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Dummy day trading #36 17-Oct-2006: YM Long trade closed

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Dear diary,

Market seems to know my frustration(just fed up with them) over those people who are questioning dummy trading. It gave me some small rewards today. Short position of YM was established below the low of 6th candle (945am NY time candle). That was a fast trade. Target at Fib extension 61.8% was achieved at 8th candle.
Cash market was losing -90 points. I chose to close my position since first target was hit. One trade closed with 2.38-R gain (27 YM points gain)

Trade Grade:
Trade score: 1: Target hit
Execution score: 1: Followed trade as dictated in my plan

Here is the beauty. Kiss her.

17 Oct 2006
17 Oct 2006
    • Is the trend up or down? Would you be looking to get long or short this futures contract? That was a big gap down. Looking to get Short

 

  • Where would you get long/short this futures contract ? Below the low of 6th candle (945am NY time candle) which was below Opening Range low and resisted by 5-MA.

 

 

  • Where would you put the initial protective stop? Above high of entry candle (High of 6th candle)

 

 

  • Where would you exit the position? Fib extension 61.8% and 100%

 

 

Be a better trader today.

Postmortem 16-Oct-2006

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Dear diary,

It was not a strong day. I made a trade and scratched it 2 hours later as It failed to form the setup I was looking for. I categorized this entry as implusive. Yup, it was a valid dummy setup, however, in my trading plan, it would only got Long above a UP candle. Well, I broke the rule, I was anxious to trade. Darn.
I was lucky to realiase my own mistake and scratched the trade when it closed below 8-MA.

Few months ago, when I just started active daytrading, I read some great blogs like ugly, tradermike, tale of tape , Maoxian etc who are doing dummy trading. I read some good comments on dummy trading. These two months, well, I would say it might not as good as early of the year for dummy traders. So, now I am reading some negative comments about dummy trading now. Some fellows left some comments at uglychart.com.

Dummy trading is not a holy grail. Even the cat outside my house knows that. You wanna trade a system? then follow the system. Follow the system? that means follow it through good days and bad ones. Manage your risk, that’s it. Dummy entry is meant for trader who are dumb enough like me to join a trend. That’s all.

Ok, enough, just some random thoughts after reading some BS from people who didn’t even start trading dummy setup and putting in some silly comments. When come to trading, people always like to think too high of themselves. Be humble and shut up, cut the BS.

If you are too tense, go Wallstrip.com. Watch the video!

Let’s trade better tomorrow.

Trades that got away 16-Oct-2006

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It was not a strong day for index futures, but there were couple of set ups for quick profit (well, if only I caught it).

This is NQ. It was not a good setup, but it showed me how the setup works with 20-MA. Potential entry would be above high of 14th bar. Noted it went down to touch 20-MA and closed above all 3 MA and Opening Range high.

[photopress:NQ15_got_away.jpg,full,pp_image]

  • Is the trend up or down? Would you be looking to get long or short this futures contract? Trend is up. Looking to get Long
  • Where would you get long/short this futures contract ? Above 14th bar high which was above opening range and closed above 3 MA after testing 20-MA
  • Where would you put the initial protective stop? Below the low of entry bar
  • Where would you exit the position? Planned target would be 61.8% and 100%. It failed to go further after reaching 38.2%. Possible exit would be below the low of 18th bar

This is a trade which I had missed out. I was having position in NQ. Again, this is another setup that would provide some small quick profit. YM bounced back after testing 20-MA.

[photopress:1Dow_15_got_away.jpg,full,pp_image]

  • Is the trend up or down? Would you be looking to get long or short this futures contract? Trend is up. Looking to get Long
  • Where would you get long/short this futures contract ? Above 14th bar high which was above opening range and closed above 3 MA after testing 20-MA
  • Where would you put the initial protective stop? Below the low of entry bar
  • Where would you exit the position? Planned target would be 61.8% and 100%.

Dummy day trading #35 16-Oct-2006: NQ Long trade closed

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Long position of NQ was established above high of 6th bar. I scratched the trade when it closed below 5 an 8 MA. One trade closed with -0.66 R loss.

Trade Grade:

Trade score: 4: Out at a different price from stop, but a losing trade

Execution score: 2: Followed trade entry, but closed out position before predetermined target was hit 5: Impulsive

[photopress:NQ_15_fib_trade_close_1.jpg,full,pp_image]

  • Is the trend up or down? Would you be looking to get long or short this futures contract? Trend is up. Looking to get Long
  • Where would you get long/short this futures contract ? Above high of 6th bar which was above Opening Range and 8-MA. Hindsight, this is not a good entry, and I was lack of patience and broke the rule-entry bar should be a up bar.
  • Where would you put the initial protective stop? Below the low of entry bar
  • Where would you exit the position? Fib extension level 38.2% and 61.8%

25 rules of trading discipline by Douglas E. Zalesky

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25 rules of trading discipline

I read an article by Douglas E. Zalesky in SFO magazine back in 2006. It is a great list of rules traders should read.

Here I am listing out 25 rules of trading discipline discussed in his article. I think it is good to spend a couple of minutes every day to go through the list before start trading.

25 Rules of Trading Discipline

  1. The market pays you to be disciplined.
  2. Be disciplined every day, in every trade, and the market will reward you. But don’t claim to be disciplined if you are not 100 percent of the time.
  3. Always lower your trade size when you’re trading poorly.
  4. Never turn a winner into a loser.
  5. Your biggest loser can?t exceed your biggest winner.
  6. Develop a methodology and stick with it. don’t change methodologies from day to day.
  7. Be yourself. Don’t try to be someone else.
  8. You always want to be able to come back and play the next day. Once you reach the daily downside limit, you must turn your PC off and call it a day. You can always come back tomorrow.
  9. Earn the right to trade bigger. Remember: if you are trading poorly with two lots you must lower your trade size down to one lot.
  10. Get out of your losers.
  11. The first loss is the best loss.
  12. Don’t hope and pray. If you do, you will lose.
  13. don’t worry about news. it?s history.
  14. Don’t speculate. if you do, you will lose.
  15. Love to lose money. What I mean is to accept the fact that you are going to have losing trades throughout the trading session. Get out of your losers quickly. Love to get out of your losers quickly.
  16. If your trade is not going anywhere in a given timeframe, it?s time to exit.
  17. Never take a big loss. Only a big loss can hurt you. Please review rules #5, #8, #10, #11 and #15. If you follow any one of these rules you will never violate rule #17.
  18. make a little bit every day. dig your ditches. don’t fill them in.
  19. Hit singles, not home runs.
  20. consistency builds confidence and control.
  21. Learn to sweat out (scale-out) your winners.
  22. Make the same type of trades over and over again? be a bricklayer.
  23. don’t over-analyze. don’t procrastinate. don’t hesitate. if you do, you will lose.
  24. all traders are created equal in the eyes of the market.
  25. It’s the market itself that wields the ultimate scale of justice.

Full article in SFO [PDF] : The 25-Point Mantra: Discipline for Day Trading

This blog post is also part of my Back to Basics of Trading Series, feel free to check it out.

Grading my trade and myself

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I have been thinking of grading my trades and execution. There are indeed some bloggers grading their trades. Trader-x grading his trade setup with alphabets (A, A+…etc), J.C from NYSE scalper’s tales grading his daily trades as well:

I’m going to re-define what I consider a good trade and a bad trade. Since I’m not doing 8000 and 10,000 share positions as often any more, I’ll consider a good trade anything that makes $150 or more and a bad trade anything that loses $100 or more.

I find it to be useful by grading my trades and trade execution. It gives me an insight of my trading performance from another aspect in addition to expectancy and accuracy.

Here is my grading plan. This is to be done separately on each type of trade setup. Basically, I am applying the ideas introduced by John Carter in Mastering the trade.

  • 1: Target hit
  • 2: Out at a differrent price from target, but profitable (time stop)
  • 3: Out at even (scratch, time stop)
  • 4: Out at a different price from stop, but a losing trade
  • 5: Stop hit

The following scale is to grade how well I actually executed the trade:

  • 1: Followed trade as dictated in my plan
  • 2: Followed trade entry, but closed out position before predetermined target was hit
  • 3: Followed trade entry, but removed stop and let position run past original target
  • 4: Entered setup late and didn’t set target
  • 5: Impulse trade

Add up daily scores and divide by the total number of trades to get an average for both categories. This will keep a grade point average of the number of trades you made that are profitable and those that are executed as originally planned. Track by trading method used, so you are able to rate each method and tweak as needed. Review the score at end of each month to see what needs to be modified.

I am particularly interested in looking at the second category which is a psychological challege. It is easy to have some buy/sell signals, but, to follow the plan, trust myself, trust my plan and methodology and reduce number of impulsive trades are challeges traders face everyday. I have the tendency to exit a trade prematurely, This grading plan will always warn me to “behave myself”.

This is just another way to improve my trading.