May 21 - Friday

It's Saturday and I'm just getting a moment to post yesterday's practice trades. In TNA, I made three trades investing about an hour and 15 minutes of my time. The first two trades were especially good for me in that as soon as I put them on, price moved away from the entry in positive territory and never looked back. I ended both trades far too soon although I didn't have time to sit and watch the second one because of other responsibilities. No excuse on the first one other than inexperience.

On the first trade, I had the presence of mind to think about going WITH the momo instead of counter to it, and I waitied for a pullback to do so. The second trade was nice in that I anticipated the reversal at the 12:20pm candle because of the near-doji. In the 12:25 candle, I waited for price to break below the close of the near-doji in the prior timeframe then took the short. Price just dropped away from the entry point. It was perfectly timed, and after closing out the trade and coming back later to the computer, found it to be well-timed on a longer time-frame.

The third trade long originated after seeing the large volume spike at 2:45 pm plus the next candle (2:50 pm) ending at its low point. My gut told me to wait for price to press down again before taking a reversal trade off those two signals. One thing I have learned with the 3x ETF's is that they are often like stopping and turning an oil tanker... the change of direction takes a little longer. I went long and price did move down against me some, but within an acceptable range, given the volatility of TNA throughout the day. The trade went positive and finally, I exited too soon but as has been the case recently, I don't have time to hang out and watch.

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An even better indicator of reversal came approx 25 mins later at 3:15pm with that volume spike after a run. Volume = trader activity. Activity tells me to "pay attention" as people smarter than me are making decisions; shorts cashing in their gains.

By this time, however, I had already stepped away from the computer.

May 19

I spent most of the day out of the office but had a chance to look at the markets in the later afternoon. Because of Scott Farnham's attention to the VXX of late, I called it up and thought I'd have a look at the chart. I liked the chart immediately... my forst impression was of how "clean" it looked. But, upon entering, I found it to be rather squirrely. Maybe it was just that it was EOD and the intra-candle volatility was increased.

In any event, my first trade was a scalp for short money paper-gain. My second paper trade was completely against grain, that's woodworker speak for going against the flow. (poor choice #1). For some reason, my first impulse is to look for reversals. Occasionally I ignore this impulse but for some reason, it is how I am wired. Too bad, because this as well as my initial entries over the past few days would have been nice winners had I gone "with the grain," in the direction of momentum. I held the trade (poor choice#2) as I have the past few days and found a good area to really hit hard to bring average price down. Then, as I have done recently, I sold the pop for a modest gain. It was around this time that I found the price really twitchy. Looks like a lot of traders were uncertain and it translated into short-term volatility.

What did I learn today?

1. I have to make my first thought to "go with momo" instead of counter to it. Doing so would have given me very nice gains on each of the past few days. My pattern of being "early" on reversals continues. Which is to say, a pattern of being "wrong" initially.

2. I must sell those losing trades. One of my weak spots is recognizing when I am wrong versus when I am caught in consolidation and need to hold onto my trade idea.

3. Be patient. Await my familiar signs of direction change in order to increase my probablity of a timely entry. After all, if I haven't seen such a sign, why should I play for a reversal of the current momo? Go with the flow instead.

May 18 - Tuesday

I did have a chance to sit in front of the computer after completing my bids and sending them to customers. Still, I didn't spend very long with the markets. As I did yesterday, I played some practice trades in RIG around 3:00pm. I went long, looking for the pop that comes after a protracted down move. It hadn't retraced with any significance since 1:00-1:30. The long was premature and I held it as it dropped. (Poor choice #1)

10-12 mins later, I felt momo start to wane on increasing volume so I found what would be a high probability reversal spot. I took four trades long at this spot, and the move paid off. I went long within 2-3 cents of the LOD. This brought my average price way down, allowing me to scale out four of the five parts of my long position. I kept the last position and sold it at the 7 EMA. (poor choice #2). Price continued rising and I left a lot on the table. Hindsight tells me I should have kept this final part of my position until breakeven before selling.

Again, poor execution by holding a losing trade then averaging down in price. This is a suckers' play and is not the pure, clean method of trading I am seeking. I will continue to fight my "demons" as the weeks and months progress.