Big Mike's Trading Blog

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

A quick look at CL 12-range today

Here is my view on the 12-range for CL today.  More can be found on the forum in the price action thread.

Let me say this first. Days like today can really be a major challenge to many traders. I am fearful that on days like today, many people won't update their journal because they went a little "full tilt"and did some major damage to their account.

A day like today may look somewhat simple in a historical perspective, but a lot of traders do very poorly on a day that is either trending or grinding like this one.

The best way to combat this is to adapt during the day. Make sure you have a fresh perspective. If you were trying to find a short all day, you should instead ask yourself "Is there a long opportunity here?" and really look for it. Make sure you aren't biased. Many traders are counter-trend by nature, and after a +150 gap they are just foaming at the mouth to go short.




The channel was very well defined early on, so it was pretty easy to only take longs. The issue was the channel was so tight, that if you tried to be a good trader and follow your rules (my rules) of buying the HH breakout, you were left with only table scraps of maybe 6-8 ticks per breakout.

Around 10am we broke down out of the TL a bit. Traders that shorted immediately got trapped somewhat, it wasn't a good idea to short directly into 85.00 area. CL traders should always pay close attention to the xx.00 and xx.50 marks, a lot of stops are placed at these prices and it sometimes takes time to break them down. It is smarter to enter just the other side of these price points, even if by only 2-3 ticks.

The disciplined traders that didn't just jump on the short and waited for the LH got it for a better entry to the short side.

The short didn't last long, because by noon we had made a HH signalling the likely end of this small bearish trend. Confirmation came at 12:30p with a HL+DB being formed. There wasn't much opportunity to trade this (for me) due to the time of day when it occurred.

Mike

Big Mike Trading Forum

Hey guys,

We've got about 16 active journals now being updated daily on the forum, great job!  I'm marking up charts and commenting on those on a daily basis, so my "advice" is still on those threads if you want to hunt for them.  Most of the journal authors created them in the Elite Journals area, but a couple are in the regular Journals area.

I've also been spending a great deal of time on the Price Action thread lately.  Anyone that has talked to me in the last few weeks knows that I've been on a "pure price action" kick, really shuttering everything except an ema20 and price, and just focusing on HH+HL, and LH+LL, trading those setups.


Next Tuesday I am holding a webinar and Q&A on trading multiple time frames and with-trend. The 100 person room limit should be resolved now, but you should still register early. I've put together a lot of example charts and will also try to devote a good portion of the webinar to Q&A.

A week after that, we've got another webinar planned from ZTrade101 where he will help everyone setup and configure the Volume Ladder for NinjaTrader. Some details are in the main webinar thread, and more details will be shared after next Tuesday when my webinar is completed. Trying to keep it to just one webinar at a time to focus on

Not long after that, benbrooke will be back for Part II of his Market Profile webinar, which will be a more in-depth look at trading with market profile. Again, some details are in the main webinar thread, and more details will be shared after ZTrade101 finishes his.

If you didn't already notice, I recently announced that Al Brooks will be conducting a webinar for BMT in June, he will be focusing on trading price action. June is the 1-year anniversary for BMT, and I actually have a lot of surprises for you guys including webinars, and lots of prizes -- some of them valued at $1500 each. I'll go into more specifics about our 1-year anniversary in a few weeks.

Every day BMT becomes a better place for traders to come together and help each other. Just recently we actually passed another famous trading site in terms of daily user activity, and we're only just getting started! So give yourself a big round of applause for the hard work that you've put into making this community extra special!

I am particularly proud of all the new journals that have been started recently, after one of my last blog posts kicked a bunch of you into gear :)  These guys are making huge strides in their trading and making some awesome revelations about themselves and their trading. It's really a pleasure to be a part of and to help them become successful.

Thanks guys!  More soon!

Mike

BMT Webinar: Using Multiple Time Frames to Trade With Trend

I know many of you are excited that Al Brooks will be presenting a Price Action webinar on BMT as mentioned here, but since that is still a few weeks off I thought I would tide you over by presenting a webinar based on Using Multiple Time Frames to Trade with Trend.

The webinar will be held Tuesday, May 4th at 3PM ET.  To register for the event, see this thread.  I will show multiple examples of how you can use MTF's to trade with trend and incorporate this method into your existing strategy very easily.

Mike

The Market by Jungian

Jungian is a member of Big Mike Trading.  Bacon is also a member.  They've been active participants in our Price Action thread.

We've recently been discussing using a simple decision matrix to journal your trades.  All the talk of the Matrix lead Jungian to write the following and I wanted to share :)  There is also a bit of a "mini-battle" going on between me and Cunparis (also a member of BMT) on my advice thread, the mini-battle is about indicators being good vs. evil, which is semi-relevant to understanding where this is coming from :)

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The Market by Jungian
with apologies to Andy Wachowski & Larry Wachowski 




Jungian: 'Cause I don't like the idea that I'm not in control of my trading.

Bacon: I know exactly what you mean. Let me tell you why you're here. You're here because you know something. What you know, you can't explain. But you feel it. You felt it your entire life. That there's something wrong with the Market. You don't know what it is, but it's there. Like a splinter in your mind -- driving you mad. It is this feeling that has brought you to me. Do you know what I'm talking about?
Jungian: The Market?

Bacon: Do you want to know what it is?
(Jungian nods his head.)

Bacon: The Market is everywhere, it is all around us. Even now, in this very room. You can see it when you look out your charts, or when you turn on your indicators. You can feel it when you go to work, or when go to church or when you pay your taxes. It is the world that has been pulled over your eyes to blind you from the truth.

Jungian: What truth?

Bacon: That you are a slave to indicators Jungian. Like everyone else, you were born into bondage, born inside a prison that you cannot smell, taste, or touch. A prison for your trading(long pause, sighs) Unfortunately, no one can be told what theMarket is. You have to see it for yourself. This is your last chance. After this, there is no turning back.

(In his left hand, Bacon shows a blue pill, the pill of indicators.)

Bacon: You take the blue pill and the story ends. You wake up out your bed and believe whatever indicators you want to believe. (a red pill is shown in his other hand)
You take the red pill and you stay in the Market and I show you how deep the rabbit-hole goes. (Long pause; Jungian begins to reach for the red pill) Remember -- all I am offering is the truth, nothing more.

(Jungian takes the red pill and swallows it with a glass of water)
---

You can find examples of the decision matrix's being shared on the price action thread.

Have a good weekend!

Mike

Pure Price Action: 6 range CL chart from today

Here is a video of a chart I marked up today following the inventory report on CL (9:30am my time).  You can ignore the pretty blue and red colors because no indicators are used in any of the trades shown.  You don't need a blue-to-red indicator to tell you what price is already doing.

I made this video today on a 6-range chart because I recognize that a lot of traders prefer range charts, and prefer a smaller chart than the 5m I normally use.  I hope you enjoy it and find it useful.

The discussion thread is on the forum in the Price Action thread.


Trading Price Action: 6 range CL chart, Apr 21 from Big Mike Trading on Vimeo.


Mike

Video: Price Action on CL (Crude Oil Futures) Tue Apr 20th

Here is a video I made for the Price Action thread on the trading forum:


Trading CL (crude oil) with price action Apr 20 2010 from Big Mike Trading on Vimeo.


I look forward to discussing it on the price action thread.

Mike

Price Action Discussion

On the forum, there is a thread where many traders including myself are sharing price action setups.  We know price action is subjective, and we know a lot of traders struggle with identifying and defining price action setups that work for them.

Below is the post that I made to the thread today.  I strongly encourage you to come check out the thread directly, and participate!  It is for Elite forum members only, so if you aren't an Elite member, you may wish to consider joining if learning about price action is of interest to you.

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Here is my view from today. I didn't trade today, and didn't even see the market in real time, so this view reflects that. I really hate 'analyzing' a day where I didn't see it evolve in real time, because watching a bar form is as important (more important?) than where it closes.




We started with a big gap of 120 ticks or so.

The first hour there really was just one possible opportunity to short with-trend, the third bar is a failed HH. It made a HH but closed lower and closed near its low, that is usually a very bearish sign. The second red bar worked past a potential triple bottom area. The third lower close continued th bearish trend with a LL and LH.

The sixth candle, a higher close, was an outside bar -- making both a HH and LL. It closed with a lot of bullish strength, the close was very near the high of the bar. This is usually a bullish sign. My with-trend only rules would preclude me from taking this long, as price was well below the ema20 so I consider it "counter trend". A series of HH and HL followed, with the exception of bar 9 which was a doji with a LH and LL. It was quickly followed with a strong bull bar, again closing near the high, and right near the ema20 level.

The eleventh bar showed weakness. We made a HH yet closed quite a bit lower from the high. Candles with big tails and wicks are usually a good indication of strength and weakness at certain price zones. In this case, the Daily S2 level was right there, so if you believe in pivots you would say that this pivot area was keeping price at bay, preventing it from moving higher as more sellers came in.

The second hour began with a bang. The news quickly drove price down and looks to be a bearish engulfing bar. The second bar, a higher close, made a LL and a LH. The third bar, a lower close, was an inside bar. It closed very near its low, a bearish sign. The high was also near the ema20, so you could try to anticipate an ema20 bounce here.

The fourth bar was massive, over 100 ticks in 5 minutes. I wasn't home so am unsure if a news story propelled this activity or if it was just a lot of stops being run as we hit a weekly low on CL. The fifth bar was an inside bar that closed near its highs. The sixth bar was a lower close, it made a one or two tick HH but closed near its low. You can picture this as a bullish trap. Buyers who came in looking for a 1-tick breakout of bar four to enter a counter-trend long position were trapped into this, and propelled the move forward as the market turned back bearish on the sixth and seventh bars.

The eighth and ninth bars represented we started to see some buying enter the market as we entered a weekly low range. A successive number of HH's and HL's followed, right up to the ema20.

The third hour begins with the tap against the ema20 after a long successive number of HH's and HL's. The first bar shows some weakness, as it has a big wick and closed directly on top of the ema20. The second bar made a LH and a LL, and was only able to move 1-2 ticks higher than the open. This is quite bearish, especially when combined with the fact we've now closed below the ema20 and the trend so far today has been bearish.

The third bar continues the bearish trend with a LL and LH, again only able to muster enough strength to move 1-2 ticks higher than the open. The fourth bar is an inside bar, but with a close near its low it shows weakness. The fifth bar is a LH and LL again, but we start to see possible buying come back to the market as the bar was basically a doji. The sixth bar, a higher closing blue bar, made a LL by 1 or 2 ticks and quite possibly trapped many shorts who re-entered the market. When the sixth bar closed higher, and then the seventh bar made a HH and HL, any possible shorts were hurting but it looks like the strength quickly wained and we had heavy selling re-enter the market for bars 8, 9, 10, 11 and 12 -- all LL's and LH's.

The fourth hour starts with more or less a double bottom, but it made a HH and closed near the high, so this outside bar shows strength. I cannot take a long here due to it being on the wrong side of the ema20 for my tastes. The second and third bars show HH's and HL's. The fourth bar, a lower close, is an inside bar that closed near its high. The fifth bar shows a bit of concern to question strength, as price was unable to close above the ema20 and we're left with a tall wick and a close near the low. The sixth bar is an inside bar that closes near the high, right on top of the ema20. The seventh bar is again a great cause for concern for bulls, as we make a HH and a HL, yet the bar is an inverted hammer and has a very large wick and closes very near its low, again on top of the ema20.

Because of the weakness of the seventh bar, bar 8 is unable to move even 1 tick higher from the open, and makes a LL and LH, closing below the ema20 and setting up a nice re-entry short. Bar 9 is another LH and LL. Bar 10 makes a lower low by 1 or 2 ticks, but then closes near its high. Bar 11, a lower close, makes a HH and a HL so is not suitable to enter a short position on. Bar 12 is a LH and a LL, but is a higher close.

Hope you guys are benefiting from all my typing!

Please share your feedback and your views.


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Mike

Are you a trader, or aren't you?

Trading is simple, not easy.

All the price action in the world, all the indicators in the world, all the money management and technical analysis in the world is great.... but at the end of the day, what you are really doing is just trying to trade better than everyone around you. You have to out-trade the crowd in order to make money.

The saying is that 5% of the traders make 95% of the money (or so). In order to join the 5% crowd, you've got to trade smarter than your peers. It is "simple", because most peers are full of psychological and disciplinary problems -- they make inconsistent decisions and don't follow their own advice or their own trading plans. The "hard" part is for you to not fall into the same ditch.

The reason that learning price action is a powerful tool, and what I believe a strong step in the right direction, is because it can be done without indicators. And indicators are the devil. You would be far better off to have none than to have five or ten. Price Action is the closest thing to the "holy grail", because it is the most basic, the most pure form of analyzing the market. You guys have no idea how many private messages and skype messages I get daily begging me for indicators. Indicators, indicators, indicators! They see a new indicator on my screen and think "Shiny!!! If I had this, I could make money!!". Indicators can be useful, but they cannot make you profitable. If you aren't already profitable then please... PLEASE... just delete the indicators until you are!

Many traders feel they cannot be trusted to trade discretionarily after suffering huge losses. They look for some black and white answer in trading, "go long here", "go short here" and no such thing exists. They would be far better off refocusing that energy into learning how to re-condition their thought process and their minds to be better traders. Trading is a very intense process, it brings out a lot of emotions, it brings out the "fight or flight" response, it basically amplifies all the things wrong in your life until they are so pronounced, so unbearable that either you run away or you face your deepest fears and overcome them.





It may sound like hogwash, and you may laugh, but I believe in what I am saying and I've got experiences to back up my beliefs. Perhaps trading is different for every individual, because every trader has a unique set of challenges to overcome, and in doing so they learn to trade differently, being molded by these challenges like water flowing around a boulder. They adapt.

For me, I literally had to become a different person in order to succeed at trading. I had to curtail my impulsiveness, I had to learn to state my beliefs only when I had substance and factual evidence to back them up, and most of all I had to admit that I was wrong. That last part is key. Every few months I thought "oh, I've had a breakthrough... now there is no stopping me! Now I can make money!!". Wrong again. It wasn't that there were no breakthroughs, because in fact there were many. It's just that no single breakthrough was enough to make me into a successful trader. It took many, many breakthroughs and many, many admissions of being wrong.

There are no short cuts in life. There sure as hell aren't any in trading. I know some "traders" who are making huge profits but they are doing so in a way that cannot be consistently maintained. They are averaging down. They are taking huge risks. They have no money management. They have no exit strategy. They never define a "I'm wrong if xyz happens" scenario, because they never plan to be wrong! These traders may come around every now and then and make a lot of noise with their big gains, but they will be gone soon enough. Stupid people can get lucky, too. But to be in the 5% of successful traders, you can't be stupid, and "traders" who trade with poor risk management, no money management, and no exit plan are quite stupid. The market will humble them eventually.

Yet still, even after I write long posts like this, and hundreds more, people still believe that indicators will solve their problems. If I have one mission, one clear objective with BMT other than empowering traders to help each other, it is to try to reshape peoples energy away from indicators and instead focus that energy into proper risk/trade/money management and into overcoming the psychological challenges of trading. If only they spent as much time in these areas as they do playing with indicators...

Mike

Price Action: What is it, how to trade it

In a recent survey about webinars, a lot of members expressed interest in learning more about the elusive "price action" that many traders talk about and refer to.

It is my intent with this thread to try and document price action from my point of view. I think price action is subjective, but that is OK because I think trading is subjective too. Or more accurately, I think that in order to make money trading you must act in a subjective way.

Subjective vs. Objective:
The primary difference can be explained as trading from the gut (subjective) vs. trading from fundamentals or technical analysis (objective). 

But even that description leaves much to be desired. One person may interpret fundamentals in a very different way than the next. One person may view a technical indicator or combination of technical indicators in one light where another has a very different opinion.

There is an entire book on Evidence Based Technical Analysis which I recommend to anyone who wants to further explore the objective vs. subjective rules and concepts of trading, but for the purpose of this thread it is my intention to show you how to "read price action" instead of reading an indicator.

What is Price Action?
To me, price action is trend/direction and a series of higher highs, lower lows, or higher lows and lower highs. You might then ask, what is trend? What is a higher high or lower low? That is why price action is subjective. Trend to me will be different than trend to you. A higher high on a 1 minute chart may not be a higher high on a 5 minute chart.

Price Action is subjective. Trading profitability requires subjective trading decisions.

Unless you are Goldman Sachs with a million supercomputers and zillions of dollars, you can't boil trading down to a science and expect a predictable or quantifiable result (an objective A+B = C). Naturally, there are exceptions to every rule and quant traders will be quick to point out that there are routine and documented examples of market behavior that produce predictable results.

But lets not digress too far. Before I start posting some images and videos of what I believe defines price action and show examples of price action, I'd like to hear from you guys. 

a) Reply below and let me know how you define price action. 
b) Do you think it is a myth? Do you think trend is a myth? 
c) Do you think it is possible to objectively define price action, or do you believe it is all subjective? 
d) Do you feel it is even important to know or understand price action in order to be successful?

Let me know.  The entire discussion will take place on the forum in the Elite section.

Mike

Big Mike Trading Webinar: Market Profile, Part I

If you are an Elite member of the forum then you know we've been planning an ongoing series of webinars.  We conducted a survey and discussed which topics the traders most wanted to discuss and learn about, and Market Profile was the #1 requested topic.

The ongoing discussion about upcoming webinars is here (Elite only):
http://www.bigmiketrading.com/elite-circle/3383-upcoming-webinars-training-education.html

The Market Profile webinar (Part I) will take place Sunday, April 18th 2010 @ 1:00 PM Eastern.  It will be for Elite members only, and you can register here:
http://www.bigmiketrading.com/webinars/

And please see the instructions and details for the Market Profile webinar here:
http://www.bigmiketrading.com/elite-circle/3457-big-mike-trading-webinar-market-profile-part-i.html


The above list is a summary of the most requested topics and also represents the material we are aiming to cover in our ongoing webinars.  If you have any other suggestions feel free to participate in the thread and let us know.

Mike

Collective2 interface for EasyLanguage (TradeStation and MultiCharts)

I really needed a nice interface between MultiCharts (EasyLanguage, or TradeStation EasyLanguage) and Collective 2.  It seems the one written by C2 themselves is not all that great, it doesn't support profit targets or stop loss orders (OCO) or even limit orders or buy/sell stops.

So, I wrote my own.  It isn't fantastic, but at least it supports limit orders or market orders, buy and sell stops, profit targets and stop loss limits (OCO), and more.  It is a three step process:  a) function, b) signal command, c) dos command.

The signal calls the function and tells it if you want to BTO (buy to open), STO (sell to open), cover, etc, the order quantity, the instrument, and any optional parameters like the limit price, stop price, target etc.

The function builds the proper Collective2 URL query and writes it to a text file.

The DOS batch file simply loops once per second looking for the text file, then uses Wget for Windows to parse the text file and hit the embedded URL's up on the Collective2 servers.  This is where the magic happens and C2 submits your orders.

I've tested it and it works well.  I welcome feedback and enhancements.

The code itself is on the forum here:
http://www.bigmiketrading.com/tradestation-easylanguage-programming/3423-easylanguage-collective2-interface-multicharts-collective-2-a.html

Mike

NinjaTrader 7 Public Beta Released

Well, 279 days late is better than never.

Today NinjaTrader released beta 13 of NT7 as the first public beta.  They originally promised the final NT7 would be released Q4 2008, then later changed it to January 2009, then later restated it saying that the first beta would be no later than June 2009.

Two hundred and seventy-nine days late, NinjaTrader has released the first public beta!

I guess now I have to change my blog to get rid of the countdown timer!  It's been there a long time!



You can download it here:
http://www.ninjatrader.com/webnew/download_trading_software.htm

Mike