CL dropping fast into yesterdays low (see the yl label). A drop of 100 ticks just begs for a retracement, so take a look at the 10 tick and wait for a long signal. I marked it with the circle. oil was not able to take out the previous low, so you have a double bottom and go long 115 or a few ticks below. Then just let it run. You might adjust the Stop to 115.01 when 115.15 is passed.
Tuesday, April 29, 2008
This tool makes it easy to get any futures (stock, options, commodities) data from IB into your Excel spreadsheet. I know, you can do that with the IB Excel Spreadsheet as well, but the example is so complex, I had to give up. I only needed streaming quotes, not a whole trading application. This IB Excel Adapter is doing exactly this, with a few lines you can request streaming data for the contracts you are interested in. And the best: The software is free.
I recently became a big believer in round number Support and Resistance lines calculated from Yesterdays close. I traded NG (natural Gas) today. Take a look at the lines labeled -100, -150, -200 and -250. Isn't that neat?
I'm following usually a maximum of 6 contracts a time, when I'm trading. Of these 6 two have multiple timeframes, the other have 5 minute charts. Meaning in hindsight I see a few of these round number hits when I go over the charts after trading. But while trading I miss quite a few setups. Here my new toy comes to play.
I developed this Excel spreadsheet, which you can download here.
(Be aware that you need Excel 2007 to display)
Before you open that spreadsheet, you need to install the IB Excel adapter and you need to run IB TWS, so the spreadsheet can connect to IB.
The Contract details are set on the page named Details and are self explanatory. What you get with the spreadsheet is the Range in Ticks from the Close (Net), the maximum or minimum Range, depending whether we are up or down and the total daily Range in Ticks. The next 2 columns (Bearish/Bullish) show you how strong up or down we are. The numbers are just another representation of the Net column.
I'm sure if you play with it, you will find a lot of other possibilities of what you can do with the IB Excel adapter.
Monday, April 28, 2008
The following article has been written as a letter to someone, who set himself the goal to go real only after 40 consecutive days of profitable demo trading. This trader had losses in the past and switched to demotrading 2 years back to really learn to trade. He now has reached a point, where real trading seems to be no longer elusive, but near again as he has mastered a lot of ground these last 2 years in his personal trading.
allow me to jump in as I have been down that road. I hope you understand this mail as well meant advice and not as bashing, but it is my frank opinion and I really hope to see you succeed in the future.
Reading your mail I have the feeling, that despite your success you are setting yourself up for another failure.
1. Being 40 days green doesn’t mean you will be able to start green in real trading. Actually looking at my own trading journal I know at my current stage as a trader I will have a (few) red day(s) after a very successful run up in my account. Your account development can be plotted like a chart and even a very strong bullish run will have some retracements, will consolidate from time to time. So after 40 green days I would expect one or multiple red days in a row, before the trend resumes. And actually, that was my downfall 2 years ago, when I was where I am today again. I was unable to manage the red days, I was unable to trade with the knowledge, that red days, that losing trades or a red week are part of the business. Ask any merchant, if he has made only profits, if he never ever had spoiled merchandise, if he never ever experienced some theft. You will find none. No the real test comes when you have had 3 red days in a row, when you have a red week after months of green and need to ask yourself: WHY?
Were these red days, this string of losses just bad luck, just a few trade setups not working or has the market changed and have you lost your edge? If it is the first, as most likely it will be, then you Continue to do what you have done in the past and the profits will come again. But when the markets have changed, then you need to go back to the drawing board, then you need to identify what has changed and adapt or you will wash out. 2 years ago, I nearly washed out. I did not adapt to the higher volatility creeping into the markets, I did not change my trading approach and it cost me nearly my trading career.
So embrace the red days, handle them, see to keep them small without taking extraordinary risks. It’s not about turning the day green after you made a bad trade, it’s about keeping the riskprofile equal over all your trades. If then the day turns green after you started with a red trade, Great!! But if you took higher risks to turn the day after a losing trade, then beware: Know that you have been lucky. And every trader may rely on luck a few times during the month. Without luck there is no success. But be sure that if you need it too often it will no longer come to you. I try to limit myself to two lucky trades a month. Usually you only know in hindsight, that you have been very lucky, that you better stop going down that road and return to the well worn safer roads you have traveled before. Because in trading higher profits always mean higher risk as well. So if you took a higher than normal risk to turn the day and you got away lucky, then turn around…or decide that you are now ready for that higher risk, but then you need to take it always or your edge in the markets will have vanished.
2. You want to change your broker and trading platform from the one you used 2 years ago. I could give you advice on what I use as anyone reading this letter can. But BEWARE you are setting yourself up for certain failure.
I found these steps 3 years ago I think and here is the link again:
Start reading Step 30 to 36
Trading becomes boring…Something becomes boring, when nothing new comes around, when you just go straight ahead. I once made a vacation in Australia, we landed in Darwin, took a Jeep and drove along the Stuart Highway down to Adelaide with a few detours right and left. But I still remember that Street-sign in Darwin saying Adelaide 4400km (~2750 miles) And that Stuart Highway went straight ahead for hours, 300km just straight ahead before a bend in the road came. Your mind starts playing games, but you need to focus and drive on and on and on.
But before something becomes boring it needs to be familiar! Anything new is by definition not familiar and it certainly will not be boring.
So your 40 days green will only be a worthwhile experience when you trained yourself exactly the way you want to trade in real time. Why do Air force pilots use extremely sophisticated simulators. Training without killing the pilot. But all that training would mean nothing if the simulator would not look and feel like the real thing. So setup your trading station exactly the way you want it. It’s a bit like decorating your own room. You need to feel cozy, actually you will be sitting there for hours a day, so it should be comfortable, it should not be stressing and everything stays where it belongs. It is your room, you don’t need to, you don’t have to share it. So make your trading station your home, where you feel comfortable. Start demo trading and after a few weeks when switching to real trading it will be just a small step. Marriage used to be such a big thing. For me the real big step was deciding to live together with my girlfriend in 1989. The marriage 4 years later was just a small step, just telling the world that we belong together, that we want to stay together. We are still together and we love each other. An anachronism in our fast world? Maybe, but I know I have something very special in my life. Is it boring at times, just going straight ahead? Of course, after such a long time there can’t be something new every other day. But I would not have it any other way!
Trading becomes boring only when it’s no longer new, only when it is so familiar that you can do it in your sleep, when there is nothing new every other day, when you are set in your trading, when you trust in your method, know deep deep down, that you really have an edge, when you can trust yourself to do what is necessary in every situation. There still will be surprises, there still will be a detour, a new road to travel, new obstacles never encountered before, but you will be able to master them, because you can trust yourself to do what is best for you. But first let it become familiar and boring. There is no shortcut on that road, we all know that. Start and just take it step by step and you will be surprised how fast these 4400km will be behind you and you have traveled a whole continent.
3. Opentick gives you a datafeed for 15$/mth. IB costs me 10$/mth if I trade demo only. Otherwise I pay nothing for the US futures data. I pay for my chartsoftware, I pay for other futures data, as I trade more than US futures. But limiting yourself to just a few shortens the time you need to become profitable. I now know that, I already took that longer road, so now I profit from the experience. But it added 2 years to my learning at least. Keep the cost of business down. Use what really gives you an edge and just stay away from all that candy right and left. It will be sweet for a few days…and the dentist will love you, as you made sure he has a job to do in the future. Keep it simple, stupid.
Thursday, April 17, 2008
Its 1:45am EST, so I’m looking at the Euro for a possible morning trade, knowing that during the switch from Asia to Europe Forex trading usually some nice moves happen in the currencies with one market closing down while the other is just gearing up for trading.
On the 30min chart I see huge volume at the 1.59x level. We had a big move yesterday and were then unable to trade beyond 1.5940 or 1.5980FX cash. I see a HH, HL and a Lower High on that 30min chart and that whole flag seems to be leaning downward. So I’m inclined to look for a short trade near yesterdays resistance levels. The 2minute chart shows a Lower high at 1.5907 (marked HH with the automatic Ensign count, but I don’t like to adjust my templates for every symbol, so I take it as what it really is, a lower high compared to the 1.5913 high made overnight)
Now I look at the 10 tick and take a Short at 1.5903 or 1.5902 with a potential add-on at 1.5922. The market at this time is thin and moves happening before the UK Forex market opens are usually reversed. Add to that, that 1.5925 was very strong resistance and I feel comfortable, that even if 1.5925 prints, we will see 1.59 again, before 1.60 is taken out. Meaning even if this short would go against me, I see a high probability, that this trade will work.
The trade did work, but made a low at 1.5891 and held there
This kind of behavior is a red sign saying – GET OUT or +7 or +8 ticks
Later in the day, I might just adjust my Stop to breakeven plus a tick as I would expect more selling volume to come in, but due to the thin market conditions prior to the London open, I take what I get and reenter the same trade again, if the opportunity presents itself.
I use no Moving Averages on any of my charts. Well that’s not entirely true, as I use Heikin Ashi charts, which incorporate a fast Moving Average within the Candles itself. But these usually help me to stay in a trade and are not consciously used to time the trade entry (at least I haven’t identified such a use yet. Still I can’t rule it out, as I don’t take every trade which presents itself and that might have to do with patterns my subconscious mind sees on these candles.)
Entries are based on Support and Resistance levels marked automatically on my chart and a retest of these levels. I have a trade bias, meaning I lean to the long or short side, based on the trend seen on the longer term chart and based on the range the contract selected for trading has made already. Then I watch the 2 minute for a possible entry signal (double Top, Double Bottom, Trader Vic2B, etc.) I also watch correlated markets to see how they behave and whether they give me a clue, how the market I trade will actually behave. Take a Trader Vic2B entry. It usually works on the DAX when the ES is holding a Support or Resistance level, while the DAX is breaking it for a Stop hunt.
Once I identify a possible signal on the 2minute I look at the 10tick chart and watch price action. Now the 10tick tells me what to do and where to enter.
Once I’m in the trade I first watch the 10tick to see whether the trade is working or not. If it starts working I switch to the 2minute until we near support or resistance, then I go to the 10 tick again and see what price action is telling me. Stay put, move the Stop or Take your Profits and leave.
That’s the area I need to work most nowadays, as I’m not yet able to grasp the real force of a trend wave correctly. Meaning I leave a lot on the table after I entered a trade correctly with the trend.
Wednesday, April 16, 2008
The Euro has hit a symmetrical target going back to August 2007.
The target remains nearly the same regardless wether I use the December, January or February lows in the Euro. The difference is in the predicted date, the Swinghigh is being made. As you can see using the January low, the high should be made near the end of April, while using the December low, the High should have been already made end of March.
So I expect a Top to be made today or in the coming days around that 1.59-1.5950 level in the futures, which actually is the 1.5950 to 1.60 FX cash level, a nice round number and target for a huge move started just 8 months ago.
March 14th my phone line went down at 9:30am right after I placed a limit order in the Euro at 1.5525 in the market. No phone, no DSL, no internet. I had prepared for a breakdown of my DSL line, but I hadn’t be prepared for a breakdown of my phone and DSL service at the same time, even if both run on the same cable to my telecom-provider. Stupid, I know. The Telco had a problem and I was cut off.
I tried to establish an internet connection using my handy, but had to learn that that wasn’t just a plug the datacable into my laptop and connect me to the internet job. It took me over 1 h to find the necessary driver disks as I had no internet access to download them in a minute. Then I found out that my new Vista notebook and my handy GPRS software did not work together. So I had to install the suite on the older laptop my wife is using and which is still running WIN XP 32. Two hours later I had a first internet connection using my handy only to learn that the IB TWS software I had on file and had in between managed to install on my wife’s computer was way out of date and that the IB servers rejected the connection unless I update the software.
Just great, all I wanted was a glimpse at the market and a way to cancel my working order or to put in some stop and target orders, in case I was already filled.
Not only was I filled, but I missed the move to 1.5570 for a -50 which would have stopped me out for sure had I had any market access. Of course we should not mention the fact that before running up to 1.5570 the Euro dropped down to 1.5480, for a nice 40 tick profit missed. I also missed the subsequent drop from 1.5570 to 1.5505, and a further move to 1.5545. When my phone was back online and I saw what fun I had missed just by not being able to see the market I exited the trade with a 4 tick profit at 1.5521 and started getting the stuff together to have a working and tested internet connection over my handy from my Vista based trading Laptop. It took me another 2h to get that one finally working. But now it’s one safeguard more.
Obviously, what i should have done, was calling IB to cancel my order. But...I have to admit...that was another lapse, which should never happen: I had the phone number not available. Be it, that all the talk about bad IB phone service somehow prevented me from storing it in my handy, be it, that in 5 years of trading with IB I never had to call them. Now I have that number readily available and feel better knowing, that if necessary I can connect to IB using my handy.
Friday, April 11, 2008
I have had always problems leaving my stops in the market when the market was moving against me, especially when it was doing so in a slow fashion always letting you think it will come back just in a minute.
The biggest losses I've had in my trading career occurred when I doubled down in such a market.
I know that letting the market take my Stop, if the trade is not working out, is imperative for my future as a trader. Still only after I stopped being calm while in a trade I was able to take a loss without moving the Stop order.
To the outside I was calm in the trade, but inside my emotions where boiling, often resulting in a canceled Stoporder or a doubled down trade.
Now I'm letting these emotions out, I swear at the market, if it goes against me, I talk to myself during the trade. And while I do that, I noticed I'm calm inside, I'm able to follow the market, letting it hit my stop or take my profits at a logical point. I'm taking less and less impulsive trades, because I found a way to let the emotions out instead of letting them boil inside.
Thursday, April 03, 2008
Buy low, Sell high
Sell high, Buy low
I know trend traders argue that a price is never to low to sell or to high to buy, but my approach is a lot safer!
You don't know when a trend day will develop, but if you trade in the direction of the longer term trend (for intraday trading use a 15 or 30min chart on indexes) my approach makes sure you are in the trade, when it starts trending.
And if the pullback you used as entry really signals the trend change (and there is just ONE real trendchange) then you will be stopped out at a less damaging price for your account compared to the trader who bought high or sold low.
Sure, you will miss a trade, a breakout or breakdown, because you waited too long to commit. But if you do the math, most actually 70% to 80% of the rangebreaks fail before a real trend emerges, so by waiting you usually will get another chance to enter. Just have patience.
For some time now we see high volatility in stocks, futures or commodities, so there is enough meat for intraday traders, even if you miss one trade. If you expand your trading to different classes of trading vehicles, you will notice, that you no longer depend on one signal. If you miss he bus on equities, because Mr. Bernanke gave the go ahead in his speech, the market reacted, but you were getting yourself a new cup of coffee, take a look at currency futures or oil futures or gold futures or treasuries or soft commodities. You will notice, they don't move in sync! They have their own patterns, they often move non or only loosely correlated to other markets, so you might catch the ride there, when you missed it in the ES.
Tuesday, April 01, 2008
Some asked me about my Trade Layout, so here it is:
I have 4 19" Flatscreens in a row powered by 1 desktop computer (core2Duo 2.66GHz, 4GB Ram, 2 NVidia 8600GT grafic-cards) and I'm looking at this screen. Below I have a 15" Acer Travelmate 5520 notebook running my trading software (Futures-trader)