My Trading Setups

SITE STATS

The most popular page on this site besides the index is the setups page, followed by the indicators page. Looking at those pages as the most popular topics was slightly suprising. I was actually hoping the psychology posts would have been the most popular, but alas, it is what it is.

As for indicators, I only use a few. I will go over the few I use in another post. In this post, I will give and introduction to my setups.

MY SETUPS

Over time, I have developed five different setups that I like for my trading and my timeframe. These may not work on different products or time frames. I do not know, I just trade on my timeframes. Since there are price action setups, they SHOULD translate to any timeframe or instrument. That said, your mileage may vary.

Second Entry

Trend Bar

The Anti

Breakout Pullback

Triangle Breakout

EDIT: I started this post with the intention of putting all six setups on one page. That became unwieldy so I a giving each post a separate post. Check back as I will update the links above as I add posts for each specific setup.

SETUPS ARE PERSONAL

The one thing to remember is that the best setup in the world does not mean anything if you can not use that setup. By use, I mean that the setup fits your personality. Every trader is different and trades differently. Whatever you do with my setups, the most important thing is to make them YOUR setups.

The One Piece of Advice That Really Helped With My Day Trading Futures Psychology

I had a comment on on this blog, saying that his trading has been a roller coaster. I know the feeling well. My demon has always been a psychological one. For that person, I want to pass on a piece of advice that has helped me a lot. It has helped my patience a lot.

LET THE MARKET COME TO YOU

The piece of advice was “Let The Market Come to You”. It seems simple, buy when you think about it, it went straight to the core of my problem. That is waiting for the market to present a good trade. My problem of making up trades or getting impatient waiting for a trade lessened. I say lessened because I still do stupid things sometimes but they are getting further and further apart.

What that meant to me was that I should wait for the market to tell me what is going on instead of me trying to project my will onto the market., I would concentrate on what the market was telling me. In short, patience.

TRADERS QUOTE

This reminds me of a quote. I heard it was attributed to Lawrence Livermore. I am not sure, so I am marking this as unknown.

“I wait until I see a pile of money sitting in the corner, then I walk over and pick it up” – Unknown

The market will always be there. Every day there will usually be opportunities in the market. Even if there is not one today, there will probably be one tomorrow. Be patient and wait to pick up your own pile of money sitting in the corner.

Also, if you know who made this quote, please leave a comment below so I could give credit where credit is due.

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Photo by Gemma Bardsley

Trading Is Boring

 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 )

 

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Photo by Strevo

A Simple Trick To Help You See The Trend For Price Action Traders

FINDING THE TREND

For an Al Brooks style price action trader, we do draw short term channels during the day. We can draw them off the highs and lows or the closes. Sometimes the chart gets crowded and it is hard to see the forest for the tress.

Using NinjaTrader, we can change the bar type from candlesticks ( the most popular chart type ) to Line on Close. This draws a line between only the closes on a chart.

LINE ON CLOSE

I picked up this trick from Mack at price action trading systems, it is not my idea. By switching the chart type, we can see the above chart rendered in a simpler manner.

Give it a try the next time you are having trouble drawing trend channels.

One and Done Today on the FESX

 

I saw a trade on the FESX this right after the open. The FESX really ran up and I took a one lot ( I have moved up to two lots now , but I still scale back ) because it was the start of the week and the US market is closed.

 

The price stalled and I bailed at +9 ticks ( € 90 )

 

The US markets are closed today so no more trading for me. Have a great Labour day !

Trading The TF ( Russell 2000 ) Over Lunch

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.

Cascade Failure Trading the TF Russell 2000

I recieved a lovely comment on the blog from Sacha
an it reminded me of everything I did wrong trading yesterday.

Cascade Failure

A cascading failure is a failure where connected parts in which the failure of a part can trigger the failure of successive parts. Cascading failures can happen anywhere and in any system ( airplanes, bridges ) and it is basically one things leads to another that leads to another usually bad thing.

Cascade Failure Trading the TF Russell 2000

I was trading the TF, and my router was having problems so I started trading on the family computer. Not that that is a problem, it is the location. Instead of being in the ‘Batcave’, it is where everyone passes through.

This was my first mistake. Asking others to not disturb me in a public area of the house.

When I am scalping , I usually only scalp the open, so I concentrate on staying calm and watching the market.

I was fine until someone came in and started talking about an small issue that could wait. Then the conversation started about not bothering me, etc. It was all in terms of thoughtfulness and caring so there is nothing to be upset about, just that the act of calmly explaining to someone , talking about not distracting me is distracting me.

Right after that, I made my first trade. I had a brain fart because I was not concentrating and placed a limit order where there was not a trade. I had forgotten to set an ATM and the order filled without and profit target or loss order. So I am scrambling to place them on an unfamiliar computer and I was not as fast as I should have been. i also realized I should not have been in the trade. The market hit my initial stop and I was down 12 ticks.Not a lot, but really frustrating. I then ran an ether net line back to the batcave and proceeded to try to trade. I the next trade, I had a profit target of 5 ticks and the market moved my way and I moved my target to 20 ticks. Made 10 ticks and then gave it all back and scratched. Stupid revenge trading. I had no basis for that except for the fact that I had lost money and “I wanted to get it back”. Luckily it was only one trade before I regained my composure. The market does not owe you anything, it is not personal.

The market does not owe you anything

So now I was totally, pissed and I just had to step back, calm down, and get my mind back in the game. I calmed down and traded like I should have for the rest of the day. When the market started getting a bit too choppy and I stopped for the day.

Total for the day was 6 trades, +8 ticks on winners and -12 ticks on the one losing trade. It seems like a lot of trading, but two of the trades were for a combined -11 ticks, and I averaged ~2 ticks a trade for the others.

There were a couple of thing that I could have done.

(1) don’t be distracted

First mistake, I never should have left the Batcave. Trading is lonely, but when it is noisy, even less so.

(2) developing a jedi mindset

I needed to stay calm and trade. I won’t repeat it here but here is a good blog post.

How to Not Have a Cascade Failure

When something is going wrong, stop trading, close your positions and walk away until you have your “jedi” mindset back.

Also, thanks for reading , I think this is my longest blog post ever.

Updating My Scalping Setups ( Day 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 )

Trade or Do Not Trade. There is No Try.

I have noticed that I trade best when I do not “Try” to trade. I just trade. This was strange, because the times when I trade live to just trade well, I do much better. I am calm, I am not nervous to get into a trade.

Last night was a big move up and I usually trade reversals. I did not get any decent pull backs and by mid morning, it was a grinding chop which was annoying. So no trades, but a great day trading.

I do need to learn more setups so I can trade more consistently. But that is for another day. I am reading Al Brooks three new books so hopefully that will help.

It Sucks to Scalp Futures on a Huge Down Day

The S&P500 fell 1.71 % yesterday. These are the days that are made for trend followers. Being a scalper is a hard thing on a day like this.

I made one trade on a pull back, and I ended up scratching it , just paying the vig commission. A few minutes after that, I got the best signal of the day and I let it pass me by. This set me up for a loss later in the day.

The second trade was a classic setup for 4 ticks.

I think it was still bugging me on the first trade and I traded up to lunch. usually I am gone by then, but I stayed around. Took another short and the market started jumping about like some one was sweeping the book or  ( more likely ) the volume dried because traders were going to lunch. The market got jumpy and I bailed. The trade went my way but I wasn’t onboard, and gave back two ticks.

Ended the day up $9.74. Yeah……

Trading On Fed Day

I hate trading on Fed day. That is the day the Federal Reserve releases their report at 2:15 pm. The market is dead most of the day until the report. So a low volume choppy day.

I made five trades for +$62.90, so combined with yesterdays -$56.84 I am up $6.06 week. Yeah. I spent $23.94 in commissions.

Wednesday and Thursday are my traditional best days for trading so hopefully I will end in the black this week.

Hockey Stick

I haven’t seen one of these days in a while. As in never, but I haven’t been trading that long. Took a loss today and that was my own stupid fault.

I wasn’t patient enough and forced a trade. Then I got out and did not take the next entry which would not have been forced and a winner.

I did manage my risk well, and that contained the losses. 1/3 for the day.

Summer trading can be a pain. I am not even sure I want to try again this Friday.


-1.25 ES points ( 5 ticks )


My Current Setup

My current setup is all price action. I do use indicators to manage risk, but the entry signal is just price action. I seem to have much better luck with price action indicators that lagging indicators. I like ‘short term momentum trades’, which are hard to trade with lagging indicators like the MACD or moving average crossovers.

What is price action ? That is a hard thing to define since every one has their own idea on what price action is.