Hello friends and traders...and trader friends! Hope everyone is enjoying their holiday season!
I'm still trading...but not really in the live market. I have been trading sim, in trading-system-design-mode. I got tired of losing money and decided to get serious about making some changes. It has been fun and interesting work.
I realized that one of my biggest problems to my approach to the market was the belief that there are always many reasons to enter a trade on each bar, in either direction. Well...this is probably true...I think it has to be true or the market would not be able to existor at least it couldnt exist as we know it. Right?
More plainly, I think my entries were getting too random. I didn't have a clear enough entry trigger and I was making justifications to get into the market at any old time. I wasn't trading with an edge. The most interesting thing in the world is that it should be possible to trade without a clear edge and not lose money. Or at least not lose much money. Purely random entries should hit at around 50%, right? And it is possible to trade without an edge and make money too. But in the past behavioral snafus have pretty much sealed my fate. Which is revealing about the nature of the market...
So I am working to establish one clear entry signal that demonstrates an edge. The trade trigger has to be fairly easy to identify. Simplicity makes it easier to test, it makes the test results more reliable, and it makes it a little easier to measure discipline while trading livewhich makes it easier to eliminate behavioral snafus. I think all these things lead to the path of consistency, or at the very least should slow the loss of capital.
Im pretty certain that a successful trading system needs to have the ability to capture outsized gains when they become available. Maybe not every time they become available but often enough. I will often hear something like 1 or 2 days a month will make your trading month. I dont have data to support this ideaother than the data that Ive obtained showing that 1 or 2 disaster days a month are enough to ensure loss of capital. Haha!
Which leads to another attribute that I am fairly certain that a successful trading system needsthe ability to limit losses.
For now, these are the main guiding principles for my new system. I have been testing a new entry in sim and will share more of the things I learn...all discussion is welcome. This new journal is to build from the ground up...the right way...I hope.