YM day trading result for Jan 17, 2008: +$303

Today is less volitile. I’m also using a higher contract count to filter out the noise. It’s also because I found that I’m not quick trigger enough on fast times. I’m using 1200 contracts/bar at the moment. It seems to be good. I’m also a lot more disciplined today. Not over trading and sticking to my strategy. At the very least, my recent loses have given me valuable experiences in day trading. Also, the floor pivot points have been very reliable so far. The price seems to like to bounce around these levels or settle in a range near them. Very useful in identifying breakouts or exhaustions.

Here are some changes I added to my day trading screen:

1. Implemented my CCI and Stochastic strategy into a PaintBar with alarms
2. Added Stochastic crossing of oversold or overbought as ShowMe with alarms
3. Increased contracts/bar to 1200 contracts / bar for slower time frame
4. Added trailing stop Auto Strategy to pull the trigger for me (but doesn’t seem to be working)
5. Decreased stop to 10 points on YM.
6. Never chase the price! It’s ok to miss some opportunities.
7. Only buy at the good end of the immediate trading range.
8. Do chase the price with a trailing stop!
9. New money management technique: once price started to move in favoured direction, move stop to 2 points ahead of entry price to cover costs and then trail it with the price with some margin.

#8 has been particularly useful today. I was wrong a couple of times in my entry but was able to breakeven because of it. Such that even being wrong wouldn’t lose me money.

Update: the market is down a lot and it seems to be oversold. I got in a long position near the bottom (or so I thought). This could lose me $50 if it keeps going down after this consolidation.

Update 2: I indeed did enter at near the bottom and my initial stopped of 10 pts ($50) were never touched. Then the price just shot up to the resistance as expected. I gradually moved my stop to trail the price move. This trade played out as I have planned. I made a quick $120 or so in the few minutes. I thought of reversing direction and go short too. But I didn’t want to push for luck for the day. However, the price is now moving down as I have guessed. It might make a new low too. Oh well.

Here’s a graph a few minutes after my last trade.

Day trade YM Jan 16, 2008 result: -$500

Seemed like an obvious down day today with more write downs in the news. WSJ is reporting inflation is at 17 year high. Boeing is also delaying their 787 delivery. So many bad news indeed.

Yet, the Dow decides to be up today. The futures gapped lower, but it was quickly closed to yesterday’s close. I saw that one coming from the CCI and Stoch and was able to profit on the brief rally. It seemed obvious that the MM are positioning themselves for the big fall.

I exited the long and went short on very good timing. Then the market went on a free fall for an hour. I was holding 2 shorts of YM (one for long term entered at market top and another one for short term, which was added on an early consolidation). The paper profit amounted to almost $1300 for that hour.

I found myself counting the profit and becoming ecstatic of the gain. This is when my discipline lost to my conviction. CCI and Stochastic were obviously turning upward. I originally intended the 2nd short position to be short term only. If I stuck to my strategy, I should have exited at least one position when the signals were staring at my face.

That was indeed the bottom for the day. The market recovered and actually went higher. This is due to the HB&B moving funds (gold, tech, oil, etc) back into the financials. They are in fact rotating funds out of each sector one at a time so that the indexes don’t tank too fast.

While I was so smart to call the first rally a fakeout, I totally forgot the same could be done on the other end! It was a double trap!!! Fake rally, fake fall, then finally settle near prev close. This is because most “news” from today were already discounted in the previous few days’ drop in DJIA. Buy on rumour, sell on the news!

I continued to trade after the big lost hoping to recover. I kept on going short near the top but the Dow kept breaking it. After a while, I finally dawned on me. I went long on the bottom and made a little bit back.

In the end, I was down about $500 to $600 on YM.

One thing I re-learned/realized is that the morning are amateurs’ market. The afternoon are the pro’s market. At least, it seems easier to trade because there seem to be less noise in the mornings for the past few days. My strategy seemed to have worked better in the morning too. I’ll focus on the first hour or two of the market from now on and see if this hypothesis is true.

Day trading YM day 2 and revised strategy

Made one short trade today on YM with a profit of $110. It was a very good call, on both entry and exit timing. I went in as TRIX is above zero and slowing down. Stochastic slow has just crossed its MA line. Also the 5 min chart shows similar reveral signals from overbought zone. In addition, the fundamental was good because yesterday’s up run was overzealous and unjustified (Bernanke’s hint of rate cut in Feb) in a sea of financial troubles lately. All signs pointed that today’s market would be down and the charts showed a good opportunity.

I exited when the stochastic bearly showed sign of upturn. The price rebounded slightly. Another less probability chance for short came on the 2nd mid level Stochastic cross under. I could have re-entered after a small bounce at that point and made a lot more on the 2nd wave. Lesson learned. When the stars are aligned, it’s good to be greedy.

I’m using TRIX and Stochastic Slow now. CCI gives more or less the same signal as Stochastic but lags a bit more, so I got rid of it. TRIX seems to complement Stochastic well because it gives a trend. I’ve been working on a new system. It also has a few new tricks too. Such as a window of opportunity feature so both signals doesn’t have to happen on exactly the same bar for the conditions to meet.

I watched the market for a while today but didn’t make any trade afterward. I didn’t want to lose my winner from today. Plus, I prefer to use an automatic system. So I continued to develop my new TRIX + Stochastic system today based on these 2 days’ experience.

Starting manual day trading

I will day trade manually for a short period to gain some experience while I develop my auto system. The market I’ve chosen is YM (mini Dow) for the short term, ZG (CBOT Gold) for the longer term, and Corn for the long long term.

YM is on CBOT, so I wouldn’t have to shell out another $55 for the NYMEX data. It’s also a more popular/mature market than ER2 so I can obtain fundamental analysis easier to complement my technical analysis. The recent price action is also very predictable.

For example, the marked spot on the left graph is a potential strategy. Notice the breakdown of the TRIX corresponds with an imminent breakdown of the price. This is just one example. But observing price pattern and TRIX pattern seems to be useful.

For my other two choices.

Gold is hot at the moment, so there could be huge swings. It’s now around $890 and I’m expecting a correction based on the fundamentals. I’ll watch the price pattern and indicators to time my entry.

Corn is on a run for the past 3 months. It has low margin requirement (~$1000) and the price are quite consistent. So waiting for breakout/down can riding the trend could be a long term profitable trade.