Big Mike's Trading Blog

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

Win three months of free data service from DTN IQFeed

Hey guys, you may have seen the banners on the forum, but if not I wanted to let you know that part of our 1-year anniversary includes giving away $4,000 of trading related prizes.


DTN IQFeed will be doing a special webinar on Thursday, June 3rd at 3:00PM ET.  You can sign-up for this webinar here.  The webinar is open to everyone!  Just scroll down a bit and find the IQFeed section and then put in your email address so you'll get the webinar link.

In coordination with IQFeed, we're giving away three months of data feed service to three winners (a total of nine months of service).  This is premium service guys!  You may have read all the debates on the forum about who has the best data feed, well generally DTN IQFeed always wins :)

If you are already an existing IQFeed customer, you still need to come participate in the webinar.  There will be a few special prizes given to existing IQFeed customers during the webinar.

In order to enter to win the three months of free data feed service, you need to go to this thread and read and follow the directions.


You can also see all the other prizes and the details on how to win them by clicking here, including a lifetime license of NinjaTrader, a lifetime license of MultiCharts, 100 commission free trades from Mirus Futures, and 5 autographed copies of Al Brook's book Reading Price Charts Bar by Bar.

Mike

Los Angeles Traders Expo, June 9-12

Scott from the forum wanted me to invite any fellow BMT'ers in the LA area to stop by for the free trading expo at the Pasadena Convention Center on June 9th to 12th.

More information here:
http://www.bigmiketrading.com/traders-hideout/3918-big-mike-trading-meetup-la-traders-expo-pasadena-june-9-12-a.html

Here is the brief summary from the convention website:

Thousands Of Your Fellow Traders Are Headed To Los Angeles On
June 9-12 – Here’s Why:
Just Four Days Can Help You Become a Better Trader…
Your FREE admission to the Expo is the best value around—here’s what you get:

SPECIFIC STRATEGIES THAT WORK: Since the first event in 1999, Traders Expo has been known for bringing in world-class instructors to teach strategies and tactics that traders like you have used to take their skills to the next level. Every session is designed to bring you the latest information available so that you can make better trading decisions starting with your very next trade. You’ll learn ways to find profitable trades that work immediately.

EXCHANGE IDEAS WITH THE BEST TRADERS IN THE WORLD: One of the most important aspects of attending the Expo is the chance to talk with fellow traders about what is working for them now. Some of the best traders in the country will be sitting next to you in the sessions, at the reception, and in the aisles of the exhibit hall. This is a fantastic opportunity to talk with fellow attendees about how they look for trades each day. Some of your best ideas for tackling the markets could come from a fellow trader you chat with in the hallway.
 
ROADMAP TO CREATE YOUR PERSONAL TRADING PLAN: As an active trader, you’re accustomed to looking at short-term charts and making quick decisions based on what you know at that moment. At the Expo, we’ll give you the opportunity to step back and look at the overall markets from a broader perspective. This is a chance to evaluate your trading style and performance and learn where adjustments need to be made to set you on track for a profitable 2010.
 
FIND THE TOOLS YOU NEED TO MAKE THE BEST DECISIONS: Software programmers and developers are constantly making tweaks and adding features to software to be better than their competition—and you are the beneficiary! The Exhibit Hall at the Expo allows you to evaluate all of the latest tools and services under one roof—research that would take weeks online.


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Mike

Why don't I post my trades?

Well, the fact is, I do post my trades here and there throughout the forum.  I'll say when I took the same setup, or when I didn't trade because of xyz, etc.  But it never fails, people always ask me why I don't have a thread that lists my trades, all one by one.  I encourage fellow forum members to do this, after all, so why don't I practice what I preach?

Well, for one I am a firm believer in journaling as a means to an end that will uncover your strengths and weaknesses and help make you a better trader.  The ENTIRE FORUM is my journal :)  I've made thousands of posts, a great number of them citing specific examples of how I trade, what I use, what I do or don't do, etc.  I use the entire forum as a place to share about my method, the psychology, the discretion, even the automation behind what works or doesn't work for me.

As such, even though I do keep a private trade log, I don't feel an overwhelming desire to share a thread with all my trades.  A journal is for the benefit of the one doing the writing much more so than the ones reading it.  It is my fear that people will just try to copy my method, and that isn't what I want.  I don't believe you can be successful by simply copying someone else's method.  You have to make it your own method, you have to own it.  I am not going to greatly benefit from a journal of my trades on the forum, because I'm already actively discussing my strengths and weaknesses across the entire forum.

Each day, I personally respond to a dozen or more journals that are posted on the site by other traders.  I mark up their charts, I act as a coach or mentor, I give them challenges, give them praise, and I even bust their balls.  A little bit of my method comes across in each of these posts.  But I want the trader to retain his method and focus on what works for him, I am simply providing a means in which to make that process easier and more enlightening.

Anyway, this blog is already long but I wanted to share a particular forum response that I just wrote when someone asked (again) why I don't journal my trades on the forum:

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Quoting Richard:
I wonder: isn't it sending the wrong message to post about automated C2 systems (which are "magical indicators that say when to go long and short", after all), and not post examples of your subjective decision-making process?  What are the people that need wake-up calls going to think when they see your threads about making (presumably) promising automated systems with 30-minutes of work?



Is it that, in your opinion, computers can be taught simple rules that work, but people can't?  Or?


There may be a downside, having to field more questions from people, but I think it's worth it to help debunk the myth that all you need is a a couple basic mechanical rules to win.  Then again, you have a much nicer personality than I do, so people probably want to follow up with you more.  I hear nonsense and I shut it down :lol: hopefully leaving people bruised but smarter.
-- End Quote --


Maybe it's part of my master plan :)


In seriousness, it is quite evident to me that people want eye candy and they want indicators.  One doesn't have to look very far to see evidence of this all over BMT.  I have threads all over the forum that talk about my methods, you just don't have access to all of them as a non-Elite member.  :( But, I do try very hard to convey a message of my beliefs which is that less is better, focus on psychology, focus on discipline, focus on money management, and eliminate the indicators.  I've repeated that message here in this thread a thousand times.


With regards to the C2 systems, I've stated quite plainly that I do not trade automated systems, but that I do view it as a hobby- as an extension of the programmer inside of me.  At least it has been downgraded from an addiction to a hobby, because if I look back today upon my work a couple years ago it would be easy to classify it as an addiction back then.  I was consumed by automation, and I felt that automation was the only way I could make money.  I felt this way primarily because I had such poor discretion and discipline, that I couldn't trust myself.  I could see the signals of my pretty indicators, but I couldn't get the results I envisioned that I should be getting.


I am not alone.  Many (most) traders turn to automation to solve this problem.  But, you can't, and I believe traders that turn to automation to solve psychological and disciplinary problems in their own discretionary trading are, unfortunately, doomed to failure.  And the scary part is, at least with discretionary trading you can really get a firm grasp on what you are doing wrong.  With automation, there are so many added variables that the majority of people don't understand, they end up being consumed by the process (can't see forest for the trees) and end up wasting huge amounts of time, and money, on the process.  It's like all the people caught up in the indicator mess, they keep explaining away a bad trade or worse they see right past the bad trade and they keep thinking indicators (or automation, in this case) will work.  It's like a form of brain washing.  Great traders can make great money, even with indicators on their charts.  But it is firmly my belief these traders make great money not because of the indicators, but because they are great traders and exercise great discretion and discipline.  Further evidence of this is all around, look at live trading rooms that sell indicator packages.  They don't even take all the signals of their own package.  Discretion is required.  The room moderator may make great money every day, but it is likely because he is a great trader, and not because of the magical indicators on his screen.


Can automation be profitable?  Of course it can.  Can indicators be profitable?  Of couse they can.  However, in my opinion the overwhelming majority of retail traders would be far, far better served to eliminate automation and indicators from their trading and focus solely on becoming a more disciplined trader, and focus on solving/overcoming those trading related psychological issues, instead of running from them.


I post my C2 stuff hoping two things will happen.  1) My system makes a million dollars, somehow, even though I hold no hope for this based on my past experiences.  I continue to try new ideas, because it is a hobby and I enjoy it.  It fulfills my needs as a programmer. 2) I open eyes to fellow traders that automation doesn't work.  Each system starts the same way: a grand idea, an awesome equity curve.  This is the hook for less experienced traders, they watch the system contently and develop an interest.  It is my hope that by being completely transparent people can start to move forward and see that automation is not the answer, as the system fails over time.  They ask questions, why not re-optimize each day, why not this, or that.  I answer to the best of my ability, and they hopefully have learned something useful about automation.


There are several more examples of automated trading in the Elite sections of the site, that you don't have access to as a non-Elite member.  I choose to post the majority of the work that consumes the majority of my time in the Elite section, as a thank you to all those who support the site.  In these areas people are working together to try to make a robust automated system work, or make indicators work.  There are also some discretionary methods about trading naked discussed as a group, but the overwhelming majority of the users participate in or are interested in automation or indicators with signal generators -- not discretion.  I think it's fantastic that there is group participation, and I strongly encourage it (why the section was created in the first place).  I believe everyone is learning, and I believe that by having additional minds in the mix some problems can be overcome that you may not see by yourself.


Still, that said, I think people would quickly lose interest in a lot of what I have to say if I didn't keep them interested with tidbits or crumbs along the way.  It is my hope that a) by not calling my trades, people understand trade calling is worthless anyway, and b) by posting chart mark up and examples of what I would have done, people can consider a different approach, and c) by participating in group threads discussing things like naked trading or price action based trading only, people can see indicators are not needed and in fact often times hamper your success.


So, I do the best I can is the summary of the post.  :) I try to help as many as I can, and I try to do it in a way that is relatable to them by sharing my own past experiences but also cautioning them against making the same mistakes I have made.


Mike

My own trading method

I continually receive requests on what I use for my own trading method.  While this info is spread out all across the forum in the form of my replies and chart markups, I did write this one post and I wanted to share it here on the blog as well.

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I only trade discretionary setups, I have no automation. Within my pre-defined method and plan, I have clear concepts of when to put on trades and when to exit them. 

I am always evolving and hopefully doing so in a positive manner  You can just read the first few posts of this thread blog to even see how my method has continued to evolve. I am more and more and more focused on price action solely, trading completely naked without indicators, and just focusing on what price is telling me, and pairing that with good money management and experience.

There is no hard fast rule of when to place or exit a trade. I just have concepts which are based on price action patterns. I prefer to follow trends and buy breakouts and sell breakdowns.

I don't use a calculator and say that this trade is 0.8:1 or 1.5:1 risk/reward. But, I do have a max risk, and if the max risk is not sufficient to properly place my stop, I don't trade that setup. I always aim for a big pay off. I position myself to reap rewards. By scaling out, I take some quick winners to help build my confidence and play to some psychological needs, and then I position other targets to reap maximum rewards. The targets are all based on pre-defined support/resistance areas. I know my targets before I ever enter the trade, and they are never a static amount.

I may take some trades that have a lower than 1:1 R/R, but I don't do so intentionally. They may just be something like 0.8:1 and I didn't judge it quite right. When you place a trade, you have no way of knowing if this trade is going to hit your target or not. Even if it does hit your target, you have no way of knowing if it will then blow through that support/resistance area and then continue running to the next level. All you can do is make smart decisions and position yourself to reap maximum rewards.

I do have daily targets. I've got a lot of other stuff I work on each day (forum, for instance), so I find that having a pre-defined target helps me trade to a goal, then stop. The goal is always evolving. The goal also does not have to be based on profit and loss, it can be based on how well I am trading, or how well the market is moving.

I don't anticipate the type of day. I do, in general, find Wednesday's to be some of the best days because of the increased volatility usually present due to the inventory reports (oil). Other than that, I trade what I see. I mark trendlines on bigger time frames and take note of key s/r areas. I then just focus on 'what-if' scenarios. If the market does abc, then I will do xyz. If the market instead does abc2, then I will do xyz2. I don't care which one the market does, and I have no interest in trading in the middle. I'm waiting for someone big to move the market, and I then hop on and ride the move. I don't want to be in the middle and try to do the moving. This method works with trend following.

Many people want me to say:
- Here is my magical indicator that says when to go long and short.
- Here is my stop and target amount.
- Here is why I entered the position.
- Here is why I exited the position.
- Here is when to trade.
- Here is when not to trade.
- Here is what your daily goal should be.
- Here is what your daily stop loss limit should be.

These answers don't exist in this way. And if you (not talking to you rassi, but everyone) are still searching for answers to these questions then I think you need a wake-up call because I personally believe you are on the wrong path.

Mike

More on Big Mike Trading's upcoming 1-year anniversary

Just wanted to share with you guys...

I've confirmed now (5) events in June for our 1-year anniversary, which means there will be five corresponding webinars and opportunities for learning and Q&A, and at each event we'll be giving away special prizes.  These are top-notch prizes guys, and worth a real $ 4,000 (not inflated BS pricing).


Stay tuned... :)  And if you aren't already a BMT forum member, join now and get ready...

Mike

More Price Action Discussion

Come stop by the forum and join the price action thread.  Here are some recent discussions and charts...

Below are EUR/USD remarks from yesterday.



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Below is a CL workspace.

Right is entry chart (6 range). Top left is 12 range, bottom left 25 range.

What you see here is what I like to call "hammered dog shit". It's a highly technical term, use with caution.  The 6-range on the right looks like something exploded, and it looks and smells quite nasty. Price is ranging between 76.00 and 76.30. That's a death trap for many traders who get whipsawed.

Why is this happening? A few things. It's Wednesday, inventory report, etc etc. Sure. But also what is price telling you? The 12 range has a LOT of problems at these low areas. The 12 range also has a pretty clearly defined wedge with a few consecutive LH's.

The 25 range also shows a lot of consolidation at this price area. We're waiting for something to happen. Something will happen, and we'll either break through the wedge and make a HH+HL, or we'll breakdown the bottom support area and make a LH+LL again. I prefer to wait and then respond when that happens, and not trade in the middle of it.



Mike

The Hand That Feeds...

Make sure you are trading your own method and your own style.  Trying to copy someone else's method and trade it won't work.  It. Will. Not. Work.  You have to own it, and to own it you must understand every facet of it, and to understand every facet of it you need to basically create it or wield it with experience on your own with a lot of time and experience.


Trader A gets a puppy.  The puppy has been with Trader A for 5 years, and is now no longer a puppy.  Trader A asks Trader B to watch his dog while he is out of town for the weekend.  Right before Trader A leaves, he feeds the dog one last time his breakfast. (hits a profit target in the market)

Trader B goes to feed the dog later that night, but the dog gets real defensive.  This has never happened before to Trader A.  The dog may even bite Trader B if Trader B does not understand the situation properly and doesn't give the respect the dog is requiring at that moment. (taking a big stop in the market)

Even though the dog has been fed thousands of times by Trader A, and never experienced this behavior with the dog, Trader B can try to perform the same action or mimic that action yet experience drastically different results.  The same is true in trading, the market must be respected and in many ways you earn that respect within yourself.

You can quantify this in trading by talking about how Trader A would set a stop or target different than Trader B, or how they would exit a trade at a different position due to a (lack of) understanding of the price action, etc.

Don't try to copy someone else's method.  Instead, you need to make it your own method.  Go get your own puppy.

Mike

Example/Tutorial of real-time Price Action Trading

The purpose of this video was to draw in real-time the HH+HL, LH+LL of the market, and then to trade those levels.  I show you the exact entry price for each setup.  The stop for each setup would be 1 tick outside of the last price action marker, in other words -- where the setup would "fail".

I forgot to mention in the video that the paintbars are colored by what side of the ADXVMA indicator they are on.  This is the same indicator mentioned above.  This indicator and paintbar coloring was not used in any way during the video, I simply forgot to turn them off and I like having them on anyway :)

Some setups have higher risk than others due to the distance from entry to that stop point.  I also talk about how to place your targets using prior price action as a guide.


Example/Tutorial of Real-time Price Action Trading from Big Mike Trading on Vimeo.


I placed the price action markers in real time as I was scrolling through the chart.  This is the exact same thing that I do for my chart that I trade from.  I usually label them pretty quick, like I did in this example video and I think with time so can you.  If things are moving too quick you'll want to try a larger chart.

For this particular trading style (trading breakouts) a range chart works best.  The price action discussed in the video is really just the most basic examples.  For more complex examples sometimes a 5 minute chart works better.  You'll need to experiment to find what works best for you, as it is my belief it is subjective.

Please share your feedback so I can incorporate it into the next video...  Use the Price Action thread on the forum.

Mike

P.S.  I just watched the video, I wasn't too clear in a couple spots but I think overall it went well.  I'll try to be a bit more clear next time.  I haven't slept yet so am a bit tired :)