Friday, 21 January 2011

Something's Broken? Part 2

OK, we have said "Houston, we have a problem". It's important to differentiate between normal drawdown and a problem. Usually, the look of the chart gives the answer.

If the issue is YOU, then it's easy. Stop trading until whatever took away your focus and discipline passes. I know I can't focus on two things at the same time, so I try not to.

If it's the market then what I do is identify what is happening: usually one of two things - sideways chop or change in volatility.

If it's sideways chop then I change modes from trading inside-out to trading outside-in, fading the moves. I can use the Keltner or CCI extremes to do this.

If its volatility, it can be more volatile or less volatile. Are targets not being met or are stops being continually hit? More volatile, I can increase my range bars and less volatile I can shorten them. When I do this I make sure that the resulting chart is smooth and without too much bar overlap. I look at my CCIs as well, ensuring that they look "normal". In the next part, I'll talk about daily profit targets and loss limits. 

Meanwhile, I found my trading badge from the old LIFFE days. It's a little worse for wear. It had my mnemonic originally outlined in green on all the letters, which signified I was a local and did not fill paper. I also had an old Disneyland badge on my jacket that said "Bear Country" as like most locals, I preferred the short side of the market because I made more money more quickly. Another local offered me 1,000 pounds for it one day after I had had a particularly good day. Like an idiot, I didn't want to sell my "lucky" badge. I don't even know where it is now. Probably still on an old trading jacket being used as rags.

EDIT: Mrs EL read the draft of this post and went to ebay and bought me my lost Bear Country pin. What a Lady!!!  I'm now an even bigger idiot for missing out on a great trade; SELL 1 Bear pin @ £1,000 and BUY it back for $5.95. What a trade to miss.

Today was an interesting day in the ES. The vid tells the story.  Youtube is having issues formatting the video so if it's still black it means it has not been processed by them yet. Been waiting an hour and have uploaded 2 versions.

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