Futures Trader Discussion/ Weekend Read

@Linda [16:14:49]> I met Don up in New York in February, @Linda [16:15:03]> and am only sorry I did not have mroe time to spend with him then@Linda [16:15:43]> He trades SPs for a living,@Linda [16:16:01]> and posts a trading Journal to the website, @Linda [16:16:10]> sharing his market adventures anda thoughts.@Linda [16:16:18]> http://donmillerjournal.blogspot.com/@Linda [16:16:27]> Here is the link for you to bookmark.@Linda [16:16:54]> Don has prepared a brief intro for you,@Linda [16:17:12]> so let me welcome Don Miller and say THANX for taking time to speaka with us today!@DonM [16:17:26]> Greetings everyone.@DonM [16:17:38]> First, let me say I consider it an honor and privilege to be speaking to Linda and her "team".@DonM [16:17:52]> While Linda and I had never formally met prior to last month's Expo,@DonM [16:18:06]> we share several acquaintances and business relationships in this close-knit industry,@DonM [16:18:20]> and I'm familiar with some of her outstanding work.@DonM [16:18:34]> And from what I know of her general approach to the markets,@DonM [16:18:45]> I think you'll find our respective styles both similar and complimentary.@DonM [16:18:57]> First, a little about me.@DonM [16:19:08]> Some of you may know me from earlier in the decade when I was very active online@DonM [16:19:21]> and asked to teach and write for various sites and publications as a result of my performance.@DonM [16:19:34]> And I did, often to the detriment of my own trading.@DonM [16:19:50]> And while I greatly enjoyed the teaching and writing (we'll get back to the writing part later),@DonM [16:20:02]> it didn't take long for my focus to become fractured.@DonM [16:20:15]> So a few years ago, I made a personal decision to put aside the pen and blackboard,@DonM [16:20:31]> virtually disappearing from the public arena to focus my market energies 100% on trading.@DonM [16:20:44]> Essentially, I felt I needed to complete an unwritten chapter in my trading life.@DonM [16:20:55]> That of discovering my true potential as a trader.@DonM [16:21:10]> And so toward the end of 2007, I decided 2008 would be the year that I would@DonM [16:21:23]> pour my heart and soul into a year long trading "journey" and push myself harder than I ever had.@DonM [16:21:40]> So I traded every day of 2008, including U.S. Holidays where Europe was open.@DonM [16:21:51]> And while I won't bore you with all the details, @DonM [16:22:00]> suffice it to say that it was an inner journey that I'll never forget, @DonM [16:22:12]> the second half and summary of which is fully chronicled in my daily trading diary blog.@DonM [16:22:26]> And I mean "fully" chronicled, meaning every wince, tear, screw-up, pain, sleepless night, joy, etc.@DonM [16:22:37]> Did I mention pain?@DonM [16:22:46]> Well, there was that one day,@DonM [16:22:52]> Oh never mind.@DonM [16:23:02]> btw, the blog started as (and remains) my personal diary,@DonM [16:23:10]> which is completely non-commercial and open for onlookers.@DonM [16:23:23]> I guess it keeps my mind on the market after hours while exercising the other side of my brain.@DonM [16:23:33]> But enough of that - you can check it out later.@DonM [16:23:43]> OK, so let's get technical.@DonM [16:23:49]> What kind of trader am I?@DonM [16:24:00]> First, let me say that I'll go to my grave believing trading is an art@DonM [16:24:08]> of self expression and that there are many ways to "paint the canvas".@DonM [16:24:21]> There are certainly a few common core principles@DonM [16:24:29]> like making sure revenues exceed expenses - lol.@DonM [16:24:41]> But then the rest is up to us to interpret market action and act within the confines of our abilities.@DonM [16:24:54]> So here's what my brush strokes look like.@DonM [16:25:04]> I consider myself a discretionary intraday scalper,@DonM [16:25:16]> who bases his decisions primarily on technical analysis.@DonM [16:25:29]> I've been a member of the CME since Feb 2004 and lease a remote IOM seat.@DonM [16:25:42]> I trade primarily ES, although I've spent a lot of time and energy trying to trade the DAX.@DonM [16:25:56]> Yet my strength is clearly ES and I don't trade the DAX much any more.@DonM [16:26:05]> My Europe trading has been breakeven at best, @DonM [16:26:14]> which I think it more a function of not performing well at 3am ET.@DonM [16:26:23]> That's my excuse anyway!@DonM [16:26:32]> I also for some reason don't trade currencies well, @DonM [16:26:41]> even though patterns are patterns whether trading tiddlywinks or widgets.@DonM [16:26:52]> So I pretty much specialize in a single market.@DonM [16:27:08]> I trade in what I call "trade sequences", which means going from flat to flat by scaling in and out.@DonM [16:27:21]> Scaling in as the market moves toward wholesale entry points,@DonM [16:27:30]> and scaling out as the market moves toward retail exit points.@DonM [16:27:36]> If done right of course - lol.@DonM [16:27:48]> I know Linda preaches that as well: wholesale-retail over and over again as the market moves.@DonM [16:27:59]> I rarely hold a position more than 10 minutes, and if I do, it's likely with just a small remaining position.@DonM [16:28:12]> A 30-minute hold would be excruciating for me.@DonM [16:28:21]> I'd classify my trades as two types:@DonM [16:28:33]> (1) liquidity-providing trades where I'm looking to buy the bid or below as the market gets there @DonM [16:28:40]> & sell the ask or above,@DonM [16:28:52]> and (2) speculative trades where I'm anticipating a larger market move @DonM [16:29:01]> and don't mind paying retail to get in.@DonM [16:29:12]> Sometimes they of course blur.@DonM [16:29:20]> My primary trading "dashboard" consists of the following:@DonM [16:29:29]> Price charts of multiple timeframes, ranging from 1-minute to 60-minute@DonM [16:29:40]> 15 & 20 period moving averages with ADX and volume.@DonM [16:29:51]> 1-minute TICK chart (right under my 1-minute ES chart)@DonM [16:30:01]> 15-minute VIX as I find its trend to often be a stellar confirming indicator of the price action.@DonM [16:30:15]> I also sometimes use a 1-minute "3-Line Break" chart, @DonM [16:30:24]> which is a non-time based trending chart that Steve Nison discusses in his books.@DonM [16:30:36]> It's most helpful in trending markets.@DonM [16:30:48]> Here's an example of 3LB reflecting today's 3:15pm ET turn:@DonM [16:30:56]> http://tinyurl.com/c4oqof@DonM [16:31:30]> (Keep in mind I'm on the east coast, so I use eastern time in my comments.)@DonM [16:31:40]> It can keep one on the right side when all else looks like chop.@DonM [16:31:52]> That's pretty much it in terms of indicators.@DonM [16:32:00]> It's a constant scan like driving a car and looking at the dash.@DonM [16:32:16]> Remember the two-second rule they taught us in Driver's Ed? @DonM [16:32:23]> (Two second glances at each indicator)@DonM [16:32:35]> Most of the time it's probably subconscious.@DonM [16:32:46]> In terms of setups, for me it's all about finding decent wholesale entry points.@DonM [16:32:58]> First trend pullbacks on volume with TICK snapbacks to help time entries are nice.@DonM [16:33:10]> But I'll also fade extreme emotion and seek to exit on reversions toward the mean.@DonM [16:33:22]> Of course "extreme" has varying degrees as we learned in 2008!@DonM [16:33:35]> One of my favorite backdrops, and one that I'm very comfortable trading,@DonM [16:33:45]> is the morning after a strong closing trend.@DonM [16:33:54]> I believe Linda calls them "Z Days".@DonM [16:34:03]> They're like a comfortable slipper for me,@DonM [16:34:13]> fading the first serious price and TICK move, preferably toward the prior day's trend support.@DonM [16:34:24]> The way my brain works, it's easiest for me to view the market as trending on some timeframe.@DonM [16:34:35]> It might only be a 1-minute trend, but it's still a trend to me.@DonM [16:34:42]> It's just how I visualize the market.@DonM [16:34:53]> So I'm not a great range trader, unless there's a nice 1-minute trend within the range.@DonM [16:35:05]> I typically trade 15 to 30 "sequences" over the course of the day, @DonM [16:35:15]> usually totaling between 500 & 3,000 contracts (both sides).@DonM [16:35:28]> My sizing is usually a multiple of 15 or 30 as those are my normal "scale-in" sizes.@DonM [16:35:40]> Last year I traded about 585K ES contracts.@DonM [16:35:49]> Keep in mind as a member of the Merc, that my transaction costs are low, @DonM [16:35:58]> which allows me to provide repeated liquidity over the course of the day.@DonM [16:36:10]> But I'd like to focus my time here on some of the light bulbs that went off for me personally last year.@DonM [16:36:23]> Much of it is psychological.@DonM [16:36:32]> The first concept is one that I implemented at the start of the year.@DonM [16:36:44]> The idea came after I realized after a decade of trading that I trade best after a large drawdown.@DonM [16:36:55]> My focus was usually sharper, my intensity stronger, and my results consistent.@DonM [16:37:04]> Think about it: @DonM [16:37:10]> How many traders have built up large balances over the course of a day, week, month, year,@DonM [16:37:25]> only to "let up" and give them up?@DonM [16:37:34]> How many of us have gotten sloppy or complacent after a large win or long win streak,@DonM [16:37:43]> experienced a draw, and then gone back to grinding it out.@DonM [16:37:52]> Been there, done that.@DonM [16:37:58]> So I created and began using a visualization equity curve chart.@DonM [16:38:06]> You can view it here: http://tinyurl.com/dnduvr@DonM [16:38:18]> The chart shows a consistent period of strong equity growth to a peak based on actual results@DonM [16:38:28]> Followed by a swift "fall from grace" FICTITIOUS drawdown toward what might look like@DonM [16:38:37]> "trend support" on a price chart.@DonM [16:38:51]> The idea was to try to put my mindset into the "day after draw" mentality@DonM [16:39:00]> during every moment of every day, hour, and trade.@DonM [16:39:12]> It also gave me a humble mindset that is so critical in this biz,@DonM [16:39:22]> and allowed me to feel I deserved the profit trade after trade, day after day.@DonM [16:39:33]> And while I still have my "brain cramp" moments, it has led to a far more consistent@DonM [16:39:44]> and sustained performance than before I implemented the concept.@DonM [16:39:53]> I have the chart posted everywhere.@DonM [16:40:01]> It's even my PC wallpaper - lol.@DonM [16:40:12]> I can't overemphasize what this concept did for me last year.@DonM [16:40:21]> Let me put it this way:@DonM [16:40:27]> Prior to 2008, I never had a $100K month.@DonM [16:40:41]> In 2008, I had nine months over $100K, including two over $200K and one over $300K.@DonM [16:40:52]> Net after all expenses and fully auditable.@DonM [16:40:59]> It was a VERY powerful concept.@DonM [16:41:10]> I'm just ticked that it took me a decade to figure it out - lol.@DonM [16:41:23]> btw, I view a real daily draw as one of the costs of doing business.@DonM [16:41:34]> If you were to look at my P&L, you'd see a line for net daily gains and another one for net daily losses.@DonM [16:41:45]> And like any business, we should strive to keep costs low, but they can't be eliminated.@DonM [16:41:56]> So isolating it on my P&L helps me both recognize its existence and track it.@DonM [16:42:09]> Another significant change I made last year is I began playing no-limit hold 'em Poker.@DonM [16:42:23]> And for some reason, that helped me more clearly see certain key trading concepts@DonM [16:42:29]> in a completely different environment.@DonM [16:42:37]> Like getting away from a bad hand,@DonM [16:42:45]> Or pushing your chips in when you sense you have the "nuts" (the best hand).@DonM [16:42:57]> An example is I trade best when the markets are highly volatile.@DonM [16:43:06]> Some don't trade those well and need to back off,@DonM [16:43:12]> certainly nothing wrong with that.@DonM [16:43:22]> But I'm just the opposite,@DonM [16:43:30]> I feed off extreme market emotion and seem to be able to interpret that action@DonM [16:43:39]> much more clearly than a slow moving market.@DonM [16:43:53]> Perhaps it's because I don't like having my capital in the market for extended periods.@DonM [16:44:02]> And was the fall of 2008 ever volatile!@DonM [16:44:08]> 1 point scalps became 10 point scalps - literally.@DonM [16:44:18]> So I pushed my chips hard, often adding to positions when the overstretched bungee cord began to snap back@DonM [16:44:32]> It was all about betting size.@DonM [16:44:41]> I know there are many schools of thought as to whether one should have a consistent betting or trade size.@DonM [16:44:52]> And like most concepts in this business, there's likely no right or wrong.@DonM [16:45:02]> All I know is for me, varying betting size by increasing it when I'm in the zone@DonM [16:45:10]> or have what I feel is a high-probability setup has helped significantly.@DonM [16:45:18]> Yes, it does get me into trouble from time to time,@DonM [16:45:27]> but in the long run it helps me far more than it hurts me.@DonM [16:45:42]> The other thing I did mid-year, as I mentioned before,@DonM [16:45:49]> was to begin a serious trading diary, which evolved into the current-day blog.@DonM [16:45:58]> In it, I vent, beat myself up, and push myself as if I'm writing to myself,@DonM [16:46:06]> which I am.@DonM [16:46:13]> I use many corny sports, movie, and poker analogies to motivate myself.@DonM [16:46:23]> After all, trading is a mental sport, isn't it?@DonM [16:46:37]> Last year, it was everything from the 2008 USA swim relay@DonM [16:46:47]> to the Patriots who let perfection slip through their fingers in the waning moments of the 07-08 season.@DonM [16:46:57]> It was Jason Lezak catching Alain Bernard in the swim relay.@DonM [16:47:06]> It was staying ahead of the green Olympic and World record pace line as the year neared a finish.@DonM [16:47:15]> It was Rocky getting his clock cleaned and needing to get back up.@DonM [16:47:25]> It was Billy Crystal in City Slickers finally figuring out what "That One Thing" was in his trading life.@DonM [16:47:39]> Silly stuff.@DonM [16:47:46]> Or maybe not.@DonM [16:47:53]> It helps me view the market in a non-market sort of way to keep perspective.@DonM [16:48:02]> The blog is completely non-commercial and will remain that way.@DonM [16:48:09]> Sort of my way of giving back to the industry for those who want to listen to this crazy man babble - lol.@DonM [16:48:22]> There's also a 365 day countdown clock that helps me keep time in perspective whenever I feel rushed.@DonM [16:48:31]> It counts down by second - lol.@DonM [16:48:39]> So if you're realllllly bored ....@DonM [16:48:44]> :-)@DonM [16:48:50]> That's an area where I believe many traders struggle,@DonM [16:48:56]> keeping a clear perspective of time during every trade, day, week, month, etc.@DonM [16:49:06]> For I view the year as a single trade.@DonM [16:49:14]> One trade - with many parts.@DonM [16:49:28]> Trade and daily results mean nothing EXCEPT in aggregation.@DonM [16:49:40]> If you visit the blog, it may help to start with key posts listed in the lower left margin,@DonM [16:49:53]> which should give you a feel for how I view this business and the markets.@DonM [16:50:02]> Lastly, I want to mention a concept that I was introduced to last year@DonM [16:50:11]> the "Chinese Bamboo Tree", which I reference throughout the blog.@DonM [16:50:25]> It's about a tree in the Far East that takes 4-5 years to develop its underground root structure@DonM [16:50:37]> You see nothing for years as you keep watering it with faith.@DonM [16:50:44]> Then in the 5th year, the tree grows hundreds of feet within weeks,@DonM [16:50:53]> almost climbing before your eyes.@DonM [16:51:00]> Trading has been like that for me, only it took a decade instead.@DonM [16:51:11]> And I know there are still so many improvements I can make going forward.@DonM [16:51:20]> I'll probably be working on my exits until the day I die - lol.@DonM [16:51:27]> Always too soon.@DonM [16:51:33]> Well not "always", but it certainly often feels that way.@DonM [16:51:43]> Please know that I share all of this not to say "look what Don did",@DonM [16:52:01]> I mentioned on Saturday's post that this industry is full of smoke, mirrors & hype,@DonM [16:52:10]> such that it's often difficult to tell what's real,@DonM [16:52:16]> or more importantly, what is POSSIBLE.@DonM [16:52:26]> So I babble largely to drive myself,@DonM [16:52:34]> but to also tell others that you CAN cut through the smoke,@DonM [16:52:40]> and it IS possible.@DonM [16:52:52]> Like poker, most fail at trading, and that will always be true.@DonM [16:52:58]> This game of futures trading is truly a zero sum game, @DonM [16:53:06]> with capital changing hands from the large majority to the tiny minority.@DonM [16:53:15]> Yet for the few that persevere, there is no limit.@DonM [16:53:28]> It may take years for the roots to develop.@DonM [16:53:37]> Years where most will tire, quit, etc.@DonM [16:53:55]> You have to want it more than everyone else.@DonM [16:54:02]> As for me, the moment I feel I've "made it" will be the moment my trading goes downhill forever.@DonM [16:54:12]> The market rewards humility and punishes ego.@DonM [16:54:18]> Always.@DonM [16:54:27]> And the rewards and punishments can both be significant.@DonM [16:54:39]> I've just somehow learned how to stay out of my way enough times to give that tree and time a chance to do its thing.@DonM [16:54:48]> I think in years past, I think I was standing on top of the seed.@DonM [16:54:56]> So I tried stepping to my left.@DonM [16:55:02]> This year, I've faced a different problem,@DonM [16:55:10]> one of keeping motivated and recapturing the enthusiasm and drive I had last year.@DonM [16:55:20]> And I think it's been a tougher challenge than even last year!@DonM [16:55:29]> So I started a daily scorecard that I post on the blog that color codes what I view as key performance areas.@DonM [16:55:38]> This week's card is at: http://tinyurl.com/cxvqjh@DonM [16:55:54]> Note the fictitious horrible score for the "day before" drawdown.@DonM [16:56:00]> immediately after the real day's grades@DonM [16:56:07]> to avoid overconfidence and maintain the "comeback" psyche.@DonM [16:56:18]> It seems to have helped, as I've limited losing days in '09 to four out of 67.@DonM [16:56:28]> As for the journey,@DonM [16:56:31]> it never ends.@DonM [16:56:38]> And tomorrow, I'll begin the day believing I'm coming back from another large drawdown.@DonM [16:56:46]> A royal mess.@DonM [16:56:55]> It will be comeback time once again.@DonM [16:57:13]> Again, I appreciate the opportunity to chat and will stick around for a while if you have any questions.@DonM [16:57:29]> [Steps off soapbox'@DonM [16:57:33]> :-)@Linda [16:57:34]> APPLAUSE.@Linda [16:57:40]> thunderouse clapping...@Linda [16:57:43]> Thank-you Don@Chris [16:57:49]> THANKS !!!!!@Linda [16:57:56]> We have time for questions and I noticed a few in the open forum@Linda [16:58:07]> if you do not mind, I will post them in here for you to answer@DonM [16:58:12]> Go for it@Linda [16:58:28]> " Don -- you mentioned the first pullback off a volume move with a tick retracement --- can you give us another example of what typically happens that marks the start of a good trading 'sequence' -- or is that your primary recurring set-up?? "@DonM [16:58:53]> Well, it's certainly one of my favorites@DonM [16:59:06]> But frankly, I'll look for any decent wholesale opportunity@DonM [16:59:15]> even if it seems I'm fading the immediate trend@DonM [16:59:24]> if there's a larger timeframe support going the other way@DonM [16:59:38]> I've still never seen a market go straight up or down@DonM [16:59:51]> Much of it is probably as much feel@DonM [16:59:59]> for when "enough" is "enough"@DonM [17:00:05]> even if just for a few minutes.@DonM [17:00:16]> My most profitable trades@DonM [17:00:23]> are frankly fading extreme emotion@DonM [17:00:30]> TICK +1300 or -1300@DonM [17:00:36]> a parabolic price move@DonM [17:00:41]> can't sustain@DonM [17:00:42]> can't@DonM [17:00:53]> those are where I'm likely sized heaviest@DonM [17:01:25]> other than than, trend entries are good@DonM [17:01:34]> just have to figure out which trend is in play :-)@DonM [17:01:47]> which hasn't been easy the last 2 days@DonM [17:01:58]> most difficult 2 days of the year for me.@DonM [17:02:05]> not losing money ... just not making much@DonM [17:02:19]> Hope that helps@DonM [17:03:43]> btw ...@DonM [17:03:53]> one reason I like trend extreme fades@DonM [17:04:08]> is because you never know how long a trend pullback will extend@DonM [17:04:20]> taking it out on the prior swing high or low is the high %@DonM [17:04:28]> but those often aren't home runs@DonM [17:04:44]> yet if the market goes parabolic@DonM [17:05:13]> there's a pretty darn good chance of a quick counter move back into reality@DonM [17:05:19]> but you have to be careful@DonM [17:05:27]> [obvious statement of the decade]@DonM [17:05:36]> I had one horrible day last year@DonM [17:05:46]> where I jumped the gun@DonM [17:05:56]> the day after the Dow was -700@DonM [17:06:09]> and then if I recall tanked another 250 or so the next morning@DonM [17:06:16]> (winces)@DonM [17:06:40]> get to tell my grandkids about that one some day@DonM [17:06:45]> funny thing is@DonM [17:06:54]> with the volaility at that time@DonM [17:07:04]> I made up the entire loss within 3 days.@DonM [17:07:06]> Go figure.@DonM [17:07:15]> Any other ?s@Linda [17:07:23]> "Don, can you describe what your typical day is like...do you do a lot homework pre and after market "@DonM [17:07:44]> Well, if I'm smart ...@DonM [17:07:58]> I'm NOT trading 3:30-4:15 ET@DonM [17:08:16]> Note the 3rd line from the bottom of the scorecard@DonM [17:08:23]> "Late PM Discipline"@DonM [17:08:34]> Has gotten me into more trouble than anything over the years.@DonM [17:08:39]> Let me put it this way@DonM [17:09:06]> If I can't execute profitable sequences during an entire U.S. session, and possible part of a Europe session,@DonM [17:09:29]> than I sure as hell won't be focused or on my game enough to trade at the end of the day.@DonM [17:09:48]> So I try to begin to visualize the likely opening sequence@DonM [17:09:50]> as the market closes.@DonM [17:10:02]> So I don't really do homework@DonM [17:10:12]> but I am very aware of how the market is closing@DonM [17:10:25]> which I guess is like doing your homework in study period@Linda [17:10:36]> what time do you start in the morning? Lately a good part of the action has been happening at night.@DonM [17:10:44]> Great question.@DonM [17:11:03]> Last year, I was usually up at 4am ET every day@DonM [17:11:11]> after Europe had traded for an hour or so@DonM [17:11:32]> This year, I've tried to take it easier and simply get up when my body wakes naturally@DonM [17:11:47]> which is usually around 6am ET@DonM [17:12:02]> The other day@DonM [17:12:09]> I recall Europe had a classic follow through@DonM [17:12:19]> opening bounce off the prior late-day trend support@DonM [17:12:25]> textbook@DonM [17:12:29]> my favorite@DonM [17:12:31]> 'cept@DonM [17:12:37]> it happened an hour after I woke@DonM [17:12:58]> and then ES didn't carry the same action after the U.S. market open@DonM [17:13:20]> What's interesting though ...@DonM [17:13:29]> is that for me,@DonM [17:13:35]> I HAVE to swim in the water@DonM [17:13:43]> waching does little for me@DonM [17:13:49]> I HAVE to feel the current@DonM [17:14:09]> so although my Europe trading last year was breakeven at best@DonM [17:14:14]> it got me "in the game"@Linda [17:14:30]> " What (or who) were some of your early influences in learning to trade etf's then futures profitably? "@DonM [17:14:31]> and I notice the earlier I start, the more quickly I can sense the day's rhythm@DonM [17:14:54]> So the DAX often warmed me up for ES@DonM [17:15:09]> Early influences ... hmmm@DonM [17:15:39]> Remember the comment about swimming?@DonM [17:15:45]> There's the pool Don@DonM [17:15:49]> Get in@DonM [17:16:08]> Oh I imagine I read books, strategies, etc.@DonM [17:16:16]> But I learn best by doing@DonM [17:16:19]> and making mistakes@DonM [17:16:29]> So most of it was along those lines ...@DonM [17:16:34]> I began as a stock scalper@DonM [17:16:40]> and did well ...@DonM [17:16:43]> UNTIL@DonM [17:16:48]> 'drum roll@DonM [17:16:54]> DECIMALIZATION@DonM [17:16:57]> ARRRRRRRGH@Linda [17:17:05]> lol!@DonM [17:17:09]> So the spread game was gone@DonM [17:17:14]> 12 cent profits became a penny@DonM [17:17:25]> So I figured I had to go the index and chart route@DonM [17:17:30]> and let time do its thing@DonM [17:17:44]> even if time is just 5 minutes ... lol@DonM [17:17:54]> So I had to adapt and evolve@Linda [17:18:03]> a lot of ex stock traders can erlate to your comment!@DonM [17:18:09]> Futures of course is arguably the only pure trading game@DonM [17:18:12]> zero sum@DonM [17:18:29]> So I'm glad I got here ... although I wasn't crzay about the route I took@DonM [17:19:13]> Futures was the largest change for me@DonM [17:19:23]> Really took me a while to get the hang of it@DonM [17:19:31]> And I still have my demons@DonM [17:19:37]> No doubt about that@DonM [17:19:48]> I'll always be ealry@DonM [17:19:49]> early@DonM [17:20:04]> But I want to be there@DonM [17:20:21]> and I try to control risk with size and scratches/re-entries@DonM [17:20:28]> which you can do if your costs are low@DonM [17:20:57]> Other ?s@Linda [17:21:05]> I posted one a few lines above@Linda [17:21:20]> hold on@Linda [17:21:33]> Don, LBR and members put a good deal of emphasis on nyse TICKS --- can you talk about any other concepts or specific tips for how to use these when scalping? @DonM [17:21:57]> Yea, I added TICK over the last few years@DonM [17:22:06]> Seemed to fill in a missing piece@DonM [17:22:38]> Well, rule #1 for me would be to make sure you're NOT paying retail to get in on extreme TICK readings@DonM [17:22:54]> LIke a huge warning flag@DonM [17:22:59]> So that's the foundation@DonM [17:23:06]> If it runs further, so what@DonM [17:23:18]> There's either an extreme contra-trend entry begging for attention@DonM [17:23:33]> or you have a new high or low that sets up a higher % pullback@DonM [17:23:55]> So I guess that leaves us with when do we get in @DonM [17:23:58]> using TICK@DonM [17:24:19]> I like retracements of TICK to zero for entries ...@DonM [17:24:33]> if the TICK has "proven" itself with stronger readings@DonM [17:24:48]> and if such a move occures WITH price doing the same darn thing@DonM [17:25:00]> it's a strong combo@DonM [17:25:12]> I can only remember one time in recent memory where it didn't pay@DonM [17:25:17]> unfortunately, that was yesterday@DonM [17:25:18]> lol@Linda [17:25:24]> "What type of stops do you use....do you use resting stops? "@DonM [17:25:31]> That's the chart is yesterday's post@DonM [17:25:36]> is=in@DonM [17:25:59]> Stops ...@DonM [17:26:11]> I'll probably need to be careful on this one@DonM [17:26:25]> I rarely use them@DonM [17:26:30]> BUT let me explain@DonM [17:26:41]> I manage risk primarily with size@DonM [17:26:48]> Example:@DonM [17:26:59]> Say I define a full lot at 60 contracts for a particular sequence@DonM [17:27:18]> As price begins to approach what I believe are wholesale levels, I'll begin scaling in@DonM [17:27:33]> and in my view, until I'm fully committed with my 60 size@DonM [17:27:40]> I'm managing risk with size@DonM [17:27:43]> not with stops@DonM [17:27:59]> So risk management to me is critical@DonM [17:28:01]> paramount@DonM [17:28:20]> but it's rare where good wholesale entries@DonM [17:28:25]> don't pay at least something@DonM [17:28:38]> and yes, I do take profits as the expected move occurs@DonM [17:28:45]> something about the ducks quacking Linda, right?@DonM [17:29:01]> The downside is that I may not have a full position on@DonM [17:29:08]> if the move happens quickly@DonM [17:29:15]> but I can live with that ...@DonM [17:29:23]> and I've also gotten better at adding to positoins@DonM [17:29:34]> upon confirmation, even if adding is simply another tick or two higher@DonM [17:29:47]> That was a huge hole in my game@DonM [17:29:53]> prior to taking up poker@DonM [17:30:14]> especially as I'm usually more the "hittee" than the "hitter"@DonM [17:30:21]> I hate to pay retail@DonM [17:30:29]> even if it's buying the inside ask!@Linda [17:30:47]> "Don, how are you using 3LB to keep direction in your trading? "@DonM [17:31:01]> 3LB is probably the indicator I use the least@DonM [17:31:14]> In a choppy market, it's useless@DonM [17:31:25]> where I find it helpful though@DonM [17:31:35]> is confirming a likely turn after an extreme trend@DonM [17:32:00]> and if the price bar action looks like a 4 year old playing with a Spirograph@DonM [17:32:06]> (that's an age test by the way)@DonM [17:32:15]> Those in their late 40s can relate@DonM [17:32:32]> Since it often requires@DonM [17:32:54]> a decent price move in the other direction@DonM [17:33:20]> to trigrger covering, it can keep one from jumping the gun@DonM [17:33:27]> trigger@DonM [17:33:43]> yet like anything, it's not an absolute@DonM [17:34:00]> and I think any indicator by itself is meaningless, and possibly harmful@DonM [17:34:12]> it's the combined story@DonM [17:34:16]> the plot@DonM [17:34:29]> not the individual characters@Linda [17:34:40]> Do you watch the other indexes for confirmation or non confirmation?@DonM [17:34:46]> I actually don't@DonM [17:34:53]> I believe Linda does@Linda [17:35:03]> do you look at volume or market breadth?@DonM [17:35:03]> And perhaps I may incorporate it some day@DonM [17:35:16]> I do have volume bars on my charts@DonM [17:35:35]> (assuming there's been any for the last two days)@Linda [17:35:41]> :-)@DonM [17:35:48]> So I do look at it@DonM [17:35:53]> especially for range breaks@DonM [17:36:04]> or to ask myself "am I the only one trading"@DonM [17:36:15]> But here's my theory@DonM [17:36:17]> KISS@DonM [17:36:24]> I need simplicity@DonM [17:36:38]> Price, momentum, and strength indicators@DonM [17:36:48]> i.e. Price, Stochastics, ADX@DonM [17:36:54]> or a similar combo@DonM [17:37:04]> supplemented by TICK and VIX@DonM [17:37:16]> give me that, a laptop, and a wireless connection@DonM [17:37:21]> and I'll be content@DonM [17:37:28]> assuming I don't drool all overmyself@Linda [17:37:36]> You use a wireless connection?@DonM [17:37:37]> I'm my biggest enemy@DonM [17:37:50]> My main trading is done via cable@DonM [17:38:00]> But I have a Sony Vaio with Sprint PCS@DonM [17:38:07]> that goes EVERYWHERE with me@DonM [17:38:25]> So I'm always connected@DonM [17:38:35]> even if on the road@DonM [17:39:03]> And the laptop and Sprint PCS also serves as my backup@Linda [17:39:08]> What do ou mean by "Pace Conviction"?@DonM [17:39:16]> so it's running alongside my main station@DonM [17:39:23]> ahhh, pace@DonM [17:39:31]> more important to me than ANY market attribute@DonM [17:39:40]> Best example:@DonM [17:39:55]> Note the red scores for yesterday and today@DonM [17:40:08]> http://tinyurl.com/cxvqjh@DonM [17:40:32]> So it's probably best to define it by saying what it isn't@DonM [17:40:48]> It's NOT a market that moves infrequently iwth lots of starts and stops@Linda [17:40:59]> "light volume chop and noise"@DonM [17:41:04]> yup@DonM [17:41:10]> or no volume and no noise@DonM [17:41:11]> lol@Linda [17:41:15]> So that is an objective observation@DonM [17:41:20]> Very much so@DonM [17:41:29]> also possibly subjective@DonM [17:41:30]> btw@DonM [17:41:38]> the scores reflect my environment@DonM [17:41:44]> some may do very well in range markets@DonM [17:41:48]> I don't@DonM [17:41:52]> I need a moving current@DonM [17:41:58]> a dance@DonM [17:42:11]> the market steps, you step with it@DonM [17:42:17]> it backs up, you back up@DonM [17:42:22]> so on and so forth@Linda [17:42:33]> Dancing with the stars?@DonM [17:42:35]> tough to dance when the band keeps taking breaks!!!@Linda [17:42:40]> yes@DonM [17:42:45]> My wife loves that show@DonM [17:42:47]> Never watched it@Linda [17:43:14]> Don, have you ever thought about getting a T-1? I have been doing some research, pricing has really come down @DonM [17:43:26]> Nope.@DonM [17:43:32]> Honestly, I don't need it@DonM [17:43:49]> Cable modem fine @DonM [17:43:56]> Sprint PCS at slower speed also find@DonM [17:43:57]> fine@DonM [17:43:59]> keep in mind@DonM [17:44:08]> I have a handful of charts and one market@DonM [17:44:16]> KISS@DonM [17:44:22]> doesn't need much bandwidth@DonM [17:44:26]> and some may be surprised@DonM [17:44:34]> that I have many montiors ...@DonM [17:44:35]> but@DonM [17:44:39]> I only use one to trade@DonM [17:44:50]> Others are for web, email, etc@DonM [17:45:04]> The monitor vendors in NY hated me@DonM [17:45:07]> :-)@Linda [17:45:45]> Do you keep a separate Computer for your execution platform?@DonM [17:45:51]> No ...@DonM [17:45:59]> Although I do feel strongly about@DonM [17:46:08]> having a separate chart feed vs. broker feed@DonM [17:46:17]> Many providers have both now@DonM [17:46:23]> Dangerous imo@Linda [17:46:37]> Chart feeds have latency issues in heavy volume@DonM [17:46:44]> If you have separate feeds, you know the price action you're seeing on the charts is validated@DonM [17:46:50]> Yes@DonM [17:46:59]> If the prices don't match, I back off@DonM [17:47:05]> Happens rarely, but it happens@DonM [17:47:18]> I have a small order window@DonM [17:47:30]> right next to my charts@DonM [17:47:39]> I have a screen print somewhere ...@DonM [17:47:41]> hang on@DonM [17:48:30]> http://tinyurl.com/dgrlcg @DonM [17:48:40]> That's a good pic@DonM [17:48:50]> Will give you a sec to take a look and explain it@DonM [17:49:14]> OK, 1- or 2-minute micro timeframe in top left@DonM [17:49:20]> TICK right below it@DonM [17:49:30]> 5 min in top center@DonM [17:49:34]> 15 min top right@DonM [17:49:41]> 1 min 3LB middle@DonM [17:49:52]> Tick bar Chart to right@DonM [17:50:05]> Larger timefame ... usually 30- or 60-min out of main eyeshot@DonM [17:50:09]> in lower right@DonM [17:50:17]> Order Entry DOM in middle@DonM [17:50:32]> Only current difference is I'm now using ESignal vs. Tradestation@DonM [17:50:37]> No real reason ...@DonM [17:50:58]> ... except that I had some issues with TS a while back when they changed versions that I never bothered to address at my end@DonM [17:51:09]> and I always had ESignal as a backup anyway@DonM [17:51:18]> plus, ESignal has good 3LB charts@DonM [17:51:30]> A few have tried to program TS for them@DonM [17:51:37]> but they've been a bit rought@DonM [17:51:41]> rough@Linda [17:51:47]> HansB [17:50:45]> Don, those prices (1298) bring back memories..sniff... @DonM [17:51:52]> So that's pretty much my screen@DonM [17:51:55]> rofl@superg [17:51:58]> TS 8.5 has 3 LB charts now.@DonM [17:52:08]> Interesting superg ... thanks@DonM [17:52:22]> yea, I remember the day ES went to 3 figures@DonM [17:52:25]> last year@DonM [17:52:29]> the DOM looked naked@DonM [17:52:30]> lol@DonM [17:52:47]> btw, the pic@DonM [17:52:52]> was taken during the overnight session@DonM [17:53:10]> so the price charts don't match the DOM@DonM [17:53:31]> Just a matter of timing when the pic was taken@Linda [17:53:32]> ARB@Linda [17:53:42]> !@DonM [17:53:43]> Normally, they atch@DonM [17:53:44]> match@DonM [17:53:45]> rofl@DonM [17:53:48]> yea@DonM [17:53:54]> btw, I do often trade ES off the DAX@DonM [17:53:56]> overnight@Linda [17:54:00]> Yes@DonM [17:54:06]> sometimes you can pick it off easier@DonM [17:54:08]> sometimes not@Linda [17:54:12]> Dax has clean roadmap for early AM in E minis@DonM [17:54:14]> depends who's playing@DonM [17:54:17]> absolutely@DonM [17:54:22]> then the game shifts@DonM [17:54:26]> DAX leads ES ...@DonM [17:54:30]> then ES takes the ball@DonM [17:54:36]> early AM our time@Linda [17:54:43]> ygol [17:53:02]> DON, are you using the order book and ratio of bid-ask total? @DonM [17:55:01]> I disregard the order book sizes@DonM [17:55:09]> too many games@DonM [17:55:12]> mostly fake@DonM [17:55:21]> I have no problem buying a heavy ask@DonM [17:55:31]> charts rule ... DOM games drool@DonM [17:55:42]> last two days, games galore@DonM [17:55:51]> eveyone trying to jump start the market@DonM [17:56:16]> But you can see by the pic@DonM [17:56:20]> everything fits on one screen@DonM [17:56:22]> uncluttered@DonM [17:56:30]> everything I need@DonM [17:56:42]> also@DonM [17:56:55]> I think Linda uses different MAs@DonM [17:57:05]> The red and blue lines@DonM [17:57:13]> are 15 and 20 SMAs ...@DonM [17:57:32]> because I'm just trying to get a visual approximation of the price actoin@DonM [17:57:43]> SMA vs EMA, 15 vs. 20@DonM [17:57:48]> all get you in the same ballpark@DonM [17:58:03]> so I like to view both@DonM [17:58:08]> makes me feel better anyway@DonM [17:58:09]> ;lol@Linda [17:58:15]> ":don, can you say a few words on ADX --- in terms of what you are looking for to set-up a sequence?? "@DonM [17:58:32]> Two things@DonM [17:58:40]> If the market is going nowhere,@DonM [17:58:47]> or chopping around,@DonM [17:58:59]> my eyes will gravitate toward the ADX on each timeframe@DonM [17:59:01]> example was today@DonM [17:59:10]> I just felt given the range play@DonM [17:59:19]> that the 60-min ADX had to be getting down there@DonM [17:59:25]> and I don't remember the exact reading@DonM [17:59:29]> but I think it was true@DonM [17:59:44]> 5 and 15 minute timeframes are my favorites@DonM [18:00:06]> balances my preferred "time in market" with "market opportunity"@DonM [18:00:12]> IF it's in play of course@DonM [18:00:18]> but back to ADX@DonM [18:00:37]> I guess I'd be on the lookout for a hard break the lower it goes@DonM [18:00:43]> i.e. single digits@DonM [18:00:54]> On the other hand,@DonM [18:01:09]> first pullback in a strong or emerging trend Aces@DonM [18:01:28]> I believe that's much of the premise for Linda's Grail@DonM [18:01:35]> strong ADX and pullback@DonM [18:01:37]> Love it@Linda [18:01:44]> !@DonM [18:01:50]> Wish we had some more of it@DonM [18:02:00]> I'd be heavy on those@Linda [18:02:07]> HansB [18:01:05]> Don, sorry if this has been asked before, do you typically scale out or in of a trade, after placing it? @DonM [18:02:17]> Strong proven trend with initial wholesale opportunity fueled by "sutck@DonM [18:02:20]> "stuck@DonM [18:02:26]> " traders needing to take action@DonM [18:02:31]> which drives price@DonM [18:02:42]> Remember, they're not bars ... they're traders :-)@DonM [18:03:07]> Re: scaling in and out, I can't remember a time where I didn't scale out@DonM [18:03:17]> I know there are different schools of though@DonM [18:03:20]> thought@DonM [18:03:27]> All in and all out@DonM [18:03:31]> All in and scale out@DonM [18:03:36]> Scale in and all out at target@DonM [18:03:41]> But let me put it this way@DonM [18:03:53]> The market is full of imperfections@DonM [18:04:00]> I am full of imperfections@DonM [18:04:21]> So I try to make up for the lack of precision on both sides by scaling@DonM [18:04:38]> Is it right?@DonM [18:04:40]> No such thing@DonM [18:04:51]> Does it work for me and does it make ME feel comfortable?@DonM [18:04:54]> Yes.@DonM [18:05:03]> Many, many ways to paint the canvas@DonM [18:05:24]> I just like to hold the brush in my right hand and use lots of blues :-)@Linda [18:05:32]> no - GREENS@DonM [18:05:37]> Oh yea@Linda [18:05:39]> !@DonM [18:05:40]> forgot@DonM [18:05:54]> It's inded all mental@DonM [18:05:56]> 100%@DonM [18:06:00]> indeed@DonM [18:06:10]> (can you tell what I prescripted vs. what I'm typing???)@DonM [18:06:11]> lol@Linda [18:06:19]> One last question for peopel starting out....@DonM [18:06:22]> sure@Linda [18:06:30]> "DON, is there a routine you would recommend to someone learning to trade to get a feel of the market? "@DonM [18:06:38]> wow@DonM [18:06:50]> ok, things to think about@DonM [18:07:09]> opinion always of course@DonM [18:07:22]> find a way to trade multiple contracts@DonM [18:07:27]> even if just 2@DonM [18:07:38]> you'll kill yourself trying to be perfect with 1@DonM [18:07:46]> the old hindsight whip@DonM [18:08:06]> have initial learning capital set aside@DonM [18:08:14]> and jump in the pool and swim@DonM [18:08:31]> also@DonM [18:08:36]> ask yourself how had do you want this?@DonM [18:08:42]> or@DonM [18:08:46]> HOW HAD DO YOU WANT THIS??@DonM [18:08:50]> HAD=BAD@DonM [18:09:02]> This is not an easy game at first@DonM [18:09:13]> (and seldom "easy" even now)@DonM [18:09:23]> You have to want it more than others@DonM [18:09:28]> You have to work harder than others@DonM [18:09:39]> You have to get up at 5am if the market is active at 5am@DonM [18:09:42]> not 6am@DonM [18:09:43]> DONALD@DonM [18:10:01]> Don't expect quick success@DonM [18:10:12]> My success has had its ebbs and flows over the last decade@DonM [18:10:27]> And it has taken me much of the last decade@DonM [18:10:33]> to find out who I really am as a trader@DonM [18:10:38]> Call me a slow learner@DonM [18:10:45]> And yes, my focus was often splintered@DonM [18:10:54]> Nevertheless, the learning never ends@DonM [18:11:02]> And I still have my moments@DonM [18:11:11]> There's not a day or trade that goes by@DonM [18:11:21]> where I don't make an "error"@DonM [18:11:28]> Accept it@DonM [18:11:30]> Embrace it@DonM [18:11:48]> I did very well last year, and all I remember frankly are the bonehead moves@DonM [18:11:55]> I sincerely mean that@DonM [18:12:03]> Stay humble@DonM [18:12:11]> Stay committed@DonM [18:12:34]> And step to the left off the dang seed@DonM [18:12:35]> :-)@DonM [18:12:47]> This way fun Linda ... I hope all enjoyed it@DonM [18:12:50]> was@Linda [18:13:20]> Don - THANK-YOU SO MUCH FOR YOUR TIME@Linda [18:13:37]> you have honerary membership to our site in case you ever get bored int he middle of the day and need some jokes@DonM [18:13:39]> You're very welcom@DonM [18:13:47]> Linda has done a lot for this industry@DonM [18:14:00]> There are probably a few threads of her wisdom in my own trading@DonM [18:14:06]> You're all fortunate@DonM [18:14:24]> I'll stop by from time to time@DonM [18:14:38]> Rock and roll!!@Linda [18:14:42]> Everyone has to still go through the process them selves, come to their own conclusions, and it is a confirming factor seeing that you have similar observations - i.e. DAX etc@Linda [18:14:47]> ROCK'N ROLL! yes!@Linda [18:15:09]> Wishing you Good Trading the rest of the year!@DonM [18:15:18]> Ditto ... good health and good trading@DonM [18:15:21]> Good night all.@Linda [18:15:22]> Thank-you again!@Linda [18:15:24]> Night everyone!@DonM [18:15:26]> :-)