my journal

[Yamato]

Well, the chart shows that the bid and ask quantities are larger where the chart has lows and highs. But that wouldn't necessarily mean that the book is useful, since the chart already shows that information plus much more, because whereas on the book you can only see 10 levels (on each side), on the chart you can see many more levels.

Also, and this is closely related to the above, it would be useful to establish whether the contracts we see in the book are a consequence or the cause of the way the chart looks. Indeed the chart is not only shaped by the book, which only keeps track of LMT orders, but also by MKT orders. Maybe what we see on the book is just the consequence of the chart, in other words, people who do what I did this morning: they see the LOW there and they place their BUY at LMT order (I later got impatient and turned it into a MKT order).

So maybe the book could be seen as a mirror of how some traders (those who place LMT orders) view future support and resistance (which is still useful but it only goes 10 ticks away at the most), whereas the chart is a mirror of how all traders have acted and created past support and resistance. Therefore the chart is more reliable because besides going higher and lower (and not just 10 levels), it shows all traders and how they acted with real money, whereas the book only shows some traders, and how they're planning to act in the future (they might change their minds at the last minute, and they might be irrelevant compared to the impact of all other traders).

 

[j2a_aj]

Well, the chart simply shows that the bid and ask quantities are larger where the chart has lows and highs. But that wouldn't necessarily mean that the book is useful, since the chart already shows that information plus much more, because whereas on the book you can only see 10 levels (on each side), on the chart you can see many more levels.

Also, it would be useful to establish whether the contracts we see in the book are a consequence or the cause of the way the chart looks. Indeed the chart is not only shaped by the book, which only keeps track of LMT orders, but also by MKT orders. Maybe what we see on the book is just the consequence of the chart, in other words, people who do what I did this morning: they see the LOW there and they place their BUY at LMT order (I later got impatient and turned it into a MKT order).

I agree but isnt MKT order something that a retail trader would do. From what I understand, the big boys sit down and wait to devour their prey. My only question is of all the levels on the chart, which levels do you take for the support (I can see this if I have a chance to look at the order book). Also, the imbalance in the order books show you that the chart is going to bounce bigtime(like your zn imbalance). Im keen on understanding how these can be mapped out from the charts.

 

[GladiatorX]

With S/R -
Don't try predict every move ... Only trade S/R that you actually consider very important ... Don't draw a maybe line just for the sake of it, so that in hindsight you can say; Yep... IT bounced of my line.

x G. Luck Trav.

 

[Yamato]

I agree but isnt MKT order something that a retail trader would do. From what I understand, the big boys sit down and wait to devour their prey. My only question is of all the levels on the chart, which levels do you take for the support (I can see this if I have a chance to look at the order book). Also, the imbalance in the order books show you that the chart is going to bounce bigtime(like your zn imbalance). Im keen on understanding how these can be mapped out from the charts.

I added more in the meanwhile, by editing my post above.

I understand your point about the big boys vs the retail traders. I'd like to see more videos by seiden (even though he tends to repeat himself) and by others to understand who the big boys are and what they do. He worked for the "big boys", and handled their orders... but I didn't find out more about them, because he didn't say more than 2 or 3 sentences about them (always the same sentences, repeated many times).

"Of all the levels in the chart", I use as support the lows and as resistance the highs, all depending to the hours I want my trade to last. If I want the trade to last 6 hours, I'd look at two weeks of hourly candles. So I guess I am multiplying the trade duration by about 80, let's make it 100, to get the period I need and then get as much details on it as possible. But that's just my rough estimate and it could be all wrong, I am still in the process of figuring it out. Let me think. If my trades lasted 30 minutes, like they used to, what would i look at? Two days (30 minutes times 100). And that's correct. I think you need to multiply the length of your trade by about 100 to get period you want to go back, and then get as many details as possible on it. Say your trade lasts 5 minutes. A few hours should be enough to figure out where the important s/r levels are.

I don't know how to define it with a formula or I would have thought of automating s/r levels, as I wish to do. In tradestation there's something similar, "lowest hi" and "lowest low" and so on, but I can't use it properly.

Anyway, remember that until 2 weeks ago, I totally disregarded s/r, so don't worry too much about what I am saying.

Your last question: I don't know how the imbalances affect charts, as I said earlier. I am afraid the imbalances in the book are a mere consequence of the chart, and cannot help you in any way in predicting what will happen, as they (might) represent just what the LMT orders people think. And those people could also move at the last minute. I've read just about every post on forums on this subject and almost everyone says they can't make any sense out of the market depth. Others say that the only way to make sense of it is via automation. I've tried that as well, but couldn't get much out of it. But once again, if seiden, who's the top expert at order flow, says that both book and volume is useless, why would you want to waste time with it? I'd say the less we have to look at, the better.

 

[Yamato]

With S/R -
Don't try predict every move ... Only trade S/R that you actually consider very important ... Don't draw a maybe line just for the sake of it, so that in hindsight you can say; Yep... IT bounced of my line.

x G. Luck Trav.

Yeah, it makes sense. If possible, keep telling us what you know about s/r.

 

[Yamato]

 

[Yamato]

 

[Yamato]

 

[Yamato]

 

[Yamato]

 

[Yamato]

Curing compulsive gambling and trading addiction.

Some of it has to do with will power but more of it has to do with staying away from temptations. I mean, this timeframe switch, from 1 minute bars to hourly bars, means this. If I stay away from charts, I will not be tempted to give in to my compulsive gambling. So I advise all compulsive gamblers out there to try this method, and let me know if it works for them. It has worked for me, not just for the last 24 hours, but even in the past, when i spent sometimes a year without gambling at all. Yeah, when I say i've lost for 12 years, I am not counting some pauses during which i just ran the systems in paper trading or other such things. I've lost consistently when I traded, that is all true. But there were some rare periods during which for lack of capital or for commitment (I was simply tired of losing), I did not trade and therefore did not lose.

If you're prone to overeating or compulsive eating (like I am) you should not fill your refrigerator with chocolates, pastries, beer and so on. I keep my refrigerator empty and I am in good shape thanks to that. I don't buy cookies... and so on.

With trading, since I want to trade, the refrigerator (markets) is always full of food (perceived opportunities), and I have to open it (by opening the trading platform and a chart) every time I place a trade. So the hard part here is that I cannot stay away from temptations, because I still want to trade, even though not overtrade.

Another thing is this: if you know what works (I didn't until now) and it's very clear to you, your chances of doing it will increase. I don't think it's entirely true, like some say, that we lose because we trade for thrills. Yes, we trade for thrills but we also wish to make money on top of getting thrilled. So, if we knew how to make money by placing 100 trades per day, it would be awesome, like a video game, and we'd do it, most likely.

The problem is that for some people like me, the fact that you overtrade keeps you from finding out if you actually have a profitable method or not. You might know that some trades are more likely to succeed than others, but if you place, along with those trades, another 10 compulsive trades, you won't even remember which ones were good and which ones were not, and you won't know if you are actually a profitable trader or not.

Indeed, I think I am capable of profitability, but I never achieved it, because I've kept on placing those extra trades. I am not playing with words and just saying "I am profitable except when I lose". I am saying I know which trades are most likely profitable and which aren't, to the point that now, by forcing myself to only place one trade per day, I can easily select the best trade, and therefore have an edge.

Many videos I've posted (by the australians mostly) said similar things: if you keep on overtrading, you won't know if you're profitable (with just a few trades), and if you aren't confident about your profitability, that will in turn be an incentive to both overtrade (to try and improve by adding quantity rather than quality, which is usually what trading requires) and, even worse, to change method. You'll throw away a good method, because those extra trades will keep you from realizing you had a good method.

I believe that anyone who's been trading for at least 3 years, and who's using a stoploss, who's using the right instruments (futures in my opinion), the best broker with low costs (IB in my opinion) is capable of having an edge. If he is still not profitable like me, it simply means that he's adding those few extra trades out of compulsive trading (or that he's not using a stoploss, but i already mentioned it as a requirement). I believe that if he can force himself, like I am trying to do (but it's going to be very hard, and today I already relapsed once with that GBP trade), to keep his trades down to 1 trade per day, he will defeat overtrading, select the good trades, and his edge will appear evident. Even if he were to choose a risk/reward trade of 1 to 1, say 40 ticks up or 40 ticks down, pretty soon he'd be able to pick the most probable direction.

Remember, the larger the timeframe the lower your fixed costs of spread and commissions. So that means that if you look for 100 ticks in one direction or the other, you already have almost 50% of winning, by choosing a random entry.

Other things that will add to your edge, besides keeping your trades down to 1 per day, having the right instrument/broker, and increasing your timeframe in order to eliminate fixed costs, are:

1) being aware of s/r levels (this one i just found out recently)
2) going with the trend (of the superior timeframe) as explained in my drawing of 20 posts ago (catching the 33% move).
3) being aware that certain things happen at certain times of the day (during the day the trend goes on, and reversals happen after the NY close)
4) being aware of pivot lines (the real pivots: r1, r2... not the s/r levels) on the EUR. I don't know about the other markets.
5) being aware of overbought/oversold conditions (simply by looking at it, you can tell if it's overextended or not: but the capability of running without a pause varies according to each market)
6) these are the ones that came to my mind right now

I am not teaching anything. I am just thinking out loud, but i am sure someone will find it useful.

Things to not bet on, from what I've seen so far:
7) volatility breakout: don't count on it, as you cannot catch it with the naked eye. I've got a system on it and it doesn't even make money
8) do not bet on breaking through support and resistance, at least that's my opinion. But do bet on reaching s/r levels (bet on the up and down from support to resistance, whether in a trend or in a range, and when in a trend, bet according to the prevailing trend, so either up or down).

All this I wrote not to educate, but because I can't fall asleep. My dad came home, and this is a source of anxiety. I met him and that's a source of stress. He talked and that's some more anxiety right there. Then, after 2 weeks of vacation (sickness, because today I got a medical excuse from work), tomorrow i'll have to go back to work, and as usual all the work will be on my back, because the others listen to the radio, go for coffee breaks, talk on the phone. So I get exhausted and every once in a while I just take off for medical reasons but partly the truth is, which i often say, "go ahead and fire me, i was stressed out so i didn't come".

So work is awaiting. Stress up my ass. Dad is home, causing negative radiations, simply by being home (memories, expressions, etc.). He talks and that's even more negative. Only escape is trading, and I can't because then i lose money... so the only escape is trading once a day, making money, and moving to the beach. Hopefully I'll have enough capital by the time i get the next nervous breakdown. Enough capital at this point would be even as little as 100k. Then the only problem is that my parents will give me a hard time for quitting my job, so that's yet another problem to deal with...

 

[Yamato]

Look here, beautiful overnight bounce on the CL. Stoploss right below support, LONG all night. Take profit below resistance, and tomorrow morning, at 10 AM CET, you close it regardless of how far it got, because the bounce has finished.

Easy 1000 dollars at least, with a risk of 200, and probability of about 50%. If it doesn't work this time, you lose 200, and it'll work next time, with an overall gain of 800. On the other hand, I don't have the margin, because I gambled it away. And also I must add that we're overbought, so it doesn't fulfill all my requirements, because in these situations I'd usually go short from resistance to support, rather than long from support till resistance.

 

[Yamato]

Stoploss on the CL would have just gone off and cost me 200 dollars. I guess this speaks in favor of following all those rules and not counting on Support even if we're oversold when the trend is overbought as it is for the CL. Even if this breakout were to be a false breakout of support, this still would be in favor of not using such a strategy because a false breakout is as bad as a breakout for my strategy, as it will cause my stoploss to be triggered.

On the other hand, the other direction (going short) is no good because I have appraised in many posts that it's not convenient to play breakouts, since they are improbable, especially if price, like in this case, is already overextended in the same direction of the breakout.

Sure enough, in the meanwhile, my ongoing trade on the ZN is doing well, because just as the CL is breaking its support, the ZN is conversely breaking its resistance, since it goes the other way.

In another situation, I'd close it, but I've decided to keep it open for a few days, because of its potential to the upside. Besides, tomorrow is Tuesday, and on Tuesdays the ZN statistically rises.

 

[Yamato]

All negative thoughts resurface at night, keeping me awake when instead i should sleep to be ready for work. Insomnia has been my biggest problem interfering with work. If insomnia were considered a sickness I'd be excused from work every other day.

 

[Yamato]

ongoing discretionary trade





What's really good is that the perceived resistance does not show the strength that perceived support was showing yesterday on the book. After all, market depth does give us some information: perceived strength of resistance by the LMT orders fellows.

The resistance zone (as pointed out by yesterday's videos it is always a zone) has been at 116'100 for the whole past week. Yet on the book, for those levels, it doesn't show much resistance. So this should mean that it's more likely to be broken than support was likely to be broken 24 hours ago (see earlier post, about 20 posts ago). Or it could simply mean that for one reason or the other there's fewer LMT orders fellows. But this could be compensated by all the other orders I am not seeing. I am still at an experimental level.

What's good with just making one trade at a time is that i can learn more because of how much i can focus and how deep i can go with my research and observation.

 

[j2a_aj]

Super. Btw, is the RSI/CCI overbought (just an indicator of how tired the buyers are)?

Also, what is your profit point / stop loss point ?

 

[Yamato]

We're next to resistance but not beyond it, so my stoploss is always the same, at the bottom of the chart, below support, since that is the only support there is (as long as the resistance holds, it cannot become the new support). As I said yesterday, I don't have a profit point, I mean it's so high that there's no point in mentioning it, as it is at the top of the 3 months chart, 5000 dollars higher than now.

RSI/CCI is one of the many things I don't look at. I am constantly trying to keep things as simple as possible and therefore I discard anything that I don't consider vital. For the same reason until recently I totally ignored s/r levels, since i either highly value something or it doesn't exist for me. And now I am obsessed with s/r levels, just as I totally ignored them earlier. The same applies to pivots for the EUR: I had deleted them from my mind, and now I check them on a daily basis.

I might go to bed again, any time. Don't be offended in case I don't reply for a few hours.

 

[Yamato]

I am starting to view s/r as many little steps on a stairway. When you're going up the steps, you don't stop in mid air, you're either on one step or on another. Even if you pause, you pause on one step. The same with price going up the stairs. Every step your foot is resting on is support, the step above it, is resistance. Mmh, maybe it doesn't work, the analogy I mean. Too bad for the comparison that we have two feet. But let's pretend we're talking about a ball bouncing down the stairs. Too bad for the comparison there's gravity. Well, better than nothing... let's pretend we're talking about a ball from a 1980s arcade video game.

 

[Yamato]

Another thing that needs comparisons and analogies is the book, or market depth, whatever you call it.

I don't know much about it, but the way it works is unusual and unlike anything i know. I mean, you have the LMT orders, but then you have the market orders which is a big power that you cannot ignore. The LMT orders sit still, but they also get moved. And they also get changed into MKT orders. Also, I don't even know if my market depth actually shows all the orders or if there's some stuff that I don't see, for one reason or another.

Provided that I'm seeing all the LMT orders (without it, all research would be worthless), the orders that make the market move are the MKT orders, the ones that make you lose a tick when you send them, if there's a spread of 1 tick of course. So, of course for every transaction there's a buyer and a seller, but the guy who moves price is the MKT order guy... and so on. Just thinking out loud... not teaching anything of course.

 

[Yamato]

I opened a bottle of wine and got a little drunk (just one glass, I hope I don't puke). Now i feel more serene. A little stomach ache though. Yeah, it totally tasted like ****. I am trying to fall asleep, that's all. I am not an alcoholic.

I can't make it tomorrow, and i wrote a text message to my boss saying I can't sleep and I might take a day off tomorrow, and to excuse me for the problems I may be creating to the office. I hope they fire me though. I wanted to add it in my sms: "go ahead and fire me if you wish" or "it's ok if you guys decided to fire me".

Now how can I be a good trader when I can't even go to sleep when I want to? I wish I had some drugs, some real drugs to sleep properly.

The Odyssey of travis, that's what I feel like calling my trading and life experience. It's anything but a normal life, and that's the way I like it. Well, yeah, it's just a mental odyssey, not like I'm actually risking my life or anything.

http://dictionary.reference.com/browse/odyssey

(often lowercase) a long series of wanderings or adventures, esp. when filled with notable experiences, hardships, etc.

Notable experiences? Hardships? None. I guess it's a bull**** odyssey, but still odyssey. An imaginary odyssey.

Yeah, actually that's a recurring fantasy: I want to get on a cruise and get into a real storm, kind of like Gary Sinise in Forrest Gump, where you don't sink but you get very close to it. And everyone is puking but I'm there on deck, getting hit by big waves and having great fun.

Yeah, I like it when other people are having a bad time. For example, earthquakes and storms. That's fun, because just by knowing that others are not liking the situation, I get happy. Kind of like the singing in the rain guy. He must have been quite antisocial as well.