The Power of Routine

The Power of Routine

A trading buddy of mine has recently posted about the problems he has in developing a routine around the other commitments in his life. A good read and highlights that a lack of routine can scupper the chances of a successful trading session, no matter how good the edge and trading plan is.

Habit deprivation is like sleep deprivation

I have found at my stage of development as a trader, that if I do not follow my routine then I tend to have a pretty crap trading session from the point of making consistent trading decisions, following my plan and more importantly updating my plan as more information comes in about the type of session that is developing.

I personally think that everyone’s routine should be tailored to their strengths and weakness.

The way I approached the day is as follows

At the end of the day, I will write out my trade plan for the next day. It would be better to do this the next morning before the session starts so I can include any developments that happen overnight that could affect the Bund when it opens.

The reason I do it the night before is that, I know from my yacht racing days, that my strategic planning can be poor on waking up. How I dealt with that would be to have the current plan written down and the reasons I was following that plan, and with the likely future decisions and the best options are already fleshed out.

These enable me to wake up in a sleep deprivation state and follow a plan without trying to remember how I got to previous decisions and what is the plan going forward.

Sleep deprivation whilst yacht racing is a complete different ball game. I have spent 9 days, only sleeping for 25 mins every 2 hours, which by the way, was complete failure from the strategic decision making point of view (I made bad call and we went from 1st to 9th and then finished 4th), but we was playing cat and mouse with modern day pirates amongst other things.

Getting the most of 25 mins.

So planning before I go to sleep is a habit that I picked up in the past which works for me.

I print out my daily trade plan, as I find it easier to follow if it sitting in front of me and I can take notes on this as the day develops.

When I get up I will come into the office 30mins before the market opens and do the following;

Read my market news to see if anything has happen overnight that could affect my market.

Check the US 10 year T Notes futures to see how they moved overnight, a move in these could affect the opening of the Bund.

I check the daily chart for German 10 year Bond Yield and the ES futures markets just as a reminder of what happened the day before and overnight.

I then read my trade plan from start to finish, circling with pen the first areas of interest and actually looking at these areas on my charting platform.

I then wait for the session to open. I have an intraday trade journal where every few hours, I update my plan and what my trades are for the next few hours. Here is an example of my intraday journal.

I will then take a break for about 45 mins between 11:00 and 12:30, and either exercise or mediate. I find this helpful in maintaining focus during the whole day.

My routine has changed in small ways over the past few years but not in any substantial way.

I have found that when I do the end of day review, that if I have gone wrong somewhere during the day, it can be correlated to me deviating from my routine.

I think that we all have to find a routine that fits our style and provides us with a foundation to make consistent and solid trading decisions.

Trading Plan Shorthand

Trading Plan Shorthand

My updated shorthand below.
I have explained only one side. For example WRH weekly range high. I have not put the explanation in for WRL weekly range low.
Any questiuons drop me a line on twitter @adeyf69

BZ Buy zone – area I am interested in buying in
BAC Break and close – means that price has been accepted above / below this level.
BAL Balance / Range Area
BOF Breakout Failure of a level
BPB Breakout of level and first PB
BEOB Bearish Engulfing Candle Pattern
BUOB Bullish Engulfing Candle
BEARPIN Bearish Pinbar (and of course there is a Bullpin)
COMP Composite, normally relating values for volume profiling
COM Commom, meaning mode distribition normally in relation to the length of the rotation
C.WHL Current Weekly High
DATR Daily Average Range
D. Prefix indicating Daily
ERC.V Extended Range Candle with Volume. Larger than normal candle with larger than normal volume
EXP.HIGH Expected High for the day
FIB Fibonacci Level
FTB First time back to level, 2TB is second time back
HTF Higher Time Frame meaning the 60min
HOLDS Price not accepted past this level
LTF Lower Time frame, 5 mins and below
L.BIAS Long Bias
MRH Monthly Range High
MM.U Measure Move Upside
OTF Other time frame, traders on the 60 min plus timeframe
OIR / OOR Open In Yesterday Range / Open Outside Yesterday Range
OE Over extended
PB Pullback
REJ Rejected
ROT Rotation (swing length) comes in sizes, the rot (swing) is either shallow, mode/common, standard deviation and /over extended (SD2) ( I use 90% for SD2)
STRONG CLOSE Close hear the high (>80%) on up candle or near the low (
SZ Sell zone – area i am interested in selling
VPOC Volume Point of Control
VAH Volume Value High
VAL Volume Value Low
WRH Weekly Range High
WATR Weekly Average Range
W. Prefix indicating Weekly
Y.HIGH Yesterday High

29th Oct Bund Market Review

29th Oct Bund Market Review

Bunds OIR and rot up to test 17, the val and sz, shorts on ltf on trigger. Rot down to test session low and minor pullback. Was a chance to get short again buy no fill on ltf trigger.ERC.V rot down with LTF sd2 volume and range, therefore looking for shorts for continuation down but the pullback to 02 mid had sd2 volume so no trade and was looking like a BOF so no trade on first opposing setup. Rot continued up and was looking for the stops to be taken at session high for a short on a LTF trigger.
Was looking to get short again if we made a failure to push high on a bof, but stalled and rot lower. Was looking for a mini bof for potential trade back into range but no setup at 02, the strength of the move thru here left me looking for shorts for a test of session low. No entry.
Bof of session low as just within my time limit of not taking trades before news so managed a scalp long before the news.
Then end of day for me.

29 Oct 2015 – Bund Daily Trade Plan

Main trade –  Possible reversal on daily.  watch for bac of y.low and strength to down side and join short on first pullback. otherwise watch for bof and range day. 

Key News 

0855 Ger Unemploy 1230 US GDP 1300 Ger CPI  

Stats

DATR 0.71 + WATR 2.12 – WK.50% 56.75 M.50% 54.72

Weekly Summary – Inside week x 3 with strong bull close and bof of Hi (Hi 57.67 / Lo 55.42)

Previous Day –  Neutral down with bear close, @ sd daily rot and fresh daily sell zone at 58.76-59.17

Bias – Neutral Bias, sc 3.

What happened –OIR rot up to p.low and into bal, breakdown with erc.v rot down thru buy zones to p.mid and trendline, buyers in and erc.v rot up to y.hi at 38, into bal till fomc and erc rot down to session lows and trendline

Hypo 1 – Down – if price holds 17-30 (val/vpoc/sz) then shorts t 95-93 (y.low) bac shorts t 78-70 (hvn/bo.origin/vpoc)) t2 60-53 (vpoc/bz/38fib) bac 53 t 45-40 (p.vpoc/hvn)

Hypo 2 – Range – if price holds / bof 93 then longs t 16 t 30 t3 39 (p.hi / lvn) if price holds/bof 39 then shorts t 30 t2 16

Hypo 3 –Up – if price bac 39 then longs t 49-53 t2 60 bac 60 t 67(val / w.hvn) t3 76-85 (fresh sz/w.vpoc/nvpoc) t4 99-00 (sz)

Red flag levels – For short trades bac 158.61 For long trades  bac 57.90

28th October – Bund Market Review

28th October – Bund Market Review

OIR pushed lower, exp for it to test 19, tried to get short at 29 for a scalp down but no fill. tested 19, and on bof trigger long.

Price bac 39 with volume and range, looking to join on first pullback or test of y.hi. No pullback and rot up to test 55 previous low and into bal, sold this for a scalp back towards y,hi but dumped this when price went into bal.  Price bac down, short on first pullback to origin on ltf trigger exp to test onh and y.hi and to find buyers or test of fresh bz at 26-17.

Took long at 35, stopped out. No fill on long at 26 and long scalp on trigger target onh. Then I took a bof long on dom entry at 20. Whilst this fitted my rules, I was ignore then strength of this second push down.

Took long off 95 trend line, 15min sd rot, 60min common rot, daily 50% marabuzzo, exp for test of 17. Looking for short at 17, no fill, short on trigger, was looking at 05 to reverse, 05 did not fill so exited short and no trigger to get long on ltf.

27th October – Bund Market Review

27th October – Bund Market Review

Bund open in range and with under average volume tested y.high, and went straight into balance, I looked for a bof of this balance to take price back into value and retest vpoc and possible range day.

Pullback into value and into balance, therefore was looking for a bof of either side to get long or short or a bac and the first pullback. No bof, and a bac to the topside with good volume and range.  Based on that I was looking for first pullback to join long and short scalps at resistance levels.

Price stalled and went into bal at first resistance area which was 15min sd rot, expectation was for pullback.  Was looking for a trigger short here, esp a mini bof to the topside to short scalp. No entry. On the pullback I was looking to get long at the previous resistance at 99 and 15 min com rot or 06 which was current mid and 5min sd rot and 60 min bar 50%. on a trigger. Got a trigger but just before news so skipped trade. 

Had a hvn and resistance at 25-36 with node at 31, shorted 30 got topped ticked. I should got out earlier as price went to first scalp scale did not fill and returned quickly to entry. A clue that it was not ready for a pullback. Got a second chance entry short, took that. 

Looking to get long at 16, 1 tick in front of the vpoc for the last rot up and bz and 5 min sd rot down got a trigger off 18, but hesitated too long and missed the fill. 

27th Oct – Bund Daily Analysis

Main trade – inside day x 2, main trade is bac of inside day and join on first pullback, secondary trade is trade on bof of inside day back to mid

 
 

Key News 0930 UK GDP

1230 US Core Durable

1400 US CB Cons Conf

  

Stats DATR  0.74+

WATR 2.12 –

WK.50%    56.75

M.50% 54.72

Weekly Summary – Inside week x 3 with strong bull close and bof of Hi (Hi 57.67 / Lo 55.42)

Previous Day –  Inside up day with bull close (idx2) 

Bias – Long Bias, sc 3.2

What happened – OIR rot up to bof fri hi and rot back to todays vpoc and into bal

Hypo 1 – Up- if price bac 73 then longs t 89-99 bac 99 then longs t 13 t2 25-36

Hypo 2 – Range – if price holds / bof 68-80 then shorts t 61 t2 50-40 if price holds/bof 50-40 then longs t 61 t2 68-73

Hypo 3 – Down – if price bac 40 t 33-21 bac 21 t 11 bac 11 t 92-89

Red flag levels – For short trades bac 157.73 For long trades  bac 57.40

26th October – Bund Market Review

26th October – Bund Market Review

Low volume day with open around vpoc and into balance, until cash open then a good volume bac of 52 an minor hourly pivot, exp for was to test or failure to test 73 and into range day as per hypo 1. Stalled before the Friday hi at 67, looking for a bof ont he topside to get short, did not happen, whilst waiting for this missed ltf trigger to get short.  Had wanted a long before the stall to get in on the move up, but pulled the order after price stalled.  Exp was for a test of 46, 33 and 21 and to find buyers in the lower Fridays range.

Price tested 46 and buyers came in with good volume, was looking for a short between 54-58 the vwap/mid/ and ftb to the new minor sell zone. Had a trigger but the buyers where in control of the dom so did not get the set I wanted so no trade. Price continued to grind high on good volume. 

Then was looking for a bof of 73 for a short, which happened, it also gave a second chance entry on the double top, but was messy on the ltf.

I was looking for longs off the retest of trend line, val and the minor bz for the rot up. But price stalled before it, and I was looking for mini bof of this low to get in long for a scalp but did not setup. With volume dropping and in bal around 60, I called it a day.

26th Oct – Bund Daily Analysis

Main trade – Inside day after trend day, looking for continuation. Prefer longs at 21-11 and on bac of 72 on erc.v and first pullback.  Beware of possibility of another range day or pullback due to bof of prev day / weekly hi at 57.67. 57.11 is daily marabuzzo line. So this area is a red flag for the continuation upwards 

 
 

Key News 0900 Ger IFO

1035 GER Aict

1400 US New Home Sales

1530 US Auct

Stats DATR  0.74+

WATR 2.12 –

WK.50%    56.75

M.50% 54.72

Weekly Summary – Inside week x 3 with strong bull close and bof of Hi (Hi 57.67 / Lo 55.42)

Previous Day –  Inside down day with n.bear close inside prev trend day

Bias – Long Bias, sc 3.2

What happened – OIR unable to test prev day hi and rot back to p.vah/hvn and into bal till mc

Hypo 1 – Range – if price holds / bof 60-72 then shorts t 46 t2 33, if price holds 57.21-11 then longs t 33 t2 46

Hypo 2 – Up – if price bac 72 then longs t 89-99 bac 99 t1 13 t2 30

Hypo 3 – Down – if price bas 21 t 11 bac 11 then shorts t 95-89 t2 56.75-.68 t3 56-42

Red flag levels – For short trades bac 157.72 For long trades  bac 57.21/11

How I am using my trade journal to improve my targets. Part 2

How I am using my trade journal to improve my targets. Part 2

One of the statistics I track is MFE and MAE.

Maximum Favorable Excursion (MFE) –  what was the maximum number of ticks in profit that the trade had before the trade closed.

Maximum Adverse Excursion (MAE) – what was the maximum number of ticks in loss that the trade had before the trade closed.

I use these stats slightly differently. Instead of tracking the MFE and MAE during the duration of the trade, I continue tracking these stats on my trades until they make the next pivot on my trading time frame of 5min.

I do this to track how well I am setting my targets and whether they can be adjusted further away to maximise my profits.

Why do I do it this way?

As my targets tend to be at the next levels on my trading time frame and at my current size I do not leave a runner position on. I found that tracking MFE/MAE during the trade duration was telling me that I was taking the max profit during my trade but not what I was potentially leaving on the table, if I had set my targets further away.

This is last 150 trades on Bund.

Note that on the losers, this is not the draw down of the actual trade but the the numbers of ticks from entry to the next pivot. My stop is 5-8 ticks and I track any violations of that on a different sheet. Which is very rare.

The maximum MFE and MAE is of limited use in my opinion.

More of interest is the the standard deviation and the mode / poc of the MFE and MAE of the winners.

First how far does the trade goes against me?

The mode / poc of the adverse tick movement is 0 and the std deviation of the  adverse movement is 2 ticks.

This tells me that I am choosing setups / entry where price quickly goes in my favour.

It also tells me that if price goes more than 2 ticks against me, then I am either early or the trade is likely to stop out.

How far does price goes in my favor until it makes a pivot on the 5min.

The mode / poc of the positive tick movement is 10 ticks and the std  dev is 12 ticks.

I have used this to choose for my first target a 5min within 10 ticks of my entry and the second target is within 12 ticks.

This information fits in with the stats for a 5 min rotation in the Bund which are 12 ticks mode and 18 ticks standard deviation.

For every 100 trades I re do this calculation to see if my first 2 targets needed to be adjusted.

But when it comes to adding size, the question is for me, do i add a runner or do i just increase size get out at current targets levels.

For this I need more data.

Going forward I am going to be collecting data based off the MFE and MAE on the 15min time frame. Entries are still on the 5min.

I will use the mode and standard deviation of the MFE and MAE of these 15min rotations and compare that to my current targets.

I will use the expectancy formula of (average win x win percentage) – (average loss x loss percentage) to compare increased size at my current targets and stops against targets based on the 15min rotations.

This is the first 26 winners

Okay, a decrease in the mode to 4 ticks and an increase in the standard deviation to 16 ticks. But this is a too small sample size to make any decisions on.

I have also started to track the reactions to levels dependent on how large the rot is on the 5min / 15min and 60min time frames.

Again not enough sample data to make any decisions but initial thoughts are that fading a common 15min rot pullback has more potential room for profit than fading a 15min standard deviation rot.

I also tracking the 15min trend and 60 min trend to see if there is a correlation

Once I have a minimum of 100 trades based on this data, I will analysis this to see how it will effect my expectancy and whether I should alter my targets or have a third target.