Tuesday, December 21, 2010

Back again: some trading reports.

Here I am back again to post in my journal. I was very busy in the last months, but I've still found some time to trade the market.
There should be many things to say. By now, I just want to post some screenshots from my actual trading activity. Of couse, these are just some random day reports, the whole archive is very huge! From time to time, I will post as many trading reports as I can. I hope you'll find it interesting:














Saturday, April 10, 2010

Trade Like a Cheetah

by Hans Hannula, Ph.D.


The cheetah. An endangered species who has survived against the odds. It has survived by using a simple set of two rules: be faster than anyone else, and be smarter than anyone else. Sound like a good trading principle? At a recent Market Technicians Association conference, in a discussion with Dr. Van Tharp, a trading psychologist, I learned something about top traders that I thought was unique to my own style of trading. What I
learned was that many top traders use animals and hunting as a mental metaphor to guide their thinking when they 're trading. The metaphor I've always used is the cheetah.

To understand the cheetah you must understand a little bit of its history. The cheetah is a member of the large cat family, but it is a very different breed of cat. It was nearly hunted into extinction about 2,000 years ago. It somehow survived by retreating from populated areas and living in a confined space. The price it paid for this survival was a great deal of inbreeding, which has genetically weakened the species. Nevertheless, the species still survives, simply by following two "rules": be faster and be smarter than other animals. It is
knowing how the cheetah employs its two rules in hunting that can help traders. The cheetah hunts in six distinct phases, which I call the survey, the stalk, the spook, the chase, the kill and the rest.

The survey finds the cheetah in its typical sitting position. This may look like laziness, but the cheetah is actually very busy mentally. If you notice, it will be sitting in a position of perspective, such as a treetop, on a mound or a hilltop overlooking a watering hole, and what it is really doing is analyzing a herd of potential food.
It is surveying the territory, like a trader tracking a group of stocks or commodities on a long-term chart, calmly watching the progress of price and time. Like the trader looking for emerging patterns, the cheetah is looking for particular movements in the herd.

The cheetah's next phase is the stalk, which is a patient stroll to more closely examine a particular opportunity more closely, perhaps a group of animals which may have separated from the herd. The cheetah leisurely walks toward or alongside that part of the herd, checking out the potential prey, focusing on such details as size, strength, nervousness and position. This is like a trader taking a closer look at a few stocks or commodities, following major trendlines, and observing cycles and oscillators. As a cheetah nears this smaller group of animals, he starts watching for motion, focusing intently on the weaker members of the group, much as a trader watches for the first price formation or trendline break or oscillator crossing that could indicate the start of a move for a stock or commodity.

The cheetah is waiting for its prey to become fearful and panic, just like a trader waiting for other traders to build up fear or desire and go into a buying or selling panic. Every trader knows you make your big money when a stock or commodity moves fast. Both cheetah and trader are looking for the initial twitch that signals rapid motion. Both are waiting for the target to spook.

As soon as an animal stalked by the cheetah selects itself, the chase is on. The cheetah kicks in the afterburner and sprints up to 70 miles an hour. At this point, the cheetah is in full control, driven by desire, while the target animal is in absolute flight, controlled entirely by fear. The cheetah feels confident that it can catch the prey, but also knows it can abandon the chase and select another animal. For the trader, this is entering,
selecting a stop, validating the move and pyramiding the trade. This phase requires absolute confidence in your own skills, something that gives me and many traders problems. If a trader becomes fear-driven, the trader may become the victim and not the victor.

Like the cheetah who knows there are other animals to be hunted, the trader must keep in mind there are other trades always coming along. Just as the cheetah does not risk exhaustion of all its energy in one chase, the trader should not risk exhaustion of all his or her funds in chasing one trade. Like the cheetah who has developed the judgment to tell when a chase is fruitless, the trader must develop the judgment to know when a trade will not succeed. This judgment is gained only from the experience of many hunts, chases, successes and failures. Failures are absolutely essential in this learning process and are simply part of the natural order of things.

The cheetah has a distinct advantage over the trader here, in that it is dealing with energy and not money. Many traders believe that their own self-worth is measured by the money they make, so that a loss triggers inner doubts, and may put the trader into the fear mode. This drains even more internal energy, hampers judgment and can lead to the inability to act. Even to stop the loss. I find it very helpful to tell myself that money is just the grease for the skids of life, and only determines how fast I can move, just as the cheetah's energy level determines how fast it can move.

The next phase is the kill and the cheetah kills its prey very cleverly. Since the lightweight cheetah does not have the jaw strength of big-boned cats, it kills by pulling up alongside its prey at 70 miles an hour, reaching over and tripping the animal with one smooth kick. The prey crashes to the ground, usually breaking its neck.
In the worst case, the cheetah will have to pounce on the prey and clamp its jaws on the throat of the already damaged, weakened and nearly dead animal. This is just like the trader who waits for a fast move to crash into a channel top or Fibonacci resistance point, waits for the change in momentum, and then closes out the trade.
The final phase is the rest. The cheetah and, I believe, the trader need a rest after a series of intense chases. Neither can run at high speed constantly. After the kill, the cheetah eats, celebrates and rests. I believe the trader should do the same. A good practice is to always reward yourself with a special lunch or dinner, paid out of the trade's profit, then rest from trading for a while. My rule is that after a trade, win or lose, I don't trade for a time. This allows me to refresh myself, stabilize my thoughts and return invigorated to the hunt.

Think like the cheetah when you trade. Break your trading into the same six stages. Remember it is absolutely essential to be in control, and not in a state of fear or panic, during the excitement of the chase. What gives you the confidence is doing the homework, the technical analysis, so you understand what is happening and can plan your approach. As I'm sure Dr. Tharp would tell you, you need a clear mind to trade, unburdened by preoccupations. If you achieve all this, you can be a clean, lean, mean trading animal.

Thursday, March 18, 2010

Scalping and common errors...


This is my report for the today's session. I made 8 trades, 7 win and 1 loss for a net profit of about +35 pips.

The price moved pretty well this time, with clear trend and fast moves. A true paradise for a scalper! ;)

Anyway not all my current sessions are like this. I've made a lot of mistakes because sometimes I traded hastiness. I still make very stupid errors sometimes, so I decided to make a list of the most common errors that you can do while scalping.

ERROR 1: CLOSE A TRADE TOO LATE WITH A HUGE LOSS.
In scalping sometimes have a rigid stop loss isn't a good idea. When you trade to take just 3-4 pips per trade, it's common to enter the trade and then see it coming back a little before the big move.
Anyway this fact could force you to keep a losing trade on because you're still waiting for the big move after a non perfect entry. The danger is to see the trend change fast while you're still thinking it will go in your direction. So, it's very important to watch price patterns and you should always be ready to close your trade if you feel the trend is turning against you. However if the trend stalls and you reach - 3 pips, just close the trade and try next time.

ERROR 2: BAD ENTRY WITH NO CLEAR TREND CONDITION.
You don't need to take all the moves. Your goal must be to take only the huge and clear moves after a clear price pattern. Don't trade if volatility is very low or if the trend is not strong. You can use a tape (like mine in the chart above) and WMA156 as a filter. Remember, price patterns and price action is ALL. Wait a good price pattern when the price move fast, and then enter at a S/R break level.

ERROR 3: CLOSE A TRADE TOO EARLY.
When price moves, it usually release two "impulse". An impulse is a strong and fast move of some pips. If volatility is high and you have entered at a R/S breakout, don't close immediately the trade when you reach + 3-4 pips. If the trend isn't "exausted" (for "exausted" I mean when there is a clear and strong trend with a big move before our entry point), watch the price come back a little and then continue in the direction of the trend for another + 3-4 pips. But this never happen for sure: If the trend isn't so strong, just close the trade at a first profit point! I can't explain more clearly, you should understand this with experience I think.

ERROR 4: BAD COUNTER TREND TIMING.
If you like to trade couter trend, do it safetly. You should wait for the VERY END of a move, don't open it in the middle of the move.
How to understand if the trend is changing? Simply. Check the 1-tick chart and watch small S/R levels. If the price has just done a very strong move with more than one "impulse" and the price change direction fast, then you can ride the counter trend move. But remember: If price seem to continue the bigger move, just exit with a small loss. In my CCI tape (the second in the chart) oversold and overbought levels are marked with white bars. If some white bars appear after a big move, and then price start to change the trend, I usually take the counter trend. When the counter trend move seem to stall, I close my trade immediately.

I hope these advices could help some of you. Sometimes I'll read again this post to be sure to keep in mind how to manage my trades. With experience you should get the right confidence to aviod these errors with no thinking. Yes, bacause when you scalp there is almost no time to think!

Tuesday, January 19, 2010

Lack of ideas...

It's been so long ago since my last post... I'm sorry for that but this for me is a very busy period and I don't have any ideas now for an interesting post. Anyway I tried to trade as much sessions as I can, like today: I traded 1 hour on the London open session and about 90 minutes on the New York open session. Net profit: +0.89%

I've now created a new Exel file where I will archive all my future performance. Today wasn't a excellent trading day, but every positive day is still a good day to me. I could have done much more with a little more luck and attitude to risk. I'm still too conservative on some perfect setups because I usually like to trade smaller moves, so, when I find a long run I'm still a bit afraid to see the trend turning against me.

In other words, I'm still too "fast" to close my trade looking for the maximum profit on smaller moves.

However I'm going to update the profit indicator in the right top side of this website.

Sunday, December 20, 2009

MM or ECN brokers?

If you type "forex brokers" on google you can find a lot of small brokers that tell you they can make you rich by trading the currencies. More beginner start theirs trading carrer opening a demo account with such brokers, believing they are the best around...

High equity traders and experienced traders know that there are some "elite" brokers that can offer a saver service: true ECN brokers.
This type of brokers are much more safer than MM because they can offer you the best spreads from central banks, the same that market makers brokers get!
Anyway there are some more reason to choose a ECN, and I'm going now to show you whitch they are and why I prefer them:

1) Market Makers brokers sometimes have interest in make you lose money, with direct or undirect methods. This is not a proof of theirs bad service, but I think that if there's only one single reason to steal your money the system isn't enought save, even if my broker would be regulated by NFA. MM earn money from spreads & market manipulations, and this can really hurt you.

MM make money by:
- Spreads difference from central banks* (see below)
- Internal spreads difference** (see below)
- Interest on client deposit
- Losses on client's trades that were never offset

So MM can manipulate the market you "see" to match theirs spreads difference, or in the best case they can "simply" reject orders, widing spreads or create lags in according to theirs interest.

2)
True ECN brokers doesn't have any interest in make you lose money, because they offer you the same spreads that normal MM take from central banks. There are some ECN brokers that doesn't make you pay a spread, but only a commission for evey trade.

They make money from:
- Commissions on every orders
- Interest on client deposits


Those brokers doesn't have any interest in offering a bad service or make you lose money because the more you earn, the more interest they have on your account, and they don't manipulate the market because the do not have any spread commission.
ECN are open only for high equity traders (but now you can get it with just some thousand of dollars...), don't you ever asked why?

True ECN requires higher minimum deposit, but they can offer a save broker system for those that want to sleep good at night. MM sometimes can be happy if you get a "bad service" or if you lose money. ECN are happy only if you keep to pay commission and yes, they are much more happy if you grow your account up... because more equity = more trades or more lots = more commissions every trade.
Don't forget that scalpers can only trade with an ECN broker or a direct and personal central banks connection, because MM are used to offer higher spreads and slower trades exsecutions.

* = The difference between the spread the broker quotes to clients and the spread the broker receives from the banks they offset from. If the broker is unable to match a buyer and seller internally, the broker will, after the positions become sufficiently large, offset with larger banks that quote them cheaper spreads.
** = If the spread is 3 pips, and the broker is able to match a buyer and a seller internally, they collect 3 pips.

Saturday, December 19, 2009

Trading setup

Like most of you knows, every trader should find his own preferred trading setup. A trading is the sum of hardware and software configuration used by a trader to reach the highest possible control on the market.
Long term traders needs to minitor multiple markets, on multiple timeframe. High equity traders usually use up to 30 (!!) monitor desk to trade in the best shape:

If you are used to trade with long-term trading systems (an example would be the M5 Trend Following System) you will get only 1-2 good signals every week, so you'll also have to monitor much more markets to get a good number of possibility every week. Stock, option and futures trader usually do the same, trading on high timeframe and following 8-10 and even 30 charts at a time.
Scalpers doesn't need to fill their desk with a lot of monitors, but only two or three medium-size monitor (22-28") is enought.
I personally own only one huge 42" monitor, where I can set my whole setup.


The first chart above is the 1 tick chart with my favourite rainbow tamplate, that I use as main chart.
The others two charts are: On the left a 10 ticks chart and on the right a 1 minute chart. All the charts have the same template, but you can see I use a volume levels indicator in the 10 ticks chart to spot low volume levels, price ranges where price usually breakouts.
I still use two oscillators (a woody CCI trend indicator and a SMA oscillator), but I don't care much about it. They are good to see things in a clearer way, but they don't matter a lot.

Tuesday, December 15, 2009

My funny motivational posters


More to come...

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