9/30/11 Trade Results: $605 Profit- Picking market direction, not "perfect price".

Looking at this chart, you see that if I did not have "realistic" targets for my trades, I would be stopped out every time because of the swings in the market. You want to have targets that are realistic, not shooting for the moon on every trade. I promise you, you will be giving up a lot of unrealized profits, and the number 1 goal of trading is to make money. Secure the profits, don't be greedy!

Here is the way that the day played out for me:

I had a short bias due to buyer failure. I took the BOT Short.

 Then, I added to the position with a break of the low of the day. I left my default targets at 10 points, while adjusting my risk to a +risk, worst case scenario, I still make a small profit instead of taking a loss.

Met both of the 10 point targets. Then took the short TL trade and met target on that at 10.25 points, having 1 tick positive slippage.

 With the slippage, it ended at $605 for the day, not $600.

Identifying buyer and seller failures to determine market direction

Here is a concept that I created and apply in my trading:

I feel that buyers and sellers are the ones that control the price in the markets and what direction the markets will go. They decide if a price is too low of too high and whether there is agreement between both parties.

In a downtrend, you look for buyer failure to enter short and to confirm your short directional bias. In an uptrend, you look for seller failure to enter and confirm your long position. You want to look for shifts in failure to form condition changes. For example, lets say your bias is short and you have a lot of buyer failure signals; your condition bias is short. BUT, once you start seeing early signs of seller failure, it means that buyers are stepping into the market to support price and that a condition change may occur soon. Here is a chart signaling seller and buyer failures:

9/30/11 Morning Prep / Analysis: Futures hold losses after econ news

Fundamentals: U.S. consumer spending adjusted for inflation was flat in August as income fell for the first time in nearly two years amid a weak labor market, according to a government report on Friday.
- No major economic announcements today

Technicals: 8:44am- All charts showing short bias. I am looking at this little uptrend on the 5 min being a possible bearish flag:

Course of action: Look for BOT Short out of the bearish flag or short the break of lows. Let all long signals pass by (until you have a major condition change, which will then allow you to go long). But until then, only short, let the longs go by, look for BOT Shorts.

Entry price means nothing, it's the direction that matters!

I want to discuss a concept that I follow during my trading day. Most traders focus so much on picking the perfect entry price that they forget the main reason that a trade profits instead of loses. It's all about picking the direction. Think of it this way, before entering a trade, do you see at least a 10 point move in the direction of your trade? You need to be confident that a move in that direction will occur. Generally, this is done through your daily trade analysis. I gave up on trying to pick the "perfect price" because there really is no such thing. It's all about being able to pick the correct direction and protecting yourself if you are incorrect. I like to start with a 10 point stop maximum, usually ends up being around 7.5 points, but more often than not gets reduced to the invalidation point which is less than 10 points.

When I tried to tighten the stop up to say 2.5 points, I found that I was fixated on the price so much, that I over-traded, revenge traded, and made mistakes. With increasing the stop, I am able to focus on identifying direction rather than the "perfect entry price". If you can't pick direction correctly, you will never be able to profit on a regular basis.

A key component that I apply is sending out a "probe trade". It's a 1 contract trade with a default stop of 10 points or the invalidation point. If the direction is confirmed, I add 1 contract to the positions, making sure that my stop is now above the average entry price no matter what.

The majority of your trading day should be analysis, only a small part of it should be actual trading. Here is an example when you recognize the BOTs, but only acting on certain ones and assume bearish/bullish flags on the counter trend BOTs. You allow them to pass by, and wait for the BOT in the direction of the bigger picture.

How to spot a reversal / change in market conditions.

Here is how I recognize condition changes in the markets. These condition changes are critical because they signal to me that I should exit a trade if the conditions have changed, and potentially look for a trade in the direction of the condition change. This will be the first post of a series explaining what I do and how I do it. For those that have experience, you might say that my condition change BOT signal is the first leg of a flag. A BOT Long being a bearish flag and a BOT Short being a bullish flag. This is very true, and I will explain in detail how I attempt to recognize the difference and manage positions accordingly when I see the formation of a flag being confirmed. For now, just take it for what its worth, and try to understand the price action during a BOT signal. I actually ASSUME FLAGS INSTEAD OF REVERSALS during BOTs. This is a key rule of mine to wait for confirmation of buyers stepping in before entering the trade.

This was the first sign of seller failure. However, I wait to allow sellers to step back into the market and see if they can depress price lower. If there is seller failure, I take the long with a stop below the swing low.

If buyers can step in and support price, I become a buyer.

Here is the confirmation of the BOT Long, where I can begin to assume the reversal instead of the flag but there is still the high probability of the flag / continued pressure from sellers:

If in a long, make sure to protect yourself with a stop. The best way is to trail swings. The number one rule is the have you stop above you entry price in this situation. Never leave anything up to chance, be protected because there is still a high probability of a bearish flag if buyers are unable to continue setting higher highs and sellers step in upon buyer failure.

BOT Long tells you four things:

1) Possibly the last wave of shorts / first wave of longs
2) Stop looking for a short.
3) Exit a short if you're in one.
4) Monitor for a long.

 _______________________
Update- 4:23 pm
Here is what ended up happening towards the end of the day. The BOT Long was invalidated with a BOT Short signaling. This means if profit wasn't taken on the long trade earlier, you must exit no matter what. The BOT short was valid for about 25 points on the NQ.

9/20/11 Trade Results: 13 Trades, $1,005 Profit

Finished trading for the day. Had really good volatility in the markets this morning. I was able to average up into almost all of my positions. I had 13 trades for a profit of $1,005, from around the open to 11:55am. Here is a chart of today's entry and exits on my fast chart.

Pretty bullish signs in the markets once Europe closed higher after the IMF Report. With the swings in the markets these days due to the uncertainty, I play it a day at a time; don't be a bull or a bear, be a chameleon. Adapt to condition changes.

9/16/11 Trade Results: $270 Profit

Today was a really interesting day. We followed Europe down in premarket, RTH opened lower, sold off, and then rallied. I had 27 trades, which is way more than usual, but I got stopped out for minor profits on most of them. For example, I would get stopped 1 tick above entry for $5 profit. I'm finished for the day, traded both morning and afternoon, will be on tomorrow morning.

Check out this BOT Long following news that Greece and its creditors to continue talks on Tuesday. I have a trend BOT automation indicator that signals the blue arrow upon break of the short term trend.

9/19/11 Morning Prep / Analysis: Futures sharply lower

Futures set to open sharply lower, Obama to set out budget plan. Here is a chart explaining the technicals:

9/16/11 Trade Results: $110 Profit

Today, I had 3 trades and got stopped out of all of them for small profits. There is still the solvency issue in European banks still. There is a lot of uncertainty and news that's whipsawing the markets currently. If today closes up, that will be a week of straight gains.

9/15/11 Trade Results: $410 profit, rules followed

After yesterday, I was really happy with the fact that I followed my rules / system. I had a few issues Thursday, Friday, and Monday with going against my system, breaking rules, and getting stuck in bad trades. Following that, I decided to take measures that will make me follow my rules at all times. With the emotional success from yesterday, I really wanted to try to continue the process of discipline and patience into today. I ended the day with $410 profit, stopping now at 11:30am because of a drop in volatility. I might trade the afternoon, but I'm not sure yet.

9/14/11 Trade Results: $225 profit, rules followed perfectly (example)

Today was an ok day, ended with $225 profit for the morning session. I am very happy with the following of my system / rules today. I stuck to all the rules and did not make stupid mistakes. I always keep in my mind the following:

Never leave ANYTHING up to chance. Don't be at the mercy of the markets. Be smart.

Here is an example of a position that I took, followed my system, got stopped out, and I'm happy for it because a condition change occurred.

9/14/11 Market Analysis: Indecision, waiting for either side to gain power

Here is the chart:

9/13/11 Trade Results: $110 Profit, day filled with stops

Ended the day with $110 profit. After the past few days, I decided to be very conservative with my stops. This resulted in 90% of my positions being stopped out. The problem with this is that I had 23 trades and only made a profit of $110. I had about 19 +$5 stops.

After this day, I will attempt to be more conservative with my entries and look for only high quality trades. The goal is to have that one position trade that goes in your favor and gives you the ability to average up into the position while trailing invalidation points. With a resulting move of 20+ points in the NQ.

Here is a position that I was able to average up but got stopped out of:

9/13/11 Morning Prep / Analysis: BNP Paribas hurts Europe

Fundamentals: This morning, bank issues, primarily BNP Paribas, have brought down European markets. Europe at fresh two-year lows on debt crisis.
- 8:30am: Import Prices m/m

Technicals: 6:05am- Technicals on slowest time-frame showing a pullback but all other charts showing short bias. Fast entry chart showing indecision from 4:30am though.

Course of action: Look for short entry signals and take them, be careful of short squeezes (be conservative with stops and have high goals for targets).

9/12/11 Trade Results: $270

Ended the day with $270 profit, 7 trades. This includes the 1 trade left open from Friday. Upon the close of Friday, my mark-to-market closing balance was -$60. I closed out that position today and had 6 trades throughout the day. So the $270 includes the position from Friday. Today was a very volatile day. My analysis indicated that there was a short squeeze in the morning followed by a steady down trend and then a following short squeeze. Thursday, Friday, and today have been kind of tough to trade properly because of the swings in the market. There are a lot of factors that are driving prices right now, the thing is, these factors have a lot of uncertainty within them.

Starting tomorrow morning, I will be back on the regular schedule of being up by 6:00am EST and having the daily analysis posted. I think my issue has been that I have been to undisciplined with my trading the past 3 days. I will have a video posted later today and will explain the issues that are occurring as well as solutions for correcting them. Here is a position that I took a positive stop on, unfortunately, the market was not ready to rally at that time. The most important thing is to protect yourself though. So be happy that you take a positive stop in trades rather than getting stuck in positions for a loss that keeps adding up. There will be the time when you are correct and the market rallies in your favor and you are able to average up for a large profit.

9/8/11 Trade Results: $200 Profit, nothing but mistakes today

Today was the toughest day ever trading. The entire day, I made almost nothing but mistakes. There's a large list of things I did wrong today. I went against the system several times, tried to pick bottoms/tops, fought the trend, added to a losing position, etc. I want to really reflect on this day later on in a video or long post because today was the worst day ever. It's not that it was bad financially, its that it was bad emotionally. There was no discipline, patient, or proper analysis. I had a struggle all day, trying to tell the market what to do. My main motto is, "I'm not a bull or a bear, I'm a chameleon; I adapt to changes in market conditions". Unfortunately, I did not practice what I preach. I was a bull when the market sold off and a bear when the market rallied. I had tunnel-vision, only looking at one candle at a time. I decided to not trade the afternoon because of the issues that occurred this morning. Even though the day ended with a profit of $200, it feels like a loss because I was not applying my system 100%. It was more of a "lets take a trade and see what happens, HOPE it goes in my favor". That is completely unnaceptable if you want to succeed in this business. Here is the chart from today:

9/7/11 Trade Results: $1,085

Today was a very bullish day in the markets. I had 10 trades resulting in $1,085 profit. I'm done trading for the day / not trading the afternoon because I far exceeded my daily goal. Here is one of the trades that was taken; BOT Long Signal with average up opportunity without invalidation. This is an "average up" position structure according to my system.

9/6/11 Trade Results: $1,010 profit

Ended the day with $1,010 profit. The markets were very volatile today. Europe issues kept hitting the US markets, and ISM had a temporary impact on price, which eventually may have changed the emotions of investors (temporarily) to the upside- at least pulling up from premarket lows but still in the red.

9/2/11 Trade Results: $500 Profit

Today was a very volatile day in the morning. After 11:30, the market basically went sideways. I have no open positions going into the weekend. I believe there is too much risk to hold overnight at the moment. I ended the day with $500 profit:

 

Here is a position from today. I was expecting the market to continue downward to test lows, break them, and set new lows. That never happened, I got stopped out of this position for a profit upon a long signal.

9/2/11 Morning Prep / Analysis: Jobs Report (8:30)

Fundamentals: Futures to open lower, fears of recession growing, markets bracing for bad news.
- 8:30am: Jobs Report

Technicals: 6:58am Every chart is showing a short bias, all time frames. Everything is red today ahead of the jobs report. The key is not to be impatient and get in as the last wave.

Note on Jobs Report:
Markets face some kind of catch-22 this morning regarding the jobs report. In one scenario stocks will go up no matter what. A good jobs report signals a stable economy and money rushes in. A bad jobs report forces the Fed to come in with guns blazing, and money rushes in.


In another scenario stocks will go down no matter what. A good jobs report blocks significant easing by the Fed and people sell. A bad jobs report signals a crashing economy and people sell.
First Empire Asset Management's Michael Obuchowski tells Morning Money: "We are in a very odd place right now. Nobody really knows how this number is going to come out. There has been so much uncertainty the last month. It could really come in anywhere and get plausibly explained away... Even if the number is very low the market reaction may be surprisingly positive given that it would be perceived as forcing Bernanke to do something more aggressive."

Course of action: Wait for Jobs report to come out. Let news digest and determine buying / selling pressure prior to taking position.

9/1/11 Trade Results: $505 Profit: Gov Jobs Report tomorrow (8:30am)

Done trading for the day. Had a few positions in the afternoon session. Ended with a profit of $175 for the afternoon. On the day, finished with a profit of $505. I am waiting for the Gov. jobs report tomorrow to initiate a longer term position trade. Going into the early morning, this is the consensus:

Economists expect the number to have risen 75,000 in August, according to a Reuters poll, after gaining 117,000 in the previous month. The unemployment rate is seen steady at 9.1 percent. 

The report is at 8:30am, so the morning will be all research and analysis until the release. Following the release, I will be looking for conviction from buyers or sellers to take a position. Enjoy the rest of the day!

   

9/1/11 Morning Session Trade Results: $330 Profit

Done trading for the morning session because volume is starting to dry up going into lunch. Ended the morning with $330 profit. I will be back at the screens following lunch, around 2pm. If anybody wants to discuss the markets later or go over charts let me know, I'm free all day basically, just going to the gym now until 1pm. Hope you had a good day trading!

9/1/11 Morning Prep / Analysis: Unemployment Claims (8:30)

Fundamentals: Futures to open lower, unemployment claims in focus
- 8:30am: Unemployment claims

Technicals: 8:23am- Charts bearish with the pull-up currently happening possibly being a bearish flag, especially is jobless claims supports the bearish direction. Buyers are testing a medium P.O.I. right now. if they're able to break through it, bias is long. If the P.O.I. is rejected and sellers step in, bias is short.

Course of action: Wait for unemployment claims. Let news digest and determine buying / selling pressure prior to taking position.