Like all of us traders I have learned enormous amounts from other traders encountered along the way. And I am grateful to them all for sharing their insight and ideas. But there are 3 traders in particular I would like to mention who have had an enormous influence over my trading and helped me get to the point where I am today. They are:
Linda Raschke: She is a great trader and extremely generous with her knowledge. I had the great good fortune to be introduced to her by my broker who was a friend of hers. I did a fantastic weekend trading course with her back in 1993 which set the overall course of my trading based on indicators, especially the MACD. Thank you Linda!
Buffy: Engaging and very savvy moderator of the E-mini trader's online chat forum and developer of the B-line. She is a warm and extremely helpful teacher who is also a dynamite trader. Thank you Buffy! Your presence has meant a lot to me as I have followed you over the years.
Jimmer: I came across Jimmer in the B-line room mentioned above. He is an older guy with a dry sense of humor who is not only a fantastic trader but who has also been extremely generous in sharing his excellent approach to trading. Jimmer, thank you from an unknown admirer! You have taught me a lot, all of it useful.
Sunday, January 4, 2009
Chart example
Here is an example of my trading charts with indicators. I know it's got a lot on it - a friend of mine once commented that it was like looking through a screen door, there were so many lines on it!
But it works for me and over the years I've become very comfortable with this format.
What do I need to measure?
There are 6 important metrics I intend to keep on a daily basis:
1. No. of trades available (i.e. trades that fit my entry rules)
2. No. of trades taken
3. No. of winners
4. No. of losers
5. Dollar amount of winners
6. Dollar amount of losers
I would like to get to the point where I consistently take 80% or more of all the trades that fit my entry rules. One of the hardest things for me so far has been to take the next trade after taking a loss. I know that if I keep taking the trades I'll come out a winner overall.
1. No. of trades available (i.e. trades that fit my entry rules)
2. No. of trades taken
3. No. of winners
4. No. of losers
5. Dollar amount of winners
6. Dollar amount of losers
I would like to get to the point where I consistently take 80% or more of all the trades that fit my entry rules. One of the hardest things for me so far has been to take the next trade after taking a loss. I know that if I keep taking the trades I'll come out a winner overall.
Friday, January 2, 2009
My Trading Style
I am a short-term trader of the E-mini S&P. Over the last 16 years I have tried trading pretty much all commodities on pretty much all time frames - but it has all led me back to the firm idea that it is much easier to predict the weather over the next 15 minutes than the next 15 days. So I use short term volume charts of the ES to trade.
My primary charts are the 9500v. the 4750v and the 2375v. I also have up on my screen a 19000v and a 3-min ES chart and I use these to establish context, which they do excellently. I don't watch the Dow or the Nasdaq or the Russell or the advance-decline line or the Tick or the Tiki or anything else. I have tried them all over the years and found a diminishing level of return from the information. Reluctantly, and after many attempts, I was forced to conclude that more is not better, that there is a limitation to the amount of useful information my brain could process and still maintain clarity. It was getting to the point (I'm sure you have experienced something similar if you've been trading a while) where I would see a trade setting up on one chart and would look across at a Tick chart or a Nasdaq chart and see something there that would fail to confirm the trade, so I would pass on the trade. And of course we all know what happened to the trade, right?!
I remember one day I got rid of all the charts I had up and asked myself "If I had to trade just one chart, which one would it be?" I decided it was the 4750v. So I experimented just using that for a while and actually did much better. The only problem was it didn't generate enough trades and it became too boring waiting for the next trade so I found myself at risk from distraction. So I added the 2375v. That filled in the gaps nicely, generating enough signals but without trading too much noise (although with the 2375v you've gotta know what you're doing or you will end up just trading noise)
Now having said all that, I keep an eagle eye on the 9500v and 19k because that's where the best trades come from. The ideal setup is where a nice swing is happening on either of these and you can find a way to enter on the lower timeframe charts.
I did a lot of research at one point on the average number of trades I could expect each day on the 4750v and 2375v and it came out to about 8 on the 4750v and about 15 on the 2375v, for a total of roughly 20-25 trades a day. I'll miss some of those as they're setting up (because I'm thinking something else is setting up) and I'll be away from my desk for some of these, especially in mid-morning slower times. But my goal is to take 80% of all the trades that will be marked on my charts by the end of the day as being decent trades.
I use a color coded system for marking my charts:
So I don't want to see too many green arrows! Because that will mean I'm either not following my rules or I'm not seeing the setups well enough - either way that's not OK.
My primary charts are the 9500v. the 4750v and the 2375v. I also have up on my screen a 19000v and a 3-min ES chart and I use these to establish context, which they do excellently. I don't watch the Dow or the Nasdaq or the Russell or the advance-decline line or the Tick or the Tiki or anything else. I have tried them all over the years and found a diminishing level of return from the information. Reluctantly, and after many attempts, I was forced to conclude that more is not better, that there is a limitation to the amount of useful information my brain could process and still maintain clarity. It was getting to the point (I'm sure you have experienced something similar if you've been trading a while) where I would see a trade setting up on one chart and would look across at a Tick chart or a Nasdaq chart and see something there that would fail to confirm the trade, so I would pass on the trade. And of course we all know what happened to the trade, right?!
I remember one day I got rid of all the charts I had up and asked myself "If I had to trade just one chart, which one would it be?" I decided it was the 4750v. So I experimented just using that for a while and actually did much better. The only problem was it didn't generate enough trades and it became too boring waiting for the next trade so I found myself at risk from distraction. So I added the 2375v. That filled in the gaps nicely, generating enough signals but without trading too much noise (although with the 2375v you've gotta know what you're doing or you will end up just trading noise)
Now having said all that, I keep an eagle eye on the 9500v and 19k because that's where the best trades come from. The ideal setup is where a nice swing is happening on either of these and you can find a way to enter on the lower timeframe charts.
I did a lot of research at one point on the average number of trades I could expect each day on the 4750v and 2375v and it came out to about 8 on the 4750v and about 15 on the 2375v, for a total of roughly 20-25 trades a day. I'll miss some of those as they're setting up (because I'm thinking something else is setting up) and I'll be away from my desk for some of these, especially in mid-morning slower times. But my goal is to take 80% of all the trades that will be marked on my charts by the end of the day as being decent trades.
I use a color coded system for marking my charts:
- a PINK arrow means I took the trade and made a profit (or break even)
- a BLUE arrow means I took the trade and made a loss
- a GREEN arrow means I didn't take the trade but it showed up after the fact as being a decent trade (so I can learn from them)
So I don't want to see too many green arrows! Because that will mean I'm either not following my rules or I'm not seeing the setups well enough - either way that's not OK.
New Year 2009
I have been inspired by Don Miller's superb trading journal to create a journal of my own, beginning January 2009. One of the things I am attracted by is the idea of using a journal to hold myself accountable to my goals, as a sort of benevolent but unseen witness to whom I have to report each day. I have found that it has been too easy for me to cop out of dealing with difficult trading situations by letting myself get distracted or switching my attention to some other task, answering the phone, etc. It became so obvious that at one time I began thinking of the phone as an indicator - whenever the phone would ring it would be a sign that a decent trade was about to set up!
My goals for 2009 are:
My goals for 2009 are:
- I want to become consistent in my trading success, rather than up one day and and down the next
- I want to become significantly profitable, in other words, generating the kind of income that would create a significant difference to my lifestyle, rather than just making a few hundred and giving back much of it in commissions. The first step in this is a target of $500 profit per day consistently.
- I want to share my expertise with others, although this is frankly of lesser importance and would probably only happen if others start being interested. I'll leave that to the universe. As my wife would say, "If it's right, the universe will applaud". At this point I don't need to be some hotshot teacher. I've been there in my other work as a psychologist and consultant and while it was great, it's not what this is about. I need to do this for me now.
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