Soybean Stress (outright position over the close)

A seriously stressful and frustrating day. My soybean spread trended up all day and I went to get out in the last 10 seconds before it closes and didn't get my position off, I ended up long 5 contracts, a huge position, I had 5 by 5 on and so I closed one side of my position. I had to wait a painful 2 hours before it opened. At that point I was getting further stressed because another position was going against me and I had averaged in, a couple of hours before some biggish news and was worried I didn't have the margin when putting the position on because I thought the initial margin would apply to the soybean position, not intra day margin. It was okay, I didn't get a margin call and I aggressively scalped the spread with the second clip.

I then traded the US 10 year vs German 10 year bond spread for the first time and was legging when the soybean position was opening. I hadn't put a sell in below market to make sure I get filled on the open. The market opened and went in free fall, I sold almost instantly, missing a few ticks and it plumeted 20 ticks or so in about 30 seconds. Thank god I got out, in all I lost $400 on the soybeans.

After some survey data came out with regards to the US economy, I sold the AUS 10 year bond, to flatten my position and watched the markets free fall, I got ready to buy the US bond to exit the spread, I eventually queued the bid even whilst momentum was strong. I read the news to confirm the move was real, but then everything reversed extremely aggressively. I had to buy back the AUS bond 1 tick worse off, I couldn't believe it. The bonds just went up and up, despite the strong news which you would expect the markets to sell of on which they did but it just magically changed. It's been a while since I saw something quite like that. The markets were extremely volatile and I was flipping between AUS/US bond spread and the US/German bond spread, rolling between the spread, so at times I had a AUS/German bond spread on. I had been patient all day on the AUS/US spread buying it very low and ended up getting out of it to roll across again and missed the spike up.

Currently in one spread and fighting to get even on the day.

Update: finished positive for the day, incredibile. Made a few outright scalps and had so much fun flipping around all the 3 bond markets that I trade. I got back in the AUS/US bond spread and it gave me over a tick profit which really helped. 22 hour day, time to sleep for 90 minutes...

First Month

I have completed 20 days of trading and it's been so intense. I have been at the computer 7am to 4.30am almost every day with the odd exception of finishing between midnight and 2am. I have felt incredibly tired but I haven't felt any affects of the tiredness on my trading so I kept pushing as much as I could. The other night I had to close one eye between 2am and 4am just to be able to see the numbers on the ladder... I couldn't sleep because I had a large position at the time. The stress has been immense, even after I withdrew for the first time I couldn't relax. Some of it was used to cover the software costs which weren't small because I had paid for 3 months in advance and I had to back pay charts a month. Additionally I was incredibly low on funds outside of trading and had just 1 month of living expenses left. Now I have withdrawn for a second time and I am feeling far less stressed. I am living in Hong Kong and my rent is equivalent of $500 US a month and food here is so cheap, so just making a few thousand $ can really help.

There has been a lot of waiting throughout the day, I felt I never forced a trade or got impatient, I would often do just 4 trades in a 21 hour day. I have put a lot of screen time in and really feel like I am conjoining with the market... it's hard to explain but I feel the price action isn't so random now. I have made a few outright trades and had good results. Trading such long hours is pretty interesting, I get to see the opening of all the markets from Australian markets, US markets and European markets. I trade them all and I trade soybeans just in the night session which is very illiquid and I actually love it. It's really transparent at times, I can see some guy putting in a huge bid and pushing the market up and then a few contracts pushing at the end and the larger positions holding further down. I sell that market and queue the bid on the other and get the fills to exit the spread. It's very satisfyingly as sometimes I have a lot of soybean contracts and I sell the bid and make it offered and the other bids vanish and I dunno if I just moved the market like that or not but it is very illiquid and very few contracts on the ladder (like as little as 10 sometimes). The other day the Australian bonds pushed higher until the close, opened up much lower then it closes for 40 minutes later on, just before the open I can see people putting in orders to buy just below where it was trading yesterday even though the market was much much lower. It instantly pushed the market up which I think is because some guys were short from that point but don't get out earlier because that session would be when they are sleeping, not everyone can trade 21 hours! For things like that I just watch and observe, I have used some technical analysis, like Elliot wave theory in my trading. I watch and see icebergs in the market, I can see people stopping out in the bond markets and what feels like traders trying to get filled on the bid and pushing the offer with size to extend the move. Example, I see a choice market.. and small traders lifting the small offer and traders putting in queues further down to buy back their longs but the offer is vanishing because their is little selling pressure and I then I conclude those traders wanting to buy back could be exiting their trades for a loss soon to push it higher so their is little downside to going long. Often I just watch and observe and right now I try to focus on the times when their is news, when markets are opening, basically when the spread could make larger moves, because sometimes it is not a spread. For example when US news comes out, it may push T notes up and Australian bonds will follow but not to the extent to keep the spread price the same. This can lead to a spread blow out and it's simply because the news is about the US economy not the Australian Economy, it's unlike the spread I traded before which was European interest rates against German bonds. During news a big move could happen and the spread could keep in. I am building a bigger picture of the week in my head and hoping to discover more about each individual market to progress as a trader.

Yesterday I added a new spread, 10 year German bond vs 10 year T note. It looks pretty decent.. although I am yet to trade it. Now I have 3 spreads to trade and I think this should give me some more opportunities. Hopefully I can put in a really decent month in March as I feel finally settled with my set up. I guess it's turned out completely different to what I thought, trading different markets than I planned but it's turned out well and I am happy with the spreads.

First 20 days trading in US dollars, Gross Profit (blue) and Net Profit (green). Actually the two would be tighter together but I trade a lot of soybean spreads which have a fine line between gross and net, but it will add a little each month I believe and push up my RTs in the market to ensure I can keep getting discounted commissions.

To put this in perspective, as the amount you make is really dependant on your capital, this is a gain of 1.69% per day which is just over a 33% gain on my starting capital in 20 days!

I am suffering from dizziness still and my glands are even more swollen today. Throughout the month I often feel like I might collapse from whatever has been affecting me for the last several months. So I am off to the hospital now, probably just stress related..

[Updated graph for the full month, 2 posts above]

I love my freedom, just dancing all day.

US holiday today, even though the markets are open almost the same hours, they acted differently as fewer people in the markets. I didn't feel there was a spread in place today and waited for a blow out. It didn't come and I missed an amazing opportunity on the open cause software didn't start in time.. I should get up earlier though to not miss the first 2 minutes. So no trades were placed today... if I had traded it would have been a great day as the spread was range bound, but I can't be mad because I avoided blowing out last week by being patient and adapting to the bigger range in spreads. I plan to be a little more aggressive tomorrow though, patience is key!

Instead I enjoyed doing some dancing: http://www.youtube.com/watch?v=wSUiac7u2gU&feature=youtu.be

A challenging week

3 weeks completed! I have felt near collapse during the week. I sleep 4.30am to 6.30am and the spread trades from 7am to 4.30am, so I have been giving it everything. I generally find a couple of half hour naps during the day when things are quiet and prices are not near any of my levels. Typically there has been a lot of waiting and actually only about 7 trades a day.

The first week was good, as non farms was really good to me. The second week I stopped out for a big loss in one of my trades and was pleased to end up break even after costs (+$20 AUD). The 3rd week was the craziest, an excellent Monday +$650 and profits slowly reached to about $1000 on 1am on Thursday. Then the spread collapsed fast and I stopped out for a $855 loss and didn't do anything else until after 2 hours sleep when the market was shut. The spread opened up about half the way back to where it fell the night before, it looked like a buy still but I would rather waste a day just to see how unsettled the market is. The Australian 10 year dropped again causing the spread to blow down further... I bought virtually the low of the drop and held if for over 1 tick. I waited before selling it and was quick to get in and out as the spread is really low on the year. I soon rolled into Friday and after the US job reports the spread was pushing up more, I waited 2.7 ticks before selling, which is tough to do because at that point it had pushed up 6 ticks from the drop the day before which is a big move for this spread. I recognized the need to adapt and instead of selling the spread 0.5 to 0.8 ticks I waited over 1 tick before selling it again. I was able to get the second sell off for a profit. I had sold the spread the second time when the US Treasury Note had fallen (puked) for a second time. Often when a market is pushing in a direction for a long time, eventually there is a quick spike further typically just before any kind of retrace. Due to the fact many traders just cannot hold it this far, scalpers will be getting out, and I guess as the markets moves further, longer term trades now are more likely to be exiting too... a series of people unwilling to take the current price, this is situation which can lead to a great sense of panic as people try and exit a price is taken fast and it has a quick domino's affect, the stops of traders are activated as traders exit which leads more traders to need to exit, buyers on the bid pull their orders in panic they will be smashed through.. people just hit sell because the prices are slipping so fast they panic if they have a position against the move. This is what I waited for to sell the spread for the second time. As I saw it accelerate, I waited for a split second pause I sold the Australian bond which is slow to react and que to buy the T note as the momentum is turning, it goes through me a little then bounces strongly and I don't stick in the position long because I try not to have too much size on in these conditions. I sell the same price again later and it pushes further over the next hour... I see the T note with regards to elliot wave analysis has done 4 out of 5 waves. If you believe this, which basically says a downward move, moves in 5 stages, down a lot, up a bit, down a lot and then up a bit and then the final wave down, which is typically the biggest. The T note free falls, and my screen is jolty from the huge amount of trades going through.. the market rips downwards. It lasts about 10 seconds and in this time I establish where I go to click buy on the T note is about where I should be taking my stop. I click buy and sell the Australian Bond to enter the spread and get ready to get out the T note if it goes past where it just bounced, I bought 2 prices away from where it bounced and it continued to retrace. I was able to get my 2nd and 3rd sell in the spread off for a profit, took a loss on the first one, got back in the spread as it headed towards the high. I thought it's unlikely to reach the high because it's pushed a little further from people stopping out in the market and it looked like the final unloading of long positions, so when the spread headed a little bit back I sold it and got out too early the next morning as it retraced back to where it was before the US job report. Which I think is because the Australian Bond and US T notes do the most volume at different hours of the day so I thought when the Australian Bond reopened it would be likely to have selling pressure, but this took 4 hours of slowly coming down and it was just too tough to wait it out as the spread had retraced a fair bit and didn't wanna have short positions from this price if it tested the highs.

When the spread came down to these levels I remembered various prices from the last couple of weeks. I felt like I had a great picture of the past in my head, I could recall action at these prices before, and remembered the support offered at this price where a trader now had an iceberg (which is a large order, but the traders shows a small amount and when that is filled replaces the small amount until his large position is filled) The T note had found a range a little above the low and waited for it to extend to the favorable side of the range and bought just above the iceberg and entered the T note. It was a great price and pretty much the low of the downward move on the spread, it spent the rest of the day on Friday going up, near the high. In total the range from Thursday to Friday was 9 ticks, a huge range. 2.3 ticks can be enough to stop me out from when I enter the spread. I profited really well from it and reclaimed my $1000 net profit for the week, I ran my profits a little further, which was extremely tough. Imagine the spread has been going 5 ticks in one direction, normally the daily range is 2-4 ticks, you have waited 5 ticks and you sell, it retraces half a tick, which it was yet to do at any point during the 5 tick move you watched and waited through. You don't wanna miss profits in case it's one of these moves which retrace a small amount when they do... but you know you can be aggressive when you sell it for the 2nd time to take profits quickly so for now you should try and capture this overextended spread by holding it and making your risk to reward a better ratio. It's mentally very tough as the retrace you want to capture can take 2 hours where you will seem profits slip back and forth but I managed to hold my first clips longer than usual. I was aggressive with 2nd and 3rd clips to try and scalp the bid and offers aggressively though.

What a week, felt nice to just sleep 8 hours.

My two cents on trading

This is what I think people should know before they trade, it's a shame to see so many people trading in an environment without a clue on what they are missing out on and I get frustrated when I see others struggling to acquire useful information about trading on various forums and in real life and all too often the poor advice given to people who are new to trading by others.

It appears to me in the trading world much useful information is kept hidden and much of the information given is from people struggling themselves to make a profit or a living. Therefore it's a mission starting out to understand so many things, how to trade, where to trade, what to trade, how do people even trade on a daily chart. If you post a question on a forum it normally is answered very loosely, asking more questions and telling the original poster that there's too many factors to give him an accurate answer. This may be true, but still little good information is actually given. So if you don't know someone in person who is a profitable trader then you will need to dedicate a huge amount of time and normally money discovering some simple stuff. Normally such a thread will lead to talking about how important it is to manage your money and to stick to your stops. When I read these posts I get frustrated, because if you asked a professional in another profession how does he stay at the top of his game, you wouldn't want to hear him go on about how he is ruthless at sticking to his plan, because people know this already, you want to know how they came about discovering an edge, not what is their edge because you should realize this takes years to grasp and cannot be typed out on the internet. Okay some people are actually clueless about money management and need to be told about it but if you can't figure that out then probably just avoid trading because being a good trader is about making better decisions than the majority of others and always thinking. Giving yourself an edge within a single market or across various markets in a combined position simultaneously like I do, an edge can mean being able to read the market, putting in long hours and reading the order book and for others its understanding how markets connect and profiting from seasonal cycles or intra-day volatility or just understanding fundamentals.

Trading is a skill and whilst many people try to trade using just a couple of lines on a chart to tell them when to place an order and spend all their time looking for the holy grail, the vast majority of successful day traders are using experience subconsciously and consciously planted in their head from long hours looking at the screen. Briefly, in my opinion short term traders focus on such tools such as volume and look at where most the value was by using volume. Volume for example tells you something because, if a lot of volume (i.e trades) go through at a certain price, it's likely this price was a good representation of where the products value is. If the price moves away from this value and little volume goes through each price, it can happen because of panic in the market, panic caused by 1 or more large trades or by a swarm of traders being forced to take a stop. In these situations the bigger players in the market could try and push the market and try to push it further from it's value which would be taking advantage of an opportunity they see. Often in this situation the market will ping back to it's value where a lot of contracts/traders were exchanged on the day. Sometimes little volume is a result of a news announcement where traders realize the current price is not representative of the current news and so each price will trade little volume and the market becomes heavily weighted to either aggressive buyers or aggressive sellers. After all this is the driving force behind why markets move, to push a market up, buyers have to be more aggressive than sellers and willing to pay the spread between the bid and the ask as it were. Obviously the value of a market can slowly change with time but is always being pushed around, traders create volatility around the "actual price" but also provide liquidity which helps you buy and sell nearer this price. This was just meant as an example to illustrate it's tough to understand how a market moves and takes time to learn, I myself are still hoping I can achieve it one day, as I trade somewhat mean reverting spreads, which takes out most the work in needing to know where each individual market is going, but that is my edge.

What I really wanted to write is, "I can't understand why people spread bet" but actually I can understand, what I can't understand is how have spread betting companies managed to keep the huge disadvantages so hidden. When spread betting, you can only buy (go long) above where you can sell (go short), which is the same when trading directly on the exchange, but with direct access you can also join a que as the best seller, so when someone wants to buy right now, he will have to pay the spread between the bid and the ask (similar to spread betting) to do so and so he will buy at the asking price, but also someone on the ask (a seller) will be matched to this trade and will be short from the ask price. As my trading approach is to profit from the bid and the ask spread, by queuing and using a hedge as a tool to reduce my exposure whilst I scalp, I couldn't ever do my trading with a spread betting company. Recently the spreads have got tighter on spread betting companies, I guess competition has increased and forced people like IG Index to tighten their spreads. Spread betting companies use the spread between the bid and the ask as their profit, people are constantly paying the spread on both sides and spread betting companies can just hedge the difference in the real market, or hedge individual trades, basically it's run as a casino, which isn't necessarily bad, just you are buying 1 or more ticks away from the actual market price! Okay so their are no commissions on platform fee's or taxes (as it's considered gambling, although I don't really agree with that) but when I traded on Eurex I would pay 40 cents on the Euro to get in an out 1 contract, which typically had a 10 euro tick value. So I could make 25 trades and make 1 tick profit in total and break even. If you made 25 trades with a spread betting company, you've paid 25 ticks. I can understand there are many products out there which move so fast that paying the bid and the ask is not a big deal but soon as news comes out or the liquidity dries up a little in the real markets, the spread betting companies expand their bid and ask miles apart to cover themselves. Now your paying a fortune and possible getting stopped out of trades when in the real market you perhaps wouldn't have been.

My advice is trade the markets directly, see more information, make trades against other traders not against a company who just preys on the fact people want an easy way to speculate on the markets, as it comes with a huge price. I often see bad logic used by people to justify doing something, such as they know someone who is profitable so if he can do it I can. There are always going to be people who are running high on luck for an extended amount of time and also there are going to be some highly skilled people who are foolish enough to not scout their options as a trader. My conclusion is simply spread betting does not mean you can't be profitable but why the hell would you bother with it! You can open accounts with any amount if you look around, you can trade markets with just a couple of  hundred dollars margin, which is the money needed to cover the risk of the position.

I believe most people trying to start out by themselves will end up with a spread betting account with charts, with some understanding of support and resistance, some moving averages etc etc. I personally think, there is merit to looking at such tools on a chart, keeping it in mind, but I think it's crazy to be relying on such tools as the main part of your decision making. For example, if there is support at a price, which means the price has bounced of this price at least once. It can be a struggle to push below it, but if the value of this instrument/product lies below the support, it may only bounce of the support again because there are enough traders supporting the price at this level, if enough people do something it's probably going to happen.. I have often seen once the price goes through support, it makes a quick move below it, because of the fact traders have seen this price has broken and a lot of traders have placed their stops below the support, as it's naturally a good place to put it. I know in Eurex I read about the Paul Rotter and he said how in the past he could push the market to people's stops, but nowadays traders have become smarter and don't all place their stops at the same level. So, basically it's my opinion the past plays a part, because so many people will be looking at it but the price will go where it wants, it will travel inefficiently towards it due to the fact traders are people with complex thoughts and opinions.

On the up

After I threatened to take the loss that occurred on my account to the NFA, I was immediately contacted and refunded $730 of the $1300, which is good enough considering I didn't try to get out of the position immediately.

I am now trading the Australian 10 year bond vs US 10 year bond. It's been all over the place, but it's been caused by NF and then the rate decision today. So there has been a lot of waiting to be able to scalp the spread.  All is going well and I found a secondary spread to trade, which is soybeans. Everyday it bounces nicely within a range then blows out in the night session. I have been trading it during the day, it just adds a small amount and I haven't got the account size to trade bigger size and trade bonds simultaneously but it's a good side trade. It's very illiquid though.

I withdrew some money, so that I now have some living funds and already I feel a lot less stressed. I am so pleased to be trading again and my costs are so much less. Everything is on the up.

- Non Farms -

Awesome, I shorted the 10 year T note during NF and then bought the low of the initial move. Was having a decent day before this and finished 30 minutes after NF, as its 10.30pm here and a Friday.

+£877 (~$1400 USD) after costs. Which makes it my most profitable day in trading.

Unfortunately on Monday the clearing house made an error which caused my account to be restricted.

One of my emails to them:

I executed a short position on the 10 year Australian Bond 'XT 03-12'. My strategy is to hedge my position on the 3 year 'YT 03-12' which you can clearly see from my trades. This time I missed my hedge and the 10 year had already reached another price I was wanting to sell, so I sold the 10 year (so I am now short 2 lots) and immediately executed the correct size to hedge my short positions. Unfortunately an error message is generated and consequently I cannot enter a long position on the 3 year. I quickly email trade desk as I just used my credit on my mobile talking to the trade desk and I had to think how I should handle this short position... I am quickly in a decent sized loss and I quickly try to exit the position. I click buy on the bid (rather than lifting the offer) as it's a clear opportunity to get out at a lower price, the offer starts to disappear and without hesitation I lift the offer. I get another error message and quickly conclude my working order could be limiting my account further. I remove the working order and try again to exit the market with 2 lots a second time. I get the same error message and quickly change my size to 1 lot and exit the market (which has now traded higher, as this move was pretty aggressive for the 10 year and not slow like it usually is). I am now short 1 lot and I cannot lift the offer to flatten my account. I run to the local shops (minutes away), top up in about 15 seconds and call the trade desk, I give clear orders to them and it was 12 hours later when they were able to get me out of the short position.

Now I am trying to get back the loss similar to the amount I made on Friday.

During the week I decided to stop trading the 3y vs 10y AUS bonds, as it's not a spread and I am now trading the 10 year AUS bond vs 10 year US bond. Which is a lot better!

I didn't make many trades, due to trying to solve software issues, loss issues.. but I was at the screen on average 20 hours a day, I made few trades, but managed to swap products to something better, get my software just how I need it to be, so it was nice to be handed a lump sum right at the end of the week.