September 27 2010 Blog Update

The action has been slow for September but I have continued to stay on the wholesale side of the market.

I find myself hitting trades lately that are the polar opposite of what I used to consider to be "confirmed" with structure or patterns.

Today was a good example of that as I shorted the ES and TF right after the open. I ended up scratching the ES and scalping the TF.

Early in the afternoon on the East coast, I shorted the ES again with a very retail entry. I had to hit where I did because I felt the price would sell this afternoon and did not want to miss it.

I ended up getting squeezed pretty hard but stuck with it. I used to stop myself out of a trade like that. Many do not understand why I would take 4 + points worth of heat.

The fact is that I believed the price was not going anywhere to the upside thus any cover would end up being a donation to the market.

I dropped the ball a bit after taking all the heat. I exited the ES followed by getting myself into a long trap on the TF because I saw a perfect cup. I was able to correct and get short again the ES into the close but was irritated by my break down in conviction.

I spent over an hour getting squeezed and believed none of it. I need to keep that up. That is how you win.

This tactic has led to a winning outcome on virtually every one of my trades in the past 60 days. Many were for just 2 or 3 points on the ES or 15-20 ticks on the TF but it adds up.

I used to say that a trader should not expect to win everyday but I now believe a good trader should expect to win everyday and should be winning virtually everyday.

This can not be accomplished with a fixed rule set or system based off hindsight indicators.

I am working on getting the new site up and running so I can take the blog to the next level.

I plan on writing in detail about my recent experiences over the past 6 months and opinion on this industry in general.

I hope to have everything up and running over the next couple weeks.

I am going to try to post some trades later this week.

September 21 2010 ES Trades

September 20 2010 Trades

September 15 2010 Trades and Comment Responses

Anonymous said...

Keep posting Brian there are plenty of us reading your blog religiously! Thanks for contributing to the trading world.

September 14, 2010 11:34 PM

Anonymous said...

Hi Brian - I have noticed that lately the TF chart is under performing the ES in terms of movement and what is a cleaner chart to read (IMHO). Any thoughts on this? I moved from the ES to the TF as the ES was beating me up and did better in the TF but now noticed that the ES chart (using tick charts) has been cleaner. Yesterday intraday range on the ES was 12.25 while on the TF it was 8.5 which seems out of whack. Is this just something that is going to fluctuate from time to time and to be expected? I'm also asking myself if it's a case of the grass is always greener as well? Any thoughts philosophical or technical appreciated. Thanks

September 15, 2010 4:12 PM

Comment 1:

Thanks for your comment and support. It is extremely motivating to see that others are following and helps me to continue building the new site.

Comment 2:

I agree that the action in terms of data display patterns has been cleaner on the ES.

The TF was producing constant symmetrical setups that were very clear throughout July and early August while the ES was producing tough trading as it has for most of this year.

However, a few weeks ago, the TF became fairly irritable and started producing a lot more noise. Since then, the ES has actually been producing clearer setups and I have been executing more frequently there.

It is very rare for the ES to have a wider range then the TF as it did yesterday. The TF still offered more equivalent volatility as the 8 point TF range is equivalent to 16 ES points.

The TF also traveled more "nautical distance" in terms of movement from point A to point B.

If you look at my trades from yesterday, I took the same trades on both indexes. Some think this is doubling up on my position but it is closer to trading 1.5 X my regular size.

I was up 49 ticks on the TF which is equivalent to almost 10 ES points. The same trades on the ES only produced a profit of 3.5 points.

It is good that you have enough feel to use words like "cleaner" to describe price action and I concur with your findings.

If you only want to trade one of the indexes, I think there is much more opportunity on the TF. As short term exploitative traders, it makes sense that less liquidity should offer us a better edge.

However, I have been enjoying hitting the ES with my new techniques because the traps have been so clear to me. I can see them well in advance and instead of avoiding them, I mirror the positions the game players are taking.

Volatility and Risk/Reward

There are 2 factors to consider when choosing between the TF or the ES.

1. The TF offers a lot more bang for your buck but also requires more risk and better trading skills. Average risk on the TF if you want all your correct trades to work is 30 ticks in my opinion. Your average loss should be significantly smaller than that but many trades on the TF will push most traders way beyond their barf out points.

This is especially true pertaining to inside support zones after approaching a resistance area on the TF. It is very prone to start holding and even building multiple pivots with the intent of getting retail traders long at the area for an extension out only to violently push down 30-60 ticks to jam all the late longs as well as those who are greedy and holding too long.

This is merely a trap that is planned and set by New York traders who know what they are doing. It is an easy turkey shoot and an efficient money grab.

Many Fibonacci traders would call this a 786 replacement. Fibonacci levels are only a description of an effect of price action after the fact and have zero relevance as to what is actually occurring in my opinion. It is interesting how reality and hindsight theory blend together sometime though.

2. The ES requires less risk but sets many more difficult traps for retail traders. I suspect that this is simply because there is far greater liquidity and many more players on the ES.

Also, the slower pace and constant grind make traders prone to make more mistakes as well as have bad judgment.

These layering factors make the ES more difficult to trade even though the pace is slower and risk is less.

From the mental aspect, when I have a tough trade that I know could take a lot of heat, I still execute on the ES first. This is because there is a perceived sense of less pain on the ES when in reality, the opposite is true.

You can tell when I am most questionable about a trade when I enter the ES first then follow with the same trade on the TF.

The TF tends to lead the ES, so when I like a trade, I hit the TF first then add to the ES once the TF shows that the trade will likely work.

I play off both indexes and have a very efficient system (mental rationale and feel not rules) for effectively exploiting the opportunities provided on each.

New Technique

I could take analysis of the correlation and relationship between these two indexes to shocking levels after all the live research I have done.

The interesting thing is that while attempting to explain and justify the way the price moves and reconcile the difference between what is seen and premised and what can actually be executed, I have refined a 6th sense that just allows me to "look" at the chart and know what to do.

September 14 2010 Trades

My feel continues to be spot on.

Today was an extremely solid trading day. The trades were clear and were all taken with the enhanced strategy I have been refining for the past number of months.

This is creating what I call "on demand" trades. Which means that I am not just buying or selling a zone or pattern but executing on a specific premise with the complete expectation that the trade will work regardless of what happens intra trade.

It is still a bet and always will be but it is a bet that I believe I can win almost 100% of the time as long as my head is clear and my gut confirms the trade. I have developed this feel by the constant drilling and RIGHT EDGE analysis I have been conducting over the past 3 years.

The value of this journey is starting to show itself.

This allows me to stick with trades that would have previously pushed or squeezed me out 100% of the time. It makes my entry price fairly irrelevant and allows for quick exits.

The basic foundation of the strategy is that almost everybody playing is wrong and that their actions will be faded by those who move the price.

I look to do the opposite of what I believe others are thinking and am generally entering at the areas where I used to get stopped out.

I noticed my blog traffic is trending down a bit lately. There are sill many readers who watch closely but I think I scared others off by recently stating that virtually every conventional method, strategy, or system out there is completely useless.

I stand by what I said and will continue to re-enforce it even if there are no readers. Virtually everything out there being taught that is not an outright scam is just theoretical and does not pass muster when it comes to reality.

I am working on a new site that will attempt to document my findings based on my own trials and difficulties over the past few years.

I want it to be an interactive site that will show trading reality as well as document my own trading results. I do not understand why this can not be found in cyberspace and am going to change that.

It is a labor intensive process. Until then, I am likely going to be posting charts only and limiting my commentary to once or twice per week.

September 13 2010 Trades

No comments tonight.

September 10th 2010 Commentary

Think about how it seems the the market always knows your own individual breaking point in terms of hitting your stop. Regardless of where you enter, it will often push just far enough to take you out before the trade works. This is not random. It is by design. It is the result of thousands of players running millions of strategies built exclusively to take your money.

Most traders early in their career and some well into their career think the goal is to outwit the fastest computers in the market by having the right stop or break even mechanism.

My opinion is that fixed strategies are virtually useless. The machines that the players use to make markets take all this into account in their algorithms and randomize the patterns at which they hit your bids and offers.

This is much like how data is encrypted. You may be able to crack the strategy if given enough time but next time it will be different.

This makes any system being sold by the cowards who consistently fill our inboxes completely useless.

Even when you have a method or just plain gut feel to precisely identify the areas that will hold, fail, continue, or extend, you must still time the trade properly and have the ability to successfully exit with a profit.

Since your edge and odds of success is dynamic and randomizing as the trade evolves, a single policy on how to handle each trade is unlikely to produce a positive result in a sample that is repeatable and without randomness. Thus, profitability on demand can not be obtained this way.

Understanding the structure and movement is just the beginning. After that, what will determine if you are profitable or not will be your ability to stand up against the other players you are competing with. No method or strategy can accomplish that.

This is a skill that is learned and refined by doing much like how a welder perfects the strength of their welds over time.

I have found that very often, the opposite of what I initially think is the proper trade. This is not a matter of simply fading myself. It is a matter of reading my initial emotion and psychology, considering what is causing those feelings, then questioning if whether the other players are actively trying to elicit those feelings.

Then I get bearing on my situation and the proper decision can be made based off my cumulative training and experience. It is usually a process of decided an action is dangerous, considering the oppose, then engaging the initial action that I felt should be avoided.

This can not be repeated through a static process. I consider the static side of trading to the the whole left side of the chart. This is where virtually all traders play their game.

The correct (wholesale) side of trading lies on the dynamic right side of the chart. This is where the few that take all the money play their game.

September 9 2010 Trades

No commentary tonight.

I made some notes on the chart. Check out the this week's other posts if you have not already.

September 8 2010 Trade Review and Word On Conviction

The blog is not dead yet.

I had an interesting trading day with many of my best observations occurring during the live action.

Part of the reason this format has started to bore me is that reflection on action and trading decisions in hindsight is fairly useless.

Who cares what I think now after the fact? It is irrelevant and helps nobody. Those who can not trade look at things in context of the past. I will look to the future and in particular, the hard right edge moving forward.

I suppose I need to stop using the word review and figure out how to make my insight apply moving forward.

Conviction

I laid out my exact premise and reason for getting long at the open in the ES chart. It is worth taking a look at.

I wanted to write about what I now consider the single most important element to successful trading...conviction.

Without it, your trading decisions have little chance of a positive outcome. As I have been saying, picking the correct price and direction is will not make you a profitable trader.

It actually has very little to do with your PNL. This debunks the concept of trading with a static strategy or fixed indicators. Many of you have witnessed how your setups look so clear at the end of the day but you lost money.

This is by design. The price moves efficiently and the process of the live auction coming to a fair price creates a completely random path from point A to point B with respect to any specific entry and exit point.

This means that anything can happen after you enter and your edge as well as your odds of success are dynamic. Your chance of booking a profit is rapidly shifting over a large spectrum of outcomes second by second.

Even with the prefect plan, price, entry, and exit point, the odds are against the retail trader. This is due to the many participants running a seemingly infinite number of strategies.

To put it more simply, thousands and thousands of people are running what could be millions of different strategies with the goal of selling to you at high prices and making you barf out at low prices or vice versa.

In order to overcome this, I must trade with conviction. I must believe in the trade I have taken and have little doubt about the outcome.

I have found that what works even better is NOT BELIEVING the move against me until proven otherwise. If I am going to lose I want to be SHOCKED at the outcome.

I spent most of my trading career getting pushed and squeezed out of my trades as opposed to my trades failing. I have made adjustments and devised techniques that can combat this issue.

Many do not want to hear this but proper trading probably requires a lot more risk than you want to take. Do you think this extremely efficient market is going to let you enter a trade with a 1 or 2 point stop and let you exit with 7-10 points profit consistently?

This is virtually impossible. Like anything else, there are one or two that can do this but most can not.

My last TF trade today is an excellent example. I had to stick with it through what would seem like ridiculous heat to most. The market does not care if I am down 8 ticks or 50 ticks. It will not respect my wishes to take only 15 ticks heat instead of 16 ticks.

As I was in the trade, I was getting angry at the thrusts down, not because I was losing but because I correctly thought it was BS.

I stuck with what I thought and got out with a small profit.

Important

It takes that type of conviction to win day in and day out. A strategy or methodology alone will not cut it.

You have to be able to this every day whether you are booking profits, broke, sick, tired, hungry, or whatever.

The only way to accomplish that is to trust you gut and be willing to let it lead you off a cliff if that is what it is doing.

If it fails you then you fail. Better that you fail out of principal or flaw in your technique than have the market bullies steal your lunch money everyday.

The concept of perpetually over managing risk is just plain wrong as are most who claim to be able to teach.

Every big trader I have met takes big risk regardless of what their advice is to others. If you think tight risk management is the way to go, watch the Paul Tudor Jones video floating around out there.

Do you think he lets the bullies take his lunch money?

September 7 2010 Trade Review and Blog Update

The reconciliation with the ES continues. I had a clear fade of the move up just after the open on the ES.

Why did I take the trade? I faded the move up because I felt most traders were buying and concluded that this would lead to many retail sell stops below the congestion at 1095.00. I felt these stops would provide liquidity and pull the price in towards themselves.

There is not much more too it than that. I have refined my trading to a game of trying to trap others regardless of structure or pattern. I am still aware of the structure but am often on the opposite end of how I used to play it.

I have continued to take it slow on the TF as action has been nasty. There is no other way to describe it. There are plenty of opportunities but I have specific parameters I have developed and have not seen much on the TF. I sitll engage because I tend to like to get into fights where I am at a disadvantage.

I am doing the right thing. Even with caution, I got myself into the retail end of 2 short trades this afternoon. However, after entering and realizing my position, I was able to anticipate myself getting squeezed and refused to get pushed out. I had conviction due to my understanding of the game.

There were many different ways to lose today and only a couple ways to win and I found one of them. It mostly came down to conviction. I have reached a level of focus in which I expect to win everyday.

I used to think this was not possible but it is.

Blog Update

I have had so much to write about recently that I can not even begin to effectively get my thoughts and observations out in the manner that I would like to.

There is an evolution going in here. This is my 622nd post. The transformation that I wanted to the public to see is finally occurring. That is the transfromation of a trader who was winning some and losing some to a trader who is winning on demand.

I have a vast amount of data and helpful observations that I want to organize and get out there but can not find the time to properly execute a project like that. It has become a source of major frustration recently which is getting compounded by all the garbage flowing into my inbox everyday.

I was bombarded by emails today from all sorts of scam artist educators and would be gurus. One of them claiming to be the "messiah of trading" and several others making claims like their calls are 89.3% correct. (calls are meaningless you stooges. The exit is what counts.)

I do not know what is worse. Is it the fact that these parasites are making money doing this or that would be traders are stupid enough to keep paying them?

I understand if you get burned once by garbage like this (I was) but it takes repeated attempts to buy the "holy grail" to support all these turds. I do not understand it.

I have to go on record and tell everybody....clearly....that if somebody has something that works why the hell are they going to sell it to you for $3000.00?

If a system, indicator, or strategy worked period, why would it be for sale? It is all absolutely 100% garbage. Every last bit of it. I doubt if there is one single educator out there who advertises frequently that can make a trade to save their life.

Where do these people come from? I suppose many are failed traders who think they will "catch on" and are just trying to make a living but there are other larger operations that are clearly outright scams.

If an indicator actually worked, the market would perpetually travel in one direction. Think about it. If there was ANY single, static, and repeatable edge; the market auction would instantaneously close it. If it did not, there would be no market made because there would eventually be only bids and only offers.

The best use of these so called tools is mostly by the few that make money at this to trap retailers who have no idea what they are doing.

Most traders do not stand a chance regardless off how hard they work until they acknowledge and clearly understand this.

This game is a giant game of poker. With hands that evolve RANDOMLY as the action unfolds. There is no way to crack it with a static strategy. There is no right price or direction to enter.

If your entry has an edge at inception, there are an infinite number of outcomes that dynamically change that edge as the hand progresses.

Do amateur traders think some dumbass with a MACD and a candlestick pattern is going to teach them to outwit the fastest computers on the planet that are run by the best and the brightest mathematical quants?

It is a turkey shoot in favor of those who control the price. The one advantage we retailers have is size and dexterity. The players often can not get out of their own we an we can exploit that with POKER SKILLS and nothing else.

The art of accessing what your opponent is holding and acting according is how to win. This can not be taught in a course that last months let alone a week long seminar.

I think if a trader wants to get profitable they need to spend 6000+ hours of agony and defeat onscreen as I have. The learning curve can be cut dramatically with nothing short of daily coaching live in the market for months.

Who is going to do that? It is a horrible business plan and leads to no profit for the coach. This concept automatically makes virtually all educational efforts a waste of time and money. There are a couple good ones out there but they still leave a lot left up to the trader to figure out.

Having said all that, part of the reason I started this blog was to have something different out there. Something that I never had. I still can not find anything like this anywhere.

The problem is that recently I am realizing that my effort is not really penetrating. How can I compete will all the douches out there who are willing live with the fact that they help nobody and make their living by being full of crap.

This blog has helped me immensely and touched hundreds of others on a daily basis but I want it to be more. I am not sure I have the time, resources, or desire to make it more.

I do not want to compete if I can not develop what I envision and I certainly do not want to go through the motions just to continue being known throughout the business. I am more of a recluse than you can imagine in my personal life.

You can not do what I have done and have a life. Many get into trading because they want more free time but those who stick with it learn it consumes everything. It is worth it to me.

Part of me wants to expand this site and make it great. Even go as far as to start a real daily trading room where I trade live in front of everybody. Pants completely down like a reality TV show and made virtually cost free for most.

The other part of me is considering going into seclusion and just refining the technique I have developed over the past few months.

It is a tough call as I say often to others on Skype.

Some of my biggest breakthroughs in the past few months have come via comments I have made privately to other traders I speak with throughout the day.

It is an extremely powerful concept and I am not sure what to do about it. I definitely feel a calling to make a significant move soon but am not quite sure what that move will be.

It is a giant poker game in the end.

September 2 2010 Trade and Performance Review

I traded the ES only today. I have not seen much to exploit on the TF this week and have correctly reduced my trading there in the short term. The TF is the one who has been doing most of the exploiting in fact.

I will go where I see an edge.

I suppose the ES and I have reconciled but the TF will remain my primary production vehicle as time goes on. I have an excellent system for using one index to initiate beginning scalps then doubling down on the other.

It is interesting how one sometimes leads the other and vice versa.

I finally capitulated and started trading the day after trend congestion and had good results today.

It is clear that after the price makes a significant move, the highest probability outcome for the next day is a sideways market.

I prep for this and have been aware of it for some time but have always been reluctant to engage it fully. Mostly because the risk in undefined.

Price rarely stays within a high and a low and is prone to wash stops above and below the congestion. Sometimes pushing 25%-50% outside the congestion.

Due to the fact that I have been specifically studying these squeezes and pushes for the past few months I have gotten more comfortable fading the top or bottom of a congestion with no stop with the expectation that the congestion will hold.

I will occasionally get run over but can no longer ignore the one of the highest probability trading days a trader can find.

I also have fine tuned my feel through studying and drilling and could just sense that price was going nowhere today. I really did not sweat my entries today until the last one and that was for good reason.

While I firmly believe that fading trending or extending markets is a losing proposal these day ofter congestion deserve their own classification.

Moving forward I will continue to aggressively play these even if I get bitten occasionally.

Performance

I have been trading well primarily due to developing some of my own techniques for identifying squeezes and pushes as well as refining my ability to tap into my correct gut feelings about where the price is going.

I have been able to manage my trades confidently and identify my areas of entry well in advance.

I need to remain level headed about this and try to keep it as simple as possible. I can break my technique down to many levels of complexity.

The important thing to keep in mind in order to continue to make the correct decisions on the hard right edge is to is allow my gut and subconscious to tell me where to execute.

There are too many reasons to consider for taking or not taking a trade. I do not believe somebody can expect to have a list of rules or qualifiers to run through every time they execute an entry or exit and be able to avoid all the traps and fakes out there.

The price is designed to bring a retailer in and squeeze them out. Proper training, drilling, and practice can develop the correct internal sense of what to do. Then one must be able to filter their feelings in order to "tune in" to the correct internal feel.

I do not want to talk too much about my day to day performance because it generally leads to bad streaks.

I have posted a chart above showing my winning vs. losing days since July 1st. It tells a lot about how an equity curve unfolds.

September 1st 2010 Midday Review

I wanted to do a midday post to demonstrate my usual premise that the price action will often do the exact opposite of what many are expecting.

I also wanted to say that it is ridiculous that every talking head on radio and TV is trying to explain that this move is due to some fundamental reason.

If I was forced to value this market based off my daily experiences with those in finance and the public in general, I would value this market at close to $0. There is no level of reality with what most "investors" base their decision on. This is a topic that needs to be covered at a different time.

It is all part of the daily manipulation. These commentators know nothing. Those who speak the truth do not get much airtime because there is little money to be made with the truth.

There is an obvious massive head and shoulders pattern formed over the past week. I was watching this yesterday and told many who I speak with privately throughout the day that I will look for a giant left shoulder squeeze.

My premise was that many retail traders and systems alike look for patterns like this. What better opportunity for the market bullies to squeeze a bunch of suckers then one of the most obvious left shoulders a trader will see?

They squeezed the price up to the left shoulder neckline yesterday, then brought it down a bit just after the open. This caused many to get short. Then they jammed everybody. It was an obvious turkey shoot that could be seen well in advance.

It was not easy to catch with the news and structure but was an obvious sign of tough trading and absolutely no fades this morning.

This move was nothing but technical. Each trade and each pattern has a completely random outcome. The market NEVER repeats itself exactly. The only thing that is constant is the game of faking and squeezing.

This is nothing but a giant poker game where a few bullies take most of the money. The best area for a trader to focus on in my opinion is the interaction with other traders and not the news or indicators that most turn to.