Futures Roundup

After days like today, I need to just walk away from the table and charts for a couple of days and do something else. If I don't, I will convince myself that I need to further tweak my system when my system has nothing to do with it whatsoever. I have a momentum indicator that I developed that works very well in trending markets and gives false signals in choppy markets - not rocket science. What I need to do is develop rules that will assist me in defining when I have trend and when I have chop. To that end, I have developed the following rules when the market opens:

1. If the globex session has a +50 tick or greater range on the YM at the 6:30 open (Cali time), it is ok to take a momentum indicator driven trade when the signals trigger.

2. If the first momentum trade is a loser AND the range since market open (from 6:30 on) has not exceeded 50 tick on the YM - sit on hands until that happens.

3. It is ok to take second trade if the Morning Session Range is greater than 50 ticks and 24 Hour Range is greater than 50 ticks on the YM.

4. If the second trade is a loser, 3rd momentum trade cannot be entered until 24 Hour Range on the YM is greater than 100 ticks AND Morning Session Range on the YM is greater than 50 ticks.

5. Failure of the 24 Hour Range to exceed 100 ticks on the YM eliminates the momentum trades for the day.

What was interesting today was that, while we had the 100 ticks on the 24 Hour YM Session and 50 ticks on the Morning YM Session, we still had chop coming out of the doldrums that did not stop until the end of the day when we finally experienced a breakout of this range during the last 5 minutes of trading. Given the above rules and using my momentum indicators, I took two long trades in the YM and ER2 - both were losers due to the chop. By applying a rule concerning breakout of the doldrum range, I would have been forbidden to trade momentum this afternoon (I usually do not trade the last 15 minutes of the day, so I would not have grabbed onto that last run. However, today I did due to my frustrated buy and hold approach). I am not certain if it is worth considering, but I will research a bit tonight. I would be considering a rule like that below:

- Do not take momentum trades following doldrum period (9-10:20) unless and until trading range established during doldrums has been broken with a bar close on the 5-min chart outside of said range.

The biggest culprit today was myself. I was not able to accept the initial post doldrum losses and then violated my rules trying to recapture ticks. A snowball effect resulted and losses were amplified thereby violating my 2% limit rule on daily losses. All of this made me feel very anxious at the end of the day due to the loss of discipline rather than capital. My initial reaction was to point blame at the indicators, but a review of those indicators shows that I would have only been in two momentum trades post doldrums. I had to shake my head in disbelief when I realized this due to the actual number of trades I took fighting myself.

So, its done and lesson is learned (hopefully). I will continue to fight it and will do everything reasonable to modify my personality with the goal of being a focused self-disciplined trader.

Summary of the day is below:

YM: -25 ticks (equal to -$125 per one contract position)
ER2: -111 ticks (equal to -$1,110 per one contract position)

I can live with the financial draw down; however, its the discipline draw down that will be tough to live with through the weekend. Now that I got that out of my system, I am off to pick up some rib eyes (yes I do have enough money left for that) and to work in the greenhouse. Feels weird writing to myself since no one else reads this, but it sure helps the mental process and getting through the discipline issues.