Feb
04

Episode #2: “Fishing For Bargains”

By Don Miller

While I thought about titling our second episode, “ARGGGGGHHHHH”, I figured I’d instead be a bit more professional and went with “Fishing For Bargains” as I walk through one of my more aggravating trades during this morning’s (2/4/11) Employment Data report release.

Continuing our mission of reality & transparency, today’s wholesale transaction again (1) uses a small account and (2) references a trade sequence that includes one blatant mistake.

As I’ve said before, if I ever DO write that book everyone has been asking for, it will surely be titled, “How I Made Millions Trading the S&Ps by Making Millions of Mistakes”.

Trading After Dark … REAL capital, REAL trades … and of course, REAL mistakes. 

Such a novel concept.

Based on the overwhelming view count of the Pilot episode (2,100 & climbing), it seems it’s a concept that was long overdue.

Categories : Low-Stakes Trading

Comments

  1. EC7 says:

    bravo,, complete transparency. Well done Don.

    have a good weekend.

  2. Mark says:

    See how the mind works? You were thinking about ‘righting’ the second exit of your trade when you blogged this: As I’ve said before, if I ever DO right that book …”

  3. Jerry Zabbia says:

    Don,

    Watching you is really fun and educational. Understanding and trusting that the market tendency will repeat, waiting for the wholesale entry and not chasing the market, and scaling out of your position is mandatory for success in this business. Thanks very much for sharing!

    Thanks also for showing your mis-step on the 2nd entry. We’ve all been there.

    Jerry

  4. steve g says:

    Don,

    Thanks you so much for sharing! This reminds me Bruce Kovner’s answer in “Market Wizard” when he was asked how Michael Marcus influenced his career success. He said “(Michael) He taught me that you could make a million dollars. He showed me that if you applied yourself, great things could happen. It is very easy to miss the point that you really can do it. He showed me that if you take a position and use discipline, you can actually make it.”

    Thanks again.

    Steve

  5. Merc says:

    Don,

    You entered 30 lots with risk at 1.5% or about $1,125…if you take three ticks of heat you are at your max risk % WITHOUT a stop in place (at least I did not see one). Can you explain this?

    Merc

    • Don Miller says:

      My approach is detailed in spades in the educational material. You’d have to figure in (1) scratching/reentering and/or scaling out if it were to stall or go against me, (2) the entire sequence of adjusting and managing if the premise changes, and (3) that the % is also a general benchmark over a large sample size given the intended selection of high probability wholesale conditions. At this stage in my career, I trust myself enough not to use “auto-pilot” mechanical stops, preferring instead to use experience and judgment to the conditions to adjust if necessary.

  6. Arun S. says:

    Thanks for the episodes, Don — they are very educational!

  7. matt says:

    Don,

    I noticed on the first tad you had a 3 minute chart and on the 2nd tad you had a 2-minute chart, is there any particular reason for the difference before the u.s. opens on time-frames? Also, is this the photon Dom ladder? I thought you usually use TTtrader? so on your first trade you put in an order 1 tick before the low of day from globex at 1301.50 when globex lows was 1301.75….This was because of the stops you are talking about where the majority puts stops at the low of day at 1301.75 so you figured they would get triggered & stopped out 1 tick below the globex low or previous days low? VEry intelligent DON…That is Professional! Par Excellence

    • Don Miller says:

      Yes, it’s the Photon DOM ladder which I’m currently using. Everything else is explained pretty well in the video and educational courses.

  8. matt says:

    You said you rather play the trade off of supports instead of resistance, is this because we are in a trending bull market? but if we were in the inverse bear market of 2008 would you have put on the trade 1 tick above the prevous high of day at a Resistance zone short?

    • Don Miller says:

      It also all depends on the exact conditions at the time … tough to respond to a hypothetical. The tendency would seem to be in line with your thinking, but every scenario is slightly different.

  9. matt says:

    Don,

    Last question i have about this video is that what would have happened if the jobs report was much much worse and the 1301.75 blew through support and lead towards a trend down day? Was the psychology of the trade based on that experience has shown you the trade had a positive “EV” expectation value….that is the % success rate x average profit $ > % failure rate x average loss $ on this trade sequence and their was a lower % of a possible variance trade loss?

    • Don Miller says:

      Too funny as I think I’ve already answered that 3 times now :-) .

      Assuming your question is serious (??? but I’m posting this last one anyway to make a point), that’s sort of like asking a quarterback what he would have done if the open receiver had instead slipped, the defender had played man-to-man vs. zone, if suddenly started to rain when the pass was thrown … or asking him what his next pass was going to be, or whether it would be a run play instead … all as the game conditions change.

      You’re either waaaaaay overthinking/overanalyzing this or trying to use the episode in a way that I cautioned in last week’s post which I encourage you to re-read. Markets adjust moment by moment amidst a larger backdrop, and it’s our job to interpret it and match its rhythm. This was simply one “pass” – albeit an interesting one – amidst more in the “game” that day (that btw had several mini bull and bear moments), week, month, etc. Nothing more.

      Traders in this mental skill-based sport/business react to market inefficiencies “in the moment” based on what’s really happening at the time … adjusting on the fly as necessary as I mentioned in my earlier response.

      Never forget that NY presentation kindergarten slide!

  10. charlie pell says:

    Don, I find if I have the bias correct just about any entry I take becomes profitable( some quicker then others). Do you have objective measures of bias?

    • Don Miller says:

      100% agree, except that pressing the outlier trades are equally important over the long run. Such is why the vast majority of the jellie efforts (both the live program and webinars) focus on determining the immediate bias.

  11. Andrew Ramponi says:

    It’s great to see more deeply into how you trade Don. At all ages and in all things we learn by example, good and bad.

    More than your actual trading style or types of sequences I am impressed by the quality of mind and thinking that you seem able to bring to the process. That’s maybe your #1 edge.

    I guess it is hard to put into words how you achieve that edge; except maybe persistence and discipline, persistence and discipline, persistence and discipline….?

    Thanks.

  12. charlie pell says:

    Don on a scale of 1-10 can you say how much you rely on objective measures to determine market bias verses “feel”? I see where pressing outliers is important but the foundation of any decision/trade has to be bias. In order to make a prediction on a coin toss you have to have a bias for either heads or tails. Of course the odds on any toss are 50-50 unless the coin is weighted. Fortunately the market is a weighted coin toss, you’re trade history proves that.

    My background is in statistical probabilities and computer science. I’m interested in applying conditional probabilities to detect and weigh the immediate bias.

    • Don Miller says:

      Hi. As a trader, I avoid #s and statistics like the plague, and would simply refer you to recent columns (a few weeks ago) on the main blog with respect to my definition of “feel”. Objective measures and feel are simply linked as they are for an airline pilot … without any separation. High probability short-term trading for me is a visual pattern recognition and reaction game based on immediate price action … nothing more. If the receiver is open, I simply try to react & throw it at him. It’s really that simple, and I go back to the NY kindergarten slide. For I’m a trader and not a mathematician, stastitician, accountant, or computer programmer … who typically have tremendous obstacles to overcome with respect to becoming traders and have to unlearn a host of skills which better suited them in other careers.

      This may also help: http://tinyurl.com/46cagss

  13. charlie pell says:

    Your trading style reflects your understanding and knowledge of the world, which is understandable.

    Humans were on earth for 100k years before we discovered radio waves. Radio waves have always been here we just did not have the means/knowledge to discover them. I don’t want to say your old or anything but technology has changed a lot in the last 10 years.

    My intrest is not to build a stand alone trading model or a pilot less airplane. I want to build tools to measure and weigh market bias. Much like pilots in the cockpits today rely on technology to make flying safer then it’s ever been.

    I would not get on a plane without a pilot nor would I turn my trading over to a computer. However I think technology offers the opportunity to make trading better just as it’s made flying safer.

    • Don Miller says:

      Agree … keeping in mind that trading will always be 99% price action … the other 1% is then split between all of the hundreds of existing technical measuring sticks which already weigh and measure bias & emotion.

      Put another way, I know I need 4 tires to drive … what the label reads on the sidewall (RSI, Stochs, John Doe Indicator in the case of momentum signals) is irrelevant to me and marketing hype for the developers.

      And all the tires ever needed to trade have been there long before me, and will be there long after me. Any slight advantage anything else will either be unnecessarily redundant or will quickly fall into the “once you find the key, they change the lock” category.

      Trading is actually quite safe for those who know what they’re doing.

      But I’m all for safer skies :-) .

  14. Steve says:

    Every programmer/statistician/engineer I have ever encountered in this business wants to build a system or indicator based off optimized hindsight analysis. Even after failing or scratching for several years and realizing something is off. It is trader derangement syndrome. The market repeats the same underlying behavior and price action over and over again but the statistics and tempo are always going to constantly change because it is a live auction driven by human decisions. You can not build a management system that will help work your way out of retail trades in my opinion.

  15. Don Miller says:

    Gonna nip this part of the discussion here so as not to beat the horse any further :-) .

  16. Richard Grissom says:

    Don, Just want to say thanks, for this video! I have it a bunch of times and I have been 3 to 5k on Crude Oil CL per day using your scale in and scale out method. My losses are much smaller now because I am catching quick profits, (Take the Money and Run!). What a difference in my trading, the only time I am getting losses is when I fight the trend by trying to predict tops and bottoms. I noticed how you kept your cursor at the ready on the price ladder and let the price move under the cursor, so all you have to do is click. Did 12k profit on the big drop day when Mubarak resigned. Went to 5 contracts with 80k account and just slammed it on the way down selling the bounces and taking the money and running. Just hope other readers catch the techniques you are using with the mouse.

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