Wednesday, August 22, 2012

One more lesson - when the system says be aggressive...don't hesitate

In trading this Market Profile Bell Curve model that i've created (modified from my collection of teachers over the years), I would group my trading difficulties into 2 categories:

a) wanting to believe a previous day's mode is still price controlling market activity (greed)
b) not being aggressive when the model says to be aggressive (fear)

My trading loss last week was an example of a). 

Today was an example of b).  I should have been involved in a max size position...instead i was watching from the sidelines.  When the model identifies an over / under supply condition, this is a 90% probability trade setup.  This means that the market goes thru a vertical supply distribution 90% of the time that the model recognizes these setups.  That means, whenever one of these setups is triggered...i should be trading with my max size...buying 1 unit as soon as the signal is generated...with scaled bids just below the market in case there is a slight dip up to my max size of 6 units.

Today, that would have been worth 20-26 ZN ticks (ZN allows 60x this was potentially a 20% return in a single trade), in a 90% confidence high probability trade.  Even when i was sitting in a dealer seat, trading a banks money, i had difficulty with this concept of being aggressive when i missed the first leg of a trade. The highest probability trades occur (such as today) after missing the first leg (buying the dip in treasuries yesterday morning was the first leg).  I need to find a way to remove the emotion out of initiating a position for this one particular setup.  If i can do that...then trading will become very easy.  This particular setup tends to occur at minimum 2 times a month...sometimes as many as 4 times.  If i only trade one type of setup, then this would be it.

1 comment:

  1. Thanks for the blog, I check in frequently ... appreciate your taking the time to point out the little details and other knowledge ... trade on!