S&P 500 E-mini Futures (ES) Trade: 8-24-09

I took this trade on a break of the opening range this morning. The chart shows an indicator I’m working on, called Adaptive Opening Range. Instead of defining the OR as a specific time, it defines the OR as the first swing high and swing low after the start time (0930 ET in this case). The red cloud starts when the start time (say, the market open) is reached, and the green cloud starts once the OR has been defined by a swing up and a swing down. My idea is then to trade a breakout of that OR, in whichever direction it comes. To me, this is better than a time-based OR definition because you actually get a range based on price action.

So today I went long (yellow line) on the Adaptive OR high +1 tick, stop was the OR low. I wanted 2 points on the trade (green line), but only got about 1.5 before it reversed. I eventually lowered my limit to +0.5 points and got filled (red line). Then price went on up well past my target. Again!

I’m too loss-averse and I end up scratching these OR trades before they have a chance to work. That or I need to reign in my target to about a point. Once I get to enough margin to trade two contracts, I’ll sell one at a closer target (like 1 point) and hold on to the other.

As for the Adaptive OR, once I get some bugs ironed out, I’ll do the usual ready-made indicator for donors, tutorial for the DIY’ers. It’s actually not too complicated once you have some logic for the swing points in place. Stay tuned…

Two Trades Today in S&P E-mini Futures (ES)

According to my developing trading setup, I should trade in the direction of the very early Opening Range (OR) breakout. Today, I watched a 1 min OR and later a 5 min OR. Because of the deteriorating internals (the NYSE ADVN-DECN and the NYSE Tick), as well as my net -0.5 point loss yesterday, I hesitated and passed on the trade, but it would have been a winner. Mistake #1. Then I went short as I thought I saw a topping near S1, but was wrong right away. Instead of cutting it early at about a -1 point loss, I held on until the full -2 points (my stop) to see if it would go my way. The trade gave me a lot of time to get out gracefully, but I just kept sitting to see if it would salvage itself. Mistake #2. Finally, I saw the writing on the wall and went long on a pullback to try to scratch the day. We got a lot of momentum near my two point target, so I pulled the limit order up two ticks and got filled, +2.5 points. Finished net +0.5 points before commissions, only about one tick after comms. Here’s the chart:

Today’s lessons for me:

1. Don’t hesitate.
2. Be wrong faster.
3. Keep swinging if you are in good mental and emotional control, and the market environment is not adverse to it.

Back to the day job grind!

UPDATE 5:00 ET–I scalped 4 more times at the end of the day. I ended up grinding back down to -0.25 points, but adding the commissions in as well, I was down -0.75 points overall. I keep learning this lesson, over and over–scalping is for market makers and suckers. I’m in the latter camp today. With that, I’m reconsidering my options for trading education and mentoring, since I keep going in circles on my own. I’ll post about what I do.