Tuesday 03/17/09 - Back to Basics

Even though today was an up day for me (+$325 on ES and +$25 on NQ), the trading was actually pretty bad. Way too many counter-trend trades. I think the small 6-tick stops give me the false illusion that I'm taking "low-risk" trades, when in fact, there's a high probability of the stop-loss being hit, and the only reason the stop-loss doesn't get hit is because I'm bailing on the trade for +3-4 ticks, which doesn't even meet my risk/reward requirement. I think I developed this "problem" when I was working full-time and figured scalping was the only way to extract some quick profits, but now that I can focus on the market full-time, I need to change things around and get back to basics: trade in direction of trend, and stick with an absolute minimum of 1:2 risk:reward ratio. Trading the NQ was also a mistake since I ended up missing setups on ES, which produces bigger gains (and losses) quickly. As far as the stats go, my win rate today was 58% with the winners being slightly larger than the losers. Unacceptable. Here's the plan going forward:

1. Identify trend on 3 min and/or 5 min charts.
2. Trade only in direction of trend. This is going to be tough since I have a natural tendency to trade counter-trend. This would work out if I had a big account and a seat on the CME, but I don't have either of those, so I need to shoot for bigger profits and be more efficient with my trades (less trades, for larger gains). 2 points will be my max stop-loss. Bigger gains shouldn't mean sloppy entries.
3. Shoot for a minimum 1:2 risk/reward ratio. Preferrably 1:3

I may not trade rest of the week or trade VERY lightly since I need to finish my final project for class by this Friday, as well as the IT project for my client. But I'll still continue to make a new post every evening with the regular charts and will be updating the Gap Tracker post as well.

On to the charts...

ES 610-tickbar (Morning Trades)


ES 610-tickbar (Afternoon Trades)


I really didn't think ES would take out yesterday's high of day, but I guess this is what happens when too many people (in this case, shorts) are caught on the wrong side and have to liquidate their positions.

TradeStation Performance Summary


Gap filled at Open


ES/$TICK (3-Min)