 

5aa70f22e1c8f_Picture1.png.e9b04dcb80f5a40f42d19abd46860b61.png

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Day 45

September 14, 2009

 

One trade. One Loser.

 

Not my day today. I was watching the market in the early morning and found it choppy so I stayed out. Around 730 (central) I thought I saw a short opportunity so I entered. I was stopped out within a few minutes and that was a clue that the market wanted to go higher. The market did eventually trend upward, but I was unable to trade by that time.

 

P&L: ($100)

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Day 46

September 21, 2009

 

Two Trades. Two Winners.

 

Today the trades came fairly easy, for a change. The market was in a sell-off mode but a short term bottom appeared to be in. My first trade was to go long at the first pull-back after price moved above the 89SMA. Attached a video of my first trade.

 

Video of first scalp.

Live_Trade_2009-09-21.swf

 

I then watched the price action. All up-moves continued to fail and/or were very weak. Eventually price broke decisively below the 89SMA. At that point I shorted the first pull-back and was quickly rewarded.

 

Both trades were very clean and took only minor heat. I followed my rules 100% and walked away happy for a change. :)

 

P&L: $200

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Day 47

September 25, 2009

 

Last week I traded a few times and did rather well. I even managed to get a runner for a few extra bucks. On the downside I got lazy and did not post anything on this forum. However, I did diligently record each trade in my spreadsheet. Here are the totals through last week.

 

Trade_Summary.png.61d40a29ea147846c616f19fb38f03f0.png

 

Equity_Curve.png.d444cc66cd89a16dc99b8bc29c429d60.png

 

You'll notice I now include Expectancy Score along with Expectancy when evaluating my system. Expectancy is the the amount you expect to make on each dollar risked. Expectancy Score is Expectancy multiplied by opportunity. Thus, the more often a system trades the more opportunity it has to produce. In short, the Expectancy Score is a number used to compare different trading system by taking into account both Expectancy and how often the system trades. These concepts can be found in In 'Trade Your Way to Financial Freedom' by Dr. Tharp. Trader Mike has more information if you would like to read about it.

 

I hate to say this out loud in fear of cursing myself but, I'm starting to get my confidence back. I brush off my losses and jump right back in. I feel good - at least for now - as I know what needs to be done. Now, it's just a matter of doing it. Executing correctly. Which reminds me, I'm still composing a post or two on my latest setups using Watts as an entry technique.

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Day 48

September 28, 2009

 

One trade. One winner.

 

Today I executed one long trade. I missed a few others as I was busy catching up on other duties such as email and the news. Shame on me. Anyway, the trade today was a classic Watts setup and entry.

 

Live_Trade_2009-09-28.png.07cac84bed4021be43bb24d9a489138a.png

 

P&L: $100

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Day 49

September 29, 2009

 

Remember in my previous post I was worried about my rising confidence? Man, I hate it when I'm right! Well today my confidence took a hit as I reached my daily stop loss amount. Ouch! I reviewed my trades in the attached video and in retrospect today's trades were not too bad. Some stop-outs occurred on valid entry signals and some were made by my dumb mistakes. Dumb mistakes need to be eliminated! In short, it was a day where I could do no right. Valid signals were losers and impulse trades were losers. Feel free to view the video for the gory details. And I was trading so well...:doh:

 

Trade Review Video: Trade_Revew_2009-09-29.swf

 

Overall, today was painful but I still feel good. I know what needs to be done. I just need to stick to my trading plan and I'll do OK.

 

P&L: ($312)

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Is this journal done? I hope not.

 

Yes, I'm in the processing of suspending this thread. Why? Well there are several reasons which I discuss below. I've been trading this method for a fair amount of time and I'm simply not happy with the results or my performance. I have at least 90+ trades under my belt - most of that with my own money. During my experiment with this technique I discovered several issues that I personally had trouble dealing with.

 

1) My inability to pull the trigger. A lot of this was due to the fact that I was using two screens each with several indicators. I tended to over analyze the situation and not pull the trigger because I would find reasons not to.

 

2) My primary setup is buying pullbacks within a trend. Simple, but how far is the pull back? At times my entry setup would trigger before the pullback was finished. Too often in my opinion. This resulted in skepticism of my setup. This caused me to refer to a higher timeframe to aid in my decision. See point 1 above.

 

3) I was often scalping but I soon realized because of my psychology and low win rate I needed to have a few runners to really make money. But when do I let a contract run instead of scalping? I could always trade two contracts and do both (scale one and let one run), but I found this unsatisfactory.

 

The above three points seem to be my weakness. I did find an improvement when using my higher timeframe (445 tick) to help filter trades. I then started to wonder why not simply trade from this chart. If trading from a 445-tick what do my setup pullbacks looked like on the 445-tick chart. When I looked that's where I had an "ah ha!" moment. To make a long story short, trading "with trend" setups on the 445-tick chart started looking really similar to setups used by Al Brooks. Indeed, what Brooks calls High 1, High 2 (bull entry) or Low 1, Low 2 (Bear entry) signals are nothing more than Watts pullbacks described on a high timeframe (5-minute in the case of Al Brooks preferred timeframe). Ah! This makes sense. However, because Brooks entry points are on a 5-minute chart a lot of the noise on a 89-tick or even a 445-tick were reduced. After discovering Brook's method I started to read all I could. In short order his basic trend following signal is simple and made a lot of sense to me. The use of trendlines along with his setups really made sense as well. Brooks also solved the problem with knowing when to take runners. Brooks has identified what I think is a a fabulous reversal pattern. At these points letting your contracts run is the way to go because the potential is so high. With Brook's method you have one chart, with only a 20 period EMA. You trade based on candle patterns and trend line. No multi charts, no indicators, just candles sticks and trend lines. How refreshing.

 

So, I plan on suspending this thread and starting a new thread using techniques from Al Brooks. I plan on trading the same market (EC) during the same morning hours. Already I've taken several trades over the past week and it appears I'm much more capable of placing trades with his methods. As I continue my hunt for a trading style that fits me, I plan on documenting my journey on a new thread. I'll post a link here to the new thread once I have it up and running. See you there.

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^^ I too am trying to explore exactly the same ideas... H2/l2's with a trend. Brooks's book just showed up last week. Please continue to post up your ideas, because i'm with you on it... i love the simplistic approach and the logic of H2/L2's but i'm just trying to refine the best places to try and apply the concept, entry, exit, etc...

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