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STF discretionary spot Forex system development journal
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STF discretionary spot Forex system development journal

  #281 (permalink)
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@Big Mike: confess I panicked when my name turned red--only one of many reasons I stopped posting. While I might welcome red when on top of my game I'm a blue person by nature and these days prefer green. I accept red means "stop posting, start trading"


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  #282 (permalink)
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Pleased to say I spent much of the morning with Andrew from Multicharts who stepped me through the difficulty I was having with MC attached exit strategies. Very thorough. Reminded me of more unpleasant Drs appointments that I knew were for my own good.

Hard to trade on command but it turns out I made money on paper during the exercise, so happy about that. I chose USDJPY for the demo, the same way we choose short sleeves for blood pressure checkups and loose pants for anal exams. USDJPY can be counted on to offer trading opportunities on short notice during Drs hours.

IMO results show there is an issue with one or more of my custom indicators (all written by me). When indicators are turned off MC goes like stink. Andrew's kind assessment was MC may not interpret what I'm trying to do well, and could I please upload to the cloud a Zip archive containing data compiled during the test for the engineers. I managed to do so, once I got over issues I have with cloud computing and figured out how to do it. I assume this is MC's way of putting the case on a back burner, but that doesn't matter to me. Trading is not about the platform or the method--all about getting the right sort of kick in the pants.

I confirmed I can trade 2 contracts profitably by intuition more easily than I can trade 1/2 contract

I also learned I trade better when I think the screen is being recorded by a 3rd party. When I mentioned this to my wife she asked, "...because you are more cautious?" and I had to reply no--I just trade better.

Which reinforces the notion trading is best when it's about performance, which requires conditioning if not an audience.

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  #283 (permalink)
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Continuing to focus on attitude trading (or, "attitude while trading") lately since at this stage attitude appears to be the factor controlling whether I make mistakes and consequently what percentage of what the market offers I'm able to capture.

By "attitude" I mean a tangible mental state--for lack of better words "mindfulness" perhaps, a perspective characterized by awareness of self (or just increasing resignation to inhabit the same skin as that self without trying to sabotage it) or of objectivity rather than a particular emotion-- that is required to trade well consistently. Could be nothing more than an attack of acute common sense for the first time in my life . In any case I suspect all profitable traders endure a similar sort of awareness at some point, over and over probably, but hope the sensation fades over time (i.e., that common sense loses it's novelty after a while) since too much of anything can be disconcerting.

To clarify (assuming it can be clarified), the state of mind at the moment could be described as what ensues when all the emotions we've experienced when trading illuminated by what we've read about trading psychology & technique--what we think we know, in other words--coalesce into a single frame of mind that seems more than the sum of its parts (i.e., reinforcing the feeling that what we thought we knew until now was mere wishful thinking). Each time it happens the feeling of "assuredness" increases, "assuredness" what allows us to trade properly. This episode may represent another stage of learning, perhaps a culmination of some sort, and in theory may signal the whole (learning) process is about to repeat in some sense, as it always does.

This seemingly new awareness is nevertheless consistent with my theory of how one learns to trade--by abandoning thrill-seeking and love of money in favour of ceaseless repetition of experience in order to deepen understanding--which may be nothing more than philosophy internalized in my formative years bubbling to the surface of the Jurassic tar pond of the mind; e.g. of Kierkegaard's notion of repetition and recollection or Gurdjieff's notion of crystallization. In other words, the path to profitable trading seems similar to what Kierkegaard portrays as the transition from the aesthetic to the ethical life (e.g., in Either/Or, a theme repeated in various forms by many, many others).

Trades themselves are pedestrian, straight out of Barry Burns' book. The transition a while ago from trading 1 contract to 2 suits me, suggesting continuing to increase position size (while maintaining the same 1% risk/trade money management rule) may not be too much of a psychological issue. It should go without saying that increasing position size while maintaining the same risk/reward ratio implies increasing account balance (by leaving profits in place or by adding additional capital), since setups must continue to respect price architecture or the whole thing will fall apart. I still peek at P&L from time to time during the session however, so that bad habit will probably be first against the wall when the next revolution in my trading comes.

At the moment USD/JPY seems less chaotic and therefore more satisfying to trade than EUR/USD.

In terms of strategy the first target (1/2 position) is always placed at 1:1 risk/reward since it so far appears that if price architecture (which includes an S/R backstop) supports this ratio then the trade can be characterized as high probability (consistent with remarks Al Brooks has made on the topic but which here reflects new insight for me on why that is so). The remaining 2 targets (1/4 position each) are placed at obvious S/R levels with risk/reward ratios preferably at least 1:2 and 1:3. Protective stop is moved to BE + costs when the first target is hit. Suspect the art of the trailing stop will remain an issue forever.

Still looking forward to discovering and fixing whatever is causing MC to be sluggish. Appreciate the effort MC support has invested in the issue to pinpoint the exact cause, since as mentioned previously IMO it very likely one badly behaved custom indicator or another.

Today's USD/JPY trades, net $400 or $500 after costs:
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Last edited by bnichols; April 8th, 2013 at 05:54 PM. Reason: Typos, clarifying remarks
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  #284 (permalink)
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No real-money action today except for one brief CL trade (1 car for for 9 ticks, chart below) to test the account connection. While commodity trading does not belong in this thread, briefly I'm migrating from commodity ETFs traded through an investment bank to trading futures through IB using the same system used for trading spot currency. So far so good trading crude live on paper and the plan is to switch to real money later this week.

The rest of today was spent on a pet project (a channel trading bot) being tested on paper (that managed to lose about $6000 in the last 12 hours ). Maybe back to the drawing board on that one.

The figure below shows CL trading setup, more or less identical to currency trading setup with the exception that a 5 minute subchart has been added for the time being to the bottom of the 200 Tick chart (2nd chart from the right, below MACD and Stochastics panels). I have no interest in trading the 5 minute chart and its only purpose to vary the 200 tick bar spacing in the chart above in proportion with the passage of time to give another indication of trading activity.

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Last edited by bnichols; April 9th, 2013 at 08:29 PM. Reason: Typo...fixed before Zondor pounces on it :)
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  #285 (permalink)
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CL continued...

On the eve of trading CL real money thought I'd share what CL looks like to me after hours when all indicators*** are on. I don't trade all indicators.

I'm tempted to repeat what Stewie (of Family Guy) said when he first glimpsed a naked female but this is a family forum. Suffice it to say I--like he--am horrified.

*** Volume and cumulative delta turned on, so far no volume profile except in the 1800 tick chart (far left). The 5 minute chart coupled to the 200 tick chart is distorting everything.

While some may not define Market or volume profile as an indicator, I do

The bottom line is indicators--any mark on a chart that is not a tick--bore holes in our skulls. Price does not care about time or volume or how we divide things up. What price thinks doesn't really matter to me as long as I can deduce what it will probably do next. The issue is I hate a meaningless and ugly chart.

I have a water bottle picked up on a trip through the NE US at a tourist trap apparently on the site where Thoreau lived and wrote. Big Thoreau fan since I can remember. The water bottle is metal, fire truck red and inscribed with the words "Simplify, simplify, simplify". I suppose in a pinch it could be used as a weapon but any motorcyclist will tell you dehydration is an issue. I prefer to use it to hold water to drink or to pour down my neck. But I bought that particular bottle because of the inscription.

If I were to interpret this sudden avalanche of associations it might seem I'm not ready psychologically to trade CL real money. Funny how the mind works. Or do we plunge in waving a sword as we usually do (now that sword waving usually earns us more heads than it costs us)

In the meantime these thoughts are distracting me and hence this thread from STF spot currency trading.

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One reason for the switch to futures from the "safe" practice of swing trading ETFs is the sort of nonsense shown in the figure below--a mini flash crash in a banking ETF on the TSX that took out the trailing stop. If I'm exposed to that kind of risk why not trade futures, where at least the potential reward is commensurate? I've asked the bank if the exchange is going to man up and cover the cost to investors of the glitch--not holding my breath but you can't win it if you're not in it

Recent flash crash of BMO ETF ZWB:
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Last edited by bnichols; April 10th, 2013 at 03:14 PM.
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  #286 (permalink)
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Got my butt handed to me today trying to trade option expiry in USD/JPY (and what is turning into another swing at long awaited level of 100.00, which may happen outside my trading session if the bulls can show enough interest to overcome the offers at 99.90), my error as usual being frenetically trading limit price action like stop price action (trading chop the wrong way) during relatively brief periods of consolidation. [I no longer make the mistake of bucking trends e.g. because price is at the top or the bottom of the screen and there is nowhere for it to go except retrace ]

Don't really know why it happened except that someone said under certain conditions we regress to what we learned first--warts and all--no matter what experience has taught us since, the implication being would-be traders can avoid a lot of grief later on by seeking proper mentoring from the get-go. Episodes like the one today seem to be evidence of that, one reason I try hard to teach my kids about the mistakes I made learning to trade in the hope they might avoid them. In vain of course (the education of kids)--you can hold a horse's head under water until he drowns but you can't make him drink :-/

"Chop" can be traded as long as we have our chop hat on and our wits about us, meaning mainly (at least in my case) we're able to rein in profit expectations to match the price excursion (mini-trend, say) being offered by the market, trading in the direction of any detectable bias to increase the odds that we're in a breakout long before conventional breakout specialists. The downside is that some fraction of the time (guessing << 20% if breakouts in general fail 80% of the time) we're going to be on the wrong side of the breakout The other downside is if we don't have our wits about us and continue to trade (continuing to trade loss after loss unfortunately how we finally twig to the fact we don't have our wits about us) we lose money hand over fist. In my favour I did muster enough of a survival instinct to halve the position size from 2 to 1 contract.

That said the figure below summarizes today's trading activity, after the (blue) smoke cleared a loss about $200 in 23 trades.

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Last edited by bnichols; April 11th, 2013 at 04:10 PM. Reason: typo(s)
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  #287 (permalink)
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Today's long bomb trade: note to self to respect floor trader pivots and TPO boundaries marking consolidation under whole numbers a little more:

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Edited to add: that (USDJPY) trade was the only trade of note today, the week probably ending up net $200 or $300. Nothing to write (home) about but better than a poke in the eye. Won't know exact figures until the IB report is available tomorrow.

In other news, work with Multicharts continued this AM when MC support recruited an engineer to observe and/or trade the installation in order to get first hand experience with the lag when the Master exit strat was invoked. My guess is the info dumps earlier in the week did not show what the issue was clearly enough. In any event after weeks of driving me nuts lo and behold the problem vanished before we got started--could not reproduce it. If Andrew of MC had not seen it previously as well I'd think I was actually going nuts--assume he will back me up on this one

All I can say is, having brought products to market myself, manned the response line, worked with clients trying to use those products and having a power similar to that of the unknown engineer--to make bugs tremble & hide with a mere glance in their direction--I have some idea what the engineer must be thinking (aside from "can't fix it if it ain't broke") . That said, something in the installation was giving me grief--just a matter of time until I find out what it was.


Last edited by bnichols; April 12th, 2013 at 04:13 PM.
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  #288 (permalink)
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Continuing to trade, develop models of price action and maintain an offline log--unfortunately the mind set since the last post not really conducive to sharing, social media always somewhat of a mystery to me. [Huge topic IMO that doesn't belong here].

One departure from the pattern of humdrum setup-driven trading occurred Friday when I slipped back into always-in trading for the day, the principles of which are well documented by many others elsewhere.

The move was partly inspired by a post on futures.io (formerly BMT) about whether and how to trade news and partly because I'm less and less interested in scalping, more interested in following the herd when price decides to migrate to happier hunting grounds; i.e., search for a new point of control (POC) even if it chooses to revisit a previous one. [Migrations between POC's can be observed on longer time frame charts, where bars begin in one POC and end in another).

The main attraction of always-in trading for me is that I'm exposed to the market if & when price moves so don't feel compelled to analyze every wiggle when price is consolidating (i.e., oscillating between value limits) especially during that peculiar calm before news events. By initiating minimal positions in up to a half dozen pairs based on a best estimate of sentiment the idea is to let the universe of event risk unfold as it should. I'm rarely totally wrong about all spot pairs when they react to news, which means worst case account balance tends to remain more or less static until I can reverse direction in the offending pairs, at which point the sun comes out and we're lying on the deck of our private yacht surrounded by blue ocean umbrella drink in hand, unmanned wheel spinning and rudder slapping side to side, at least until the familiar sound of coral against the keel brings us back to reality.

I suppose always-in trading works for me because I'm only engaged when I need to be. Until then the mind is free to wander, and the mind must wander.

The bottom line is, if we don't have our chop hat on when price is ranging traders like me (irrational Type A impatient) can lose significant money, and Job 1 is Don't Lose Money. Always-in means managing chop as required to ensure we're on the right side of the breakout when it comes rather than suffering the psychological trauma of repeated failed setups when not in the mood. The other bottom line is, the approach requires some amount of experience, especially finessing losing positions into winning positions. As a corollary of experience always-in is probably for better funded accounts, that presumably became better funded because if we learned nothing else experience taught us to cut losses before they become ridiculous.


Last edited by bnichols; April 28th, 2013 at 04:23 PM. Reason: Oops
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  #289 (permalink)
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Example of initiating an always-in session from this morning, which unfortunately didn't turn into anything after the session was cut short by an unexpected errand. I exited all trades just as pairs were reacting to US personal finance numbers--ordinarily would reverse with a "2 x position" trailing stop.

Initiation of positions with 1/2 contract each was straightforward with the exception of GPBUSD, which took a couple of tries before it chose a direction. Net after commission on all trades was probably $200 or so.

EURUSD
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USDJPY
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GBPUSD
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USDCHF
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  #290 (permalink)
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You are weighting yourself heavily with the USD compared to the others, no? May I suggest EUR/USD, EUR/JPY and USD/JPY for balance? Although in that case USD and JPY correlate a lot more to each other than to EUR, so maybe throw in USD/CHF and EUR/CHF as well.

In that case you would be

3 x USD
3 x EUR
2 x JPY
2 x CHF

You could even throw in CHF/JPY depending on what spread and slippage you would expect from your broker.

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