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Lord Sidious's Trading Journal

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  #1 (permalink)
Lord Sidious
Portugal
 
 
Posts: 91 since Apr 2012
Thanks: 8 given, 15 received

Hi, Guys!


Ill open my Trading Journal sharing with my last 2 trades of yesterday. Id like to ask for opinions.


Trade 1:



Trade 1: Wall Street Index (1 per contract)

Contracts: 5

Position opening: 13179

Limit: 13260

Initial Stop: 13170

Final Stop: 13182

Expected profit: 405

Loss in case of stop hit: 50

Spread: 2 points (10 in this case)

Profit: 15


Well, I bought 5 contracts near the days low. Stochastics were near 0, MACD Hist were diminushing, MACD lines were about to cross, MA 5 was starting to reversal and pointing up. My target was 13260. I enter the position at 7:15 pm (GMT). I knew Id have to let this position to go to the folloing day, as Id have to pay for it (I trade CFD).

By 8:25 pm, price rose to 13217. At that point my profit was 190. However I didnt close the position, as I expected the price to rise during the following day (today). At this time I move my stop to 13182, to cover spread. My idea was to give some space for the price to fluctuate. Well, 13217 would turn to be todays high. During the night, the price fell and my stop was reached. From 190 I could get, I got 15. I didnt lose money and that is key for me.

Heres the 5 min chart:




And here you have the 30 min chart:





Trade 2:



Trade 2: Light Crude June (1 per contract)

Contracts: 3

Position opening: 102.57

Limit: 103.57

Stop: 102.37

Expected profit: 300

Loss in case of stop hit: 60

Spread: 6 cents (18 in this case)

Loss: 60


Light Crude fell almost 400 points yesterday. At the point I open the position, like the previous trade, Light Crude was near the days low (after that great price fell). There was a MACD divergency with price. MACD lines were rising and MACD hist also, keeping above 0. All MA lines went flat starting to point up. I open the position at 102.57 and put my target at 100 point higher. Once again, day trading was not possible, as I enter the position by 7:25 pm (GMT). The market rose to 102.72. My stop was 102.37, has I allowed the price to be a little lower than the days low (102.43). Well, the price fell until 98.36!


5 min chart:




30 min chart:






CONCLUSION:



If I could give a rate to me trades, I would give a C- to Trade 1 and D to Trade 2. My strategy was not totally wrong. I just should have predicted the price would hit or be close the Fibonacci point and fell again (thats what almost happen). As for trade 2, I confess I didnt expected for the price to rise more than 400, again.

I day trade! I rarely do swing trade. In any other situation I would have taken those 190. However I pointed for that target price...



So, guys, opinions? How do you acess my trades? Sugestions?



Thanks a lot!

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  #3 (permalink)
 the1target 
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cleared

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  #5 (permalink)
 ThatManFromTexas 
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I'm just a simple man trading a simple plan.

My daddy always said, "Every day above ground is a good day!"
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  #6 (permalink)
 mrmuggins 
manchester, england
 
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Whatever your reason for getting in a trade, the best reason for getting out was that it was wrong. So, losing a trade because your stop loss was hit is is always good, because you do not run the risk of blowing out your account and you can make another trade based on your strategy.

Do not be too hard on yourself.

Believe me when I say that having a losing trade is not as bad as you may think.

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  #7 (permalink)
Lord Sidious
Portugal
 
 
Posts: 91 since Apr 2012
Thanks: 8 given, 15 received


Big Mike View Post
Congrats on starting your journal.

Mike


ThatManFromTexas View Post

Thanks, guys!



mrmuggins View Post
Whatever your reason for getting in a trade, the best reason for getting out was that it was wrong. So, losing a trade because your stop loss was hit is is always good, because you do not run the risk of blowing out your account and you can make another trade based on your strategy.

Do not be too hard on yourself.

Believe me when I say that having a losing trade is not as bad as you may think.

Yes, I agree. For me not to lose money is always essential. Thank you for your input.

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  #8 (permalink)
 Cloudy 
desert CA
 
Experience: Intermediate
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Hi Sidious. Nice to see your new journal!

Looks good to get some trades down. Later on you can discover new setups and ways to improve your stop and money management. 1 euro ($1.3) per tick sounds pretty good to start out with. Good trading.

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  #9 (permalink)
Lord Sidious
Portugal
 
 
Posts: 91 since Apr 2012
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Cloudy View Post
Hi Sidious. Nice to see your new journal!

Looks good to get some trades down. Later on you can discover new setups and ways to improve your stop and money management. 1 euro ($1.3) per tick sounds pretty good to start out with. Good trading.


Thanks, buddy!


Good trading!

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  #10 (permalink)
Lord Sidious
Portugal
 
 
Posts: 91 since Apr 2012
Thanks: 8 given, 15 received


Hi, guys!


Yesterday things went bad.

As usual, I sold DJI near the days high. Greed led me to trade 10 contracts.

So:

Contracts: 10 (1 per point)

Stop loss: 12 points (about 2%)

Target/limit: 25 points

Possible loss: 120

Expected profit: 250


Loss: 120



Positives aspects:

- I was right once again, at the moment of my entry. The market fell 11.5 points, as I was profiting 115.


Negative aspects:

-Greed won again. I could have closed the position and have a 115 profit. However, I didnt close, expecting a higher profit. So the market rose first to my opening price. Then, hit my stop loss.




Conclusion: - Should have taken 115 or event any profit smaller than that. However, I must accept the risk of losing money on any trade I enter.


One more lesson.

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  #11 (permalink)
Lord Sidious
Portugal
 
 
Posts: 91 since Apr 2012
Thanks: 8 given, 15 received

Hey, guys!


Today things got better.


I made four trades. This day I looked more to price action than for indicators.


Setup/Rules to follow:

- Pay attention to price action;

- Days 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;

- Go for at least 8 ticks of profit;

- Avoid choppy prices change;

- Do not pass the 2% loss rule.



Trade 1:

Contracts: 10

Market direction: Sell short

Stop loss: 8 points

Spread: 2 points

Expected profit:€80

Trade result: €90



Trade 2:

Contracts: 10

Market direction: Buy

Stop loss: 8 points

Spread: 2 points

Expected profit:€80

Trade result: €80



Trade 3:

Contracts: 12

Market direction: Buy

Stop loss: 8 points

Spread: 2 points

Expected profit:€96

[B]Trade result: €96



Trade 4:

Contracts: 10

Market direction: Buy

Stop loss: 8 points

Spread: 2 points

Expected profit:€80

[B]Trade result: €0



BALANCE OF THE DAY: €74









Trade 3 analysis: Althoug I feel I was not lucky (the market fell only 3 points of my stop loss, and then rose 50...), I should have waited for the next clandestick formation.

Trade 4 analysis: The market didnt rise as I expected. It fell some points instead. So, I got out as soon as I could. I closed the position with €5 profit, but slippage made the trading result as €0.



Any critics and suggetions would be welcome, guys!

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  #12 (permalink)
Lord Sidious
Portugal
 
 
Posts: 91 since Apr 2012
Thanks: 8 given, 15 received

Hey, guys!

Im done for today. Had a loss of about 2%, so no more trades today.



Trade 1: Wall Street Index (1 per contract)

Contracts: 10 (Sell Short)

Position opening: 12827

Limit: 12805

Stop: 13137

Expected profit: 200

Loss in case of stop hit: 100

Spread: 2 points (20 in this case)

Loss: 100


I followed my rules. However the market went up. Like I wrote in another thread, Im starting to see that indicators are that reliable for my day trading.

Heres the chart:



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  #13 (permalink)
 Jaguar52 
NY + NY/USA
 
Experience: Advanced
Platform: Ninja
Broker: Optimus Futures- Rithmic
Trading: CL, 6E
 
Posts: 236 since Nov 2009
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I got your buddy request.
First, my name is Ed.
What is your name?

Are you trading live cash?
How long have you been trading?

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  #14 (permalink)
Lord Sidious
Portugal
 
 
Posts: 91 since Apr 2012
Thanks: 8 given, 15 received


Jaguar52 View Post
I got your buddy request.
First, my name is Ed.
What is your name?

Are you trading live cash?
How long have you been trading?


Hello, Ed! My names Joo!


Yes. I trade for about 18 months. So far Ive lose some money in my learning experience (trading losses and books bought). I intend to be sucessful in the future. Slowly and gradually, Ill achieve my goals!




Thanks for your post!

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  #15 (permalink)
 ThatManFromTexas 
Houston,Tx
 
Experience: Advanced
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Trading: TF
 
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Lord Sidious View Post
Hello, Ed! My names Joo!


Yes. I trade for about 18 months. So far Ive lose some money in my learning experience (trading losses and books bought). I intend to be sucessful in the future. Slowly and gradually, Ill achieve my goals!




Thanks for your post!

@Lord Sidious

"On the job" training with real money can be very expensive.

Have you considered learning in SIM and switching to real money after you become proficient at trading?

I'm just a simple man trading a simple plan.

My daddy always said, "Every day above ground is a good day!"
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  #16 (permalink)
Lord Sidious
Portugal
 
 
Posts: 91 since Apr 2012
Thanks: 8 given, 15 received


ThatManFromTexas View Post
@Lord Sidious

"On the job" training with real money can be very expensive.

Have you considered learning in SIM and switching to real money after you become proficient at trading?


Hi!

I have paper trade before. The last time I did, I had about 87,5% profit in two weeks. If my tactics worked there, they should work with real money. The thing is the pressure of risking our money and that the account I had for paper trading was almost 4 times bigger than my actual real account.

From the time I started, my trading losses are near €1700 (about 18% of the total money I invested). I was able to have 2 consecutive profitable months (the previous to this).

But I guess SIM trading would be good to test my tactics and strategies.


Thank you.

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  #17 (permalink)
 Cashish 
Miami FL USA
 
Experience: Advanced
Platform: Ensign 10, NT7 DOM
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@Lord Sidious

Portugal

Trading Experience: Beginner
Platform: None, at the moment.


Pardon my ignorance, is Portugal time the same as London? If I look at your charts it appears most of your trading is in the afternoon "your time." Was wondering if you have a "real job," and trade in the afternoon (3-7 pm) by necessity. Wondered why you don't trade one of the European indexes?

What exactly is the Wall Street Index, a CFD of the Dow? The charts you're using, are they supplied by the "broker" you use, and the data too? I assume the commission is buried in the spread. How do you enter trades, from the chart, or is there an order entry (DOM) window? How about volume data, do you have any idea of the number of participants in this market (wall street index)?

Trading is a tough task, making money is ever harder. IMO, you're running a foot race with concrete blocks tied to your feet! If you're serious about trading, and making money, I invite you to re-evaluate the Market you're trading and the Tools you're using. At the risk of being obtuse, I suggest getting a proper broker, data feed and charting program. Look at several markets, maybe the Mini Dow (YM) is a good fit, that's up to you. I'm partial to regulated exchanges.

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  #18 (permalink)
 monpere 
Bala, PA, USA
 
Experience: Intermediate
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Trading: SPY, Oil, Euro
 
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Lord Sidious View Post
Hi!

I have paper trade before. The last time I did, I had about 87,5% profit in two weeks. If my tactics worked there, they should work with real money. The thing is the pressure of risking our money and that the account I had for paper trading was almost 4 times bigger than my actual real account.

From the time I started, my trading losses are near 1700 (about 18% of the total money I invested). I was able to have 2 consecutive profitable months (the previous to this).

But I guess SIM trading would be good to test my tactics and strategies.


Thank you.

Among other things, sim trading will test your strategy, live trading will test your psychology.

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  #19 (permalink)
 Jaguar52 
NY + NY/USA
 
Experience: Advanced
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Trading: CL, 6E
 
Posts: 236 since Nov 2009
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There is a tremendous difference between sim and cash trading. I suggest you repeat your sim with exactly the same size account size you intend to use real cash. Also, that you achieve a sustained profitable performance level in sim for at least 3 months using an approach that will be duplicatable in real cash. For example, if you are in sim and at week number 3 and decide to double up and take a loaded up trade, then will you really do this if you are down in cash? Will you double up a loser to fix it, and will you trade beyond your loss limit?
One of the most deceptive things about sim trading is that we tend to bend the rules and fudge a lot. You need to have some kind of accountability and stick to a strict approach technically while in sim. This includes strategies and money management.

Also, in sim, there is no point to trade with more than 2 contracts. Trading 2 contracts would enable you to include a runner money management. Trading 5 contracts in sim is pretty much pointless and it will paint a false picture .... one that with a 5 contract drawdown will do little to portray the real pressures of real cash loss.

Also, until you are stable in cash, I suggest you reduce your risk per trade to under 1/2% so you can weather the learning curve drawdown.

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  #20 (permalink)
Lord Sidious
Portugal
 
 
Posts: 91 since Apr 2012
Thanks: 8 given, 15 received


Cashish View Post
@Lord Sidious

Portugal

Trading Experience: Beginner
Platform: None, at the moment.


Pardon my ignorance, is Portugal time the same as London? If I look at your charts it appears most of your trading is in the afternoon "your time." Was wondering if you have a "real job," and trade in the afternoon (3-7 pm) by necessity. Wondered why you don't trade one of the European indexes?

What exactly is the Wall Street Index, a CFD of the Dow? The charts you're using, are they supplied by the "broker" you use, and the data too? I assume the commission is buried in the spread. How do you enter trades, from the chart, or is there an order entry (DOM) window? How about volume data, do you have any idea of the number of participants in this market (wall street index)?

Trading is a tough task, making money is ever harder. IMO, you're running a foot race with concrete blocks tied to your feet! If you're serious about trading, and making money, I invite you to re-evaluate the Market you're trading and the Tools you're using. At the risk of being obtuse, I suggest getting a proper broker, data feed and charting program. Look at several markets, maybe the Mini Dow (YM) is a good fit, that's up to you. I'm partial to regulated exchanges.


Hi, Cashish!


Thank you for your post.

I trade with IGMarkets. The charts you see are from the IGMarkets platform. IGMarkets is a CFD broker. Yes, is a CFD of the Dow. The commission is a 2 point spread. And yes, Lisbon and London have the same time zone (GMT).

I enter trades from the chart. I use Level I real time data, no DOM window. Unfortunetly, my broker doenst have volume for futures, just for stocks. I can acess Level II data, but Ill have to pay for it.

From the futures markets, mini-DJI is the one I prefer, because it has a good daily range and de spread are not that high. Sometimes I trade Light Crude, but a 6 cent spread is not has good as the 2 point spread of DJI for the type of trading I do. DAX 30 and FSTE 100 is also available for 1 point spread. Mini-Nasdaq 100 and mini-S&P500 are 1 point and 0.5 spread, but the daily range is smaller than the DJI.

At the moment Im testing Ninja Trader platform. It seems to be very interesting. It would give more information than I have with my broker. However, its a bit hard to give about $1000 for the software. I know there are others more expensive.

I trade in the US market. Even the few stocks I traded were from the Nasdaq Index. Honestly, I was thinking about open an account with a US broker. I have two brokers (one for trading, other for investing). Both of them allow CFDs. For you to see, any operation for stock trading is beetweem $14 to $20 with this two brokers.


One great problem I have is my trading account. Is small (about 6000). I heard that to open an account with IB, the minimum is $10 000. Plus, commissions for stocks are way lower, from what Ive seen.

I think that my following step should be to get a good trading software. Ive seen e-Signal, CQG, Tradestation and even Metastock. All of them are two expensive for me. Its hard to have a profit each month, so how can I pay for monthly use of software? Its hard.

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  #21 (permalink)
Lord Sidious
Portugal
 
 
Posts: 91 since Apr 2012
Thanks: 8 given, 15 received


Jaguar52 View Post
There is a tremendous difference between sim and cash trading. I suggest you repeat your sim with exactly the same size account size you intend to use real cash. Also, that you achieve a sustained profitable performance level in sim for at least 3 months using an approach that will be duplicatable in real cash. For example, if you are in sim and at week number 3 and decide to double up and take a loaded up trade, then will you really do this if you are down in cash? Will you double up a loser to fix it, and will you trade beyond your loss limit?
One of the most deceptive things about sim trading is that we tend to bend the rules and fudge a lot. You need to have some kind of accountability and stick to a strict approach technically while in sim. This includes strategies and money management.

Also, in sim, there is no point to trade with more than 2 contracts. Trading 2 contracts would enable you to include a runner money management. Trading 5 contracts in sim is pretty much pointless and it will paint a false picture .... one that with a 5 contract drawdown will do little to portray the real pressures of real cash loss.

Also, until you are stable in cash, I suggest you reduce your risk per trade to under 1/2% so you can weather the learning curve drawdown.


When I did paper trading, I trade according to my real account, and respected the 2% loss rule. However, things are differente with real cash, our cash.

You have good suggestions. Thank you.

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  #22 (permalink)
 monpere 
Bala, PA, USA
 
Experience: Intermediate
Platform: NinjaTrader
Broker: Mirus, IB
Trading: SPY, Oil, Euro
 
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Lord Sidious View Post
When I did paper trading, I trade according to my real account, and respected the 2% loss rule. However, things are differente with real cash, our cash.

You have good suggestions. Thank you.

I think two major things generally affect discretionary trading behavior when switching to live vs sim. One is confidence in your method, the other is trading scared money. If you don't have confidence in your method, fear will cause most traders to change how they select and manage trades. If you are trading with money you can't afford to lose or are afraid to lose, it will also cause most traders to change their trade selection and trade management approach. Their discretionary trade selection will become more restrictive, and their profit taking will become premature.

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  #23 (permalink)
Lord Sidious
Portugal
 
 
Posts: 91 since Apr 2012
Thanks: 8 given, 15 received

Well, I finally did one thing I should have done already - look at my notes and evaluated my trades.


Since, I have no software, I had to do this by hand first and then to do it on Excel. This is a very simple balance of all my trades since the beggining of this year:





Conclusions:

- I now realize that after all, Crude is the most profitable of what I trade;

- I rarely trade Forex but it also has been profitable;

- I only trade 4 times stocks (Check Point Software Techologies, Oracle Corp, Cisco Systems and Akamai Tech). My loss comes only from commissions, as my trading decisions were correct. However, insecurity forced me to exit too early, and did not let the profits run;

- I must conclude that my worse performance is trading Stock Index futures;

- I really do have more winning trades than losing trades. Thats a good sign, although my losses are bigger than my profits.



Analysis on my worse trades of Stock Index futures:

- My worse loss occured when I clearly broke my rules. Plain stupidity! Specifically:

- a) - US SPX500 - the max contracts (1 per point) I decided to trade, judging my trading account, is 25. For 5 times I tried to trade with...100 contracts (1 per point). Pure greed, but greed leads to fear, and as soon as the market turned against me, losses where big;

- b) - DJI or Wall Street - absence of stop loss, expecting to correct a bad trade with one or two more, in order to cover the previous losses (catched several falling knives);

- c) - In the beggining I didnt use the 2% loss rule.


More lessons learned from this analysis.

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  #24 (permalink)
 Cashish 
Miami FL USA
 
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Trading: Currency Futures
 
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Lord Sidious View Post
I think that my following step should be to get a good trading software. All of them are two expensive for me. Its hard to have a profit each month, so how can I pay for monthly use of software? Its hard.

With the 1700 Euros you lost since you started this thread, you could have paid for many months of trading expenses....

I typed ""open futures trading account with $5000"" into google and quickly got; Optimus, Velocity, Tradestation, Alpari and Trade Pro, I guess it's still very do-able and very common. Whether any of these are available to you in Portugal is unknown to me. To be absolutely clear, I'm not recommending live trading with a $5000 account.

Opinions are like what each of us sit upon, we all have one and they usually stink! I'll post mine in the hope that someone (if not you) may benefit from it, and in return save themselves some money.

There's some good information and direction appearing on your thread pertaining to paper, simulated and live trading. I consider "paper" trading just that, reviewing either printed charts (on paper) or charts on a screen and writing notes (on paper) as to hypothetical entries, stops and exits. Although exciting when I reveal a string of (hypothetical) winning trades and find myself dreaming of living in a beach house in the Cayman Islands with my private indoor snorkeling reef, the exercise is mostly emotionless. Probably more frustrating than anything.

IMO, Simulated trading with an electronic trading platform is a step up from the prior. Not only can I test my methodology and theories in the live market, I simultaneously learn the limitations, liabilities and risks involved in electronic trading. It's been mentioned up thread but I'll state it differently. Have you ever heard the expression, "Figures never lie, but Liars figure." There's no place to hide when trading a live account, but simulated trading platforms offer many dark corners for traders to hide from their trading reality. Just ask Jamie Dimon, I bet he'd agree. Simulated Trading results are only as reliable as the honesty of the trader. Check out the Top Step Trader video in futures.io (formerly BMT)'s video archives, I believe it's a great model/idea and I also believe it's going to catch on quick. The specter of accountability is brought front and center, leaving the "simulating trader" no place to hide.

With all my previous ranting laid out I'll get to my point. I believe new traders often confuse learning how to trade with making money. The lure of making a lot of money fast is the nemesis of most newbies. Is it possible, yes. Is it probable, no. When considering an attempt to trade in today's markets, don't bring a sling-shot to a gun fight. I suggest reverse engineering your goals. Ask yourself, what tools do I need to trade the market in a professional manner with my methodology. Shop around and find the charting platform that fits your needs, does it have the indicators and studies you need or will you have to import third party tools into the program. Are you comfortable with the software, do you trust the third party tools to perform day in and day out. Not all data feeds are created equal, some might work for you but not for me. Know the limitations of the data and be aware of the effects your data has on certain indicators/studies. How about trade execution, do you prefer trading from the chart or do you prefer a DOM. Dynamic, static or self centering DOM, know what you're getting before committing.

Armed with the proper tools who've selected now you can begin to learn to trade. No one can do it for you, it's an inside job. Give yourself plenty of time forward testing on a good simulator, the market will always be there, waiting to take your money. You're competing with serious traders with serious attitudes who are in this business to make serious money. I suggest you get serious too.

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 Cashish 
Miami FL USA
 
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Lord Sidious View Post
Well, I finally did one thing I should have done already - look at my notes and evaluated my trades.


Since, I have no software, I had to do this by hand first and then to do it on Excel. This is a very simple balance of all my trades since the beggining of this year:


- I now realize that after all, Crude is the most profitable of what I trade;

- I rarely trade Forex but it also has been profitable;

- I only trade 4 times stocks (Check Point Software Techologies, Oracle Corp, Cisco Systems and Akamai Tech). My loss comes only from commissions, as my trading decisions were correct. However, insecurity forced me to exit too early, and did not let the profits run;

- I must conclude that my worse performance is trading Stock Index futures;

- I really do have more winning trades than losing trades. Thats a good sign, although my losses are bigger than my profits.



Analysis on my worse trades of Stock Index futures:

- My worse loss occured when I clearly broke my rules. Plain stupidity! Specifically:

- a) - US SPX500 - the max contracts (1 per point) I decided to trade, judging my trading account, is 25. For 5 times I tried to trade with...100 contracts (1 per point). Pure greed, but greed leads to fear, and as soon as the market turned against me, losses where big;

- b) - DJI or Wall Street - absence of stop loss, expecting to correct a bad trade with one or two more, in order to cover the previous losses (catched several falling knives);

- c) - In the beggining I didnt use the 2% loss rule.


More lessons learned from this analysis.

Funny you posted your analysis at this time. I wanted to add a snip of the Scouting Criteria from the Top Step Trader website, before you put me on your ignore list!! I'm posting this as a guide for you to consider as you glean further information from your own trading. Don't get me wrong, oh Lord (Sidious), you're obviously doing something right since you have survived the last year and a half. I'll respond to your win/loss % with a guarded not bad. What jumps out at me is your risk management. Protect your trading capital. You mentioned Ninjatrader in you resent post, I like their account performance analytics, if you understand how to use them they're very helpful. I've used the NT DOM and performance analytics for years and have limited knowledge of other platforms for comparison. I'm adding another snip you may find informative.





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Lord Sidious
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Cashish View Post
Funny you posted your analysis at this time. I wanted to add a snip of the Scouting Criteria from the Top Step Trader website, before you put me on your ignore list!! I'm posting this as a guide for you to consider as you glean further information from your own trading. Don't get me wrong, oh Lord (Sidious), you're obviously doing something right since you have survived the last year and a half. I'll respond to your win/loss % with a guarded not bad. What jumps out at me is your risk management. Protect your trading capital. You mentioned Ninjatrader in you resent post, I like their account performance analytics, if you understand how to use them they're very helpful. I've used the NT DOM and performance analytics for years and have limited knowledge of other platforms for comparison. I'm adding another snip you may find informative.







Lol! Ignore List? I wouldnt, believe me!

Im here to learn, and for that I am willing to see my faults and errors. Thats why I try to improve seeking (and to work) my weaknesses as a trader. And for that, I do thank you, my friend, because youre helping me!


Thanks for the attachments. I know the last one, but thank you, anyway!

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Lord Sidious
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monpere View Post
I think two major things generally affect discretionary trading behavior when switching to live vs sim. One is confidence in your method, the other is trading scared money. If you don't have confidence in your method, fear will cause most traders to change how they select and manage trades. If you are trading with money you can't afford to lose or are afraid to lose, it will also cause most traders to change their trade selection and trade management approach. Their discretionary trade selection will become more restrictive, and their profit taking will become premature.

I agree, monpere! I find paper trading helpful, but one have to be in the real cash market to see how it is.

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Lord Sidious
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Guys,

In my previous post, I posted my balanced resulting of my notes/trades evaluation.


Well, I did another exercice on my trading analisys and honestly, Im shocked and angry, but at the same time happy, to verify the result of my greed, rules violation and my stupidity.


Here is the balance I firstly posted:






Like I also wrote, I did several trades where greed, rule violation and stupidity won. Here they are:

- a) 2 trades on US SPX 500 where trade with...100 contracts (1 per point). According to my rules Im not allowed to exceed 25 contracts and I must set stop loss at the 2% loss rule (about 120), which I didnt. Result: 750 loss!!!!

- b) 1 trade where I ignored my rules, was very risky. I trade 100 contracts, but I was able do profit 50. Nevertheless, I should have avoid this situation. Result: 50 profit.

- c) 3 trades on Wall Street (DJI) where I did not use stop loss rule, and worse, where I kept entering trades against the trend, hoping to cover the previous loss. Result: 469,50 loss!!!


Now lets look at my balance without this 6 stupid trades:





857,60 loss turned into 317,22 profit!!!


I know that "IF" is an inconsequent matter, but I must conclude that was I sticked my rules, Id be profitable! Im not trying to say Im a good trader or to convince myself I know lots of trading stuff. It simply allows me to see that maybe Im a little better I think I I was. Knowing that if I stick with my tactics/setups and follow my rules makes me to be profitable (or at least to have better results) helps me and gives me even more desire and will to learn more things in the future! My preserverance, patience and will to suceed boosted even more at the moment I did this more analysis!


So many lessons learned since I start analysing my notes and trades!!!

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  #29 (permalink)
 Fat Tails 
Market Wizard
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@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. Thats 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 days 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. Days 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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Lord Sidious
Portugal
 
 
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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. Thats 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 days 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. Days 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!



Thank you so much for your input, Fat Tails! It was extremely helpful!


Thank you, again!



Good trading!

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  #31 (permalink)
 Big Mike 
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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

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Lord Sidious
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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 dont 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)
 Cloudy 
desert CA
 
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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. https://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)
Lord Sidious
Portugal
 
 
Posts: 91 since Apr 2012
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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, Im sure Im 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)
 Anagami 
Cancun, Mexico
 
Experience: Advanced
Trading: Stock Index Futures / CFDs
 
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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. Thats 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 days 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. Days 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 mind is its own place, and in itself can make a heaven of hell, a hell of heaven." - Milton
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  #36 (permalink)
Lord Sidious
Portugal
 
 
Posts: 91 since Apr 2012
Thanks: 8 given, 15 received

Hi, guys!


As Big Mike suggested before, Ive 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, Ill stop trading for that day.

Heres my trading plan for the following two weeks. Ill 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 wont 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.



Ill post the analysis of my trades after each trading day!



Lord Sidious (aka Vader - Big Mike contribution)

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  #37 (permalink)
 Cashish 
Miami FL USA
 
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  #38 (permalink)
 tickleboy 
Seattle, Washington
 
Experience: Advanced
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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. Thats 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 days 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. Days 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)
Lord Sidious
Portugal
 
 
Posts: 91 since Apr 2012
Thanks: 8 given, 15 received

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. Thats why I have an expected profit smaller than a possible loss. In any normal trading situation Id never do that! However, Ill 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):





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 didnt 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):




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 days 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 Id 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 didnt, 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!! Ill refer to the entries as "Not allowed entries" - "NAE".


Here it is:





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 didnt 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 didnt 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 werent according to those I defined. Didnt 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. Didnt enter.




Dont get me wrong, guys, by writing this. Like I wrote it isnt my intention to ignore my own rules. Ill 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 couldnt 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!

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  #40 (permalink)
 trendisyourfriend 
Market Wizard
Quebec
 
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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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 ddnut 
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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.


trendisyourfriend View Post
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.

@trendisyourfriend, absolutely! You have to determine which side is in control and then join the flow. However, indicators can have a place when backtesting to evaluate a basic concept. Ideally you are looking for patterns in the price (or more accurately patterns in trader behavior) but developing a backtest on price patterns is rather difficult. Once a person has confirmed that the underlying idea has merit, he can look for the price patterns and the reasons behind them. Since indicators lag, price signals are more useful for actual entry/exit. I have found that backtesting and optimization can only go so far. Not enough people realize this so they start the endless search for 'faster/better' indicators. [My personal experience - YMMV, in which case give me a call ]

@tickleboy, Lord Sidious has the right idea. Start with a concept, test it while observing whether will the rules will catch good trades and avoid bad ones but also when the rules fail to catch good trades. After the trial period, adjust the rules or add/remove a rule. So far so good.

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Lord Sidious
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Somehow, dont know why, charts 1 and 2 were not correctly upload in my First Day Trading (New Trading Plan) post. Everything alright now! Click here, please.


Good trading!

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  #43 (permalink)
 Cloudy 
desert CA
 
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In regard to indicators, even though they always lag, they can be used in other ways to help gauge a probable entry or reasons to stay out of a trade, or exit a trade. For example, while a MACD alone will be lagging, looking for divergences with MACD in comparison to price is another way of using MACD , looking at a pattern on the MACD instead of just the current close of bar result of the MACD. Then there's also an average of the MACD which can help generalize the overall trend in the past 20 bars or so depending on its settings. Divergences can also be looked at on the stochastic. Stochastics can be helpful to a more experienced trader when price is in a range and the trader wants to scalp tops and bottoms. When there's more momentum and bigger movements in price, stochastics fail to show discernible fluctuations when they overstay it's oversold or undersold boundaries. And then a momentum indicator such as RSI would be more reflective of price movement in this scenario. Also, like TIYF said, it's important to have an awareness of price structure. Like knowing for example when price is in a consolidation phase vs. a trending phase, when a continuation breakout is likely to occur or a trend is showing weakness and a reversal may be coming soon. Price action material like Brook's can help in that area.

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Lord Sidious
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Hi!


Guys, Im beggining to feel quite unconfortable trading my trading plan. I find to rigid and honestly, it should be more flexible. I feel as I have a strait jacket. In fact, entries oportunities are very few, if I follow all of the rules. Thats why today I did only 2 trades again. Both of them turned out as losses, but once again I was right regarding market direction.



Trade 1



Loss: €8



Trade 2



Loss: €8




Chart (entries market as red arrows):

Note: The orange line marks the moment I start trading.






Analysis (Trade 1):

- Entry (short) when 5 SMA was pointing down, Stochs was close to overbough area, MACDHist and MACDlines were bearish. Sold, with the 8 points target and 8 points stop. Market went down 6, then rose 9.5...! However, my entry proved to be right, as the market went down.


Analysis (Trade 2):

- The previous candle to the one I shorted, penetrated the Support 1 line. 5 SMA was point clearly down, Stochs was oversold and MACDHist and MACD lines were giving signs that the price would continue to fell. RSI was near 60. I waited for the candle to pass 8 points in order to enter a short position. Price fell 5.5 points, then hit the stop, exactly 8 points higher, in the Support 1 line. After that, the market fell more than 40 points.



Grey arrow:

- This was a situation that Id have enter long. However, since it was 5:15pm here (12:15pm in the US), I didnt enter because I defined I wouldnt enter during the 12:00 - 1:30pm (US time), or 5:00 - 6:30pm, here.


Once more, there were several situation Id enter judging for price action, that turned to prove right, but that I didnt enter because the rules didnt allow.


So, until now I have 4 trades (1 win, 3 losses). I beggining to see that this plan maybe should be adjusted. Its quite frustating to trade like this. There are very few ocasions were all my filter rules meet all together in order to enter a position.

I know that I commited myself to trade with this plan for 10 trading days (two weeks), but honestly, I was thinking about making some adjustments. What do you guys think?



Good trading!

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Lord Sidious
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Cloudy View Post
In regard to indicators, even though they always lag, they can be used in other ways to help gauge a probable entry or reasons to stay out of a trade, or exit a trade. For example, while a MACD alone will be lagging, looking for divergences with MACD in comparison to price is another way of using MACD , looking at a pattern on the MACD instead of just the current close of bar result of the MACD. Then there's also an average of the MACD which can help generalize the overall trend in the past 20 bars or so depending on its settings. Divergences can also be looked at on the stochastic. Stochastics can be helpful to a more experienced trader when price is in a range and the trader wants to scalp tops and bottoms. When there's more momentum and bigger movements in price, stochastics fail to show discernible fluctuations when they overstay it's oversold or undersold boundaries. And then a momentum indicator such as RSI would be more reflective of price movement in this scenario. Also, like TIYF said, it's important to have an awareness of price structure. Like knowing for example when price is in a consolidation phase vs. a trending phase, when a continuation breakout is likely to occur or a trend is showing weakness and a reversal may be coming soon. Price action material like Brook's can help in that area.


Tell me about it! I feel Im chained...!



Good trading!

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  #46 (permalink)
 Cashish 
Miami FL USA
 
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Lord Sidious View Post
Hi!
Guys, Im beggining to feel quite unconfortable trading my trading plan. I find to rigid and honestly, it should be more flexible. I feel as I have a strait jacket.

I know that I commited myself to trade with this plan for 10 trading days (two weeks), but honestly, I was thinking about making some adjustments. What do you guys think?

Good trading!

I think you're starting to feel the labor pains of the work of trading. Don't confuse making money, with learning how to trade. In your few trades you're beginning to see things you might want to change, that's good, that's the whole idea behind this exercise. My vote is don't change a thing, continue on with your commitment. Ask yourself different questions; Am I waiting for the bar to close before entering? Am I placing my orders (limit or market?) on, above or below the previous bar's close? If I only changed this (order entry within the previous bar) would this adjustment effect my stop out rate? Maybe you are limiting yourself with the time restraints, "time will tell." Think outside the box, don't crawl back into it! You're on a mission to collect data and define a baseline of your trading, not make money. You're the one choosing to do this with a cash account!!

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 Cloudy 
desert CA
 
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Hey Sidious, ok, I looked at your chart. And tried to duplicate it on my platform, and put some of my thoughts on it. Please mind that this
is of course totally after the fact. I would recommend bollinger bands set at 2.0 but I heard you're committed to not
changing your chart for a period, so maybe it's not a good idea now.

YM can move a bit on the 5min, so maybe a bigger stop say 12 or 15 would be needed unless you can pinpoint very good entries. After price has moved in your trade's direction say 7 or 8 ticks, you can move your stop to close or at break even, lock in a tick or two. Anyways they're lots of ways and advice to manage stops and trailing stops for runners. I still have problems managing my trades too.

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  #48 (permalink)
 Fat Tails 
Market Wizard
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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.

@tickleboy: Sorry I did not see your post earlier. The forum allows you to mention another member by using the prefix @ - as I have done with you now. That way the other member will be alerted to your post!

Finding an edge is crucial. Just selling an overbought stochastics or buying a MACD divergence does not work. There is no edge.

So what gives you an edge? First you need some setups made up of an entry rule, several exit rules and a way to define your position sizing. Then you need to test the setups via simulation or a backtest. If some of your setups pass the test you may pray that the setup that worked in the past will also work in future.

An edge is thus a setup that has been validated statistically. Too large a subject for this thread. Except that I did not see any edge in @Lord Sidious' trading approach.

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 Fat Tails 
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Lord Sidious View Post
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. Thats why I have an expected profit smaller than a possible loss. In any normal trading situation Id never do that! However, Ill post profits and losses.

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

Now you have a set of rules. But do you know that these rules provide you with a statistical edge? Have you made any backtests or have you run any simulations?

Have you tested whether a stop of 8 ticks is appropriate or whether you should have a stop of 20 ticks?

Or why did you select those rules?

Maybe it was an angel who appeared during night and told you to trade that way.

I am happy that you reduced the number of contracts traded. This should make your tuition fee cheaper.

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Lord Sidious
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Cashish View Post
I think you're starting to feel the labor pains of the work of trading. Don't confuse making money, with learning how to trade. In your few trades you're beginning to see things you might want to change, that's good, that's the whole idea behind this exercise. My vote is don't change a thing, continue on with your commitment. Ask yourself different questions; Am I waiting for the bar to close before entering? Am I placing my orders (limit or market?) on, above or below the previous bar's close? If I only changed this (order entry within the previous bar) would this adjustment effect my stop out rate? Maybe you are limiting yourself with the time restraints, "time will tell." Think outside the box, don't crawl back into it! You're on a mission to collect data and define a baseline of your trading, not make money. You're the one choosing to do this with a cash account!!

I dont enter trades lightly. I take in account some of the aspects youre writing, not all, however. But yes, Im starting to see things I might change. The question is Im starting to think Ive made my rules too rigid. One of the things Im seeing is that 8 points for a stop loss in DJI trading is too tight. I stand by my losing trades, but the fact is this was proven in all the 3 losing trades. 8 points stop were easily hit, although my entry direction was correct.



Cloudy View Post
Hey Sidious, ok, I looked at your chart. And tried to duplicate it on my platform, and put some of my thoughts on it. Please mind that this
is of course totally after the fact. I would recommend bollinger bands set at 2.0 but I heard you're committed to not
changing your chart for a period, so maybe it's not a good idea now.

YM can move a bit on the 5min, so maybe a bigger stop say 12 or 15 would be needed unless you can pinpoint very good entries. After price has moved in your trade's direction say 7 or 8 ticks, you can move your stop to close or at break even, lock in a tick or two. Anyways they're lots of ways and advice to manage stops and trailing stops for runners. I still have problems managing my trades too.

Yes, Cloudy, Im starting to agree that 8 points is too tight. I wont change my chart/rules until the end. 8 more trading days!

Thank you for your analysis. Unfortunately I cant understand it, because text size is to small...



Fat Tails View Post
Now you have a set of rules. But do you know that these rules provide you with a statistical edge? Have you made any backtests or have you run any simulations?

Have you tested whether a stop of 8 ticks is appropriate or whether you should have a stop of 20 ticks?

Or why did you select those rules?

Maybe it was an angel who appeared during night and told you to trade that way.

I am happy that you reduced the number of contracts traded. This should make your tuition fee cheaper.


No, it was not an angel!

These were rules I simply came up with, based on what I read and from my little trading experience. Like I wrote before, I begin to see that 8 point stop is not appropriate for DJI trading. Yes, so far I lost €24. Not that bad.



Thank you for your answers, guys! I really appreciated!

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  #51 (permalink)
 ddnut 
San Marcos, CA
 
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Lord Sidious View Post

Guys, Im beggining to feel quite unconfortable trading my trading plan. I find too rigid and honestly, it should be more flexible. I feel as I have a strait jacket. In fact, entries oportunities are very few, if I follow all of the rules. Thats why today I did only 2 trades again. Both of them turned out as losses, but once again I was right regarding market direction.

...

I know that I commited myself to trade with this plan for 10 trading days (two weeks), but honestly, I was thinking about making some adjustments. What do you guys think?

Sticking to a plan is difficult but it is the only way to identify patterns in your trading that are not working. If you keep changing rules you will not know which ones are helpful and which ones are hurtful. But if you find that one of them is obviously not working then there is little reason to continue following that rule. The whole point of the exercise is to ensure that you have a proven edge before you commit serious capital.


Quoting 
I will enter trades after identify if the day is trending or ranging. Trade range days will be prefered.

I have not seen you mention this rule in your analysis. Are you sticking to this rule? Also note whether the trade is trend or countertrend.

Before you consider changing your rules, just make sure that you are following all your rules.

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  #52 (permalink)
 monpere 
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Lord Sidious View Post
Yes, Cloudy, Im starting to agree that 8 points is too tight. I wont change my chart/rules until the end. 8 more trading days!

8 trading days at 2 or 3 trades per day is certainly not enough of a sample size to determine if any trading method has a good chance of being successful long term. As others have said before, backtesting is where you determine if a trading concept is worth even trying out in any forward fashion live or sim.

Also, changing your rules and or chart after 8 days, does not mean that you can continue forward with the assumptions that you derived from the previous 8 days. Whenever you change one thing, any thing about your method, all the conclusions you derived prior to that change should be considered void, and you should start the proofing process again from scratch (day 0), re-backtesting the new method with the new change, and moving forward again from there.

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  #53 (permalink)
Lord Sidious
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ddnut View Post
Sticking to a plan is difficult but it is the only way to identify patterns in your trading that are not working. If you keep changing rules you will not know which ones are helpful and which ones are hurtful. But if you find that one of them is obviously not working then there is little reason to continue following that rule. The whole point of the exercise is to ensure that you have a proven edge before you commit serious capital.

I see! Thats the idea, I agree! However Ive seen already that Ill have to change my stop loss. My 3 losing trades failed because the stops were easily hit.


ddnut View Post
I have not seen you mention this rule in your analysis. Are you sticking to this rule? Also note whether the trade is trend or countertrend.

Yes, Im sticking, although I forgot to mention. Thats one thing I could metion also, if the trade is trend or countertrend! Nice sugestion.


ddnut View Post
Before you consider changing your rules, just make sure that you are following all your rules.

Thats the reason for me to feel chained, Im following all my new rules.



Thanks for your input.

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  #54 (permalink)
 mrphr 
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@Lord Sidious

Do you really need to use three oscillators [RSI, Stochastic, MACD]?
You do not need to answer me, instead ask that question to yourself.

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Lord Sidious
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mrphr View Post
@Lord Sidious

Do you really need to use three oscillators [RSI, Stochastic, MACD]?
You do not need to answer me, instead ask that question to yourself.

Hi, mrphr!

Like I wrote before, these indicators give many false entries signals during a trading day. However, and altought we know that there are no certainties in the markets, if they are close to each, giving a signal, it could be better than not having them.

The purpose of this exercice is to test (even just for two weeks, as I know I need a lot more time), if my trading plan, tactis, rules and strategies show a proven edge. I trade for 18 months, thus Im at the beggining. This is a path I need to stay, in order to improve.

But, do you want to make a sugestion for other indicators?

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 monpere 
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Cloudy View Post
In regard to indicators, even though they always lag, they can be used in other ways to help gauge a probable entry or reasons to stay out of a trade, or exit a trade. For example, while a MACD alone will be lagging, looking for divergences with MACD in comparison to price is another way of using MACD , looking at a pattern on the MACD instead of just the current close of bar result of the MACD. Then there's also an average of the MACD which can help generalize the overall trend in the past 20 bars or so depending on its settings. Divergences can also be looked at on the stochastic. Stochastics can be helpful to a more experienced trader when price is in a range and the trader wants to scalp tops and bottoms. When there's more momentum and bigger movements in price, stochastics fail to show discernible fluctuations when they overstay it's oversold or undersold boundaries. And then a momentum indicator such as RSI would be more reflective of price movement in this scenario. Also, like TIYF said, it's important to have an awareness of price structure. Like knowing for example when price is in a consolidation phase vs. a trending phase, when a continuation breakout is likely to occur or a trend is showing weakness and a reversal may be coming soon. Price action material like Brook's can help in that area.

Except for the Al Brooks part, I would think you were reading directly from my trading plan!

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  #57 (permalink)
 Cloudy 
desert CA
 
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Thanks Monpere, I'm honored if I came somewhat close

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  #58 (permalink)
Lord Sidious
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No chance to trade yesterday. Thats the problem of trading part-time.

Everything is set for today! Looking forward to it!



Good trading!

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Lord Sidious
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Hey, guys!

Ive had my trading day 3. This time I tried on paper trading (one broker that uses the same platform of the one I use to investment. By the way, the platform is not very good, bugs, indicators disappear, etc. Two of the charts arent very good regarding image quality...).


Well, in about 45 minutes I did 3 trades. 3 winning trades!

I had to add the symbol of buying manually after copying the chart, as the platform didnt added it (Chart 2)...




Here they are:


Trade 1 chart





Trade 2 chart





Trade 3 chart





Analysis:

All trades followed the rules/tacticts. You have days wainting hours to enter. I had entries in about 45 minutes...! About simulating trading, this time, I dont know what to think, if the fact of not having pressure/emotions can have anything to do with the 3 sucessful trades. I think not, as I simply followed my plan, plain and simple. However, I think it could be better to think about paying close atention to the "M" (Mind) part.



Overall:

7 trades: (4 wins - 3 losses).




Good trading!

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  #60 (permalink)
 Cloudy 
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Congrats Sidious, nice job!

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  #61 (permalink)
Lord Sidious
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Hey, guys!


Another trading day, using sim/paper trading. 3 trades, 2 wins and 1 loss.



Trades 1,2 and 3 chart:






Analysis:

Onde again, all trades followed the rules/tacticts. And once again, my trading time was about 40 minutes. Trade 1 went bad. At the time the candle opened, it followed another that made price fell, and the slope of the 5 period SMA was pointing down. Price fell for 5.5 points and then market went up, hitting the 8 points stop. The next two trades went as expected.



Overall:

10 trades: (6 wins - 4 losses).




Good trading!

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Lord Sidious
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Cloudy View Post
Congrats Sidious, nice job!


Thanks, Cloudy!

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  #63 (permalink)
 Jaguar52 
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Remember that ultimately the success or failure of your trading venture will be you.

So as you parlay back and forth and get advice and counsel, opinions, suggestions (and maybe even a few snickers); all this information needs to be considered and you need to reach conclusions and decisions based on your belief or disbelief from the results of their application over time.

Take the time to give things a chance. We all come from our own space, and most of our opinions are based on our own experiences. For some MACD suck. For others the MACD is gold.

You could set a milestone measure. Like once you set something up, take at least 100 trades with it before you trash it completely or discount it partially.

It is like looking for pearls in rough current. First you have to be able to swim, then you have to find the shells, then harvest it, raise to the surface and see what you got. All the while you are holding your breath.

Also, I believe that the most correct answers are already known to you. You just need the time and place to accept them. No one can give them to you. We can only help guide you and hopefully keep you from picking up an octopus....those things will suck your brains out.

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  #64 (permalink)
Lord Sidious
Portugal
 
 
Posts: 91 since Apr 2012
Thanks: 8 given, 15 received


Jaguar52 View Post
Remember that ultimately the success or failure of your trading venture will be you.

So as you parlay back and forth and get advice and counsel, opinions, suggestions (and maybe even a few snickers); all this information needs to be considered and you need to reach conclusions and decisions based on your belief or disbelief from the results of their application over time.

Take the time to give things a chance. We all come from our own space, and most of our opinions are based on our own experiences. For some MACD suck. For others the MACD is gold.

You could set a milestone measure. Like once you set something up, take at least 100 trades with it before you trash it completely or discount it partially.

It is like looking for pearls in rough current. First you have to be able to swim, then you have to find the shells, then harvest it, raise to the surface and see what you got. All the while you are holding your breath.

Also, I believe that the most correct answers are already known to you. You just need the time and place to accept them. No one can give them to you. We can only help guide you and hopefully keep you from picking up an octopus....those things will suck your brains out.


Thank you for your help!

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Lord Sidious
Portugal
 
 
Posts: 91 since Apr 2012
Thanks: 8 given, 15 received

Hi!

Heres what happen in the last day of week 1:


- Today I did 3 trades, 2 wins and 1 loss, paper trading again.


Trades 1,2 and 3 chart:







Analysis:

My trading time was about 40 minutes, but I did the 3 trades in just 15 minutes. Trade 1 went bad. All the filters to go long were confirmed, but the market didnt rise 8 points, instead it fell much more than 8. However, giving the momentum and the fact filters to go long were confirmed, I took advantage, in the same 5 min candle, to go long again, which proved to be a good decision (trade 2). A bit after rising about 40 points, market showed signs of a pullback. This time I bended a bit one of the rules (stochs was not interely in the overbought area, although it was closer to that, than to oversold). Right decision again, as the market fell almost 30 points.




Overall:

13 trades: (8 wins - 5 losses).

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Lord Sidious
Portugal
 
 
Posts: 91 since Apr 2012
Thanks: 8 given, 15 received

Hello, guys!


The main objetive of these 2 weeks trading, is to test my new trading plan efficiency, not to worry about making net profit. However, my analysis will take in account profits and losses, even those got with paper trading.

Here is it:







The good:

- All of the rules were followed;

- All my entries were right about market direction;

- % of winning trades bigger than losing trades;

- Profitable week.


The bad:

- A bit of lack of patiente and anxiety to respect the rules;

- Stop loss easily hit;

- After 4 trades (1 win, 3 losses) with real trading, and the fact of 7 wins and only 2 losses occured with sim/paper trading, may suggest that the "M" (Mind) part may not be helping as it should.



Possible changes:

- Bigger stop loss, due to type of trading instrument (DJI);

- Easing a bit the fact of all filters have to confirm (instead of all 3-4 have to verify at the same moment, allow only 2-3 to verify).



Week 2 will start soon. Filter/rules/strategies are the same, stop loss the same (8 points), but instead of targeting for 8 points Ill do it for 12 points.



Good trading!

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Lord Sidious
Portugal
 
 
Posts: 91 since Apr 2012
Thanks: 8 given, 15 received

Hi, guys!


Firts day with new objectives: - target for 12 points, instead of 8.



3 trades, 2 wins and 1 loss.

Once again, the platform showed problems with charts. In chart 1 and 2, the previous candle to the first trade is green, not red with a big wick.




Trades charts:













Analysis:

- Trade 1: Trade in which rules were not fully met. 5 SMA slope was not clearly down, stochs was not clearly near the overbought area and MACD bars and lines were not giving a clear sign of revearsal. However, I enter because the market was showing signs of a pullback, after a big rally. Winning trade.

- Trade 2: 5 SMA slope and stochs ok, MACDs not that good. Market went about 6 points down, but after rose for 10 points (hit the 8 point stop) in the same candle. After that continued rising. First trade regarding the judgement of market direction. Losing trade.

- Trade 3: All indicators Ok. Took advantage of a rising candle, that started to reverse, to enter with the judged market direction. Winning trade.



Same thought present: 8 point loss too tight for DJI.



Overall:

16 trades: 10 wins - 6 losses



Good trading.

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  #68 (permalink)
Lord Sidious
Portugal
 
 
Posts: 91 since Apr 2012
Thanks: 8 given, 15 received

Hello, guys!


2 trades, today. 2 wins! Couldnt do 3, unfortunately.


Charts:


Trade 1




Trade 2






Analysis:

- Everything went well with trade 1. All the rules and indicators were followed. As for trade 2, although it was a winning one, not all indicators were entirely according to rules.




Overall:

- 18 trades: 12 wins - 6 losses




Good trading!

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