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Learning to trade through self discovery
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Learning to trade through self discovery

  #41 (permalink)
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Cashish,

Thanks for the book recommendation. I'm a fairly frugal guy, but there are two things I'm not afraid to spend money on: 1. Healthy foods, 2. Books.

I'm in the middle of "Mastery" by George Leonard right now. It's a short read, under 200 pages, and in my current stage of learning, it is extremely powerful. The book is teaching me to slow down, to enjoy the journey, to allow the act of practice to be its own reward.


Here's my month-end August week-by-week tick count:
8/1 - 8/5: +50
8/8 - 8/12: -68
8/15 - 8/19: +19
8/22 - 8/26: +132
8/29 - 8/31: -99

On paper, it doesn't look so bad. These numbers don't take into account commissions, so overall for the month I actually ended in the red. Looking deeper, 8 winning days and 6 losing days. Three of those losing days totalled -169 ticks. I believe it is those types of days which I need to analyze in depth. I hypothesize that there a small number of days per month where I have fallen into an undisciplined, tick-fever driven frenzy which end up killing my monthly profit, or in some cases, put me into the red for the month.

I am developing some mechanisms to determine and pinpoint these stages in the moment, and snap myself out of such mental states. Today was the first day of implementation. I traded well today, but ended up with a small loss.

I must constantly ask myself: Am I trading well? Am I following my rules?
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  #42 (permalink)
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I haven't posted in my journal lately, however, I've still been actively trading. In the month of September, I have started to look at why I consistently break my trading rules. Looking through my trade logs has been a humbling experience, and although I knew that psychology played a big factor in trading, I still underestimated it's impact.

I'm comfortable with my trading rules, they were developed in a logical way, backtested, and forward tested in the forex environment. Over the longer term, they work. But when I took the method to the futures currency market, things did not perform as well. I figured that the month of July was an anomaly. But when August didn't work out so well, I forced myself to take a hard look at the data.

Then a problem surfaced. The data could not be trusted because I had broken my rules too often. There was no way to determine the efficacy of the system when the system itself wasn't followed. Why couldn't I follow the trade rules?
This led me to narrow my focus. In September, I've put great emphasis in measuring my ability to follow the rules, and decreased my focus on my P/L.Two tools I developed were my emotion log and green/red calendar.

Emotion Log
I made an assumption that I do not trade well (don't follow my rules) in an anxious emotional state. I decided to start noting my emotion every 5 minutes during my trade hours. The first week of data was eye opening. There were periods of "anxious", "anxious to get in the game", "don't want to be left out", "antsy", etc. These periods outnumbered the times I was "calm", or "observant."

Green/Red Calendar
For this month, I've narrowed my view of trading success. It's simple-- if I follow my rules, then I mark the day as Green. If not, then it's Red. Please note, this is not a measure of how many ticks I've captured, it is simply a determination of rule-following. So far, for September, I've broken my rules three times. The rest of the month, I've done a good job of following them.

Tracking this data in this manner has already produced some better results. I've taken 18 trades so far this month. In July and August, I took 56 and 59 trades, respectively. My overtrading problem could possibly be managed with the above tools.

Again, three weeks is a small sample size when it comes to the implementation and testing of these tools, but I'm liking what I'm seeing. And it has tremendously reduced my stress levels.

I must constantly ask myself: Am I trading well? Am I following my rules?
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  #43 (permalink)
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dc618 View Post
I have started to look at why I consistently break my trading rules.

I'm comfortable with my trading rules, they were developed in a logical way,
Over the longer term, they work.


The data could not be trusted because I had broken my rules too often.
There was no way to determine the efficacy of the system when the system itself wasn't followed.
Why couldn't I follow the trade rules?

Two tools I developed were my emotion log and green/red calendar.

It's great to have you back DC, sure seems like you have your finger directly on the pulse of your trading. I like the emotion log and green/red calendar, especially the 50+ trades to -20 trades, this is huge, good job. I like the thought of starving brokers . Also the fact you have "tremendously" reduced your stress levels, this alone should pay big dividends going forward.

You seem to be a smart guy, so you've probably already figured out everything I'm about to say, so consider the following a simple reminder.

Why couldn't I follow the trade rules?
The fact is you could, but for some reason you chose not to.

I'm comfortable with my trading rules, they were developed in a logical way, Over the longer term, they work.
You know this, you've done the work of trading and developed a system that has proven to you over the long run you will be profitable. So why is it so easy to break the rules and throw the plan out the window? Don't feel like an orphan my friend you are not alone, click any journal on any forum and I'll bet within a page or two you'll be saying to yourself, "that sounds like Me." The market has many quirks to it, it often rewards us for NOT following our plans and then penalizes us when we DO follow the plan, go figure. I hope you know of what I speak. I believe the answer lies in an uncompromising commitment to the discipline needed to "stay on the reservation" and stay within the boundaries of our trading plans, win, lose or draw. My definition of discipline is, the ability to absorb pain, whether it's the pain of not getting a trading signal prior to a nice breakout and having to sit by and watch the "could have been" profits add up or the pain of taking 3 or 4 nice trading signals in a row and watching them trigger your full stop. But IF we're committed to following our PROVEN trading plan this is exactly what we must do. If not, then as you stated, "There was no way to determine the efficacy of the system when the system itself wasn't followed."

Truth is DC you can follow your trading rules, the HOW is the WHY.

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  #44 (permalink)
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Month-end September performance

Here's how my September ended up. . .

9/1 - 9/2: +20 ticks
9/5 - 9/9: -66 ticks
9/12 - 9/16: +88 ticks
9/19 - 9/23: +63 ticks
9/26 - 9/30: -18 ticks

September total: +87 ticks

The tick-count wasn't high, but September felt different, in a positive way. My learning efforts focused on psychology-- my failure to follow my own trading. The analysis led to the development two major tools, both psyche-related (see one of the previous posts).

The major positives on the psychology front were:
1) Clearer idea of when to execute
2) Reduced stress level
3) I didn't lose money

I'm looking forward to October, with a goal to execute better, trade effortlessly, and still NOT worry about the tick-count.

I must constantly ask myself: Am I trading well? Am I following my rules?
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  #45 (permalink)
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Month-end October performance

It was a frustrating month. The most frustrating since I started this journal. The reason? I'm still dealing with instances of total breakdown in discipline. It happened once in October, where I was consistently wrong on the market's direction, but kept trying to go against it. The result was a one-day, total loss of 76 ticks.

The rest of the month wasn't as bad, but I didn't have any "extra-base hits". Definitely no homers this month.

Here's the week-by-week:
October 3-7: +38 ticks
October 10-14: -72 ticks
October 17-21: +17 ticks
October 24-28: -6 ticks

October total: -23 ticks
42 trades

Too many trades, a loss of discipline on one really bad day. It's not my worst performance, but as I learn more about trading, I'm starting to clearly see my errors.

Next month, I'm going to try and run through a pre-game mental preparation routine before each trading session. I've found that I'm too easily hypnotized by the movement of the market. It seems to draw me in, to lull me into a state of greed, which in-turn forces me to take trades with a low percentage of success. I'd like to be at a stage where I can unconsciously execute my plan, but I guess I need to start with a conscious routine.

I must constantly ask myself: Am I trading well? Am I following my rules?
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  #46 (permalink)
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@dc618

How about a half-time report this month, are you still trading between 3-5am for the most part, how'd you do with the "global" time change, OK I hope. I know you're trading around family/job obligations but I've found if I take my seat for a 2am (East Coast) start instead of 3am I usually have an extra opportunity or two, you may benefit from that, and then catch a cat nap before your normal day begins (if you regulate your caffeine intake ).

A chart would be nice, anything new there, and are you still throwing around those 3&4 lots, you may be able to reduce your stress a bit by sticking with 1 or 2 for awhile. I have days with good opportunities (good days) and days with poor/questionable opportunities. If I stay focused in reality when trade-able opportunities are scarce I can realize, "this opportunity is questionable" then, by applying strict money management rules, I can accept my loss and come back tomorrow. My trading is limited to a few hours each day (2-6am), and if I hit a profit of +/- $X I quit, so sometimes I'm done by 4am. Sure, I know every trade I "left behind" I would have initiated with a perfect entry and closed with maximum profit with a perfect exit, but what the hell.

You may enjoy this, if you haven't seen it.

Video: Mind Over Money | Watch NOVA Online | PBS Video

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  #47 (permalink)
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I didn't trade last week, and I haven't had time to even look at the data behind the first week of November. Here's what I'm grappling with. . . I want to find ways to go with the trend. My current methods are breakouts (happens very rarely in the 3-5am time frame per my rules) and reversals (which are prone to being wrong often).

Here's the other thing, I have felt that need to be "in the market". The emotion has often led me to jump into ill-conceived trades. This is something I have spent some time contemplating, for I believe that if I could find just a few more trade opportunities, then I might satisfy this need. I don't think I'm asking for much-- if I could take one or two good trades per day (instead of just one or two good trades per week), then I believe I'd be much happier.

So here's the problem: How do I increase my trade opportunities?

Well, I could increase my risk. But I don't really want to do that. I could watch more instruments. Possible, but I'd like to look for other ways first. I could start researching bar-by-bar analysis or Edwards-and-Magee patterns. This is something I could try. I'm trying to see if inside bars and engulfing bars could give me additional signals to enter trades. At the same time, I'm trying to observe how breakouts from consolidation patterns can help me find my method of going-with-the-trend.

@Cashish
Funny you mentioned it, but I will be reducing my lot size as I start looking for different entry methods.

And I'll be posting more charts. I looked over some of my past trades from August, and remembered how useful the chart mark up could be. By the way, thanks for the link to the piece on Behavioral Economics. I've read a couple books on the subject, and it has always fascinated me how some application of basic mathematics and statistics can prove that our human "hunches" are often wrong. I guess that's why backtesting and small-scale forward testing is so important.

I must constantly ask myself: Am I trading well? Am I following my rules?
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  #48 (permalink)
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Thanks for the post DC, I'm enjoying keeping an eye on your journey.

"So here's the problem: How do I increase my trade opportunities?"

There's a lot of buckshot in your post, and I have some free time this morning so I'm going to take this opportunity to pick it out. You and I share a similar/limited time slot for our trading and I can understand your "problem" (for lack of a better term). But first, let's get on the same page with one important definition, "good trades." A good trade to me is any trade that doesn't cost me any money. From following your thread I get the idea you have a different definition, one that implies a certain dollar value. True, if it wasn't for the money most of us (I for sure) wouldn't bother with all this "trading crap" in the first place. So for simplicity let's agree that a good trade is a 50 point move. WOW, catch a couple of those each day and your brother-in-law will be throwing money at you screaming, trade, trade, trade! But let's work with 50 points.

OK, so now all we have to do is take one 50 point move out of the market during the two hours you're sitting at your desk and not concern ourselves with the other twenty one hours of the trading day. Now I'm going to change the rules. Why, because I'm a statistical trader and I can share some facts with you. In my last post on your thread I mentioned I start my trading at 2am instead of 3am and I usually have an extra opportunity or two and thought you might benefit from that. But even if you don't rise at 2 the information may help.

At last count I have over 70 trading books on my shelf and I have nothing by Dr.Brooks or Edwards-and-Magee. My methods are about as old school as you can get. I use a lot of adding machine tape and reams of paper to find what my computer can tell me in a second. I find (for myself) it keeps me involved with the market on a more personal level, e.g. what was the high between 3 and 5am this morning (hint, lower than 2 and 5am). Not everyone likes the worksheets of Arms, Wilder or Grandmill but that's what I cut my teeth on. To me the markets are a numbers game and probabilities can be gleaned from the mountains of data the market churns out real time each day. Your first post on your thread was July, can you tell me the average range of your market between 3 and 5am? If you can't how do you know the trading opportunities you seek even exist? I'll help, they do. The average range of the Euro future between 2 and 6am is 84 points. The average range of the 2am (1) hour bar is 47 points. So if more than half the (ave) move happens before you take your seat, what "trend" are you trying to "go with?" I suggest you hone your skill at looking at the bigger picture, calculate your risk ahead of time and enter at the first opportunity and hang-on.

This is turning into more than I intended, forgive me. Although I have notes and figures on every piece of paper on my desk don't get the idea I'm living in the stone age. I know my competition, and I understand electronic trading. When you wrote, "My current methods are breakouts (happens very rarely in the 3-5am time frame per my rules) and reversals (which are prone to being wrong often)" I had to wonder if you're seeing what's lurking "under those bars." If you're poised for a breakout, anticipating a nice twenty point run, and are unaware of the German open, low or high, or yesterday's highest volume level (POC/PVP) or intraday shifts of the same, that run can stop dead. Selling the high of an opening bar at 3am (like this morning) feels a lot like picking a top, but if you have a waste basket full of adding machine tape to backup your statistical theory and a hard stop sitting above the market at a level you are absolutely comfortable with, that's what wins the game.

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  #49 (permalink)
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Two trades today. The second one faked me out. I guess it was a bull trap, and I got trapped. Overall, though, I felt I traded decently.

I must constantly ask myself: Am I trading well? Am I following my rules?
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  #50 (permalink)
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DC
So you missed a couple nice long entries this morning, oh well Do you know why they're called bulls?

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Because they have BALLS

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