Came across a chat transcript on Elitetrader where Mark Oryhon from Velocity Futures in August 2003 gave some tips on futures trading (link here).
There are a number of good tips and nuggets that Mark gave. I especially like the tips on plotting your entries / exits using colored lines on a chart, and scratching trades that you are unsure about or trades that don’t work right away. In the last session, I found myself scratching a few trades that went in my favor almost immediately after I got out, so I was thinking whether I have been too aggressive in cutting my trades and not giving it enough time to work. I guess scratching trades quickly is still better than taking a loss, but I’ll have to get used to seeing those wins-that-could-have-been.
Keep Detailed Trading Logs
- Log the following for each trade
- Time you get in
- Time you get out
- Reasons for getting into the trade
- Plot each trade on a 1-minute chart after the trading day
- Connect the entry and exit points with a green line if it is a winner, red line if it is a loser
- Look at the daily stats
- # winners
- # losers
- Biggest winner
- Biggest loser
- Average winner
- Average loser
- Average time in winners
- Average time in losers
- Time in biggest winner
- Time in biggest loser
- Average winner > Average loser
- Biggest winner > Biggest loser
- Time in biggest winner > Time in biggest loser
- Average time in winners > Average time in losers
- Check to see if
- Losses snowball one after another
- Trades churn in a trading range
- Caught on the wrong side in a trend day
- Any particular time of day where they lose money
Four Most Common Problems
- Trading just to make the next round number in the P/L.
- Trading more size when you are down
- Trading without proper preparation.
- You need to prepare your plan and trade your plan.
- You need to know the major news expected each day so that you are not caught by surprise.
- Know the support and resistance levels to watch
- Know what other sectors to watch that would be leading tells (e.g. bonds, dollar, or some other sector)
- Trading when you are emotionally upset / mad
What To Do When Experiencing a Rough Patch
- Cut back size
- Trade less
- Wait for easy trades
- Get a string of small winning days
- Then add size
- Scratch trades that you are unsure about, don’t wait for it to turn into a loser.
- The best trades work right away. If it doesn’t work out right away, don’t wait for it to go against you
- Don’t trade your bias, but go with the flow if your bias turns out to be right.
- Change the P/L from dollars to ticks.
- Watch the TICK, learn its patterns.
- Understand higher highs and lower lows.
- Pay attention to C, IBM, MSFT, SOX index, BKX index (that was in 2003, may not be as relevant today)