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Catching Big Waves - a trader's journal of surfing the the markets


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Catching Big Waves - a trader's journal of surfing the the markets

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  #2081 (permalink)
 researcher247 
Chicago, IL
 
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GaryD View Post
I went back to the risk matrix and looked at what 0.85% would be on a theoretical $100k account. To trade at 1 contract per $25k would be about max leverage for my belief in a stop loss placement for CL, and that stop is tight. Two PDFs attached.

I rarely let my stop get hit though, and you said "the avg. risk%...". Do you mean the realized loss average? Or the stop placement average?

-------------------
Hi Gary,

I averaged all of my 'initial stop loss risk'. Not counting b.e.'s plus/minus a tick. Back then my risk of total margin averaged (as it does today) from a low of 0.44% up to as high as 1.8% of margin per trade.

When I averaged all the losers up I got an average RISK of 0.85% of the margin I used for trading.

So, the stop placement average. When I entered a trade I would write down the initial risk in % of my total margin account. I did not count commission or potential slippage.

So if I was trading 6 CL and my risk was 17cents I would use $1,020.00 as the individual risk%.

I would average everything out at the end of every day and every week and every month and quarterly. That is how I personally did it. I knew what my normal stops were (a range) so I made sure when I began going larger in size I had the proper $$ in my margin account. Not everyone likes to do that--I understand.

I knew based on my own personality/psychology that less than 1% (on avg.) per trade was manageable risk for me when sizing up.

peace

Hedvig

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  #2082 (permalink)
 researcher247 
Chicago, IL
 
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Posts: 430 since Oct 2009
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Let me clarify,

I have always used multiple timeframes to trade (small/medium/large) off of. My small timeframe risks were/are typically 0.4 up to 1% of my margin; medium timeframe initial risk were/are usually 0.75 up to 1.5% of my margin and large timeframe initial risk were/are typically 1% up to {but never more} than 1.8% of my margin.

So, to clarify, I have a 'range' (rather large) of initial risk as a % of margin {0.45 up to 1.8%} but my AVERAGE risk over time usually falls just below 1% of margin.

If a trade looks good on my highest timeframe but has larger than 1.8% of margin risk I wait for a smaller timeframe setup in that direction for less risk.

It is pretty easy to know what the average risk is over time when you work with the same charts every day, right?
---------------
I know many people don't like to keep alot of money in their margin account; so I would assume that if one was trading size you have the money 'liquid' so that your psychology stays straight.

It boiled down to a simple equation for me; I knew @avg. of less than 1% of my margin that any trade would not make or break me.

Finally, I concentrated on bi-weekly results and monthly results much more than daily/weekly results. My trade expectancy worked best when I had a large enough sample size and for me that is best looked at every 2 weeks and every month.

peace

Hedvig

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  #2083 (permalink)
 GaryD 
Orlando, Florida
 
Experience: None
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researcher247 View Post
Let me clarify,

I have always used multiple timeframes to trade (small/medium/large) off of. My small timeframe risks were/are typically 0.4 up to 1% of my margin; medium timeframe initial risk were/are usually 0.75 up to 1.5% of my margin and large timeframe initial risk were/are typically 1% up to {but never more} than 1.8% of my margin.

So, to clarify, I have a 'range' (rather large) of initial risk as a % of margin {0.45 up to 1.8%} but my AVERAGE risk over time usually falls just below 1% of margin.

If a trade looks good on my highest timeframe but has larger than 1.8% of margin risk I wait for a smaller timeframe setup in that direction for less risk.

It is pretty easy to know what the average risk is over time when you work with the same charts every day, right?
---------------
I know many people don't like to keep alot of money in their margin account; so I would assume that if one was trading size you have the money 'liquid' so that your psychology stays straight.

It boiled down to a simple equation for me; I knew @avg. of less than 1% of my margin that any trade would not make or break me.

Finally, I concentrated on bi-weekly results and monthly results much more than daily/weekly results. My trade expectancy worked best when I had a large enough sample size and for me that is best looked at every 2 weeks and every month.

peace

Hedvig


Yes, I am following you. I had been moving back and forth between 1% and 2.5%, seeing that range as maximum initial risk per trade, but anticipating average realized loss to be lower.

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  #2084 (permalink)
 GaryD 
Orlando, Florida
 
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  #2085 (permalink)
 djkiwi 
Mercer Island WA
 
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Trading: TF/NQ/ES/Stocks
 
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Hi Gary, thanks for the excellent journal. It is very inspirational and enjoy reading it. In respect of stop placement I'm not sure if you have considered setting stops based on intra-day volatility and average true range. Basically it requires working out/keeping a note of:

1. time when you enter the trade
2. the average time you typically hold a trade
3. Calculating the median volatility at that time of the day.
4. Setting your stop based on the 30 minute ATR.

I wrote a detailed post on this here(post 12) and show a table of 30 minute ATRs for oil from 6.30 to 8.30 am. I've been using the practice for some time now and by understanding the typical volatility I'd expect at the time of entering the trade and placing my stops accordingly I've had a significant improvement in my stop-out ratio. You can ignore the delta stuff as I see you don't use it to trade.



I'm currently working on another version which strips out news driven and non-news driven days.

Cheers
DJ

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  #2086 (permalink)
 GaryD 
Orlando, Florida
 
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GaryD View Post



Initial resistance and initial support held flawlessly since Sunday's price action started.





Even though my S/R and my indicators said buy, I did not trust the CL move, even though it did run right back up to resistance. I got in around 104.18, but dropped the long trade early as the ES and TF were really struggling and looked like they might break down hard. The indexes and CL did finally part ways this afternoon, something I thought I saw about to happen last week, but it didn't. (And then today did not agree with. Such is trading.).

I switched my focus this afternoon to TF and caught a short at roughly 817, down 18 ticks. I am starting to enjoy TF somewhat as a diversion. It seems so tame compared to CL.


CL seems to have a very broad zone of resistance, hard to define into a range of 20-50 ticks. It seems more like a 105-106 area.


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  #2087 (permalink)
 GaryD 
Orlando, Florida
 
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Posts: 6,462 since May 2011





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  #2088 (permalink)
 GaryD 
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  #2089 (permalink)
 GaryD 
Orlando, Florida
 
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TF came off lije the sky was falling at the initial H&S I posted. I hand intended to watch it for a possible short, then never got a 2nd chance. For ES to hold and TF to fall like a brick has my attention.

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  #2090 (permalink)
 GaryD 
Orlando, Florida
 
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April has ended with my account down for the month. Lost a dime in the piggy bank. Very sad occurence, made me sit and stare at that pig and do a lot of thinking.

$2,100.00 down, trading an average of 3 contracts. I have still retained more than half of last month's profits, and up still for the year. (My "quarter" will end in May), and I am expecting to redeem myself before that date.

The amount I am currently down on should be a daily accomplishment, IF I were trading correctly. But I have fought around that balance so much it feels like I am getting nowhere.

The dollar amount of the loss is not significant, What is significant is I am starting to see what my issue is when I step up in size. And as much as I despise admitting it, it is discipline.

Discipline became my personal mantra about 3 years ago. It was my computer screen desktop background for about a year, so that when I started my computers up in the morning it shouted out at me across 3 screens. "DISCIPLINE" in 2" high white letters on a solid black background in triplicate. I made it a daily focus, and thought I had it down. But since then I have gotten too creative with my entry and exit rules, thinking I am learning movement enough to interpret the same thing differently at different times, and it served me very well trading a single contract. I could almost always find a decent opportunity.

But when I add the element of larger dollars, ( and yes, I do think about it despite telling myself not to), the flexible rules I have get bent in the wrong direction.

I have made some trading mistakes this week that seem like I have stepped back 5 years. The desire to just get back to breakeven for the month started to dig into my mind, and I took at least half a dozen trades in the past few days that made no sense. I would just close them and ask myself what I was doing. And then, 24-48 hours later, same thing.

The NEED to make the losses up has crept inside me, and the frustration of knowing 4 contracts should be no different than 2 is nearly making me almost insane. I have become my own rougue trader.

I know where a part of it is coming from, maybe even all of it. Issues related to a feeling a failure from living in the wrong house for me at this point. Feeling like I could solve my problems with an extra couple thousand a week, and feeling I have proven to myself I have the skills to do it, if only I add a few contracts. That is unfortunately my trader's poison for the time being.

I am going back to one contract for the month of May, and going to finish the month that way, allowing myself to regain some sense of calm. Put more emphasis on certain things I have seen. Forget the money and just make the trade.

I was expecting to start trading a larger account this month, thinking I was finally ready to do it, and in so many ways I am ready, if it were not for that one tiny little detail, that if ignored will quickly cause the market to chew me up and spit me out. Discipline. Interesting to see how quickly dollar signs can move that out of first position. The good news is, I am conscious of it.

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Last Updated on May 23, 2014


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