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Been working on why I've experienced draw down in March and April. So I've been doing some work this last week and this weekend. Mostly about stats. @Gary keeps drilling me about what my stats say. MFE, MAE, etc. I have intermittent stats. I keep them then I quit. Then I start again and then I quit.
I'm an idea person, not a detail person. But in this game, the devil's in the details so this last week I decided to pull out some old stats, go back and recreate some recent ones and see what I could learn.
I found out my MFE is around 25 ticks. My MAE is around 12.
I also wanted to see how the large winners contributed to my overall profitablity vs taking a fixed number of ticks per trade and just waiting for that to work out.
Turns out the larger winner attempts cost me money. Not that I didn't have a couple but that I gave up a lot of smaller wins seeking the home run. Essentially I was trying to trail my stops instead of taking the fixed target. Trouble was this, I didn't let the trades run near long enough and I took a lot of little stops. This is NOT the way a trend trader trades. I have always said I was a trend trader. Well as it turns out, I don't act like one at all. I try to trade with the trend, not always successfully mind you but in terms of following a trend until it's over, I don't do this at all and to be fair, I never have. Patience is not a virtue of mine and patience is what is needed to let the trend play out. It also means being satisfied with lots of tiny stops and tiny winners waiting around for the big wave. I am not content with that. At my current level of skill, I need more and quicker positive feedback than true trend trading gives.
What I did find out though was I have a sweet spot at around 20 or so ticks. Both for the set up and the exit. It seems I can wait for those pretty well. Another thing I found out was this, when I wait for the set ups, I generally win and the losers don't bother me much. When I am impatient or greedy, the losers kill me emotionally and the winners never satisfy.
The constant changing between looking for smaller wins vs looking for larger wins was draining me emotionally. There was internal conflict between what I knew I could do and what I wanted to do. I wanted to post consistent 50+ winners instead of a series of smaller wins. This was ego driven to look good to my readers but also to somehow boost my own sense of accomplishment. For this reason alone I may reduce my posts to once or twice a week to prevent my ego creeping back in wanting to prove how great a trader I am...NOT!
Since I knew I wasn't fulfilling what I wanted to do and more importantly, I knew it was unlikely, my trading became less and less disciplined. I over traded some days and under traded others. If I was up, I was reluctant to take the next trade since I was conflicted over how to manage it and what my expectations were for it. If I was down, I wanted to make it up...there was no rhythm to it. Just pure randomness.
So with the study of the stats, a conversation with a friend and some serious soul searching, I'm hereby declaring my trend following days are officially over. Instead, I intend to identify my trade set ups (usually 3-6 per day) take those for 20 tick fixed targets using a trail stop once price goes my way at least 15 ticks and let it play out. Based on the MAE I discovered, I am reducing my initial stop from 20 down to 15 and I might reduce that further to 10 depending on how this plays out over the next few weeks.
This kind of study is beneficial to do every so often. Its a pain in the neck but had I not done this, I'd still be conflicted about what kind of trader I actually am vs what I thought I was. CL moves enough each day to create several opportunities to profit. I also discovered that I need to actually trade the entire 2.5 hours I say I do.....this gives the max profitability available for my style currently. I did some informal study about what happens to the PnL after this time frame and the long and short of it is there seems to be no obvious benefit to trading longer. Some days of course there is a lot more to be had but many many times its just chop suey after that so the long term expectancy of trading longer hours is about the same as just trading the first couple. I don't have any real stats to back this up since I rarely trade longer than this anyway but just looking at the charts the last couple of months seems to reinforce this thought. There have been some late day runs lately but since I am not catching those runs anyway, its a moot point.
An interesting week coming up for sure....I'm actually looking forward to it.
Cheers.
Simplicity is the ultimate sophistication, Leonardo da Vinci
Most people chose unhappiness over uncertainty, Tim Ferris
It will be interesting to say the least to see how this works out for you. I advise you to monitor your own stats a bit better now and don't be blinded please by the Ninjatrader automatic MAE / MFE stats. These stats are indeed useful but they do not measure either your potential nor (and this is most important) your intent.
Let me explain (please allow for me projecting how I feel during a trade sometimes):
Scenario: The intended Swing
You take your first setup of the day, trendline broken or whatever, and after 2-3-4-5 ticks of heat, it goes your way. Phew. Quickly it rings up 6 ticks of profit and then settles into the 9-10 ticks of lovely green. Then comes your first test. It settles for 30 seconds, 1 minute, 1minute an 45 seconds and then ... phew. rattles down to 23 ticks. Relief and pride sparkle though the veins and an itchy right hand index finger hover over the mouse. Either you are fortunate in the next minute or two and you get a proper runner (40 ticks) or you start seeing it coming back. 21, 20, 18, 16, (oh dear), 14, 16, (phew) and then you see 18 and you have had enough. "Order Filled" says the nice lady from the DOM.
The stats for this one say
P/L : 18
MAE: 5
MFE: 23
But ... while you go off and make breakfast for your daughter, wake your wife with a coffee or take a well earned toilet break (they are very nice after a winner I find!!) your initial "swing trade concept" is still working.
@vvhg 's journal template has an interesting extra field he calls "Benchmark". This is the real MFE that you should look at. He defines it as "Maximum favourable excursion under ideal circumstances". In this case the Benchmark MFE can includes what happens after you chickened out of the trade because you didn't want to give back any more ticks.
If you change your stop and target setup be sure to monitor these two things.
Benchmark-MFE (ideal profits for intended trade)
Benchmark-MAE (ideal stop area for intended trade)
This will help you to see if you made the right decision. The trade above was either one hell of a good scalp or about half of a swing !
p
p.s. Not to say that you chicken out of any trades ... but I sure do !!
I lost a great project manager this year. He is alive, but retired after having a heart attack on the job. Too much stress.
My mother was diagnosed with a terminal illness before I was born, They gave her 6 months. She decided, if she was going to die anyway, why not try everything available. She wound up living another 40+ years after thrwoing herslf into hard core holistic therapy.
My physical health seems to be intact, but you know about my financial health issues over the real estate collapse. It caused me to learn, with a lot of difficuluty mind you, to seek happiness over money, laughter over stress.
My stepfather asked me recently how I was doing. I said great, but the motivation was different. I told him "I realized, my only real responsibility is that I have to eat until I die. Everything else is whatever I want it to be".
@GaryD, thank you for this. I appreciate it very much.
People over possessions is kinda of how I am looking at things these days and not just because of the health issue. The older I get, the more I trade, the more I see how fragile life is, the more I want to simplify, downsize, reduce, etc....this allows for intensely more enjoyment of people, experiences and emotions as they present themselves.....the old saying holds true, its the journey, not the destination that counts....destination is important to be sure...one must have this in mind but to ignore the journey purely for the sake of the destination is folly.....and if the destination is "riches or wealth" that is a moving target....how much is enough?
I am waxing philosophical now....time to quit...
Thanks again....
Simplicity is the ultimate sophistication, Leonardo da Vinci
Most people chose unhappiness over uncertainty, Tim Ferris
no chart today but +29 ticks trading until just after 8AM. I know there was a huge run after that but so what. I don't chase big runs anymore.
Spent the last 2 1/2 days at the hospital in Phoenix with my brother who's had some serious complications after a minor surgery. Those were some tiring days.....almost no sleep, lots of driving and tons of time to think with no charts around.
The more I thought, the more I like the plan I laid out last week....today I executed perfectly on the plan. Netted 29 ticks after commissions on 5 trades. 1 loser, 2 winners and 2 BE.
No stress, no mess....just the way I like it.
Simplicity is the ultimate sophistication, Leonardo da Vinci
Most people chose unhappiness over uncertainty, Tim Ferris
2 BE trades, 2 20 tick winners. Net +40 ticks after positive slippage on my last exit.
Emotions in check today...not because i forced them to be quiet but because I am confident in the set ups and what they may or may not do. I have reduced my stop to 10 ticks, so far so good. I like it of course but to be fair, it looks really really really close on the chart, thus far, not had to worry about it.
All this has combined to reduce my stress by a factor of probably 90%, its enabled me to wait for the "A" set up as @Gary says and to wait for the trade to play out. The BEs will probably increase but thats because I am not willing to let a 15 tick winner turn into a loss at this point. I rather exit at BE and reenter if I still like the trade ( I did that once today, both were BE) than have a loser after waiting and waiting for the set up and then have it turn into a loser after going 75% of the way toward my target.
Done for the day.
time to eat....
Simplicity is the ultimate sophistication, Leonardo da Vinci
Most people chose unhappiness over uncertainty, Tim Ferris
