Friday, September 29, 2006

Better trading

In a newsgroup someone suggested taking just one profitable trade in the morning and then walk away from the markets for a while, for the day.

I’m not sure, this is really a way to cure for always giving back profits made

What do you do if the first trade is a loser

What do you do if you are trading good and make your daily goal

What do you do on a losing day

I thought the same way this trader did for a long time. I took one or two trades a day. I stopped when I made my daily goal, or just one profitable trade. I stopped after 2 or 3 losing trades ending the day red.

But does it get you nearer to your real goal?

What you learn is discipline

And it's a very good lesson to learn. But it will not help you to learn trading.

Being a daytrader means

  • You trade your edge
  • You follow your trade plan
  • You adhere to your money management rules
  • You know your statistics
  • You are flat at the end of the day
  • And at the end of the day your statistics will again tell you, you had on average x% winners and y% losers

It is your job to trade your setup

You don't ask, if it might be a winner or loser. Your statistics already give you the numbers and it wouldn't be your setup, if you did not know 100%, that this setup gives you a chance to be profitable on the long run, that it gives you your edge in the market.

Having the daily goal is good, taking just one profitable trade is good. But it is just one step on the way.

You need to prepare for the inevitable string of losers, you need to finance them. And you can do that only with a string of profitable trades. Embrace the days, where you exceed your daily goal in such a way that you make your weekly goal sometimes within just this one day. Because you know, that tomorrow might be the day where you lose everything you made today.

And if you stop today because you made one profitable trade you might not have enough to finance tomorrows loss

What this trader suggests teaches you discipline, but it also might be

Fear to lose the profits already made

Do it for a while, but leave it behind when you are ready to really trust yourself.

Never go broke booking profits

You think so?
Think twice.

You have profits and losers. If you continuously have less profits than losers, you will go broke, even when you take profits on your winning trades.

So the correct rule for any aspiring trader is:
Make sure your profits pay for your losers and commission.

That way you will still have an account when you have found your edge in the market.

Sunday, September 24, 2006

Risk or Can you make a living from trading

Say you want to make 50k$/year.
And as for so many aspiring traders your account is somewhere between 10k$ and 20k$.
We all know the compounding spreadsheets and it sure appears to be possible. The problem is the risk part, we usually overlook in these compounding examples, which tell us, that in 50 days we will trade a 5k$ account upto 50k$, taking "just" 2 or 3 points ES or Russel a day.
Let's take the 10k$ the 20k$ account size example.
You start trading 2 contracts as so many do.
And as a lot of traders (actually somewhere between 80% and 90%) you will fail after a while.
As I see it, these traders fall for the lure of overleveraging themself, of taking too much risk for their account size.
After trading for a while, your statistics will tell you what you lose on average on a losing trade. And unless you microscalp, it will be usually somewhere between 10 and 20 ticks / trade, so somewhere in the range of 100$ to 250$ loss per contract traded.
For our aspiring trader trading 2 contracts that makes a risk of 200$ - 500$ / trade. Let's take it in the middle, so it's a 350$ / trade risk.
Now we all know, losing trades come often in a row, so you need to decide what is your worst case scenario?
3 losing trades, 4 losing trades in a row? Most likely, if you start trading the risk might actually be 5 or 6 losing trades in a row, but say you have decided after 4 losing trades, you pull the plug for the day.
4 losing trades * 350$ = 1,400$ risk / day
4 red days in a row, sure not unheard of, so our aspiring trader is down 5,600$ on his 10k$ - 20k$ account
Does it happen? Oh yes, I know at least 1 trader, who had this happen to him and it wasn't such a long time ago that that happened to me and I recently wrote about it (more bang for the buck)
For me it meant imposing some strict money management rules and setting the internal margin / contract to 10k$.
This limits the profit potential, but the profits really take care of themself, once you get the losers under control. (At least, if you have recognized your edge in the market)
Most important it means this measure is getting the daily risk under control.
Not the risk in the individual trade, but the overall risk you take every day, because you know you have statistically x% losers, which means you will encounter losing streaks as sure as you wake up every morning.
So does that mean, it's impossible to trade a 10k$-20k$ account so you can take out 50k$ / year?
It most likely is, yes, because the risks you have to take are too high and statistically you will encounter the losing streak, which can bust you.
Therefore, you will first need to trade your account up, living from some other funds or a second income, before you will be able to take 50k$ out of the market on a regular basis.

My Tradedesk

Someone asked about it, so here it is

20060924 059

(Bit difficult to make a picture of a Flatscreen, so the desk appears a bit dark)

Saturday, September 23, 2006

Dealing with a red day

Yesterday I had a very deep red day after 2 weeks of green ones and all the feelings of

  • am I able to trade
  • is my system sound
  • why am I such a mooron
  • can’t I recognize a trend, when I see one
  • is my good fortune over and the swing down starts again

were back.

Ignoring these feelings will led to them being fullfilled. You need to deal with these thoughts to reach an emotional neutral state again. But how?

Negating them, telling you, your system is sound, you can trade won’t help. It’s too easy to say so and the one you have to convince is

You yourself

So you know, that it’s just a saying and you are just trying to convince you, that the feelings are not valid.

You need to do more.

The first step I have already taken by writing this article, by writing about my feelings, as this forces them to light so I can deal with them, instead of having them linger in the background of my mind doing their subversive work, which would destroy all I have build so far.

Next comes a mind-playback of the trades to relive the feelings in the trades, which went wrong. Was there something in common?

The first was a HSI trade. I went short and was totally convinced the trade would eventually be a winner. It lingered around my entry for 10 or 15 minutes, going a few points up, then down, then up again. I saw selling in the contract, HSI had not followed the US markets down, so I thought it would eventually and became complacent, when suddenly HSI squeezed up and hit my disaster Stop.

Shit, it happens in HSI and I told ‘em HongKong traders names. It helps to vent your feelings if something went wrong to regain composure, to regain an emotional neutral state.

But besides going against me this trade shattered my downward bias I had had for the day. And this was the real error I made yesterday. After seeing HSI squeeze 100 points up after a strong down day in the US, I traded the european markets with the same bias. I traded to the long side waiting for a squeeze to happen, which never came. Instead I was stopped out twice on DAX and twice on FTSE, before I realized my error. 5 red trades in a row. It was a long time that that happened to me and it was a very costly error, as I give the Dax and FTSE 20 ticks Stops.

The Stopsize is not the problem, not being able to switch back to my shattered trading plan was. My charts told me go short, priceaction told me to go short, but instead I waited for a squeeze which never materialized. Had I traded the long side as countertrend trades, I would have waited for a support to be hit and entered within 1 point of it. but something held me back. Only when I saw DAX going 5 points or more I took the long side, seeing it as sign, that the european markets took the lead from HSI and would trade to the upside. 1 or max 2 points green and then the sledgehammer was there again driving DAX and FTSE down.

About 1400$ down in 5 trades on 1 contract after 1 hour of trading was sure a hit to my confidence.

I took a deep breath, stopped looking for a trade and stepped back from the screen.

What had I done wrong?

I had been too confident about the HSI trade. I had been proven wrong and therefore the short side, which had failed in the HSI, must be the wrong side for the european market as well.

Even after I had recognized this false conclusion, I wasn’t able to switch back to the short side. The first trade still lingered in the back of my mind, asking questions like: Chris, what will you do, when you are again caught in such a squeeze. Will you be able to pull the plug? Are you prepared for another defeat? So I traded without confidence and therefore late on the long side. And for this I paid.

To stop trading wasn’t an answer either. I’ve done that, been done that road and it usually lead to strings of red days, as I then question my trading, my signals more and more. The last year gave me confidence. I see the trades, I can trade. So I did, what I usually do, when I get no clue on a market.

I looked at a different market. Natural Gas was even more erratic than usual, so I looked at the Gold market. ZG provided a good setup and I made the first 300$ back. Another one brought  the balance down to -900$.

In the meantime it was afternoon and Dax had broken further down. I took it short, got caught in a reversal, as one would expect after Dax was already down 80 points for the day, reversed after -10 ticks and was out +10 ticks on the long side, bringing the balance back to neutral.

Another 2 Gold trades were stopped at Breakeven +1. And while being down huge in the first hour of trading was no reason to stop trading, as string of Breakeven trades in the late afternoon (usually around 5 to 6 pm my time, which is noon in New York) is a sure sign, that I’m done for the day. And I have come to respect that sign.

So I closed the day deep red with the knowledge, that the week was still green, that I was still able to concentrate, to pull the trigger and take good trades after a string of real bad trades. I got 1/3rd of my morning loss back, and had I been really fit in the afternoon, I could have made it all back in a Short Dax or Short Gold trade, which both ran about 40 ticks after I got the signal.

I did not take the trades, but I saw them and hesitated. Something to work on and a lot more productive, than thinking about the losing trades. Still writing this lengthy article has brought some closure, has brought some understanding to the why it happened, so I will not again fall into this trap, but recognise it right away and profit from it.

Thursday, September 21, 2006


Don’t continue reading, if you like to read my blog just because it might provide you helpful insights into the mind of a trader on the road.

Yesterday I received a letter from David Taylor, whose Blog “Dismally” I sure like to follow on a regular basis for the insights it provides to my trading.

Hey Chris...

I know you keep your blog out of the political world, and I know you're not even an American, but I've written something about the recent articles that are coming out on the Canadian who was tortured by our government.

I'm wondering if you have any interest in doing your own write-up. I think as a group, as bloggers, we may be able to make some noise in regards to this.... and maybe make some change.
To tell the truth I wasn’t sure how to respond to it.
Should I write David, telling him a polite “No, I won’t, I will stay quiet”?
There sure are a lot of reasons to do so.
  • Mr. Arar isn’t the first and won’t be the last torture victim in this war against terrorism
  • I haven’t written about the innocent Mr. Kurnaz, released in August after being held captive for 5 years
  • I haven’t written about the innocent Mr. El-Masri, who is sueing the CIA for torture in Syria
  • Writing about it might make me an unwanted person in the US, when I have to go there next time. I sure have some IP addresses looking like US official ones in the list of IP’s accessing my website and this blog.
  • The current administration has been not only elected, but reelected by the American People. The facts where known then already. The Film “Fahrenheit 9/11” by Michel Moore had raised a lot of questions, had told a lot of facts, and still the people elected to keep the administration in the White House.
  • So who am I, a German, questioning the will of the American People.

On the other hand there are a lot of reasons to raise questions, to speak-up for the people not able to speak for themselves .

  • I’m a child of the German post war generation. I never had to endure the horrors of war
  • When I was in the military it was clear that no German soldier would ever be allowed to serve outside of Germany. And it was also clear, that the communist block would in fact never make war against the western european states. For me it was a clear decision to serve, but to tell the truth, there was also this voice inside me, telling me: Hey Chris, go for it, it’s the easiest way, it will make it easier in the future for you, it’s an adventure, it’s just 15months and there sure is no threat for your own life.
  • After the reunification of Germany the political landscape changed. Now German soldiers are serving around the world and we are faced with the truth, that we can’t hide behind others to do our job side by side with our allies.
  • But if we go to war in the name of peace, in the name of democracy, in the name of a greater moral authority, telling other people, what political system is best for them, then we should make damned sure, that we ourselves follow these moral and legal guidelines.
  • Then no western government, no superpower, noone can put himself outside of the law or circumvent the law, so the rules setup by it’s own people may not apply to him.

As you all can see, I’ve decided to speak-up , not only for Mr. Arar, but for all torture victims. History has told us, that staying aside, not speaking up, going the easy way can led to total disaster and destruction.


The American People have a new chance to make it more difficult for the current administration to work outside of the law. This has nothing do with voting for Republicans or Democrats. This has todo with the Balance of Power which has to be restored.


The Government has to be held accountable for every act it is doing in the name of the People and I sure hope, that the American People on November 7th, 2006 take the necessary steps to make sure, that this will be again the case.

Wednesday, September 20, 2006



Your broker is down

and the market is rising

A predicament not just one trader found himself in yesterday.

What do you do? Do you have a plan or do you revert to Hope?

I for myself prefer a plan. And this plan first calls for analysis of the problem.

1. What is down?

  • The Internet
  • Your broker’s servers
  • The exchange

2. What is your response?

  • Always have a 2nd Internet connection connection installed, tested and ready for use Cheapest solution is a dial-up connection, but you might also consider having one using your Laptop and Handy. Even without datapacket subscription, you can establish a Dial-Up connection using your Handy to connect to the Internet. A data-cabel connecting your Laptop with the Handy is much more reliable, than the already existing Infrared or Bluetooth connection and will cost you about $2 on Ebay.
  • If that’s not working call your broker and exit immediatly. You will need the phonenumber nearby.
  • Have a backup broker. Then you have the option to offset any open position at any time
  • If the exchange is down, then you need to have a list of contracts traded on other exchanges, which will enable you to offset any position you have at least partially. You just need to calculate how much they move on average for each tick the contract you have the open position in, will make, so you know what size you need to trade.
    During the US markets RTH the German DAX as well as the Eurostoxx50 are both actively traded on Eurex and might be used to offset any open US index position.
    The Bonds may be offset with a position in the German Bund.
    Open currency positions might be hedged with a Forex position, if you have a Forex account. Otherwise, at least during US RTH EUREXUS offers currency futures as well, even if these are not very actively traded.
    Energy contracts on NYMEX can be offset with contracts traded on IPE

Being stuck in a position is no excuse for a loss. There are options available to you.


Monday, September 18, 2006

More bang for the buck

=> Overleverage => Blown out account

Trade the contract which gives more bang for the buck. It took me nearly a year to climb back out of the hole I had been falling in following this advice.

I new them all. Books telling me to trade the ER2 with 8k$ margin, ZB with no less than 10k$ margin in your account, regardless what your broker was offering you. But also old traders, I respected for their wisdom, for their market knowledge. They said to me, Chris, don't over extend yourself. I thought, why? I have it all under control. Not only the market, but also my reactions, my feelings, my emotions. But tell you what, I hadn't. I felt bad one week, the market did not care, I traded as if I were fit, but made errors, did not believe them, hoped, made more errors and lost more.
I made it back. Trading 1 contract. Slowing increasing my daily goal from 10ticks a day to 20 now 30 ticks a day. The final goal will be 50 ticks a day. I'm not there yet, but it sure is possible, I sure see the trades, I'm just not yet able to take them all. I'm on the way.
A daily USD goal is fine, but it is a huge difference, if you can consistently make 500$/day trading 1 contract or 5 contracts. If you make the 500$ consistently trading 1 contract and you increase size to 5 contracts and you are able to do everything else identical, you will make 2500USD / day. Very simple
If you make 500$ trading 5 contracts, to earn 2500$ you will have to trade 25 contracts.
I sure know which of these 2 traders I would like to be.
My Money Management Plan now allows me trading 1 contract / 10k$ account size regardless of the contract I trade. 1 year ago I allowed myself trading 1 contract / 4k$ account size. I wasn't ready for it. I now see my errors, actually it was one major error I just recently identified and which is at the core of the "able to do everything identical regardless of size" statement.
I tweaked it. I thought of scaling in, of scaling out of positions, when everything I had to do, was trading bigger size. Everything else had to remain identical. Not similiar, not tweaked, identical.
Why? Because otherwise the statistics I had accumulated about my trading, the statistics which are the basis for my belief, that I have a trading edge, are no longer usable, no longer valid.
By changing the way I trade I made them obsolete. I had no idea, whether I had an edge using my new scale in/out technique or not. And by subcontiously recognising this problem, doubts and hesitation came into my trading. And these finally led to my downfall and disaster.
Then I did not see it. Just recently, when I increased size again and repeated my error, I saw, that I had travelled that road already. That I was about to repeat what I had done a year ago and today I understood why it would not work.
Today I aim to increase the ticks/contract I make. This tells me that I really make progress as a trader. The number of contracts I trade becomes insignificant. Because when I've mastered these 30 or more ticks/day on average, I will slowly increase the size I trade, get used to it and be able to trade this increased size without tweaking my trading plan.

Thursday, September 14, 2006

Get-Out Now Feeling

Took the HSI long at 17194, exit at BE+2 (17196)

My trading plan would have worked nicely, but I got a bad feeling about the position. As you see it dropped slightly after my entry before it took out the 17200 resistance level.
This dropping action caused me to exit as I saw selling come into the market and better out at Breakeven +2 ticks than paying a 20 tick Stop.
My feeling was not correct this time!
Is that a reason to trade differently the next time?
No, I don't think so. I've come to trust my feelings. If they scream out, I heed the advice.
And there was enough reason to go out where I did.


HSI is down for the day, so 17200 could have proved a double top (on the 1min in the first picture) in a falling market.
It did not, but so what. Next time it might.
No, when I enter a position, especially one against the current longer term trend I expect it to get me into profit fast, so I can move my Stop above entry. If that plan doesn't materialize, or if I just hesitated too long and got a late entry (good entry would have been 17180-85), then chances are enhanced, that I will get stopped or take myself out of the market at a small profit.

Tuesday, September 12, 2006

A very good question

and one I asked myself over the weekend as well:

Hi Christian,
Can you explain to me what major changes you made in your trading for better results.
How do you define the trend now?
Kind regards

I have to admit, that I have no clear answer.

I still do very dumb trades, I still have lucky trades, my Loss$ / loss trade ratio is still higher than my Win$ / winning trade ratio. Lucky I have a lot more winning trades than losing trades, which takes care of this imbalance. It still leaves me with an uneasy feeling, when the shit hits the fan and I have a losing streak.

This eMail forced me to think about my trading, what is my edge, what is working now, which did not earlier, what did I change, that makes trading now so much clearer?

Most notable change was the switch to use Linecharts and admitting

I’m not interested in the high or low of the previous bar

I’m just interested whether prices go up or down when I take a trade

Look at the black line, which is the German Dax. It dropped nicely from 5816 downto 5780 after the open (09:00) of the regular market.

If I go short, I like to see the black line pointing DOWN

If I go long I like to see the black line pointing UP

Difficult rule? No, of course not. But this rule makes sure I trade With the Trend in the timeframe I have chosen to take my signal from.

All other information on my charts helps me decide to take a trade or to decide where to expect Support or Resistance

To make sure I don’t miss that prices on average are going down, I have a Blue-Red Regression line on the chart. It tells me the trend:

Blue = Trend Up
Red = Trend Down

Next you see No Grid on my charts. A grid is arbitrary, it fools us in thinking, that there might be resistance or support, when there is none. Instead I have certain lines on my charts.

I mark the following pricelevels with a line on the chart:

Yesterdays Close and Todays Open for Gap trades (blue / green line)
Hi-Volume price levels (red dotted), as here I expect a lot of 2–way action on a retest
The High and Low of the previous bar of different longer timeframes

In regular candlestick theory a long trend is defined by showing successive higher highs and higher lows. Take a trader, which uses a 60min chart. He would expect the previous bar low not to be violated for the trend to remain intact. By marking this hourly Low on my chart I know, that there may be traders looking for a retest of this price level, as it would give them a second chance to board the train in the timeframe they trade.

I mark these priceleves on the right side of the chart

The daily High (red arrow), Low (blue arrow) and 50%-Level (yellow arrow) This gives me an impression where we are trading in respect of the days range
The highest and lowest High and Low of the previous 10 bars, to know with a quick glance whether we are consolidating a move or trending again. This information is secondary and might be removed from my charts at some time.

I mark on my charts also Bollinger Band Zones and Exponetial Moving Average Zones. I use Zones, as I don’t think there is one correct EMA or BB setting and all the other settings are wrong. There is no holy grail, there is not one correct technical indicator. But of course a lot of traders looking at similiar charts and similiar indicators will react predictable. A 20ema and a 34 ema are not a lot different. In a trend move I expect prices to bounce somewhere between the 20ema and 34ema.

On the other hand I expect the Bollinger Band Zone to act as Reversal zone. I know once prices penetrate the BB-Zone that the price move is extended and I expect a reversal or sideways movement which brings prices out of this BB zone before the next trend move lower starts. Trades taken from the BB are usually Countertrend, so I take a small stop with these trades, while Trend Trades get a lot more room. Violating this rule usually leds to my worst blunders and very costly experiences. Something I just did today on the HSI, when I took a Short in an Uptrend and it really got very expensive, as I did not believe, that the HSI would disregard precedences set by the Nikkei and the SPI which were down intraday.

The Short at 17053 cost me an 80 tick loss this morning.
Compared to my trading just a few months ago, this did not freeze me, seeing my account down 500$ on 1 contract just 1h into the trading day, but I took advantage of the DAX short I posted above and made 40 ticks or 500 Euro on it.

A lot of traders might ask, why did you not stop the trade? And I ask myself that question. I did in the trade, but I saw a clear downtrend in the longerterm chart and most likely tomorrow HSI will be down, retracing all of todays move. But as I don’t swing trade the HSI I let it run into the disaster Stop I use on HSI. Just bad luck, that the move was so strong today. Nonetheless I learned a valuable lesson for my future HSI trading, as I took the short with HSI being up 170 ticks on the day after the morning session and that means in the future I will let the HSI prove itself first before I assume a trend change in the afternoon regardless what other markets are doing.


On my charts I use a longer and shorter Commodity Channel Index. I learned a lot in Woodies CCI-Room a few years back. And after trying the STO, the RSI, the A/D and even a few selfmade Oscillators, I came back to the CCI. It’s as good or bad as all the other Oscillators. You need to know, how they work in trending and ranging markets, you need to know how they are calculated or more exactly, how they react when a consolidation turns into a trend move and vice versa.

But what is most important:

Oscillators are secondary information

They don’t lead prices, they might spike, when a small range suddely is broken and tell you that a stronger move might be expected, but that’s it.

First you look at prices, they tell you that something might happen at certain price levels.

Second you look at the oscillator and if you see a confirming pattern forming you take the trade.

Look at the first Gold trade I marked above. Prices test the EMA-Band. On the CCI a real nice sling is forming. So when you see the EMA-Band rejecting prices and gold trading again below 621 you go Short with the sling on the CCI present.

What turned my trading around was most likely being sure about my edge, knowing what I trade and what I look for in the market. Add to that a lot of screentime and not looking for home runs. Of course knowing how far an average trendmove will carry you, can keep you a lot longer in the trade which helps with the win$ / winning trade ratio.

Friday, September 08, 2006

Don't be stubborn

Have a trading plan, call tops or bottoms, trade countertrend, but ... Don't be stubborn

I've written about me liking gas futures around 6$. Gas fell hard yesterday and I thought my reasoning still sound. So I went long QG yesterday night, and closed it after the open for a few ticks, as it did not take out the 5.730 resistance level.


My trading plan called for a retracement of yesterdays sharp move lower on the assumption, that gas, being down below 2004 pricelevels, would find a bottom around here, with the montly support coming into play as well.


In a downtrend you have just one bottom, but a lot of false ones. And going long a sharp downtrend as we have seen in gas over the last month means you take a countertrend trade. So you have to be prepared and bail, if the market is not behaving according to your plan.

Thursday, September 07, 2006


Why does adding to a losing trade does not work for me? I know, it's basic market lore that you never ever add to a losing trade, but...but somehow it works, or not?

Today I had a very deep red day and it was sure enhanced by my adding to two losing trades, which just went way further against me.

In backtesting adding to a losing trade while maintaining the ultimate Stop always shows better results than adding to a winner. And it has of course worked for me as well or I would not try it again and again.

After I closed the losing trades and I had a smaller winner, where I entered directly with full size, I suddenly understood, why - for me - adding to a losing trade does not, can not work.

My statsistics tell me that I have 80% winners vs 20% losers on 810 trades made this year sofar. I add usually at 20 tick intervals and for the last few months that was actually the number of ticks I used as Stop, aka the place where I was convinced that this trade would not work out.

Now what I'm actually doing with the Add-On technique, which I applied today, is adding to a trade which just yesterday I considered a failure. A trade which fell into the 20% loser category and which by all means should have been closed long ago.

So what should I do? Disregard my statsistics, that tell me that Add-Ons actually can improve the overall results or stay firm with my trading technique applied the last months, which showed me very good results and just increase size.

The answer is obvious.Looking at my trade journal and my statistics from an objective perspective the answer can only be: Go in the market full size and handle the trade as you have done the last months.

Monday, September 04, 2006

Fear to fail

Have you ever had this feeling, that you are intentionally hurting yourself by taking a certain trade? It happened to me on Friday. I had had a Breakeven day on balance but had to trade myself out of 3 -20tick Stops on Dax, which really hurt emotionally. I still managed to be green on balance on the day, but somehow I felt as if I should be due more on this day.

Having written about Gas earlier and having studied the charts I had decided, that a breakout above 6.000 would most likely constitute a valid breakout trade. But instead of waiting I plunged in at 5.975 right below the resistance on the 60min chart, which had held a few times already. I did that right before dinner and I took not 1 contract – as I should have done, QG being a new contract for me, but I took 2.

Every rule violated and I got slapped right in my face. Coming back from dinner I saw Gas down 10 ticks from my entry. To make matters worse my longer term bias overruled my daytrading rules and I held the 2 contracts over the long weekend instead of taking a 5 tick loss into the close on Friday.

Sunday night saw Gas down about 25 ticks at 5.750, the lower end of the range. A break below would invalidate the reversal pattern I saw on the 60min chart. But the range held and Gas ticked up. 6 h later the trade was closed at 5.995 for 4 ticks.

What saved me today was having a bit more experience in reading a chart and appreciating the huge daily range Gas is showing. Still I had to accept an extreme risk in a dumb trade to be able to close it at a profit.

Looking at Brett Steenbargers Blog I saw, that he had choosen to discuss exactly these problems in 2 posts (Part 1, Part 2) over the long Labor Day weekend I had experienced on Friday.

So let’s take his advice, step outside of yourself Chris and try to dissect yourself for the true reason of Friday’s behaviour.

The first 6 months of this year saw myself down on balance. Step by step I was gliding deeper into the red zone until I was down nearly 50% for the year. Starting June 1st this changed and now I’m about breakeven for the year which makes it 100% in 3 months.

I had changed my charts, which now speak to me, I had limited my trading size to 1 contract and I reversed a steep slide into a nice upward trend.

Now my trading plan again calls for a change and it seems I fear this change.
Increasing size is something I’m not comfortable with, even if now again I’m regularily trading contracts, which compared to say the Russel pay twice or even more per Tick. But it’s still just 1 contract.

It’s nothing tangible and I think, it’s most likely a fear to fail.

But doing nothing, remaining in the comfort zone I have build around myself will as well lead to failure. Only by stepping forward, by overcoming fear with trust in myself and the abilities I have gained will I be able to succeed. Doing what is neccessary even if it hurts emotionally.

Fear to fail is a powerful emotion and it sure can lead to the inability to trade at all or by forcing the issue, it can led your fears come true, so you have to admit to yourself, that the fear actually was well founded.

The voice, which gives me comfort, which tells me to trust myself , to trust my abilities is a calm one, not intruding, not forcing the issue, but persistent. And it is telling me, that I can continue doing what I did successfully for the last 3 months, following a good plan, which has reasonable goals and which allows for setbacks, which are no failure.

As so often in my life, I will again follow the calm voice and see where it leads me.  

Friday, September 01, 2006

I wish all of you a great Labor day weekend.
Recently I got introduced to the Gas futures (QG V6 is the frontmonth currently) and what makes them attractive is, that they are trading a bit below a monthly support line going back 3 years at least. Add to that, that compared to oil gas is relatively cheap looking at the price increases for the last 2 years and we have a nice commodity to trade on the long side going into the colder season, which should stem further price declines.

2 comments I found over the weekend reading a bit about trading natural Gas:

Gas Pains

Natural-gas futures close at 20-month low