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STF discretionary spot Forex system development journal


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STF discretionary spot Forex system development journal

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  #61 (permalink)
 Big Mike 
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bnichols View Post
Alrighty--will create a new thread under Platforms & Indicators, something like AI Platforms, if that's ok.

Use a couple keywords people will search for, like Neural Network for example.

This way people can find it (including me).

Mike

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  #62 (permalink)
 bnichols 
Dartmouth NS
 
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Head's up. Having stewed all night about the too-good-to-be-true P&L it finally dawned on me the problem is the way I'm normalizing training and test input and output vectors (code snippet grabbed from a filter routine is totally inappropriate for nets). The target is being included in normalization calculations, essentially giving the net a peek at the future--huge no-no.

Will fix normalization before the project is moved to its new home.

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  #63 (permalink)
 bnichols 
Dartmouth NS
 
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Since the last post working on software, swing trading stocks and using Barry Burns' basic trend trade method to trade short time frame EUR/USD.

Software in development includes the following 3 items:

1. NN package mentioned last time, which (after removing its ability to see the future) turns out not to be so amazingly profitable after all. It needs a few more tweaks before publishing. Might be useful for someone wanting to experiment.

2. A wrapper written in Visual C# for a hodgepodge of programs in PHP and the R language to download end of day OHLCV data from my favourite provider (stockwatch.com, likely no better than any other end of day data provider) for all instruments & indices on all N American markets as well as all FX pairs (32000 or so items total), collate to individual OHLCV files for each instrument/index/pair, run a few indicators & and Arima model predictor on the updated files and finally screen the results for potential opportunities. The program is still in alpha (incomplete, several annoying bugs) and at this point am focused primarily on the Arima predictor, in particular writing code to quantify performance.

3. An NT strategy to implement the highest probability FX trading method I know of (i.e., trend trading )--not hard to write--just tedious--and unfortunately still mostly scribbles in my paper journal. IMO Barry Burns' basic method is as good as any in that regard so I've been using it more or less exclusively since the start of the month to confirm I know it (so I can code it).

On that topic (trading BB's trend method manually), since the first of the month it's averaged approximately 50% successful trades and lately (last few days, once I manged to focus), successful trades of the last 24 approached 80%, bearing in mind that I do not take a loss if I can help it and perhaps 20%-30% of those "successes" are trades that were stopped out at +2 pips.

Once again in defense of BB, if necessary, while some opine he might have packaged freely available techniques that may be as old as trading itself (albeit with a few proprietary refinements), and may be peddling nothing more than common sense, alas for many traders, including me, common sense is not necessarily our strong suit and at least in the beginning any sort of package (and IMO BB's style of teaching in this case) that reduces the myriad techniques out there to basics and thereby filters out most of the noise is a blessing, given the cacophony of the trading industry. In fact I like the fact the system is so simple--it doesn't distract from price action and didn't waste a lot of time installing & learning how it works. Like all systems BB's basic trend trading system clearly defines high probability setups, which (once I quit trying to game the system) stopped my over-trading. [While there are methods to range trade and to trade chaotic conditions the ones I've tested seemed stress- and inevitably mistake-inducing, perhaps simply due to the nature of the market] Also, no matter how sophisticated a trader we might imagine ourselves to be, it's hard to argue too heatedly against what becomes essentially a monotonic increasing cumulative P&L graph once we've learned to follow a few rules. The bottom line is, once we've mastered a method--any method--to the point we are consistently profitable, as far as the market cooperates one's income becomes pretty much a function of the number of contracts traded (just not so large that we become a target for some institution's bot ), and IMO that is all that matters.

The charts below show my implementation of BB's trend trader and a few typical trades, here relying mostly on Murrey Math for S/R and hence entry & targets, but also magic numbers, PriorDayOHLC and pivots (for those times in every session it seems price makes more or less a beeline e.g. for the floor pivot). I use 200 Tick, 600 Tick and 1800 Tick charts for short time frame, medium time frame and long time frame respectively, trading the 600 Tick chart and using the 200 Tick chart for placing entry and initial stops. I use as many targets as S/R levels between entry and "likely" beginning of the retrace (often 2 Murrey Math levels max).

The annotation on the chart tries to point out the alignment of BB's "5 energies" (trend, momentum, cycle, S/R and fractal) for a typical high probability trade; i.e.,

E1-50MA trending (rising, in the example below)
E2-MACD positive + rising (or bottoming) for an uptrend; negative + falling (or topping) for a downtrend
E3-K stochastic less than 45 and preferably less than 20 + rising + having crossed above D for an uptrend; greater than 55 and preferably greater than 80 + falling + having crossed below D for a downtrend
E4-nearest S/R for support and target placement
E5-confirmation of the mid time frame momentum and stochs as far as possible from both short and long time frame charts.


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  #64 (permalink)
 bnichols 
Dartmouth NS
 
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The fixed NN Predictor project has been posted in its own thread here

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  #65 (permalink)
 bnichols 
Dartmouth NS
 
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Last 2 trades on Friday happened because
- I wanted a little extra cash for the weekend (bad, bad reason for trading)
- there still seemed to be a little left in the trend before it would start feeling any headwind from (according to the buzz) significant resistance at 1.2672.

Both trades made money but both were not high probability according to my understanding of BB's system.

The first trade was a bet on a bounce off Murrey Math 0/8 in the direction of the trend, clumsy entry at 1.26375 with initial stop 6 pips below at 1.26315 and 2 targets initially at 7.5 and 15 pips above the entry. Bid touched the stop before reversing, which unnerved me. Moved the targets to 1.2650 but ultimately bailed entirely at 1.26435 for 6 pips in the face of what seemed at the time growing resistance, but in hindsight the trade was probably in less danger at that point than when entered

The second trade was contrary to trend mostly because I didn't want to get caught in end of day/ end of week volatility. I chanced it because momentum was slowing (what I perceived as divergence) at the top of the channel, short entry at 1.26515 (slightly above the magic number of 50), stop at 1.26555 (1 pip above last high, within my 6 pip limit), stochs & momentum dropping on the entry (STF) chart, targets 7.5 and 15 pip below. Both targets were hit and that was it for me for the day & the week.

I have a variety of simple ATM strategies I use for manual trading, choice depending on price action, S/R density and so on, which in this case placed a stop and 2 targets automatically when the trades were entered and moved the stop to break even + a couple of pips when the first target was (or ought to be) hit. The targets are adjusted to S/R levels as necessary, and occasionally the stop (toward the action) if it looks like price is getting ready to back up over me.


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  #66 (permalink)
 bnichols 
Dartmouth NS
 
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Back in the saddle after a motorcycle trip down the US east coast last month (including the entire Blue Ridge Parkway, Skyline Drive & Tail of the Dragon for good measure)--great opportunity to blow out the cobwebs and to remember why I trade (to afford to get away from trading ). First few days back at it were iffy but today I made 144 pips (spot EUR/USD) in the hour and 20 minutes spanning the non-event hosted by Mario Draghi. **

I feel pretty much nothing about today's gain since it simply confirms that at this stage the issue is not capturing pips when the market offers them but hanging on to them--a problem that reared its ugly head early on and continues to plague me from time to time. I rarely lose money by misreading a setup, far more often by over-trading (continually entering low probability trades) when bored, frustrated or tired. Having suffered the consequences of over-trading for a couple of years while learning the craft I'm only now beginning to recognize when I'm not fit to trade, at long last starting to accept that if I want to trade (or at least want to hang onto profits) then I have to obey the rules about diet, fitness, getting enough sleep, routine and trading only when the market is active. In short, I'm beginning to appreciate that knowledge and a system are not enough--profitable trading also requires lifestyle changes & self discipline, and no system is going to change that.

It's going to take some time (2 weeks?) to get back up to speed on technical issues--the neural net in another thread and automating the system I use here for manual spot Forex.

** ETA: loved Mr. Draghi's phrase to the effect the ECB is going to "take some months to design modalities"

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  #67 (permalink)
 Big Mike 
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Welcome back

Mike

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  #68 (permalink)
 bnichols 
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Thanks Mike...good to be back.

Today's Post Mortem

This morning's trading session was a perfect example of what I talked about yesterday; namely, the sole impediment to consistent profits for me at this point is not making money but hanging onto profits. "Hanging onto profits" is the mental basket I prefer to store all the negative factors that impede profitable trading these days, psychological & otherwise, since in my view all such factors feed off each other so belong together, all are present & accounted for and all are pretty much in remediation. In other words all are issues contributing to a common effect (negative trading outcome) hence these days easier for me to conceive as a single problem, rather than as separate issues I need to gnash teeth and wring hands over. If that makes any sense.

In any event IMO the trading day actually starts the night before when one hits the sack (step 1 = good night's sleep), and last night I was unable to doze more than a few hours. Overslept & woke up in a panic, sucked back a coffee laced with maca, stumbled into the trading room and discerned through bleary eyes EUR/USD was accelerating downward rapidly with remarkable enthusiasm, no clue why (didn't know what time it was and had forgotten about the US jobs report, therefore didn't know this was the initial reaction which I might be able to play when on my toes but not otherwise). Before the trader brain could get in gear a finger clicked "Sell Market". To make a long story short I was down about 57 pips before the smoke cleared and once the coffee kicked in I spent the rest of the morning struggling to undo the damage.

The good news is spin control (which no doubt we all practice according to our level of experience and which provides a convenient measure of our level of experience if we insist on testing it) worked better than hoped. The reptilian part of the brain (or whatever part doesn't sleep) realized the mistake immediately and sounded the usual alarm, triggering another part of the brain to start logging the potential train wreck (whatever part functions like the black box in an aircraft). The log shows as expected the part of the brain controlling the mouse finger is insisting "I CAUSED THIS AND I CAN FIX THIS", still another is screaming "STOP PUSHING FREEEEKING BUTTONS", while what is presumably the Voice of Reason repeats "We'll do a situation analysis ASAP boys, but not before we've had our coffee" like a broken record. Emotions seem to pop out of fox holes like enemy soldiers while the analysis takes place except at this stage in our career no prisoners are taken--the sniper part of the brain is picking off each one as soon as it shows itself. Finally the trader shows up and begins to work and we gain back 49 pips. He reports "Should have been up those pips instead of down 8", but best he could do under the circumstances.

ETA: I imagine the familiar personality characteristic that precipitated the havoc this morning to be the lazy & impatient gambler, who apparently also doesn't sleep and believes in luck rather than smarts or hard work, probably because it's a more flattering explanation of why less deserving people than himself often seem to be better off. His bad behaviour is rewarded just often enough to reinforce it. In fact he's in it for the rush and once that passes, even when a gamble pays off must somehow dismiss the inexplicable feeling of guilt and unease that comes from receiving something one hasn't earned. May be next against the wall in our little revolution

ETA: Rather than record every trade prefer to mention only anything out of the ordinary. Instead will start listing daily P/L month to date. For August so far it's therefore +136 pips.

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  #69 (permalink)
 Adamus 
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It's interesting to see the more experienced traders sometimes go in without a firewall in place between their thoughts and reality. I relate habit-building to a firewall - I still have a long way to go with it all though. I am fascinated by the human mind - specifically my own and anyone else who uses theirs in the same way. Have you thought of mechanical support - some sort of bio-feedback device that would measure your pulse/blood pressure/brain waves and give you a green light to trade? i.e. would detect and display when your thoughts were in the zone and not acting the way you describe? Or do you think that's an unnecessary crutch, when we should be building those discipline habits on our own?

You can discover what your enemy fears most by observing the means he uses to frighten you.
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  #70 (permalink)
 bnichols 
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Interesting idea, to use biofeedback. In my youth I might have tried it (there may still be a brainwave monitor kicking around here somewhere) but the closest I get these days is checking my blood pressure periodically. Wonder if my daughter (studying neuroscience at university) could offer any advice. Right now she's working on brain differences between bilingual people who learn a 2nd language early vs late in life--will try to convince her traders' brains are much more interesting

For the time being the objective test for me is the (estimated) probability of the trade--if I start taking anything other than high probability trades I know something is amiss, best to quit before they start turning into losing trades.

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