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Lord Sidious's Trading Journal
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Lord Sidious's Trading Journal

  #31 (permalink)
Site Administrator
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Vader,

I'd like to see you lay out a plan that covers the next two weeks of trading. The plan does not need to talk about methodology, but simply how you will approach every day, how you will analyze results, how you will take action or not. What is your goal each day? What will you do at the end of the day to review and find out if you accomplished the goal?

Hint: this has nothing to do with net profit. This should be about following simple rules. If you cannot, then you cannot trade.

Identify a goal, work on that goal, post about that goal, grade yourself on the goal. Then move on to the next goal. Do one thing at a time, and forget about net profit.

Do not change your charts for two weeks. Not a single change of any kind.

Mike

Due to time constraints, please do not PM me if your question can be resolved or answered on the forum.

Need help?
1) Stop changing things. No new indicators, charts, or methods. Be consistent with what is in front of you first.
2) Start a journal and post to it daily with the trades you made to show your strengths and weaknesses.
3) Set goals for yourself to reach daily. Make them about how you trade, not how much money you make.
4) Accept responsibility for your actions. Stop looking elsewhere to explain away poor performance.
5) Where to start as a trader? Watch this webinar and read this thread for hundreds of questions and answers.
6)
Help using the forum? Watch this video to learn general tips on using the site.

If you want
to support our community, become an Elite Member.

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  #32 (permalink)
Trading for Fun
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Big Mike View Post
Vader,

LOOOOOOOOL!



Big Mike View Post
I'd like to see you lay out a plan that covers the next two weeks of trading. The plan does not need to talk about methodology, but simply how you will approach every day, how you will analyze results, how you will take action or not. What is your goal each day? What will you do at the end of the day to review and find out if you accomplished the goal?

Hint: this has nothing to do with net profit. This should be about following simple rules. If you cannot, then you cannot trade.

Identify a goal, work on that goal, post about that goal, grade yourself on the goal. Then move on to the next goal. Do one thing at a time, and forget about net profit.

Will do, Mike! I just trade for part-time, so it may not be possible to present the trading plan tomorrow. However don´t you think my trading plan is not a...trading plan?



Big Mike View Post
Do not change your charts for two weeks. Not a single change of any kind.

Sorry, but are you refering not to change DJI or Crude Oil trading? Or to stay with the same time frame?



Thank you for your help!

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  #33 (permalink)
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Sorry to hear about your recent drawdowns. I have the same problems re-occur all too often. You've gotten great responses and advice from the best on futures.io (formerly BMT).

"Vader", ; Palpatine(Ian McDiarmid)/Sidious was my favorite part of the prequels too. I saw this CNBC segment on Friday. http://video.cnbc.com/gallery/?video=3000089789 Funny how Carl the CNBC guy, was trying to get from Lucas news about any new ep.7,8,9 or further SW development. Lucas was talking about how making movies seemed like an "unexpected" , "changing from hour to hour" , random market, haha. Maybe he's a closet trader too.

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  #34 (permalink)
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Cloudy View Post
Sorry to hear about your recent drawdowns. I have the same problems re-occur all too often. You've gotten great responses and advice from the best on futures.io (formerly BMT).


Hi, buddy!

Thank you for your concern.

Yes, I´m sure I´m in the right place to improve as a trader! So far it has been great!



Cloudy View Post
"Vader", ; Palpatine(Ian McDiarmid)/Sidious was my favorite part of the prequels too. I saw this CNBC segment on Friday. One-on-One with George Lucas - CNBC Funny how Carl the CNBC guy, was trying to get from Lucas news about any new ep.7,8,9 or further SW development. Lucas was talking about how making movies seemed like an "unexpected" , "changing from hour to hour" , random market, haha. Maybe he's a closet trader too.

Great! Maybe, who knows...!


Good trading!

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  #35 (permalink)
Live Your Bliss
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Fat Tails View Post
@Lord Sidious: As you have kindly invited me several times to comment your trading journal I will post now.



You have shown the courage to post your trades, and to show the results. So I hope that you do not mind that I will comment your trades without telling you that everything is wonderful, and that you can stand the criticism. The same comments would have applied to myself some time ago , an expert is somebody who has already made every possible mistake, and I am not even an expert.

I think that successful trading requires three things. For me they are equally important. If one of them is missing, you will be quickly taken out of the game. You need and edge, you need to know yourself and master your emotions and you need to apply some basic money management rules. That is all. It sounds simple, but it is difficult to achieve. You don't have an edge and you don't have appropriate money management rules. And as you don't stick to your (ever changing) rules, you also don't master your emotions. Actually nobody does when beginning to trade, and you are paying your tuition fee to the lucky counterparty that you selected for your trading endeavour. Others, who trade via an exchange pay the tuition fee to other traders.


Psychology

You state that

"I really do have more winning trades than losing trades. That´s a good sign, although my losses are bigger than my profits."

I don't think that it is a good sign. It just shows that you are not sticking to your rules. This is what is typically happening:

(1) FEAR that losers turn into winners: The fear that a winner will turn into a loser scares the trader into taking an early profit. Also it is not only fear. If you click the mouse button you will be rewarded with the SATISFACTION that you have made winning trade.

(2) LOSS AVERSION: If the trade is underwater, the trader refuses to acknowledge that it has been a losing trade and therefore does not close it, but either hopes that it will move back into positive territory, or even worse, doubles the position to average down the breakeven point. This will make it easier for the positive to move back into positive territory, but on the other side it will double all losses.

Fear and loss aversion leads to many small profits and a few large losers. This shows as a high percentage of winning trades, but an average losing trade twice as high compared to the average winning trade.

Now let us have a look at your rules. Excellent that you have a target and a stop loss for each trade, before you enter the position. So far you have published the following trades:

Post #1, Trade 1: Target 81 points, Stop 9 points, R-Multiple 9, Result 3 points
Post #2, Trade 2: Target 100 points, Stop 20 points, R-Multiple 5, Result - 20 points
Post #10, Trade 3: Target 25 points, Stop 12 points, R-Multiple 2, Result - 12 points
Post #11, Trade 1: Target 8 points, Stop 8 points, R-Multiple 1, Result 8 points
Post #11, Trade 2: Target 8 points, Stop 8 points, R-Multiple 1, Result 8 points
Post #11, Trade 3: Target 8 points, Stop 8 points, R-Multiple 1, Result -8 points
Post #11, Trade 4: Target 8 points, Stop 8 points, R-Multiple 1, Result 0 points
Post #12, Trade 1: Target 22 points, Stop 10 points, R-Multiple 2, Result - 10 points

This set of trade reveils a few things:

- You do not have a proven edge to trade, because you are frequently changing your rules. I do not see any positive expectancy, it more looks like gambling. In the first trade, you have a R-multiple (potential win divided by potential loss) of 9, then it comes down to 5, 2 and 1. A high R-Multiple always means a low winning percentage, a lower R-Multiple increases the odds of winning, which is more satisfactory. Therefore I am not astonished that you are gradually decreasing the R-Multiples, as this will lead to a higher number of positive experiences.
- For the trades that you posted you were able to mostly stick to your rules. Out of 8 trades, 6 have ended with one of the two announced results, which means a profit or a loss at the announced levels. This is good. Only for the first trade and the second but the last trade you have cut your profits short. Both cases confirm the point (1) above, the first within the context of that trade, the second but the last day within the context of the day, as it was a winning day and you did not want a winning day to turn into a losing day.
- However, if I look at your intended R-Multiples between 9 and 1, and the realized R-Multiple of 0.37 (average winning trade = € 1721.83/47 = € 36.63 versus average losing trade = € 2465.20/25 = 98.61), then there is a huge gap. Your average losing trade was 3 times higher than your average winning trade, which suggests that you were suffering from both fear and loss aversion.


Where is your edge?

To succeed in trading you should either have 10,000 well spent hours of screen time, - you are now an artist - or alternatively a proven edge.

"Well, I bought 5 contracts near the day´s low. Stochastics were near 0, MACD Hist were diminushing, MACD lines were about to cross, MA 5 was starting to reversal and pointing up"

This is definitely no edge. It is just the standard idea people have, that two lines are crossing and price should now move up. Also see video thread "Awesome Chart".

"There was a MACD divergency with price. MACD lines were rising and MACD hist also, keeping above 0."

This is no edge. Mathematically a rising MACD below the zeroline means that negative momentum slows down. Imagine that you drive with a car from Lisboa to Porto and that you reduce your speed. This does not mean that you are going back to Lisboa! You are still driving to Porto, albeit at a slower speed. The MACD histogram above zero is bullish, if the MACD is above the zeroline, but not if it is below.

"Setup Rules to Follow: Pay attention to price action. Day´s High and Low as the prefered zone to enter. Watching for Fibonacci points. In a considerable price change, looking to enter the rally or pullback. Do not enter if there is at least a minimum of 10 ticks of price change in the reverse price change. Always expect for at least two candles to hit the same "low" or "high" of the considerable price change, in order to get a confirmation. "

This is confusing. How do you know where the day's high and low will be prior to the fact. The reward-to-risk ratio may be good at those points, but the winning percentage is particularly low. This is not good for the self esteem of the trader and you will probably not stand it. How do you determine Fibonacci points? I like your idea with the pullback, but so far you have not posted a single pullback trade. I don't see the necessity for a 10-tick filter in general. I like the idea to enter a trade on the second attempt that price makes in any direction.

Definitely you don't have any edge so far. Just looking at the MACD and the Stochastics is not enough.


Money management

Minimum requirements:

(1) Define maximum loss allowed per trade (for example 1% of account size). Calculate the maximum loss for your account and adjust your position size accordingly. For example if you have an account of € 5,000 - you should not lose more than € 50 per trade. The only advantage of a CFD account is that you can trade small and adjust your position size. Make use of that advantage and trade small. For the wall street contract if you stop is 20 points and the contract is € 1 per point, than 20 points mean € 20 per contracts and you should not trade more than 2 contracts.

(2) Define maximum loss per day and stop trading after it occurred. For example you could stop after 3 losing trades (3%). If you don't respect this rule and continue trading after the third losing trade, stop trading for a week. Also define a maximum loss per week, for example 10% of the account, and stop trading for one week if that loss has occured to review the trades and the reasons for the drawdown.


Recommendations:

- Only trade 1 contract until you have been profitable for 8 consecutive weeks. Your account will last longer and you will learn as much, as if you trade 10 contracts. The psychological pressure will be less, so you it will be easier to master your emotions.
- Trading CFDs means high spreads, so the odds are skewed against you. A spread of 6 cents for CL will not allow you to be profitable. This is another reason to only trade 1 contract. You mention slippage. There cannot be any slippage on a CFD contract. The market is quote driven. It means that your counterparty just changed the price. You are trading against a financial institution. They take your orders on their book, because they know that it is likely that oversized spreads and emotions will quickly lead you to make losses. They have invested in IT infrastructure to get your € 6000,- - and for sure they will get it. They don't even hedge your positions, why should they. You are being cheated into a game that you cannot win this way. In case that you make regular profits, they will increase your slippage. Your only advantage is that you can trade small.
- Don't touch Crude Oil, the spread is too high.
- Before you continue trading, try to find a setup with a proven edge.
- Don't always change your position size, but keep it simple and enter all trades with a same size defined by the risk calculation (maximum loss allowed per trade).

I have posted this with mixed feelings, as I do not want to embarass anyone - well with a few exceptions , but you are certainly not in that group. In the end I could not resist to simply write what I think. I wish that it may help a bit ....




and I hope that you will be able to improve your bottom line. Good luck!

What Harry gave you here is gold. I'd study this religiously and follow to a t.

"...the degree to which you think you know, assume you know, or in any way need to know what is going to happen next, is equal to the degree to which you will fail as a trader." - Mark Douglas
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  #36 (permalink)
Trading for Fun
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Trading plan

Hi, guys!


As Big Mike suggested before, I´ve made my trading plan. It ended to be longer that I thought, so sugestions and opinions would be welcomed!

Here it is, Mike, my Trading plan for the following two weeks:



Trading Plan

Since I need to improve my trading strategies, to test my tactits/setup/strategy/behavior and mostly evaluate the following tranding plan, I will trade using only 1 contract, as Fat Tails suggested. In fact, trading 1 contract (€1 per point) will have the advantage of paying only €2 spread per each trade, as the pressure of losing will reduce greatly.


If I hit the daily stop loss, I´ll stop trading for that day.

Here´s my trading plan for the following two weeks. I´ll stick to hit for that period of time and then evalute the results.

Further information:



Trading Instrument: Dow Jones Index
Contracts: 1 (€1 per point)


Objectives:

Trades: 3 per day;

First week:
- Per trade: 8 ticks;
- Per day: 24 ticks;
- Total 1st week: 120 ticks;

Second week:
- Per trade: 12 ticks;
- Per day: 36 ticks;
- Total 2nd week: 180 ticks;

Total of two weeks: 300 ticks

Stop loss:
- Per trade: 8 ticks;
- Per day: 24 ticks;
- Per week: 120 ticks;
- Total: 240 ticks
- Loss Per Trade: 0.15%

Expected Profit:
- 1st week: €120
- 2nd week: €180
- Total: €300

Possible Loss:
- Per week: €120 (about 2%)
- Total: €240 (about 4% loss)


Strategies:

Entries:

- I will enter trades after identify if the day is trending or ranging. Trade range days will be prefered.
- As soon as my daily objective is achieved, I won´t trade more for that day. The same applies if the stop loss is hit.
- Trade time period: Beetween 9:30am to 12am (2:30 pm and 5pm local time) or beetween 1:30pm and 4:00pm (6:30pm and 9:00pm);
- Will look for:
-> Scalp for 8 points;
-> Pullbacks.
- Trade with good momentum, avoiding choppy price action;

Exits: Limits or stop hits.


Filters:

-Long:
a) - 5 period SMA points up or the slope points up;
b) - Stochastics are close or in the oversold area;
c) - MACD lines and MACD histogram show signals of reversal in the side of the trade.

-Short:
a) - 5 period SMA points up or the slope points up;
b) - Stochastics are close or in the oversold area;
c) - MACD lines and MACD histogram show signals of reversal in the side of the trade.



I´ll post the analysis of my trades after each trading day!



Lord Sidious (aka Vader - Big Mike contribution)


Last edited by Lord Sidious; May 14th, 2012 at 07:08 PM.
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  #37 (permalink)
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Developing Your Trading Strategy

CME Group Featured Videos

Building Your Trading Plan

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CME Group Featured Videos

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  #38 (permalink)
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Trading Edge

Hi Fat Tails. I was reading your comment on Lord Sidious's Trading journal and you talked about the need for a "Trading Edge" but you didn't explain how one would go about finding or researching that edge. Have you posted about this somewhere else that I could read about your thoughts on that? I don't want you to have to write out something I am sure you have written about somewhere (Or someone else for that matter).

You had mentioned that a rising MACD below the zero line is no edge which I believe I understand. So my thoughts on finding an edge with the MACDs would be locating some pattern (Say... a large acceleration on the MACD line indicating a strong move as an example) and then backtesting that pattern to see if it statistically results in a high probability setup or not. This is just what I am reading into it... please correct me if I am wrong.



Fat Tails View Post
@Lord Sidious: As you have kindly invited me several times to comment your trading journal I will post now.



You have shown the courage to post your trades, and to show the results. So I hope that you do not mind that I will comment your trades without telling you that everything is wonderful, and that you can stand the criticism. The same comments would have applied to myself some time ago , an expert is somebody who has already made every possible mistake, and I am not even an expert.

I think that successful trading requires three things. For me they are equally important. If one of them is missing, you will be quickly taken out of the game. You need and edge, you need to know yourself and master your emotions and you need to apply some basic money management rules. That is all. It sounds simple, but it is difficult to achieve. You don't have an edge and you don't have appropriate money management rules. And as you don't stick to your (ever changing) rules, you also don't master your emotions. Actually nobody does when beginning to trade, and you are paying your tuition fee to the lucky counterparty that you selected for your trading endeavour. Others, who trade via an exchange pay the tuition fee to other traders.


Psychology

You state that

"I really do have more winning trades than losing trades. That´s a good sign, although my losses are bigger than my profits."

I don't think that it is a good sign. It just shows that you are not sticking to your rules. This is what is typically happening:

(1) FEAR that losers turn into winners: The fear that a winner will turn into a loser scares the trader into taking an early profit. Also it is not only fear. If you click the mouse button you will be rewarded with the SATISFACTION that you have made winning trade.

(2) LOSS AVERSION: If the trade is underwater, the trader refuses to acknowledge that it has been a losing trade and therefore does not close it, but either hopes that it will move back into positive territory, or even worse, doubles the position to average down the breakeven point. This will make it easier for the positive to move back into positive territory, but on the other side it will double all losses.

Fear and loss aversion leads to many small profits and a few large losers. This shows as a high percentage of winning trades, but an average losing trade twice as high compared to the average winning trade.

Now let us have a look at your rules. Excellent that you have a target and a stop loss for each trade, before you enter the position. So far you have published the following trades:

Post #1, Trade 1: Target 81 points, Stop 9 points, R-Multiple 9, Result 3 points
Post #2, Trade 2: Target 100 points, Stop 20 points, R-Multiple 5, Result - 20 points
Post #10, Trade 3: Target 25 points, Stop 12 points, R-Multiple 2, Result - 12 points
Post #11, Trade 1: Target 8 points, Stop 8 points, R-Multiple 1, Result 8 points
Post #11, Trade 2: Target 8 points, Stop 8 points, R-Multiple 1, Result 8 points
Post #11, Trade 3: Target 8 points, Stop 8 points, R-Multiple 1, Result -8 points
Post #11, Trade 4: Target 8 points, Stop 8 points, R-Multiple 1, Result 0 points
Post #12, Trade 1: Target 22 points, Stop 10 points, R-Multiple 2, Result - 10 points

This set of trade reveils a few things:

- You do not have a proven edge to trade, because you are frequently changing your rules. I do not see any positive expectancy, it more looks like gambling. In the first trade, you have a R-multiple (potential win divided by potential loss) of 9, then it comes down to 5, 2 and 1. A high R-Multiple always means a low winning percentage, a lower R-Multiple increases the odds of winning, which is more satisfactory. Therefore I am not astonished that you are gradually decreasing the R-Multiples, as this will lead to a higher number of positive experiences.
- For the trades that you posted you were able to mostly stick to your rules. Out of 8 trades, 6 have ended with one of the two announced results, which means a profit or a loss at the announced levels. This is good. Only for the first trade and the second but the last trade you have cut your profits short. Both cases confirm the point (1) above, the first within the context of that trade, the second but the last day within the context of the day, as it was a winning day and you did not want a winning day to turn into a losing day.
- However, if I look at your intended R-Multiples between 9 and 1, and the realized R-Multiple of 0.37 (average winning trade = € 1721.83/47 = € 36.63 versus average losing trade = € 2465.20/25 = 98.61), then there is a huge gap. Your average losing trade was 3 times higher than your average winning trade, which suggests that you were suffering from both fear and loss aversion.


Where is your edge?

To succeed in trading you should either have 10,000 well spent hours of screen time, - you are now an artist - or alternatively a proven edge.

"Well, I bought 5 contracts near the day´s low. Stochastics were near 0, MACD Hist were diminushing, MACD lines were about to cross, MA 5 was starting to reversal and pointing up"

This is definitely no edge. It is just the standard idea people have, that two lines are crossing and price should now move up. Also see video thread "Awesome Chart".

"There was a MACD divergency with price. MACD lines were rising and MACD hist also, keeping above 0."

This is no edge. Mathematically a rising MACD below the zeroline means that negative momentum slows down. Imagine that you drive with a car from Lisboa to Porto and that you reduce your speed. This does not mean that you are going back to Lisboa! You are still driving to Porto, albeit at a slower speed. The MACD histogram above zero is bullish, if the MACD is above the zeroline, but not if it is below.

"Setup Rules to Follow: Pay attention to price action. Day´s High and Low as the prefered zone to enter. Watching for Fibonacci points. In a considerable price change, looking to enter the rally or pullback. Do not enter if there is at least a minimum of 10 ticks of price change in the reverse price change. Always expect for at least two candles to hit the same "low" or "high" of the considerable price change, in order to get a confirmation. "

This is confusing. How do you know where the day's high and low will be prior to the fact. The reward-to-risk ratio may be good at those points, but the winning percentage is particularly low. This is not good for the self esteem of the trader and you will probably not stand it. How do you determine Fibonacci points? I like your idea with the pullback, but so far you have not posted a single pullback trade. I don't see the necessity for a 10-tick filter in general. I like the idea to enter a trade on the second attempt that price makes in any direction.

Definitely you don't have any edge so far. Just looking at the MACD and the Stochastics is not enough.


Money management

Minimum requirements:

(1) Define maximum loss allowed per trade (for example 1% of account size). Calculate the maximum loss for your account and adjust your position size accordingly. For example if you have an account of € 5,000 - you should not lose more than € 50 per trade. The only advantage of a CFD account is that you can trade small and adjust your position size. Make use of that advantage and trade small. For the wall street contract if you stop is 20 points and the contract is € 1 per point, than 20 points mean € 20 per contracts and you should not trade more than 2 contracts.

(2) Define maximum loss per day and stop trading after it occurred. For example you could stop after 3 losing trades (3%). If you don't respect this rule and continue trading after the third losing trade, stop trading for a week. Also define a maximum loss per week, for example 10% of the account, and stop trading for one week if that loss has occured to review the trades and the reasons for the drawdown.


Recommendations:

- Only trade 1 contract until you have been profitable for 8 consecutive weeks. Your account will last longer and you will learn as much, as if you trade 10 contracts. The psychological pressure will be less, so you it will be easier to master your emotions.
- Trading CFDs means high spreads, so the odds are skewed against you. A spread of 6 cents for CL will not allow you to be profitable. This is another reason to only trade 1 contract. You mention slippage. There cannot be any slippage on a CFD contract. The market is quote driven. It means that your counterparty just changed the price. You are trading against a financial institution. They take your orders on their book, because they know that it is likely that oversized spreads and emotions will quickly lead you to make losses. They have invested in IT infrastructure to get your € 6000,- - and for sure they will get it. They don't even hedge your positions, why should they. You are being cheated into a game that you cannot win this way. In case that you make regular profits, they will increase your slippage. Your only advantage is that you can trade small.
- Don't touch Crude Oil, the spread is too high.
- Before you continue trading, try to find a setup with a proven edge.
- Don't always change your position size, but keep it simple and enter all trades with a same size defined by the risk calculation (maximum loss allowed per trade).

I have posted this with mixed feelings, as I do not want to embarass anyone - well with a few exceptions , but you are certainly not in that group. In the end I could not resist to simply write what I think. I wish that it may help a bit ....




and I hope that you will be able to improve your bottom line. Good luck!


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  #39 (permalink)
Trading for Fun
Portugal
 
Futures Experience: Beginner
Platform: IGMarkets
Broker/Data: IGMarkets
Favorite Futures: Dow Jones Index, Light Crude
 
Lord Sidious's Avatar
 
Posts: 91 since Apr 2012
Thanks: 8 given, 15 received

First day trading (New trading Plan)

Hello, guys!


I could only do the analysis of my first trading day (15th May) now.

Like it was written, the main objective is not net profit, but to see if my strategies/rules/tactics/filters work. That´s why I have an expected profit smaller than a possible loss. In any normal trading situation I´d never do that! However, I´ll post profits and losses.

I follow all my rules/tactics defined in my trading plan, except I did only 2 trades and not 3.



Trade 1



Position opening: 12695 (Long)

Limit: 12703

Stop: 12687

Spread: 2 points (€2 in this case)

Expected profit: €6

Loss in case of stop hit: €8

Loss: €8



Chart (5 min):

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Analysis

I could only start my trading day 3 candlesticks before the doji near the 61.8% fibonacci retracement (followed by the downtrend). The entry was due to the fact that the market appear to be starting a pullback. Plus, 5 period SMA was clearly pointing up, Stochs and RSI were close to the oversold are. The only thing was the MACDHist and MACD lines. Altought they were beneath 0 line, MACDHist bars were getting smaller and MACD lines were close of being flat. I assumed this as a possible reversal signal. Plus at the time I enter, price didn´t fell below the 21.3% fibonacci retracement.

I put my stop 8 points below. The market fell 13 points and then went up, returning to the direction of my trading position. Rose for 21 more points. Although I was correct entering long, the trade turned out as a loser one.




Trade 2



Position opening: 12642 (Long)

Limit: 12650

Stop: 12636

Spread: 2 points (€2 in this case)

Expected profit: €6

Loss in case of stop hit: €8

Profit: €6



Chart (5 min):

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Analysis

After a big downtrend, the market penetrate and passed the Support 1 line. However, there was and imediate opposite movement following the candlestick of the day´s low. There was one hits in the Resistance (S1 line) and the second following candlestick penetrate it. However, the third candle penetrate the Resistance line again. Judging for the price action thrust, 5 period SMA slope up, Stochs and RSI being in the oversold zone, MACDHist was getting closer to the zero line and MACD lines were close to cross-over, I decided to go long after a 4 point penetration of the Resistance Line. The result was a winning trade.


Overall, 1 trading loss and 1 trading win! I like to think, however, that my entries were both correct regarding market direction. I feel, however, that my filters are bit "rigid", as they do several mixed entry signs. It was not easy to follow my rules, as I wished to enter other times, when my rules/filters were not being followed.


That is why I´d like to you know other situation that occured during my trading day. To make things clear, I wish to say that this is not an excuse not to improve or to ignore my trading plan. I followed the market all the time and the following chart shows 4 situations I was tempted to enter the market, altough I didn´t, simply because some (or most) of my filter rules were not being met. The fact is that ALL of this 4 entry possibilities were correct!! I´ll refer to the entries as "Not allowed entries" - "NAE".


Here it is:

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NAE 1:

- After the last uptrend, candlesticks got in most of them lower highs. 5 period SMA was starting to point down. The Doji formation was a sign that I could have enter in the following candlestick. However, Stochs and RSI were not in the overbough zone. However, MACDHist were getting smaller and coming to closer to 0 line, and MACD lines were closer to cross-over. Nevertheless, because it would not follow my filter/rules, I didn´t enter;


NAE 2:

- Two candlesticks before my first trade, there was a hammer formation, at the end of a downtrend. Stochs and RSI were in the oversold zone, but 5 period SMA was still point down and MACDHist and MACDlines were clearly bearish. Therefore, I didn´t enter;



NAE 3:

- After a pullback, the highs the group of 4 candlesticks at the top, reached the same area (represented as a resistance line drawn). More, near the zone of the 38.2% fibonacci retracement. 5 period SMA and Stochs were according to sell rules, although RSI was not in the overbought zone. MACDHist was above 0, but MACD lines were getting closer to the cross-over. Rules/filters weren´t according to those I defined. Didn´t enter.



NAE 4:

- After the market penetrate and pass the Support 1 line, there was a doji formation. 5 SMA and MACDHist and MACDlines were according to the possible entry, although Stochs and RSI were clearly not. Didn´t enter.




Don´t get me wrong, guys, by writing this. Like I wrote it isn´t my intention to ignore my own rules. I´ll follow them for 10 trading days (equivalente for two weeks). However, I must be honest, as I felt a bit frustated for feeling drawn to enter, and simply couldn´t because I was trading new rules. Worse of all, I was correct regarding every one of these "Not allowed entries".



Looking foward to the next trading day!


Last edited by Lord Sidious; May 17th, 2012 at 06:36 AM.
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tickleboy View Post
Hi Fat Tails. I was reading your comment on Lord Sidious's Trading journal and you talked about the need for a "Trading Edge" but you didn't explain how one would go about finding or researching that edge. Have you posted about this somewhere else that I could read about your thoughts on that? I don't want you to have to write out something I am sure you have written about somewhere (Or someone else for that matter).

You had mentioned that a rising MACD below the zero line is no edge which I believe I understand. So my thoughts on finding an edge with the MACDs would be locating some pattern (Say... a large acceleration on the MACD line indicating a strong move as an example) and then backtesting that pattern to see if it statistically results in a high probability setup or not. This is just what I am reading into it... please correct me if I am wrong.

I have stressed in bold your passage about the MACD and your reference to testing some patterns. I would bet most people interested in trading the markets think along these lines, ie, finding a recurring pattern by using some mathematical indicators and try to profit from the signals they provide. If the markets were just that, i think it would be an easy proposition but is it really just that?

Markets are not price movement. They are traders making trading decisions.

To find an edge and profit on a consistent basis, you'll probably need to re-examine your conception of what makes the markets tick so to speak. If the markets are not price movement then you need to ask yourself why are so many traders focusing all their efforts on this aspect! To be sure, just look at how many indicators there are in Ninja and/or are constantly developed. Most of these indicators are centered around the notion that markets are just price movement. Sure you can test a pattern and see if it is profitable but in my opinion it is not the fastest and safest way to find a long lasting edge that does not depend on backtesting to become manifest in your attempt to profit from the markets.

In my opinion, you need to form an understanding of the nature of the markets. The way to profit is through finding opportunities where there is a higher probability of a sufficient number of traders making trading decisions, which will lead to net order flow in a particular direction, and then acting to trade with this orderflow.

Find the areas on a chart where other traders will make trading decisions and you've got yourself an edge.

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