Jay's Journal

[jasont]

Trade Setup For March 20th

Here are the Zones I'm watching for 20th March:

Resistance

1307.50-1308.25
1313.75-1314.50
1321-1321.50
1328-1328.75

Support

1297-1296.25
1294.25
1289.25-1289.75
1283.50-1284

My outlook for today seems to be on the downside. After the big move we had up without follow through, it tells me we may not be ready to bounce well just yet. It seems the picture gets worse as each day goes on, possibly a hint that the market may be turning in the near future?

One thing I believe is that when everyone is talking about how bad the market is going, it's time to start buying and vice versa. The DJIA is retracing from the 57 EMA right now which is not a good sign. Having just hit it yesterday and retraced I'm inclined to think we may be seeing some movement down from here. The VIX isn't showing any strong signals right now but is slightly toward the buy side. A few more days and we may see another strong buy signal like we saw a few days ago prior to the big up day.

As always, just a rough forecast for things to look for on the day. I'm better at seeing moves as they progress in real time, not so much at forecasts based on the longer term outlooks. I'm watching to see what happens on the day.

My Focus

I'm going to keep my focus the same as it was yesterday. I'm looking for major patterns and keeping my attention on the Tick for a sentiment gauge. Again I'll be writing about it at least every 20 minutes and I'll also work on the breathing during a trade. My attention needs to be on the 5 minute chart during a trade and only glancing at the order bar to see if big orders are staying or being removed. As always I will keep my rule of only trading whilst feeling 100% and sticking to the risk management rules I have stated numerous times. I'm hoping my energy levels are a bit better tonight so I can stay with the market for longer.

 

[jasont]

Trading For 20th March

Here is what went on for 20th March:

9:30 Market opens right in the middle of my S&R area with a slight gap up. I am actually sitting here wondering why I didn't have a resistance area at 1302.75 because it looked like a significant pause in the market on the way down. Not to worry though, I'm aware its there now. Tick opened right on that 0 line so it will be interesting to see how it plays out.

9:42 Ouch, that 1296 area was broken through without hardly a second thought and it has been a bottom for the past two days. There is a small bounce just after however I wouldn't be too quick to jump on a long trade the way it looks now. Tick is showing the stocks are pretty pessimistic right now. Will give the market a bit more time to show me what its doing. I've been given a good tip to leave the first half an hour of trade alone so I can get the full story before jumping in. It reminds me of what used to happen with my afternoon trading. I would get on the market but it would take me 20 minutes or so to get the idea of how the market is trading. Maybe I should keep the first 30 minutes of the market as watching time.

10:00 Market seems to be having a strong upward move right now. Tick is hitting the overbought stage but on such string buying it's not a good idea to test the situation. Market volatility just picked up and caused my data stream to lag. Needed to reconnect. Betting against a move like this is the same as standing in front of a freight train, you're likely to get mowed down.

10:04 Safest option right now seems to be buy on the bounces. Looks like we want to go to higher from how strong this move was. I did just see an opportunity to short at 1310 but decided I'd wait to get a better picture of what is going on.

10:16 Bugger, just missed a long entry at 1306.75. Looking for a bounce off the EMA as the market has stumbled down there and the Tick was having trouble staying below the 0 line. That missed entry was caused by hesitation, not because I noticed it too late. I was looking at it knowing that I should put an entry in but for some reason I waited a few moments longer for more clarification and I missed the trade. Not a great way to be working in the market.

10:23 And away she goes. Not sure how much I'd trust it for another good push forward without a decent pullback now. The Tick is showing stocks are still bullish so anything on the short side will need to be quick. It's hard finding an entry when the Tick is playing around that 0 line so much. It keeps sitting on it and when it does the chances of the market rising or falling sit at 50% as opposed to the odds increasing when it is overextended one way or another.

10:31 Market is caught between the ema's right now. Hit the fast line as a support and then hit the slow as resistance. Is quieting down as these ema's draw together. Momentum is in the hands of the bulls for the short term but the bears for the longer term. Definitely an interesting battle. Not sure how much longer the stocks can keep up the buying though. In fact at this point the buying looks like it is slowing down, not sure how valid that is but the fast move to where we are has certainly deteriorated. Question is, breather before continuing on or short term top?

10:36 I saw a great opportunity to get in at 1212 but for some reason I couldn't pull the trigger. I didn't feel afraid, though I very well could have been, but I just couldn't get myself to jump on. Something held me back. I wasn't thinking about the P&L or anything like that, I just wouldn't hit the order. Feck me, the perfect situation describing what holds me back. From what I could tell, I wasn't feeling afraid to a degree of thinking about it. I'm presuming it was fear holding me back but I didn't have the nervousness I ordinarily do when I'm afraid to place an order. I just have no idea. I froze. Surely the monetary value can't be my fear because my stop would have been 5 ticks away on one contract. Hardly a round of drinks.

10:42 Now is the time to make sure I don't place a trade out of frustration. I can't let myself get irritated about failing to place the trade. I'm going to step away for 10 minutes and think about why I froze. It isn't helping me thinking about it whilst looking at the screen.

10:54 Ok I'm back and I cleared my head. Still haven't figured out or understand my problem but I no longer feel as though I should place a trade just to prove I can. I do however feel like I should refrain from placing trades today. I'm obviously not in the best frame of mind to do so today, too much focus on self and not enough on the markets.

11:00 I'm going to call it a night. I am going to figure out the cause of my hesitation and make sure this problem is solved. It is plaguing me right now.

Daily Wrap Up

In true Aussie fashion I'm going to let out a "Crikey". I am extremely disappointed in my hesitation and failure to convict on quality trade ideas. What is interesting is that the same thing occurred with my simulation account. I take my simulation trading very seriously and after my first few weeks trading with it, I sort of shrunk in my shell a bit and only traded once or twice per week. This lasted for a few weeks and then I snapped out of it and my trading became consistent.

I am pretty certain my trading plan is not the problem, I seem to be finding the ideal areas to trade and am pretty clear about that. I'm not convinced it's the monetary loss causing me to hesitate either. I think it's what the loss represents to me. I'm not sure if I fear being wrong, fear rejection, in fact I have a sense it may be that I fear success. I have always liked being challenged and I guess if I become consistently profitable I am afraid the challenge will vanish. I do fear becoming successful to a point where you ask, "whats next?" and you literally can't think of anything else because you have done it all.

I'm not sure what the fear is, I'm no psychologist, but I am going to try and find out. The focus now goes on trying to find out whats going on in my head and get an understanding of what my underlying fear of placing orders is. If I can understand that, I will understand myself better and be in a better position to trade. Time to begin researching.

In regards to giving myself a grade for how well I followed my focus, I give myself a 'B'. I'm not exactly happy giving myself that score after hesitating with my order placement but I didn't put anything about that in the focus and I need to be truthful. The 'B' is because I didn't mention the Tick as much in my journal.

I took a break when I felt frustrated with myself which was good, I also wrote less frequently in my journal as well which allowed me to watch the market more. The trade rules I set didn't have a chance to be used as I didn't get in any trades. I was watching the major patterns unfold which was good and I only glanced at the 2 minute chart to see if it was trending. I need to now create a focus that works on my placing of orders so I get some time in the market and reduce my hesitation.

 

[dbphoenix]

Here is what went on for 20th March:


9:42 Ouch, that 1296 area was broken through without hardly a second thought and it has been a bottom for the past two days. There is a small bounce just after however I wouldn't be too quick to jump on a long trade the way it looks now. Tick is showing the stocks are pretty pessimistic right now. Will give the market a bit more time to show me what its doing. I've been given a good tip to leave the first half an hour of trade alone so I can get the full story before jumping in. It reminds me of what used to happen with my afternoon trading. I would get on the market but it would take me 20 minutes or so to get the idea of how the market is trading. Maybe I should keep the first 30 minutes of the market as watching time.

Are you familiar with the idea of price rejection?

 

[jasont]

I'm not sure Db. It depends on how you are referring to it? Can you please explain in what context you are referring to price rejection?

 

[dbphoenix]

When price drops, hits a level, then bounces away rather than settling in. Or like touching a hot stove, if you prefer. You had your support level correct, but note how price behaves, first after the Jobless report, then just after the open. This should suggest that there's no interest in the downside, making that little hesitation around 0950 (EST) a high-probability place to enter a long.

 

[jasont]

Thanks Db, I see what you're saying. The nature of the rejection had good strength behind it making the 0950 EST small stall to be a good place to enter long. I agree with your interpretation of the market, it was something I didn't pick up on during trading.

For some reason I'm not too good at seeing the minor during trend pullbacks and stalls. The one you mention is very subtle and the ability to read the choppiness of lower time frames is essential. It is very easy for myself to get caught up in the chop when I look at the 2 minute chart. I would like to be able to read them better however when I used to trade from them my interpretations of the market were very inconsistent. It was when I shifted to watching the 5 minute chart that I could see direction change with consistency.

I think the message of the bounce you explained is valuable. During trading I didn't check to see the impact of the jobless report in the pre market hours. Had I kept note of that I could have possibly been more aware of the bounce. I consider the market popping under a support area by more than 3/4 of a point that the area is not well placed. It hit the limit of my buffer and I'm presuming I mistook the fast break of it for a hurry to cover short positions and others to take longs. I'm still not hitting the right chords when it comes to interpreting the opening half an hour.

 

[dbphoenix]

Give it time.

 

[nine]

Jason, something I found useful and still do if I think I'm getting off track is to print out the view of something I missed. Print with all charts just before and also after its happened.

Then study them. Make sure its one of your tested setups. And repeatedly rehearse how you'd like to have taken the trade - next time or the time after you should get a pleasant surprise.

 

[jasont]

Thanks for the support guys. It is hard knowing what you should be doing and producing something different, as you say Db, give it time. If one thing trading has taught me, it's that patience and persistence pays off.

Nine, that is a great idea to print off the before and after of an area to figure out what I missed. It is hard to do with my trading though as the majority of my trading is based on the flow of trades going back and forth. I look for the potential turning points in advance with the S&R zones, possible ema bounces and chart patterns which emphasize where traders are likely to be stuck. However its the movement, the back and forth that goes on at these areas which tells me if the market is likely to turn.

I do record most of the important parts of the day on video as well and give verbal insights. Also after each trade I record where I got in and out with comments on what I did well and what could have been improved. Even still, I would love to record the entire day's trading whilst I'm entering and exiting positions yet it slows down my platform. I'll give the printing of the charts a shot as well to see if it helps. Thanks Nine.

 

[jasont]

Trade Setup For 24th March

Here are the zones I'll be watching for the 24th March:

Resistance

1332-1332.50
1338.50-1339.25
1343.75
1346.75

Support

1323.50-1322.75
1317-1316.25
1308-1307.25
1395.50-1394.25

Ok so we seem to be at a decision point in the market, at least thats what my information is telling me. We didn't manage to break the lows of January on the DJIA yet the NDX and SP did. Granted they were only slight moves below. We have either paused for a further decline or for a reversal since those January lows. To be honest, I'm not sure which way it will go right now.

With the Fed doing all it can to avoid further economic toil and the credit situation becoming fully disclosed with company reports, I'd say we are in a good position to get back on our feet. Average Joe is now talking about the credit problems which is usually a good sign that things are set to turn against wide spread beliefs. Commodities have also declined indicating some funds may be coming back into equities to buy at perceived low prices.

On the other hand some of the technicals are saying we aren't out of danger just yet with the VIX uptrending and the Indexes doing the same. In times like these you have to make a decision, trust the charts or look at the fundamentals. Right now I'll give it some more time to play out but will not refrain from trading either side right now. I'll go with the flow.

My Focus

My focus is pretty similar to what I was doing last week. Going over my stats for the past few weeks I have realized I am trading more each week and my results since trading the one lot have improved immensely, though are much smaller.

My stats not including my first three days are pretty good, I am trading a good win/loss ratio but it would be better if I took more trades. My risk reward ratio isn't crash hot when I include the entire time I have been trading but is looking good from the point I began trading the one lot. So overall I can say I am improving and reverting to the one lot has helped me get a handle on things. My trades are increasing slowly in number which in honesty I am happy with. I guess building up my number of trades is best so I don't shock my system and I can get comfortable with the idea of trading numerous times.

So this week the focus is on trading the major 5 minute chart patterns in my plan and reverting to the 2 minute chart for assistance in a slow market. That is slow uptrends/downtrends that don't appear on the 5 minute chart and usually creep up the 15 SMA on the 2 minute chart. The Tick is still a major focus and something I need to keep my eye on just as much as the 5 minute chart. Again I will be making sure I write about the Tick at least every 20 mins in my notes.

My risk and money management will stay the same with 3 hard stops being hit resulting in me calling it a day. No more than 2 attempts at the one trade idea and if I do take losses on both attempts that I take a 10 minute break.

During trades I am going to continue my breathing techniques and relax my muscles as I have noticed at times I am tense. Usually after 1 minute or so I become relaxed and I think that is due to my hard stops when they do get hit, usually are hit in the first 1 minute. That is usually an indication that my entry wasn't in a good place. I will also make sure I mainly watch the 5 minute chart and only glance at the order bar. I tend to panic when I watch the order bar for long periods and get caught up in the action.

 

[HOLLY]

Read the entire post from start to (current) end - well done - you seem very focused and I've learned from your writings as well as the guys who have also commented - keep up the good work!

 

[jasont]

Thank you for your kind words and support Holly. It does help a lot when people offer their advice and encouragement. I am glad that my journal can not only help myself but others can get something out of it as well.

 

[jasont]

Trading for March 24th

Here is the journal for March 24th:

OK just making a note of the news that will be out today, at 10am we will see the existing home sales. Not sure what sort of affect it will have on the market but it is something to be conscious of during that time.

Right now I am feeling pretty nervous for some reason. Maybe because it has been longer than the normal weekend break or maybe it's something else. I can't quite put my finger on it right now but it does act as a warning light for me. Taking it easy is a good idea whilst I'm in this state. Will assess it after 20 minutes of market trading to see if it still persists.

9:30 Here we go. Gap up on the open to 1336. Not much overnight trading to use as a guide as it was closed for more time than usual due to Easter and Good Friday. Just now it's slowly rising toward the 1338.50 resistance area. Will give it time to show me what it's doing.

9:45 Market is up but not looking incredibly strong at this point. Tick is above the zero line but still not ready to be used for trading. Will give it some more time to show me what it's doing. The 1338.50 area was easily broken though.

9:56 Have a bit of rejection going on here, looks pretty interesting. Tick is holding the 0 line though. Maybe a bit early for a turn but we'll see. Leading right into the home sales data so will wait to see what that produces.

10:02 It seems I have underestimated the strength of this bullish run. From here it would seem the safer trades are on the long side with the trend until something changes. Home sales produced a quick run up, now we just need to see if it will stick.

10:10 We have a bit of a stall here and a possible short opportunity yet I'd rather stick on the long trades right now. The Tick has shown a bit of a divergence yet it would be a risky trade. This thing could potentially rocket from here.

10:12 Times like that its good to have a strong plan. Market just hammered after the stall. Db would no doubt be wondering why I didn't get on the long side hehe. I'll wait for a more predominant pullback before entering. Right now we are looking stretched and some sort of decent pullback should be coming soon. Hopefully it occurs before I clock off for the night.

10:20 Currently I'm thinking we could see a pullback to the 1343 area that may produce a good long opportunity. Right now we are seeing a stall that could be traded long on the 2 minute chart but as we are not on a slow trend I'll stick with my 5 minute chart. The Tick is still holding that 0 line and looking pretty bullish. Usually when everything is bullish it's the best time to look for a pullback. If we get below 1347.50 it looks like it could be a downhill run to 1343 according to the order bar.

10:31 What a great battle that just went on. Tight sideways move and broke to the upside yet things don't quite add up just yet. NQ has made higher high yet ES and YM haven't followed. Tick shows it should be going higher according to stocks but is struggling to do so. I think it may need a bigger move down before it musters up some more good strength. Tick is still holding the 0 line, pretty good effort if you ask me. Stocks are staying strong.

10:41 I was about to say my trade ideas are off for today but now we seem to be making a double top area. Granted it is now turning. Hehe well I am doing ok with recognizing which way to trade, in fact anyone could pick to trade on the long side so far. I am just having trouble recognizing the timing of orders. There was a clear as daylight opportunity to trade long around about 10:30 yet I was too set on waiting for a pullback that may never come. Let the ego go and just trade the market feel! I should know by now that change in the days direction for decent pullbacks usually occurs after a decent rejection, one we are yet to see thus far.

10:56 Looks like the Tick might be making the transition into negative territory. Market might be making a decent pullback. Granted I said this earlier and the market took off.

11:10 Well that was interesting. Just as I decided to throw a long order in at 1351.50 the market took off but is now resting back near that area. I think I took too long waiting for the entry but now the move I was wanting has already happened and it's come back. Not confident attempting to get on now as it didn't stay too strong on the move. Time to call it a night. No strong opportunities I saw to trade yet the opportunities were there. I think I was off my game tonight in recognizing the flow of orders and timing trades.

Daily Wrap Up

I'm not sure there is much to say about today's trading. My timing was off today. I was able to recognize the safer trade idea but missed the two opportunities to trade. Even though I picked the long side to trade, I was waiting for a pullback that wasn't coming. In fact the second pullback was a decent one to enter on and I waited too long to enter.

I'm not too disappointed about todays trading even though I missed a couple of good entries. I wasn't concentrating as much as I normally do and didn't have the greatest timing working for me. You get the days where you're just not switched on and I accept those and think they are days best left for watching the market.

I give myself an 'C' for following my focus. Although I was watching the 5 minute chart for patterns and the Tick, my concentration wasn't as strong as it normally is and I found myself writing in the forum in the early market open. I did write about the Tick consistently however I did feel a bit of a disinterest toward it. I can't assess my risk and money management as I didn't place any trades.

 

[jasont]

Trade Setup For March 25th

Here are the zones on my watch for 25th March:

Resistance

1356-1356.50
1360-1361
1391.50-1392.50
1400.5

Support

1349.50-1348.75
1342-1341.25
1335.5
1332-1332.50

I don't have much in the way of resistance for the June Contract. I have areas from the March Contract I could use but not sure I would trust those. People who were stuck with the March contract are not stuck with the June contracts so they don't quite follow over. Also when we change contracts the areas are usually a point or two different, at least that is what I have found.

So my outlook for tomorrow is similar to yesterday. The bigger picture looks like we may be building up for a good move up. The DJIA 12750ish area is the high of the recent range and if we get through that and stick, we are likely to see things turn around.

The 1400.50 area is the top of the range on the ES so it will be a key area to break if we are going to continue this move up. If we aren't going to break this range we are looking at a decent move down but I'm more inclined to say we would see a consolidation prior to that. However I'm no fortune teller and will go with whatever comes.

My Focus

My focus remains the same as yesterday. Watching the 5 minute predominantly and keeping an eye on the 2 minute should we begin a slow trend. The Tick is still on the watch list and will be recorded every 20 minutes at least. My risk and money management stays the same. Hopefully some trades come up so I can work the during trade focus.

 

[jasont]

Tradingh for 25th March

Here is the notes during 25th March:

The overnight market had some big moves but looks like it will open without much of a move. So really it hasn't gone anywhere since yesterday. It was up prior to the ICSC store sales report but came down about 9 points after the announcement. I got an email from CNN about Home Prices in 20 key markets declining 10.7% over the past year but I can't seem to find the report for this. Bloomberg doesn't have any reports due out in regards to housing for today. Not sure what to make of that. Is it an independent report of some sort? The Redbook hit at 8:55am and since then we have tapered off.

The one to wait for today is the consumer confidence due at 10am. This usually has an impact on the market but I'm not the sort to trade from economic news. Just knowing that it will be announced at 10am is enough for me. I only want to be aware of possible increased volatility during that time, I don't really care for trying to figure out which direction it could potentially send the market. Too much speculation for my liking.

9:32 It seems we opened right at yesterdays closing price and have continued yesterdays stair step pattern down. Just coming down to that 1349.50 support area, will be interesting to see if we have a bounce from there. Everything seems to be pointing down right now. The Tick is just below the 0 line and we look as though the ema's are acting as a bit of resistance right now. That usually tells me we have a steady move down for the moment.

9:37 Market is pretty volatile for the open climbing just what it dropped in the first 5 minutes. My support area was passed by a point and then the market reversed from there pretty strongly. Interesting opening action to say the least. From the size of the 2nd Tick candle, it looks like most of the stocks are on board for buying. Not normally a big candle like we have just seen so early on.

9:42 Market looks like it has been hit with a Pitching Wedge right about now. Straight up. Unless there is an equally strong move down after this up move, I'd say long trades are the safer way to go for the moment. Granted I'd like this volatility to soften a bit before jumping in. These types of markets are what get me sucked in for most of my substantial bad trades.

9:53 Still a pretty wild market right now. Looks like people may be scrambling for position prior to the Consumer Confidence report. Tick isn't telling me much right now apart from no clear direction is appearing just yet. YM has made a lower low for the day but the ES and NQ haven't. Who is leading who right now? I'll wait until after the report before I consider trading.

10:04 Well we had our equally strong down move that has put buying on halt. The consumer report had the market make a quick snap down and we hit the 1342 resistance and bounced. Quite a substantial bounce too. Showed a lot of orders down there but not sure if it will hold or fold. Market still too volatile for my style of trading, hopefully in the next half hour or so it calms down a bit. The Tick still isn't giving much in the way of clear signs, stocks seem to be pretty erratic right now.

10:22 Ok So I entered at 1346.50 on the short side for a roll over and the market kicked against me. I had my hard stop at 1348.50 just above the recent peak. Based on the new resistance zone and a Tick extreme prior to entering with the ema just above it. Whilst I was in the trade I realized the Tick was at the low point when I entered so I looked to get out with minimal damage. I think I have the right market area to turn, I just may have been a bit too early. Market isn't looking like it wants to go higher.

10:29 Thats what I was looking for. Shorted at 1348.25 with a stop at 1350.25, hiding behind the ema. My profit target was at 1346 and it was taken pretty quickly. It hesitated at 1346.25 and I was tempted to move my target up to 1346.25 but instead I stuck to my guns and gave it a bit more time. I'm glad I could pick up on my mistake of entering a bit too early and then waiting a bit longer and getting in at close to the best price I could. I am impressed that I didn't trade to get back at the market or to make up for a lost trade. It was all about the market and not about myself.

10:45 Ok we have a 1-2-3 bottom here that will really only be clarified by a move past that 1348.50 area. The market is moving pretty quickly and strongly today so it will be interesting to see what happens. I wouldn't say we are over extended on the downside just yet but we could be ready for a good bounce. The Tick is still wavering between buying and selling right now without showing clear direction. The stocks don't seem to be convinced on either way right now.

10:48 Just wanted to record what I did during my trades. The first trade I was breathing a bit deep at first and could feel my heart begin to pound however I implemented my breathing I do to relax and shortly after it dissipated. I'm guessing that helped me roll the loss off and focus on looking for the next trade. The second trade I was pretty relaxed, my breathing was deep and I wasn't tense. Both trades I was focusing on the 5 minute chart and glancing at the order bar which was good.

10:56 Just seeing now that the consumer confidence report supposedly tumbled from expectations. Guess that is why people aren't so optimistic on the buying side until just recently. We may have an opportunity for a long trade following the 1-2-3 bottom we have. Upward Stair step type pattern may be on the cards, just have to sit tight and see. The Tick has passed over both bbands which usually tells me the volatility is picking up a bit. It is staying around the 0 line though so hard to see which way it is swaying.

11:02 Damn, I was too busy writing about the move and it looks as though it is going without me. Too much writing, not enough watching.

11:14 My eyes are starting to strain. Too much time on the PC I think. I was tempted to trade off the 2 minute chart just then for a long position but it goes against my rule for not trading the first down bar after an up trend in the upward direction. Was looking at it at 1448 and would have been a nice trade. I think I may call it a night, would like to stay up longer and trade but I need some rest. I am happy with today's progress.

Daily Wrap Up

Well today's trading has been a big improvement. That isn't because I managed to make a gain but because I was able to look past the initial loss. Recently when taking a loss I have been shrinking into my shell like a turtle and tiptoeing around the market trying to avoid another loss. Today I took the loss on the chin, reassessed the market and realized my trade idea was still valid, I was just a bit too early on the first entry.

Whilst in trades I was keeping calm after the initial minute or so that usually has me tense, the breathing helped and keeping focus on the 5 minute chart also helped. The first trade was the right idea at the wrong time. I was happy I managed to get out without my hard stop being hit, I did try to get out at 1347.25 with a limit buy but the market escaped me. The second trade was placed as well as I could get it, I stuck to my guns with my profit target, it could have been a bit lower but I tend to like putting it in easy to reach places. Usually I'd have a second lot that would be trailed, hence the reason behind placing it in an easy to meet spot.

As a ranking for the day I will give myself a 'B'. I did well in managing my states during trades by watching the chart instead of the order bar. I mainly watched the 5 minute chart during the day and glanced at the 2 minute chart. Towards the end of the trading I wasn't watching the Tick as frequently as I should have been which can be worked on. I am not giving myself an 'A' because I was writing in my notes too frequently. It caused me to miss a buying opportunity after the 1-2-3 bottom and that is disappointing. I think I will need to develop a minimum time entry rule for my notes.

Overall it was good progress and I feel like the fear to trade is slowly creeping out of me. Today showed that I could take a loss but if I continued to pay close attention to the market, I could still be profitable. I had developed an association with the market that a loss meant I couldn't make a win for the day. Hence why I would turtle and avoid another trade. The good news is that today shows a step forward to removing that association.

(I've decided I'll post my trade results in points so people can easily follow instead of having to calculate it themselves)

Trade 1: 1.5 point loss
Trade 2: 2.25 point win
End Result: 0.75 point gain

 

[jasont]

Trade Setup for 26th March

Here are the areas I'm looking for on 26th March:

Resistance

1354-1354.50
1359.25-1361
1366
1391.50-1392.50

Support

1351-1350.5
1347.25-1346
1342-1341.25
1335.5
1332-1332.50

My outlook for tomorrow is that we could see further consolidation followed on from today but possibly make a move lower. The Vix is reaching the point it tends to be bouncing from lately which usually indicates further downward movement. It looks as though it may have another day or two in it before it reaches that area though.

The DJIA looks like it's having trouble pushing past the 57 EMA with the top of that range at 12750ish. The NYA hasn't been showing as much enthusiasm as the DJIA on the latest move either. However if we saw some strong movement past the 12750ish area on the DJIA it could open up the doors for a nice upward move. Right now we seem to be at decision point as to whether this recent range is a pause before further selling or an accumulation of buying.

Daily Focus

Ok the focus stays similar to yesterday. I want to continue watching the 5 minute chart unless a slow trending market pushes me to watch the 2 minute chart. I am going to increase the minimum time frame for recording my thoughts on the Tick because I feel I am spending too much time writing instead of watching. I now will record the Tick info a minimum of every 30 mins. I'm also putting a time separation on my journal entries of 10 minutes. So now every entry must be 10 minutes apart so I can spend more time watching the market and less time writing about it.

During trades I will continue to monitor and implement my breathing and relaxation methods and keep my focus on the 5 minute chart. It helps reduce panicked decisions that arise from watching the order bar too closely.The risk and money management stays the same.

 

[jasont]

Trading for 25th March

Here is what happened for the 25th March:

OK so we have had the Durable Goods information at 8:30am which caused a slight drop down immediately after but it didn't manage to cause a continuation of selling. That appears to me as though the market may have taken it in it's stride and not placed much importance on the announcement. New Home Sales report comes in at 10am today so that is something to keep an eye on. Like yesterday it may be best waiting until after that information is released before trading. Right now it looks as though we will open with a small gap down.

9:34 Market has opened with a small gap lower and hit the support area at 1346.50. Having trouble moving lower at this stage, normally a good move is to fade the opening gap as it often is filled early into the market open when the gap is 4-6 points or so. The Tick has opened with stocks not willing to buy up. Too early to tell what the sentiment is at this stage.

9:46 Ok we are going lower but it's not without a battle. Each move down is taking some effort to push. The Tick doesn't tell me much right now but it is hinting that stocks may not be so keen to go lower for some reason. The Tick is staying pretty flat on the 0 line. Coming close to the 1342 area of support so will be interesting to see if it cuts through this easily as there was a bit of activity there recently. Rain has just started outside, nothing beats watching the market with a coffee in hand with the sound of rain on your roof. It's bliss.

9:56 To trade I like to see a bit of down and up action to see what the markets doing. There is a lot to be said about where peaks and troughs form. We have bounced from the 1342 area support and how far this goes will tell me how the market is looking with a few more clues. Home Sales report is soon, is it a coincidence it had it's bounce prior to the report or are people truly buying in anticipation of it? Me, I'd rather wait and see what happens and formulate some trading from there.

10:11 Hmm just missed an opportunity at 1348 to short. As I was looking for where I'd place my stop the market moved down. The Tick was overextended on the buying side and we were coming into the gap down we had. Market looked like it was struggling to push higher. Not to worry, plenty more trades will present themselves. One thing that is interesting is that we have had a move on the Tick go from extreme over buying to extreme over selling. This can sometimes indicate a trend to the downside is in the works.

10:24 We have what could be a similar 1-2-3 bottom to yesterday but I'm not sure I buy it. It's having a real hard time right now and the Tick is barely giving it credit. Seems like more of a push for position rather than buying power.

10:34 Ok so the 1-2-3 bottom didn't stick and as the Tick indicated earlier we now seem to be in trend down mode. 1342 area support is giving the downward momentum a hard time. Tick is finally starting to look like stocks want to take a direction.

10:47 Not much seems to be presenting itself to me right now. There was a small stall during this downward move that I was waiting to hit 1343.50 but it only made it as far as 1343. Waited too long for the trade to present itself and didn't even bother putting an order in. Definitely in trend down mode here, nothing out of the ordinary with the Tick right now, I just need to wait for some pullbacks.

11:03 Market looks like it is rolling over here but I don't think it is ready to just yet. The way the orders are going tells me that it needs a small push a bit higher before another good rollover. I could be wrong but that's what the market is telling me. Tick isn't convincing either.

11:17 Ok well it seems that patience does pay off in the market. I did have a few times I was tempted to enter prior to right now but I waited. I got in at 1342 with a stop at 1344 which was hiding behind the EMA. The YM and NQ were stalling and the Tick was showing divergence. Typical rollover trade often seen on days like today. I am happy with my patience I used. Profit target was placed at 1340 and was taken after some hesitation around 1340.50.

11:21 After that it's time to call it a night as I won't get another chance to trade the downside without being up for another hour or so, that is if the market continues lower. Tonight was just one of those nights when you enjoy the market action. It's peaceful to watch and I would have been happy just to watch if no trades had of been taken today.

Daily Wrap Up

Well it was a reasonably quiet day for my trading. The market only provided a couple of opportunities for me to trade, the first one I was a bit too slow to recognize, the second one I managed to get in and make a good trade.

Things just seemed to be firing on all cylinders today which was good. I was keeping my focus on the 5 minute chart and my concentration was strong without much effort. During the trade I was pretty calm, I wasn't tense. I was happy that I kept patience when I had the initial urge to enter on the short side. However I watched the 5 minute chart with the way the orders were interacting and saw that it wasn't ready.

In regards to following my focus set out, I give myself an 'A'. I was watching the Tick and 5 minute chart and kept to the rule of only writing in 10 minute frames. My focus was clear and when I was in a trade I was calm and my breathing was deep and slow. My attention was on the charts instead of the order bar which was good. My risk and money management was good and I called it a day after I reached my 2 point profit target.

Trade 1: 2 point win
End Result: 2 point gain

 

[jasont]

Trade Setup For 27th March

Here are the areas I am looking at for 27th March

Resistance

1338.25-1338.50
1343.25-1344
1348.75-1349.50
1351-1351.75

Support

1332-1332.50
1323.50-1322.75
1317-1316.25
1308-1307.25

My outlook for tomorrow is that we are likely to see a continuation to the downside. DJIA and SP have peaked right where you would expect to see the current range go on. The VIX is turning back up which usually indicates some pessimism coming back into the market. We were looking rather bullish as Gold and Oil were coming down from their recent highs but it seems they are having another run up.

Whilst the US is reducing Interest Rates and the rest of the world is not so quick to do so, it doesn't give the market much chance of breaking this range. I suspect something fundamental would need to occur to propel this market out of it's current range. As usual the outlook is just a guide and any move during the day takes priority.

My Focus

The focus for tomorrow stays the same as yesterday. I'm still easing back into the trading and only trading when I feel up to it. The 5 minute chart and Tick remain my major focus with the 2 minute coming into play on slow trends. My money and risk management stays the same. During trades I will continue to watch the charts and work on my breathing. Right now I just need to keep doing these things consistently.

 

[jasont]

Emotions, Trading & The Zone

This post has been spurred on by a discussion in Gododdin’s journal entitled “Touch, Pause, Engage” which is a very good example of someone looking to enter trading but not sure what to trade. Very helpful journal with many traders offering advice.

Where to start with something like this? Well I guess it’s a bit of a psychology post and something I have been researching for the past few years. Trading to me is primarily psychology of self and secondary psychology of the market. I have found the only way to absolutely remove emotions from trading is to trade a purely mechanical system. Something that I have done in the past and didn’t sit with me well. Simply because my mechanical system couldn’t tell that things had changed when I could clearly see they had.

Now why would we need to trade a purely mechanical system, many times needing a computer to trade automatically to remove ALL emotions from trading? Simply because it doesn’t require a decision. The system makes the decision. All you need to do is pull the trigger which in itself is also a decision as no doubt many mechanical system traders have had a second thought about trading a particular set up when they sense something is not right.

So what about the traders that say you need to remove all emotions from trading? This has almost become a slogan amongst traders these days but is scientifically and clinically flawed. The age old idea came from the days when neurological investigation was limited and we didn’t quite understand the human mind.

In fact I’m not saying traders don’t feel like they are trading without emotion, I in fact feel the exact same way when I am in the zone. When in the zone all that matters to me is the moves of the market and getting in and out of the market is not even something I consciously think about doing. No thoughts enter my mind apart from curiosity about where the market is headed next. The profit and loss doesn’t exist, just the flow of the market and enjoying the action. It truly does feel peaceful.

The Zone or Flow State was examined by Mihaly Csikszentmihalyi of the University of Chicago, a psychologist who spent 20 years researching peak performance. It is referred to as follows:

“Flow represents perhaps the ultimate in harnessing the emotions in the service of performance and learning. In flow the emotions are not just contained and channeled but positive, energized, and aligned with the task at hand. To be caught in the ennui of depression or the agitation of anxiety is to be barred from flow”

Now what is the point of this post? Well I wanted new traders to understand there is not an emphasis on removing emotions from trading but more so focusing their concentration on the market. If your anxious in trading, don’t sit there trying to push anxiety deeper down, it bottles up and physics dictates that energy doesn’t disappear, it simply transforms. You need to express that energy in another way instead of trying to conceal it. Get up from the screen, many times recognizing that anxiety is creeping in is enough to become relaxed again. Other times you may need to do 15 minutes of exercise to expend the build up of energy.

Why exercise? Exercise, for those who don’t exercise daily it's a way of expending energy. Immediately after exercise you may feel energized and pumped up, but shortly after you peak from the energetic high and you become mellow.

The reason I say to focus on the market instead of removing emotions? There are a number of ways to enter the zone or flow state. These states are what you want to access whilst trading yet it is an illusive state. If you’re in it and you think “I’m in the zone” you will lose it. One way the zone is accessed is through immense focus on a task at hand. That is the way I access the zone, my concentration is only on the charts and I breathe deeply. I’m never quite sure when I hit the zone but after I move away from the screen I realize I was in it. Nothing else mattered except the charts and the market. During I felt great, at peace and relaxed. When you’re in the zone you feel bliss.

You want to avoid trading whilst having any hyper emotions. Emotions are going subconsciously all the time, unless you have a clinical issue with the Amygdala section of your brain. Ordinarily when you take information in visually, it first reaches the Thalamus of the brain. The Thalamus translates what it sees and sends most of the message to the visual cortex, the other portion goes straight to the Amygdala. The visual cortex also part of the rational mind assess the information and decides what the response should be. If it’s emotional then the information is then sent from the visual cortex to the Amygdala to create an emotional response. This is the normal way things operate and your emotional responses are contained such as when traders are in the zone or flow state.

However when you are in a Hyper Emotional state and the Thalamus sends most of the message to the visual cortex and some of the message to the Amygdala, you end up with a purely emotional response. The reason is that the information reaches the Amygdala quicker than the visual cortex and the hyper emotional state gets a reaction out of the Amygdala before the visual cortex can assess the situation.

That is the reason why at times you may have had a hard day at work and become a bit irritated and are in a hyper emotional state. Someone at home says something and all of a sudden you fly off the handle and later think, why on earth did I do that? You are in a state that elicits emotional responses.

So, removing hyper emotions is not done by pushing them aside as they don’t go anywhere, they need to be expended in some way, as I said usually recognizing them and doing some deep breathing solves this. However other times some more energy needs to be expended through exercise etc. Traders who are saying they trade without emotion are in fact trading in the zone or in the flow state where emotions are contained and channeled for the purpose of their task they focus on. Subconsciously emotions are still operating but they are not controlled by the information sent to the Amygdala, they are controlled by the visual cortex or the rational mind. Hence it appears as though there is no emotion at all.

I think that pretty much wraps up what I wanted to get out. The focus isn’t on removing emotion but more so focusing on the task you are doing such as watching the market flow. When you do that you enter the zone or flow state and emotions are contained. When you feel yourself getting anxious or fearful etc, recognize it, take some time out, do some breathing or whatever it takes. The get back to the screen and focus on the market. If you find your mind skipping from the market to what you did yesterday or what you can do with your profits you make from the market, you are outside the zone.

If anyone is interested in understanding their emotions in regards to trading better see the references below:

Brett Steenbarger – “The Psychology of Trading”, “Enhancing Trader Performance”, Brett Steenbarger Trading Psychology, TraderFeed

Denise Schull - CBOT - Win the Emotional Trading War (a few good free webinars on the topic there)

Daniel Goleman – “Emotional Intelligence”

 

[nine]

Good post. Its important for people to understand the emotional responses are not bad for your trading - it's what you do when the emotions hit. I'd just add something that you didn't talk about from Denise's stuff - ANNA.

She said that you need a plan for emotions when they arrive and you've put up a lot of the plan. But its worth knowing about her mnemonic ANNA.

A Anticipate emotions (know whats likely to hit you and when so you can plan what to do)
N Notice that the emotion is there (what are the tells that your getting excited / fearful / greedy so you can spot the emotion before you do something stupid)
N Name, just say the emotions name a few times which pulls your brain to processing in the forebrain not the amygdala which is sometimes called the reptile brain. This reduces emotional intensity - try it, say fear four or five times slowly when your heart starts to beat fast.
A Address the emotion with your plan (like exercising or walking away from the computer for 10 minutes or refocussing on your trading plan).

And finally, something she didn't say, is that the brain runs on glucose. Each time you have to use self discipline and pull the brain into forebrain mode you use glucose and if you start to run low you'll fail to correct yourself. So after an act of discipline, when you've done the exercise have a bite of chocolate, or apple, or a sweet drink to get the blood glucose back.