First week trading the DOW mini

[bottomdollar]

Hi All,

After experimenting with SB for the last two years and finding that it didn't work out for me since I like to play very short term plays I thought I'd try the futures route via IB, dealing with the DOW mini.. hence, still playing small until I can become better at this.

Well, I was a bit apprehensive when I saw the Trader Workstation screen.. I wanted to get to know the trading platform before I placed my first trade so did some reading and then remembered Tsim+ which is a great bit of kit and simplifies the whole process. I'm now using that and it works well.

After a few simulated trades I thought I'd make my first trade... watching the futures charts and the book trader screen just made me think how 'jumpy' the DOW mini is.. it flickers easily 2-3 points.. anyway, my first day, I was down a mere 1.5%.. I was happy with that.

Over the next week, I traded successfully and managed on the fourth day to increase my starting portfolio by 2.5%.. it certainly seemed easier than spreadbetting.. with a 1 pt spread, it was easy to get out of trades even with the futures market being slightly more volatile.

However, today, it went bad.. I came back home after the 9 to 5 jobby, extremely eager to repeat teh success of the previous few days.. I was just itching to go!

However, no such luck.. I knew at the back of my mind that there weren't any setups waiting for me.. looking at the days happenings in hindsight during the period when I was at work, I could see that there were some great moves earlier on in the day.. however, I make a point of not daytrading during the day as one can't watch it. I guess in a way, I was a little disappointed about not being able to catch those moves.

The chart was in a period of consolidation and I made two trades.. both of which were losers.. the first one was just me dying to place a trade... mistake no. 1.

The second, I had placed a short in the market and then called for dinner.. I set my stoploss and buy stop and came back to find that the market had caught me on my stop and then reverse and sailed through my buy stop.. annoying.. but nevermind...

My third trade (a revenge trade!), I had placed an order with a stop and target.. then lost internet connectivity for around 5 mins which seem like a long time!! I wasn't sure if the trading platform still honours the stops that I had put in place but there was a moments panic...

When the internet connection came back, I was another 20 pts down and one of the stops had kicked in.. however, it seemed that the stop didn't cancel out the target stop and another position was opened.. arrgh! This went against me again and with the lost internet connection, Trader Workstation and Tsim+ were out of sync.. Tsim+ showed no outstanding positions but Trader Workstation did so I wasn't sure what was going on!!

Anyway, closed it eventually at another loss... my resulting cash balance is down 3.5% from the starting amount!! Or, I lost 6% from the previous day (including my previous wins)... what a day

Nevermind.. just wondering guys what your thoughts are.. (if any). Should I have capped my losses for the day.. eg. max 2% loss for the day and then give up for the day? I realise I was clouded by emotions which affected my performance... the exhilaration of winning the last few days leading to rush trades and not waiting for a signal, the loss of two trades in a row which lead to another 'revenge' trade to make back the losses.. then (not my fault) the internet connection died on me..

What do you think? Any comments from the veterans?

 

[frugi]

I'm not a veteran, in fact I've recently started trading the mini dow full time as well, having tried a vast number of approaches over the years.

But I will say this anyway. You've pretty much answered your own question I think bottomdollar. I used to do just the same, have a couple of good days, become overconfident, crave some action and make impulsive trades for the hell of it. Or take a loss and try and win it back with a revenge trade. It never works, believe me.

Force yourself to be patient. Simply do not ever take a trade unless one of your chosen setups is confirmed. Allow the market to give you money when it is ready, do not force the issue because it is much bigger than you. Oh yes it's so tempting to jump in - the fear of missing a big move, a wish to be involved, the feeling you're not working unless you have an open position, a desire to punish the market or prove yourself right etc. We are extremely good at deluding ourselves that the risky course of action is the correct one.

In one word -

DISCIPLINE!

It took me literally years to acquire discipline and I still make silly mistakes*, so don't beat yourself up about it, but remember that every time you are disciplined and successful you will reinforce that behaviour to the good. Best of luck.

*one reason why I only keep 3k in my IB account. Funny how that keeps the losses small

 

[Quercus]

I, like Frugi, am no veteran - other than in terms of being humbled by the market for the past year or so!
I can only emphasise the point made above of discipline, or perhaps more importantly the use of rules. I've had some pretty bad days over the last year, and it has lead me to incorporate two hard and fast rules.
1. Three losing trades in one day - walk away!
2. Do not revenge trade - walk away, or take a paper trade if tempted. Revenge leads to only one thing - a downward spiral! (and believe me I have diary pages of +12 trades taken in revenge!)
I still have relapses on a regular basis, which is why I'm trying to DEFINE in very clear terms, what allows me to enter a trade. Getting there slowly!
Cheers
Q

 

[twiggytwo]

Hi Bottomdollar, what was the reason for the internet loss?
Or did you get the plug pulled on you !
regards twiggytwo

 

[frugi]

I still have relapses on a regular basis, which is why I'm trying to DEFINE in very clear terms, what allows me to enter a trade. Getting there slowly!

Do that and you've practically cracked it; obviously the definitions have to be profitable, and the exit is probably more important than the entry

I cannot overstate the difference between trading a lot of vague patterns and trading a few clearly defined ones. In essence, one needs a mechanical system, but one that is far too complicated for a spreadsheet or program because it harnesses the superior power of the human brain to qualify the rules and judge each situation on its own merits.

A read of 30 chapters of Joe Ross really helped me grasp this point, esp chapter 8!

http://www.trading-naked.com/Articles_and_Reprints.htm

Also, just a personal opinion, I wouldn't bother with any fancy TWS front end. All you need to do is buy and sell with market orders (or stop orders for breakout strategies) and be able to put a stop and/or limit in quickly, which TWS does admirably.

 

[Quercus]

Thanks for the encouragement frugs, I'll keep at it!
I agree on the TWS frontend thing too. I used ninja for months, and loved it, for it's simplicity and similarity to the SB system I'd been used to. Now that I can't reinstall it due to SP2 issues, I've had to get used to TWS again, and I find that the book trader is great for doing all that you mention above. It's just down to discipline again - if you don't have a frontend - you MUST put the stop in the market yourself! (of course it must be within your risk parameters too, and be clearly defined from the price action and not just a random point size. )
It's all sooo easy when the market's closed.
Q

 

[frugi]

So true Q. I may be nearly able to talk the talk but as far as the walk's concerned I'm barely toddling!

Funny I never got on with booktrader but I like the TWS hotkeys. just a simple Ctrl-B or Ctrl-S to buy or sell at market with an automatic stop say 20 points away (to be adjusted at leisure) that transmits automatically usually does the trick.

 

[wisestguy]

I don't understand why people trade the emini dows, with the bigger margins and comms , and low liquidity , you might as well stick to SBs .

Better to do the emini S&Ps , though from my experience that is a very hard contract to win against .

 

[bottomdollar]

Thanks for all the replies guys.. I have studied the psychological aspects of trading quite deeply and understand the importance of developing a sound trading psychology. I recognise the pitfalls though and know what I need to do to quash them but it's human nature and it's quite a difficult thing to master.
Frugi - thanks for the words, discipline is so important.. I allowed myself to stray away from this... annoying! Have to keep focused. How are you finding the full time trading? Is it working out ok for you?
Twiggy - some salesman from Cahoot called me and I plugged in a phone upstairs (where I was) to talk to him.. this screwed up my ADSL line.. I wont be doing that again!
Wisestguy - I have found the DOW minis to operate fairer than the SB.. with SB, they move the spreads completely out of your favour when the market is turning so you end up at least 5 pts down.. it's impossible to trade SB short term to grab a few points. The commission isn't too bad, I need to make a point to cover the commission for each round trip.

Thanks for the posts..

 

[henry766]

your revenge trade could also have lost because your system don't work , it's easy to find unusual reasons for losers after the event and forget that a lot of winners were entered for similer reasons, thereby convincing yourself your a winner with a few mistakes , 3 in a row , even 2 in a row is a worry!!

 

[sidinuk]

With the much reduced daily trading ranges of late the mini Dow has the edge over the emini S&P500 with 1 tick being worth 1 pt against the S&P500's 0.25, basically there's a lot more ticks in the day for the Dow! It is also getting a lot more liquid and certainly plenty liquid enough to trade 1 or 2 contracts during market hours. The mini's Dow's margin is only $1,250 compared to $2,000 for the Emini S&P500.

Frugi is spot on though, to trade anything successfully you need a solid trading plan. Here is a lot more information about online futures trading which should help a little.

 

[wisestguy]

With the much reduced daily trading ranges of late the mini Dow has the edge over the emini S&P500 with 1 tick being worth 1 pt against the S&P500's 0.25, basically there's a lot more ticks in the day for the Dow! It is also getting a lot more liquid and certainly plenty liquid enough to trade 1 or 2 contracts during market hours. The mini's Dow's margin is only $1,250 compared to $2,000 for the Emini S&P500.

Frugi is spot on though, to trade anything successfully you need a solid trading plan. Here is a lot more information about online futures trading which should help a little.

it's not wise to bank on reduced trading ranges , the markets could go volatile again without notice.

there may be more tics un the Dow , but it is only $5 per tic , how much per tic is the emini S&P ?

And 7 bid 5 ask is not getting a lot more liquid in my book . you may be doing 1 or 2 lots now , but when you want to shift up then liquidity will be a problem . Even margins at $1200 per lot is not that great , SB's are still cheaper , not that they are ideal mind you .