This post was contributed by a guest author, and does not necessarily reflect the views of Richard or MovetheMarkets.com

Next week I’m going to try something different to stop these blowup days I have. Generally, they happen about once per week. On the surface, it may seem that I trade poorly on those days. However, I have come to a different conclusion. When you are a piker like me, and make 20 round trip futures trades, you’re asking for trouble. Its surprising these days don’t happen more often considering the unbelievable number of trades I make.

There is only one criteria I will use to monitor my performance over the next month — the number of round trip trades I make. When I used to be a dummy, I only made one or two trades per day. In fact Zoomie recommended this awhile back. Although I knew he had a point, I disregarded it. My only focus was to be profitable at the end of the day. Who can keep track of Rs when jumping in and out of trades. I’m sure many traders are profitable with a fast paced style, but I see something different in myself. Multiple trades generally indicates that I’m unsure of direction, so I keep changing my mind (and position). That’s a sign not to trade.

Something else I used to do was skip the open. I knew I didn’t have the discipline or skill to trade it. Although I plan on starting later in the day, I will only grade myself on the quantity of trades. Each day when I report the results of the VC, I will give myself a grade based on this scale: (a) two trades or less = A, (b) more than two round trip trades = F. That may sound harsh, but I believe its the single most important factor in gaining consistency in my trading. Generally, once or twice a day, a trade will jump out at you. I need to quit pouncing on everything I see. Even if I miss the “best” opportunity of the day, I’m alright with that. Its not always easy to see it in the heat of battle. As long as I don’t chase every wiggle, I will be closer to where I want to be.

Btw, if you haven’t read the comments on this post, check it out. Random Trader made sense on sticking to your trading plan, but Tyro was able to put into words what I personally believe about the real challenge to trading (comment #7).

This post was contributed by a guest author, and does not necessarily reflect the views of Richard or MovetheMarkets.com

This post was contributed by a guest author, and does not necessarily reflect the views of Richard or MovetheMarkets.com

On Wallstreak yesterday, there was some discussion about whether scalping short in the StreetSmack method is just attempting to call the top in a move. There are an infinite number of potential tops in a move, but only one true top. Your odds of getting it exactly right are slim. Better to short a weak stock.

This is all true. However, there is more to a parabolic short than that! You only want to enter a short if there is a convergence of several things:

1) Momentum divergence, meaning price made a higher high but momentum made a lower high.

2) Potential overhead resistance is being reached. This can be a pivot point from a daily chart, an upper trendline from a price channel on the 15 min, a 200 day MA, a 52 week high, etc. Anything that could potentially offer resistance to further price movement.

3) Price action up to the resistance point must be parabolic! A slow uptrend or any consolidation at the resistance is just as likely to break out as break down, and there’s no edge at that point. A parabolic rise, however, is probably not sustainable and will likely be repelled by the resistance as it is already overextended.

The question becomes “How do you define parabolic movement?” There are a number of ways, from eyeballing, to actually calculating a mathematical formula for a parabola. My method is this: Compare the price movement to a moving average on a higher timeframe. Say the price on a stock has spiked up $2 in the last 15 minutes. If a fast moving average is not able to keep up with the move, then this is a parabolic move. Price usually does not get far from the 5-ema without retuning to it (or at least close to it). So if price gets too far away, it’s likely (not guaranteed) to return to it. So my definition of parabolic is an extreme move away from the 5-ema on a chart with a higher timeframe.

Even with all of this, you still don’t want to enter a short yet! You can scale in a very small position here. As price goes down (or up) you can scale in and out to dynamically change the average price of your position. But you still haven’t really entered yet.

The cue to finally enter and pile in big for your full position size is a big downward break. You wait until it’s obvious that there will be a collapse. If it never comes, you never fully enter. You’re not shorting the top, you’re piling in to a stock that is in a confirmed downtrend on a very short timeframe. That’s the difference.

These charts of my trade in RIO show each of the above elements–Momentum divergence, nearby overhead resistance, parabolic upward movement with respect to the 15 min chart 5-ema, and a confirmed downtrend before the big entry.

Just to make a point, I traded one more time today while writing this (I lost -4.5% today in 7 losing trades with only 3 winners. I’m killing myself by forcing trades. I took good setups, but they didn’t work. But RIG did (which I didn’t trade), and it was just like trades I took in HANS and AGIX; go figure).

Anyway, I traded very small, scalping URBN short, so it was basically just a practice trade. This is a poor example, but it’s the best I could do on a Friday before a holiday weekend, okay? :P It shows all of the elements outlined above:

This post was contributed by a guest author, and does not necessarily reflect the views of Richard or MovetheMarkets.com

This post was contributed by a guest author, and does not necessarily reflect the views of Richard or MovetheMarkets.com

This post was contributed by a guest author, and does not necessarily reflect the views of Richard or MovetheMarkets.com

A decent-sized 16-cent winner on Triad Guaranty Inc. (Nasdaq: TGIC). I thought it would be a scalp at first, but I actually let it retrace a bit, because I thought the initial drop was too weak and another would follow. So, I’m not sure what to call this type of trade. ultra-discretionary?

I was extra careful all week, because I was scared of the pre-holiday markets. Luckily, I think there were enough random news events that we got pockets of movement all week. Great! Hopefully volume will flow back in by next Wednesday or Thursday, and there’ll be more tradeable action out there.

I will be unavailable starting about an hour from now until Monday night. Gonna do a little mini-vacation. I’ll see you all Tuesday (and I’ll try to update the weekly stock scan Monday evening).

Since I’m in a hurry, here is your weekend non-reading… an adorable-sounding Irish woman takes an EOT-style trade:

And another one from Harvey Walsh… I wish he talked a bit more about his rationale for entry, especially on the aapl trade. Oh well.

Stocks Mentioned In This Article
Stock	Links
TGIC	| |

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• ‘Unprecedented’ Volatility: Perception vs. Reality (Teresa Lo | PowerSwings.com)
  …when John Bogle announced on CNBC yesterday that it’s the worst he’s seen in his 55 year career, I knew I had to go back into history and take a look.
  (tags: trading volatility)

This post was contributed by a guest author, and does not necessarily reflect the views of Richard or MovetheMarkets.com

All too often when we read trading books, we see a pattern that plays out perfectly. Then we go on to spot double bottoms, make our trade, and finally find out it wasn’t the bottom. We average down, the position comes back to break even, and we feel some relief. You know what happens after that. I laughed when I saw this chart. Although I don’t average down, and hold losers overnight (winners either), this chart reminds me of my own trading.

I would love to see at least one chart in every trading book like this. If I had a better grasp of the English language, I would write a book myself. I think its easier to write the book, than to actually trade. I would almost bet that many of the books I have bought are from washed out traders with enough knowledge to become dangerous.

Zoomie pointed out on Prospectus’ post that he believes it takes about three years to become profitable. If nothing else, after two years, we should have enough knowledge (and maybe a secret indicator or two) to write a book.

That’s Plan B!

And before everyone starts bashing Boogster, how many traders are willing to air their dirty laundry every single day without fail. I know I’m not. I will quickly drop out of the VO, and change my name. However, my fourth grade writing skills will be easily recognized.

This post was contributed by a guest author, and does not necessarily reflect the views of Richard or MovetheMarkets.com

This post was contributed by a guest author, and does not necessarily reflect the views of Richard or MovetheMarkets.com

I’m getting an early start on the holiday, and will take tomorrow off.

This post was contributed by a guest author, and does not necessarily reflect the views of Richard or MovetheMarkets.com

Quitting at 1PM ET. Not enough on my radar to keep me entertained.

I remain undefeated this week. Go ahead and add comments calling it luck. I will laugh all the way to the bank. The teller will be delighted by my upbeat manner, and impressed by the size of my… deposit.

Ok, if I haven’t jinxed myself yet, surely I just did.

Just another scalp, this time for a meaty 20 cents, though. Of course it went on to run another 60 cents, rrgh, but I think that was based on some UN nerve gas scare. It recovered all that ground 3 minutes later, so I don’t feel too bad about missing that part of the drop.

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This post was contributed by a guest author, and does not necessarily reflect the views of Richard or MovetheMarkets.com

Here’s my PnL chart since I started Prop Trading at the end of July on a % equity basis. When I was up 30% I posted my Best Day Ever post. Since then, a solid downtrend. Trader Mike is now thumping me big time. My win / loss ratio stands at 38%/63%.

This post was contributed by a guest author, and does not necessarily reflect the views of Richard or MovetheMarkets.com

This post was contributed by a guest author, and does not necessarily reflect the views of Richard or MovetheMarkets.com

This post was contributed by a guest author, and does not necessarily reflect the views of Richard or MovetheMarkets.com

• Top 15 Terminal Commands for Hidden Mac OS X Settings
  Ways to change some annoying defaults, like the over-simple save dialogs, etc.
  (tags: mac osx)

This post was contributed by a guest author, and does not necessarily reflect the views of Richard or MovetheMarkets.com

I quit! Not trading of course. Tonight I removed the workspaces I use to trade oil. One of the reasons I chose this instrument when I started trading futures was the volatility (read potential). However, the liquidity on the miNY crude contract is terrible.

With the recent swings in the indices, there is plenty of opportunity to make money. Besides the liquidity, the reward:risk ratio seems much better.

A few losing oil trades, and I’m down huge which affects my pysche. We’ll see how long this lasts.

This post was contributed by a guest author, and does not necessarily reflect the views of Richard or MovetheMarkets.com

This post was contributed by a guest author, and does not necessarily reflect the views of Richard or MovetheMarkets.com

I traded 9 times today–3 wins and 6 losses. Two of those losses were a full -1R and dumb plays where I chased a rally. I just throw money away. Luckily for me, I had a trade pay off big in CFC early today, and I finished up about +1% on the day (from a high water mark of +3.5%). I entered once for a loss and then the second trade paid off in spades. The chart of the CFC trade follows:

I went short premarket at 19.56 with a stop at 19.75, above the premarket high. After the open, we made it as high as 19.71, where I covered to avoid slippage on my stop. This happened to be just about the top tick. After more weakness, I went short again at 19.47, and got the break I was hoping for. I covered half at consolidation after the breakdown, and then covered the rest when we broke back above 18.80 where I had set a stop to protect profits. My stop was 0.10 from entry, so I pulled out +6.2R on this trade. My $ size was only 0.5% of my equity, so it only returned 3% though. Not all R’s are created equal.

This post was contributed by a guest author, and does not necessarily reflect the views of Richard or MovetheMarkets.com

This post was contributed by a guest author, and does not necessarily reflect the views of Richard or MovetheMarkets.com

WINN:

This post was contributed by a guest author, and does not necessarily reflect the views of Richard or MovetheMarkets.com

Partial day for me today… I was out on my normal Thursday outing early this week. But, I still made 2 small scalps for 2 wins. No fibonacci plays today, I’m afraid. My watchlist remains terribly small this week.

ALGN formed a picture on the chart that’s pretty common, and suckers lots of people in. Hopefully my description can save you some money, if you’ve been victimized before!

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