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It was a pretty good week last week, and I am starting to see a real improvements to my trading all around. Its a lot of work on things like learning to be disapplied and figuring out a strategy. I think at this point I have started to understand, in a general sense, how its really done. I feel that I have moved from one level to another, that I now know just enough to get started. I think now trading well over time is mostly about management. You have to manage yourself, how you react to emotion. You have to manage your account and your time and strategy. There is a lot to unpack in this, and right now I don't have the time. Right now I'm just getting started in doing all this managing.
A large and successful part of my effort to learn how to manage how to trade well has defiantly been journaling. This process has shown me where I started and where I am now. I would say that having a journal is essential part in learning how to trade. If your plan is to learn how to trade then you should start by having a journal, and the first entry should be something like- "My plan is to learn how to trade." Part of what I realize now, thanks to keeping a journal, is that I started out with a trade plan, and that plan has been steadily evolving ever since I started keeping a journal. Where I'm at now is I see that I need to once again change my trade plan in order to keep growing.
By my own definition I'm not a trader yet, but I'm getting close. Lately I have managed to become disciplined enough to trade. I have learned about risk and account management. I've learned about strategy. Its like most of the pieces are here, Now I just need a plan to assemble them, and then I'll be a trader. A definite part of what is missing from the "everything that I need to trade" equation is capitalization. Basically there are 2 things that I can do now, start small, or start with a prop firm. Both options have their strengths and weaknesses. Up till now I have always planned on starting small, but I think all that is changing.
So now my "trade plan" is to explore Top Step- to take what I have learned so far and see if its good enough to pass the combine and earn a funded account. I have been using various methods of measuring my performance. My plan now is to change my demo account funding level and my own trading rules to reflect those of Top Step so that from now on when I trade, I'll do so exactly like I was taking the combine. I'll first be targeting the $50k level.
I think with where I'm at, that I totally have what it takes to pass the combine, but doing it demo first is smart. Like a lot of things that I've tried it might be a dead end, or not. Time will tell. In any case it will be an excellent metric of how well I am doing so far.
So tonight I reset my sim account to $50,00. My goal here is to simulate the combine to see how I might perform. Step 1 is a profit target of $3,000 in at least 5 trading days with 50% of the winning trades held for 20 seconds or more. Here are the rules I will have to follow in order to complete step 1:
1. Only trade permitted products at permitted Times. This one is easy for me because what I trade is the indices, which are the permitted products, and the permitted times cater to day traders- in At 5:00 pm, out at 2:00 pm. So far, so good.
2. Do not hit or exceed the daily loss limit of $1,000. This is very similar to my own daily loss limit, which I have been doing a pretty good job of obeying.
3. Do not allow my account balance to hit or exceed the trailing maximum drawdown that starts off at $2,000. This ones a bit tricky, because really, that is all you can really lose in step 1 or you fail. So to me, the challenge of passing the combine is can you manage risk and trade well enough to overcome this. More on this later.
If I can manage to hit the step 1 profit target, then I would move on to step 2, which has the same profit target, but 3 additional rules:
4. Do not hit or exceed the Weekly Loss Limit of $1,000. Ok.
5. Do not hold positions into major economic releases. I can totally do this one.
6. Follow the scaling plan. This one also might be tricky because I have never scaled, so I guess now would be a great time to incorporate scaling. Again, more on this one later.
These are my new rules going forward. What I am finding out is its easy to follow rules if I can understand why they are and what they do.
I will say that the TopStep rules get a lot of criticism, which generally comes from people who attribute their failing the Combine to the rules, not to the fact that they have trading losses.
In one sense this is understandable. One reasonable objection to using TopStep, or any other funding company, is that you have to play by someone else's rules instead of your own. But the requirement that a trader have rules in the first place is something that people don't see the absolute importance of. Among traders who do have actual rules, the most common unhappy comment you see in trade journals, when they are reviewing their losing trades, is something like "I didn't follow my rules." The rules may be good or no good, but if you don't have something that makes you act consistently, I guess you think that trading can be done completely seat-of-the-pants. Another word for this is trading by impulse, not the world's best method, although probably the most common one.
So, you may find that these rules do not fit you personally, and that you have to say good-by to TS and go anther way; or you may find that you can work within them just fine. But you need to have rules, and the most important ones to have are the ones that force you to stop your losses before they engulf your account. All of these rules are risk and loss control rules. It's good to have some.
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I will say one thing about the "follow the scaling plan" rule:
The "scaling plan" doesn't refer to scaling in and out of trades, it limits how many contracts you can use per trade, based on your account balance: if you're in profit less than 1,500, max two contracts; less than 3,000, 3 sontracts; more than 5,000, max 5 contracts (for your "50K" Combine.) Some such risk restriction is crucial. I suggest using less that the allowed number, such as always one contract, until you're really sure you can go to two, or actually, for the entire Combine.
You may have understood this rule perfectly well, but I wanted to emphasize for anyone else reading this that it is a risk control measure. Traders trading their own accounts usually would be wise to have some such rule also.
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Good luck. You will either pass it or you won't, but the exposure to real rules that are actually enforced, and real consequences for poor trading, can be very valuable if you learn the lessons that are there to be learned.
Good journal. Keep it going.
Bob.
When one door closes, another opens.
-- Cervantes, Don Quixote
I've now pointed my charts from the micros to the minis. Things looks a little different, but what I am trying to do stays the same.
My current and preferred trading method and strategy is trend following, buying the pullbacks. My timeframes are the 60, 15 and 5. I honor the 60, obey the 15, and trade from the 5. Here I see that we are starting Monday well below the 15 minute 50 MA channel. On the higher timeframe this looks like a pullback that could be ending soon. This is not a good time to trade, but a good time to wait and see what happens next.
These recent changes feel like moving into a new house or maybe starting a new job. Due to the new rules, specifically the trailing maximum drawdown rule, I am forced to look for only the best trade setups with really good risk to reward. Here is the NQ today-
Because trailing maximum drawdown is only $2000, I am back on the 1 minute chart looking for tighter entries. Mind you, I'm not looking to scalp, but am looking for a quality trade. Here I have found one. Why I think its quality is confluence. Here there's a head and shoulders pattern, S/R both static and dynamic, and a great trigger with the break and retest. I am now forced to consider looking at the 1 minute chart. Why I have been hesitant about this is I often get confused about the real direction price is headed. This is something to think about.
First, I have enjoyed following your journal. Woo hoo
I can see how a 1 min can be tempting. One thing I have done is get creative with time frames. Sometimes going to a 3 min chart can expose wicks and reversals cleaner for example. All depends on assert behavior. I love 2hr charts for many reasons. Maybe you can try some odd sizes for time-frames and see if one makes the levels stand out better. Just thoughts that came to mind. Hope you don't mind me posting this on your journal.
Day 1 trades of the Top Step combine simulation run
Today's letter grade is a 'C' for violating my personal rules about time frames and trend. I'm still figuring some things out and there is a chance that those rules might change. Even with all that I was able to put together a decent day. It wasn't luck and it wasn't skill, or it was both. Got caught on going in too early on the first trade, I had the right idea, I was just too early, something or someone made me pay. I'm calling trade one a trap.
What was good is I realized it for what it was and got back in. I was thinking and not feeling when I made the second trade, that's good. I got out of the second trade either too early or a little too late depending on how I look at it. There was also a third trade in this series that I should have taken, which would have hit my profit target.
Not a bad result for the day, despite some clumsy trading. Later I'll journal my specific plans on how I plan on passing this combine, Today's trading followed the combine rules and overall is what I wanted to see for a first day.
Today's letter grade is 'B'
I was kind of backward on the day, waiting for reversion to the means. I kept seeing support on RTY @ 2234 and got in WAY too early. I ended up holding the position longer and taking more heat that any other I have taken- the price action kept telling me that we had support. Here's how it looks on the chart.
Not gonna lie, that was a LOT of heat. Its not what I want to trade, so that's bad- BUT, I saw the support and rode that mother out, so that's good. *Note to self* Take the easier trades. This is the first time that I used more that one contract. I bought the second contract later when the support just kept holding and there was more bullish activity. It worked out, but I think that I can make better trades than this.
Again, I followed all the rules of the combine. In fact, I am actually following all the step 2 rules as well. Today's net profit is $392.24 My profit target on the day is $300.00. If I hit that number every day, then at the end of 10 days, or the minimum time it takes to finish step 2 of the combine, I will hit the combine goal in the right amount of time. If I'm a little ahead like I am now, that's ok too, because chances are that I wont hit $300.00 every day, or if I do, than I'll have to take a "20 second loser or small winner. I'll cross that bridge when I get there.
Tomorrow's goal is to get back to trend trading like a boss. The last to day's have shown me that I can be a little sloppy, but I don't want it to become a habit. So tomorrow I'm going to really work on finding the kind of trade that I like, even if that means not trading at all.
