It is possible. Remember the first sentence on the site. This is an experiment for me and I might decide that it is not worth the time required, especially if it interferes with my trading and ends up costing me money. My three girls are now in college and I am in search of intellectual stimulation to fill the void, especially in the afternoons while my friends are still at work.
I would like to but when I tried that after one of the first articles I wrote in Futures Magazine, I suddenly got hundreds of emails. Most of the questions are answered in the book. Remember, when you trade, you are in a gray fog and nothing is ever clear. If the setup is too unclear, always wait for a second entry. If the trade just takes off and there was no second entry, there was likely enough fog so that there will be a pullback that will allow you to enter.
Because I don't want to register as a CTA and subject myself to the distraction of compliance and audits. I called the NFA and asked for guidance before launching this site. They won't allow me to make claims of results, to make trade recommendations, or to answer specific questions about your trades. These all require NFA registration and I want to keep my life simple (look at my charts...black and white, no indicators). They said that I am able to post my analysis of charts and answer general questions without having to be registered.
I tried to post a lot about what I was seeing on a day in August 2009 but I was too concerned about how my trades would look so I modified my style. Also, I was too cautious in what I was saying and it could cause others to not take trades that they should take. I found that I was able to read well and call major moves in advance but I did not trade enough of them the way I prefer to trade because I was too aware of people looking over my shoulder. So, it cost me money, and it might have cost them money, too. Lose-lose situation. Trading is very difficult and there is very little that separates success from faillure. I discovered that I lose some of that margin when I pay too much attention to this site during the day and I simply am not talented enough to lose any of that edge and trade was well I would like to trade. I will try sticking to typing big picture reads and trading invisibly and then see if I can continue to post without mismanaging my trades.
As of today, August 6, 2009, I have not received a penny from the book. Since trading books typically only sell hundreds of copies and since my share is so tiny, do the math. A good trader can make more in a day than I will out of a year from my book.
So why did I write it? I like to write and I thought that readers might enjoy my take on reading price charts. I wish that I had a resource like it when I started out. Also, I would love to give lectures at business schools or trading firms and I am hoping that the book would give me a credential that might entice someone to invite me.
I just copy from TradeStation and paste into my site. I usually want to show part of the prior day, so the bars might always be too close. You might just have to compare with your own charts to see the details.
I wish that I was able to change the defaults but they cannot be changed. Since it would take too much time to change it every time I type, if you cannot read the text well enough, you might have to copy the text into a word processor and change the font to a size and color that is better for you. You can also increase the font in your browser in Mozzilla with Crtl ++ and in IE through View->Text Size.
I wish that I was that good! When I looked at sites of expert traders in years ago, I was always annoyed because I did not believe they were actually taking the trades and I doubted that they were good enough to read fast enough real time and to place their orders and manage the trades correctly. Because of this, I understand that you might be annoyed with what I am doing here. However, I want this to be an educational site and not an advisory service and not a forum to garner accolades for my trading skills. I don't want to be viewed as a performing athlete with an audience getting emotionally involved with every trade that I might make, either cheering my successes or castigating me for my mistakes. I am a trading recluse who enjoys writing and teaching and if that is how you view my role, then I hope that you enjoy this site.
I am posting my reading of the charts and although I try to catch every major swing that I post I simply am unable to take every setup. My goal is to catch three or four major swings and many high probability WT scalps every day. I often don't bother with many setups that are likely to be only 1 pt scalps, especially if I think that a major trade will set up very soon, or if I am already in a swing position and don't feel it is strong enough to be adding to it. I usually try to scalp subsequent WT entries once I am in what might be a good swing trade (for example, H1 and then H2 longs in a bull). I sometimes take positions in stock, bonds, or notes when there turns out to be an Emini signal at the same time. Sometimes those other mkts have setups on 60 min or daily charts that I have been waiting to trigger and when they do, they sometimes take priority over the Emini. I often have to take two or three trades in opposite directions if I think that the mkt is about to have a good swing but the direction is uncertain. For example, in the first hour, I might buy a DB and then reverse to short on a DT. I try hard to take all of the potential swings in the first 90 minutes or so because the odds are high that the LOD or HOD will develop from one of those entries.
Also, I have received requests to post marked-up charts on mkts other than Eminis, and most of those are just my analysis and not actual trades.
I was once in a room with a person whom I still believe was a successful trader and he tended to talk a lot about his trades but always in hindsight. He never mentioned anything that he was about to do. He would say something like, "I hope that you all just took that long ten minutes ago. I just took my profit." That made me angry because he only mentioned his winners and never his losers. Also, he never talked about trades before he took them. I still think that he took a lot of the trades but I believe the he was looking for adulation more than he was trying to help others. Personally, I resented it. However, I do believe that it is very difficult for me to point out a pattern that is setting up, and then discuss the entry as I am taking it. I know because I tried it one day in August 2009 and it cost me money. Unlike my friend, I will point out patterns as they are unfolding and discuss what to watch for, but at this point I do not believe that I can also discuss the actual trading as it is taking place without hurting my profitablility. I simply believe that I do not have the ability to do both. I hope that there is enough left to make it worth you time.
I only post trades that are entirely logical in my mind. For example, on 080509, I would not have taken that 11:00 H2 long in BW above the EMA (I always prefer PBs that come near the EMA to first touch the EMA, and I usually avoid BW until one side appears trapped), nor would I have shorted that 10:50 f DB on a BW setup, especially when this might be forming a BP from the bull BO of the f W after the 10:10 bear trap, which should have at least two legs up. Since there was a bear trap and a possible reversal up, I am only looking to buy unless something very strong sets up, and BW is not a strong setup and should only be traded WT in general (if it forms above the EMA, it will likely BO upward...see p. 143 of the book). Also, most traders should not trade BW under any circumstances because it is very difficult to read and the odds of being profitable over time are not great unless you are a very strong PA reader. This looked more like a bull W PB, which it became. Finally, see p. 148...Be very selective in the middle third of the day and in the middle third of the range. Trading BW is not being selective! In general, the smartest aggressive traders are looking to scalp the opposite side of all those BW entries!
There are maybe 40+ setups a day and many are low probability and I would never trade them. Each of us has a line somewhere between good and bad and I am only posting things that are on the good side of my line. Some traders might have a line further over to the bad side and are willing to accept a higher losing %, but I tend to look at setups the way I think a trader at GS who is trading hundreds on contracts might look at them. I only want institutional quality setups, and I am especially careful in BW. To be honest, I don't even know if some of the trades that I posted were winners or losers because that is not how I look at setups. I simply decide if the setup is strong, and if it is, then there is a trade I should take, even though some will be losers.
I believe that most people who try trading will not have careers as traders. There are many factors that go into it but the reality is that the large majority of people who try trading ultimately cannot make a living from it long term. Unfortunately, many people need to try it for months to years before they reach that conclusion. There are so many factors involved that it takes a long time for you to decide that you have sufficiently explored it and are then able to conclude that you cannot make a living from it.
Do I know traders who are making a living? Yes. How much can a reasonably good trader make? If a trader becomes very consistent, averaging 2 pts a day, and trades a modest volume, like 5 contracts, that is about $100,000 a year. If you make 10 points a day, which very few traders can do, even just trading 3 contracts is $300,000/year. A trader should set a reasonable goal for points and try to make it every day. Is 2 points a day possible? Yes. Is 4 points? Yes, but you have to be very disciplined and trade the first hour well. It is a good sign if you find yourself disappointed after netting 6 points on a day. Is 20 points possible? I doubt there are very many traders who are averaging that much because it simply requires such intensity, focus, and accuracy that it would be very hard to do every day of the year.
Larger volume requires more than just capital, because there is always emotion involved. I have one friend who trades 24 contracts and one day about 10 years ago, I watched him trade live via computer (we quickly typed our trades back and forth to each other) and he made 14 points and said that it was an average day for him. And he is in his seventies. Do the math...that is 7 figures a year. I have other friends who have told me that they make doctor salaries. I had another friend who was trading 100 lots in the Eminis successfully and he only traded the first hour or so because he said that he analyzed his results and found that 90% of his profit was in the first hour and he didn't want to wear himself out before beginning the next day.
A long time ago I asked a very well known trader what the trader’s volume was and I received a rude answer. I have asked a couple other successful traders years ago and they, too, were annoyed. And I was annoyed by their annoyance! Why not help me out and give me an idea of where the road might take me? For me, I now find that I don’t like to discuss income either. I will say, though, that you might have noticed that I emphasize trades with the potential to make 4 points of profit and am less interested in 1 point scalps. That is because I decided that if I am going to get to institutional size volume, I should be trading like an institution and taking institutional setups and avoiding anything else. Will I ever get there? I don’t know but I hope so. I do know that some traders continue to increase their volume even after many years of successful trading. I know others who plateau and stay in their comfort zone forever, even though they have the skill to multiply their income several fold.
Will I someday trade live in front of an audience, showing my exact trades and profit as the day unfolds? I can’t imagine it because I am simply too much of a trading recluse and that would make me feel too exposed, self-conscious, and uncomfortable, and I know myself well enough to believe that it would interfere with my trading. Also, I would feel pressure to perform and to not have dips in my performance, and that would be a distraction. I don’t want to report one income and then go into a few months of making less and feeling like I misled people. I also wondered about entering a trading competition but I feel that it would be more to win praise and quiet doubters, and that is not sufficient justification for me. I trade for myself and do it best when I ignore what other people think about me or the market. I just want to quietly trade and take my bumps as they come and not worry about how they might affect someone else. And someday, I hope to be a one person, reclusive institution.
When there is a strong (STRONG!) trend, for example, a bear, and then a rally that goes above the EMA and starts forming EMA gap bars, each one of them is a possible setup. If there is a good signal bar (see book), then that is a setup. If the order is not filled, keep placing orders below the good signal bars until you get filled. The market will try to test the low of the bear and usually will form a LL but sometimes will form a HL, and then try to make at least a two legged rally.
Bar 1 is an EMA G in a bear but it is a doji and the bar before it is a doji. That is not strong, but you could still short it if you wanted. Bar 2 is a 2nd entry for an EMA G and a strong bear signal bar. It led to a LL, which then led to a strong bull move over the next several days.
Remember, you are looking for a two-legged PB in a trend, so both the first and second leg actually have to pull back and not simply be in a MC. Otherwise, you have an L2 or H2 but not a very reliable signal.
Bar 1 is an L2 but not an entry because the mkt had been going up for about 10 bars so you need a clear second leg up and not just an L2 in something that looks like a channel. Also, the RB overlapped the prior bar too much so there was nothing to reverse (reversals reverse trends, not TRs), and that L1 was not a good enough show of strength by the bears.
So what do you do? Whenever something does not look good enough, just wait because there will be good setups all day, every day. The mkt was in a channel so an L2 is not reliable. What do you wait for? Some examples include a second entry in the form of a LH, an L4, and EMA G, or a third push up in the channel that could create a W, as it did here.
Bar 3 was a better L2 with a short entry near the top of the pattern (the small bear IB). Bar 4 was even better because it was clearly a HTF two legged move, and EMA G, and this second leg was a W (a channel with three small pushes in it).
Bar 5 was BW so you cannot be looking for anything unless you are a strong trader. It was the end of two legs down on the day, and BW can be a reversal pattern at a new LOD, especially when it is at the end of the second leg. In any case, you should not be trading BW unless you are a very good chart reader.
Bar 6 could also be seen as an L2 or an L4, but with this much BW, only the best traders should be trading. Two bars earlier, the mkt TO the H of an RB and therefore might have two legs up. You could look at Bar 6 as setting up a PB and the end of the first leg up. Is this good enough to place a swing short? I wouldn't. Does it look like it has better than a 70% chance of being a successful short scalp? I don't think anyone believes that. So you step aside and wait for clarity.
I address this in the book. I try to keep my dollar risk the same an every trade (unless I am trading half size on a questionable signal or double size on a great signal). When I am uncertain how big a stop to use, I use a price action stop and adjust my position size accordingly. For example, if I was buying in the forex and I did not know what size stop to use, I would place my stop below the signal bar and calculate how much money that would be. If it was $200 and I normally risk $600, I could trade 3 units (for example, 3 contracts in the euro FX futures).
When I trade mkts other than the Emini, I am much more inclined to swing so that the trade won't take my attention away from the Emini. This means that my 1st PT is often equal to or greater than my initial PS.
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