Posts Tagged ‘draw down’

As a Trader Thinks So Is He #3

Thursday, October 6th, 2011

Today is October 6th, 2011 as the expected rally on Wall Street continued, taking traders by surprise.

We did hit exactly the high of the outside resistance I mentioned in yesterdays post of S&P 1160 and stopped. I mentioned this number also early on today in a training session for members and showed them why.

Currently we are at the top outside resistance as I describe it and two things are next going to happen. The first one will exhibit a greater degree of bullishness but both are good. If we break over this current level with conviction the next level up is around another 30 S&P points at 1190. At that time a pull back to the current 1160 area will be in order on our confirmed way to higher prices. The next scenario is a pause likely tomorrow, with a range bound day and a pull back Monday and Tuesday to around the 1113 / 1120 area. Followed up by a move back up and over the the current 1160 area to again much higher prices.

Both of those moves are not what traders would have thought three trading days ago, but it exactly what I had in mind. I did say back then in part that the S&P should stay above the 1120 area and it got flushed out during the next trading day, only to zoom past all of those levels to the amazement of many.

Currently, for a confirmed move, it would be to soon to enter, but a move up off the current level would be the early entry move. A second chance on a back fill from the would be break will likely be offered so there is still time either way to get in on the coming move.

I know this may be a shock for many, but what I see currently is the same thing I see in a tick chart of very small size, no different. Again, it is to soon from that stand point to enter, so hold still and wait.

I don’t want to sound like I am giving investment advise, so all of this is just my opinion and everyone should make there own mind up as to future direction. This is my thoughts talking out loud, though very unpopular I feel in good company.

Above is the one trade I took from today for roughly 2 & 3 points. A very easy trade with virtually no draw down and no waiting for things to happen, just the way I like it. As I mentioned yesterday, we need three things to make this work for us, Time, Place, Energy.   Those are the things present in this trade and that is why it worked when it did. It was the right time, it was in the right place or (space) and it had the right amount of stored energy.

There is a reason and it is duplicatable for anyone who can follow, but that is not always that easy. You have to have the right mindset to follow through with what you know to be true and that will take me into where I left off yesterday.

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Two days ago, I started a series of trainings that will be continuous for the near future. The first one was laying the ground work stating that our souls, not spirit is made up of three things. (Mind, Will, Emotions) Those are the things that define us as who we are. We need to get into all of those areas to find out who we are as it relates to our trading and much of that leads us to the second post yesterday which was tied to our thinking.

“As a trader thinks, so is he” is the title of today’s message. This is a term taken from the Bible, Proverbs 23: 7 , which states, “as a man thinkith in his heart, so it he”.  A famous writer, James Allen, picked up on this and wrote a book nearly 100 years ago about the truths of that statement. It is not really a spiritual writing even though spiritual principals are highlighted, but filled with immeasurable truths based on just that one line.

As a man thinks, so is he; is the basic idea, which is all based on the fact that our thoughts determine the outcome of most everything we do. If you feel you are a failure, you will only see defeat. If you see yourself as always making the wrong the trading decisions, then your next trade will be a loss. It is just that simple. The way you see yourself is what you are going to get. Look past what was and look to what will be. There is the answer and the ideal you are seeking.

Let me quote a section from James Allen, “As A Man Thinkith”;

“Only by much search and mining are gold and diamonds obtained, and man can find every truth connected to his being, if he will dig deep into the mind of his soul. That he is the maker of his character, the molder of his life, and the builder of his destiny, he may unerringly prove, if he will watch, control and alter his thoughts, tracing their effect upon himself, upon others and upon his life and circumstances, linking cause and effect by patient practice and investigation. And utilizing his every experience, even the most trivial, everyday occurrence, as a means of obtaining that knowledge of himself, which is understanding, wisdom, power. In this direction, as in no other, is the law absolute that, “He that seeketh, findeth; and to him that knocketh it shall be opened.” For only by patients, practice, and ceaseless importunity can a man enter the door of knowledge”

This says a lot and can write a pages just on what was said above, but let me start and just continue tomorrow where I leave off.

Gold and diamonds are not easily found it take work to uncover those treasurers. It will take work to search within our souls how best to control our minds, our will and our emotions. Anything of value rarely comes easy but this is the necessary search that  James Allen is talking about.

You can find what it will take to follow your trading method, what ever that is for you, if you make a decision to do so. It all starts with a thought and followed up with a decision to follow that thought, and then the will to see it through. Your answers are within you, search for the truth even if it hurts, that is the beginning.

More to come in tomorrows post.

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Day Traders, It all Starts with a Thought

Wednesday, October 5th, 2011

Today is October 5th, 2011 as we continued to see follow through in the reversal from yesterdays big move.

In two days, we have retraced back up almost 2/3rds of the declines within the last 6 trading sessions. Current price on the Emini S&P 1135 as more work will need to be done to get things turned around.  For the short term, 1160, is the outside resistance number that will need to be challenged, which is 25 S&P points away. We will likely see some resistance between here and the high mentioned, but if and when we break over the 1160 number will can expect more behind this rally.

In today’s trading, I just took one trade and it is shown below with other potential turns as marked. It was quick, fast and with little struggle with only a tick or two of draw down after entry. That is just the way I like to see it go down and only happens when three things are present. You need to enter at the right time, the right place and with the right amount of energy behind you to move your position. When you have those three in place, you get the prefect trade.

There were plenty of other good trades before this and plenty of good ones after this, but I took the one when I started following the markets that lined up with those three elements mentioned. Only invested about 20 minutes total in following and trading this session.

Day Traders can trade all day long and some of them do, but if you want to come out on top and not have to put yourself through undue amounts of pressure, then taking a few trades and being done is fine. Not all days are this quick and not all days are the points on the light side, but some of them are and by choice most often.

Trading all day is a personal choice, it is just not mine. I want to enjoy the freedom that trading offers and get to do that often. Living in the mountains, I have plenty of recreation and things to do, but its not all about me. Having time to invest in other things and people is a gift I want to continue to expand on.

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Let me shift gears into what I was talking about yesterday and just try and pick it up from where I think I left off.

The thoughts of a day trader is one of the most important things that surround him as he builds up to the point of entering a position. If those thoughts are in line, then many times they will lend itself to much better results, but if those thoughts are off in any way, a different force will tend to take over.

That force will often go unnoticed until it is often to late. Being aware of these facts will better equip you to tackle the challenges of profitability.

So let me go back to my statement, our thoughts will determine our actions and results. That is a very true and real statement. Let me quote a famous author who wrote over 100 years ago in a book called, “As a Man Thinkith”.  This is the basis for much of what I want to talk about in the coming weeks. The full quote is, “As a Man Thinkith in his heart, so is he”.

The author is James Allen and he was and still is very popular. He wrote 20 different works and died at an early age of 48.

This quote is taken from the Bible, Proverbs 23:7 and is the basis for his work. The practical principals transcends religion as that is not anything of which this is about, but getting in harmony with you and your world.

The way you think about yourself has so much to do with the results that play out, it is somewhat self fulfilling. If you see yourself as a struggling trader who just can not seem to get anything right, then you will get exactly that in the end results. To expect something different would almost be odd. You can only rise to the level that which you see yourself becoming and if it is that of a struggling trader who can not get anything right and always seems to get stopped out on your trades, then you will find a way to only enter your trades to line up with getting stopped out.

At that point, many will blame the trading method, or system they are following and look for something else, when the thing they need to do is look within themselves and examine the deep seeded views they hold for themselves and how they see the challenges they currently face.

If you make a choice to change your thinking and do the things that will produce the results that line up with where you are going, then you will find it within yourself to wait and only enter the trade when you know you have the greatest chance to profit.

These statements are in its simplest form and it will take a lot more to uncover where I really want to take you, but this is the basis for what we want to accomplish in the next few weeks.

I will stop here, but pick up exactly where I left off tomorrow. This way, you will have time to first think of what was just said and how it applies to you, the trader that is trying to find his way through all of this.

Let me leave you with this, as a trader,  if you know what to do, when to do it and why you are doing it, then you have that part covered and need to focus on doing just that. Many know the things mentioned above very well, and can not for some reason still bring it together. There are forces that are working against you that you are not aware of and it is not your fault. That is just the way it is for most, so don’t feel like you are alone. There is help and over the next few weeks we will uncover many of those issues to help you recover to top trader status. It all starts with a thought.

Trade well, trade committed, Vince

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Market Move Taking Many by Surprise

Tuesday, September 27th, 2011

Today is Tuesday September 27th,  2011:  We saw some nice follow through in today’s session early on with a large gap opening higher and holding to yet higher prices into the afternoon. I only traded for less than 30 minutes in the morning, but later in the mid day was pointing out how the market was going to go to 1189 as a top for the last move. It came together perfectly and went a few ticks over the 1189 mark I called out to my group in a training session I had going. From that point, resistance did come in and a very nice short took hold late in the day. All something clearly seen within the trading method.

Early on, the market was in a very narrow range, much different than we have been accustom to seeing, but you will see days like this. Many times, when you have a huge gap opening, you will get a restricted range.  The bulk of the move came in the gap higher which many were not able to participate in except those trading in the Globex pre-market. The gap higher and its accompanying interest coming in after the open, helped to hold up the market and limit any selling. Those that wanted in, took every opportunity to get long at small pull backs and so supported the gap higher. Until prices reached the target high of 1189 my call and actual 1190, there was no longer any reason to stick around as the move was complete and the smart money hit the doors running, thus the large late day sell off.

Knowing that 1189 was an important trade to target in today’s trading would have given you insight in holding for higher prices if that is withing your trading model. I did not want to stick around and be exposed to the market all day and being in the market for only 20 minutes with a modest trading goal in hand worked for me today. I do have an interest in trying to hold for larger targets and many times I do, but I always balance that with time. I value time as a commodity that I can never get back. The more time I can free up to do the things I like to do, is of great value to me and so there is the balance.  /  My trades from today below.

The market as mentioned and as you can see above early on, was a little choppy, but often that is just fine for me. Either way, trending or choppy, the method will perform.  It is us that just need to read it and get in sync with the price action. If you try and impose your will on the market, you will be humbled. We can’t trade for what is not there just because that is what we want. If you take that stand and you can, then you need to be prepared to wait for hours and even days for some.  The market is the market and what ever we want does not matter to it. You either conform to it or wait until you see what you like, but be prepared to wait, because waiting is a trade just like a long and or a short. Many traders have never thought about that I am sure. Waiting and not taking a trade, “is a trade”.  It is a “no trade”, which again is a trade position. You are waiting for your conditions to come together.

For me and the way I trade, I don’t have to wait long, 10 minutes, 5 minutes, 15 minutes, until what I need to see comes together and then it is down to moments for the entry, which is done without hesitation. As mentioned above, that style appeals to me and I like it. I can get a few points from a variety of market conditions, get out and be off. Time off is one of the things that trading is supposed to offer as a benefit the last time I checked. (pun intended)

Anyway, I took only one trade and scaled out for + 1.75 points, +4.75 points, and +2.50 points, an easy day for what could have been a difficult day for many. The second exit I had a trade to target in mind at the top but ended up closing a few ticks off that high.

The trading indicators are very consistent and is my own twisted version of something to give me a near perfect guiding light that reflects my trading method. The trading indicators are not the trading method.  All members  learn how to read the price structure as it relates to the method. Which came first, the chicken or the egg?  Well, that may not be a good example, but which comes first, the price or the indicators?  “SURVEY SAYS________ “   ‘The Price’ .

When you learn how to read the price and enter where you should, at the “Sniper Holes”, then you will not experience very much draw down after entry and is a great way to trade. I could never sit through 3-4 points of draw down on a regular basis while things shaped up for an advance. I think I would die if I had to do that in the hope that it will pan out. That is no way to trade. Members can get there entries down to ticks and that can still produce several points when proven right, which can be often.

Day Trading is not a easy venture, but for those who are willing and see the opportunities, the rewards are endless in offering you the time to do other things that you really love to do and bring a richer more meaningful existance to your life. It is possible for many more traders who find out what it is that they are lacking. It might not be your method, but it could be you, so look within first for your answers, you just might find what is missing.

Best you all,

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Trade Decisions

Tuesday, May 10th, 2011

Today’s market we saw the Dow up +78 and the S&P futures +11 in a slow trading session with only 1.5 million contracts traded. I traded a good portion of the day today and did finish well, hitting a nice method trade to  target for several points. Yesterday I only traded for the last hour and so included both sessions in the chart below.

I have marked up on the screen the “trade decisions” that where identified by a custom indicator that works within the trade method. The small windows circled, are area’s that a trade decision could be made. That window is small, which helps to zero in on the exact entries that a market move is likely to take place. There are many reasons for a market shift within those area’s and that is really apart of the method, but the trade indicators do line up with the method not the other way around.

When you make a trade decision, to go long or short, you don’t want to see the price retrace much against you, that is called a draw down. In making the right trade decision, you won’t see that draw down, but will see a price increase in the direction of your entry, simple enough. The trick is, how to zero in on those holes and pick out the entries that make for the right trade decision.

It is in knowing market behavior and the likely path of price that this is accomplished. Many of us have heard, “knowledge is power” and in this case it can also be translated into money $ .

Market conditions are always changing and with those changes picking the right type of strategy for the conditions is important. For some, learning a pure scalping method is the way to go. It does not have to be complicated, but low risk entries are the key to any good trading method, but few are able to find it. Learning to trade a scalping method where this is the norm are few and far between.

To trade the model I have above, I usually use a 4-5 tick stop and take what the market offers, sometimes it is a lot and sometimes it is small, but the key is to wait until the trade comes together. This is just one screen from a whole picture, no shown, and we know what they say about a picture; its worth a thousand words. In this case that too would apply. The point is, I have another model that is for scalping small targets.  there, a trade can be taken with a 3 tick stop and a target of 3-4 ticks on most trades is common. I don’t show this model, as most traders like to take trades for larger returns, but this does exist within my trading method.

This scalping method holds at a minimum a 1 to 1 trade ratio and up, with a high percentage of trade wins. Market conditions will dictate how many trades are available in any given day, but 20-30 trades is not uncommon even with slow or low trading ranges. This part of the method trades in what I call the dominant trend and counter trend within the method.

Trading a scalping method that provides low risk entries, small draw downs under changing market conditions is all more than I could ask for. I find myself trading out of my T-2 screen most often and not the T-1 scalp screen mentioned these days, which is what you see above. Again, that is a small limited view of things but it does paint a clear picture for all to see. I just need to be diligent in following it.     Best to you all.

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Trading Recovery Day

Thursday, February 3rd, 2011

2-3-11;

Today was a recovery day from yesterday, which was not really a big loss, but no gains were made. So today I did make that up. I did take on more risk than I am used to, with a bigger stop on one trade and larger size. I was still ahead for the session when that happened, so it was not coming from a position of a draw down.

The market sentiment numbers came out for stock market direction and the percentage of bulls dropped while the market has been rising steadily, currently 52% are bullish; (55% or more is a bearish reading).  We were above the 55% area for about 10 weeks with only higher stock prices to follow. This tells me something is wrong somewhere. The sentiment gauge is not in sync for the last two and half months. Many think, it is because the Fed has increased the money supply, and it has big time. That money is finding its way into the markets from a variety of institutions.  It is defying logic with looming issues that could rattle the core of our country.

I would like to share a web site that I have been following recently, as I have found much of the information very accurate and informative. I would recommend it to those who want to keep abreast on inflation and the general state of our economy. The site is called “The National Inflation association” and their web site is www.inflation.us

The information in the sight might give you some insight on what is happening and what is coming. For those of you who are loyal readers, you may want to check this out for no other reason than to protect your wealth and be informed.

It is nice to be positive and think that way, but the reality is, we all live in the real world and not knowing what is happening is not going to help anyone. So, get informed, see what other well educated people are saying about the economy and near term future. I would add, do not worry, as that is not going to add one day to your life. Enjoy each day, but do not worry and do not live in fear. I look above for my stability and peace, for those whom it may apply, I encourage you to do the same.

Good Trading – Vince

Today’s Trades Taken

Yesterday’s Equity Chart of Trades Taken below

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Day Trading Requires Focus and Discipline

Saturday, March 21st, 2009

Today is Friday, March 20th and the major indexes continued to back off.

The Dow was down 122 points and the S&P was off by 15. We will likely continue the retracement over the next few days as the market posted a back to back weekly gain, something it has not done since May of 2008. I have a daily chart below of the Dow and S&P and you can see that after redrawing the outside line, which I was off by a little originally, it is now lined up straight and the market traded right up to it. It also happens to be the broken support of a few months ago. I mentioned it yesterday, but you can see it today in the chart below. Support when broken will then become resistance when tested. That is what we have seen the last 2 days. The Dow also lines up, the same way.

I had a good day trading today. It was slow going in the beginning. I started late, during the slow volume time of day, and could not get any traction. I was splitting my trades when I would have done better with, all contracts in, all contracts out. After a slight draw down and the passing of a little time, the volume came back and I got myself on the right side of the trend and started putting it together. My equity had very little draw down after that, almost straight up. I settled the day out with $+1629 dollars after commission costs and had over 20 entry trades.  Still traded small for the most part and have not yet made any changes, like I was talking about yesterday.

I have one small video of a trade I put on and a still shot of the trades just after that. I backed off on the size again at the end, which is really a good idea. If you have solid gains and you decide to keep trading, you have to have a point where you will lock in your profits for the day and give no more back, if you fall below that point. If you start to over trade and make mistakes, you can give back what you worked hard to get. That is the reason for backing off on size at the end of the day when you already have your daily goal and good profits. You will be a conservative trader with this approach.  This is about money management as well.

Do not let greed creep into your mind and find yourself shooting for the stars. More is fine when it is the appropriate time. I would say that if any one is just starting out and you do not have anyone helping you through the process, you should only be trading for a small daily target. I recommend about 2 points and not really any more than that.  The reason is, you do not have enough experience to deal with all of the changes the market will throw at you. Eventually you will get taken out. That is the hard cold facts.

We all like to think it won’t happen to us, but that is presumptuous on on our part. Being honest with yourself is the first step to victory and that victory can come in the form of two points a day. If you can pick that up, consider it a big victory and try and do it again tomorrow.  A common scenario is, you will pick up a few points and think it is easy, then let your guard down.  The market then gives you a read that you have not seen, or are not familiar with, and the gains are gone. You then say, “Iwill get that back,” and don’t exercise patience having already lost your focus, because you are thinking about the money and your losses increase.

You have to be able to stop yourself, if this is happening and walk away. Clear your mind and when you take your next trade, don’t be thinking about anything else, other than the process. Are you doing the right thing based on the method? Don’t be thinking about getting even with the markets. That has been called, REVENGE TRADING and it can do a lot of damage, not only to your account, but more importantly to your ability to have confidence in what you are doing.

By losing your focus and discipline, trading like this, you only join the ranks of so many others who thought they could. The battle is greatly in your mind. That is why I have some very good books on my web site to help you with the process. If you have not read any of them, I recommend that you do. Some of them are not even related to trading, but it sure does apply and can help with many other areas of your life as a bonus.

http://www.screencast.com/t/MHjVQ0SI8L              Today’s equity chart

http://www.screencast.com/t/qBfXqtoGBXq             Live trade video

http://www.screencast.com/t/ITUh0ylJ                      Still shot of some trades, end of the day             

http://www.screencast.com/t/M4FpJW2M8kx          Still shot of Daily S&P

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Controlling Fear and Emotions while day trading !

Thursday, March 19th, 2009

Today is Thursday, March 19th and the markets back off on light volume.

The Market, in general, slowly backed off its highs from yesterday. The night trading saw a move back up to yesterday’s high and when the general market opened at 6:30, the Dow shot up 50 points and the S&P about 7 points. There was a gap in the S&P and when you get an extended move, like what we have had the last couple of weeks, with the market trading near its high at 800, it was likely the gap would be filled rather quickly.

I missed the initial move down by a second and found myself a little frustrated, not a good emotion when trading. I was looking for a low risk short entry and took a trade a little early and got high tick stopped. I was in a little heavy, I think 7 contracts. I was sure we were going down but was just a little too anxious. So I started to back off on size a little. I had to wait the market out, but I was still a little anxious. I prefer to see a choppy market early on, because there are usually a lot of small trade set ups, but when it is trending right off the bat, it can be hard to find a low risk place to get in.

All in all, I did OK, making 15 trades with 9 gains and 6 losses. I scaled out of all the trades with 2 targets. Posted about $800 dollars in profit. I made a few mistakes today, but it happens. The market did just what it always does, so I definitely can say that I was to blame on a few of the losses that I could have avoided. The other losses were no one’s fault – just probabilities that show up.

After yesterday’s big gains, I decided to back off a bit. I am trading a lot more than I usually do and I can’t complain. I have been posting very solid profit every day for about 7 weeks of trading. I need to do some assessments and go over my trading plan. I do not want to lose sight of my goals. I had wanted to increase my contract size and make less trades, but I have been making more trades with small contract size. Again, I can’t complain. I have been getting the increased gains that I had planned on, but I have been having to work a lot harder to get it.

One interesting thing I recently saw, there is a TV show in England that took 100 people and interviewed them for a trading career. Out of the 100, only 8 were chosen, with a mixed level of education. To make a long story short, within 2-3 weeks of being properly trained, 4 were making money and 4 were losing money.

The person who did the best was a mother of two children who had an entrepreneurial background. The person who did the worst was a I.T. engineer. The I.T. guy said this was the hardest thing he has had to do in his life. When a program is not working right, he just reprograms it with the right settings and the problem is solved. He tried to apply the same principles to trading and could not do it. The next best trader was an ex-soldier. He said he was used to making quick decisions and was flexible to the current task at hand. He was not boxed in, with seemingly an absolute frame of mind.

The moral of the story is, that being successful at trading has more to do with your personality than intelligence or I.Q.  We follow principals and not so much rules. There are definitely guidelines to follow and you have to know what you are looking for, but having the right personality for the job is essential. The Mother of two was cool under pressure and applied what she learned. She was not overly scared, but placed the trades as they came up and she got the expected results.

We all can learn from this story, including myself. There is no place for FEAR when trading. If you are afraid, then you are not ready. You may be trading with too small of an account or you may not really be able to take on the risk. The best way to approach this is to allocate an amount in your account that you can comfortably risk. If you draw down to that amount you will stop trading and give yourself a month off to assess the whole situation.

So if you are OK with risking, say $500, that would be 10 S&P points with only one contract. You could give yourself a daily loss limit of say just 2 trades or 2 points. If you are not on it, with gains out of the gate, then you wait until tomorrow and try again.

But do not trade with fear at your side. The worst thing that can happen is already predefined, so accept that fact and go forward. You have 5 days of losses, assuming you lose every day, before you get to your total limit for the month. That is really not too much damage to take on, when you look at the big picture of hitting your daily goal of 2-3 points per day.

http://www.screencast.com/t/RVRfEqSe19Y             Some of today’s trades - Still shot

 http://www.screencast.com/t/vGOqsxDEII               Today’s equity chart

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