FTSE Premarket Review 2012-11-02

The FTSE retraced the previous days move yesterday and bounced at the 100% fib.  Seems like a pretty bulish move.  Slow start to this morning so expecting a bit of a retracement.  Also NFP today so probably not a great deal of action until then.

Levels to watch:

5908-10
5866
5830-32
5819

Trading - Your Inner Dialogue

Read some good tweets from @trader_dante today regarding the thought processes of a trader which I thought would be good to record for the future.  He was talking about the inner (and outer) dialogue he has with himself when considering a trade.

"One trader sees a breakout and understands that is technically "bullish" and takes the trade. Another trader is asking questions...

1. How far has price already travelled today? 
2. How does that compare to an average day? 
3. Why might today be any different?
4. Has price broken enough to take the buy stops? 
5. Are those buy stops shorts puking or longs initiating?
6. Have retest traders using buy limits had a chance to get onboard on any timeframe? 
7. Where will shorts puke? 
8. Where will longs target?
9. What's the bigger picture telling us? 
10. Is price behaviour confirming my opinion which is based on the net result of my understanding?

So I take entries with more confidence when my understanding is deemed to be right by the price action."

FTSE Premarket Review 2012-11-19

FTSE looking bearish today, hitting the top of the bear flag shown.  I will look for opportunities to get short until the top of the bear flag is broken.

Decent area from 5980-90 to look to target if I can get a short on.

Alternatively the DAX is approaching the bottom of a bull channel, if this bounces we could see the FTSE break the flag and I will look for a retest of the top of the flag to get long.

Result

The market false broke the top of the flag and then tanked on bad news (google results i think).

Drawing Effective Support and Resistance

I thought I would jot down a few ideas I have regarding effective support and resistance levels on chart that seem to have worked for me.

Firstly a definition for anyone who has arrived here and is not familiar with support and resistance can be found over here.

• Strength is defined by the number of touches and the reaction off the level
• More recent swing levels are more relevant
• Important levels should be marked on higher time frames, weekly and daily work for me
• Beware of marking levels that price has previously not respected
• Bias the level relative to the current price, eg. if price is above the level it maybe possible to bias that level to when it has previously acted as resistance and vice versa when the price is below I try to bias the level to represent previous support.  This is because I like to trade breakout re-tests of these levels.
• Review levels on my charts once per week, remove any levels not being respected and tweak weekly and hourly levels

Time for a trading plan

Right, last weeks performance was poor to say the least, it's time to pull together all the wishy washy ideas of a trading plan I have had going round in my head and get them down (and stick to them).  This is partly inspired by Simon Massey over at ftseday and by The Disciplined Trader by Mark Douglas which I have just finished reading (and will read again).

Firstly the acceptance:  I fully understand that the poor performance last week was in stark contrast to the previous 2 weeks because of poor self discipline (influenced by emotion), bad cash management (risked more than I should have) and over trading mediocre and invalid setups.

Rules of the trade

I WILL…

• Only trade valid setups (imagine I have to justify every trade to a pro trader)

• I will risk X% of my account on each trade
• Take full or partial profit at +X pips
• Stop trading for the day when I have hit my target
• Cut trades when the reason for entry is invalidated
• Get up at 6:30 every trading day to evaluate the pre market action and prepare for the open
• Stop trading for the day after 2 full losses
• Be aware of my emotions particularly "REVENGE", "im going to miss out" and "I hope this turns around"
• Record every trade I make with notes and suggestions
• Learn from my mistakes by reviewing my trading log weekly/monthly
• Help as much as I can and continually learn and improve my knowledge of markets and psychology
• Run over these rules everyday
• Make sure I have time for my family outside of work and trading

I WILL NOT…

• Listen to the emotions above
• Look for reasons to stay in a trade that s going against me
• Trade around important news releases and the US open
• Leave trades open overnight
• Take trades I cant be around to monitor continually
• Pay attention to anyone elses opinion on the market

Taking losses

I will cut losses quickly when the trade is invalidated.  Once open trades should be managed on the lower time frame chart, I will identify areas that if broken will result in order flow against me and get out at or before those areas.

After a loss I will review my emotional state.  Do I need to relax and cool down?  Do I feel tense or agitated?  If so then I will take steps to resolve this.  Breathe and review the trade, I will not trade until balanced again.  Was that trade a fair set up?  Did I manage it professionally?  A loss is only that, its part of the business and part of learning.  I will learn from these trades and move on.

I have removed some of the details in the plan as my tolerance for risk my differ to other people and my set ups are unique to my experience.

Trading rooms

Great post from Robert Sweetman regarding the day trading room at ftseday.  Well worth a read as it worked for me after spending years reading trading books and trying every strategy under the sun.

It's still really hard work to get control over your emotions but just watching other traders work helps massively.  The fact the everyone is helpful and supportive is priceless.

Just don't mention indicators...

Options expiry

I wasn't going to trade today (17/2/12) because I already made 25% on my account this week and it was options expiry which I have been told is trickier to trade than a normal day due to big players moving prices.  When the price came back down to the double bottom around 11ish I couldn't resist grabbing a few points as the R:R was really good.  Got out for +8 just before the price took off, should have held onto this trade but thought the price was stalling.

Tried to short off the 20 level in the afternoon, got my stop to b/e and got stopped out shortly afterwards again just before the price tanked.  Resisted chasing the trade.

Looking forward to Monday as I think we might see the FTSE breakout of the range it's been in for the last couple of weeks.

Over confidence / Over trading

So I blew a few pips yesterday (16/2/11) due to over trading and a lack of discipline.  In the morning I had 5 trades, 4 that got stopped at break even and 1 (the last one) that I jumped out of early with 5 pips profit.  In hindsight I was lucky to get away with this, chances are that one of these trades should have gone against me and hit my full stop but the market was stuck in a tight range and I got away with it.  Fact is that after the first entry, which was a decent set up, I shouldn't have continued entering when the price kept on revisiting the original entry level.  Getting back in the first time would have been reasonable but not the 3 times afterwards (unless I was purposely scalping for the range, which I wasn't).  My final trade that I closed for +5 does raise some questions about is it OK to get out of a trade early or should you leave it to hit the b/e stop.

The afternoon started well, I went short at 70 and doubled up at 75 (both strong levels), the 70 trade got stopped for breakeven but the 80 level held and the 75 trade spiked down and hit my target at 65, +15pts in profit for the day, pretty sweet and looking at my account balance only 5 pips from doubling my original.  Now at this point I should have taken a look at where my mind was at, 7 trades with no losses in a fairly short space of time had filled me with false confidence and I thought I could make those final 5 pips, in fact I thought it was pretty much guaranteed at time, worst case scenario I would at least get a chance to put my stop to b/e.  As the price came back to 75 I jumped in short and got stopped out, same again when the price came back to 80, this time some news about the ECB and Greece caused the price to rise.  +15 pips to -5, alot of hard work wiped out.  This is not the first time that over confidence after a series of wins has go the better of me and is an area of my psychology that needs to be addressed.  Never again !

Now I just need to figure out how to spot this coming and take appropriate action...

My FTSE trading diary

My FTSE trading diary.  OK, so I have been promising myself to set this up for sometime after reading Robert Sweetmans first class blog but after a bad run of trades early 2012 I resolved to finally get it started to try and stop myself making anymore dumb ass mistakes through undisciplined trading.

I have been trading part time since 2008.  Started off with a small spread betting account which I used to trade indices (mainly FTSE), it took me about 2 weeks to blow it up so I decided to move to trading shares on the FTSE 250 and AIM.  The trades I made were based almost 100% on fundamentals and I made decent profits (few grand) for the first couple of years but became steadily more frustrated having to put up with the down swings in the market chipping away at my profits.  This, along with the realisation that it was unlikely I could live off my gains lead me towards trading the indices again.  After reading a load of books and trying to trade every system and market under the sun that I could find I decided to direct my focus on the FTSE, this is partially my choice and partially due to the influence of Mike over at ftseday.co.uk who has been an incredible source of advice.

I day trade the FTSE only now, I am still have a full time job but enough spare time to analyse the market and I can usually get a couple of trades in the morning, lunch time or evening.  I trade off price action alone, no indicators and use support/resistance, gaps and trends to find my entries.

I will try to post some analysis of the market as I see it, some of my trades and general thoughts on the market and making money.  I don't have system I just try and trade what the market shows me.


"I won’t do any trade until there is money lying in the corner of the room and all I have to do is walk over and pick it up."  Jim Rogers