Big Mike's Trading Blog

Day trading futures, discussing money management and trade management techniques, and more

Your Trading Destiny

I was just reading a sample on my Kindle of Carl Futia's book The Art of Contrarian Trading, and in the preface or Chapter 1 (I can't remember which) he is trying to prepare the majority of traders that they will lose, and tell them that if they don't have an edge then they should not trade.

Anyway, in it he says that unlike the professional world, in trading a high IQ, substantial net worth, a greater education and lots of hard work will not make you a profitable trader.

I firmly believe the statement and have been saying similar things for a while myself. But, I think of critical importance is something he left out. That there is hope. The thing is, it is absolutely true that a high IQ, substantial net worth and greater education are not enough to give you an edge in trading. But what is also true is that you and only you are in complete and utter control of exactly what will give you an edge. Yourself.

It's been said many times. Trading is simple, not easy. In fact, trading is the hardest thing I've ever done in my entire life. It's also the most rewarding.

Trading makes you be at your absolute best. Anything less, and you won't be successful. You've got to have your life in order, you've got to have your beliefs in order, and you've got to have confidence in yourself. All self-doubt and outside influence is left at the door. As it should be. Trading is about facing your inner most demons, and winning, quite possibly dramatically changing your own tendencies and behaviors in your life.

So it's easy to say that trading can and will in fact change your life. If you succeed. And you control your success. Not your boss, not your family, not the market. You.

It's easy to find excuses on why you had a bad day or bad week. None of them matter. The market doesn't give a shit about your excuses folks! The market is only about the now. It is what it is, nothing more and nothing less. The market is never wrong.

I know many of you are part-time traders and are hoping to one day be full-time traders. You might want to check out this other thread, btw, where I was hoping to discuss that in more detail. It's fine to be part-time. In fact, in many cases, it's more than fine. It's prudent. But what I've seen over and over, and what you must be careful of, is approaching trading as a hobby. For me, treating trading like a hobby is basically treating it like a trip to Vegas. You win some, you lose some, all that matters was you had fun, right? Yes. In Vegas that is what matters. In trading, your a fool if that is what matters.

So even if you are trading on the side, you still must treat it with all the respect it demands and in fact it deserves. Even if you are filthy rich and don't care so much about losing money trading, please just stop and give that money to homeless people who need it far more than you apparently do. Don't carelessly trade as a hobby, for the fun of it. Don't do it.

Now on the other side of the fence, there are a lot of you that are trading and trying with every fiber of your being to do it the best you can. And you are still losing your ass. Some of you have blown up once or twice already. Some of you are lost. Some of you are begging for it to turn around. Some of you don't know what to do next. It is to these people that I would like to say "get a grip!". You are in complete control of what happens next. You are in complete control of your trading performance. You do not depend on the market, you in fact depend on yourself. Once you've come to that realization, then everything else will start to make sense. Some of you madly trying new methods over and over and over, hoping something will work, hoping something will change, hoping something will improve. In doing so, you are completely overlooking what is most important: yourself.

If you are struggling, you've got to look within to find out why. I'm not talking about going to see a shrink and talk about your mommy, although it probably wouldn't hurt. You laugh, but really I am serious. To get deep down at why you are struggling with trading, you have to get deep down inside yourself, your thought process, your biggest fears and obstacles, your pre-programmed behavior and patterns in life. Like I said before, you've got to face your demons, and you've got to win.

What are some ways you can do this? Well, first, you've got to give yourself a fighting chance. You have to give yourself the opportunity to actually learn from what is happening. One way to do this is to slow the heck down. Eliminate the confusion. Create a brand new blank chart, from scratch, and only put two or three indicators on it. Then put a "freeze" on your chart and your workspace.

Promise yourself you will not change anything for the next two weeks. Yes, oh my, two whole weeks you will not change a single setting, a single color, nothing, so help you God.

Step two is to journal. Don't stick your tongue out at me, young man. You've got to journal! If you are old school then go grab an 8.5x11 notebook and on each page put today's date. On the left put the time, column two put the price, column three put your feelings. Record every single trade. Record why you entered, and why you exited. Don't make it fluffy and pretty. Record exactly what you are thinking. If you are thinking "I feel like it's going up" then you better write that down. If you are thinking "this can't go any higher" then you better write that down.

Come back after having done that for two weeks, and I assure you, you'll be a new man. A new trader. You'll have learned a great deal about yourself. For instance, if in two weeks your chart is different or if you skipped a day or two journaling, you'll have learned that you have no self control or discipline. If in two weeks you completely hate your chart, you'll have learned that what is on your chart doesn't make sense to you and you should then gradually (very gradually) make a change or two, and then freeze it for another two weeks. If in two weeks you look at your journal and see a bunch of patterns like "this can't go any lower" followed by a "got stopped - was wrong, it did go lower", then you'll have learned that you are not doing a good job of reading the chart.

Your journal should also contain what I like to call the "woulda/coulda/shoulda" entries. In real time, as they appear on your screen, you should write down any trade that you wish you had taken but you didn't. Do it in real time, like within a couple minutes of missing the entry. No cheating. Write down why you thought you should take it, and write down why you didn't take it. Example "I really think this double bottom is going to hold" followed by "but I've already taken two stops, so I am going to skip it". Come back and analyze all those woulda/coulda/shoulda trades after a couple weeks and look for patterns, you will be very surprised with what you find.

I'd love to hear from all of you. Am I right? Am I wrong? Are you following my advice? Are you trying these things? Have you been there, done that, and are now succeeding? Have you been there, done that, and are still struggling?


VIDEO TUTORIAL: How to create an advanced NinjaTrader Strategy

The strategy contains a few optimizable parameters such as SMA length, EMA length, HMA length, three different targets with custom tick settings on each, a stop size, and the option to move target 2 to breakeven after target 1 is hit, as well as move target 3 to breakeven after target 2 is hit.

Tutorial: Create NinjaTrader Strategy from Big Mike Trading on Vimeo.

(dont forget to click the bottom-right icon to expand to full screen mode, so you can read the text in the video)

The strategy is just an example! It took all of 10 minutes to write. Even though it says it made 20k in 90 days over 700 trades, it will likely fail going forward. Simple strategies are usually best, but this one is too simple to work fully automated. Most strategies I write for customers take me hours of work (this one took 10 minutes), so don't just go and copy this strategy and expect good results.

Instead, I created this so you could get your feet wet and learn some of the basics of a more advanced strategy than what Ninja includes with the base install. I also created it so if someone shows you backtest results where it makes tons of money, you can see just how easy it is to produce those results.

Also, don't forget that optimizing based on net profit is virtually worthless. I've spent two years tweaking my custom optimizer type and it considers everything you can imagine such as balanced longs/shorts, trade counts, commission costs, profit factors, expectancy, trade duration, and a bunch of other stuff I don't want to go into because I am not giving it away.

With the normal drop-down list of optimizer types in NT, you don't want to just pick the result that shows the most net profit. You should factor in as many other variables as you can. Unless you're going to do what I did with the custom optimizer, the easiest way is to dump the results to an Excel spreadsheet (feature is built-in to NinjaTrader) and then work some analysis there.


NinjaTrader 7 Beta Video Review

Hey guys!

Here is a quick video I made showing some of the biggest changes in NT7. I think most of you know I'm not very happy with the development of NT7 in general, so I've been putting it off for quite a while to be honest.

But in the last few days I spent a little time with it, and when it isn't crashing, some of the features are nice and something to look forward to. Of course, the biggest problem with NT has always been its stability, so that remains to be seen as we're still in a private beta at this point.

NinjaTrader 7 beta 6 in the video, the latest available at the time of this post. I briefly cover the continuous contract improvements, the session manager, hot keys, historical bid ask data, and spend most of the video going over the Chart settings and new multiple time frames settings, as well as the new Data Series options for indicators.

Some of these features were available in NT 6.5, but you had to write your own code to accomplish it. It remains to be seen if the NT7 built-in alternative will be superior or not to those implementations, but it looks promising.

NinjaTrader 7 Beta Video Review (NT7 beta) from Big Mike Trading on Vimeo.

One major thing I forgot to go into more detail on in the video: the seamless sessions for multiple contract termination dates. Say for instance you pull up a chart of CL 03-10, you can now load 90 days of data (CL 02-10, CL 01-10, CL 12-09) on one single chart, seamlessly and automagically, as NT knows the start/end contract dates and will merge the data together. It's basically the same as IQfeed and eSignal continuous contracts, but is now available for Zen Fire users.

I'll plan to make another video showing the new strategy analyzer and genetic optimizer, and the new market replay features. That will also give me an opportunity to talk more about the continuous contracts, as that is a key feature in strategy development. Give me some time

I also hope that the NT dev team has learned some hard lessons during all this. NT7 is about two years late, and there has been a bit of a uprising. So, I try to keep that in mind and cut some slack to the dev team. But they've got their work cut out for them...

You can find more on this on the BMT Trading Forum:


New video - blog post #100

It just so happens this is post #100 on my blog :)

I haven't had time to post a video in a long, long time, so I finally made some time tonight and present you with a 30 minute video for your viewing pleasure. I know how much you love to listen to me repeat myself over, and over again, and show you how easy it is to make millions in the market :)

Big Mike Trading from Big Mike Trading on Vimeo.

The discussion for this video is over on BMT in my trading advice thread:


Trader's Edge News Stories

I recently added a new feature called "Trader's Edge" to the Big Mike Day Trading Forum.

It looks like this, on the top of the main index page:

You can sort by the most recent stories, or just view random entries.

This is just the first of many steps we're taking to create a central Hub area on our index page. We're creating many new modules for the home page, and will eventually move the Forum Category listing off to a separate page so the home page contains all the most recent, most popular, most relevant forum posts as a starting place to jump to other forum content.

We'll be making more changes soon, including a new and improved skin/theme for the site. You can share your feedback on Trader's Edge here in this forum discussion.


Be Honest with yourself

Now that you've got a goal of trying new markets, time frames, and styles in two week periods, while documenting your feelings of each, you'll need to know what to do with this information.


It is incredibly easy to review the information and jump to the wrong conclusion. You have to be very careful here.

First, it's crucial that the source of the information is pure and accurate. In other words, don't try to fool yourself. If you were over-trading the hell out of a 6 range chart on CL, then you need to write that down. Don't find excuses, be honest!

Second, when reviewing what you've written, you need to spend hours on each item carefully considering what it means, why you wrote it, what was happening, and what the result was.

Third, you can start to form a "short list" where you've combined several of the most frequently occurring feelings or thoughts from your notes. For example, a short list might look like:

- Don't like small charts. Anything less than a 5m chart doesn't make sense to me. I can't see why things are happening.
- No patience to hold overnight or multiple days.
- I don't like ES. It is just too slow for me.
- I really like CL. It moves fast. I like all the opportunities it gives me.
- I really like the 5m chart. It make sense to me. I can see why the market moves the way it does on a 5m chart.

This is just a small example of a short list. You'll end up making a dozen short lists, one list at a time, and then eventually combine all these short lists into a master list that can be used to identify your strengths and weaknesses, and define your market, time frame, and style. For instance, other short lists might be based on your daily routine (when you start/stop trading, your day job work schedule, your family time, etc). They may be based on your physical and mental state (tired/exhausted, sick, nervous, anxious, etc).

Over time, months and years, all these short lists start to come together and define you as a trader. The important thing is to not try to rush it. If you are in a hurry to be profitable, then you will 100% not be profitable!

It's like having a closed mind. If you have never eaten a certain kind of food yet have made up your mind that it's repulsive to you, then you have closed your mind to it and are biased towards it.

The same is true of trading. If you've made up your mind that you will be able to do it quicker/faster than what everyone says, then you are now biased in that regard and everything you do will be skewed. It won't be true.

Don't get me wrong. Willpower is crucial. You have to believe in yourself. But, you have to believe in yourself about the right convictions, such as "I will always be honest to myself about why a trade failed". To me, if you make a statement such as "I will be successful no matter what it takes", it is dangerous and not helpful. I hope you can see the difference between the two statements.

An open mind is the crucial first step to being honest with yourself. If you continually try to hide your mistakes from yourself, you will never benefit from them. Mistakes are critical! It's how we learn. And there is nothing wrong with making them! It's nothing to be ashamed of! It's nothing to fear! How can you learn if you never make mistakes? So getting back to the notepads --- be certain to be honest with what you write.


Struggling to define your niche?

Lately I've noticed several traders struggling to identify their niche. They are unsure of what instrument to trade, unsure of what time frame, unsure of what indicators to use, unsure of where an entry should be and where an exit should be, etc.

These traders are struggling with themselves.

They've yet to identify what their own strengths and weaknesses are. And they've yet to have the experience in the market to know the rest (ie: instrument, indicators, signals).

You can start with either one -- your strengths and weaknesses, or your market experience -- but both must be done before you can define your niche and create your edge.

Market experience does not have to translate to years of 40 hour weeks. You can take baby steps, such as two week periods of trying new instruments, new time frames, new signals. You should also try new styles (short-term [ie: buy/sell in minutes], mid-term: [ie: buy/sell in same day], long-term: [ie: swing trades]).

It's only after you try different instruments, time frames, and trading styles that you can have the experience to know which one plays to your strengths best.

In fact, if you are unsure what exactly your strengths and weaknesses are, then a scenario like above where you try new instruments and styles for a two week period at a time will help you define them. Listen to yourself, make notes on your feelings about certain scenarios and certain markets.

For defining strengths and weaknesses, you could for instance have a notepad where you write down how the ES 5m chart makes you feel when you trade it. Write down how the CL 12 range chart makes you feel. Same goes for trying short-term, mid-term and long-term styles, if you find yourself exhausted with short-term trading, it could mean you are over-trading and one of your weaknesses is patience and discipline. If you find yourself missing signals on a mid-term or long-term style, it could mean you lack confidence to pull the trigger, and are concerned if this is "the one" trade that you should be taking.

After exploring these different methods for two week periods at a time, you'll have plenty of notes to help you make a complete list of your strengths and weaknesses, and then to define what market, time frame, and trading style suits you best.