August 18 2010 Trade Review

I went on a fairly aggressive rampage this morning and was done for the day at around 11:00 AM EST.

Today I drew an important line in the sand and engaged the market on a higher level than what I had previously. While this required more risk than usual, it evoked glimmers of my overall goal which is to trade by premise only regardless of noise or pattern.

Early Shorts

The day got off to a rocky start for discipline and strategy as I took a couple early shorts just after the open. Sure there was a little double top forming some inside resistance and a shallow lower high but the price had already moved down significantly overnight.

I do not know what it is about the short side but it is nearly useless to hit these coming of newly established support after a stretched leg down. They seem to squeeze 90% of the time and that is what happened.

I realized the first entry was a likely trap once it moved 7 ticks in my favor immediately after I entered then hit a wall. I suppose I should just take the super scalp in these situations.

Then price pivoted again and moved down and I got sucked into the second trade which was a sucker short just before the squeeze.

The difference is I felt it immediately. I knew I was out of position and why and quickly covered for a small 4 tick loss.

Then I got on the right side of the market via the squeeze.

Longs

My read became very clear and focus was extremely strong. The next 3 trades were will entered and poorly exited as I kept covering with 5-8 tick profits instead of letting the trade open up to my usual minimum 15 tick benchmark.

I think this was because the low put in on the ES looked like a fake. I just plain do not believe anything I see on the ES. There is a circus of fake outs going on there non stop.

I netted 12 ticks on the first three longs which was kind of weak. Then came the mistake the may have changed my trading for the better.

I had already been getting away with sloppy near retail entries all morning and was irritated at my 12 tick net off 3 longs considering the move up. I was getting away with this because my feel was very spot on today.

Then I entered a long towards the top of the first squeeze leg at around 624.5. It was way too aggressive and I knew it could pull back. The funny thing is that I did not really care. I think I started getting a big head because the price was doing everything I thought it would and I knew it in advance.

So the price pulled back and it was fine. Then it started pushing down further and further. I started to get very irritated. Not because I was taking heat but because I just did not buy that the market was going to sell off.

I saw this move for what it was which were bullies pushing out the longs. However, I was taking way more heat than usual. At one point, I had almost $500.00 per contract in negative equity. I consider an average loss (1 unit) for me on the TF is around $175 per contract.

I got uncomfortable when the price penetrated 620 but I was pot committed and still did not believe the move. i was as confident as I could possible be that it was a fake and stuck with it.

Then I realized that if I was that confident in premise and going to follow through that it made sense to add to the position at the optimal prices so I did. This was total belief in what I felt in premise regardless of pattern. It felt very natural.

The price quickly reversed and the squeeze was clear. I was less concerned about the outcome intra trade on this trade then any trade I can recall over the past number of months. It is a huge step forward considering the risk taken.

I covered the trade right where I felt it should be covered with a net 25 tick profit. I was all done based on feel, premise, and belief. However, it is not my goal to add to positions and I will not make a habit of it.

What occurred was me making a live adjustment to a tough situation in order to successfully manage myself out of an over aggressive trade.

The other factor that allowed me to take 50 ticks heat there was that I now have the capability to get 50 ticks back if I lose it. I have the ability to let my bets work and can deal with getting plowed when I am wrong.

I need to ensure that I continue being aggressive when I do get down.

The other interesting observation is that where I exited the 1st entry after all the heat, I could have just cut the initial trade for a small loss then re entered at the lows.

However, you do not know what will happen in advance. Cutting a trade for a small loss for no good reason leads to pulling yourself out of winners. Plus, had I not been getting bullied, I would not have stepped up my personal aggression enough to add to a position that was that much in the red.

It was very much like somebody who has been getting picked on for years finally standing up and kicking somebody's ass.

That is what it takes to win intra day and I need to figure out how to maintain that mindset without getting undisciplined.