Diary of a Madman

[saiter]

****, ****ty, ****, ****. That was the best way to describe today's trading.

DAX 6 PM - 8:40 PM

Before trading, I decided to check out the world news, commodities, FX etc. The EUR was up against the USD, oil was down (I thought this was irrelevant to the DAX because AFAIK the index isn't composed of any primary resource companies), Obama decided to regulate the banks (I thought this would affect the German banks in the index because of credit flow or something) and most of the markets were in the red. I concluded that the DAX would be following the world's lead and would be heading downwards too, so I entered with a short bias. This was not meant to be. The DAX went up, almost breaking through its high and then fell back down slowly.
Most of my early trades were against the trend and I have no clue what happened halfway in the session, but everything fell apart and it went to ****. Towards the end, frustration and desperation got the better of me, and I tried anything to get a point (I think I was begging at one point lol . I was almost too embarrassed to post the results.

Results

Today's action



Outcome of trades. The first few were against the trend. I thought the DAX was going to plummet but it didn't and my short entries got stopped out.



****




I don't know when I'll be back, but in the mean time, I'm going to "study" what's happening to the DAX whilst it's going sideways. Perhaps it'd help with picking the trend.

 

[skc]

Madman, thanks for posting... it is indeed quite terrible results but it is highly commendable that you are sharing them for all to see.

I noticed that your no. of trades have vastly increased since the beginning. I also noticed that you have not ever mentioned what exactly made you hit buy or sell. What does discretionary mean to you? Are you scalping or picking directions? Are you using fundamental market news or looking at technical levels? Will you get better equity from tossing a coin?

Your thread has good interest from some best forum traders and unless you initiate more discussion, you are not going to get more feedback!

Good luck.

 

[saiter]

Madman, thanks for posting... it is indeed quite terrible results but it is highly commendable that you are sharing them for all to see.

I noticed that your no. of trades have vastly increased since the beginning. I also noticed that you have not ever mentioned what exactly made you hit buy or sell. What does discretionary mean to you? Are you scalping or picking directions? Are you using fundamental market news or looking at technical levels? Will you get better equity from tossing a coin?

Your thread has good interest from some best forum traders and unless you initiate more discussion, you are not going to get more feedback!

Good luck.

Skc, it's true that the number of trades have increased.. I guess I've become too trigger happy. My main method for entry is to go long/short around support resistance. I try and pick the direction through the DOM. If the bid keeps chasing the ask and there is an increasing amount of bidders, then I go long. The opposite applies for short.
I could be failing because I'm using the wrong strategy for the wrong market condition.
For example, yesterday's market may have been better traded on pullbacks. I could have waited for the price to move backwards after a big decline and then shorted when I thought that there were enough sellers to prevent the price from going higher.
Perhaps this isn't even the case, and the fault lies with my trade management or just lack of experience. Note that I've only been day trading since I started this thread.
I will keep on pushing along though, and will try to learn more about the DAX.

 

[nomore4s]

Perhaps this isn't even the case, and the fault lies with my trade management or just lack of experience. Note that I've only been day trading since I started this thread.
I will keep on pushing along though, and will try to learn more about the DAX.

Saiter,

It seems to me you haven't got specific set ups for entries and exits and are relying on "feeling" to enter or exit each trade, so in effect each trade is an impulse trade - imo you will never be successful trading like that.
The way you are using the DOM is obviously not working, you are getting sucked into the trades at the wrong times - either too late or too soon, and then spat out the other end. Maybe try the opposite just to see what happens?

I would suggest reading Mastering the Trade by John Carter, I found this book extremely helpful in understanding what day trading is all about. I don't use any of his set ups and some of the book is irrelevant due to it being US based, but the core of the book about common mistakes of day traders is very good and opened my eyes to a lot of the mistakes I was making.

I think it is fair to say what you are doing now isn't working and you need to find a different way of doing things or you'll just keep getting the same results.

 

[saiter]

Saiter,

It seems to me you haven't got specific set ups for entries and exits and are relying on "feeling" to enter or exit each trade, so in effect each trade is an impulse trade - imo you will never be successful trading like that.

True, true. I don't have a definitive, objective description of my entries/exits and most of the time I feel that I'm rushing things as I'm missing out on the trades.

The way you are using the DOM is obviously not working, you are getting sucked into the trades at the wrong times - either too late or too soon, and then spat out the other end. Maybe try the opposite just to see what happens?

Yup, the plan from now on is to find out what the DOM looked like when the DAX was about to turn or when it approached resistance/support. I'll then try to identify the same "DOM Patterns" in real-time and act on them.

I would suggest reading Mastering the Trade by John Carter, I found this book extremely helpful in understanding what day trading is all about. I don't use any of his set ups and some of the book is irrelevant due to it being US based, but the core of the book about common mistakes of day traders is very good and opened my eyes to a lot of the mistakes I was making.

Thank-you for the suggestion, but I'll be honest and say that I won't have time to read a book on trading in the next few months. If that ends up being my downfall then perhaps trading isn't for me at this point in time.

 

[skc]

Thank-you for the suggestion, but I'll be honest and say that I won't have time to read a book on trading in the next few months. If that ends up being my downfall then perhaps trading isn't for me at this point in time.

LOL. You are spending 1.5-2 hrs paper trading and prob 15-30 minutes writing on this forum, but you won't have time to read a book? Come on...

And you are willing to let that be your downfall! Clearly your passion for trading success is not surpassed by your passion to not read a book. You are living up to the stereo typical image of a gen Y'er... :shake:

(Making myself sound old in the process).

 

[saiter]

LOL. You are spending 1.5-2 hrs paper trading and prob 15-30 minutes writing on this forum, but you won't have time to read a book? Come on...

And you are willing to let that be your downfall! Clearly your passion for trading success is not surpassed by your passion to not read a book. You are living up to the stereo typical image of a gen Y'er... :shake:

(Making myself sound old in the process).

Haha, between uni, work and family/friends/down-time, I literally just don't have the time for it. Besides, I have read a few books on trading and I had trouble absorbing some of the information because they were so boring and I wasn't paying much attention.

 

[nomore4s]

Alright Saiter I'm going to be pretty blunt here.

Skc, it's true that the number of trades have increased.. I guess I've become too trigger happy.

The number of trades have increased because you make some bad trades and then start what-if scenarios which then cause you to jump at anything that moves trying to make it up - again caused because you have no method or system.
This is over-trading - over-trading is trading for the sake of trading, if your system triggers 500 trades in a day and you take them all that is not over-trading but if your system triggers 10 trades in a day but you take 50 trades what is that saying? The problem is on any given day you have no idea about how many signals your trading is generating.

True, true. I don't have a definitive, objective description of my entries/exits and most of the time I feel that I'm rushing things as I'm missing out on the trades.

Of course you feel like you are missing out on trades, because you don't have any idea of when to enter or exit a trade. Price starts moving in one direction so you jump on thinking your missing out but you've got no idea about whether it is a move you can actually trade because you've got no method.
Because you are entering whenever you "feel" like it you are not getting any decent feed back on your trading because you've got nothing structured to give you feedback on your results.

Yup, the plan from now on is to find out what the DOM looked like when the DAX was about to turn or when it approached resistance/support. I'll then try to identify the same "DOM Patterns" in real-time and act on them.

How are you going to do this?
It appears to me you have no understanding of the workings of the DOM and how it relates with price movements and more importantly how to turn that into a trading system that works. So do you think that by just watching the DOM all day without any sort of structured learning & review system that all of a sudden you are going to magically understand when & how to trade?
Practice is fine but unless it is deliberative practice you are wasting your time.

Thank-you for the suggestion, but I'll be honest and say that I won't have time to read a book on trading in the next few months. If that ends up being my downfall then perhaps trading isn't for me at this point in time.

You are willing to waste 2 hours a day trading repeating the same mistakes over & over again with no idea of -

• why & where you are going wrong
• no plan or method in place to establish the reasons above

But you don't have 30min a day to read a book which might give you the info to rectify the above problems?
Until you implement a method or set ups that you can later review and then understand why they are or are not working you are wasting your time trading on the sim anyway imo.
The reason for practicing on the sim is to perfect your execution of the set ups you are going to use in trading. If you are just on sim for 2 hours a day entering trades willy-nilly how do you expect to improve or gain any knowledge on how to be profitable?

 

[nomore4s]

My main method for entry is to go long/short around support resistance. I try and pick the direction through the DOM.

How do you identify support & resistance?
Why do you use the DOM?

Is it just because you've read on some forums that a few gun traders use the DOM as part of their trading strategies you think that it is the answer to becoming a competent day trader?

• What do these gun traders use the DOM in conjunction with?
• How do they use it?
• What are the actual patterns they are looking for in the DOM?
• Do they look for confirmation of these patterns on the charts?
• What other info and/or indicators do they use with the DOM?
• etc etc

 

[ThingyMajiggy]

Saiter, its all these "boring" bits that will make you profitable, not which indicators, lines, tools people use. Trading isn't a get rich quick while you're doing uni/work and socialising imo.

If you really want to do it, you will. You won't find excuses about how you can't do this or can't do that, I think its a matter of you HAVE to do this and HAVE to do that, review, read, study, practice, screen time etc.....that is, if you want to become more profitable. If not, then I suggest you keep doing what you're doing.

But thats just me right, I'm certainly no expert. Hope it works out for you, if you really want it.

 

[MRC & Co]

I would say nomore has hit a few points on the head there.

Though I used to love "Mastering the trade", I actually think the only useful information is using multiple timeframes, gaps and particularly market internals. The rest is a lot of junk.

DOM patterns are just one more useful edge you can find, but you have to use them in conjunction with the charts. That being said, the way you are using it is completely wrong. You seem to be great at jumping at the wrong shadows and being tricked by the order flow, so just do the opposite!

 

[nomore4s]

Though I used to love "Mastering the trade", I actually think the only useful information is using multiple timeframes, gaps and particularly market internals. The rest is a lot of junk.

lol fair enough. This probably highlights the difference in our experience and expertise at day-trading, as I'm still a novice in this area.

The bit I found useful from this book was the mindset needed to day-trade. Nearly all the beginners mistakes he had in his book I was making, once I addressed and dealt with these issues I became profitable using the same methods I was using, I just cut down on the amount of bad (impulse) trades I was making.

I think Saiter is making a lot of those same mistakes..

 

[MRC & Co]

Yeah, I guess the trouble here is, Saiter doesn't know how to trade less and pick his trades, because he has no idea what works. The only way to find that out, is to trade like a madman, try everything and anything and remember what works and what doesn't.

As far as trading DAX, as a scalper, I would say it is close to impossible to do from Australia let alone for a newb, never met a successful DAX trader here and I know of some great ones (used to be one of the biggest DAX traders in Europe), who tried. It's tough with the speed from here from what I hear, considering how fast the DAX is known to move.

On order flow, funnily enough, there is one guy who uses simply DOM and market internals (just watches all the major stocks with a simple price ticker of each one one screen and SPI DOM on another). No charts. He was the biggest pit trader of the SPI I believe when the open outcry pit was open. Still a large local.

Anyways, as far as tips on DOM, I've talked about some things to look for before, but here are a few, they are very simple, there is no magic in this:

1) Look for big size at a level, if price comes into that size extremelly quick, it is more likely to bounce away (yes, you would think the quicker it comes in, the more likely it would break, but no, those on the move into the size are looking for a place to cover).

2) Look for refreshing orders, probably will hold price, you may be able to frontrun it and just take flicks on the other side of the spread, cheap ticks. If it's refreshing at a major level, it may be an area being defended.

3) Look for times where there is size away from market, but nobody goes up and clips it, probably means there is a lack of pressure that way and is more likely to trade away from it. Say for example there is a big buyer and the trend is up, now there is size 5 ticks away from market on the ask, price sees it, but doesn't move towards it to take it, the buyer probably doesn't have that many orders to do and it is more likely to move back down. This works better in times when cash is shut and it's only the futures open, as cash bots are now turned off and you can rely purely on the futures order flow.

4) Look for big size that just appears at market, or moves closer to market, i.e. say it's 4 ticks away on the ask, but they drag the order to market, it's probably someone who is getting desperate to get their fill, but you don't know who is on the other size to clip them, so wait until they actually start hitting market and hit quickly infront of them, if it's just one order, you can then cut and reverse into the size once it starts getting chewed and get a scalp both ways. There is a market where they do the same with icebergs, and drag them at market so you can easily frontrun them and they generally occur at a certain time, but I'm not giving that little secret away. This market has a few great little tricks, but you will have to find it and the tricks yourself.

5) Other times it is just apparent if there is a big buyer or seller in the order flow, you get used to seeing how the order flow looks when a big buyer or seller comes in, so on pullbacks, you have more conviction to get on board. On these moments though, it is probably a bad idea to hit tops and bottoms, be patient and wait for the pullbacks. But it will take you a long time of watching to realise what these situations look like and how the big guys in your market execute their orders. They of course, 99.9% of the time try to hide it so us bottom feeders don't frontrun them and make them pay up higher prices.

There's just a few to get you started. Others I'm not giving away as I use them and want to keep my fills! ha ha. Hope this helps.

 

[saiter]

Yeah, I guess the trouble here is, Saiter doesn't know how to trade less and pick his trades, because he has no idea what works. The only way to find that out, is to trade like a madman, try everything and anything and remember what works and what doesn't.

Cha-Ching! There is a method to this madness... I hope

Anyways, as far as tips on DOM, I've talked about some things to look for before, but here are a few, they are very simple, there is no magic in this:

1) Look for big size at a level, if price comes into that size extremelly quick, it is more likely to bounce away (yes, you would think the quicker it comes in, the more likely it would break, but no, those on the move into the size are looking for a place to cover). Are you talking about large bids/asks being flashed?

2) Look for refreshing orders, probably will hold price, you may be able to frontrun it and just take flicks on the other side of the spread, cheap ticks. If it's refreshing at a major level, it may be an area being defended.
I've seen these happen already, but I've been too afraid to trade them because I didn't know when the price would break away from this range... I guess that's what stops are for

3) Look for times where there is size away from market, but nobody goes up and clips it, probably means there is a lack of pressure that way and is more likely to trade away from it. Say for example there is a big buyer and the trend is up, now there is size 5 ticks away from market on the ask, price sees it, but doesn't move towards it to take it, the buyer probably doesn't have that many orders to do and it is more likely to move back down. This works better in times when cash is shut and it's only the futures open, as cash bots are now turned off and you can rely purely on the futures order flow. Yup, I've seen these large orders. I've also seen large orders suddenly disappear once the price reaches it and I know that they weren't filled because they didn't come up on the Time & Sales. I don't think it was someone flashing because they were there for quite a while. Where can I find more information on cash bots?

4) Look for big size that just appears at market, or moves closer to market, i.e. say it's 4 ticks away on the ask, but they drag the order to market, it's probably someone who is getting desperate to get their fill, but you don't know who is on the other size to clip them, so wait until they actually start hitting market and hit quickly infront of them, if it's just one order, you can then cut and reverse into the size once it starts getting chewed and get a scalp both ways. There is a market where they do the same with icebergs, and drag them at market so you can easily frontrun them and they generally occur at a certain time, but I'm not giving that little secret away. This market has a few great little tricks, but you will have to find it and the tricks yourself.
I haven't seen this yet, but I've seen something slightly similar. Large orders (~40) that are at the current bid about 3 ticks away from the ask start "breaking up" into a medium sized order (~15), 2 ticks away from the ask and then a smaller order (~5), 1 tick away from the ask. I figure this is strong buying pressure as the bids move to meet the ask?

5) Other times it is just apparent if there is a big buyer or seller in the order flow, you get used to seeing how the order flow looks when a big buyer or seller comes in, so on pullbacks, you have more conviction to get on board. On these moments though, it is probably a bad idea to hit tops and bottoms, be patient and wait for the pullbacks. But it will take you a long time of watching to realise what these situations look like and how the big guys in your market execute their orders. They of course, 99.9% of the time try to hide it so us bottom feeders don't frontrun them and make them pay up higher prices.


There's just a few to get you started. Others I'm not giving away as I use them and want to keep my fills! ha ha. Hope this helps.

Also, I've over the past 2 sessions there is sometimes a "stalemate" between bidder and asker when there is a 1 tick gap between the bid and ask. Tiny orders (~1-3) jump ahead of the current bid to meet fill the gap and meet the ask. Once these orders get filled, the bid falls back and the 1 tick gap opens up again.
I guess I could trade that but it only has an R:R of 1 and I don't know how frequently it will occur.

 

[Trembling Hand]

Its quite clear reading Mr C setups to using the DOM that a retailer has no hope of using that as their main tool for trading.

Why?

Size. We are talking small moves here, really small. A retailer hasn't the size to throw around nor the cheap brokerage to make the small moves profitable. Then they also haven't the risk manager standing over their shoulder stopping you wiping out 2 weeks of good work with one day of madness.

 

[saiter]

DAX 6:45 PM - 9:30 PM

This time I decided to trade without focusing on the price ladder. My set up includes three charts: 60 min (to see the trend over the day), 1 min (I might change this to 15 min) and 15 sec. I mostly look at the 15 sec chart to see what the immediate trend is.
My entries and exits are now based off of the T&S. My aim is to still try and find out when there will be an up/down trend, but I'm now using a different tool.
How do you know when there is buying pressure? When there are a lot of orders being filled at the ask, some orders being filled above the ask and few orders being filled at the bid. I don't expect orders to be filled underneath the bid, but if they do, sirens start going off and I begin to anticipate a reversal, HOWEVER, I'm assuming this depends on the market conditions. For example, if there's a strong uptrend I don't expect much action below the bid and I expect it to be very small (~1-3 contracts). If there's a strong downtrend, I expect more action below the bid. I still expect this to be small (~1-3) but they will occur within 1-3 seconds of each other.


Pre-Market: FDAX seemed to be trending upwards from pre-open, but the DAX was in the red the previous day. Commodities were down, the asian markets were down, and the DOW just made it upwards.
I also remembered the day that I lost a LOT on the sim. The FDAX ended in the red but the pre-open was suggesting it'd go upwards. It didn't begin turning until after some time. With this in mind, I expected an uptrend in the first few minutes followed by some sideways action and then a downtrend. I kinda got it right...
I went in with a bias towards the short side.


Results

The price chart. It looks like it went sideways but trading is still going on. I still think it'd end in the red. Notice that I've also taken fewer trades.



Outcome of Trades. This time, I decided to work out the money management prior to trading. I have $10K starting capital which goes to $20K after margin. The max I want to lose is $150 in a day (probably a bit steep now that I think of it), so if each tick is $12.50 (it's actually in EUR but for simplicities sake...) I have to stop trading once I hit -12 ticks. If I place a stop loss @ 4 ticks, I'll be out if I get 3 losers in a row before turning a profit.
I guess this time I was lucky and didn't get those 3 losers in a row.



Equity curve. Firstly, IT'S POSIIIIIIITIIIIIIIIIIVEEEEEEE ****, about time! Secondly, massive draw downs. I suspect that this is because I'm entering during sideways action and I'm getting stopped out. I'll have to look back on this.




Questions

How do the institutional traders try to bluff everyone into a move? Do they just make an "artificial" price chart so that certain indicators go off and fibonacci levels are met? Do they change their tactics whilst trading e.g. they sweep for shorts and then they'll try to make moving averages cross?

If this is the case, does that mean the tactics of an institutional trader will change for each market because each market's participants trade differently?

 

[saiter]

Its quite clear reading Mr C setups to using the DOM that a retailer has no hope of using that as their main tool for trading.

Why?

Size. We are talking small moves here, really small. A retailer hasn't the size to throw around nor the cheap brokerage to make the small moves profitable. Then they also haven't the risk manager standing over their shoulder stopping you wiping out 2 weeks of good work with one day of madness.

Does that mean the only option is to follow them and the aim becomes to workout their next move?

 

[Trembling Hand]

Questions

How do the institutional traders try to bluff everyone into a move? Do they just make an "artificial" price chart so that certain indicators go off and fibonacci levels are met? Do they change their tactics whilst trading e.g. they sweep for shorts and then they'll try to make moving averages cross?

If this is the case, does that mean the tactics of an institutional trader will change for each market because each market's participants trade differently?

"artificial price chart"

Does that mean the only option is to follow them and the aim becomes to workout their next move?

No the only option ever is to find a pattern that repeats often enough and with tasty enough R:R that you can make money from. The BS you have in the above quote just leaves me ........ well, I should be polite for once, speechless.

 

[saiter]

It's been a week since I last updated this diary and a lot has changed since then. Uni has started (for me at least) and the workload is increasing, so I will not be able to dedicate as much time to intraday trading. As a result, I've shifted back to a longer term approach: Trading over 2 days

"artificial price chart"



No the only option ever is to find a pattern that repeats often enough and with tasty enough R:R that you can make money from. The BS you have in the above quote just leaves me ........ well, I should be polite for once, speechless.

This quote did a lot for me. I ditched the DOM and went back to the charts. I found a few patterns that occurred over 3 bars in a 10 tick chart and 2 bars in a 30 second chart. I ditched the former as it was too hard to exploit (I couldn't get my order filled before the 10 ticks were over!). The latter could have been profitable, however, it needed a lot more testing, and as I am unfamiliar with C# (and don't have the time to learn it), I modified it to a 2 day period.

Thankfully, the pattern still occurs on a daily chart, with an occurrence of 75%.
I am currently trying to work out entry strategies. The first strategy was time based, that is, enter on a particular bar in a group of 5. I've pushed this over to the side as there does not seem to be an advantage to entering on a particular day AND because the code still needs some work. The second strategy is based on statistics, that is, enter at a particular price given its previous behaviour.
The exit strategy will be a profit target/trailing stop.