Best Thread My Journal at a Prop house

Hi Guys,

Currently working at a proprietary house and thought I would write a blog about not only my trades but also a little bit about day to day life at such a company.

I'm not to sure how many of you trade Futures, but the way that I trade can be applied to the spot market as well so I hope at least someone out there benefits from this journal (if anything it gives me something to do and keeps me from getting an itchy trigger finger which usually results in losing money)

Please feel free to comment or send me any feedback (dont be to harsh)

Pozzy.

Ok so im going to try and post in real time, Im only trading GBP/USD and EUR/USD at the moment.

24/02/10

EUR/USD March 10 contract:

Price is pretty much range bound and drifting sideways.

I've used a 30 min chart to mark of the range because it is easier to see.



As you can see the Euro sold of rather nicely yesterday and made its swing Low at 1.3500(nice double 00 figure) Its previous swing High was at 1.3580. Now since price is neither making new swing highs or new swing lows I would define it as Range bound. So the range is marked off and its time to sit on hands and wait until there is a break out. Price did poke out for a cheeky false breakout at around 20:30 last night.


GBP/USD March 10 Contract

As boring as it might be GBP/USD in pretty much the same situation.



There was the big sell off yesterday on the back of King and the BOE statements and now the market is drifting sideways. It is very easy to look to the left of the chart see the big moves and feel that the range isn't valid or that its an 80 tick range so there is still plenty of potential to scalp within it. However price is caught between its previous swing high and low and until it breaks out the market will chop around within this boundary so for me the kettle goes on and it becomes a waiting game.

Hi pozzyp,

Should be an interesting thread to follow.

As you mention previously it made a false break around 20:30. Are you waiting for a break in either direction and retest of the S/R before taking a trade?

Rowan

Thanks for the support,


Price on the GBP just pokes its nose out of its currents range signaling the possibility of a Long trade.




dropping down to a lower time frame, (I use a 2 min but thats just my preference) We can see MACD has also made a bullish cross. This gives a nice suggestion that buyers are entering the market and confirms a Long entry for me. I place my entry above the breakout high so in this case 1.5480 (this guards against a false BO) yet before that order triggers MACD crosses again bearish and the trade is canceled. Price drifts back into its range. Back to waiting

blog sounds interesting, do you trade from mainly 30 min or hourly charts ? take it you are not salaried at prop house you you need to be profitable to pay the bills ?!

Hi pozzy,
I'm interested to see that you use MACD. You'll be aware, no doubt, about the on going debate about the merits - or lack of them - of indicators between those that favour them and the price action purists who don't. What would you say the general attitude in your firm is towards indicators in general (not MACD specifically)? Indeed, that question can be extended to charts and TA in general. Increasingly here on T2W there are threads suggesting that not only are indicators of all shapes and sizes useless, but that conventional TA is useless too. An insight into what other prop' traders use, be it funnymentals, TA, price action in its various guises - or something completely different - would be of great interest.
Cheers - and I hope the trading action picks up for you when the US opens!
Tim.

advfntrader: I don't really use the 30Min chart just used it in this case as I thought it showed the range a little clearer. Normally look at a 4hr, 1hr and then a shorter timeframe so 2 -3 min. It is commission only so I try my best just to forget about the P/L but still always find myself peeking.

In regards to indicators Tim im actually not a big fan. 90% of my trades are based on price action I just use MACD in this instance almost as an alert just to flag a point of interest and then ill fall back on price action. I keep an eye on the fundamentals "funnymentals" I like it but I only watch out for major announcements GDP, interest Rates, that sort of thing. My theory is that if the news significantly moves the market, enough to change bias then that will be reflected in Price action. If the announcement just causes a spike but doesn't change prices general directional bias then its not important enough for me to take note of anyways. I think it all depends what you trade, I know some of the guys here that trade stocks and indices are fairly dependant on figures and news. IMHO if you trade price action you are trading what the market is actually doing. I feel fundamentals are a little bit like reading the form card at a horse race and then placing a bet based on that information. Price action on the other hand is waiting for the race to start and then betting in running you still might get it wrong but least that way you get to see which horse is in the lead (strange analogy i know but it was the best that came to mind) Think what im trying to say If a market moves im not really botherd why I just want to be on it.

So after about 7 hours of sitting in front of a screen waiting for my range to break out finally the Euro had a little push up. It all happened a little bit quick and certainly was not the move that I was looking for. However it has given way to another trade setup.




Price broke out and made a new swing high at 1.3596 (I add 2 and round up) so my entry was Long at 1.3600. Price then pulled back and yet again started making swing highs and lows within the previous swing high and low (marked with cricles) and the chance of an upward move at this point is finished. The bearish MACD cross also signals this and the trade is off the table.

In the process of typing this the new setup on the Euro that I mentioned triggered me long but i didn't get a chance to get a screen shot of the trade. I did however manage to snap the new setup before the trade happened and you will be able to see clearly what I was looking at.



So again price is between its swing high and low and again I'm a waiting for a break. This time however it happened with a bit more conviction, price broke to the up side and I was long at 1.3600 with a stop at 1.3580 (didn't get chart shot but you can clearly see from the others that it was the setup I had been waiting all day for)
I like to scale out 2/3rds of my trade at half the stop loss size and then leave the last 3rd to run as long as possible. This is a method that was taught to me and means that the risk is taken off as quickley as possible.

Price continued to rally making Higher highs and higher lows. At the breech of a swing low I moved my stop to entry as this signaled the move running out of steam which it did and I ended up getting stopped out. so total trade was + 10 ticks on a 1/3 of my position size. Not even enough to cover the cost of the desk for the day but still I stuck to the plan and therefore it was a good day.

I know this post is a little disjointed but it was my first one so hopefully they will become more organised. Ill try and write a post tomorrow about my trade plan which should make my posts make a little more sense

GBP has still done nothing all day so ill prob hang around for another hour or two and see if it breaks out as the longer it takes the more explosive the move when it goes.

Thanks for all the support and ill speak to you tomorrow.

Pozzy,

How long do you look to hold trades for?

Is there any expectation on the part of the firm that you should make a certain number of trades in a certain time, or can you wait as long as you like for the right setups?


By the way, the Bernanke speech to Congress at 15:00 GMT seemed to cause some movement in both directions in the spot EUR/USD and to a lesser extent in GBP/USD. Maybe it was less noticeable in the future, which I wasn't following, and maybe not the kind of moves you are waiting for.

montmorencyt2w said:

Pozzy,

How long do you look to hold trades for?

Is there any expectation on the part of the firm that you should make a certain number of trades in a certain time, or can you wait as long as you like for the right setups?


By the way, the Bernanke speech to Congress at 15:00 GMT seemed to cause some movement in both directions in the spot EUR/USD and to a lesser extent in GBP/USD. Maybe it was less noticeable in the future, which I wasn't following, and maybe not the kind of moves you are waiting for.

Click to expand...

Morning Mike,

The firm is really relaxed and give you the freedom to operate how you wish. So in terms of how many trades a day I place they don't put any pressure on at all. As I am still relatively new here, I do have a few restrictions, so I only have access to GBP and EUR and I don't hold trades overnight. If I wanted to sit here through the Asian market and trade then I could but I don't leave the office with any open positions. This will change as time goes on and as I build a longer track record with them.

I'll follow up with a little market overview in the next post.

Thanks for dropping in.

24 Febuary 2010

Morning guys,

Bit of a frustrating day for me yesterday things didn't pan out how I wanted them to but thats just the way things go. Still made a very small profit so it could of been a lot worse.

As Montmonercy pointed out, Bernanke caused things to pick up a bit in the afternoon the Euro broke its range and got me in long which I highlighted (not very well I know) in yesterdays posts.

The GBP however did very little and bounced around in the range that I had marked out in the morning. Try and just look right of the vertical line on the chart.



So as you can see price by my definition was range bound, and by this I mean it is caught between its previous swing high and swing low (marked with circles) Even with Bernanke talking price didn't break out of this range so there was no trade for me and at about 18:00 I decided to go home.

Now I didn't take this trade as frustratingly I wasn't on the desk at the time. However I can hand on my heart say that I would of done had I been here. A few of you asked me how I would of traded the breakout so I'll show you even though it's a trade I did not take as I wasn't here. I know trading in heinsight is very easy but I hope you can see from the fact that I marked of this range earlier in the day that I would of actually traded it and that I'm not just making this up

So looking at a lower time frame:



you can see that price is still trading within the range that I had marked out. It broke out at around 19:30 (red circle). Now for a short the breakout I would wait for a break of the breakout bars low and I do this by -2 and rounding down on that break out bars low. So I would of been looking at shorting at 1.5380. This wouldn't of triggered and price bounces back into the range.

Finally having been stuck for aggggeeeeesss, Price breaks out at around 01:00 so again -2 and round down of the breakout low to give entry price which is 1.5375 (light blue line) and this time the trade would of triggered. My stop goes at the pullback high and +2 round up so at 1.5395 (red line) and first profit target is half the stop size at which point I scale out 2/3rds leaving the last 3rd to run risk free. This time the move was fairly solid and I would of run that last 3rd for as long as possbile. I'll address what i do with the last 3rd in another post and how you can build on the position as the move continues but for now I hope you can see what I was waiting for (even if i did miss it) and how I would of traded the breakout had I been here.

I really hope that makes sense its hard to explain on here please let me know if you have any questions about this trade or anything else.

Thanks for dropping by.

Pozzy

10 points for DavidS in seeing the GBP short at the break of the overnight range which is exactly the setup ive been showing. so grab yourself a gold star mate. :clap:

25 Febuary 2010

GBP/USD March 10 Contract:

Below is a 10 min chart that shows the overnight range nice and clearly. Again the definition of a range for me is price being contained between its previous swing high and its previous swing low (marked with red circles) So mark off the boundary and wait for the breakout.



So the same as I did before. I drop to a lower time frame and wait for the break out.




This happened just after 08:30 and is marked by the red circle. So same process take the breakout low and -2 round it down giving an entry of 1.5300 (red line). Stop goes above the pullback high (blue circle) +2 round it up giving a stop of 1.5325 (light blue line). So thats a 25 tick stop half of 25 is 12.5 (13). So my scale out point is 1.5287 (green line) where I closed out 2/3rds of my trade leaving the last 3rd to run.

Now I know this is a little incomplete about the last the 3rd but I just want to run through this particular trade setup a few times and how I get in and where my stop goes as I think its a solid price action setup. There is no need for complex analysis or indicators all of the place. Its a simple range bound break out setup and I hope it gives a little insight into how I'm trading.

For me on this trade I hit 13 ticks on 2/3rds of my position and my last 3rd was break even. So again not gunna break the bank but if you working from a 3lot position then it boils down to 26 ticks to one lot. (I hope that makes sense)


I promise i'll run through the trade management for this setup soon and this isn't the only stratergy I look to employ I just felt it was a good starting point.

Thanks for having a look and please any feedback is welcome.

Pozzy

Hi PozzyP,

Have you developed this system just from watching the market and gauging price action by site, or is it founded on back testing? It seems very mecahnised, something that could be tested...esp the risk management of taking off 2/3rds at half the stop. Am I right in saying any win rate of your trades will be profitable?

Cheers

Quick question:

Why was your entry at 1.5300 and not 1.5305 (the initial swing low -2). I guessing it's because "rounding" - what are you rounding to?

I'm intrigued as to how you manage a runner on your final third. I'm guessing some of them have to run a long way to make up for a few "on the trot" stopped out losers.

timothy0387 said:

Hi PozzyP,

Have you developed this system just from watching the market and gauging price action by site, or is it founded on back testing? It seems very mecahnised, something that could be tested...esp the risk management of taking off 2/3rds at half the stop. Am I right in saying any win rate of your trades will be profitable?

Cheers

Click to expand...

Hi Timothy,

Wow some choppy stuff for the Euro on those US figures!!!

Thanks for the post.....

I wouldn't say that I trade a system, im just trying to trade what I see on the charts. I cant really claim any development credit as it is all info and strategies that have been passed onto me be it via books, a mentor or a website. I always think of it as another weapon in the Arsenal and that the skill of trading is just selecting the right tool for the job (another one of those cringe analogies)

I have however had to develop a certain way of trading that is based around my working day and can suit my requirements and restrictions. Most of the methods I use I have backtested and looked into numerous variations of the same concepts.

In regards to being mechanized I have a trade plan that I stick to (well try really hard to stick to) which is why my trades can become a little rule based at times. I don't always scale out 2/3rds it's just a method that suits my current situation as working here I have a set amount risk per day/trade so the quicker I get that off the table the quicker I can look for my next trade. Like everything it has its pros and cons.

Thanks again for stopping in.

Pozzy

pozzy, how do you find the liquidity in the bp contract? If you are using a SM order to enter, don't you get slipped on a 3?

I used to trade bp at a prop house. If I was carrying anything overnight, I used to sh*t myself when I took a look at the order book in the early hours and saw no one there.

I once got routed to Asia to check a position and was told in broken English there was no market in Cable.

DavidS said:

Quick question:

Why was your entry at 1.5300 and not 1.5305 (the initial swing low -2). I guessing it's because "rounding" - what are you rounding to?

I'm intrigued as to how you manage a runner on your final third. I'm guessing some of them have to run a long way to make up for a few "on the trot" stopped out losers.

Click to expand...

Sorry David I should of said, I round to the nearest whole or half number.

Your 100% about the risk/reward as getting stopped out means you take a hit on the full position and profits when you do get a nice move can be softer due to scaling out. This is something I have increasingly looked into and gone down many different routes. I usually will only have a max stop on this type of trade at around 25 ticks. Most of the time it's a 10 - 15 tick stop so the scale is very close by. I have found that the amount of times I get the scale out and then stopped out for break even vs letting the trade run for a bit then coming back and getting stopped out on a full position means that the P/L actually balances out over time its just preference and varies on how you like to manage the trade. I have scaled out in 3rds at larger targets as well as left the whole position to run. The way I view it is I take a small profit then use that profit as my risk for the rest of the trade. I do know a few longer term stratergies where you comp into the move instead of scaling out and build a larger position if the move proves to be more solid so there is def other options.

Bottom line is you are right, a run of losers can sting a little but over time things come good.

Thanks for the comments

Pozzy

trader_dante said:

pozzy, how do you find the liquidity in the bp contract? If you are using a SM order to enter, don't you get slipped on a 3?

I used to trade bp at a prop house. If I was carrying anything overnight, I used to sh*t myself when I took a look at the order book in the early hours and saw no one there.

I once got routed to Asia to check a position and was told in broken English there was no market in Cable.

Click to expand...

I havn't had a problem with getting slipage as of yet but then im not trading huge size. I often get filled in 2 or 3 portions but so far thats as bad as it gets. I do hear regular shouts of abuse though from other traders not getting filled but I think GBP and Eur are thick enough during London/Us hours to get my trades off.

Just wanted to cap the day off. I managed to get in short on a GBP trade which came off but didnt catch the full move. So there was only two trades for the day and again not a huge profit in the bank however it was good enough for me and is another up day.

Sorry I didn't get a chance to post the second trade up but had a surprisingly lively response to this thread (which I wasn't expecting) so ended up writting a few separate posts.

I had a few PMs too asking questions about price action and how I trade it so if I get a chance tomorrow, I'll write a little price action post so please drop by and check it out.

Thanks for all the comments.

Pozzy

26 February

GBP March 10 Contract:

Following on from the same method of marking off the overnight range and then waiting for a break out. I took a little snap shot of a GBP chart pre GDP figure and I have marked it's trading range. The figure caused a little spike but price quickly retraced back into its range so I'm still looking for the breakout and for price to start moving (in what ever direction that may be) The green circles mark off the swing points of yesterdays move before the range.

The red circles show the last swing high and low before the range.




The pink lines mark of yesterdays trading range and the same set up. As you can see the breakout got me short and was a fairly nice trade

Thanks

Pozzy