Return of Daybreak Trading

[swansjr 10]

Day 19

Wednesday, December 9, 2009

 

P&L: $330 on 3 trades.

 

 

Making money has been easy the last few days. My first trade was a scalp. But after that I tried to let my profits run. As you will see in the video, I had a little trouble with that today. Overall, I've been following my plan well and the market has been rewarding me.

 

Attached are two videos to cover todays trades.

 

Live_Trade_2009-12-09.swf

Live_Trade_2009-12-09_2.swf

[swansjr 10]

Day 20

Wednesday, December 10, 2009

 

P&L: ($280) on 2 trades.

 

 

Today was armature hour as I made two dumb trades. Just last night I was kidding with myself that my excellent trading streak I was experiencing would end. This morning it happened. What went wrong? Well, I was too eager to place trades. This caused me to enter trades that technically, I had no business entering. I'm looking at my trades now and I have to ask myself, what was I thinking? :doh:

 

I also did not video record these trades. I was kind of distracted with doing other things such as reading the news and checking email and I did not get around to recording. I have to wonder if recording helps me to focus? I mean, I feel like I have to explain what I'm doing and in doing this, I'm more careful with my trades. I'll be recording Friday's trading for sure!

[swansjr 10]

Day 21

Friday, December 11, 2009

 

P&L: $107 on 2 trades.

 

 

Not much action early in the morning. But eventually a bullish trendline did break and created a decisive leg down. Price returned to touch the EMA and I promptly shorted for a quick scalp. Little did I know, if I held on to that contract it would have been a smooth and well paying ride down. However, at the time I was interested in a scalp for two reasons. 1) The trend was still up 2) I often scalp the first trade after a bad day to boost moral. That may not make real sense, but I guess it makes me feel better.

 

Price continued to break support and finally landed on an important low that has held for a few days. I went long thinking I might have captured the low of the day. Once price moved beyond a theoretical scalp level, I placed my stop at break even +1 tick. My target was open. However, price would reverse and take me out for my 1 tick profit before falling more. Another support level failed. By now it was time for me to head to work.

 

It was interesting to note that much of the bullish action was timid and unable to gain much muster. Bullish candles were physically smaller than the bearish ones. As price reached the EMA it just could not gain steam. I was noticing the bears had the upper hand. This kind of thing is not always apparent, to me anyway. But today you could just see which side had the upper hand.

 

Overall everything was executed with precision according to my written trading plan. I think this weekend I'll post my trading summary. I have just over 30 live trades recorded and I'm in the green, which is a good start!

 

Live_Trade_2009-12-11.swf

 

Live_Trade_2009-12-11_2.swf

[swansjr 10]

Trading Results

as of December 11, 2009

 

Time to post some results of my trading. My first trade was on November 6th and I've performed 34 trades so far. Most of those have been documented in this thread in video and/or screen capture. I've been trading with real money and I'm happy to say I have a Net Profit of $1,584. That's an average of $46.59 per trade. My method has an Expectancy of .41 and a 65% win rate. I'm only trading one contract. The following graph has more detail including an equity graph.

 

 

One of my major goals for 2010 is to show weekly consistency in profits. Below is are my weekly totals. So far I really only had one losing week.

 

 

Finally, here is a list of all my trades:

 

 

In summary I'm very pleased with my results. I've had a few minor screw-up but nothing major. I'm feeling comfortable with my system and believe I can focus on improving my ability to capture more dollars per trade. One thing I do want to do is review all my recorded trades and see what my results would be if I made each scalp trade a runner. That is, what would my performance look like if I exited trades by placing an exit at a logical place such as a distant trendline, resistance level or simply exited at a break of the EMA.

 

I'm a big believer in trading with a plan and documenting results. I do have a written trading plan. It's actually a 23 page document where I detail my beliefs about the market, my goals, position sizing rules and my trade setups. Also, every day I print out the days chart with my trades and I place them in a binder with notes about each trade. Between my trading plan, my recording of each trade and executing my plan with consistency I feel I'm slowly making progress. Yes, consistency is vital and it's starting to become apparent that allowing trades to run is far better than taking many scalps.

 

I do realize this is very early in my latest experiment into discretionary trading. I only have 34 trades and that's not a lot at all. However, I really feel I'my getting a routine in place and building momentum for 2010.

[rcossey73 10]

Thanks for opening up your journal. I think I may need to do the same thing as I am horrible at keeping records and often want to go back and look at things only to find I didn't record anything! Just yesterday I was thinking I need to go back and see how I did during the Christmas to New Years break and although I traded during that time I didn't keep any notes.

[brownsfan019 17]

Thanks for opening up your journal. I think I may need to do the same thing as I am horrible at keeping records and often want to go back and look at things only to find I didn't record anything! Just yesterday I was thinking I need to go back and see how I did during the Christmas to New Years break and although I traded during that time I didn't keep any notes.

 

If you don't document anything, how do you know if you are progressing?

[swansjr 10]

Thanks for opening up your journal. I think I may need to do the same thing as I am horrible at keeping records and often want to go back and look at things only to find I didn't record anything! Just yesterday I was thinking I need to go back and see how I did during the Christmas to New Years break and although I traded during that time I didn't keep any notes.

 

I understand. If it's not recorded it makes it very difficult to improve. So far, posting this on-line journal is helping.

[swansjr 10]

The Exit Test

 

In an attempt to improve my P&L, I wanted to determine what exit would have worked better. So I want back over my charts and reviewed each trade. I then determined what my exit would be based on three different exits and "replayed" the trade to see if the new target was hit or not. Those three different exits are:

 

"Close Beyond EMA" - place an exit order one tick beyond the bar that closes above/below the EMA.

 

"Trendline Break" after allowing price to develop, draw a trendline and exit one tick beyond the bar that closes above/below the Trendline.

 

"Resistance Area" this is simply picking a logical (nearby) resistance area as a target. This could be a previous trendline, a previous trend channel line or a horizontal line representing a previous area of resistance.

 

My current exit style largely depends upon my feeling on how the market is moving and/or the setup. A good number of my trades have been simple 8-tick scalps. For reference, my current Net Profit is $1,584. So what exit technique performed better? Below is a table with the theoretical Net Profit for each of the exits.

 

 

Exiting based upon the EMA does not provide much help. There was hardly any difference from my current results. Using a trendine is better than my current technique but the best exit technique was picking logical resistance areas. This produced over two times my current Net Profit!

 

What these results seem to be telling me is instead of utilizing my static 8-tick profit, I can set my target based on a logical exit point that will result in me capturing more ticks per trade. It really looks like I should incorporate this into my Trading Plan.

[brownsfan019 17]

What these results seem to be telling me is instead of utilizing my static 8-tick profit, I can set my target based on a logical exit point that will result in me capturing more ticks per trade. It really looks like I should incorporate this into my Trading Plan.

 

I think that time you spent to find this out will pay you many times over.

[swansjr 10]

Day 22

Monday, December 13, 2009

 

 

P&L: ($180) on 3 trades.

 

Mondays trading was rather poor. In retrospect, I was not careful with my trendlines or previous areas of horizontal support. You can see in the video that by the end of my trading I adjusted my trendlines and it significantly changed the perspective. A missing horizontal area of resistance near trade number two was missing. This would have been a logical target and it would have been hit. But I failed to draw it while the trade was on. I was then stopped out as a scratch trade.

 

In short, I got sloppy and paid the price. It's interesting to note that nearly all failed trades are due, not to the setup not working, but some other error such as not reading the market correct or taking impulsive trades. Winning in this game is about cutting out the mistakes you make which eat away at your P&L.

 

Live_Trading_2009-12-14.swf

[swansjr 10]

Day 23

Tuesday, January 5, 2010

 

P&L: $35 on 1 trade.

 

 

Happy New Year to all!

 

Today turned out to be my first trading day of the new year. Nothing setup for me Monday. When I awoke this morning I immediately saw one of my setups forming. That setup was what I call "trendline break and re-test of the extreme". You can see the set up explained in the video. As the market created a lower, low I saw a bull bar entry. I could feel the pressure to make this first trade of the new year a winner. I entered the trade as planned, set my profit target and stop loss. Price moved in my favor within a few minute however it could not climb above 10 ticks from my entry. When price stalled for nearly 25 minutes, I got spooked and bailed. My trading plan does not indicate time limits on trades and this trading plan violation cost me as price would soon rally to my original profit target. What should have been a $220 trade turned into a $35 trade.

 

Today was a mixed bag as I entered like a pro but exited like an amateur. I'm very disappointed but will work hard to correct this. I know I'm probably a little rusty but I will get back in the swing of things. Violating my trading plan is my biggest problem I need to overcome. This issue goes hand-and-hand with my first goal for 2010: To have four consecutive weeks of profits. It's a modest goal, but it will be a challenge.

 

Sticking to the plan = consistent profits.

 

Live_Trade_2010-01-05.swf

[daedalus 10]

Did the same thing my first day back this year. Great entries and crap management. Came back today and made up for it.

 

Thats why you've got tomorrow!

[swansjr 10]

Day 24

Wednesday, January 6, 2010

 

P&L: $160 on 1 trade.

 

 

When I awoke this morning I immediately saw, once again, a "trendline break and re-test of the extreme" setup forming. I entered the market then had to take some time to figure where to put my target. Nothing was obvious. I started to think a scalp might be appropriate, but according to my recent testing I should place my target at a logical location. I ultimately picked the vwap which was 20+ ticks way. Well, price action languished for a long time before finally breaking down. My target was hit about an hour later. I managed the trade well today, but was slow on the entry. But that was largely due to the fact the setup was forming right when I was starting to get my barrings.

 

I need to maintain my discipline and build my gains. I would like to put in a positive week to get this year started with positive momentum.

 

Hey daedalus, glad to know I was not the only one who screwed up his trade management on the first day back!

 

Live_Trade_2010-01-06.swf

[smuhr 10]

I entered the market then had to take some time to figure where to put my target. Nothing was obvious.

 

First I would like to thank you for your daily trading report. I am following it since you started and it really interesting !

 

When you went short, you can see on the chart a Big M pattern.

 

And thanks to this chart pattern you could easily place your target :

 

Compute the height from the highest peak (A) to the lowest valley (B) and then divide by 2. Add the result to the highest peak (upward breakouts, C) or subtract it from the confirmation point (B) to get a downward breakout target (D). The result is the target price. The link to the left explains the measure rule. If you are lucky, price will bottom (D) at the launch price (E).

 

 

Identifying chart pattern is really useful to place your target.

 

Waiting for Day 25,

Regards,

Steven

[swansjr 10]

First I would like to thank you for your daily trading report. I am following it since you started and it really interesting !

 

When you went short, you can see on the chart a Big M pattern.

 

And thanks to this chart pattern you could easily place your target :

 

 

 

Identifying chart pattern is really useful to place your target.

 

Waiting for Day 25,

Regards,

Steven

 

Steven,

 

Thanks for the idea. I'll keep that in mind when looking to place my targets. I created a short video response as well.

 

2010-01-07_M_Pattern.swf

 

Glad to hear you enjoy my trading journal.

[smuhr 10]

If you look to your last trade :

 

Day 4-5 : Big M - BIG W

Day 18 : Big M

Day 19 : BIG M

Day 23 : BIG W

 

Just with this simple chart pattern you could win lot more

[swansjr 10]

Day 25

Thursday, January 7, 2010

 

P&L: $247 on 1 trade.

 

 

I was unable to trade at 500 today but started looking at the EC market a little after 620. Price was falling under a clean bull trendline. Price began to poke above the trendline and then failed. I shorted the fail and rode it down to a longer term bullish trendline. Once price hit the longer term bullish trendline, I had a strong urge to go long. It's a classic long after price came down to touch a bullish trendline. But the previous shorter-term bearish trendline that was in place all morning remained. Do I wait for this trendline to break? Or do I simply take the bounce off the longer-term bullish trendline?

 

In this situation the longer term trendline should take priority. That is, the bigger picture is bullish and I should have jumped on. I watched for an appropriate bar, but did not take it. This type of situation is not in my Trading Plan so, I sat on my hands. I know last year such setups have worked out. In retrospect this one worked out beautify as well.

 

I completely forgot about this situation happening. I'll need to update my trading plan for this situation. I'm sure there are others situations that I've not accounted for as well. In any event, I followed my plan well. I got a little jumpy at the exit and I dinged myself for it. But everything went rather well.

 

Live_Trade_2010-01-07.swf

[smuhr 10]

Hi Swan,

 

How long have you been trading ?

It would be interesting to have a description of your "trading career path"

 

Regards,

Steven

[swansjr 10]

Day 26

Friday, January 8, 2010

 

P&L: ($139) on 1 trade.

 

 

I got dinged today and probably entered not the best entry. The market was a little on the choppy side before the unemployment numbers came out. It was on the wild side when the report came out. I remained on the sidelines and watched the show.

 

Live_Trade_2010-01-08.swf

[swansjr 10]

If you look to your last trade :

 

Day 4-5 : Big M - BIG W

Day 18 : Big M

Day 19 : BIG M

Day 23 : BIG W

 

Just with this simple chart pattern you could win lot more

 

Yeah, back on those days I was scalping for 8-ticks. Now I try to get more points out of each trade. I will keep your method in mind!

[swansjr 10]

Hi Swan,

 

How long have you been trading ?

It would be interesting to have a description of your "trading career path"

 

Regards,

Steven

 

Well, I started day trading in the spring of 2007. I was hooked when I made $1,000 in a few hours. I knew day trading had some serious potential. I was into stocks then but the crazy margin rules and the yearly IRS reporting was horrible. I also did not like the idea of looking at a bunch of different stocks. Late in the year I stumbled upon the guys over at Trade The Markets and they turned me on to futures. Futures held a lot of mystery as well. But once I understood them they quickly became my preferred day trading instrument. I could simply focus on one market, the IRS rules were simple and the margin requirements were very reasonable. On January 1, 2008 I started day trading YM with a crude trading plan I developed based on concepts I learned from Trade The Markets. Namely, opening gap fades, and pivot plays.

 

At this time I understood risk management and it was this knowledge that saved me. I've always had decent risk aversion and never took outlandish risks. If you recall, during the fall of 2008 there was some crazy volatile days and I survived those. The Dow would move 400, 600 or even 800 points in a single day. My first year of trading futures I was rewarded with with a 20% return on my initial capital (after expenses!). I could not believe it. My first year of trading futures was positive. I even have photos of me holding the checks I cashed in the fall of 2008. Looking back the market was rewarding me for being sloppy. My consistency was horrible. Many of my trades were done by the seat-of-my pants. I had no real discipline or game plan. But my risk management kept me in the game and all my profits would come from two trades. There were two days of extreme volatility where I managed to enter at the right time and ride it. Ever make $1,400 trading one contract of YM in 15 minutes? I did it. It was luck.The remainder of the days (98%) were me trying no to lose too much.

 

I knew I was lucky in 2008 and begin in earnest to fully understand day trading and move me to the next level. By spring of 2009 I was ready to take another stab at being truly successful. I started treating my day trading as a business. I started documenting everything. I read about the psychology of the markets and and really focused on discipline, my plan and trading like professional. My first real attempted ended in a wash with the Watts system which was documented in this thread. Late 2009 I developed a new strategy that you are witnessing live today. I like to think I've improved. Trading for me has become less of a game and more of a science. My decisions are far less ruled by emotions and I would like to think I'm starting to "get it."

 

Constancy, self control and following a plan. In my mind, I don't have to trade often, just trade right. Making fewer and fewer mistakes is critical to growing your equity curve. Letting profits run and cutting losers is a lame cliche but it's true for me nonetheless.

 

That's my short life as a day trader.

[swansjr 10]

Day 27

Thursday, January 14, 2010

 

P&L: ($105) on 2 trades.

 

 

I've not been trading because EC has been in a trading range since Monday. Within this range it's been rather choppy and I decided to not participate. Today I entered on what I thought was a bearish trend and was first taken out at a stop loss. Then taken out as I moved my stop to break even. The market did move lower so, I was correct on the direction. However, it was choppy given my tight stop levels.

 

Live_Trade_2010-01-14.swf

[swansjr 10]

Day 28

Friday, January 15, 2010

 

P&L: ($85) on 2 trades.

 

 

Well, so much for having two weeks of consecutive profits. My first goal for 2010 is to have four consecutive weeks of profits and the first week of trading was damn good. Since then I've had 5 consecutive losing trades. All week EC was range bound within a bear flag as seen from a daily chart. Monday, Tuesday, and Wednesday I did not even trade because I know I'm not good at trading ranges. But Thursday and Friday I jumped in and got chopped up. The only good thing was those 5 losing trades amounted to about $66 each - far smaller than my average win. I've been thinking about this bear flag price action and I came to several conclusions:

 

 

1. Don't trade those days.

 

2. If you do trade those days most trades should be exited based on scalp paramters. My break even trades would have turned a profit.

 

3. If you do trade those days the best setups occur at the edges of the flag. That is, fade the edges of the flag.

 

4. If you do trade those days, a wider than normal stop may be needed.

 

If anyone has advice on trading this type of price action I would love to hear it.

 

Live_Trade_2010-01-15.swf

[swansjr 10]

Day 29

Tuesday, January 19, 2010

 

P&L: $20 on 2 trades.

 

 

Today I managed to scrape a positive P&L breaking my losing streak. Once again I was right on with my direction of the market but the choppiness caught me on the first trade.

 

Today price was moving down to the lower extreme of the bear flag as seen on a daily chart. When I awoke price was within 15 ticks or so of hitting this low so I did not do any trading then. Price punctured the lower flag extreme then reversed breaking the bear trendline. This was the classic setup for a trendline break and retest of the lows.

 

My first trade was a short after two thrusts up. The second thrust was halted by the lower extreme of the bear flag which price was now under. A perfect place to short. I did and was stopped out on a large bull bar. Price would soon roll over to re-test the lows.

 

I switched to a 5-minute chart to reduce the noise. I took the first clear bull bar after the lowers were re-tested. I got out at my scalp target simply due to time - I had to get to work. If I had more time I would have held.

 

Today's setups were classic patterns. I need to adjust to the choppiness for now.

 

Live_Trading_2010-01-19.swf

 

PS: It's now late Tuesday night and price is well outside the bear flag on the daily chart. We should have some nice clean downward movement!

 

[Mickey Caine 10]

Hi Swansjr

 

I hope you are well, it is not like you to miss posting your daily journal. I really enjoy reading your posts, they have been an inspiration to me.

 

Best wishes