Chipping Away

After a near-$1K loss on Thursday, I started today's (Friday) session with recovery in mind. Specifically, it was all about being cautious and just slowly chipping up. Specifically, today wasn't about trying to recover everything. It was just about making good plays and that's exactly what I did.

Let's take a look at today's trade report.

TSTrader Performance Center

I entered Friday's session with low volatility in mind. This led me to be a bit more careful with my entries. Believe it or not, not even this mindset helped. Taking a look at my cumulative P&L, I was underwater for the first hour.

My P&L dropped to -$282 by 10:30 AM. Not too concerning since all the major indices opened with a whipsaw. I was able to make a few scalps, which means keeping my targets closer than I otherwise would've aimed for. This helped me go back to even, but it wasn't exactly smooth sailing from there.

If you take a closer look, you can see that the profits I accumulated were returned right back twice since my cumulative P&L went back to the even line. Typically, this is the riskiest duration in my trading. This is where I would normally get frustrated with returning my profits and try to double-down to make everything back. Fortunately, this wasn't the case.

I was able to sit on my hands and just wait for better setups to form. This produced a lot more winning trades. However, each loser was still quite costly. My ALT is higher than my AWT. Since I took on more losses in the first hour of the session, my win rate was only 69% (don't say it, not nice). My expectancy is also a bit lower than what I would've liked to see, which should be concerning. If I sustain an expectancy of $17 per trade, it would imply that I could experience more negative days.

One of the main challenges of my strategy is cutting losses quicker. It's a matter of cutting losses quicker when price goes against me versus letting the trade breathe to ensure that it has time to go in my favor. Now, this is especially tricky because price action works a bit differently in futures. You can't just simply place a stop above a fractal and expect that to work. You'll run into one of two problems.

Problem #1: the stop loss is too far. If you try to use price action to set this stop loss, it could be as wide as 10 to 20 points. Of course, this is based on my observations.

Problem #2: even wider take profits. Explosive moves do happen in futures. When you side a wider stop loss, you give your trades more breathing room. However, each loss becomes more expensive as well. As a result, you'll need to sustain profits that can cover your losses. This is difficult to do since you won't have major directional moves every single day. What makes this even more difficult is the fact that you'll have to get the direction right as well.

To ensure that I'm not setting wider than necessary stop losses, I really need to optimize my entries. In order to do so, I'm beginning to experiment with leaving a tick stream open. Here's what my current platform layout looks like.

TSTrader Tick Stream

My main chart isn't time-based. Instead, it's volume-based. For the sake of showing a bit more information, you can see all of my fills on the chart. Normally, I have this hidden so it's less distracting.

On the left side, I now have tick streams for ES, NQ, and YM. Now, it's important to know why I want a tick stream and what benefit I hope to get out of it. If it's simply for the sake of more information, that's not good enough. For me, a tick stream shows price upticks and downticks and how many trades took place. On a very short term level, this allows me to see where price stabilizes.

For example, I would want to enter short on a pullback of a dominant down move. However, I often end up being offside for quite a while after I enter as price trades higher. I could either exit my trade and take a small loss or let it run and give it a bit more breathing room. So far, I've been letting trades run. Sometimes I can squeeze out a profit, but, once in a while, my stop loss will get hit. This causes my ALT to be larger than my AWT.

The tick stream provides further granularity, which I hope will allow me to see where upticks or downticks exhaust. This allows me to strategize and enter at more optimal price levels. If price goes against me, I can confidently exit at a small loss since the tick stream's sign of exhaustion was short lived. Looking forward to see if this will finally produce AWTs that are larger than my ALTs.