So this is the start of my trading journal. The 1st post is gonna document my journey so far. I have a bad habit of writing too much detail, which also shows in my trading style I will try and keep in shorter, but the 1st post is gonna be a bit longer. I suspect my trading journey is similar to many.
Been learning about trading since January 2010. Started off learning about stocks and specifically the ASX stockmarket as I am based in Perth, Australia. Didn't have much capital to trade with, which is probably a good thing, so stumbled over CFDs, very appealing because of the risky high leverage, ie. I could control a 10k share position on a $500 margin!
So highlights of my journey on how I got to this point being on futures.io (formerly BMT)'s forums writing my trading journal.
By April 2010, I had read about 10 books and countless websites, probably putting at least 20 hours a week on top of fulltime job. I am a IT Technical Consultant and have quite a demanding job in the daytime. Anyway, thought that I was all set to go, understood charts, patterns all the technical stuff, didn't get too bogged down in multiple technical indicators. So started looking at Australian CFD providers and learn about difference between market maker and Direct Market Access CFD providers. Preferred DMA providers as I didn't like the idea of a MM taking the opposite hedge position on your trade. I.e. they profit more if you lose.
So took the plunge with a really great and flexible company, which I will not name just in case I would be breach of something on the forum. A prominent CFD DMA provider. They were really flexible as I started with only $2000 AUD, and the first 3 months of trades would charge me only 0.10% of trade or minimum $1 AUD per trade!!! So $2 AUD risk in transaction cost, 500 shares on 5% margin ment that I would earn or lose(!) $5 AUD per cent change in share price, so 1 cent profit covered transaction costs. Sounds like a dream doesnt it, well enter the novice trader who knows it all.......
So started trading with CFD DMAs, had a couple of little wins, tiny actually, then put in a trade based on a load of positive news I think Seven Network were acquiring some industrial company (freight ?? or something). So media hyped it up and guess who bought it at the top at about 7.88 per share.
Only bought 300 CFD shares, so initial risk was probably $40 or so about 2% of my account size, so sensible position sizing. But, I was so focused on the news I didn't look at the price action properly (i.e. charts) and the next day it dropped like to within 1 cent of my stop loss!
I panicked and then thought that because the news was so good it was going to come back, so I left it a couple of days, actually cancelled the stop loss order 10 mins before it triggered. After 3 days I was nursing a loss of -$240, so my risk should have been $40, but was now 6x that, those that read Van Tharp will know about r multiples. So I was holding a -6R lost and not knowing what to do. My previous wins were really like +0.08R type affairs, $30 was maximum i had earned up till this point which would be +0.75, so -6R which was also about 25% of my 2k equity it was a monster trade...killing 1 quarter of my account in one trade!
So I actually closed my eyes and clicked sell, ouch, it was gut wrenching. lots of things went through my mind, I thought god I can't do this, I can't learn to trade, its too hard etc etc
Had a horrible 24 hours worrying about it all, getting loads of self doubt about being able to be profitable ......
So, after a few days started trading live again. Similar story, started reading alot more, everytime I had a loss, I would start reading and learning more, making it more complex.
What I wasn't enjoying especially was only been able to trade from 8am to 2pm WA time. 8am is when I have to take the kids to school, if youve traded stocks and single country markets you will be aware of gap ups and gap downs!!!! So I was always trying to watch the open and close and it was at such an inconvenient time, family time and work hours.
Then started chatting to guy in office about trading and found out he had moved to another CFD provider, one that was a very well known MM, but you could trade ASX Shares, Indicies, Forex and Commodities all from one platform.
With ASX share trading, I was always at the mercy of gap opens, I didn't why the market would jump 3.40 to 3.59 today and then open at 3.38 the next day. There was no news I could find on web that was particular discussing that company to make it move like that. Didnt really think about Volality, ATR, etc etc back then.
Started following google finance for world economic events when the UK and US markets opened particularly. I was finding it fascinating, seeing how all the economic news was moving stock prices.
Continued to do crap with first account and eventually got it from $2000 AUD to $1200 AUD before I closed the account and took out my remaining capital. No reflection on the company, just decided that world events and being able to trade that was much more interesting and viable a trading option for me, because :
1) Trading Indices allowed me to trade MM spot futures contracts on all world indexes and the major ones being 24 hours.
2) I was understanding basic chart patterns and technical analysis, but I didnt get why prices moved in the way they did. Particularly in the 2010 market April to September it was quite volatile, not unusual to see a -150 drop in dow overnight. Great if you were shorting it, which my mate at work was doing. He started with $2000 like me and made $2000 profit in about 5 weeks! Took that out and basically continued to trade with the 2k profit. I was finding that index moves in dow, sp500, asx200, dax, ftse were looking highly correlated with the main economic news coming out of google finance every night. Obvious now, but it was a golden moment for me where a piece of the trading puzzle fell into place, i.e. macroeconomics.
So opened an account with said provider that mate at work was using. Transferred $1200 from other account and started trading the indices mainly. 1st 6 weeks allowed you to trade very small contract sizes (micro account), so I could trade with a 0.05 contract or 5 cents risk per index point.
So, as soon as the small contract size ran out, I continued with my very poor Risk/Reward trades and eventually dropped the account to $860. Yet again I did one trade on an ASX company based on rumour and lost $100 in the single trade. This time I honoured the stop loss, but nevertheless I was risking 10% of my account in a single trade.
So I stopped trading live and started searching more, as all platforms I had so far traded with allowed demo trading for only about 30 days. Then I started to focus more on forex and found that almost all the providers offered demo accounts and many were non-expiring. So from about September 2010 I began demo trading only....
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As I learnt that forex was even more closely correlated with world events than the regional stock markets. I got more and more interested in forex, especially as they offered demo accounts. Started trading a demo account with one broker. Was still very cautious, and would slowly get the account in positive, say basically drawdown to 10% and then up to 3-5% profit on account, before doing stupid trades and dropping the account by 15-20% in about a week.
Bizarrely, in the space of september 2010 - June 2011 I repeated the same mistake, did well and just as I was getting successful I overtraded and took some bigger losses. Didnt really increase position size, but let losses run much longer then necessary. Discipline again was not my strongpoint.
Was I mad ? Because after 2 demo accounts I decided to move back to live, a micro account with $1000 AUD since beginning of July. Again started off well, then did a few bad trades and one on the CFD for SPX500 which I didnt notice was the wrong contract size, so it was moving $1 every 0.1 of SPX, or $10 per whole point. On a $1k account, that was just silly. Below is my journal entry from that day when I made the trade.
23rd August 2011
SPX500 in live. Followed this through the day in my real account. Placed Buy order at 1150, didnít like the way the 1150 figure was not bouncing very high. Then after 3 retests of 1150 level I jumped in long and then it immediately went the opposite way!
Then I checked the pip cost and it was 0.96 a pip. This was way too high, I am normally trading in micro lots in currencies so 0.10 a pip is ok, maximum 200 pips for $20. So 0.96 a pip is way too high, $20 is only 20 pips or 2 points on SPX500. Given volatility in the last few weeks this was not a good trade to be in. But I moved the stop to -50 or $50 risk (5%). So 5% gave SP a bit of room, but the next price structure level was right on 1145 and I accordingly got stopped out at that level before the move higher. See the chart for the painful trade
So, whats the verdict here, very bad trading or just unlucky. I would say bad trading, as my original trade idea and entry order would have played out perfectly, as it did in the demo, had I not played with it and then not paid attention to risk management parameters. Discipline is still clearly lacking in my trading.
But I am actually happy with this, as as I journal my trades I am understanding that my trading is not consitent because I am not consistent. My trade ideas are technically sound, and are definitely getting better, but my management and/or execution is horrendous. So I am going to continue to journal privately, and sometimes publicly, as it really is starting to give me insights into my trading.
------End of Journal
I havent taken a live trade again since 28th August 2011. In the end it wasnt that bad, sure it was a mistake because of the risk size and it showed that I am not happy emotionally when trading above my risk tolerance which is not more than 2% in any trade. So again, I learnt from this trade a big lesson in risk management and having a plan and sticking to it.
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So I came to realise (at last), that what is really lacking in my trading is a consistent trading plan and method. I need one that suits me and one that I can follow. Without this its just like gambling, how can I measure or improve if I don't consistently trade the same way. What I have going for me in trading is that I really enjoy it, I love learning about the markets, tools, platforms etc. I used to follow alot of websites on economic indicators and trade ideas, but have come to the conclusion that all of it is just a distraction away from a consistent trading approach.
I have become increasingly interested in purer price action trading, in particular supply/demand zones and this has been largely influenced by Sam Seidens work. It seems to be a natural progression from my charts I had on the micro account where I largely viewed price movements against weekly and daily pivots.
I recently attended a free 2 week event put on by triplethreattrading called protraderbootcamp. This covered all aspects of trading, but what I particular enjoyed was 1) The use of Ninjatrader for chart trading and ATMs 2) The use of Range Bars and fibs for price action.
So, my current forex account didn't have range bars and I found that most of the platforms coming from brokers also didnt provide this. So I kept coming back to NinjaTrader. So, my next mission was to learn to use Ninjatrader over the last few weeks and test out some broker feeds.
This is largely what I have been doing over the last few weeks and have settled on using PFG as my broker for forex trading via Ninjatrader. What I particularly like about the PFG API is that I can place ATM strategies in Ninjatrader and once trades are triggered I can quickly log into BestDirect8 and join orders via OCO just in case. I may not use it, but I like the idea of this additional protection if I hold longer positions in the market.
So, after all this rambling whats the point ? The point is that I now need to form that trading plan and follow it and I am hoping that I can find some feedback and discussions to guide me in the right direction.
I have funded my PFG account with $5k, but I don't intend to trade live yet until I can "sign-off" on a consistent trading plan, which I will hopefully document here.
I still have my micro account with $930 in it, think I will close it and move the money back or should I keep the micro and trade live in there ? Thing is I want to trade solely in Ninjatrader as if I become the successful trader I want to be, then I will eventually be able to trade futures via ninjatrader as well.
Well, off to a halloween party now and will try and write up some actual trade plan ideas over the next few days. Any comments/samples on structuring a trading plan would be appreciated.
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Excellent journal so far , Im enjoying it thoroughly and keep it up ! Sounds like tenacity alone will keep you in the game so it looks like you're most of the way there .
I think you struck the gold vein when you wrote - "So, whats the verdict here, very bad trading or just unlucky. I would say bad trading, as my original trade idea and entry order would have played out perfectly" . Probably the hardest part of trading is letting the trade unfold .
Be careful adopting someone elses approach . Remember , its their "vision" you're learning and its tough to adopt or adapt to their way of doing things .
So back to work today, so didnt have time to do too much work on my setups. Did spent some time looking at how to setup daily and weekly pivots. You will see that this has been a favourite of mine, and the previous chart with the SPX500 chart shows pivots.
Used the current weekly pivots to look at going short on EUR/USD in 1st 2 hours or so of Asia session. Since it hadnt breached the PW-Close, the RR looked good. Didnt expect it to play out quite as quickly as it did! With hindsight, I could have got a lot more pips, but I should be happy with my trade as both targets were hit.
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Well its late and I need to rest. Still have contract work that I need to do instead of trading, but just couldnt resist ... addict....
Good job with your journal, I look forward to reading it.
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So, last night I wrote about my EURUSD trade, nighttime for me is really a couple of hours into the US session. Looking at where the EURUSD has ended now (in the 1.3830 level), I can't help regretting taking profit on both parts of my short.
This is a common feeling I get on successful trades, as many times I have entered at a good level only to take profit too early. A common inexperienced traders folly. However, this trade hit both my targets, I did not adjust anything on the trade. So in terms of following the trade idea and letting it play out I should give myself A+.
But, do I feel regret for not setting the TP targets wider ? Well yes I do, but this would seem to be a negative trait to my trading ? Of course, other trades when I have set the TPs to be wider, the targets didnt get hit and a retrace back to BE and take me out are more frustrating.
So, I am assuming that my focus is wrong here, the profits or otherwise are not important, what is important is sticking to the plan ? I had a few good reasons for the entries and TPs according to pivot levels etc, and they played out perfectly. It is only with hindsight that you feel you could have done better.
How do you train yourself to be grateful for what the market gave you and feel satisfaction on sticking to the plan rather than missing out on profits ? I think I know the answer, but welcome peoples comments.....
As mentioned before, I currently have a fulltime job and an additional technical writing contract job that I have to do in evenings and weekends. This is really distracting me from developing my trading plan, or trading is distracting me from my contract work... you get the picture.
I am still in simulation mode and will likely be for sometime until I get some dedicated time to write up some rules. Like a kid in a toy shop, I have been experimenting largely for Ninjatrader and lots of indicators to find the ones I am most comfortable with. I am trying to get to a stage where I have a workspace setup that I "set in stone" and just trade off that.
Interestingly, at least for me, I find yet again I am most comfortable with Pivots and Fibs. What I really like are the indicators from Fat Tails, the anaCurrentWeeklyOHL and anaPivotsWeekly. They add an extra dimension to measuring price action for me as they include PW levels as well.
I am also incorporating Big Mikes futures.io (formerly BMT)EnvelopeExpansion and experimenting on different timeframes in conjunction with the pivots and fibs. All of this just helps to guage likely price action levels, but I feel that I may be able to use the futures.io (formerly BMT)Envelope to help me set some criteria for entry, such as shorts below CMA line etc.
Attached image shows a trade I took in EURUSD, following futures.io (formerly BMT) rule. CMA line was turning over, waited for retest of CMA line and then shorted. Target was 1st fib line, which was also (at that time) the weekly 38.2. It hit perfectly.
Then took a trade tonight (as I was itching for one), and went long (yes long!) EURUSD. I went long as the market had found support at 1.580, in the 8 range bar it was consolidating an the futures.io (formerly BMT) lines angle were starting to straighten out. Of course I knew it was risky since such a strong down move all day, but there are always buyers at some point, just as there are sellers. What I like about the trade was that I had a stop of only 18 pips, so if I was wrong I was out quickly. Its not the winning or losing, its the following the plan ......
Stops .... I will need to start to document this when I have freed myself from the contract work, but I am finding that alot of my entries are too early. Where my stops are, are frequently where my entries should be!! Always easy to see that with hindsight, but thats why we sim trade and journal isn't it ? The issue I have with this, is I find it hard to put entry orders in at those levels as I dont want to miss the move.....Better to miss the move than get whipsawed out me thinks....
Anyway, big thanks to Fat Tails and Big Mike for the indicators, now where did I leave that discipline to trade with them Good night .
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Watched the markets on and off today. In morning had a quick play with ATM Strategies. Main reason was I had a trade in last night short EURUSD at 1.36010 or something. 2 contracts 30 stoploss each and 50 and 100 target. Went to bed and left it running.
Hit my first target of 50, then retraced and stopped me out for 30. So leaving me only with net +20 pips. If I had had a breakeven trigger on the 2nd contract I would have made +50. I like the way I can use ATM to manage 2 contract trades better. Will experiment more with it over next few weeks. By the way I am primarily trading Sim101 and a Demo account at the moment. I have realised that one of my big drawbacks in learning to trade is fear of my account going into negative, even in demo and sim !
I think now that this is holding me back in my trading development. I need to balance the need to not lose compared to the need to learn and develop a plan and a system that I have faith in. To learn to trade, the account balance should not matter so much as finding a consistent and repeatable trading process.
Ok, attached trade is 2 mini-lots on the EURUSD, just 20 minutes before US open. Although its veterens's day, so is there a US Open. I'm long at 1.3630 and trade has been in profit and sitting on 1.3640. Funnily I put on an ATM put but the Autobreakeven stops at 25 and 30, which as I am trading to TenthPip, its onlt 2.5 and 3.0 pips. Amazingly, I didnt get stopped out. I feel that I will be whipsawed out, which would give me a 6 pip win or so, but hey 1st target is 1.3680 (+50) so RR is very good.
Happy weekend everyone. I'm out all weekend with my eldest son, who is competing in U13 state athletics championships. Speak again soon.