Thursday, May 31, 2007

May 31 Trade Summary $2,030


Traded the first 2 1/2 hours and now I gotta go to work. I did a pretty crazy trade on CL, a 10 lot for 5 ticks in 5 seconds, and as of right now if I had held the trade I would have an extra 5k on the trade, but it was just a quick scalp before I leave for work. No time for analysis.

P/L= $2,030

Wednesday, May 30, 2007

May 30 Trade Summary $1,517


Unfortunately I had technical problems with IB this morning and missed the first hour of trading, and as a result missed some good trading. IB failed to log me in this morning and wouldn't open the book trader when I finally did get a connection. I finally got connected at 7:30am and scalped the next 2 hours, took a break, and scalped another 20min, and now I'm done for the day.

P/L= $1,517 (61 RT)

Broker Problems-

IB error on log on-

Also, for some reason my total contracts traded on my trade summary log is showing double the amount of contracts I actually traded. It says I did 122 round turns today, when I actually only did 61 RT.

Trading style today-
Today is the first day I implemented a new trading style based on scalping volatility spikes. This new style of trading should have profit targets hit quickly and has a tight stop as default. With this new style of trading I hope to increase my contract size for each trade, become more mechanical in my trading, and eventually be able to move to trading ES to trade larger size.

Market Observations-
NYSE A/D opened at the lowest level I have ever monitored before (I'm sure Feb 27 was a lower value), but the futures couldn't push the NYSE A/D down any further on heavy volume during the morning, and we rallied right back into bull mode and have been trending up all day. ZN got faded today like it usually does at 7:30am, and XLE and Financials look to be the strong sectors today, which are the best sectors IMO for a trending bullish day.

Tuesday, May 29, 2007

May 29 Trade Summary $706


Could only trade the first 4 hours. I'm not sure if it was the market or me today, but I did really bad. I did some major churning today, mainly during the first 2 hours. I did 132 round turns trading ER2; that's about $600 just in commissions. Looks like Oil and Financials are weak and tech's are relatively strong today. I was looking at a new trading technique today, and I think that may have affected my trading. Also, there seemed to bearish divergence between the A/D lines of the exchanges and the price of the indices until the market turned at 8:30am.

P/L= $706

It looks like IB made an error on my trade summary log today, I only did 132 round turns, which makes since according to the gross and net P/L.

Friday, May 25, 2007

May 25 Trade Summary $3,250


Could only trade the first hour and a half. I'm surprised I ended the week with a profit considering I had a 8k loss on Monday. Today we had a bullish NYSE A/D setup, and a fade around 7:45am on volume exhuastion. Expecting a retrace into the afternoon and probably a lot of chop.

P/L= $3,250

Have a great weekend ya'll.

Thursday, May 24, 2007

May 24 Trade Summary $2,034


Priorities- That is what I need to work on.
I traded the first 4 hours, and now I'm going to work. When we have a selloff like we did today, you have to be trading the contract you know. Unfortunately my attention and assets were wrapped up in ZN and AAPL when the selloff started, so I had to manage those trades, and I was unable to trade ER2 during the selloff, which as a result caused me to lose a lot of potentially easy money to be made. Overall, I'm satistfied that I got a good trade in on ZN, considering I lack experience trading it, I did exit too soon though. (I bought bonds ahead of the selloff, unfortunantely I forgot to short equities at the top because most of my attention was spent on watching ZN and ZF.) I did get a few good scalps on YM, and I'm actually surprised that I traded so many contracts on YM and ER2. I had a downside target of 828 on ER2 today, I feel bad that I didn't make more money than I did considering the large range we had today. Overall, I need to stop wasting my time with AAPL, and I need to just work on ER2 and YM.

P/L= $2,034

Market observations-
Bond/stock inverse trade occured today, marking what looks to be the start of increased volatility for the markets and a possible correction for equities.(However we have memorial day coming up so people may be just be unloading positions before the 3 day weekend). ER2 caught up to YM today in terms where they trade relative to each other. I was actually buying YM and shorting ER2 today, the opposite of yesterday. It seems like everyone caught on to the buy small caps and short big caps pair trade by Tuesday. I looked at is a more of a blowoff top, where large short positions were being accumulated in small caps and ER2. Rick Santelli said last month that he expected SP500 to test the old highs before a market correction, he looks to be correct so far. Bob Pisani and most of the broadcasters at CNBC always tell you the news 1-2 days after its happened. Bob Pisani was saying yesterday, "Record short interest", "market is likely to continue higher and squeeze the shorts".What about all of last month, shorts were squeezed badly on all of the "good earnings news" like AMZN. Guess what happened, shorts were squeezed, covered near the top, we consolidated near the top for awhile, smart money came in an added shorts to all those "good earnings companies", and now we have a nice setup for a slow decline into the summertime. Time to sell some calendar calls.

Wednesday, May 23, 2007

May 23 Trade Summary $2,018


It looks like volatility is dying and the market is going to go into chop mode. I wouldn't be surprised to see the market end near a high or low for the day. I'm more biased to the downside for YM, but we are still in the bullish zone for the NYSE A/D line, and ES is near its all time high so we probably won't see a selloff yet.

Trade summary-
I pushed a runner on ER2 this morning and got about 1.2pts on 9 cards. I stuck to my strategy of only taking longs on ER2 and shorts on YM, and things worked smoothly today. Later in the day I put a 10 lot short on YM for a 5 tick scalp, and did some trading in Crude oil and XLE.
YM continues to look pretty bearish to flat(I think some calendars calls were sold last friday), and the NYSE A/D is more bearish then the NASDAQ A/D.
During choppy trading(like the last hour), it is amazing to see how well block trade signals work.

P/L= $2,018

Market observations-
It's interesting to note which sectors are the ones responible for the tick extremes(which sector has all of the stocks hitting the bid/ask near the high/low of the day and what is the reaction seen in the futures indices and commodities like crude oil and gold. I missed a key time reversal on Bonds today, I'm starting to wonder when ZN well turn around. If your going to swing trade, bonds sure seem to be a good trading vehicle; a contract that I need to spend more time on learning. Although Time and Sales may be overlooked by some traders, I've been reading the tape much more lately and have been noticing an important pattern to when a breakout is going to occur and when it's likely that the price well be faded. Another interesting fact about today was that I forgot to turn on the TV to CNBC, maybe not hearing CNBC in the background helped me focus better today.

Tuesday, May 22, 2007

May 22 Trade Summary $1,166


Well if you didn't see it yesterday, then you must have seen it today. Huge divergence between big caps and small/mid caps. With every low on YM you should have bought ER2, and with every High on ER2 you should have shorted YM. I didn't see this change between the indices until yesterday afternoon, and as a result there was a fatal impact on my trading results yesterday. YM is lower then it was yesterday and ER2 is higher than it was yesterday.

P/L= $1,166

I actually messed up first thing in the morning because I saw a short setup form. Unfortunately I went short ER2 (should have shorted YM instead), and I ended up letting a $500 winner turn into 3k worth of heat. Absolutely ridiculous, I know, it looked like it was going to be another blow up day. But I held the short, Vowing not to go short ER2 again, and finally covered ER2 around the 9am lows for a small profit. I then made a cool scalp trade with 8 cards for a few ticks based on something I've been noticing, and then I had my computer freeze up while it processed this mornings recording, and as a result I missed the afternoon breakout. I later tried going long ER2 at 841, got stopped out, went short and got stopped out, and then noticed a similiar pattern that we had yesterday (a price and volume peak), so I went short and made about 1/3 my profits.(Again, I never should have been looking to short ER2, but I saw the trade and took it, again I would have been better off shorting YM). I then later did some stock trades, covering my short on SMH and XLE too soon, and then near the close I shorted YM, and that trade was a piece of cake.

So until I see things change, if I want to go short ER2 I will short YM instead, and if I want to go long, I will go long ER2 over YM. Another thing I made a mistake on and failed to notice was that the Nasdaq advance decline line is a much better gauge to use when trading ER2 and NQ, where as NYSE A/D is better used on YM and ES. I'm still using NYSE TICK, but I will look into seeing if NASDAQ TICK is any better to use.

May 22 Afternoon progress

P/L= $575

I was getting my butt kicked this morning, but stuck it out. Not sure if I'm done for the day, I'm waiting for a possible afternoon breakout in SPY and IWM. 837 has been a magent on ER2 today. I tried a scalp trade with 8 cards and got 2-3 ticks, a new scalping setup I've been looking at where you only have a few seconds to react based on NYSE TICK and block trades. I recorded it, so I might be able to show to you guys later. I'm so happy to be positive today considering how choppy its been and how crappy I traded yesterday.

May 22 PreMarket


Well, in the last 2 days ER2 has caught up to YM in terms of percentage gains for the past week, and IWM is at it's 52 week high. I have a bullish bias on ER2 going into today and will be looking for long signals. I will pay less attention to the divergence between ER2 and YM because trading off the diveregences between the indices doesn't work like it use to. I will be looking to see if there is strength in SMH and XLF today, which will help ER2 and ES make new highs for the year. Only add to winners and cut the losers. There is no real news out today except for the Richmond Fed index at 10am EST and Paulson speaking at 9:15am EST, so today should be a fairly straight forward day.

Monday, May 21, 2007

May 21 Anatomy of a blow up day $-8K


P/L= $-8,100

It would be wrong not to post today's performance, because it is REAL, and it shows that I'm human and mess up just like everyone else. I was short YM, covered and lost 2k, went long ER2 at its tops and sold for a 2k loss, went short ER2 and lost 4k. The divergences messed me up. I tried trading longer time frames then my usual scalping while holding large size. As a result I traded badly, trying to get back to breakeven. I'm looking at a few things where I might be able to trade large size and look for 5 ticks per scalp. Today was definitely a depressing day. I'm going to go back to scalping and trading my usual size, because that is what has worked the best in the past. I should stick with trading ER2 as well, because I'm not as good at trading YM. It's funny that I drew in arrows to where ER2 would go today on Sunday night, yet I totally ignored that ER2 was traveling there because I was trading YM and focusing in on it. I've added a new label - tagged- trading blow up. For all the people that thought that it wasn't possible to win everyday, well, here it is, my blowup day. Lets see how much I can lose tommorow from revenge trading and trying to make it all back in 1 day! (NOT)

May 21 morning trading


I'm short YM at 13580. There is a big bearish divergence on YM compared to ER2.(the reverse of what we saw last week). Profit target is 20-50pts to the downside. I'm waiting for an afternoon breakdown. ER2 is making new highs, but YM is still near its opening price. I'm taking some heat on this trade, but it looks like there is strong resistance at 13590 and that traders are buying ER2 instead. I bet this divergence is really messing with traders heads that have been trading YM for the last few weeks.

Sunday, May 20, 2007

May 21 Week Outlook

The Monday following option expiration Friday can be a good day to trade. I'll be watching for signs of a trending market.

Friday, May 18, 2007

May 18 update $844


I was getting ready to leave for work and I came to my computer and saw that ER2 had broken out and was at 823, and that YM had bearish divergence compared to ER2 (the reverse of what we've been seeing lately), so I got a quick long scalp on ER2, and a short scalp on YM.

P/L= $844

OK, now I'm officially done.

Market Observations-
Too bad I missed ER2's afternoon pop, no one was expecting it I bet, but with expiration today, the divergences aren't working between YM/ER2, and we saw a reverse of what we have been seeing between this pair for the last month.

Have a good weekend ya'll

May 18 Trade Summary $744


I traded the first 2 hours, and now volatility is flat lining and volume is weak, so I'm done and getting ready to leave for work. I should have traded CL (crude oil) a little more this morning because the patterns and volatility was better than the stock market futures indices. As the day goes on I think the divergences between YM and ER2 will narrow as positions are closed out.

P/L= $744

Market Observations:
There was an interesting pattern at the 15min mark (9:45am EST) today, which has to do with the closing out of positions in options and futures.

Notice the pair trade between XLE and SMH and the pop in CL at 6:45am.

Have a good weekend ya'll

Video is Done

To all those that emailed me, I decided to just post the videos on the web, because it would have taken me longer to email everyone back individually. So, everyone gets a chance to see my videos if they want.

I decided to load the video clips on my homepage at John's Putfile homepage, (so thanks to for providing this service)
I cut the hour long video into 3 scenes, with each scene being a different setup where I took a trade.

Video Viewing Tips- I suggest you increase the view size once you've gone to the video and make sure the audio is turned up.

Just a warning to all those viewing- I swear, burp, yawn, sing, and make stupid comments in these videos. Also you will here my audible alerts going off every once in a while.

First trade was a short based off the opening bearish NYSE A/D value-
Click here to watch 'High-Probability-Trading-May-17-Bearish-open'

Third trade was a short based on NASDAQ A/D bearish setup-
Click here to watch 'High-Probability-Trading-May-17-scene-3'

Thursday, May 17, 2007

Update on Video

I've been working on it for 3 hours. The file is 580mb and is too big to send through email. I'm working on a way to reduce the file size. I've used google's video uploader which allows this large of a file, but there converters make the quality very blurry. I'm working on it. I won't be getting the video out tonight until I find a way to reduce the file size down. I'm trying googles video uploader as a back plan, but I may have to wait for google's video uploader to finish rendering which takes hours, and then I have to wait for approval from google before it can be viewed, so that is still a day away. I'll send you guys out something in the next day or two, it's just gonna take some time and work.

Trading Video

For those that responded for a copy of the video, I will work on emailing it out later tonight. I'm still at my work and won't be able to upload it to share until later tonight.

May 17 Trade Sumary $522


Only traded the first hour and traded small size. I made a recording and for those interested in seeing it, email me, and I'll try to email you the file. It is a pretty lame video, I woke up 15 min before market open, so it was kinda rushed and put together and I don't have time to edit it, but you can still see me trade and hear my thought process. Gotta go to work, expecting a choppy trading day.

P/L: $522

May 17 Long YM/short ER2

I was listening to CNBC this morning and I heard one of the fund managers say he expects to see large cap strength and small/mid cap weakness, a pair trade; long YM, short ER2. You can see in COTC reports that the speculators have positions weighed in this direction as well. About a month ago I heard the same strategy from another money manager they had on CNBC. Yesterday I should have been taking long YM positions and looking for short positions in ER2. Even Dr. Steenbarger talked about this strategy on his recent blog entry at TRADERFEED as well. I use to trade based off of divergences between the indices (ie YM leading, so I'd buy ER2), but this is a mistake, because there are strategies being deployed by big money that makes these divergences widen instead of shrink, making it frustrating for divergence traders.

I gotta leave early this morning, not sure if I'll be trading. I think I will do a recording this morning and look for a setup that I've been seeing lately.

Wednesday, May 16, 2007

May 16 trade summary $1,624


I should have made double what I made today but I made some big mistakes. It was fairly obvious that we were going to get a short covering rally into the close, I just wish I was long YM instead of ER2. ER2 had bearish divergence all day compared to YM, and I struggled on my long ER2 positions. I should have been buying YM, because it has a bullish divergence as you can clearly see in any chart.

P/L= $1,624

I was down considerably today, but held true to my long ER2 position into the close.
This morning I held a long position on ER2 at 815 for over an hour holding 10 cards and I took some negative heat on the trade. It was frustrating to see ER2 getting rejected off 815 3-4 times showing a big bearish divergence, while YM and ES had bounced back to the morning opening levels. Because of ER2's bearish divergence I ended up exiting my long ER2 postion too soon. I had a target of 817, but ER2 wasn't moving quick enough, so I scaled out into 816's. Because of ER2's bearish divergence I later tried shorting 817, thinking it was a good resistance level, but ended up giving back my 1k profit and ending up going in the hole. Then I was thinking, WOW, I should have held that 815 all along. So I went long at 819, took 1.5pts worth of heat on the trade, and waited for the close. With all three sectors trending higher into the close, I knew there was a good chance of a closing short covering rally, so that's why I was long on ER2 into the close. Normally I don't trade like I did today. I messed up because I was trying long positions on ER2, when instead I should have gone long YM. The bearish divergence on ER2 was frustrating for me today, so I will be smart next time and remember to take long positions on YM, and short positions on ER2, like I did yesterday.

I'll post some charts later, gotta go get some food, haven't eating since 6 this morning.

Tuesday, May 15, 2007

May 15 Trade Summary Update $3,129


Well I missed 2 easy setups, 1 being the morning pop (I actually was long at 822 off of a buy stop I placed, but I only took at 6 tick scalp off of it, I didn't think we were going to pop a full 8pts, so I missed the trade due to hesitation and thinking WOW, I'm not chasing this type of volatility, I'll wait for a pullback), and the other setup I missed was when I was typing my my afternoon blog entry (I guess I shouldn't have lost focus). I think I should have made double what I made today, but I got a little less confident as the day progressed because my mind frame switched to capital preservation mode. I did push myself a little in the afternoon and put on trades to get to the 3k mark because I was already over 2k and I still had another 3 hours to go to make that extra 1k. I pretty much just watched the trading into the close, missing another 2 setups, but I didn't want to screw up a good day by trading the last 30 min chopp.

P/L= $3,129

No trade log today, only a summary. (Reason: the trade log is too long, like 3 pages)

Charts Time:
YM/ER2 Divergence

NYSE A/D bearish divergence setup (also NQ A/D more bearish setup, -100 AMEX reversal at 11:45am TOO!)

NYSE A/D trend lines helps keep you on the right side of the trade-


Market Observations-
Today was a good momentum day where adding to winners payed off.
NYSE A/D showed bearish divergence after the morning pop, as well as ER2 and NQ, while on the other hand YM kept going higher (probably due to lots of retail traders covering shorts, not knowing that YM was overvalued relative to the other indices, as it usually is).

Trading thoughts-
I think I might be wasting my time scalping stocks intraday, because I'm much more productive trading ER2. I tried trading 4 other stocks besides AAPL today, but the orders were taking so long to get filled that I canceled all of them. I'm use to trading ER2 where the fills are pretty much instantaneous, and didn't like having to wait for my orders to be filled while the market was moving (AAPL however is much quicker at getting filles and suites my taste compared to the NYSE listed stocks). I did manage to scrap out 100 bucks on AAPL, but during that same time period I was trading AAPL I probably could have made 2-3x as much trading ER2. If I'm going to trade stocks, I think I need to use a scanner to find my stocks and look to put on trades and hold these trades for 30min or longer instead of trying to scalp them, because I'm more likely to get chopped up scalping stocks. So, I should continue to scalp ER2, and look to find stocks that are trending and put short term position trades on these stocks, instead of trying to scalp these stocks (because my time is better spent scalping ER2 and not stocks).

May 15 afternoon progress $2,022


Not sure if I'm done trading yet. Believe it or not I didn't make any of my money by buying the morning pop.

I tried trading some listed stocks and the fills take forever, so I'm sticking with nasdaq stocks for scalping intraday.

I expect the dow to keep going up, there is a big bullish divergence between YM and ER2. You could do a hedged strategy with option or futures by going long YM and Short ER2.

NYSE A/D started near the neutral to bullish zone this morning and popped into bullish territory after 7:05am, currently at a value of 1.95, but showing bearish divergence and resistance overhead with ER2 being the best short right now if you wanted to take that risk.

Monday, May 14, 2007

May 14 Trade Summary $512


The morning was difficult to trade and it wasn't until around 9am that I started making money. I initially went short in the morning, but got stopped out, so I went long and struggled most of the morning.There was a big divergence between YM and ER2, which had me trying to bottom pick during the morning. Finally I reversed to a short position in the afternoon and scalped a few pts. and made the bluck of my profits.

P/L= $512

Market Observations-
NYSE A/D started out neutral and went bearish in the afternoon with the corresponding selloff in the major sectors (XLE, XLF, SMH) after BUSH's speech at 9:25am.

I've gotta got to work, so can't trade the last hour and a half, but we could keep selling off by the looks of it. Watch for a possible time reversal at 12pm.

Sunday, May 13, 2007

NYSE A/D Strategy

This is a rough draft of my NYSE A/D strategy. This will be an evolving strategy as I research it more.

I follow NYSE values to determine market strength and use it as an indicator to base my trades off of along with NYSE TICK, Volume, and price action.

NYSE A/D Values Observations-
Very Bullish: 3.0-4.5
Bullish: 1.5-3.0
Neutral: 0.6-1.5
Bearish: 0.2-0.6

When NYSE A/D opens on a large bar up between 0.6-3.0 look for a large and quick reversal bar within the first 5 minutes of market open for a potential short trade setup that may last for 45-60min (Time period of expected reversal 7:15-7:30am)

When NYSE A/D opens with and extreme value 3+ or less then 0.5 there is a bias to go in the direction of the extreme NYSE A/D value; moreover, if there is a gap in the morning, and the gap is not filled in the first 30min, look to trade in the direction of the NYSE A/D extreme value.(ie. If NYSE A/D is 3+ after 10min of market open on a gap up with no gap fill, go long and expect bullish trend day, the reverse is true for NYSE opening below 0.5 and not filling the gap in first 30min)

Other things I will look at in conjunction with NYSE A/D is relative sector strength in XLF, XLE, and SMH, as well as the volume seen in these ETF's and the Futures contracts ES, ER2, NQ, YM, ZN, 6E, and 6J.

Opening Short setup, NYSE A/D neutral value range-

Opening Gap and run, NYSE A/D Very Bullish Value-

Opening NYSE A/D extreme value gap fade, but still bullish bias from NYSE A/D Bullish value-

Opening NYSE A/D bullish value-

Opening NYSE A/D short setup, NYSE A/D bearish opening value-

Opening NYSE A/D short setup, NYSE A/D bearish opening value-

Opening NYSE A/D long setup, NYSE A/D very bullish opening value-

Weekly Outlook

Index comparison:
YM strongest, ER2 Weakest

Inverse relationship between ES and ZN.

Friday, May 11, 2007

May 11 Trade summary $543


Trade Log

I traded the first 2 hours, and ER2 was difficult to trade off the open, however I held true to my long bias because of strong tick readings and NYSE A/D broke its descending trendline at the key time of 7:15. I did a little bit of trading in AAPL and C because I noticed some block trade fades. Should have held my AAPL short at 108.34 a little longer.

P/L= $543

I'll try to post some charts and analysis on yesterday and today's trading later. Time to go and eat breakfast now.

May 11 premarket action

The Eco numbers on PPI and retial sales came out, and they looked bad, but that doesn't matter, price is all that matters. ZN popped up but is now trading from where it was before the number. ES and ER2 are up. If you shorted ER2 on the close yesterday and are still holding you are feeling the pain because ER2 is at 826.5 right now. Yesterday was a double disrtibution day when looking at the charts from a market profile standpoint. I'm expecting NYSE A/D to open above 0.5 this morning. Will shorts cover at the open, or well bulls sale at the open? With the daily candle formed yesterday it looks like an easy short setup, almost too easy. I'm expecting Chop today and will be watching volume and sector strength in XLE, XLF, and SMH. I'm expecting an inside day, but will be watching for possible breakouts if the main sectors all start trending.

In the news- Greenspan sees one-third chance of recession, last time Greenspan came out and said this the reaction occured in the asian markets and then caused a global selloff, Feb 27 ring a bell? Funny that we get a news headline like this after yesterdays decline. Well, lets see what happens today......

Thursday, May 10, 2007

May 10 update $2,638


Messy afternoon trading, but in the end I came out ahead, should have shorted ER2 instead of YM on the bounce at 8:45, I shouldn't have looked at my P/L in the morning, because I started thinking preservation,,,, I should have been using more size on the bounce.
Trade log 1

Trade log 2

Well, I skipped lunch, because it's not that often you get days like this. I don't like trading the last 30min because it can be real choppy. I went short because of the heavy volume hitting NYSE TICK lows and scaled out a little too soon. It looks like a whole bunch of people that shorted at the close (probably retail traders) got a bad whiplash in the after hours which resulted in huge short covering.

I'll do some analysis later, my brains gotta rest.

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