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Hey guys I want to share something with you. It has been a real gem for me and I hope it'll be a gem for you too.
About 6 months ago I started doing what I call a "Perfect trading journal". In addition to my journal in excel, at the end of the day I open a new chart with the same setup that I use for my trading. I then go bar by bar and trade the day as if I were trading it the first time. Yes I have the benefit of hindsight but I try to be objective and take the trades as I would have if I were really trading. Hindsight does influence me but that's actually a good thing. Let's say I know price reversed and in my real trading I was caught on the wrong side and stopped out. When I do the perfect trading I look for clues that could have alerted me to the reversal and I look for how I could have gotten out sooner. This enabled me to see things differently and soon I started seeing them real time. I kid you not.
So after a couple months of consistent profitable trading, we went on vacation. On vacation I traded just a little, during the kids' naps and the last hour of the regular session which is 9-10pm here. I didn't do the perfect trading cause we were on vacation and I didn't have much time.
Guess what happened? I started loosing again. when we got back I stayed in the bad habit of not doing perfect trading and I continued loosing. I ended up stopping trading and going to sim for a while. This was partly due to the slow summer months but I really think it's cause I stopped the perfect trading.
So a few weeks ago I decided to change things around. First I took off all indicators. I decided to trade just on price & volume. I also decided I'd do the perfect trading again.
Guess what happened? I became profitable again! And I decided this time no matter how well I do, no matter how consistent, I will not stop the perfect trading. It takes about 1 hour a day which is not easy to do but it's worth it.
Here is an excerpt from my excel from the first week I started my perfect trading work. This is built from the real tradelog and the perfect trading tradelog:
My goals were:
I used these goals to color my stats green or red. I'm meeting my goals or I'm not.
This chart brought to my attention that my winners were smaller than my losers. This is something that bothered me for a long time. I thought it wasn't a big deal cause I was winning 68% of my trades. But then I started not winning 68% of my trades and the wide stop started eating all my profits. And I was not profitable.
So I decided to work on that and I ended up with a new system (also when I removed all indicators). My point in that is that by analyzing my stats I discovered a problem with my system and took corrective action.
Here is a chart of my "Perfect ES" trading for today.
The blue/magenta arrows are my actual entries/exits (Ninjatrader markers). The red & green are the "perfect trading" entries/exits that I add myself at the end of the day. I'm never perfect and that's not the goal. The goal is to see how I could have handled each trade and learn from my mistakes, and also to learn to have confidence in my system (I have a nasty habit of cutting winners short and letting losers run!!!). When I see in my real trading that I got 2 points but my perfect trading got 6 then that reinforces in my head that I need to follow my rules.
I encourage you to try this for a week and see if it doesn't help you. If you feel like sharing, post your perfect trading chart here. I'd love to see everyone doing this because I truly believe this was a key part of my becoming profitable. Remember that in trading you're up against professional traders who are doing their homework. If you're not doing yours then you're at a disadvantage!
Please let me know if you have any questions or comments, I hope you found this post useful. My wife hopes you do because this made me late for bed...
Excellent post cunparis. Makes me think of exactly where I am. Once I ditched all the indicators on my chart I was finally able to "see" what price was doing. Also, when I look to get into a trade now it's clear cut, I don't have 5 different indicators giving me different signals and causing me to second guess myself.
Keep up the awesome work. I hope to get back to posting charts and trades next week. Was in and out all week so didn't get to do much.
Blz
P.S. I saw you reference on forexfactory a 3 period rule for exiting a trade. Is that just exiting after 3 bars complete without the price action moving in your favor?
Cunparis, very interesting. I'm going to implement that next week. I had the same issue, with getting out a early on my winners. I found that Heiken Ashi bars kept me in the trade until there was usually a true reversal. I was on standard candles and was consistently getting faked out. You might get in a little later also, but thats confirmation for me.
I'm not sure I should have mentioned the indicators part, I subconsciously slip that in every time I post I think. That's not the point of this thread, but I think it doesn't hurt either. If someone is consistent with indicators that's great. Perfect trading can show you inconsistencies and help you to improve regardless of what's on the chart. If you're using indicators and multiple timeframes then it's even more important to do the perfect trading.
The ES system that I mentioned above (the excel sample) I used 3 timeframes and 5 indicators (I'm counting Price & Volume here). That's 15 things to analyze on every bar. Now I have 2 indicators (Price & Volume), 1 timeframe. It's far easier to monitor 2 things than 15. So if you're monitoring 15 then there's a good chance you can second guess or flat out miss trades. This is where perfect trading can help.
Here's one more idea while I think about it: You can try "perfect trading" for new setups, even if you're not trading them. I like to test out new setups so I often go back and test the last few weeks and then walk it forward (end of day perfect trading) and if the results are good I go to sim real time and continue the perfect trading and then if results are consistent I go to real money. consistency is key here, it doesn't matter if you win 4 ticks or 20, all you need is to be consistent and earn the same amount every day with very few loosing days. Then position sizing takes care of the rest. (I know you know all this Blz, I'm just writing for everyone's benefit).
The 3 pt rule comes from DiNapoli. I don't study DiNapoli, I learned it from someone else. If your trade is not moving in your favor after 3 bars then get out. My variation: instead of getting out, tighten stops. I'm experimenting but yesterday I got out after 4 bars and was glad I did.
You were pretty hot with your trading a few weeks ago so I hope you are finding profits and can share some more charts.
Saroj - I'm glad to know people appreciate them and find them useful. As long as people keep participating I'll keep sharing. No secrets to success guys just lots of hard work. I didn't finish my perfect trading last night (remember the close is 10pm here) so I'm up and at it at 8am trying to finish it so that I don't take time away from the family later once everyone is up.
In the beginning I did it in excel. Just logging trades. This time I decided that instead of doing excel, I will do it with charts. I think excel is still a good idea and I may go back to excel, but I thin of the two charts are more important because it's in the charts that you can really analyze everything. I save each chart with the date & market so that I can go back and review them later. I'll probably start printing them out at work and studying them on the train.
Getting caught up, here is my perfect trading chart from Thursday. Thursday was not a good day for me for ES so it's good that I post examples of my bad days as well as good days. I don't want to give the impression that I always win. IN fact this trading without indicators is new to me I've only been doing it for 3 weeks now.
I added some conventions:
dot = missed trade
diamond = mistake
I also name each entry. This is important because you have to be consistent. For example if I find all X trades are profitable but Y trades are often losers, I can start paying close attention to Y setups. The # to the right of the entry code is the # of points/ticks I should have gotten. In this case I"m using a 4 pt profit target for ES. If ES starts having a higher daily range then I will increase my target and/or try for runners. But with the limited range I'm lucky to get 2-4 pts.
I hope you find this useful, let me know. The funny thing is when I know I'm going to post it here I put a lot more effort into it which is good for me but even better if it's helpful for you guys..
Sorry this wasn't clear. Here's what I do. I go bar by bar, usually I cover up the right side so I only see the bars up to the current bar. In reality my annotations usually give the future direction away but that's ok.
So I trade the day as if I were trading it for the first time. But each time I make a mistake, I go back and analyze the chart and I ask myself "How could this have been prevented"? Let's say that I went long and price reversed and stopped me out. So I look at it and I see that when I went long there was much lower volume (I'm totally making this up, it's not valid). So then I could say to myself "I went long and there was lower volume, so maybe a rule that I can't go long on a signal bar that has low volume". Then I'll go back over past charts and look to see if this little rule would be beneficial. If it is then I include it in my rules. If not then I discard it.
This is trial & error and it's hindsight trading. You may think that I'd be 100% in my perfect trading but I'm not. Often there are setups that just fail. If I don't have a rule to prevent the trade then I take it in perfect trading.
One other thing, I try to keep my setups really simple so that I don't have to think & second guess. So in perfect trading I focus more on exits. Specifically is it better to use a profit target, if so how much, and should I let a runner run. In my analysis I have found that CL rarely moves more than 30 ticks without some kind of pullback. So I'm now using 30 ticks. Each day I see if I would have made more than 30 ticks holding it as a swing. If the answer is yes then I can consider increasing my target or swinging it. So far the answer is no. On Friday I got out at +30 on a 50+ move. But that's ok because getting out at +30 saved me ticks on a prior trade.
So basically perfect trading can be whatever you want as long as it helps you improve your trading. If you have written rules (which I recommend) then your perfect trading will help you improve your rules. If you don't have written rules then your perfect trading is likely to be completely unrealistic. You can always find a reason not to enter a trade and have zero losers. So I strongly recommend having your rules so simple you don't need to write them down or write them down. I did this on a previous setup I used and I was modifying it every day. I had several pages containing all my rules. It was very helpful for me to fine-tune my method. After a month it was relatively stable and condensed down to half a page.
