August 31 2010 Trade Review

I had a couple decent scalps on the TF today but the good trading happened on the ES.

Starting with the TF, I was distracted just after the open and did not engage. I am not sure if I would have engaged. The low was not very convincing and I could tell risk was high.

More importantly, I did not feel any trades so I stood aside. After the TF rolled off 606.5 I hit a sequence of inside support trades. These are not exactly part of my strategy and it was risky to take them.

Inside support on the TF is not very trad-able without very significant risk die to the fact that it often pushes ridiculously deep back into the range before reversing back up. Often, it pushes almost back down to support as I learned last week.

I think this is where the 78.6 retracement traders think they are on to something. It is not the measurement that makes the trade, the deep push down is simply a push out of retail longs. It is a game and nothing more.

It is notable that the fact that i scalped the exits as opposed to holding made the trades profitable. The structure "looked" like it would extend. This is often where I would give back in the past; holding the entries and hoping they would move up as they should.

The price came back for another retest and I took profits. I will catch way more of these than I will hold extensions to completion.

ES Trade

The ES trade today was excellent. It was another example of using feel and engagement in order to execute the correct trade.

I had a line at around 44.50 a couple days ago but had removed it. I traded the squeeze and fake premise on that long and nothing more. Had the line been there, it likely would have been a distraction.

In fact, I am considering removing all lines from my charts. That will bring my read and feel to it's most natural state. I suspect the lines are distracting and have determined that they mean nothing.

The market does not care if there is support there. The players actually use it to trap and manipulate. I will no longer play the "will it be shallow reverse prior to zone or washout extension game." I do not have an edge there without a discretionary decision.

If I need to be discretionary, why not just remove the lines and observe the price more like a machine. I know where is support and resistance is. I think I will get an even better read on the zones without the lines. I will focus on the clusters of pivot and make a gut interpretation based on experience and some framework I have been working on.

The ES trade came out of nowhere. I was actually complaining to another trader about how I felt there was no edge at the TF inside support. My premise was that there is no way to tell at any level whether that support would hold or not.

A trader could be right in any direction. There was no reason for it to have any particular outcome. I do not believe that some can be long and some can be short and both be correct. I support this statement by saying that a trade is never wrong if you have unlimited time and unlimited risk to work with.

A positive outcome is a matter of position and engagement, not price.

There are areas where there is a right and a wrong trade and that is what I am trying to hit.

About 2 seconds after I got done complaining about the lack of edge, the ES accelerated down and I immediately felt a buy. I did not see a pattern or a zone. I simply did not believe the move and bought in the middle of nowhere.

In fact, it was dead stick right in the middle of the range which I have spent a lot of time writing strategies to avoid these areas. I now believe that premise is completely irrelevant along with most of the other "rules" I have put together over the past couple years.

The premise and simplicity of my buy allowed me to sit through and ugly congestion and 3 thrusts down intra trade with a good level of confidence. I did not flinch during the trade. I knew I was was playing chicken with the price but that is what needed to be done.

There was a certain level of certainty about the outcome. I never would have sat though all the games and fakes there if my premise was buying support. I would have scratched or lost. Anything but won.

This can be dangerous. I have recently discovered that too much humility towards the market is not good. I need to respect the market understand the trouble I can get into but also must have conviction.

This trade was made with aggression and won. Many were shorting there and got squeezed. It was again a higher level of trading for me.

I need to work on continuing to tap into this feel.