The Market is Always Right

The Market is Always Right by Thomas A. McCafferty is the latest trading book I am reading.
I was pleased to FINALLY see something I have been telling people put in a book.

To quote:
Successful traders, contrary to popular fiction, tend to be conservative risk takers. This may sound like an oxymoron, but it isn't. The true art of trading is discovering how to get an edge on the market you trade. How can you put the odds, even if ever so slightly in your favor? The trader who does not do this is a gambler. That is the difference between trading and gaming.

I cannot stand gambling and I find nothing amusing about people flippantly comparing it to gambling. It is calculated controlled risk. You cannot control the inherent risk when you drive your car everyday, but YOU CAN control your risk on every trade.

28W - 10L = 38T = 73.6%

Base System: 28W - 10L = 38T = 73.6%
Sub System: 14W - 0L = 20T = 100.00%

Trading: No trades today
Net: 0
Net:0

Tough day for the system, not many signals, but it still won. I love the fact that the subsystem went for 100% again today. Trde of the day was a spectacular short near the open.

31W - 5L = 36T = 86.1%

Base System: 31W - 5L = 36T = 86.1%
Sub System: 16W - 4L = 20T = 80.0%

Trading: 80% Profitable
Net: +650.00
Net: 13 Points

91% of my trades were long on a day when they market was hammered down. The system had a strange low number of valid signals today.

My daily short signal a few days ago seems to have worked out very well. I read on the John Carter book this weekend that markets cannot sustain levels below or above the S3 or R3 level, WRONG! Hell, I think we hit the S4 level!

Mastering The Trade by John Carter: My Review

Call me cheap but I always try and find a bargain when buying training material. I got a like new copy of John Carters book for about $33 shipped from Ebay. I tore through it this weekend and got it read. I skipped a lot of charts, since I already understood the concepts behind his setups.

I figured the $33 was would more than pay for itself in the education I would get.
I will sum up the major concepts and list them as pros and cons in my opinion.

Pros:
Top down approach, researches all markets, has an idea of the big picture.
Theories on stop runs moving the markets churning the novices.
Psychology - most important aspect of trading.
Market Internals
Setups for Trades
Business/Trading plan

Cons:
Gap Play
Theories on 5m Market Volume predicting market direction for the day
Computer advice
Brick Play
3:52 play

These are just my opinions. The most important thing for me was seeing a real trading plan. I finally understand just how detailed it should be to give the trader a direction every trade and every day for the whole year. This alone was worth the price of admission.

Some of the trading strategies just do not resonate with me. The computer advice was good for the average computer owner, but was not helpful to me.

I suggest any trader or novice read this book. There are many good self checks in the book to help keep you out of impulse trades. I really took away a sense of needing to tighten up my plan and really focus on getting consitent following strict rules and goals. I plan to revisit this book many times and maybe backtest some of his setups more. Perhaps I am missing the market direction analysis and not understand it deeply enough right now. He is really a swing and position trader at heart (I think) so he tends to really analyze the bigger picture and timeframes.

I like the top down approach to the markets by doing daily checklists and research. I may not see the relevance for my particular system in doing so. This may change over time as I oneday hope to swing trade, position trade and daytrade all at the same time. His trade setups are valid and there are many many chart examples. I found the most value however in the last chapters especially getting to see his trading plan example.

Tech Advice for traders.

I work in the tech field, so I thought I would give some advice to those who decide to avoid the inevitable day when the pc dies in the middle of a trade.Some of this will be beyond the average Joe, but the more you can follow it the better off you will be.

1. Get a UPS power supply. Plug in the pc, monitor, modem, firewall and router to the UPS. Aside from lightning protection I guarantee one day your power will go out. It is only a matter of time. They start at $55.00 and will allow you to close your trade and shut down your operating system when the power goes out.

2. Build a computer or have someone close to you build a pc from name brand standardized parts. If your power supply or memory dies, you can get one quickly locally vs. sending it off to or calling Dell or a major pc maker.

3. If you can afford to build two full pc's, then do it. Leave one loaded and ready to go in case your main machine dies.

4. If you cannot afford two machines, at least get a removable hard drive bay. Load identical new drives for trading software and OS only. If one stops booting or is hit with malware, you can turn off, slide it in and reboot to a working clone drive and be trading again in minutes. This is CHEAP insurance.

5. Don't email, web browse, fileshare, mp3, instant message or ANYTHING else with your trading pc or trading drives. Do not use your family pc to trade from. Do not let anyone use your trading pc. The average person will be infected with malware many many times due to human nature. Yes, even with antivirus and firewalls it IS going to happen.

6. Only load the exact software you need on your drives. Keep your operating system, trading software, video card drivers and antivirus up to date.

7. Keep your pc off the floor. It will suck in dust and hair and dirt otherwise. This increases heat and heat kills. Every 6 months "gently" blow out the pc with compressed air. Do NOT spin the fans 6000 rpm's with compressed air, you will burn the bearings out. One month later your fans will begin to grind and die. Hold the fan blades with a pencil or a finger while cleaning them off.

8. It is ok to leave your machine running. This is an endless debate. I say if you have temperature variances in your trading room, leave it on. It stays one temperature and one humidity level inside the case and connections will not become brittle on the motherboard from the heating and cooling cycles. On the flipside if an electrical storm is coming, you can turn them off if your not using them. If you have no software memory leaks, it will not hurt anyting by letting it run.

9. Get a real hardware firewall loaded with anti malware software. Learn to use it. Sonicwall offers Total Secure. Avoid Symantec and large security suite type products for the pc itself. Try something like Eset NOD32 which is lightweight on resources on the pc itself. If you followed the above rules, you might be able to get away without antivirus at all on the pc, but get it on the firewall.

That is all for now.

51W 13L 64T = 79.7% Tough Day!

Base System:
51W 13L 64T = 79.7%
Sub System:
28W 5L 33T= 84.8%

Trading:
No trades today, no time at all.

Starting reading John Carters "Mastering The Trade" last night. So far it's so so. Some new ideas, some old, so useless info and some priceless info.

My system has a weak short signal on the daily chart, pretty close to what I had predicted yesterday. What a terrible day for trading! Chop Chop Chop. This was the worst looking batch of signals I have seen ever in the system. I think I would have been profitable, but not an easy day by any means.

I recorded a seminar of live trading calls today from Bulls Eye Traders. Franz Shoar. I am curious to see how well the system did vs. this pay service, I am predicting my system did much better. I will report back after I watch the full seminar.

I hope everyone was profitable or at best even on the day. Chart of the day shows a great, clear as a bell signal short. My signal was in the very start of this huge bar down. This particular signal is somewhat rare and I was checking yesterday, it seems to have a higher than normal win ratio. I may start tracking this signal on its own.

77W 15L 93T=82.8%

Base System: 77W 15L 93T=82.8%
Sub System: 29W 4L=33T 87.9%

Trading:
No trading today, no time at all.

System was working just fine though...nice and steady.

We neared the 100 SMA today on the daily charts. If we close a decent amount lower tomorrow, it could setup a short of the systems daily chart. In case you don't remember the last long on the daily charts it was the market bottom a few weeks ago.

Todays chart was a long continuation trade.

72W 20L 92T = 78.3%

Base System: 72W 20L 92T = 78.3%
Sub System: 27W 3L 30T = 90%

Trading:
None today.

Lots of smaller moves with a higher than normal trade count today. I was not near the screens at all, but it looked to be another good day. Market direction and sentiment seems mixed.

I am still working with ideas for filtering losing trades.

76W 10L 86T= 88.4% Opinions are dangerous

Base System: 76W - 10L = 86T = 88.4%
Sub System: 20W - 0L = 20T = 100.0% Again, another 100% day, wow.

Trading:
Net: +975.00
Net: 19.5 points
Accuracy: 70.49%


I tried to relax today, but I had the chance to watch the markets and I just can't sit there watching signals pass by.
The subsystem racked in another 100% day. It is slightly harder to trade though. Today I was experimenting with both systems together. Although I had my bad moments, I really was back in the game today and saw much of the morning session. I really could get a feel for where we would pause, reverse and dive quite often. I still played the average down game and got stuck in some real bad trades. When I do this, I always close them even or for a slight profit/loss to allow my P&L numbers to be real.
The fact is many times I miss 6 points of trades because I am stuck in something trying to get even, so what did I gain by moving my stop? This is the discipline I need to work on before going live. Even as good as this system is, it is SO hard controlling the trader.

At one point I was doing well and using dynamic S&R levels to confirm my signals. Then I formed an "opinion" that we would break to a previous high. I got in long and got stuck backwards against my own short signal. As usual my system was fantastic, the short fell over 4 points against me with me riding in it! I worked through it, but again, I missed some easy points fighting a bad decision.

I have found out that there are prop trading firms that will give me a $50,000 account and they absorb the losses in exchange for a cut of fees. I am officially open to this arrangement from a firm or private party so feel free to contact me if you have the money and need a system. I have something more than good enough to sell and I would be willing to teach it to someone after they sign a non disclosure.

Chart of the day shows a great long opportunity off the bottom, followed by a short off the top - just perfection. I have never been able to ride these, but I am happy taking what I can when the signal is there.

48W - 7L = 55T = 87.3% Rally Fest

Base System: 48W - 7L = 55T = 87.3%
Sub System: 15W - 5L = 20T = 75.0%

Trading:
Net: (-$300.00)
Net: -6 points
Accuracy: unknown due to software issues

I usually preach against listening to news, but I have to admit today was a day to have known what was going on. The premarket action already had a HUGE rally showing that Wall Street really does have insider trading happening. I actually do not know what time the news hit - but something was clearly going on way before the open.

I have some personal things going on and had issues with Ninjatrader. Midday I switched back to Bracket Trader and that was a mess. With no mental focus and many distractions I was slaughtered. The system as usual did just fine. I had always read about traders needing to stay away from the market when distracted and I finally got to see why. I had some good trades and should really have been ok, lesson learned. Even though I will have some time tomorrow, I will take the day off. Wednesday I will be unable to view the markets. I will post nightly recaps if I can.

Aside from the usual, I need to begin working on a solid trading plan and STOP moving STOPS. Once I get the plan going if it proves profitable and I can stay disciplined I may be ready to move to real money.

Chart of the day shows some shorts and some longs as signaled on a 1m chart.

Simulation: Why it is important.

Dr. Brett Steenbarger agrees on the importance of simulation as a trading base.

How many times have you heard this from friends or family?
"Yea but are you making real money?"
"If it was easy, everyone would do it"
" It's like gambling"

I took a course a few years ago in which they mandated after the trader fully understood the system, that they use a real simulator to trade with realtime market data. They required that you have 10 profitable days in a row in which you hit your profit target. If you made it to day 8 and failed, you start again. Only when you had this hurdle overcome, did you think about trading real money.

This simple concept is more important than any training anyone could have. If you do not have confidence in seeing the system win and lose, your emotions will be too great upon entering and managing a real trade. I am lucky enough to have worked through the emotion of real money while swing trading. This simulation idea really made an impression on me though.

I read recently where a trader simulated for six solid months everyday to learn the ups and downs of his system. (ESResistance) I am happy to say he now reports he makes his income all from trading full time. This is AFTER he took the time to learn it strengths and weaknesses and more importantly his own weaknesses.

I rarely get a positive response from anyone when they ask about trading. There seems to be three scenarios I hear with the third being rare.

1. Are you making real money yet, if so why arent you rich?
2. Yea, I knew a daytrader once, he did great for awhile then lost it all and more.
3. Yes, I know a guy who trades from home and does very well.

It is human nature to question traders and to believe it's not possible. Try and brush it off and move on to more pleasant conversation, like how they are hoping the plant does not lay them off, or just how crazy gas prices are. Thinking outside the box that we were indoctrinated into scares the average person. Try not to take it personally.

So let's address those comments.

How much real money are you making then???
None. I am not making real money yet, but I am posting a daily profit for X days in a row on average. I am training to be a methodical, logical and calm trader before I risk my hard earned capital. I want to trade for life, not for 6 months.

If it's that easy everyone would do it, why isn't everyone doing it?
Because it in fact is not easy and requires a special personality to truly succeed and overcome common psychological flaws and preconceptions that we all have. If they really think your simulation is easy or not real, ask them to do the same and show profitable trading consistently.

"Why not just go gamble because that's all your doing"
If there is a casino that will allow its customers a 70-85% edge in winning, then I am gambling. By the way, what's the address to that casino? A casino can make all the money in the world with a 5% edge. I am risking money trading only when I know I have clear edge and I know the maximum risk if I am wrong.

Simulate as long or longer than you feel you need to. You have nothing to prove to anyone but yourself. Have a profit and loss goal in mind for the day and go back to simulated once you have won or lost the max for the day. Slowly build your trading up to where you need it to be only when your are consistently profitable and more importantly comfortable.

38W - 5L = 43T = 88.4%

Base System: 38W - 5L = 43T = 88.4%
Sub System: 18W - 3L = 21T = 85.7%

Trading:
Net: + $1200.00
Net: + 24 points
Accuracy: 85.71%

End of week ES average daily range: 28.65 points

Today was a solid mix of styles with at one point a string of 15 winners in a row. Talk about pushing the outside of the envelope! The system had plenty of signals and I took plenty of those. I also did some work off of my dynamic S&R levels and stationary S&R levels. I mainly caught parts of the morning sessions between phone calls and meetings. I traded fairly well between distractions and tried to let profits run more than usual, but still kept a trailing stop ultra tight.

The new signal is one that takes some nerve to take. It completely stops the market after a swift move. I feel it is detecting capitulation. The moment when traders give up due to the pain of the loss being too great. I step in a buy or sell at the high or low.
I am starting to understand what the system is doing. The market is nothing more than support and resistance (S&R) which is nothing more than fear and greed with is nothing more than human nature.
Somehow, the indicator is able to catch this battle and show me when the sides are switching places. So the signals I have been trading from are really just showing me support and resistance areas even if I do not happen to have them plotted visually. Because so many traders use different methods to determine important S&R, it leaves places in the the market where I get signals at seemingly random intervals.

I also zoomed out today for a wider perspective and can see that I might have the ability to capitalize from larger moves someday, perhaps trades lasting an hour or more. All in good time. For now the goal is to learn to grind out a steady income.

Chart of the day has a breakdown signal. It was a perfect formation one that can be taken with relative calm.

70W - 12L = 82 T = 85.4% Subsystem potential.

Base System: 70W - 12L = 82 T = 85.4%
Sub System: 23W - 1L = 24T = 95.8%

Trading:
Net: + $975.00
Net: + 19.5 points
Accuracy: 77.50%

The subsystem should apparently be the my main system!
I was able to trade for a bit today on and off between phone calls and working.
I mainly traded the base system and also had some pure S&R trades. Although I did get too aggressive and felt the need to be right a few times, I did make some progress in optimization. I had a few trades come back to stop me out at +.25, but I also held some for greater gains with a tight trailing stop. I had more short trades than long today. I was able to get as much or more profit as usual while trading less, this is important.

We finally got the reversal I thought might be due earlier. The 50% Fibonacci level at 800 did indeed hold for now. Traders really like that 50% fibonacci. We had a great short setup at 9:43 CST that was a 50% fib from the earlier move down.

My chart today shows how the system often signals the top and bottom, without realizing it. I have read that picking tops and bottom is a losers game. I just take the signals as I see them.

Initial Optimization thoughts

Looking back over 10 trades from today, as I thought, the results are cause for slight euphoria.

Delusions of grandeur aside, let's run some numbers and talk facts.

3 trades could have been closed at +.25 since they went against me. Moving my stop to +.25 once it moves +1 in my favor seems to be a valid method. These may have become stop outs. I need to see this in live action to be sure. Trust me, even with this volatility my system can handle tight stops.

The additional points available on the remaining trades were easily around 20 points. A minimum of 13 points extra vs. going for 1 point. Add in the savings in fees of getting 13 more trades to get those 13 points and that's like a free point in itself bring up to 14 points.

In looking at this I remembered that I saw this mechanical exit method long ago. I had put the idea aside to concentrate on trading the system live and getting consistent. I had planned on learning to let the trades close mechanically eventually once I was making money. This was a nice way to benefit from the time invested in reading a book. Sometimes years of study and thinking come together in a matter of months.

I was interested in the 1 point scalping potential because back in 2005 the ES had a tiny daily range. I want a system that can deliver consistently if the markets go back to that mode. I firmly believe that traders looking for these consistent large moves will be crippled and whipsawed if the environment changes. I also believe the base system will continue to grind out profits in a lackluster market.

Book: Optimize Your Trading Edge

This is a great book by Bo Yoder. Apparently, my desire to have a high win rate, even at the expense of missing some huge trades, is a common mistake among traders. He has even helped large firms optimize their proprietary computerized trading systems. Over time if I adjust my emotions to handle more scratch or losing trades, while letting the trades run more, I could most likely quadruple my net profits. I need to forsake some emotional pain, for financial gain. It comes right back around to the concept of Zen. The "need to be right" is often stronger for traders than the need to make money! The EGO is destructive in trading.

Inspired by this latest concept, I am going to start checking my setups and see how much profit was left on the table vs. how many break even trades or losing trades there were while going for runners. I think I may be shocked at how much better I can do by allowing my ego to get bruised some. The next step obviously will be to start adjusting my trading style. The systems signals will still be just as valid, but I can also utilize the indicator for exits. I have been tracking two possible mechanical exits based on the indicator. It appears both would offer much greater potential than going for 1 point. The second of the two would really allow for greater profit at times, maybe triple. In addition it would greatly reduce my trading fees and stress levels.

Looking back on my research so far, it looks like I was trying to use the 1 point to prove the system had a consistent edge. In doing so I failed to understand that in most cases the risk to reward ratio is more important.

He really explains how many traders come close to making it, very close, but fail. Based on my history, I know I am on the right track. I am in the toughest phase of the process right now.

This was a surprisingly relevant book and I highly suggest all traders read it and find ways to analyze the systems they use.

69W - 12L= 81T = 85.2% 800 level resistance

Base System: 69W - 12L = 81 T = 85.2%
Sub System: 26W - 2L = 28T = 92.9% (pinch me I am dreaming)

Trading:
Net: + $362.50
Net: + 7.25 points
Accuracy: 100%

I will structure my statistics in this format now for easy reading. The sub system is the same as the base system but on a longer term candle period.

My buddy Jeff trades live daily and coined the term "gunslinging". This is my introduction of the term to the trading world. "Gunslinging" is entering a trade based on feel or momentum, rather than a perfectly technical setup. Jeff grabbed 10 points off the Fed Announcement. "Sling away Merrill, sling away" (see the movie "Signs")

I had a clear short signal within .5 points of the top at 800. Accuracy!

I had almost no time to trade today at all and was very busy. 75% structured, 25% "gunslinging" but I managed to have a 100% session. My gunslinging is more about moving a stop or adding a contract if you feel the signal was right, but it might need some wiggle room.
Each time I got near the screen I just happened to see a setup almost instantly. Here is the confidence building part. 75% of my trades were long during the morning short frenzy. Going against the masses can work. If the signal is the right one it can be taken with a good deal of confidence.

Last night I noticed 800 was the 50% of the high/low on daily charts. Then, I completely forget to watch that level. Actually, I was nowhere near the screen at that time anyway. The morning started out like I thought it could. They hammered the longs badly. Caught everyone long into the close and then blew out their stops during the morning. Once they shook the market clean they ran it right back the other way. I thought for sure it would have closed down, so I was shocked to see it rally again. For the fibonacci traders the 800 level as a high makes perfect sense. The sellers were waiting for that level and they hit it hard. Although the day was up technically, we have a candle that shows a perfectly even battle. Massive volatility is my systems best friend, so I had a higher than norm win rate.

I have now incorporated the new signal into my totals and will no longer track it on it's own.

Longer Time Frame Signals

Last week I checked a longer time frame signal and found it performed 100% that day. I just checked today and over the whole day and into post market it is 18/18 = 100% again!
Yesterday its was 21/24 Winners. 21 Winners - 3 Losers - 24 signals. 87.5%

I am forced to use one small screen at work while remotely trading. At the very least I should be watching this longer time frame for trades. 100% again. Unreal. I have been forcing myself to try and use one monitor, but I think ideally a trader needs three as a minimum. BUT...that being said, only if what's on the three monitors serves to simplify the act of trading.

Paralysis from analysis is a real and deadly issue. If I can say one thing, it is that I have long ago stopped hesitating. If anything I should be more sure the trade is valid.

I think I have been enthralled with the lower time frame because I am usually rushed and like to see trades working if I only have a few minutes to check the screens. I will keep tracking both time frames. Any thoughts?

38W - 9L=47T= 80.9% BuyBuyBuy... On Sale Now

67.47% profitable on all trades with a slight edge on the long side. Poor performance.
+$1137.50 Net profit
+22.75 Net points

I am FEAR. Fear grips my every moment. From fear of missing entries, to fear of stopping out to the fear of breaking even to fear closing my trades early. I am FEAR incarnate.

If your a trader, you understand that all too well. If your not and you think trading is easy...you must also think there is no need for sports coaches and psychologists.

I started the day well and actually added a contract to an open trade when the trade was going MY WAY. This was a first and is a good thing. I was quickly past my daily goal and then I began with the "need to be right", the adding contracts averaging down losing trades and moving my stops and fighting to get even or ahead .25 or .5.

CLEARLY, the system gives an edge to trading. If it did not my terrible trading performance would be showing more losing days. This is a good thing.

I made some real progress today understanding why some signals scrape out 1 point and some go for 5 points. I was unable to capture any of that logic in my profits however. I want to thank Pete at Keystone Trading and Greg Capra at Pristine. Their free seminars got me thinking in a new way about S&R and I came up with an idea that seems to have promise. Sometimes you might not agree with what you hear and you might not use it, but it will inspire you to think outside the box. This is why I never stop listening to seminars and reading books.

I am not surprised that we have rallied again. What perplexes me though is why in the world we rallied right through the prior days high without even a pause? Certainly some buyers (suckers) must have got trapped long at the top the other day? How can there be no sell orders sitting at the top??
If you have insight into this, please comment, because it blurs my understanding of S&R.

At 13:30 today the market collectively bought the 50% FIB retracement of the morning and the rest was history. Skyrocket. I was in there averaging down and caught a nice signal but failed to grab the amazing runner. Chart of the day shows this move. (no the 50% fib is not my system)

Monday Daily Chart: Look out below

I forecast a pullback starting today last night. I am doing nothing more than using concepts I learned from Pristine's training. For the morning session it looked like I was wrong, but we sold off HARD at the 771 area to end the day with a massive BEARISH candle. This could indeed be the start of a pullback lower or "death drop". The odds are a lower close tomorrow, or at least within the range of todays large range. I will trade both directions as always however.

Monday 39W +6 L= 45T 86.7%

The raw system did very well today averaging 86.7% winning trades.
Net profit $1187.50 or net 23.75 points.
Trade stats 72.5% correct on all trades.
I traded aggressive today, moving stops and averaging down. I was also distracted, nervous and trading on and off between other things.

I was trading blind without S&R levels today and I have no idea why 771 was important, but clearly there is something there.

Trade of the day was a picture perfect signal on the system and also happened to be a huge double top. Short 12:47 CST

Weekly low resistance hit

We hit a weekly chart low this week during this rally near 760. We could see some pullback here during this week.
Key levels are 745 and 760 for intraday trades.

MoneyShow.com Recommended Viewing

I discovered a great site with free seminars from notable traders and trainers. I was watching one of my mentors just now, Oliver Velez. I was having doubts about my system and having short term base hit trades. Earlier when watching a Hubert Senters/John Carter video they were talking about large stops and giving things room to run. I was feeling guilty about missing some 4-5 point moves. However Oliver just stated an incredible fact...

"the average length of a trade for a Nasdaq market maker is 4.5 SECONDS."
"the average length of a trade for an S&P market maker is 4.5 MINUTES"

If the trading GODS are ultra short term traders, I can safely say I am on the right track.

Friday the 13th 45W 10L 55T=81.8%

Average ES Daily Range for Week: 30.65

Today I spent some time just watching. I saw quite a few winning trades go by and the system was working well. Late in the day I got Ninjatrader running and took a few trades. In my rush to do so I forgot that I was charting Junes contract and had the March contract in the DOM. The trades still worked out and I then corrected the issue.

Results: 8.25 net profit of $437.50 I was 92.31% correct on my trades. I cannot complain there.
I took more time in selecting the signals and was using the markets internals ideas at times. I need quite a bit more time with my internals ideas however. As usual they are harder to trade in the live market than reading a chart at the end of the day.

Something very interesting was happening. I was seeing price not moving when it should have moved according to the internals. Shortly thereafter a large move would occur. I will be analyzing this pattern and making sure I have a reason to have a bias in the direction of the move. If this continues to work, this in itself could become a very high percentage trade setup.

Social commentary alert:
The news, as always is over saturating the story of the markets rally and looking for reasons why. Once the markets have run all the scared money out they reverse it, simple. When the pain is too great to stand, they are waiting there to buy it low and sell it high. We are sheep, we move with the herd. Most look for the easy trending moves, while the pros are buying the falling knife with an open hand and taking the risks and reaping the rewards.

Trade of the Day:
I have one signal that often signals a reversal. At times it reverses the whole market as seen here.

Rethinking and Retooling

Sometimes it's good to take a step back and rethink things. Today was a very stressful, exhausting day. Although it is simutrading, I take the outcome seriously and feel the pressure to succeed while simutrading.

A long time ago I was working with ideas related to market internals. Recently I read a lot of traders using the TICK indicator for timing trades. It has some merit, but can be difficult to implement. If you doubt me just watch the TICK if your new to this indicator.

I reworked some ideas just now around market internals utilizing the same signals I use currently. I think I may have a new way to enter trades, but it is still technically the same system. I will check this for a few days just to see if it produces better percentages or more obvious signals.

Wish me luck.

Thursday 41W 18L 59T= 69.5%

New signal = 69.6% New Time Frame 75%
Looks like we hit my target on the daily charts. The talking heads said it was good Citigroup earnings or something...I say it was technical analysis of the traders who knew the news early printed themselves into the charts. We clearly had some euphoric senseless buying happening.

Traded on and off today. I was reckless and had wild swings. I ended up +$500 or 8 points net, but I am considering today a loser due to how I traded and reacted.

I am currently reading "Optimize your trading edge". I am realizing just how frail the edge can be due to the trader executing the trades. I need to regroup, look at losing trades and filter some signals out.

Wednesday 44W 13L 57T=77.1%

I was able to simutrade on and off all day today. On a positive note I ended up 35 points net or $1750.00. I did better at closing losing trades and generally in controlling the urge to add contracts to losing trades. I missed a LOT of profit and traded way too much, but overall made some progress in keeping emotional control.

I think for many traders, myself included, the enemy is the need to be right, the "ego". I read a good book called "Zen In The Markets". It really covers how much the ego stands in the way to becoming a great trader. If you can admit your wrong quickly and honor your stops, it is a great foundation.

I was experimenting with a larger time frame and took some trades using it. The longer time frame signals were 23/23 today, yes, 100% correct. Certainly something to consider.

The new signal did ok today again 9W 3L 12T=75%.
My overall win percentage of the trades was 69.83%, not my personal best.

Tuesday Rallies - 42W 12L 54T=77.7%

It looks like my daily chart analysis was correct and we have rallied long towards the 20 MA.
The new signal for today was 18W 8L 26T= 69.2%

The system was quiet today only delivering 54 trades. I had some time in the a.m. to simutrade and did terribly. -$412.00. I was against the uptrend for one thing I left some positions open because I had to leave the office and obviously it went against me. I was trading sloppy, reversing, second guessing myself etc. I did however manage to close a lot of trades quickly if it went against me, small losses at first.

Clearly I am distracted and lacking patience in the setups. Would it be better if I was not working? Maybe slightly. Its a psychological game for sure. Clearly the system itself is reliable, but I need to set strict rules and practice following them.

Monday 65W 16L 81T = 80.2%

The system held steady delivering 80.2% today.
The new signal did well again. 21W 5L 26T= 80.7%

I took a few mixed premarket trades while getting ready for work, no big news +$25.00 net. I did not have even one minute to watch the markets today. My plan is to trade very cautious and adhere to my stops. The aggressive trading is too speculative at this time and a beginners mistake of boredom setting in.

Well, my daily chart analysis of a possible reversal has held today. We worked right within Fridays large range. The long rally was pounded back down however, let's see how the fight goes tomorrow.

Relief to to the sellers? Starting soon...

As of market close Friday I have a confirmed long setup on the daily charts.
Tonight, Sunday night, it is staying slightly positive as well in after hours trading.

The last signal like this one was short as shown. We have a large range from Friday to work in, but I will not be shocked if we recover some ground this week back up towards the 20 MA.

Market data over the last three weeks shows an average daily range of 30.32 points.
This is a far cry from the days of a 3 or 5 point range.

Friday 54W 12L 66T = 81.8% Reality Check.

Ok, I finally had 30 minutes in front of my own pc, so I was very excited. The problem was it was during a huge trend up on a Friday at 2:30pm. I started out well. I was trading aggressive and was up $1500 quickly. Then the uptrend began and I kept adding and shorting against it. I once watched a trader lose 30 straight days of profitable trading in one day doing this same thing. You would have thought I would have learned. Well, I learned a little because I closed the trade and took the loss of -$2500 and some change.

He on the other hand held the position overnight. The #1 thing not to do. His position went against him more overnight and who knows just how much he lost.

So today was a nice dose of reality about ignoring signals and predicting the future. Better to have that happen simulated than live. Also I had issues yesterday with the software while connected remotely. This proved I was right in not trading live that way.

I will say this, the system did signal nearly every single long with the trend and only had 1 losing trade signal against the trend. Again, I the trader blew it, not the system.

I will spend some time crunching the numbers in trying to keep stops tight and possibly have more break even or small losers than full stop losers. This might be a safer way to trade.

The new signal: 20W 3L 23T = 86.9%

On a positive note, the new signal did well again today. This will be fun to watch over the next 10 days or so before I get confident.

Trades of the day were a hair raising long following by a risky short.

Thursday 65W 10L 75T = 86.6%

I was able to get some simutrading in today and ended up about $2362.50. I traded aggressive again. I only had one or two that went against me enough to get uncomfortable. As usual I did not catch the big moves. It appears a 2 point stop is needed at times due to back to back signals forming.

Trade of the Day was an explosive short with the trend. I confirmed tonight that Ninjatrader includes my trading fees in it's P&L if I am using Interactive Brokers (which I am). I thought for a moment my recent posts were off not having included my fees, but I was wrong.

I have been watching a new signal for a few days now. I will start tracking it. I have already begun trading it. Today it was 75% on the day.

Wednesday 68W 25L 93T = 73%

Some tricky short term and longer term trends today leave us closing about the 700 level. It is nice to see we regained some ground after the recent downward spiral.

I had limited time to simutrade today and was very distracted and rushed while doing so. I did manage to play slightly more aggressive and ended up net profit $1950 or 39 points on the S&P 500 Emini future. My goal is 2 points, but I am getting all the practice I can. They were all 1 point or so wins and at times had 2-5 contracts in all or nothing. I capped those trades off with a lot of little 1 contract 1 pointers on perfect signals.

The more exciting stat is that I was 85.48% profitable on all trades and 88.89% on my longs alone. Ninjatrader does a fantastic job of analyzing your P&L and has quite a few reports for this function. For those readers who "think" trading is gambling or are hearing that from family and friends, read those stats to them. This is well calculated risk, not gambling.

I am anxious to see the system if the range ever goes back to 5 points a day. I have traded the system on holidays or near holidays and although boring, it did work.

For the trade of the day I selected a trend resuming signal rather than my ever popular reversal signals. We had a weak head and shoulder pattern forming when the signal occured. This one would have worked with a trailing stop.

Til Tuesday 75W 13L 88T = 85.2%

75 Winners, 13 losers...not a bad day at all. I only was able to watch the market for the open. I saw about 5 trades in 15 minutes. It is amazing to watch back to back trades sometimes got for 7 in a row! I took four trades or so with three winners.

When I got home later tonight, I saw an afterhours setup. I quickly took the trade and got 1 point very quickly. My total net gains on the day were 4.5 points. More than my daily goal.

Soapbox Alert:

From a long term perspective, I am disturbed at how the market is just not finding any bottom. The last ten days of data are almost a 45 degree angle down. Apparently a new president is not enough of a distraction to bolster any positive thinking. It certainly will not cover up the fact that our "smartest minds" on Wall Street and in banking have made unforgivable decisions. Buying subprime mortgages from irresponsible americans sounded like a great idea right? Greed and gluttony have utterly decimated our financial systems and our real estate markets.

I highly recommend viewing Season 27 of "FRONTLINE": Inside the Meltdown. This is a great PBS series.

The trade of the day was a great reversal trade. I have read many trading books and the mantra is always the same. The "trend is your friend", "picking tops and bottoms is a losers game" I am here to say I pick tops and bottom all day long. It just works that way...a signal is a signal.

Manic Monday 86% 90W 14L 104T

Another amazing day. The S&P has failed to even think about holding the 739 level and it looks like the market is tanking FARTHER down.

104 tradeable signals today, just amazing. Nearly a new record. Today while simutrading I moved my stops and had added contracts and was stopped out while away from the screen. This left me with a negative $1000 start to my day. Part of this may have been due to switching from Bracket Trader over to Ninja Trader. Bracket Trader gives you instant fills, which I do not think feels real. With Ninja Trader you get delays, multiple price bumps etc. It feels very real and was handicapping me more, which I like. I want the simutrading to be the real deal.

Seeing the -$1000 start as a challenge, I decided to have fun today. I allowed myself to move stops and to add contracts to positions. I was very aggressive buying into tanking moves and selling into huge rallies. On average I was using 2-6 contracts with a max of 10 at times. I would not say I was entirely reckless however. I was slowly adding to the position if price was approaching resistance/support or additional back to back signals were forming.

I traded bad AGAIN missing some nice 4 point continuation moves, but I did snap up a lot of 1 point trades.

On and off all day between working... with a nice lunch break... left me with a net gain of $4337.50. That figures to 86.75 points. 2 points is my daily goal. This is where the uncomfortable silence goes..............................

So for fun let's say I can trade that way with the right account size and I trade 5 days a week. If I can sustain that everyday for a year, that's $1,041,000 net profit.

I am very analytical and a realist. I had never even thought it was possible to make that trading as a retail trader. Once in a while its good to really imagine what could be. This time however, with a full days worth of trades printed into my trading platform, there is not much left to the imagination. This system is working and its only enemy is me the trader.

Yea, I know..."but you can't win everyday". I agree it's the weekly totals that matter, but so far I have never had a losing day. It performs very consistently. The improvements need to made in the trader.