Day trading report Jan 25, 2008: -$140

The keltner + stochastic strategy seems good. However, I still lost money today.

Two reasons really:

1. my stops are too tight
2. YM is too choppy

I have cut down on erraneous trades but the false positives on the long side today caught me many times. I don’t think I’ll be trading the Dow from now on. Furthermore, the more I day trade, the more I want to develop a trading system for mechanical trading. Day trading is giving me experience and ideas for new strategies. I will get back on programming soon.

I have enabled CME data and will try the ER2 next week. I decided to move to ER2 like I’ve always planned on. The only reason I haven’t done so earlier is that the stake is a lot higher there. But if I can trade better there, then it’ll be better than letting YM eat up a bit here and a bit there even though it’s $5/pt. On the same day, here’s the graph for ER2. Notice that it’s much nicer and fewer false signals, aka MM traps.

And here’s my performance report from today.

ER2 market fewer noise

I followed the Russell 2000 mini today on a day trading setup. My strategy for Dow should work on the ER2 too. Moreover, ER2 seems to be more straightforward and easier to trade. It really does seem like a nice market to trade. I’ll continue to keep an eye on it.

Automatic trading medium and long terms

By now, it’s obvious that day trading is too dynamic for a simple system to cope with because of the noise. Yet, not all hopes are lost. Swing and long term trading poses a viable alternative. In the 135 min. ER2 example above, the Stochastic and CCI signals I’ve been using seem pretty reliable. I think I will focus on developing systems for medium term (a few days) trading from now on.

I’m inclined to trade ER2 after today’s lost from the Dow because of MM manipulation. The big indexes are too easily manipulated and are drawing too much attention. Too many professional players are involved in the big indexes, so making a living out of them may be difficult.

ER2′s 135 min ATR is about 6 – 7 points ($600 – $700 on the mini). The swings can be about 80 points, or $8000. This is too much for me at the moment. So I’ll have to wait until I can get more capital. I’m focusing to trade Gold and Soybean for now.

ER2 1200 contracts / bar

Upon further reading of the charts, ER2 does seem like a better deal for day trading with a breakout strategy. The intraday swings are typically more than 10 points (sometimes 30 or more) and ATR is about 1.5 points only. Furthermore, there seem to be fewer fake breakouts in ER2. See figure for example.

Also, 1200 contracts / bar seem to be a good starting point to test some strategies. I’ll work on this more this week.

ER2 day trader's market?

ER2, E-mini Russell 2000, seems to be a good market for breakout day trading. Notice the large swings and frequent actions from the graph.