Monday 10.03.2014

It's been a very tough day today in DAX. We have opened with a medium size gap down and proceeded to sell off during the pre-market. Once cash got opened, market reversed and started to climb. I had come to my trading station around 9-30 CET, so it was very much on its way up.





During this run there were hardly any entries up, plus I was looking for a short once gap gets closed. I was targeting area 9400. But it never got there. It printed double high there but it was too volatile for me to enter. I could not get an entry for my risk of 15 ticks.

I had a feeling it could climb up more, so was looking for long entries. The first stop did not give me a setup. The second one printed a setup as per my system, but I could not get in. I had a pending bid at 9333 and it came to 1 tick off it. I was way too careful with this entry. It never made a great runner but had plenty of exit points and would be a safe trade.

Market made another leg down but I was still looking for a long. After an impulse up I was committed to enter on a long. Once it pulled back it printed a quite decent entry long. I took it.



It made just 1 tick of draw down and came into profit. It had produced 7 tick profit or so, it was way too early for me to put to break even, but I could have reduced my risk, moving stop to the recent lows. But I kept it at default 15. Then it came roaring down, giving hardly any opportunity to limit my risk. It stopped me out and gave 2 ticks of slippage for -17.

At this point I could see the exhaustion of the move up and started to look for shorts. Last impulse down was larger than a previous one and I called for a resumption of a down trend. A short setup came along the way. I was decent.




The only problem with it could be that we did not get any break of the pullback TL, but it printed multiple top high consolidation and usually it is a very good entry point for a pullback when contracting triangles don't break on their flat part but reverse. But no chance here. It went straight into red and gave no chance to reduce the risk. It proceeded to my stop, slipped me 1 tick and reversed there. Even if I had an entry 2 ticks higher and would be still in the trade, it wasn't a runner I was looking for. But it would give 20-something ticks and would certainly not be a loser.

By this time I could see a range developed in the POC region and was sitting on my hands keeping powder in my last bullet dry. I waited till the US cash open and some initial indecisiveness, and then saw DAX taking a turn lower, with ES going lower as well. We broke consolidation and then took out lows and printed momentum candles on so decent volume.

So I have decided to look for a short entry in the momentum market. The setup came along soon.



We've got a contracting triangle, lower highs, then a break of a pullback TL. I put my order in more aggressive not wanting trade to get away from me. But it came roaring into the red and quickly stopped me out and proceeded higher.

That was the end of trading today.

I went for a walk. When I came back and checked the market, I could see next two entries were all niceness and first would give 25 ticks and second was good for 60. Volatility had reduced and entries were low risk.

Here is what I am taking from today:
1. While I might have had some confusion on direction today (and no wonder - a tough cracker of a day), I took trade in a disciplined fashion, as per technical setup and did not run a scary chicken. I was cool, my heart rate wasn't rising much (last week my pulse was all over the place when taking trades)
2. I started to implement my goal for this week - take all system trades, do not run for cover too soon (until we have an impulse in a right direction), stay cool

However there is something I need to consider:
1. Filter out excessive volatility and don't enter when market is giving very broad entry sketches like today requiring maximum risk even to get in, wait for a market to settle
2. Don't take two trades one after another too soon, unless you are getting into the same setup after a fake out stop-run and setup is confirming its validity. Otherwise - wait for an hour or wait for a next session.
3. If market is not cooperative - leave the last shot for the evening session, after the european markets close, price action becomes less volatile and usually gives some cleanest setups, while slow, that might run full distance to 60 ticks profit target.

In general I do feel good even if I lost 800 usd today. It reminds me why I should not run scared and protect too soon, take meager profits when market is going my way and instead sit through the trades and take large profits. It is to pay for the days like today when nothing seems to work and most moves are stop runs.

There will be another day tomorrow. I will prevail and come on top of this thing once again.

Weekly update

I won't be bothering you with a lot of backdated screen shots, but I need to make up for a couple of weeks of trading I have already done in a quick fashion.

To give you some idea where I stand here is the starting conditions:
1. My starting capital is 10 000 euro (my balance is kept in euro at my broker)
2. I trade currently 1 contract of DAX, which has 1 point (2 ticks) worth 25 euros. Which gives around 17 bucks of ticks' worth
3. My risk is up to 15 ticks per trade and up to 45 ticks per day, I stop after that or 3 consecutive losers
4. My weekly risk is 1500 euro (120 ticks) from the highest balance value in a current week
5. I target 30-60 ticks profit on trade, possibly more during high momentum phases
6. I plan to add a second contract once I have 2000 euro in profits.

There are my daily statistics so far.



There are my trades from the this week.

Weekly roundup

It's been a productive and bit emotional week. I have finally gone live last Friday and ended a day with a loss of 15 ticks, done one trade. (190) euros from my live account.

 This week had slow Monday being a Presidents day in US, but DAX was trading even if rather slow. I did one trade.


Took a fast catch of a flying knife at the good confirmed level on expected stop run past earlier lows. My mistake was scalping my way out for just 8 ticks and not re-entering on another test. It was a trade of the day I failed to exercise properly.

Tuesday gave some more buzz.

However, I also did one trade only.

Wednesday was a day of disappointment. I have realized I took Monday and Tuesday trades on demo, rather than on a real account. I have got frustrated and started to doubt myself and took no trades.

I can back strong on Thursday, reinforced and reinvigorated.

I took 39 ticks home in two trades, 550 euro into my real account.

Friday was good and bad too.

My first trade was just excellent, 3 ticks draw-down  and a run was good for 140 ticks. But I screwed it badly. Again. And not retaken. Again. I protected the trade too fast and got stopped out for +1 tick in 30 seconds. Then I spent 20 ticks trying to catch up onto a long. Second trade was a cheap attempt that failed, it was ok. Third trade was a dumb one. And last trade was a mistake on my part. I knew it was an expiration day but did not realize DAX options expire at 1 PM CET time, so it got hit by the liquidation of long position collected by option sellers protecting the low the gave me the first great trade I failed to collect on.

Gave back 19 ticks or 237 euros. Still finish week positive and my total balance is about +50 euros.

However I have learned a lot and will dedicated a special post to it.

It's been some time since I posted last time. We have moved to Santa Cruz de Tenerife for 3 months to survive the winter which is horrible back there at home, and try living in Spain and see how we like it. So it took me out from trading for a week as I were setting things up, getting internet access and things, organized VPS server. But I did trade demo for a while.
Eventually I have skimmed down on my trading tools going back to bare minimum to reduce demand on internet throughput and I wasn't using all things anyway.
Effectively I have started to trade live only last week. I did so far 4 trades during 4 days in FDAX.

First trade I took immediately went against me running level's stops, I did chicken out and moved take profit to entry, reasoning if it comes back I will get out. It did come back, took me out for zero and then run to my planned target. It was a classic stop run reversal and I should have held.



My second trade was bit late, into lunch time. Market already made a trend leg up, it was fast and I did not enter on break out entries. It did come to the high with force and entry looked good, but was bit premature. It fell back against me and held there for quite some time nearly stopping me out few time. Then some bulls came in, made a run up, at some point bringing me up to 20 tick profit. I failed to act, expecting a sustained break. But it turned to be a stop run. I was waiting on a retest of entry and some reaction but it fell like a rock and stopped me out for -15 ticks.

Yesterday we had some movement in European session but much wasn't expected due to lack of US flows. I managed to get an excellent entry, but got out thinking on another run down. Exit was bit too late, I should have gotten out on a stall of an impulse up and then re-entered at a better price once it stops moving down. But I did not act on a second part. Ended up with +8 ticks but trade eventually gave whole target of 60.

Today was a quite touch start. It managed some sort of a down move but with a lot of buying back effectively turning it into a volatile range. I stood out of market just watching. After hours of waiting and end of a lunch time, it managed to come back to the upper range level and printed a breakout pattern, consolidating there. I took a trade, it only went 3 ticks against me but it stood there for a while unable to break it. I was thinking of getting out as it was getting too long of no action. But then it broke up, took out yesterday high. Then it started to pullback and I acted fast getting out. It did ended up being a stop run reversal. Then it gave another setup, short now, but I wasn't keen on taking shorts plus US session was nearing. This second possible trade could be the best trade of the day.
End result: +29 ticks.

Trading dax

Took a trade using the rules outlined yesterday.

Level from the yesterday US session upper range border. Move up, pullback and then another pullback where price reacted already today. Zero drawdown, 30 points profit.

Likely I won't trade more today due to ECB coming. Even though it is still demo (plan to go live next week) I don't like to trade as I would not trade live. Builds bad habits.

Flexing muscles

Before I plunge in DAX, I have decided to trade two weeks on demo, to get back to grove, to settle in new environment (we have moved for the winter to Santa Cruz de Tenerife), organize my trading desk using my large notebook (17" Envy) and get finally a decent internet connecting while having 3G as a backup. I am using a VPS from speedytradingservers, CQG datafeed, Ninja trader 7.

Today I want to show good, bad and evil in trading DAX in European session. DAX is a very volatile instrument printing daily ranges from 100 to 500 ticks. Average is perhaps 200-300. It is probably the most volatile instrument from any liquid instruments available. However, it is also very technical, and tends to follow the money. It has very good levels, and my take in trading DAX is to establish a sentiment and momentum, market type, plot levels and trade rejections from 3 minute chart. In a picture above you can see a typical day in DAX. Entry is with a very short stop of 7.5 points (15 ticks) and target was taken at 30 points profit. 4:1 reward to risk. This is what I look in DAX.

Another example. Previous day market consolidated, volume profile is very compressed. As cash opened at 9 AM at Frankfurt, we broke up from the range but then pulled back to revising a key level, that formed range top for the later part of previous US session. I entered at second test, trade had zero drawdown and quickly brought 30 points.

A trending day in DAX. I have marked all good areas to enter short and/or add to position. You can make big money on days like that by holding and adding to position. It's always hard to know when it happens, but nothing is easy in trading. These days come often enough in DAX. Just have good reward to risk and re-enter or add to position when good signal occurs. If you can do that, one day like that can make whole month's profit easily. This is how DAX has to be traded and this is where it at its best.

 Another example of reversal/wide range day. This is most difficult one to trade. But again, work with levels and don't call tops and bottoms. Look for momentum and direction established and trade reversals of pullback at previously drawn levels. You may lose some and some will go to break even but one or two will win big.

At last, let's review a full session trading in DAX. I have marked trades that should have been taken here. This is a range day, a very narrow one for DAX. You never know when it happens but it is safe to assume every day as a range day unless proven otherwise. Expect a range play and be positioned for a break out with a good cushion of profit.

The market has opened with a gap down. There were attempts to close the gap at pre-market, but highs were sold aggressively.

Entry 1 - we see another attempt to close the gap, previous level and highs sold off again. Entering on the wicks of 3 minute candles. Target is 30 point, risk is 7.5 points. Target would be achieved.

Entry 2 - break of the range down and pull back up. The road down is open, there is a possible short position building. Or a test down, you never know for sure. Entering short at the previous level again. This trade made enough profit to move to break even (10-15 points is enough). Price would come back to entry and stop us at entry.

Entry 3 - we can see a break of the range up and two legs up with HH. Entry at the pullback to old level on the candle tail. Same risk and target. Profit 30 points.

Entry 4 - continuation of the move up, pullback to the level, entry at tail. This trade made 20 points. This is a judgmental call - take the profit at this level where price sold off big, or leave it at break even. I consider it as a break even.

Entry 5 - fresh level, not very clear, won't be traded if we are still in the long from entry 4. Otherwise entry short is possible. It would make 30 points.

Entry 6 - break down of the range, one pull back, new low, another pullback to the level. Entering at level short. Quick loss of 7.5 points.

Entry 7 - already existing local level (intra-day). It would have made 30 points but would be in progress during ADP Employment news.

Now is time to show the real trades (demo).

First trade - tried to get long on the small pullback. I saw a loss of momentum and closed in a small profit.

Second trade - happened at point 5 by the previous analysis. Good entry but I closed it too early, too much obsession over small time frame consolidation and reaction.

Third trade - tried to buy a low of the range. If I would be in a previous trade I would not be trying to do that. A loss.

Fourth trade. Sold a pullback to the level, it went well but was unable to break the lower level and pulled back taking me out for just 2 points profit.

Fifth trade. As it took me out I re-entered again on a weak signal. This is a mistake, re-entries unless happen after a good move usually lead to losses. So it happened.

Sixth trade. Tried to reverse and buy the level. A foolish trade and should never be done. Ever. A loss.

Seventh trade. Sold the level with market order, as tried to hop on the train. A stupid trade. And a loss.

Eighth trade. Sold a new level which was already confirmed. A good trade and would have made 30 points profit unless I closed it at 15 points profit. However ADP news were coming in 15 minutes and it was a right call.



Few conclusions and rules to trade:
1. Wait for a borders of range to form, we need few highs or lows to mark the level
2. Look for coincidence with a levels of the previous day
3. Break out from the range does not mean I should try to enter on the first pullback to the previous range border. It means if price comes back to the range, I should look to to enter at the level inside or at the opposite range border only.
4. If I assume trend is starting and we get a pair of legs outside of the range, then I can enter at the border of the broken range
5. I should only trade inside the range if price broke down from the range and came back inside. Otherwise I should trade only range borders.

EUR/USD flops

Tried first to long EUR/USD on the basis of a pullback to a strong level and recent reaction. 20 pips stop.

Momentum quickly stopped me out.

4 hour bar closed below the level and I decided to revert to short at the same level as you can see above. However, market made few attempts to go short again but very shallow. It was a late evening Friday, I decided to leave position over the weekend with around 20 pips profit. No gap up is expected, if anything sentiment is negative for euro.

It opened on Monday where it closed on Friday. Made few attempts to go lowever, but maximum I have seen was 25 pips. I made a mistake of not taking this profit as clearly momentum was lost into ECB week. Eventually it pulled back and stopped me out for another 20 pips loss.

Then market has died.

Currently sitting on 96 euro loss. I had few small trades too, last one was an attempt to get into a short again, but moved to break even too fast and it stopped me out slipping few pips. If I left it alone I could make 20 pips but again, this is nothing.

I target 3 to 5 reward to risk with these trades. I plan to risk 100 eur per trade at initial phase. I used only half of the risk per trade now, to get into the game again and get used to carrying a position for several days if needed. Once I close the loss and make some profit I will go with 100 euro risk per trade.

A NEW BEGINNING

It's been a long way. I started to actively trade in 2009 (some rare trades with shares were done as early as 2003 and first try in Forex was in 2006). I went a long way from technical trader to news/volatility trader, to algo/volatility trader, to order flow trading and finally back to put all of this together in just one simple approach.

I traded very little in 2013, as I have decided to step up the game and move to futures market, since forex had volality died in 2012. But of course as I moved on it picked up again! But more about it later. I had spent the whole year getting used to futures contracts, session trading, intra-day trading. I focused mostly on gold and later on crude and dax. I went on with TopStepTrader prop firm and won a hardest 150k Combine with the first try in gold. I became a Live Trader with them in summer 2013. After taking a step back I have completed another Combine (also 150k) winning over 12k with max risk of 4.5k in 20 trading days, using gold, crude, nat gas and minidow contracts.

During the time I have become also enamored with DAX, German stock index traded at Eurex exchange in Frankfurt. It moves like a beast but it is technical, it's quite expensieve, so you get the highest potential from a single contacts if you know what you are doing. And it trades in European session and again in American session.

By the end of 2013 I have formulated a plan to go forward and take my trading live again.

I am starting with a capital of 12 000 euro, allocated 10 000 to futures trading and 2000 to forex trading. I might add more to forex if needed later.

I plan to double my account in 3 months. I will start with just one contract in DAX and a maximum daily loss of 600 euro, or 45 ticks plus slippage and commissions. I will stop trading after 1500 loss till the end of the week, counting from the highest achieve balance or starting balance of the week. I will add 1 more contract after I make profit 2000 euro.

I plan to actively use pyramiding into the profit, going with high target and making big on the large moves. If I get another setup when well in profit I will add more size and have a stop where I won't lose any money on the whole trade.

In regards to forex trade, I want to refresh my technical skills and take it as a side operations, looking for setups on 4h charts and not monitoring it constantly. I plan to risk 100 dollars per trade initially until I have some profit and then I can add more capital as I feel smooth about it.

My plan for 2014 is to take my capital to the level where I can trade 10 contracts of dax or 10 lots in forex. That would be something like 50k. It may sound optimistic but hey there is no bussiness in trading for pessimist, besides, I truly believe if trading the plan strictly and re-using profits as a cushion for adding more size, it is well achievable.

If I get hit, I will stop trading, regroup, go back on demo for a month or more, then add money to the capital to the levels mentioned and start again. If I do well, I will consider adding more capital and trade more size. In any case, sign up for my updates and watch me taking it to the stars!