Friday, March 31, 2006
Seconds ago I was profitably stopped out of my beautiful short position put on at 11205 when the electronic Mini Dow Jones finally fell through support around 13:15.
There was considerable range down to 11170 but it sure didn't stay there long. Perhaps one tick. I just kept tightening up that stop as the position developed. It's been a long week of stand-by for me. I don't like to trade on days when the FMOC makes it's interest rate announcements. This week the sell-off was so dramatic after the new Federal Reserve Chairman addressed the committee I've been suffering from the "Missed the Move BLUES" for the rest of the week. I really hate to sit through those equity building moves. But that's said in hindsight. As usual the move down was so severe and rapid there was just no where for a trader like me to get on board. And the reason to stay out on those FMOC Tuesdays is the move could have been the other direction just as easily. The sell off is more of an unwinding I believe of long positions. The rest of the week illustrates that as no new shorts have entered. It's just a back and forth range of indecision. I think we'll be range bound trading the support and resistance the rest of the day now. We'll see.
Tuesday, March 21, 2006
Patience pays off. I ran an errand to ship a bunch of my son's personal items to the new city he's living in. I also needed to get my mind off the support and resistance back and forth the Dow and Emini S&P were giving us. Events actually made me grin as I left. I took a quick look at the Japanese candle stick charts before I left, saw a break out to the upside and stuck to my plan. Honestly, I hesitated to turn the computer off but I'd made my mind up and indecision breeds losses. I walked away. So here's how it went.
I drove over to the Greyhound shipping depot in my area, dropped off the two boxes and gave them far too much money. The invoice included a fuel surcharge. I'm waiting for that to show up on the round turn commission for trading commodities. It's everywhere now. Plane fares, even after paying high ticket prices. Even my mechanic charges a fuel surcharge on his bill. I can't figure that out because it's MY freakin' fuel he uses to test drive my van. I expect we'll see it on cucumbers and lettuce this summer. Anyway, returning home after my Tim Horton's double double I booted up the charts and sat down to see what was up. After I write this I'm going to try another screen capture in case you don't have charts of your own. These are the types of profitable trades you should be waiting for. And yet it's also a good example of how easy it is to get faked out.
The 12:40 bar on the 10 minute chart of the mini Dow Jones broke out again to the upside and closed high on the candle at 11402. It was another break out bar from the recent highs that had just formed while I was returning. I'd missed the morning rally accidentally on purpose for the reasons I've just explained...Discipline. When the close of that bar was taken out I went long. I rode that baby up figuring we're going to set a new pace higher and finally break out of these indecisive doldrums. This bar soared up to a high of 11413 and promptly sank to a low of 11308. The formation created was a double top with my bar I'd gone long. I'm totally engulfed and stopped out for a loss. Here's where it gets nerve wracking!
When the close of 11309 gets taken out to the downside I went short. In truth I didn't even plan my stop. The sell off was fast and I wanted on board. Usually I like to plan the stop loss first. As it turns out I had time to plan it but it sure made me uncomfortable that far away. High range bars like the 12:50 leave no place for a tight stop unless you go into the lower time frames like the 5 minute or one minute bar chart. That's exactly what I do.
So what proceeds to happen is my 13:00 bar proceeds to rally and I send in a stop just over the double top at 11402. The truth of it is my records show I set it at 11401 because I was moving fast. The next bar started to make me think I's stopped and reversed incorrectly as a mini rally ensued. The floor traders were probably testing resistance and searching for buyers to step back into the S&P pits. I grated my teeth, popped this morning's coffee into the nuker and filed my shipping receipt away so I didn't have to look at the screen. I'm not comfortable with a stop and reverse position and I didn't want to watch it prove or disprove itself. The 13:20 bar started to prove my position again but still I hesitated to bring down my stop to break even. Even though the high candle, high range bar seemed to set up the pattern, the entire morning was built up with bars just like that and this could all be a fake out. There is really no way to predict these things in truth. Anybody who tells you otherwise is kidding you.
Well, to make a long and profitable story a little shorter, it wasn't long before I was extremely happy to be short. Study that chart. I was able to pull the stop down at the end of each ten minute bar to the previous high and just let it ride. It wasn't until minutes after 3 o'clock that I got tagged out and I really wanted to be gone. I pulled the stop in so tight at 11317 it was going to get me out fast I hoped. There turned out to be more on the table but I don't like to be in that close to the end of the day. What a beautiful run and frankly I think I'll go out on a limb here. Today is an indicator of a nice topping formation and I'm thinking if the week plays out, I might shift my bias to the short side. Of course, tomorrow should be see saw after today's down side action. We have to rest now and again!
We just saw how wicked even the mini Dow Jones can be with a swing over ten minutes of 28 points. After yesterday's support and resistance chop chop salad bar I might just run some errands this morning and come back this afternoon. I don't like to predict but on the daily Japanese candle stick chart we seeing indecision and what I see as a topping action. The 60 minute Japanese candle stick chart is flipping back and forth for three days. No trend.
Now a couple of hours after the opening wildness I see nothing opening up. The Dow and Emini S&P remain locked in the support and resistance channel with gyrations either way. That makes me uncomfortable and I don't trade it. Off to errands.
Just coming back into the room in preparation for my day trip and I see the Mini Dow has finally taken off. My mental decision was to quit for the day and I'm sticking with it.
Friday, March 17, 2006
The vicious sell off we just saw strengthens the need for tight stops on a run up like this morning's first hour. The 10:30 bar in the Dow Jones reached a quick high of 11356 and sold off like a falling stone for a low of 11336 and it's close of 11339. It was wicked. I'd been looking at a topping formation but decided not to be short. Missed that baby!
Thursday, March 16, 2006
The double top on the Dow Jones 10 minute bar chart is being perfectly formed by the double top on the 5 minute bar chart right now. The first real sell point of the morning was just set up. It's been a great run up from the opening bar and the double bottom at 9:30 and 9:35. I don't trade the overnight session so didn't even have my computer on to catch the first rally at 8:30. No problem. There'll be more. As a matter of fact my thinking is to leave this short alone and sit tight. We're getting quite a bullish push in the Dow and S&P these last few days so I see these selloffs as corrections to support in this recent bullish trend.
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Let's talk! Otzi@telus.net
Wednesday, March 15, 2006
I got fed up with the chop chop this morning in the Dow Jones and buggered off to my boat. I wanted the feeling I was accomplishing something. In retorpect I'm glad I passed on sleeper Monday after Friday's gift. Yesterday I lost my focus and turned off the charts so I missed the Dow rally. And of course, by losing patience today I missed the final two hour breakout for a nice little rally. Better to lose patience, recognize the problem and walk away from the charts before your money runs away from you. Tomorrow's another day trade profit potential.
What is your biggest problem in your trading?
Let's talk! Otzi@telus.net
Monday, March 13, 2006
Friday March 10 was a treat. So much so that I haven't even opened the charts since. I wanted a full three days off. So I'm disciplining myself and not even going near Monday's action. I often feel that when a 'windfall' trend gifts a trader with excellent, no effort profits, it's best to stay away for a bit. Chances are despite the weekend, the next trading day after a mover like Friday will be a sleeper anyway. It's possible I might be missing something, but the personal strength I gain from not trading is worth it. The markets will be there tomorrow. And so will I.
Friday's trend was right out of the gate and just pounded in the equity for me. I won't dwell on this because you already know if you're active, trading skill and self understanding come more from the losses and not the wins. It's how we manage ourselves and study from our errors and mistakes that teaches better trading. When the trend takes off for you and all you've got to manage is the trailing stop, there's nothing to learn except how to control the greed.
Lack of discipline in that mode means you'll leave profits on the table. I've taught myself to let the market dictate how much I earn. That's not to say I don't frequently get knocked out in a retracing move only to miss the rest of the trend. But that's fairly easy to hitch up for the next leg by just trading the break out from the support or resistance range.
Having said that, there was an error I made and I need to acknowledge it. For your sake as well as mine. I had a real sense the market was going to sell off around noon. I gauged that not only would there be some profit taking but we might see a serious correction. I did something with which I've never been entirely comfortable. I raised my stop up so tight it pinched and I changed the platform to double the contracts. It's called stop and reverse. I'm just telling you that personally I have some difficulty committing one way and then having what it takes to quickly go the other. What it usually means is I'm admitting I'm wrong. That's probably why it doesn't sit well with my makeup. I'm just being honest here. Nobody likes to admit they're wrong but in trading, recognizing you're wrong early is better! There's an understatement if there ever was one!
Now in Friday's play, I was banking profit and willing to risk reversing for the sell off. There's a big psychological difference. I changed the platform when I pulled up the stop around 11:45 to 11155. I got clipped out of my longs on the next bar and let me tell you, I left lots on the table because the high of the noon bar was 11174. The low was 48 with the close at 11149. That's a range of 26 points to save you the math! I made my notes and promptly forgot that I'd doubled the contracts. In my feeble little mind I was flat the market. Of course in reality I was now short.
I don't like to sell tops usually because I like a confirmation the turn is done. That's why this behavior was out of character. In all honesty I'm sure I was rubbing my hands together, congratulating myself on how smart I was and thinking about grinding some espresso beans. It wasn't until I pulled the trading platform up on the screen quite a bit later to get it ready for another possible trade I realized what I'd done. I double checked the confirmed trade window and blanched.
I was short! I felt my blood pressure rise as I realized the potential damage I'd done to myself. I pulled up my charts and holy bar chart Batman, the profit taking sell off was well underway and I was in the clear. As it turned out the double top of 11158 at 12:30 to 12:45 held and the sell off carried on. I was onboard and didn't even know it.
Now that's just STUPID behavior on my part. I'd caught the reversal and not even known it. When you look at Friday's second dramatic reversal later at 15:00, you can see the potential wipe out of earlier profits I could have sustained. They rallied it up for the close so fast it made my head spin. I was long gone of course because I fixed the problem, set my stop loss to cover the shorts and changed the number of contracts back to normal. I chided myself for being so dumb but thanked my lucky stars I'd escaped and actually made more than I'd counted on. It's a lesson learned to check all the little details, especially I think now, when operating outside my own personal comfort zone. As I reflect on this, that might be what happened to me. I'd lulled myself into being comfortable as Friday's test of recent highs lulled me with it's siren song of profits. I'll be more on my guard next time and so should you.
Thursday, March 09, 2006
Switched over to June first thing this morning. That felt a little weird seeing as it was snowing right at sea level today on March 9th. That meant I started the day by missing the opening trade I like to look for. Too bad as it was a classic.
I spent that time switching over my charts. My trading platform gave me the notice upon start-up that June was now the front month. I thought I'd better not argue with 'Hal' as I call it. So I took more than 30 minutes to switch everything over From March to June. I don't mind that so much in the fall and winter when moving to the spring as front month. It gives me pause to move to the summer solstice so quickly right now. I get these feelings even though it's only symbolic...like a chart. That's what our charts are! They are symbols.
Study them with the right attitide and they're symbols of potential. Trade them with the wrong attitide and they're symbols of failure. The mind is an amazing thing. Our minds literally create our world for each of us individually. Sometimes when things slow down and I watch the bid/ask window on my trading platform (Hal) I wonder what folks are thinking. I often feel, as I've written before, that we're being picked off by the Morgan Stanley boys sitting behind their platforms running stops. That's one of the reasons I took last night to post the chart on my bullbearbulletin blog. Study it even though I left you with nothing but the chart. In the future I hope to find the time to spell out the details, but for now you'll have to rely on your own abilities.
Yesterday's big range days that go nowhere scare the hell out of me when I consult my 'conspiracry theory' mind set. But trusting in myself, I overcome these feelings. I believe whatever we think, hope, wish and dream is what we create. I believe the markets to be a mirror reflection of that mind set. I feel today and everyday is positive. We've got the whole world at our fingertips.
Going over my chart and equity report tonight of course I'm disappointed at being clipped out of my short with my tight stop @ 11095 entered at 12:05 EST. only to watch and decide not to chase the market as it sold off through the lunch period. I made it up later, but I'm only human and I would have LOVED to just sit in there short and watched the equity I had to work for, just build for me. But nobody said trading is easy!
Wednesday, March 08, 2006
Having loads of fun day trading again after such a long absence. Taking my own advise and spending the months of Nov. and Dec. studying, testing and refreshing my skills gives me the relaxed posture that's needed to make this work. I'd grown a little rusty just position trading throughout most of '05.
The one minute charts I set up were too fast on their own so I've gone back to overriding the higher time frames on top of the one minute graphs. In other words I've got the 5,10 and 15 minute charts tiled on top while the one minute run behind. Then the 60 minute is underneath it all so I can set up my support and resistance levels on the time frame closest to the daily.
Here's the nub of what I've reminded myself since Christmas and what's keeping me safe and profitable in this fast game. Never forget price action PRECEDES the indicators. Past patterns may be enticing and self fulfilling, but they cannot predict the next bar. Support and resistance that held in the past will blow right out one way or the other. Usually moments after the indicators tell you you've put on a safe trade. That's why smart selection of loss protection is the first step in placing a trade. Today had some absolute killer range and it felt good to come away with only one tiny loss while working the trading platform for all it was worth.
I'm also proud of posting this chart up for you. I don't have the technical computer skills to mark it up for you just yet but when I teach myself those details and get better. In the meantime, it's worth having a study on your own.