Today I want to present a snap shot of my journey with some bullet
points detailing some difficulties, lessons learned and then finish it off with a freeze frame of where I am currently and a projection of the future in terms of actions I am taking and will take. Some of what I post here I have not discussed much if at
all in my various threads. I figured the threads were about trading and not so much about the tiny details. But I want it here so I can remember it as time goes by and to perhaps give a narrative of what I consider to be a typical journey for a lot of traders.
My journey began about 2.5 years ago with a purchase of a trading room vendor DVD and a monthly trading room membership. This cost me $1000 +75 a month. I remained in the room for two months and then I left after the moderator chewed me out over what I considered a routine simple question. He was right about a lot of things though including the absolute insistence that simple is better. Its from him I learned my intense dislike for all things squiggly at the bottom of the chart. Therefore there has been no attempt from me to learn to use a MACD, RSI or Stoch. I've tried them but every time I compare them to
price action alone, they always lag way to much. So no oscillators for me.
He had been a successful tech bubble entrepreneur and sold a tech company back in the day when tech was booming. He turned to trading so he didn't have to work so many hours and according to him, spent 5 years and nearly a million dollars of his own money losing using various methods. He said he learned to hate oscillators as a result of getting in trades based on what they were saying and finding out they were way late. He said he became successful when he dumped everything but three moving averages and learned how to use multiple time frames. At the time I met him, he was trading 50-150
lots on ES and
scalping for 4-12 ticks at a time. I know this sounds odd but I actually met the guy. Turns out he lived in my small home town for a long time, then moved to a larger city to develop his tech company and his parents still live in my city and he comes in once in a while to visit.
I then went on the Holy Grail hunt for the perfect indicator and risk elimination method. During this process, I tried Viper Trading Systems (dont laugh, i learned some stuff from them) I tried Channel-trading.com with Kevin Hudson. I really liked that guy but I understand he's disappeared at this point. Kevin spent a lot of time with me at no extra cost and he's also the one that directed me to futures.io (formerly
BMT) for the free MP indicator for NT 6.5. Like me or hate me, blame Kevin Hudson. He traded MP in a way that seemed 100%
counter trend. I could see a short trend setting up on my non MP charts and he wouldn't trade it short. Instead he'd wait til price got to 1-2x IB and go long. And then most of the time, price just stalled. This was trading ES during the few months in 2010 that ES left its
volatility behind. I even tried those guys over at Back To The Future trading. I liked those guys as well and they proved to me that indicator based trading could work because they really did trade totally mechanically based on the indicators they used. I can't remember why I left them but it seems like they kept wanting more money or something...could be wrong about that though.
I figured I needed to trade trend at that point and moved on. Attended lots of free webinars and workshops. Read tons of threads on futures.io (formerly BMT) looking for something that spoke to me. Nothing really did. So I decided to create my own.
This creation of something uniquely mine has occupied my time the last year or so. Along the way, I've struggled with creating repeatable entries, exits and
money management. I'd get some clarity on one and feel real excited about things and then find I was ignoring the other two. I'd switch focus to another one of the issues, get some traction and then find I needed attention on the last one. None of it seemed to gel at the same time. All along I knew I was making progress, I was just extremely frustrated with the 2 steps forward, three steps back shuffle.
Every time I would make progress, it seemed like a layer of complexity would be added to my thinking and one thing I knew was, I wanted simplicity. And so it would be back to the drawing board in an attempt to coalesce new knowledge into something I could do repeatably and then simplify it.
During this process my account history is as follows....all these ran concurrently with the discussion above. I don't remember exact times but the narrative is enough.
Account starts small but enough. I trade sim for two months just to get used to the mechanics and pretend I know what I am doing.
Start live trading. Account shrinks by about 1/3
Go back to sim. Get more comfortable.
Live again. Shrinks to about half. back to sim and thus begins holy grail hunt...
Trade live with Viper Trading auto traders. 50/50 success rate. Can't tolerate
drawdowns. back to sim
Try various trade rooms. Account reduced to about 25%
Start to think its more about me than the method...back to sim to figure me out.
I think I have it, refund account, trade live. More shrinkage. Hunt for method with tiny stops...death by a thousand cuts.
I find TopStepTrader. Give that a try. I had no idea the level of discipline required to trade under those kinds of guidelines. It was absolutely excruciating. Took their combine three times in a row. No luck. Could not trade with the level of discipline they demanded.
Back to my own account. This time with the discipline drilled into me by TST. Still stuggling with exits and money management but now I at least know I need these more than entries.
Alternate between live and sim working on these issues. Start to see some level of success. Mostly break even.
Give TST a try again. My account is still pretty small even with the refunding process I went through and so TST looks good. Took a couple of tries but went live with TST. Traded live with them for awhile. Can't remember how long but blew that account out. Could not maintain discipline. They felt I need some more time to work on certain issues.
Back to alternating between my live and sim accounts working on the things TST said to work on.
Tried again. Went live again with TST. Again, had trouble with exits. Just could not figure out when and where to take profit.
Scratched a lot of trades and slowly drew down the account. Learned more about risk control. Started to get it in terms of how to use stops and where they should go.
Back to my account and sim. Tried lots of different ideas in a fairly short period of time looking for ways to use real stops but minimize their size. Gave that up and just decided the right thing was to put them where they belonged and just live with it. Mostly break even both live and sim. Odd how my sim trading mirrored my live trading or is it vice versa?
Back to TST. Went live once again. This time kept the account for quite a while. Slightly better than break even over time. However, TST is not in the business of backing BE traders and so for a third time, a live account is gone.
This time I decide I need to once and for all figure out the mental aspect of the game before I risked another live dollar either with TST or my own money. This is where I am currently.
During this time, I switched instruments several times. I started with ES, then NQ, TF, ZB, 6E and now CL. Combine instrument changes with chart changes and you can see why its taken me so dang long to make something out of this wonderful opportunity.
Now the last two weeks have been sim and have been done with the express purpose of solidifying three things I think I finally got to come together three weeks ago in a brief moment of clarity. Those three things were: Simple entry rules that did not demand intense intellectual gymnastics to figure out, Simple and repeatable exits but with the caveat the exits MUST be dynamic with market conditions and third, rock solid money management for both initial size, daily stops and subsequent sizing increases once profits are the norm and not the exception.
The first item, Simple entry rules was something I had been thinking about for a long time. I went to the simplest entry method I had used and decided I wanted to make it visual. It needed two things,
momentum on its side as well as sound price action structure. I found I just didn't have the chops to do the kind of work that @
Private Banker or @
GaryD or some of the other analysis heavy ideas required. I found it in something @TMFT uses. Its just EMAs but it helps me visualize price in a way I've never done before. It has two things going for that I value, momentum and structure and then a third very important component for me, visuals for both. Further, filtering trades was easy and each entry had to have certain characteristics. Otherwise no trades. I experimented with some of these over the last two weeks and have determined for the most part which ones to take and which ones to leave alone. Nothings perfect but at least its repeatable.
The next item, exits came about 3 months ago when a friend told me about a forex trader that used a certain type of fib based exit but I had trouble working the method into my trading in a simple, repeatable manner. It took me a bit longer than I thought to figure this part out but since I am a
scalper and like to be out on whatever swing I am trading, I needed something that would maximize the swing while not being to greedy. I wanted to leave some but not to much on the table. Further it needed to be dynamic with market conditions and it needed to be 100% repeatable with no grey area. Lastly, it needed something approaching reasonable risk/reward ratio of at least 1:1.
I finally got this dialed in when I watched a video by Todd Mitchel as he talked about his exits. What he did made perfect sense to me, fit my personality style and was mathematically sound and repeatable. Basically its a 2 stage exit. 1X risk and 200x risk. I use it slightly different than he does but thats ok, it works for me and best of all, its dead simple. It produces an over all 1.5X risk if both exits are hit. The trail stop was something I worked on last week and while nothings perfect, I've decided to do this. Stop is moved to BE once first target is hit. Once price is within 75-80% of 2nd target, move stop to 1st target. At that point, worse case is
AIAO at first target. I'm sure this will not be totally optimum but for now, this is what I've decided to do.
The last item, money management which has two parts for me, daily stop loss and its derivative, per trade position sizing came AFTER the first two items above became available. I simply took what I was willing to risk daily, divided by 4 and calculated position size on a per trade
basis based on the result of that simple division problem and the size of the risk. I then created a simple grid of risk in ticks, plotted the resulting size next to it and viola, money management. I further refined it by deciding when to increase my daily stop which will in turn allow me to increase the number of lots per line item in my risk grid by a factor of two since every trade has two positions, all lot increases must be able to be increased by two as well to make my exits even....i suppose I don't need even exits but it seemed logical at the time.
So emotionally I now feel better about the three critical areas of trading. Entry, exit and MM. The last area I am struggling with is one I think I will always struggle with. Allowing the trade to fully develop and giving it time to mature to the second exit. I've done some work on all in all out at 1X risk and while its fine in terms of dollars, a two stage exit at 1X and 2X risk is better in terms of overall
PnL. Of course that assumes you hold to that second exit. Otherwise its just better to be AIAO at 1X risk and hope for decent win ratio.
Here is my plan for the near future.
As the last couple of weeks have been sim working out the finer points of what I have just outlined, this next week will be a crucial forward test of both me and the method to produce consistent profits taking only system trades and then holding for system targets. Using position sizing on each trade to manage risk.
If this week goes well, then I intend to re-qualify for TST the following week. They have a great program for those of us with smaller accounts but big dreams. Further, it appears they have implemented several trader coaching programs to help traders with the mental aspect of the game. Dr. Menaker does a regular spot on Friday and there are other regular contributors to the traders development. The one thing they didn't do then nor does it appear they do now is teach you to trade. You need to learn that yourself. The mental aspect of the game they do focus a lot of attention on and I plan to take advantage of that as much as I can.
Now I know I am gonna take some heat over various aspects of this trading plan. But I don't really care. This is for me and me alone. This thread is a place for me to document my journey and its been invaluable for this purpose.
My monetary needs can be met with 3 lots and 20 ticks a day net over time. That's within my safe zone for plausibility given my current skill set and emotional stage. However, my desire is to attempt to triple that each day to allow for loser/
scratch days and for days I don't want to or can't trade. This works out to around $1800 as a theoretical target each day. My risk management grid says that's possible on 1-2 trades depending on risk of course. So we'll see going forward. As the Marines say, "All plans get shot to hell once the bullets start flying. You'd better be able to adapt and advance".
Lastly, since the mechanics are more or less set, I've decided to focus most of my time on the mental and emotional aspects of life and of trading. To this end, I've begun a daily habit of a brief time of meditation, reading a brief inspirational story or passage from my Bible, I began the gratitude project two days ago and I am reading this book
Amazon.com: The HeartMath Solution: The Institute of HeartMath's Revolutionary Program for Engaging the Power of the Heart's Intelligence (9780062516060): Doc Lew Childre, Howard Martin, Donna Beech: Books and it looks like it might be invaluable in helping me with my holding trade problem as well as other areas of stress reduction.
Over all, I'm really excited about the future again. Many things that have been eluding me seem to have come into focus. I have a level of confidence I've not felt since I could quote the FNMA underwriting guideline from memory!
Attached are two charts. The one on the left is my final chart. Its from @TMFT. Next to it is a naked chart I keep up. I have the levels marked on it along with my entries the trading chart gave for Friday. You can see the levels are respected, they are in line with both break outs and pull backs based on momentum. I've found over the last two weeks this holds true. I've also done about a year of visual
back testing. Nothings perfect of course but that was pretty labor intensive and it produced enough consistency to warrant further forward testing.
As a trend follower, the old adage that you take the middle third out of the trend applies here. This method has the same inherent flaws any
moving average method does. Its especially vulnerable on very narrow
range days. On days like that, I've given myself permission to size the chart down to a time frame low enough to produce a trend. The targets will shrink as my profit projection method is dynamic. This is in line with the idea that you take what the market is giving, not what you are demanding the market give. The good thing about CL is that most of the time, it moves enough in one direction to give you decent opportunities to profit. Its a rare day price goes only sideways.
Well thats it for tonight. Its 11:30, I'm tired and tomorrow no charts or anything trading related.
Feel free to ask questions or make comments but nothing personally negative. I've decided to just block anyone that's negative from posting in my thread from now on. To be fair, that's only happened a couple of times but for some reason, I get the feeling there may be some negative blow back on this post.....not sure why....
