THE CME FLOOR
My trading really did not take off until I visited the CME in the summer of 2014. I have a friend with a Gold badge on the CME floor, and he took me to the floor. He went down to the floor once or twice a week just to get out of trading from home. That was the time my trading really changed.
As I write this at the end of May, the pits are due to close by July. I
WHAT I LEARNED
I have always been a screen trader. I have beent o the floor, but I have never traded on the floor. I always thought that those guys had some sort of super human abiliy to trade down in the pits. When I went, I saw guys sleeping in pits, pits that were compltely empty and the stalls around the floor mainly empty. The option pits were full, but the outrights pits were just dead. I walked acoss a completly empty ZS ( Soybeans ) pit with just a monitor showwing the Globex price, where I traded.
What I had imagined was traders shouting constantly trading back and forth between each other. What I saw was traders just doing nothing until orders came into the pits. These guys ( and girls ) were not being active, but they were reacting to the market. Letting the market come to them and that was the piece that really sunk in.
I changed my trading. I moved from a tick chart to a 15 min chart. I think the tick chart is more accurate, but that is not the poitn. I needed to be patient like the traders I saw and I could do that with a 15 min chart. Not staring at the market all day, just when something is going on.
The second change was to just look at price and an economic calendar. I reducend the number of setups I use to about 6 somple of them. The guys in the pit were trading .
MORE ABOUT PIT TRADING
Open outcry trading, depicted in such movies as “Trading Places” and “Ferris Bueller’s Day Off,” is a thing going away. There are some websites that are trying to preserve the history of the pit. There is a movie Pit Trading 101, at http://www.pittrading101.com/ . A really interesting blog & website at Trading Pit History https://tradingpithistory.com/ and http://www.tradingpitblog.com/
TRADING IS BORING
When I started trading, I loved being in the market. I hated the weekends because the markets were closed. I was always watching Bloomberg TV and CNBC. It was exciting and fun, but not that profitable. Actually, it really was not profitable.
TRADING WELL IS REALLY BORING
Being able to be bored has saved me. Instead of watching the screen all morning I can watch other things ( Gmail, hulu ) and pick my spots.
I watch the market, and I know when news is coming out, but that is about it. I don’t need anything else. Sure, news on days like Fed day matters, but what the market does after that determines how I will trade. Not by watching a talking head on Fast Money.
WHAT AM I DOING
The revelation that everyday there is almost always a trade has taken a lot of the pressure to trade off of my trading. Knowing that there will be another trade is liberating. To watch a trade take off with out me does not bother me. It used to, and then I would make a stupid trade JUST because I had missed one and I was angry. It only worked out enough for me to keep doing it for a while until I lost too much money.
So now I am trading, and I just relax. Most of my trades are in the first two hours of the day. Certain days I may trade longer, but usually nothing until the afternoon if I am still around. I treat trading like fishing. The time you sit in front of the screen is like setting on the dock with a fishing pole waiting for a bite.
( I am not a fisherman, so feel free to correct me on my analogy )
Photo by Strevo
CONSTANTLY GETTING BETTER
The more I trade, the better I get which is as it should be. When I started trading, I was not seeing that many trades per day. I wanted to be in the market and one of my big problems was seeing trades where there wasn’t a trade. Trading hope , instead of a setup.
As I get more experience trading, I am getting more and more setups every day. This is a good thing, but some of them are lower probability trades. Now, I won’t win every trade, but every trade I lose takes a winning trade or more to make it back. That is just the nature of trading. What I need to focus on is making the best of the opportunities I see in the market everyday, and that means being selective.
MORE SELECTIVE, BETTER WIN RATE
The hardest part of being selective is sitting on your hands. As I get better trading, I also get better at sitting on my hands. So looking at the stats for my trading, my best trades are my second entries and pull back in a trend. They have the greatest profit factor in my trading.
Profit Factor returns a ratio that can be used as a performance measure for your strategy. It gives you an idea of how much money you are making (Gross Profit / Gross Loss). A higher ratio is a good thing.
So this week, I started to heavily prefer Second Entries in my other setups by combining them and pullbacks in a STRONG trend. By doing this, I think I will have a higher win rate, fewer trades and a larger profit ratio. The only bad part is the sitting on my hands part.
Today I am trading the ES. I went short off a double top and got smoked three ticks. Meh, the signal bar was not great and in hindsight, I should have waited. It turned out to be a triple top and I made 4 ticks on the next move down.
The next entry was a first entry pullback to the EMA. I went short and without out even waiting one bar for my trade to work, I moved my target to two ticks and puked out early.
Have you taken a loss? Forget it quickly. Have you taken a profit? Forget it even quicker! Don’t let ego and greed inhibit clear thinking and hard work – Linda Bradford Raschke
CUT MY WINNER SHORT
I CUT MY WINNER SHORT. A classic way not to be profitable. I thought I had gotten over that habit, but I still do it sometimes. Maybe we never truly get over our bad habits. The most important thing is not to let it ( a trade cut short ) affect me and I get more aggressive because I am mad at myself or the market.
BACK IN THE SADDLE
I took off over the last week, the week of the 4th of July in the United States. So back and the first day back, was a bad day, it was just choppy yesterday.
So today, I was back in. I am just trading one contract until I get my ‘trading’ legs back. My first trade was just a 8 tick scalp without a runner. It would of been a nice trade for a runner, but I need to go slower.
I almost took the 9:30 pullback, but I was hoping for a greater pullback. There were a lot of S/R lines above that point and I was expecting a lot chop. This time it didn’t, but it is a percentage game, and one trade does not make a rule.
TRADING OVER LUNCH
I took a with trend trade around 10:45 Chicago time. I was not really feeling the trade. I was not happy with the trade and I puked it out at +1 tick. The thing is, trading near noon NYC time, there is a LOT of noise.
Lunch hour today, did nothing but chop.
The other reason I think was that I was reading Al Brooks book “Trading Price Action Reversals” and he wrote something that stuck out. That traders can lose more in he middle third of the day than they made in the first third of the day.
So, I cut the trade, closed the monitor and stopped trading for the day ( I only trade the mornings anyway )
AL BROOKS NEW BOOKS
I would check out Al Brooks new three book set. His first book was great, but these three are actually written much better.
On Friday, I went rogue and had a couple of bad trades and shifted into revenge trading mode. Traders biggest problems are greed and fear and I was overcome by greed this time. I The good thing is I recognized that I was no longer “Trading Like A Jedi” and stepped away from the computer before much damage was done.
My pride was hurt more than my trading account. The amount was small, but its effect on me has continued.
Today, I was much more cautions. I took two trades in the morning. The first I had a 9 ticks target when I put the trade on. I got in and the trade went 6 ticks my way and I moved my stop to BE+1 and scratched. I usually don’t do that, but I became more cautious. I did consider not trading anymore for the day.
After all, a break even day is better than a losing day when you are not trading well.
The second trade had a target of 11 ticks. Going to a couple of tips before the recent low. After five ticks, I hit an S/R line and I got out.
So two trades, neither executed well because I let bad trading on Friday get into my head.
Such is trading.
I noticed that I have not updated my setups page in forever.
I am basically still using GeeBee ( although I don’t give it a name anymore ) but i has improved significantly over the years and I have added and removed things from the setup. I will have to go through and update my setup page soon.
I have discovered that most things I add to my setup , hurt performance over time. The only thing that really helped was going down to a lower timeframe to time entries and exits.
I have four indicators on my charts now, none of which I use for actual entries. I use them to see what the bias and state of the market is at that moment.
If you are having trouble with your setups, try removing something and it may help your performance.
( As for the picture, I am trying to stay away from processed sugar, but pictures like these make me want to go off my diet )