Monthly Trade Analysis - March 2007

Well this has been a difficult month because of the volatility (both high and low). My net for the month was +7.7 points out of a total possible of +31.1 which is considerably less than my monthly goal of 20 points. I feel I could have traded the system better this month, particularly I feel that I should have been less concerned about the win ratio and more interested in the average winner vs. average loser.

The following table shows my trades and analysis for the month:

March 2007 Trading Summary for Russell Futures (Actual)
Date	Trade 1	Trade 2	Trade 3	Trade 4	Net
3/1/2007	-1.8	8.6	-1.8	-0.7	+2.5
3/2/2007	-1.8	-1.0	-1.8		-4.6
3/5/2007	No Trades
3/6/2007	No Trades
3/7/2007	-1.8	-0.4	0.4		-1.8
3/8/2007	0.2	-1.2	-0.6		-1.6
3/9/2007	3.8	1.5			5.3
3/12/2007	1.7	1.0			2.7
3/13/2007	-1.8				-1.8
3/14/2007	4.9	4.0			8.9
3/15/2007	-1.8	-1.8	0.2		-3.3
3/16/2007	3.1				3.1
3/19/2007	-1.1				-1.1
3/20/2007	-1.8	-1.8	-1.8		-5.4
3/21/2007	-0.1	0.0			-0.1
3/22/2007	2.0	-1.2			0.8
3/23/2007	-1.8	0.0			-1.8
3/26/2007	3.8	-1.8			2.0
3/27/2007	-1.3				-1.3
3/28/2007	-0.1	3.6			3.5
3/29/2007	0.0	-0.2	1.8		1.6
3/30/2007	1.7	0.2	-1.8		0.1
					7.7
		Largest	Largest	Average	Average
	Win Ratio	Winner	Loser	Winner	Loser
	44%	8.6	-1.8	2.12	-1.32

And the next table shows the system's trades for the month:

March 2007 Trading Summary for Russell Futures (System)
Date	Trade 1	Trade 2	Trade 3	Trade 4	Net
3/1/2007	-1.8	10.1	-1.8	-1.8	4.7
3/2/2007	-1.8	-1.0	-1.8	0.5	-4.1
3/5/2007	2.1	-1.2	3.2	4.9	9.0
3/6/2007	3.5	0.5	-0.1	2.4	5.3
3/7/2007	-1.8	-0.4	0.9	1.5	0.2
3/8/2007	-0.3	-0.4	1.5	-0.4	0.4
3/9/2007	3.6	1.6			5.2
3/12/2007	0.1	0.6	0.3		1.0
3/13/2007	-1.0	0.2	-0.3		-1.1
3/14/2007	5.4	4.1			9.5
3/15/2007	-1.8	-1.8	-0.9	-0.5	-5.0
3/16/2007	1.5	3.2			4.7
3/19/2007	0.2	2.6			2.8
3/20/2007	-1.8	-1.8	-1.8	1.4	-4.0
3/21/2007	-0.4	-0.3	-0.7		-1.4
3/22/2007	1.0	-0.8	0.6		0.8
3/23/2007	-1.5	0.2	-0.5		-1.8
3/26/2007	3.8	-1.8	-1.8		0.2
3/27/2007	-0.2	1.3			1.1
3/28/2007	-0.2	-1.0	3.6		2.4
3/29/2007	0.0	-0.6	1.8		1.2
3/30/2007	-0.2	-1.8
					31.1
		Largest	Largest	Average	Average
	Win Ratio	Winner	Loser	Winner	Loser
	45%	10.1	-1.8	2.13	-0.97

Even excluding the 5^th and 6^th (which I did not trade) and which consisted of 14.3 points that still leaves a gap of 9.1 points between my actual trades and the system trades. Additionally, my trading of the system had a slightly lower win ratio (1%) and a higher average loser amount (-1.32 vs. -0.97).

For a week by week analysis, the actual trades are as follows:

Week 1 Week 2 Week 3 Week 4 Week 5

-2.1, +1.9, +9.6, -7.6, +5.9

And for a week by week analysis, the system trades are as follows:

Week 1 Week 2 Week 3 Week 4 Week 5

+0.6, +20.1, +9.1, -3.6, +4.9

It appears that my best trading weeks were the third and fifth and that my worst trading weeks were the first and fourth. I obviously had difficulty recovering from my losses in the fourth week. It’s also obvious that missing two trading days this month (during the second week) was absolutely crucial 14.3 points worth. I’m going to strive to be more mechanical next month as I would like to capture at least 75% of the total profits possible.

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Russell 3-30-07

The Russell continued it's bullish move this morning by gapping up and holding firm against the sellers. This activity was sustained until later in the morning when sellers came in and filled the gap.

First trade of the morning was a long at 6:42 at 807.2 for +1.7. Second trade was a short at 6:59 at 808.30 for +0.2. Third trade of the morning was a long at 7:37 at 808.40 for -1.8.

Net for the morning: +0.1
Net for the week: +5.9
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Russell 3-29-07

We had a nice gap up this morning of about 5 points, but then the market started to slide and the market looked to fill the gap all morning and finally did.

First trade of the morning a short at 6:52 at 807.50 for +0.0. Second trade of the morning was a long at 7:21 at 807.20 for -0.2. Third trade of the morning was a short at 7:37 at 806.90 for +1.8.

Net for the morning +1.6
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Russell 3-28-07

After a small gap down, the Russell fell into an amazingly tight range of about 2 points. At about 7:20 the market opened up and we finally got to see some morning activity.

First trade of the morning was a long at 6:57 at 804.7 for -.1. Second trade of the morning was a short at 7:21 at 803.9 for +3.6 points.

Net for the morning: +3.5
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Russell 3-27-07

This morning started off with a strong open and the Russell was off 4 points within the first 30 minutes. Since then, the market has been consolidating and will probably make another move later this afternoon and I wouldn't be surprised if price moves back to the open.

Unfortunately, the largest move of the morning was not a valid signal (since it started its move yesterday afternoon. Too bad, but sometimes that happens. First trade of the morning was at 7:17 long reversal at 809.50 for -1.3

Net for the morning: -1.3
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Russell 3-26-07

After a choppy start, the Russell picked up significant steam on release of the housing starts data at 7:00 PST. Hopefully this means that we'll be moving into a less contracted market range for the week.

First trade was a short reversal at 7:00 at 815.02 for +3.8. Second trade was a long reversal at 7:16 at 811.50 for -1.8.

Net for the morning: +2.0
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Russell 3-23-07

Well the lesson this week is that extreme volatility moves (i.e. the past few weeks) tend to correct themselves. This has led to a tight week with little opportunity for the momentum moves needed to be profitable with the system. In my opinion the key to successful trading is knowing when to turn up the gas on your system and when to ease off. Overall I think I did a reasonably good job of easing off this week, although I still think I could have eased off a little faster on Wednesday. Hopefully we'll return to some semblance of market activity on the Russell next week.

First trade of the morning was a short at 6:47 at 814.40 for -1.8. Second trade a long at 6:57 at 815.50 for +0.0. After seeing the early chop of this morning and the lackluster enthusiasum to follow through in either direction I skipped the third and fourth trades of the morning.

Net for the morning: -1.8
Net for the week: -7.2
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Russell 3-22-07

After yesterday's explosive announcement, the market once again settled into a fairly narrow range, but with some early morning bearish movement attempting to reach yesterday afternoon's lows. It's starting to look like this will be the week of the ranging morning.

First trade at 6:42 short at 814.00 for +2.0. Second trade was at 7:07 long at 813.30 for -1.2.

Net for the morning: +0.8
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Russell 3-21-07

Well this morning's early activity looked so much like yesterday it was Deja Vu. The market never stepped out of a 3 point range the entire morning. I managed to keep out of trouble this morning for the most part by backing off where necessary. I even managed to scalp a little on the side. Hopefully things pick up a bit.

First trade of the morning was short at 6:45 a.m. at 799.70 for -0.1 (yes that's a misprint on my chart) and the second trade was long at 7:15 at 800.10 for +0.0.

Net on the morning: -0.1
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Russell 3-20-07

The Russell opened with little directional movement and continued to have difficulty breaking out of a 4 point range the entire morning. This is a poor market for momentum strategies, and this has been the first morning I've had to shut down my workstation in awhile.

First trade of the morning was short at 6:37 at 791.5 for -1.8. Second trade of the morning was long at 6:45 at 793.60 for -1.8. Third trade of the morning was at 7:01 short at 791.7 for -1.8.

Net for the morning was -5.4.
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Russell 3-19-07

The market gapped up 5 points at open and the bears just couldn't fill the gap. It looks like we're potentially seeing a little bit of recover in the stock markets.

First trade of the morning was at 7:10 at 790.7 short for -1.1.

Net for the morning: -1.1
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Russell 3-16-07

The premarket was pretty quiet and there was no overnight gap. However, the market opened to almost immediate weakness and sought yesteday's low early in the morning before rebounding and seeking yesterday's close. Today was a great day for the system, however, I was only around for some of the action.

First trade of the morning was a short reversal at 6:35 at 789.00 for +3.1 points. The second and third trade I was not around for, however, the second trade triggered long at 6:45 at 787.60 and would have made about +3.5 points, and the third trade triggered short at 7:47 at 790.7 and would have made over 6 points. Too bad I decided to stop early for the morning :)

Net for the morning: +3.1
Net for the week: +9.6
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Russell 3-15-07

After a brief show of weakness premarket, the Russell opened up higher on the day and continued to climb for the first 20 minutes of the session. After that it consolidated into a tight range that was very choppy. I suspect that we'll see a late morning or early afternoon breakout from this range.

First trade was short at 6:45 at 786.00 for -1.8. Second trade was short at 6:54 at 786.50 for -1.8. Third trade was short at 7:15 at 787.90 for +0.2. Fourth trade was long at 7:30 at 788.00 for +0.1. It's tough to give back so much after a great day like yesterday, however, it happens. Hopefully Friday will be more active.

Net on the morning: -3.3
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Russell 3-14-07

This was a momentum market this morning and simply picture perfect from beginning to end. The Russell opened higher than yesterday's close but failed to take out the 780.00 resistance area. The market then moved to below the low of yesterday and followed that up by making another attempt to reach 780.00.

First trade of the morning was a short reversal at 6:45 at 777.9 for +4.9. Second trade of the morning was a long reversal at 7:10 at 772.6 for +4.0. You don't get much better than that.

Net for the morning: +8.9
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Russell 3-13-07

The premarket was down from yesterday's close and the market opened lower on a five point gap, however, there just wasn't much enthusiasum this morning creating a very tight and choppy early morning range.

First and only trade of the morning was at 6:55 a.m. 790.3 for -1.8.
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Russell 3-12-07

The market opened up pretty much flat this morning and then proceeded to extend the range down into yesterday's value area, after that the market returned to the opening price range.

First trade of the morning was at 6:45 short at 791.5 for +1.7, second trade of the morning was long at 7:18 at 791.6 for +1.0.

Net for the morning: + 2.7
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Russell 3-9-07

The market gapped up overnight and then settled into an early choppy pattern. Unlike the past couple of mornings, however, the Russell broke out of this consolidation and moved to fill the gap and find yesterday's value range.

First trade of the morning was a short reversal at 6:39 a.m. at 793.70 for +3.8. Second trade of the morning was a long reversal at 7:30 a.m. at 790.1 for +1.5.

Net for the morning: +5.3
Net for the week: +1.9
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Review of Enhancing Trader Performance by Dr. Brett N. Steenbarger

During the process of creating my Futures and Forex trading blog, I took the time to review other popular trading blogs on the net to try and learn what sorts of things attract readership to a trading blog. During this process, I found Dr. Steenbarger’s site Trader Feed. After reading several of his blog articles it became clear to me that this was a high quality site with consistently well thought out and well written topics regarding trading psychology, market analysis and trading. While looking through his site, I saw that he was selling a new book called Enhanced Trader Performance: Proven Strategies From the Cutting Edge of Trading Psychology. Having been impressed with his blog articles I ordered the book from Amazon.

To be perfectly honest, unlike a lot of other traders out there I have been consistently disappointed with the typical trading psychology book. I don’t disagree with the principles, but rather there seems to be a serious lack of practical application in many of these types of books. Everyone knows that they shouldn’t pull their stops or do stupid (and emotional) things while trading – but how do you actually change your behavior?

The book starts off with an example that is counter to examples in other trading psychology books that I have read. Basically, the unemotional trader is still a loser – despite his lack of emotion, and the emotional trader uses his feelings to push himself harder to succeed. This example resonated with me, since I’ve seen several traders that are unemotional still continue to fail – after all if you don’t have an edge it doesn’t matter if you’re last name is Manson.

One of the best points of the book resides in the next few chapters and for me was the quintessential element of the book – practice. Just as an athlete must train thousands of hours to run a mere 50m in the Olympics, a trader must practice continually to hone their edge. The biggest reason that I have had difficulties in my own trading has been from lack of confidence. As the author states, it is difficult to build confidence when you are losing. The way to get back into a winning state is to practice (preferably with historical simulated data tick by tick). The way I do it is with NeoTicker’s simulated server (where I can see my market, indicators, and execution platform and actually take simulated trades over the past day, week, month or whatever). There are other platforms like NinjaTrader that can do this type of simulation as well. According to Brett, another excellent training device is to watch yourself take real-time trades with the use of a video camera. This is something I’ve always thought about, and reading this has inspired me to make it happen in the near future.

As part of these “practice” chapters, Brett reviews different elements of a trade that the trader must train for. Just like the athlete that may be strong on endurance but weak on the sprint, a trader must bring together pattern recognition, decision making, and trade execution into one seamless process. Brett also discusses how we can train to improve each of these components and gives specific software/training that he uses. Another fantastic portion of the book is devoted to discussing how a new trader, intermediate trader, and advanced trader should train – because for each of them there are different things to work on and the further along in your trading you are, the harder you must work. An important point that Brett illustrates is that the reason many beginning traders fail is that they don’t give themselves time to have fun and really enjoy the learning process. After all, the beginning golfer shouldn’t expect to become Tiger Woods overnight.

The last several chapters focus on psychology and how different practices of psychology can be utilized to help address specific problems. Brett states that certain destructive trading practices can indeed be addressed by positive self-talk but deep rooted psychological barriers cannot necessarily be overcome in this fashion. Brett illustrates several different ways to tackle deep rooted psychological problems in these final chapters.

For myself, I know that this is a trading book that I will be re-reading again and again. It is not the typical trading psychology book filled with fluff and rehashed common sense, but rather a manual for personal development as a trader. It is obvious to me that Brett is not only a psychologist but also a trader and this is definitely a determining factor in the usefulness of this book to the developing or experienced trader. Finally, I have a trading psychology book in my bookshelf that I feel addresses the psychology of developing as a trader as well as the practical applications to make that development a reality.

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Russell 3-8-07

The premarket on the Dow indicated overnight buying strength, and the Russell opened up about 9 points higher than yesterday's close. Although some early morning buying interest came in, it was unsustained and we quickly fell into a very low volume and choppy morning.

First trade of the morning was at 6:31 long reversal at 789.90 for +0.2. Second trade of the morning was at 6:47 short reversal at 789.70 for -1.2. Third trade of the morning was a short reversal at 7:32 at 791.50 for -0.6.

Net for the morning: -1.6
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Russell 3-7-07

The pre-market gapped down slightly, however, the market held early on. Things started to get really choppy during the early a.m. and have only slipped into a range expansion day in the afternoon.

First trade of the morning was at 6:38 long at 778.01 for -1.8. Second trade was a short reversal at 6:58 at 777.90 for -.04. Third trade was a long reversal trade at 7:10 at 778.01 for +.04. Pretty sideways day.

Net for the morning -1.8
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Forex Pirates in Tucson

As some of you might know, Avery and Michal (of Kreslik.com)hosted a trading meeting this past weekend and the reason I've not been posting the last couple days is that I've been hanging out in Tucson. Thanks to all the wonderful traders who were there, and thanks to Avery and Michal.
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Russell 3-2-07

The premarket gapped down slightly from yesterday afternoon's weak close. Well it was bound to happen after nearly an entire weak of trending activity - we finally had a sideways morning and a particularly choppy one at that.

First trade of the morning was at 6:39 a long reversal a 788.2 for -1.8. Second trade of the morning was a long reversal at 7:04 at 786.2 for -1.0. Third trade of the morning was a short reversal at 7:22 at 785.0 for -1.8.

Net for the morning: -4.6
Net for the week: +7.7

Well this was a rough morning, but I took all the trade by the system.
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Simulated Economies in World of Warcraft

Although it might not be evident, I spent much of my teenage years playing computer games - particularly strategy and roleplaying games. In fact I sometimes believe that gaming has led me to my involvement with trading (i.e. the ultimate online game).

So when some of my friends at started telling me about World of Warcraft (WOW) I already had an idea of what it was about, and because I had played other MOOs and MMORPGs I was familiar with playing in an environment where there are other real players all playing on a game server such as EverQuest. When I started playing WOW, I appreciated the strategy and roleplaying possiblities immediately. However, recently I've discovered a new interest and that is watching the economics and marketplace of WOW.

What makes the WOW economy so interesting to study is that unlike many other computer games, there are enough human players to create significant economic shifts. After all, there are over 8 million players world wide. It's like a micro-world economy. Another interesting element is that unlike in the real world, there is no fixed quanitity of currency (currency is spawned whenever monsters are killed and there are technically an unlimited number of monsters). However, currency circulation is very different than the real world because each time that you buy something from a non-player merchant that currency is effectively taken out of circulation permanently. Thus, the only true trade market is the Auction House (AH) where players can post their extra equipment for sale and other players may buy it.

Interestingly, because of this in game market, market players have arose to provide certain market functions and of course have attempted to manipulate the market whenever possible (or not regulated by Blizzard). Such instances of this occur when wealthy buyers buy out a certain rare item and then repost it in the Auction house at higher prices (i.e. cornering the market). Eventually, buyers become fed up with high prices and new sellers arise looking to take advantage of such high prices thus bringing supply back into balance with demand.

Another WOW market phenomenon that has been occuring and has come under fire is the use of real currency to buy WOW gold. Usually this WOW gold is being "farmed" by underpaid foreign sweatshop laborers who run 9-12 hour stints making a few dollars a day. This gold is then resold to online merchants who sell it to gamers looking to improve their character without wanting to do the drudge work themselves. Metroblogging Azeroth has an excellent article on this that discusses the potential negative impacts on the WOW economy that I found particularly noteworthy.

After looking at how these simulated economy dynamics are there any relevant inferences that can be drawn about real marketplace? Well I think that the largest similarity I see is that there are informed and uninformed participants in both markets. Uninformed participants either directly or indirectly provide opportunity for those who are informed. Additionally, both markets experience market manipulation and illiquidity occasionally.

I'm sure there are other similarities as well as plenty if differences. If you have any thoughts on what simulated economies can teach us please let me know.

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Russell 3-1-07

Well we had a very volatile start to the month of March. The overnight market dropped about 14.0 points based on more activity in the Yen. Although the market upticked at the open, immediate downward pressure came in and initially pushed the market lower. Bulls came back to attempt to fill the gap and have done so, but have failed to push much higher.

First trade of the morning was a long reversal at 6:38 at 777.8 for -1.8. Second trade of the morning was a long reversal at 6:51 at 776.5 for +8.6 (I entered about 1 point late due to the speed of the market). Next trade was at 7:08 short at 785.2 for -1.8. Fourth trade was at 7:11 long reversal at 786.7 for -0.7. Last trade was at 7:24 short reversal at 785.7 for -1.8.

Net on the morning for +2.5

This was a very interesting morning and I feel that despite the late morning choppiness, I traded the system pretty well. I give myself a 8 out of 10 for the morning. The two things I could have done better 1) entered trade 2 faster (I wasn't paying close enough attention), 2) spotted the choppy market we had entered and skipped trade #4.
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