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Monday, June 20, 2011

Post for the new week

Posted by Admin:

X is going to be off on vacation for the rest of June (and early July). He asked that I make a post a few times a week to facilitate anyone who wanted to make comments or discuss trades/setups.

Here is a photo of a dog wearing a hoodie:



Chips and Salsa said...

That dog puts Phil Laak to shame.


TPX, 15m, 5ema, Fibs OR, entered above Bar 4, took partial at $63, currently trailing the rest on a close below the 5ema.

BBY, 15m, same set-up as above. Took partial at FE, trailing the rest on a close below the 5ema.

These were both non-gapping stocks that honored X's Fibs. I found several others, but I couldn't take them all.

Chips and Salsa said...


More powerful non-gappers:

5m - LULU, LUV

10m - M, HCN, NKE

15m - NWL, RDK, PDM

30m - ORLY, RHI, FL, AN

Same set-up: 5ema, Fibs OR, etc.

Klaorman said...

6/20 trades

RMBS 10th 5m bar
This setup bar’s real body straddled the 38 fib and 8ema, but its tail touched the 50 fib. I thought, eh, good enough and took it. It took a while, but it made it to the ORH and a bit beyond. I got out when it broke under the ORH.

P 7th 15m bar
I didn’t see this setup, which was a hammer at the 5ema and R1, but if I had I’m not sure if I would’ve taken it because of the strange-looking shooting star followed by a red hammer that came before the setup bar. However, it hit beyond the 200% extension.

Grove Under said...

Thanks to all who wrote feedback regarding the current market conditions as well as how you handle difficult trading periods. It's very helpful to hear the experiences of others.

For those interested in reading on, this (LONG) comment is about my current situation regarding trading discipline, and what I'm doing to get to the next level.

My ideal weekly profit target has been 0 to 3+% on < 20 trades. More importantly than the P&L, I wanted to execute well against my plan.

Although I'm only a few months into full time trading (after being mostly out for a decade), when I started to experience a significantly higher number of daily trades last week (in some cases 20+!) along with an accuracy rate dropping to < 30% (vs. >70%), I knew to call timeout before a real blowup or an unrecoverable draw down took place.

Several 2% (and higher) losses in my portfolio per day for several days in a row is a very loud message that all is not going well. Something went terribly wrong, and I didn't have a quick and easy answer to the deep rooted cause beyond a superficial, "I had a bad cold", "I over traded" and "it was revenge trading."

Trader-X and Tom C. have years of detailed setups in the archives, covering 30 min to 2 min time frames. Profitable setups that will likely stand the test of time. There are no secrets. You just need to wait for them and pull the trigger when they appear. Simple, right?

So why is it so hard to remain consistently profitable?

I'm realizing more and more that after you learn the basics and fundamentals of trading, psychological warfare...all within yourself...is possibly the biggest factor preventing consistent and long term trading success.

For me, it's all those mind games and internal chatter that get in the way.

In order to help me get to the next level, I knew I needed to make a serious commitment to a plan that will raise my level of discipline to a much higher level.

Flowtastical reacquainted me to Brett Steenbarger's great website a while back, but I needed something more portable and organized so I got his latest book (2009), "The Daily Trading Coach - 101 Lessons for Becoming Your Own Trading Psychologist."

Although I'm only a third of the way through the book, I've made practically all the mistakes or had the same mental chatter he describes in his lessons. It's as though he wrote the book just for me. In all the many great stories and quotes, I find reassurance and hope. It's an amazing book.

The sections in the book I have found very helpful are the specific exercises according to what area you need to improve. Any elite musician, athlete, writer, chess player, or anyone who is (or wants to be) at the top of their field has to consistently practice very long and hard in their respective fields. I needed some help to learn some basic "drills", which will enable real and long lasting behavioral changes.

Based on what I've learned so far, here are some very short term steps I'll be taking:
* Grade setups taken - Start doing a better job of consistently rating each of the trades I took. I've reviewed my recent worst days, and there are many trades with ratings of C, D and F.
* Improve the structure of my journal - 1) Add a column to describe what I learned from a losing (and perhaps winning) trade, and 2) another column on how I will improve my trading tomorrow based on what I just learned.
* Begin having non-profit related goals for the week. Initially, this will focus primarily around ensuring that I execute only A and perhaps B rated setups. I will also need to address the "boredom" issue.

Although I'm not done with the book yet, one key takeaway I know is that I will always need to do my "drills" in order to remain a consistently profitable trader. No shortcuts. The long journey ahead continues.

As always, your frank and honest comments are always appreciated.

Anonymous said...

Chips and Salsa,
You mentioned in an earlier comment that you use Thinkorswim scanner to look for $10 to $100 stocks trading above/below their previous-day highs/lows. Am also a TOS user, but when I check out their scanner, it doesn't have this function, only previous day close. I have also emailed TOS to ask and they said this is not possible. Could you pls feed me with more info on how you do this? Thanks alot!


Chips and Salsa said...


Sure, I'm happy to help. I actually got a chance to post all the details as a follow-up under the "COG - 060811" post towards the bottom (11th comment). I go into all the specifics, but please let me know if there is anything else I can add, if it's still not clear. :D

Chips and Salsa said...


By the way, if TOS said it's not possible, then they are sorely mistaken. I would contact their thinkscript team directly, and they will tell you just about anything you need to know. The scanner can be configured to produce a near-infinite number of results depending on your near-unlimited parameters. It's possible that you may have been talking with someone who doesn't work in the script department and unfortunately just isn't aware of all of the scan's functions. General customer service is usually pretty good about getting things right with them, but like any good company, you may still occasionally get a misinformed rep.

Times of Your Life said...
This comment has been removed by the author.
Chips and Salsa said...


SLW, 15m, 5ema, Fibs OR, entered on break of bar 3, currently holding to $33, if it can get there. Should have sold under break of bar 9's low, but the day was so bullish on SPY, QQQ, etc, I decided to risk it after moving my stop to breakeven. It is paying off.

I won't lie. My stomach has been in knots riding this out. Will sell if/when it hits $33. Otherwise, will sell on break below previous swing high of $32.64.

Flowtastical said...


You're well on your way. Find out what setups you're good at and repeat those. That's really it.

Out of all the trades you took last week, how many would you say you would take over again? Why? Which ones made you the most money? Why?

Put a gold star sticker on your most profitable setups and paste them on the wall or set up a private blog and save the chart. Every day post your best setups onto the blog.

Over time you are going to know what you're awesome at.

Anonymous said...

chips and salsa,
Thanks alot! I missed out on your more detailed comments on the scriptings earlier. I was referring to their basic scanner and they probably forgotten to tell me abt thinkscript. Thanks again.


Grove Under said...

Thanks for the great ideas. Now that I have a decent amount of data to review, it's becoming easier to ask myself and evaluate the types of questions you mentioned. It's amazing to see how much room for improvement is possible.

Which leads me to another question regarding potential...

Everyone (especially prop shop traders):
I'm reading a great book called "One Good Trade" by Mike Bellafiore. He's the cofounder of a proprietary trading shop, and here's something I was surprised to read regarding ROI from trading.

"A talented developing trader can make over $500k-plus a year after payouts with daily buying power of less than $250k. I warned you, the whole thing sounds absurd initially."

I believe they have 10:1 (or more?) leverage for buying power, but assuming a conservative retail leverage of 4:1, that is equivalent to $62k cash in your account.

So, a "talented developing" trader at a prop shop can make 700% (or much more) annual ROI? Can anyone confirm?

I don't doubt the absolute profit $'s possible (he mentioned that his elite traders consistently take home, after payout, over a million a year), but what I'm surprised to hear is the absolute % return.

This type of information helps me to identify one component of what it means to be an "elite" level trader. I like to know what is possible, even if it seems unreal at the moment, so that I can figure out longer term stretch goals.

Appreciate any feedback.

Klaorman said...

I didn’t find any setups on 6/21, so I didn’t trade that day.

6/22 trades

WNC 11th 5m bar
This non-gapper’s setup bar straddled the 38 fib and was on R1, but it was also under the 8ema, so it was a bit iffy. I tried it with small shares. It hit a wall a few cents up; I finally got out a bit under breakeven. It stopped out later.

HSOL 7th 15m bar
I had actually taken the short on this stock after the shooting star on the 4th bar, but the 7th bar was a doji hammer, so I covered at breakeven. Then I noticed that the bar was at the 38 fib and 5ema, so I got long. However, it faltered at whole number 6 during the Fed non-event, so I got out there. It then hit the ORH exactly before dropping.

Missed trades

AVAV 5th 10m bar
I completely missed this one. Price had bounced off the 38 fib, but the high of the setup bar didn’t give much room to the ORH and the 5ema wasn’t really close by, so I’m not sure if I would’ve taken the trade. It chopped around the ORH for 2 hours before printing green to the FE.

FRO 6th 15m bar
This setup bar was a doji hammer at the 38 fib and 5ema, but somehow I wasn’t sure, so I passed. It did chop around a bit, but then it hit the ORH before falling.

Chips and Salsa said...


Foot Locker? More like Hurt Locker. Har-Har-Har!!! D:

FL, 15m, 5ema, Fibs OR, entered break of 4th bar, stopped out below 4th bar. I normally don't trade on FOMC days. Now I remember why.

Chips and Salsa said...


I can't speak for anyone but myself, and there are probably people out there who make a killing, 700%, etc. But since I started exclusively day trading with 4x broker leverage, my best run, as far as the most gains in the shortest amount of time, was during the bull run from September to December, 2010, where I increased my account balance by 84%.

Unfortunately, during this period, I was also testing out many different systems to find the right one for me personally, and it did cost me money. And my money management was atrocious, costing me far more in losses than I should ever have allowed. So who knows what could have been, had I already chosen a single, consistent system and stuck with it.

Since then I've made additional profits, and I am trying my best to duplicate that pace of returns. However, I believe as I become more focused and practice what I've been learning here, I will put up at least 100% per year. It doesn't seem unreasonable, given the power of compounding on a near-weekly, or for some traders, daily, basis.

I have read on Trader Mike's site a discussion about what is considered a fantastic return annually for a day trader, and there were all kinds of opinions on it. Many considered triple digit percentages a given. I guess it's a matter of development, risk/reward, discipline, experience, all that stuff.

Now if I blow up my account again, those numbers mean nothing, lol. :\

Chips and Salsa said...

By the way, I didn't mean to suggest that there weren't winning stocks out there just because of the Fed. I'm just steamed that the one I picked seemed to chop around all day waiting on announcements like the general market. EXH and PDS on the 15m, for example, did well, as did a ton of others. It's just annoying when you're picking one that doesn't move. Maybe my set-up wasn't so good.

Side note: If you grow your account by 1.5% per week, that's just over 100% in a year, compounded.

ElToro said...


At prop firms there is never a mention of % return or ROI. The only thing that matters is what is on the board at the end of the day, month, year. If you are at a good prop firm and are a good trader buying power is never an issue.

joshua said...


you have to have 25k in a pattern day trading account so the minimum intra-day buying power is 100k not 62k.

timo4sho said...

Chips and Salsa,

Im interested in your scanning method. How do you come up with your trade candidates? Would you mind sharing this process?



Grove Under said...

Sorry if I wasn't clear in my explanation, but I meant that $62k in a margin account is equivalent to $250k in buying power.

So based on the quote, it sounds like a good trader at a prop firm can make $500k annual profits based on something similar to a $62k margin account. That's pretty efficient use of capital!

Good point regarding discussion of buying power (or lack thereof) in prop firms. Bellafiore also wrote that it's not that relevant to their shop, and he doesn't like discussing it since it seems so unreal without understanding the proper context.

Chips and Salsa:
That's quite an impressive run you had Q4 last year! If you've done that well once, I'm sure you'll do even better on your next run with your increased focus and discipline.

One of my goals is to allocate a certain amount of capital for day trading, and I'm not yet sure what that size should be based on my risk tolerance and style. I'm still trying to crawl and walk without falling too often.

But I do believe there is a certain limit to how much size a retail individual can trade based on most day trading strategies.

As an extreme example, if you had a billion dollar account, there's probably no way you're going to effectively utilize all that capital via day trading alone.

So maybe once I get to $100k, that's the "right" account size, so then I sweep all profits out on a regular basis? I know the answer is different for everyone, and I don't have enough data nor trading consistency to make that determination yet. Just thoughts rattlin' in the back of my head...

Flowtastical said...


What people fail to understand is that your return can be infinite in trading just like in life. You are only limited by your own beliefs.

I'm at a prop desk in nyc. My goal to to increase my financial value to infinity. How much percent return is that? Plenty of guys I know make millions. Who cares? They're aren't you, you aren't them. They have no idea what its like to walk in your shoes. Their value has zero to do with you.

Study your pnl. Copy your best setups. Forget the bad ones. Make your best trades better. Make yourself better. Eat better. Sleep better. Trade better. Constantly work on increasing your own value to infinity. Do it a little at a time and it will add up. I lost so much money in the beginning of my career and wasted so much time trying to be a million dollar trader on day one. I kid you not when I say ALOT of money.

You have the potential to make more than anyone else on any desk. Study your pnl.

Did I mention study your pnl?

Klaorman said...

6/23 missed trades

FRO 7th 5m bar
I sat down late and missed this shooting star-like bar at the 5ema. It made it down to the FE before bouncing back to the ORL.

BMY 4th 15m bar
I passed on this setup bar for a bounce because I thought it was a spinning top; after it almost made it to the ORH, I found out that a spinning top should have a much narrower real body. Oh.

BBBY 9th 10m bar
I actually saw the wide hammer on the 7th bar, but not in time as I missed the entry during the 8th bar. That trade would’ve stopped out. I missed seeing the setup bar, and by the time my alert for the 7th bar fired about 2 hours later, I thought I was kind of late, though it still hit the ORH.

GCO 6th 15m bar
My alert was set a bit under the high of this setup bar, but when it hit, I quickly pulled up the stock and found that the offer was .20 higher. It did come down right away to where I could’ve bid for it at the 49 whole number, but by then I wasn’t so sure about the trade anymore. It chopped around for a while, dipping under 49 again for a few times, which made me not want this “stock which was going down,” but it finally took hold during the general market upturn and hit around the 162 fib extension for a 2 buck gain. I guess the lesson here is to trust the setup.

joshua said...

grove, what are you doing to fight the boredom? that is what is killing me. i traded in an office for a bit and it was great because you could shoot the sh*t and still trade the way you wanted. i was trying to find a voice chat room just so i could listen in to some characters, sorta like T3 but not expensive. i haven't found any. anybody know of anything? i don't need trade ideas, and i don't want anyone's opinion about my setups, just b.s. about the market and life. i try listening to stern on sirius, or other talk shows, but when the market starts moving i need to focus. the problem is, stern isn't watching the market so i have to turn him off a lot.

joshua said...

klaorman, do you trade all the different time charts all day, or watch the 5 min for the first hour and then switch to a longer time frame as the day goes on? or if you see a setup, no matter what time frame it is, you take it?