-$1000 in 2 days!

I’m down $1000 in 2 days from day trading ER2. Take a look at these graphs and it’s obvious the reason is that I’ve over-traded.

ER2 graph February 7, 2008.

ER2 graph Feb 8, 2008.

I have completely forgotten what I have learned in the past two weeks in Canada. I could blame it on the fact that I’m not used to trading at night and that I was very tired also because of jet lag. However, I shouldn’t have traded at all if I knew that I wasn’t in good condition.

Perhaps the thinking that caused me to trade so many times is that I didn’t want to miss any opportunities. I move in too fast before the signals are mature. Thus, one thing I need to do is don’t guess where the market is moving. Let the signals mature and the price to move a bit first before entering; I don’t have to get in and out at exactly the top and bottom of a swing.

For the moment, I am imposing a 3 trades maximum rule to restrain myself until I’m producing better results and am more disciplined.

Day trading report Jan 31, 2008: +$590

What a day today. Volume was great and swings were huge too. I had a good day today and covered my losses from yesterday. Good days always seem to come after a bad day. I think it’s probably because I’m more calm after a losing day. So now, I just need to maintain my composure even if I’m up.

MBIA had a conference call today and told everyone everything’s still good even though they are reporting a $2.3bln loss last quarter! Go figure! Someone at BillCara is suggesting that the fund managers are proping the market because it’s the last day of the month. Just so they can have a positive January.

I traded the pre-market signal as intended and it paid off. The gap closed as expected but I exited too early again. If only I held longer, my profits would have been in the 4 figures today.

I did well today, entering trades only when the risk/reward ratio is deemed worthwhile. In addition, I am making use of resistance and support levels. I think this helped a lot.

However, I think I need to be quicker on my decision. I found that many times, I was still pondering should I enter and then the price have moved already. On the other hand, my exit trigger is a bit too fast because I’m still not letting my profit run. Thus, I think I need to automate some of my decision making process (like adding some ShowMe’s) rather than just eyeballing my indicators. One idea I’m having is tune my fast time period with an appropriate ShowMe. This should be something simple. I am thinking of implementing a ShowMe for local high/low with stochastic divergence as setup.

Day trading report Jan 30, 2008: -$560

A hell of a ride today from the FOMC at 2:15pm. The day was pretty quiet before the announcement. Then at about 2:14pm, the price broke up because the FED lowered interest rate another 50 pts to 3% as expected.

I tried my scalping strategy explained a few days ago, it didn’t work! After losing about $1000 in the past week on these scalping trades, I think it’s time to admit that I suck at it and stop doing it! A few bucks here and a few there accumulated so quickly. Until I have thoroughly developed and backtested a strategy, I should not use it in trading.

On the other hand, my Keltner + Stochastic strategy is working well. The only problem now is that I need to be more confident about it and let my profit run. See this graph below of this fading trade I took after the price shot up on the FED outcome. I knew that it’s going to come back down to fill the gap. And I knew that I shouldn’t be reading my fast time frame. Instead, if I enter on the intermediate time frame, then I should exit on the intermediate time frame too. I knew that the bounce would take us to the other side of the channel but I exited way too early because I looked at my fast time frame and lost confident.

The reason is that earlier today, I had full intention of waiting for exit signal on the intermediate time frame, but the $200 bounce ended up to be fake and I closed out at a little loss on that trade. The price movement seemed the same at the time of my exit, so that spooked me out of a potential $700 more profit. I really shouldn’t let my loses cloud my judgement. I should just learn from it and move on. In hindsight, the difference is that this afternoon trade had a HUGE run prior to it and my CCI + Stochastic signal was on too, whereas the moring losing trade only moved from mid channel and CCI signal wasn’t on. Lesson here is that if there are more than one BUY/SELL signal on, then the move would have higher probability and would be bigger too.

There’s still a lot for me to learn.

Day trading report Jan 29, 2008: +$130

Everyone is waiting for the FOMC meeting tomorrow, so not much is happening today. As such, the day is mostly inside a trading range. I should have taken the first SELL signal just before the open because it was the biggest move. I didn’t take it because it was before the day session and I was worried of market manipulations.

However, upon looking at the past few days’ of data, it seems that even pre-market signals seem reliable on ER2. I will consider entering a position outside of the day hours in the future.

Not much happened today. I sort of used Stochastic to try to trade today, but it wasn’t very reliable. In addition, I observed the price movement and used mostly instinct and chart pattern to trade. It didn’t turn out too well but I did develop a new strategy based on it and it seems to be good.

I realize that I need more strategies to capture more market movements. Having just 1 setup is very limiting. I was down for most of the day but made it back into the black after 3pm. The first hour or two and the last hour are really good on ER2 because there are more activities and more moves in those times.

I also looked at other markets today. The S&P Midcap 400 seems good too but it moves like the YM and ER2, so there’s not much point in trading it with ER2. It just doesn’t provide diversification to trade heavily correlated markets.

I also looked at some FX futures, but the ATR is too big. It would be good to trade it on a longer term once I have enough capital.

For now, I’ll stick with ER2 and try to develop more strategies.

First ER2 day trading Jan 28, 2008: +$240

I thought of just mental trade today because it’s my first day at ER2. But then the signals were so good that I had to take a position. It ended up well. I think this is a good way to limit myself, I simply wouldn’t trade until I thought I just had to take it.

Also, it seems that the first 2 hours and last 90 minutes of the day session were easier to trade. The moves were more obvious.

Once I got my first trade in, I started to continue using my strategy. However, like yesterday, there were many false positives. But unlike yesterday, the price movements were less dramatic and I was able to inch up my stop so even these wrong trades didn’t eat me alive.

After like 3 or 4 false positives, I just stopped trading for the day and watched Wall Street Warriors. Unfortunately, just minutes later, the price finally broke and dived like I thought. It would have been an easy $700 there. The uptrend kept inching up until RUT broke 700 points (the line of the bear, major resistance). I didn’t think ER2 would break 700 so I entered at the hesitation ceiling but it broke. When ER2 is about 704 (RUT=701), there was another hesitation ceiling, I took a short and got stopped out because I moved my stop to my entry. I thought the price would go up again so I didn’t try again. Then just a few minutes afterward, the price finally broke down like I thought it would.

I could have entered a short at 703.80 and put a stop just above the day’s high, 704 something. It would have been a few pts of risk. But the profit potential was high because we’ve been moving up all day and the signals have been in OB for all day too. The break could have been significant. I should have kept trying because the risk/reward were good and both technical and fundamental were on my side.

What kept me from entering is remembering from last week’s experience with YM. False positives can easily eat out an account.

So lessons from today:

1. Sometimes it take a few tries for the price to break.
2. If risk/reward is really great and strategy says enter position, it might be worth another try.