Friday, 15 January 2010

Written Live - A trade in the life of EL & Kiki

Trading the ES today in RTH was a usual type of day. Tomorrow at the webinar (you can still register - see link in KEY POSTS in the right hand column of this blog), we will go through the process in more detail.

We bought the market just before the RTH open at yesterday's VAL support as the order flow was positive. The trade didn't last long as we reversed at 1141.00 as the market turned sellers and the VAL didn't hold.

First scale was at + 2 handles at 1139.00. Second scale at 1137.00 AFTER the price hesitated at the Keltner lower channel. Now we have just 1/3 left and have made 6 points for every 3 contracts of our position. The stop loss is now break even so we have a completely free trade. I'm writing this blog "live" as we are trading. Its quite different but it shows how relaxed trading is today.

I must say that one of the outputs of teaching Kiki and of writing this blog has been greater discipline and ............Just covered the last at 1136.75....more relaxed trading. I think it is because I am more accountable. The end result seems to be a better win rate.

Well, I out of bullets now and need to look at a re-entry or wait for a new trade. Let's wait and see how it goes.  Short again now at 1136.25.  Price has just touched 1134.50, This is a critical point in the trade. OK, I have now scaled 1/3 at 1134.25. Price has now hit 1130.00 with a hanging man candle and my stop is moved to break even (plus a tick). Second hanging man forming and I am out of the whole position at 1134.50. I don't care what happens now as this trade, part of which was a re-entry is over. On the first set, I made 9.25 per 3 contracts and on the second set 5.50 per 3 contracts, a total of 14.75 per 3 contracts. Hope my maths is right.

OK, now let's look at the money management. Did scaling make more or less money, did being prepared to re-enter make more money. Should it have been an all in, all out trade. Should I have scaled in? Market is moving lower as we speak with a possible re-entry at 1132.75 but not for me. Unless its an obvious trend day, I only re-enter the same swing once. The context of the trade was yesterday's higher value. I want to see what happens today after the first trade to see where the order flow is likely to take us. My initial thought was overlapping higher value but so far, I am wrong. I am wrong but made 14.75 points per 3 contracts.

This type of flexibility of thought is a basic requirement of day trading. That is why I use the methodology I do. I follow the flow and let the market make me money. I neither predict nor try to second guess as I would be handed my head (which happened in the past more times than many of you have had hot dinners). Writing this blog "live" has been great as it allowed me to try and pass on what was happening as it was happening. No changes have been made to what I wrote for publishing except the usually checking for grammar and spelling by my long suffering darling wife.

Click chart to enlarge


  1. Have you ever thought about posting on Twitter? Not necessarily posting entries and exits but just thoughts about the markets and the way order flow is going? That would be amazing! I appreciate all you do for this blog and the traders that follow it. I'm currently in the process of meshing a few of my favorite bloggers styles together and your use of range bars and Volume breakdown has been a big thing for me. I'm still trying to learn how to piece the puzzle together but It's coming along I think. Thanks again!

  2. Anon, Order Flow is the key. Whatever else you mesh, if you leave order flow out, not just VB, you will probably be delaying your success. Price is driven by orders, its that simple. How you capture that information is another thing. I don't think I'll ever have the bandwidth to do more than one thing at a time. Today's live commentary was quite short and I went back to trade as normal afterwards.

  3. Thanks for the reply, I think you are right about not knowing how to read order flow delaying my success. I have mainly just been trying to use a volume profile of the current day as well as the past few days to find places where price has been accepted/rejected. I follow VB as well as the DOM display, I'm having trouble figuring out what to believe in the DOM and what to disregard. I try not to get too caught up in it, but I don't know what else to try and follow in order to give me the same information. I find myself trying to pick tops/bottoms too often which isn't a game for a beginner to be playing. But I find myself feeling very uncomfortable making inside out trades as you refer to them because I don't have a close determined place to put a stop loss and when I've tried to place them I often end up taking too much heat on them for me to be comfortable. I appreciate any advice that you'd have for me.

  4. Anon, its not the stop that's important. My stops are rarely hit. I'm out when I see the trade is not going to work. We'll talk about this losing trade tomorrow at the webinar.

  5. i am curious about trade 1....i am guessing you went aggressive against 1144 at close price of, since you were in trade 2 i wonder what was your thought process while in trade 1:
    a) possible resistance at 1144 and will see how it plays out....hence, broke even when 1144 shut you down
    b) you bet at 1144 reversal and hence got 5ticks....if so what gave you clue for reversal at 1144.....this trade then ends up as scalp and you appear as swing trader

    any feedback is greatly appreciated

  6. Can you post the name of the book where you read about momdots?

  7. Please can you show us a few picture how look market profile before and after spliting.

  8. Sorry -- big disappointed from webinar. I think you should tell in advance that your webinar be some church service or symphonic poem for newbies.

  9. I am just another reader here but I take a big issue with Edo99's comment. It's crazy to me that someone would be disrespectful to Tom and Kiki about the content of the webinar. All they are trying to do is help traders become profitable...moreover, they are not charging for their information, they are taking a generous amount of time out of their own schedules to provide information and you can tell from their demeanor that they are genuinely nice people.

    Perhaps you are angry because they didn't give you the holy grail to trading. Guess what…there's no such thing! You have to work it out yourself...there is no magic answer!

    I personally have taken the information that they have provided and slowly, by working hard over the past three months, turned myself from a consistent loser to a consistent winner. I've still got a long way to go but progress is there. Thank you for what you do Tom and Kiki...there are a bunch of us out here who appreciate it.

    Raleigh, North Carolina

  10. How long did it take you to gain a feel for being able to reverse your thoughts from long to short on a dime. It seems to me that this is key. You have to enter with a bias and then be ready to reverse when the market tells you too ? ....any thoughts ?

  11. maddog, it was a play at VAL. As soonas I saw the order flow turn and the VAL didn't look like holding, I saw that there was enough room on the downside for more than 2 points. That's all I cared for in the short. I then monitored the market for a continuation in the selling which in dact did happen.
    Anon, Charles Drummond first used dots similar to my MomDots. He was not published but there is some stuff on the web you can read.
    tom25, I'll post MP splits next week.
    Edo99, I ha doped I delivered what was on the box: How I am teaching Kiki to trade. If I do another webinar perhaps we'll be able to do more complex stuff now that Kiki is getting proficient.
    MPconvert, its all in my written trading plan. My TP calls for me to evaluate a trade at the close of each bar. My bias disappears when the market clearly tells me I am wrong.