@treydog999

I've got good news for you. In your case it is easy to find out whether you are making progress or not.

Before I begin you should know that the way you ask the question gives an indication that you should be optimistic. I can't make proper judgement yet but there are grounds for a positive outlook. The main reason I say this is that you are clearly not lost. The fact that you can give such a comprehensive background to your question and the fact that despite being clearly under some emotional/psych pressure your writing is clear is very good.

In this message I will outline a simple way for you to make an evaluation. You can use it now to get a general feeling and use the same structure to continue evaluating at regular periods.

Structure:
The structure for success in trading (or sports, or study or any sort of process where learning and a feedback loop is important) is relatively straightforward. Lets think in terms of a pyramid.

1. Level I: The Foundation: The bottom of the pyramid
The foundations for success are the things that you have mentioned in your mail. Support, capitalization, the grey matter to be able to experience trading in a structured way. If you were a kid thinking about a sports career this is the phase where you look at your kid and you evaluate - do they really enjoy this activity. Does it suit them.

In your case, you have stuck at things and clearly have a handle on all the ingredients that are necessary. You have committed capital and continue to do so despite losses. This is in fact encouraging. You are not mad.

The outputs of this Foundation Level are twofold. Visually think of the next level of the pyramid being split in two pieces.


2. Level II: The Operations: The plan and the execution of the plan
On nexusfi.com (formerly BMT) and in every trading book on the planet there are two operational aspects that are the key to your success. If you never make it to the next level you can be successful if you get this level right.

I ask you two simple questions:

a. Have you developed a plan ?
b. When you are trading are you executing this plan/sticking to the plan

The questions are simple and honest answers are important. If you try to kid yourself or are determined to look for the easy way out here you will never make it and should stop now - get a less expensive hobby. The answers and key to improving are in your journal.

The Plan:
Do you have a trading plan? Do you? Really?? I don't want to see it but if I asked you to mail it to your husband or your wife would they say "This looks thought out, simple, clean and professional". Would your father or your mother be happy with it ? Would your teenage kids be proud of you for having spent your time developing it and polishing it? Please note, I am not asking you whether you have rocket science in your pocket. I am just asking do you have one ??

The Execution:
Let's presume that you have a plan and that it is up to scratch. It is a worthy plan. It reflects the expertise that you have developed since you started trading. It is your intellectual property. The really, really, really important question is: "Are you following your plan?". I know a number of traders , some of whom are on nexusfi.com (formerly BMT), who are amongst the cleverest people I have met in my 45 years. They have a world of experience in life and business. They have intimate knowledge of the markets, the platforms, the tactics and the strategy. They have plans. They do not follow their plans. They are not making progress. They cannot make progress.

Truth with a capital T:
"If you do not follow your plan, you commit two sins. Firstly you cannot attain the goals of that plan. This is bad and causes financial pain. Equally bad maybe even worse, you cannot make your plan better."


Ask yourself the question. "Am I following my plan?"

3. Level III: Strategic Development: The Dream
Everybody in this business who will survive and develop will need to develop in a strategic way over the years. Let's not spend too much time on it right now as it is not directly relevant. Let it suffice to say that following 1, 2 or 3 years of pulling in the cash with a great plan and super execution you will want to develop in some other way. I don't mean to stick my head down Mikes pants in any way but it is a relevant example that we are all familiar with. @Big Mike went down the road of nexusfi.com (formerly BMT), he shares his ideas about retirement in the sun and has the family and dogs that we are familiar with. Let's say that this is what we can see of the strategy. It leads to the dream.

I don't want to stray too much from the message of this thread but you or anyone else might like to go and look at the Webinar of Manesh Patel. I hope I have the right link here. He hit the nail on the head a few times in this webinar.

Webinar: Manesh Patel on The Psychology of Trading Hi guys, It is my pleasure to welcome back Manesh Patel of E.I.I. Capital Group for another webinar presentation on Wednesday, September 12th @ 4:30 PM Eastern US. The topic is "Psychology of Trading", and some of the items discussed will …

Summary and Notes:
OK. Lets bring it altogether. You have to ask youself just 3 questions

1. Do I have a good foundation -------------------- YES / NO
2. Do I have a plan -------------------------------- YES / NO
3. Am I following the plan ------------------------- YES / NO

Notes and Answer Key:

Question 1:
If you answer NO to question 1. Then you cannot make progress until you put in a good foundation. Like I said in the beginning. You seem to have a foundation and the brains to go to question 2.

Question 2:
If you answer NO to question two (remember, you just need "a" plan. Not the plan that can shoot the eyelashes off a fly just a good plan that you feel is worthy) then you can and WILL make progress by improving this plan with your latest structured knowledge. If you answer YES to question 2 then excellent. Proceed to question 3.

Question 3:
Let me turn things around here a little. If you answer YES to question three even if you are still not consistently profitable. "Yes, I follow my plan well but the results are not good and I still manage to follow my plan" - then you a gold medal contender. Following the plan and being able to move forward when looking death in the eye is the stuff that champions are made of. If you are doing this ... despite the fact that the losses are mounting ... you have ice in your heart my friend. You are good. Sounds a bit funny huh? It is a little counter intuitive but it is the truth.

If you answer NO to question 3 then we are in a difficult spot. Yes you have a foundation, Yes you have a plan but No you are not following the plan. Many are the ways that this ain't gonna work. Not only are you not making progress but you will never be able to make progress and improve your plan unless you hit it.

nexusfi.com (formerly BMT) is full of clues and tiny footprints and tracks that tell us that this is the rocky road. "Moving your stops", "Not taking signals because you don't think they look good", "Constantly chaning the chart". You know this stuff.

I am a glass half full guy. Maybe knowing this for some people is an ice breaker.

Final Words:
treydog999. Tell me the answers to those questions and you will tell me and yourself the answer to the question "Am I making progress?".

best regards


p

Seriously, this post is AMAZING. can i thank you multiple times?

Question 1: Do I have a foundation? I believe so, I have read hundreds of books, from price action, auction market theory, psychology, automated trading, high frequency trading, DMA. Any and every webinar that peaked my interest. I even took courses in financial engineering and computational finance on the side. I have a large toolbox of understanding. Its not very useful/effective at this point. But it exists.

Question 2: Yes I have a written plan, its very detailed and based on a business plan. I have actually shown the entire thing to my family members to have them review it. It includes very specific rules for entries, exits, risk management, when I will trade, how many contracts, trade management. It has gone through many revisions but i keep all of that there so i can see how it has evolved. Its a substantial document at this point. I have a cliff notes version posted publicly on my journal thread. It evolves publicly and changes are made based on reasons shown, mostly in the area of simplifying and drilling down to 1 tool / entry technique to master.

Question 3: Ah the crux of the matter. A majority of the time I execute my plan, my journal shows over 90% of the time. I do not take revenge trades, I know when to pull my own plug due to risk or psychological imbalance. Others have told me and I believe that discipline is my greatest / only trading skill. But humbly in my heart, I know I could do better. They are not "blatant" rule breaks but they are in that gray area so to speak. This area is 100% in my control and improvable. Without a doubt, I KNOW I can get better here.

How do I see myself in this whole thing. I am trying to loop phase 2 and 3 together over and over again until I make progress. I have a plan, its well written. I trade 20-30 trades and then determine what is going well and going poorly. Revert back to the plan and edit/evolve it. Rinse Repeat. But its a hard road to hoe because trading is strange. You don't see progress clearly, and the randomness inherent in it makes it even more difficult to discern. You make a change, still losing, do it again, still losing but hopefully less this time. That I believe is my heaviest psychological burden. I am a fat man on a diet, whose scale is mostly random. Not knowing if what I am doing is actually helping. Which is the entire reason I posted this. Thanks again for your insight @podski. Also thanks to the futures.io (formerly BMT) community for letting me bear my soul and not get burned for it. This is one of the reasons futures.io (formerly BMT) is awesome.

@treydog999: I do not know how @podski meant his 3 questions, but I like this structure to answer your question about the right path. However, I have my own interpretation of these questions and what the answers to these should be in order to answer your question properly. Maybe this will shed some light on your problem...

Question 1: Do you have a foundation? This has nothing to do with how many trading books you have read or how many seminars, etc. you have visited. This has to do, with what @Trendisyourfriend has mentioned in the first reply to you: The EDGE. So, question 1 should be answered honestly by you and you should ask yourself whether you have a method which shows an EDGE. Answer also, how you know that you have an EDGE. Did you backtest your method? Over what time period? Did you apply a proper testing process? The latter is the most important and often neglected part of testing by beginning traders. There are some very good books about how proper testing works. The outcome of successful testing is a robust (!) method.

Question 2: Do you have a written plan? This is the plan, that helps you to execute the EDGE, which has been hopefully determined in question 1. Nothing else. It might include some self management aspects as well. And if it is more than a few pages long, my view is that it's worthless. A plan should be operational and, hence, short. It should be something which you can go through briefly before every trading session. Nothing useful in having a plan with twenty-something pages sitting on your shelf. Or, if your EDGE is really more complex, try to create a shorter, operational version of it for everyday use.

Question 3: Do you follow your plan? If not, then it is probable that the EDGE you have found in question 1 does not fit your personality. For instance, I have tested successfully some statistical methods but could not trade them well, as I have to analyze and interpret charts (I love that aspect of trading). I've realized that I feel more comfortable by trading discretionary... and that, in a certain manner as well. If your answer to question 3 is "no", you have to go back to question 1 and try to find another EDGE which fits your personality (another style of trading).

Hope that helps a bit.

Edge is important, of course. But placing all the emphasis on the edge is inappropriate.

But if you don't have all the other building blocks in place, you'll never be able to get to where you actually have an edge.

It's like saying in order to beat Tiger Woods at golf, you first need to be able to beat Tiger Woods at golf.

You need to build a foundation. And all of those other things you mentioned in your poll are layers in that foundation. There is no single thing in trading that is going to make you profitable. Instead, it is a combination of all the little things that will.

Mike

...

@treydog999:

Discretionary methods can be tested as well: manual back- and forwardtesting (moving the chart bar by bar and making decisions - this is not the same as live trading but comes close), sim trading, small live account, etc.

The fact that so many discretionary traders are on this forum does not prove anything. How do you know how many of these are profitable and to what extent?

Yes, I am a discretionary trader as well. But my decision to become one was not influenced by what other people do, but by what I think is the right way for me. I tried different paths until I found out.

You have to think for yourself and develop your own approach that fits you.

I don't like Mark Douglas' definition of "edge" as - if taken literally (he talks about "probability") - it leads to focus on the win rate. But there are methods out there with lousy win rates which generate overall massive profits as the winning trades are way bigger than the losing trades. So, an "edge" in trading - as I see it - is to have a method which generates a net profit over time. That covers the different strategies possible.

I do not understand what you write below the attached graphs and I do not have access to your journal either as I am not an elite member. If you want to know what I mean by proper testing, read Robert Pardo's book Design, Testing, and Optimization of Trading Systems. Even if you are a discretionary trader you will understand what I mean.

Well, what I've meant with "EDGE" is what I've described above. If others define "edge" differently, then we are talking about different things. Then just exchange "EDGE" in my posts above with: "OVER TIME NET PROFITABLE SYSTEM". Without an OVER TIME NET PROFITABLE SYSTEM all the planning and psychology will not help you. And I don't think that it's so easy just to execute it and to get rich only because you have an OVER TIME NET PROFITABLE SYSTEM. And some discretionary "systems" cannot be easily (or even not at all) automated, but they can still be tested.

What I am getting at with the statement of discretionary traders or automated traders on this forum is simply this. Using the strategy development methods laid out by Pardo, Bandy, Striesman, Chande or Kaufman are that automated trading has a significant advantage over discretionary trading. So you would presume we would see more automated traders than discretionary ones, or at least on % of profitable traders.

As with back testing of discretionary systems by hand bar by bar. Sure its a great tool, though not as accurate as systematic backtesting, out of sample testing, and WFO. Although I do take the discretionary part as a dilution of the results, due to 2 factors. If I could show you the same trade some time later say 10 years or 10000 trades later would a discretionary trader, trade it and manage it exactly the same way? Maybe but probably not. Also could you give that system to someone else and have them execute it the same way? again, maybe but probably not. This was my sample of one point. Where because of the subjectivity, how statistically significant is the samples put out by this type of testing methodology. Which is a reason why I am saying that automation has advantage over discretionary on this point.

Everyone who is a trader is looking for a net profitable system over time. This is the entire goal of this exercise. Now I agree with you on the testing, I do develop automated systems. I understand conceptually what you are getting at in trying to apply it to discretionary trading. I just don't agree on the level of applicability of that automated workflow on discretionary trading. Even with an automated backtested system over 10+ years, basket of instruments, monte carlo results, incubation, walk forward testing, and real time out of sample trades thats only an indication that you may have discovered an "edge". Though its persistence in the future is unknown, we only know it worked in the past. It really is just a filter, get rid of stuff that never worked as it probably wont work in the future. But stuff that worked in the past probably has a better chance of working in the future.

As with regard to my charts, it is giving you the stats of 1 of my discretionary trades. Boiled down to an entirely automated process. Seeing if after my entry trigger, is there positive expectancy. Which can be seen in the average trade chart. As you can see it is positive. So this entry type has directional bias, and positive expectancy in the mathematical sense. So if I enter at my area, I have higher % chance of price moving in the direction of the trade, and in such a way that I expect to make more money than I lose. The rest of the charts are other statistics of that system. There is no need to actually reference my journal, all the information needed is posted here.

Not necessarily. One thing is the proper testing of a method. The other is the extent of the "edge" (as I see it) of a method. For instance, most automated systems do not take the context of the market into account properly, or at least not to that extent to which a discretionary trader is able to. That's a big advantage of discretionary trading (if the trader is good at it, of course).



Good, we have the same view here. What you say in the last sentence (marked bold by me) is what I was getting at. And the more proper the testing has been done (with all its flaws for discretionary methods), the better the chance the method will stand the test of time. But its for sure no guarantee.



Okay. Are these 50 different tests of this one discretionary trade which are shown on the x-axis?

Honestly, I do not know anything about your progress in trading. I just assumed that you struggle with it for some while now, as you have started this thread (maybe by bad). Maybe this is not true and you were asking your question whether you are on the right path only as a general question one should think about when starting trading?