Today is Friday, May 8th and the markets as of now, 9 am West Coast time are making a come back from earlier losses.

Today’s market action was interesting. We saw a gap opening up of about 8 points on the S&P, it pushed a little higher, formed a nice top and sold off, good and plenty. It moved back to the middle where it found support and later rallied to near session highs. That is when I stopped watching. I will look later tonight to see how it all finished for the day.

My trading went well, nice and smooth, hitting double daily goal, just at $1,000 with only one losing trade in about 1 hour. I think I put on 9 trades with a couple of split trades in there. That is what I like to see, but it all depends on me. I know that I can always do better and I strive to do that each day. Many of the stops that I take can be avoided and some can not. I don’t worry about the ones I can’t avoid, but only the ones that human error comes into play. I have rules and sometimes I break them, as we all do. When I stay as close to the rules as I can, it usually works out pretty well.

Today, I was short at the top for a split trade, got 1 point early and put myself in a no loss trade. The second half continued to work lower and all was well. I moved my stop down, but got a little distracted and got high ticked out. I was one tick too tight, still made 6 ticks on the trade, but that move kept on going. I had a tentative target of several points on the second half of the trade.

Often, traders can become frustrated when they don’t get the amount that they were looking for and start to abandon their trading plan. Here is where controlling your emotions is vital. You can get frustrated on a winning trade as well as a losing trade and self control needs to be called on. If you have in your mind that your trading goal can and will be met, it is going to happen by taking one trade at a time. If you look at the big picture, it can be overwhelming and that can throw you off. We are only targeting at a minimum, 2-3 points per day. Most often I double that, but I always have in my mind, that if I can get to 2-3 points and the price action is good, I can get to 4-5 points. I never think of hitting 5 points as my goal right away.  It’s always 2-3, and if things still look good, I can continue, often times with smaller contract size. This takes the pressure off of having the thought of giving back your hard earned points.

That is what I did today and I was happy with it. I had some frustration coming in when I got high ticked out.  I knew that the market was going to hit a bigger target, which I pointed out on the screen. I looked for a re-entry point, but there really was nothing that looked good.

The action on the way down was a little strange. Usually you have some resting points, a few small pivot points then a break. I did not see anything like that, so I had to stay out. It ended up dropping a lot more without a bounce and I chose to just wait it all out. After that move ran out of steam,I put on a few small moves on in the CHOP,  it worked out well.

After a large move up or down, you tend to get tradable formations for small moves. Some of those moves went farther and as I always say, that is just fine. I never cry about taking a small move if that is what I planned on ahead of time. If it goes for several points, no  problem. Some times I elect only to take all trades for 3 or 4 ticks no matter what.

I remember one day not long ago, I did that, I had like 40 winning trades in a row. I said that I was going to stop when I get my next loss, it never came.  It was a very large day for me. Other times I take  split trades or what I call a “T-2 setup”. While I am at it, I will explain the three the basic setups that I use.

The first is a “T-1 setup” which is a scalp trade of no less than 1/2 point but usually not more than 1 point to meet the definition. The next is a “T-2 setup”, which is a split trade where after the entry, the first half of the order comes off at around 1 point and the second half comes off where ever I feel that I can safely get the second target without getting too greedy. I have the second target usually preset at 2 points, but I move it to where ever I can get a larger fill. The third is what I call a “T-3 setup” and that is when I see a pyramid situation. I won’t go into what all that is but I think you may be able to figure it out.

If I see different market condition, I am ready for what the market can give me. Like I have said before, you cannot tell the market to give you what you want, you have to be willing to take what it will give you. So being flexible is very important. If you know how to scalp trade for small targets and hit those targets about 75-80% of the time and often a lot higher, then you have a base to build off of. When the conditions are right for RUNNERS, the T-2 is a great way to go to capture more of what the market is offering. When you have those days that you get long extended moves in one direction, the  T-3 can bring you windfall profits.

If you always keep your sights set on just getting your modest daily goal, when the opportunities present themselves for more, you will not have any hangups to hold you back from receiving them.   If the markets ever started to trade in a quit narrow range like it did some time ago, many S&P systems traders would get chopped to pieces. If it stayed like that for a while, many traders would be out of business.

The market is designed to make you fail and it will do everything in its power to make that happen. You need to ask yourself this question: if that is true, then what are you going to do about it?

http://www.screencast.com/t/en4uOjUTvh6          Today’s equity chart