Dom's notes

Despite having been hammered for posting my sincere feedback re. ATW in the appropriate thread (or may-be, because of ...) I am starting this thread for the benefit of all waanabee traders.

I have no intent of sharing my exact trade setups, however I will share as much as I can - the good, the bad & the ugly, and if someone learn something from this then it won't have been a waste of my time.

I have been a student of the market for over 4 years now. I actually started my education with Investools PhD program (which was a lot of money for not much outcome in my case), trading stocks then options, then started to focus on the SPX (directional Calls/Puts then credit spreads), at some point I discovered the futures / ES in particular and that was a "revelation" ... 1/4pt spread vs 2pt spread for the SPX options, I was sold in no-time.

I purchased Todd Mitchell's system (TradingConcepts), which was a lot less money than Investools but no more outcome in my case, at least it triggered my interest in Fibs (back then, retracements only) and I did a lot of research / backtesting using Fibs - but at the end of the day, the real challenge resides in figuring out which fib level will "hold", and to this day I have to admit I have not solved it.

Anyway, I then spent a lot of time in a couple of "free" trading rooms
learning pure price action, the person that was offering his time teaching PA free for several months later offered a paying program, which I took, but I still couldn't make money live. I took another mentor, recommended on a free forum, and despite he being a nice guy (and why wouldn't he be when students are paying), this also was a failure.

I was about to throw the towel when I found ATW, started with the 101A education, added 3 weeks later the mentorship education, and have been studying / backtesting a lot for now a full year. I reached a point where I can "consistently" make fake-money on sim, however the transition to live trading is a real challenge for me, because of fear I pass on many trade setups and I deviate from my trade management rules.

So, that's the background. I trade CL (Crude Oil "big" contract) which is very liquid, has 1 tick spread throughout the European & US session, and is nicely volatile (day range is on average 250-350 ticks, some days even more - like today : 450 ticks). I find CL to have a lot of momentum, it shows very repetitive "patterns" (at least, for the fib user that I am).

I don't use any indicator, I trade price action using a lot of price projection techniques (best book IMO on this topic is Robert C. Miner "Dynamic Trading").

If I have one advice for new traders, it is look for another way of making a living ... but if you are truly in love with the markets, then I believe it is a must to 1) find an excellent education (this is way more than just reading books, and frankly, there is probably no one-stop education shop) and 2) find a mentor to accelerate your learning curve.

Now that this is out of the way, a brief summary of my week :

Tuesday - tried 1 trade early morning, entry hit no fill, that made me mentally sick for the rest of the day, I passed on 2 setups (both wins), the last setup I tried but my entry wasn't even close to be hit.

Wednesday - 2 setups no-fill, then 1 small winner (got out at 1/2 of my target for pseudo-good reasons - really, lack of discipline), and I passed on the last one (another wouldabe winner :( )

Thursday - passed on 5 setups (4 wins / 1 loss), took 1 small winner (1/2 target again, same lack of discipline), and missed the best setup of the day by being away for 5min

Friday - passed on 1 setup (win), no fill on next 2 setups, then I couldn't focus & called it a day.


Bottom-line - only 2 trades this week, I made ~10% of what I should have made if I had the discipline to follow my plan.

Day's summary

CL live : no trades today : 4 entry-errors

I am just BE since July 1st, and it seems the 2 losers (yesterday & day before) did some damage to my psyche (again) ... I passed on 4 good setups, just to see them be winners ... couldn't resolve myself to pull the trigger, and the problem is compounded by each win that I pass :(

Hi Dom,

I haven't read all of your posts, but based on some of your posts that I have read, my understanding is that you do have a trading plan/method.
If you believe your method has +ve expectancy, then the issue becomes psychological: you either don't truly trust your method enough, or you don't trust your ability to perform.

According to Mark Douglas, having confidence in the face of constant uncertainty is the key to succeeding as a trader.

http://www.mypivots.com/board/topic/5713/1/how-to-build-confidence

Consistency is the true holy grail, and all paths lead to Rome.
In other words, all of the different approaches towards gaining consistency will more or less involve building up one's confidence.

If taking a losing trade is affecting your ability to perform, then either reduce position size until it doesn't impact your psyche, or go back to trading in simulation until you have worked on the process sufficiently enough to restore confidence.

Hope this helps, good luck, and keep us posted.

Hi Phileo,

Thank you for offering some advice ... I really appreciate !

I believe my psychological issues can be summarized as follow : I don't have yet traded enough with real money that the outcome of a single trade just doesn't matter - which I am convinced between 2 trades, but unfortunately I change viewpoint as soon as I get filled for entry, and some days even as soon as the next setup arise.

It is almost impossible for me to reduce size, as I am already down to trading 1 contract ... and I don't think switching to QM would work for my trading plan. The only thing I can do at this point, is to work on the stop size ... I stopped trading my automated system for that very reason (I was too uncomfortable with 42-ticks stop), and in my discretionary setups I currently use a 16-ticks stop ... which is possibly still too large (from a psychological point of view, even though I know this was the optimum stop size in back-testing). I am currently looking at ways to reduce the stop size at least on part of my setups.

As for simulation ... at this point I don't think it can help me much, given my trouble comes from trading real money, not sim money.


To be frank, I am really looking forward to that "lucky" streak, which will create some buffer in the account so that taking a few losing trades won't matter as much ... until then, I must work on myself and find a trick to force me behave according to my trading plan.

To that effect, I track the "system" P&L of the trades that I take, in addition to the actual P&L ... this way I know the real cost of my behavior errors in trade management. I also track the number of "entry errors" (trades that I passed on), even though I don't track their "system" P&L (I just assume their average outcome would more or less match the average outcome of the trades I take).

I just haven't found yet a way to use these metrics in an effective way to improve my behavior :(


Thanks again for your comments :)

Originally posted by dom993

Hi Phileo,

Thank you for offering some advice ... I really appreciate !

I believe my psychological issues can be summarized as follow : I don't have yet traded enough with real money that the outcome of a single trade just doesn't matter - which I am convinced between 2 trades, but unfortunately I change viewpoint as soon as I get filled for entry, and some days even as soon as the next setup arise.

It is almost impossible for me to reduce size, as I am already down to trading 1 contract ... and I don't think switching to QM would work for my trading plan. The only thing I can do at this point, is to work on the stop size ... I stopped trading my automated system for that very reason (I was too uncomfortable with 42-ticks stop), and in my discretionary setups I currently use a 16-ticks stop ... which is possibly still too large (from a psychological point of view, even though I know this was the optimum stop size in back-testing). I am currently looking at ways to reduce the stop size at least on part of my setups.

As for simulation ... at this point I don't think it can help me much, given my trouble comes from trading real money, not sim money.


To be frank, I am really looking forward to that "lucky" streak, which will create some buffer in the account so that taking a few losing trades won't matter as much ... until then, I must work on myself and find a trick to force me behave according to my trading plan.

To that effect, I track the "system" P&L of the trades that I take, in addition to the actual P&L ... this way I know the real cost of my behavior errors in trade management. I also track the number of "entry errors" (trades that I passed on), even though I don't track their "system" P&L (I just assume their average outcome would more or less match the average outcome of the trades I take).

I just haven't found yet a way to use these metrics in an effective way to improve my behavior :(


Thanks again for your comments :)

Hi Dom,

What is the MAE (ie. most adverse excursion) of your system's signals?

Day's summary

CL live : 3 no-fills

I spent all Sunday manually backtesting the most aggressive entry level for my "short-term momentum" setup, this provided some improvement on initial stop placement, and also confirmed it is performing better all in all than the regular entry level. So decided from now on to only use that aggressive entry level (for "short-term momentum" setup).

That said, it only gave me 3 no-fills today :( - better than 3 losers -

I decided to pass on the 5th wave short setup (after 11:06 low), because of the magnitude of W2 / W3 which created the need for a very large stop, and the possibility that all the down move was over (that W3 was subdividing into a 5WM, which completed between its DF51/DF51x, and LoD being only 15-ticks away from 3-day Low) ("system" result for that trade : +10-t after about 2h trade, taking up to 34-t heat)

Then I plain missed a perfect confluence that would have yielded a winner (taking care of lunch for the kids).

Rest of the session had nothing for my trading plan.

Pretty poor result for a 2pt range day !

Originally posted by phileo
Hi Dom,

What is the MAE (ie. most adverse excursion) of your system's signals?

Yesterday I manually backtested ~140 trades (CLQ0, since June 20), filled a large spreadsheet, and interestingly found a way to optimize my initial stop ... still using a max initial stop of 16-ticks (which again, appears to be the optimum), but I now have a way to adjust it based on current price action. The overall improvement on P&L is about 10%, not too bad for my time investment.

Also found the optimal target to be 16/17 ticks (no difference on P&L), so will be using 16-ticks target moving forward, which gives this setup an average reward:risk ratio of about 1.15:1 (based on backtesting sample)

Yesterday's summary

CL Live - no trade.

I passed on a long ~7:10, as CL had reached its max completion target for 5W move from overnight low.

I then passed on a long ~8:30, at that time I was contemplating a swing trade with target 77.ish (1st completion target for 5W move off July 6 low), but stop had to be below the 75.25-75.40 DPTL, and that was too big a stop for me even for QM.

I missed the long at 9:13 (was driving my kids), and at 9:25 that pullback didn't look good to me.

I think I should have taken a CT short on the retest failure of 77.03 (which was 1st completion target of 5WM), the volume pattern on 1min chart was pretty telling - but that entry style isn't currently part of my trading plan.

Rest of the day was pretty much chop & frustration.


Today's summary

CL live : 2 win / 2 BE / 1 loser / 3 entry errors & 5 management errors - overall BE day, should have been BIG winning day :(


The frustration had carried-over from yesterday, I jumped on the pullback after that marginal LL at 7:13, realizing too late (& not taking action to close the trade) that this breakdown bar reversed & closed on its high ... Adding insult to injury, I failed to act on the ledge that developed in the next 10min, where I should have clearly tighten my stop to just above the ledge. Bad start for the day, max stop + 2-t slippage here :(

I jumped short a few min later, after CL completed a small 5WM into VWAP, and started to reverse ... I include this one as an entry error, as it is not part of my trading plan. I had set my target to a retest of overnight low, and at +16 I moved my stop to +10 ... and got stopped :( I know a 10-t trailing stop is the very minimum in CL, I just wanted to preserve a few more ticks, because of 1st trade loss :( Count this one as a trade management error, too.

Took an aggressive short on the 1st leg down after the open (despite the DB/mLL at overnight low), moved stop to BE+1 @ +7 ... and got stopped. Trade management error again, should wait for +10 for the auto BE stop to kick-in.

No fill on 1st pullback (11:48) after I came back with my kids, then took a long at 12:17 after ABC - good entry, but got a bit scared by the volume & speed of the C leg, finally bailed out BE+1 after a few seconds - another trade management error, that should have been an easy win.

Took a great aggressive entry after the 2pm breakdown (on FOMC minutes I guess), but I bailed out w/ 7-t when a few sec of patience would have given a full win. Trade management error again !


Finally, I ended up hesitating and passing on a 5th wave short setup around 2:22, the "system" entry was too aggressive to my taste (but still a decent winner), and I didn't notice until too late a great confluence on a more conservative entry level for this setup. Entry error.

Painfully honest but appreciated.

Have not read it all as I wanted to skip to the end to see current state.

I have never used backtesting or auto trading personally, just to let you know. It's only mentioned as I don't write code or books. Not interested in rediscovering the wheel. I really don't care for trying to educate others as most is lost to the masses. Heck, I can barely use a computer. My focus is profitable trading.

I would like to speculate on your setup for 5th waves as I have a useful EW knowledge level for trading.

It would seem to me that a better system would be to focus on the bottom of the 2nd or B wave for an entry. You would know sooner if successful. You would't have to be concerned if it was a 3 or a C wave. and either one would be higher than the first wave top.
You can evaluate the waves after booking profits and then look for a 5th wave play should there be one. Usually, a 4th provides plenty of opportunity and time.I would call this playing the 3rd wave, which can itself be extended as a 3 or a C with a higher or equal degree of probability as any potential 5th wave. There are corrections to trade and this would be more activity and opportunity depending on the tick level traded. I personally like multiple levels/timeframes.

Yes, 5th waves extend, but not always. Extended 5th's are a short to me, at least back to the 2nd wave of the 5th. Playing the third wave would have you right there if a 5th develops. Also, the 4th wave is usually more complex and counter to your limitations at present. And you definitely eliminate the possibilty of a truncated 5th wave.

There a thousands of ways to trade and people use them all. If you find yourself stuck in trading hell, relocate. It might be you? It might be your method is not for you? You seem to scalp fair and it seems more congruent with your patience level inside your trading world and real world at present.

Just food for thought as I appreciated the honesty.

All my best!

Day's summary

No trading today - I had a couple appointments in the morning, and decided to take the rest of the day off with my kids.


DavidS:

Thank you for the comments and suggestions - much appreciated.

As for trading 3rd waves (C or W3), I agree 100% with you on the idea. But to this date I have not found a statistically profitable way of doing it - at least, using an entry in 2nd wave (B or W2) - because so often that 2nd wave turns out to a full retest of W1-start, or more.
I would appreciate any suggestion or pointer in this area.

I also agree that entering in W4 is an emotional pain, because as you stated W4 are often complex. But W4 are fairly predictable in terms of size, and the odds for a W5 do increase after a strong W3.

Day's summary

No trading again today - I had several appointments throughout the day.


Interestingly, CL morning low came at the confluence of a 3-day 5W move 1st completion target (75.50) and a short-term (overnight move, 5th wave of the 3-day 5W move) 5W extended completion target (75.48).

CL reacted to the tick at the 75.48 level, then double bottomed at 75.43, for a nice 80-ticks rally.

Dom that equity curve looks too good to be true so I'd be scared but hope it trades like that in real time....what became of your trading contest...? how did Chuck Huges do ? He wants me to spend almost 4 k on options recomendations