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Spot FX Day Trading: The Jigsaw
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Spot FX Day Trading: The Jigsaw

  #141 (permalink)
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No Trades

Just wasn't in the groove today. After doing my pre-session prep I had no feel for price action so called it a day after an hour or so. Turns out it was an excellent day for listening to tennis on the radio, gardening and playing with the kids. With the holidays and NFP's on Friday I may just take a few more hours out and come back fresh and lively next Monday.

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  #142 (permalink)
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1 Scratch

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Game plan today was to wait for a pull back to the creek level (blue band) and then get long. ADX was well into exhaustion for the current down move so my bias was tentatively long - as long we traded above yesterday's close. There were two big demand waves early in the day which set the tone.

I did get long but was wary as the down-wave into creek level showed ease of downward movement, so I waited for another down wave to assess things. That showed no selling pressure so I got in with a stop under the most recent HL. I scratch the trade after 7 bars as there was no ease of upward movement and the recent context was not convincingly bullish.

I passed on another long later in the day as the R:R was not appealing and to be honest there was little ease of upward movement for the whole day. Price is now testing the breakdown level from last Friday.

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  #143 (permalink)
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2 Losers


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A tale of two stop losses today. The first was a good stop out. My game plan was to go long with a HL on top of yesterday's high (my upper band). I had a long bias today (wrong but I'll get to that later) as there was decent volume on yesterday 6E futures contract with no following through of the Friday's breakdown. I figured this indicated buying. There were other factors that indicated to me that we may be due a reversal of sorts.

Once price broke below my upper band I was still looking for longs but not until price would have reached the lower band (an axis line of earlier resistance turning into support). This was were I did not follow my game plan and took a spring and was stopped again. Funny how a bias effects judgment. I was viewing the slow grinding progress down as evidence that there was continued buying in the background. Compare the ease of movement up earlier in the session (50 pips in 2 hours), to the 6 hours decline and we were still not at the earlier low. This compounded my directional bias and triggered me to enter early. What I did see but did not assess as this price action was unfolding was that all but two of the largest tick volume waves were all demand waves. The supply waves were smaller. This is opposite to what is expected on a decline. I think this shows repeated lack of reward for the effort to take prices higher on each up wave; more likely this was hidden distribution - which would help explain the breakdown after the US open.

The correct set up long would have been price accepting the lower band and springing off that level after showing a change of behaviour to long - in practice a substantial demand wave and ease of upward movement. Something that did not happen and would have kept me out of the trade. At the time I believed these things were in place but they were not.

This has been a wake-up call for me. I write a game plan pre-session which puts in the upper and lower bands. This is where I want to do business, typically trading where price accepts or rejects these levels (the only exception is a on a trend day where I can get on retracements). The game plan is not typically biased for long or short trades. So the question I am asking myself is: what value is there in bringing a daily bias? It would be simpler to write my game plan, put in my levels and trade the set-ups based on the price action of the session.

With 2 stops I was coming close to my daily drawdown limit so I walked away. That was the right thing to do.

The image below shows what then happened. Price broke through my lower band and my game plan was to take shorts on a pull back to the ice level. Had I not taken the second trade I would have still been trading I believe I could have taken this short and turned the day around. But would I have taken it given the strength of my directional bias - which was proved incorrect?

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  #144 (permalink)
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2 Scratched

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Did my job well today. After we jumped the creek in the London open (middle band) I was looking for longs. First trade was a long on a MACDh retracement. I had worked out we had 3 legs in this move since the LOD so didn't allow it to stew. If there was momentum left in the move I wanted to see it quickly as the third leg up was showing diminishing tick volume on the upwave. I gave it one rotation and came out for a scratch.

Second trade was an attempted short. The high of the day at this point was a potential upthrust and there were some signs of weakness coming in. There was the largest supply wave of the day and some ease of movement to the downwaves too The highest band was were we broke down yesterday so if sellers were still around they would most likely defend this level.

I keep stats on the frequency of various highs and lows of the day and where there is a double top in the London open and morning session there is a 54% likelihood of putting in a daily low in the afternoon or early Asian session - providing that high holds. In practice this would be a reversal day triggered by the increased volume at the US open. So the trade idea was to put in a stop above the high and sit through the session to see if we would test yesterday's low. I entered after a low volume secondary test of the upthrust. The trade didn't get moving and I allowed one rotation and came out for a marginal loser. The potential R:R on this trade was very favourable so I am happy I took it. What actually happen was the more probably play - where the LOD is in the late Asian session (i.e. pre London open), the likelihood of the HOD being in the last three sessions (US open, afternoon or early Asian) is 78%, i.e. a low to high trend day. So whilst the probability was higher for the trend to continue, the reward at this point was not worth the risk.

Both trades were in my game plan I executed to my rules. I didn't work with a daily bias today and to be honest I think this simpler approach may have value for me.

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  #145 (permalink)
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2 Scratches & 1 Loser

No chart today as my 350 tick chart is about a mile long - lots of activity on the Euro after the 400 pip rip. My plan today was to keep wide stops as there was sure to be more volatility.

My first trade I got short in the down move in the London open. I missed the better entry of the morning (a pull back to ice) - didn't pull the trigger in time. I felt I was chasing the move a bit and although the entry was in line with my game plan and rule set, the move was running out of steam and I scratched it. That was a correct call as price reversed shortly afterwards. The ideal play was to have sat on my hands, but having missed the better entry I forced it.

Second trade was much better. An upthurst of the high of a range that had formed between 1.3070 - 1.3020. Again in line with my game plan and rule set. I gave this a chance to get moving, but it was stalling and with news due (US initial jobless claims) I scratched it. Again a good call as the news spike would taking me out.

The last trade of the day was a full stop out. I was playing for a long at this stage. There were good signs of strength coming in with 3 big pushes down from the HOD there was bear flag forming and I was expecting a pop off of the base at 1.3000. I don't really know what happen here, at the time I thought I was following my rule set, but on review the criteria were not met. Also I had an opportunity to scratch the trade with a loss of half my risk after I had given the trade ample time to prove itself, but I held on.

I felt performance anxiety creping in today and that, I think, effected my judgment toward the end of the day. I knew I was closing in on a circuit breaker rule and was focusing on that rather than executing trades.

The circuit breaker is 7 consecutive losing / scratched trades. And now I go to SIM until I can deliver a net profit for 2 sets of 7 trades. I welcome this opportunity as I could feel my monkey was taking over, and if I let him loose things are sure to get worse quickly. I realise I have gone live before I have enough confidence with my new approach. A spell in SIM to iron out the wrinkles, get my monkey back in its cage and most importantly preserve my capital is the right thing to do.

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  #146 (permalink)
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Sounds tough but you're obviously doing the right thing. I stopped 3 weeks ago to sort out the rest of my life because all the psych stuff was wrong. It sounds like you're implementing the Inner Chimp stuff. That's a great analogy - I'll have to read the book, although it comes in at no. 6 on the list behind quite a few other reads I've got on my waiting list.

You can discover what your enemy fears most by observing the means he uses to frighten you.
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  #147 (permalink)
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Hi Adamus,

Thanks for chiming in. I think know what the current issue is, I've just been avoiding confronting it. So I am confronting it publicly right here.

I have a habit of over-complicating things. I start off with simple rules and slowly they become more intricate. I believe this may be a mechanism I use to not accept the risk I am taking on a trade by trade basis. I am happy to take stops so it is not the money factor that is driving this, it is the 'not wanting to be wrong' factor.

I have a time based stop and allow myself to scratch trades 'if they do not feel right'. These are just easy to find exit doors when I'm in a trade and do not like how I am feeling, whether that is a trade that never gets positive, or a positive one that stalls. So those features are out of my plan. I will come to break even after a decent move in my favour and trail a stop behind substantial highs/lows. But no more micro-management, I will either be stopped out or my targets will be hit. Simple to follow in theory.

I also know that I increasingly micro-manage as my weekly/monthly performance. The more I need a result the worse I trade. So getting rid of the ways to do this seems my only option. Cold turkey time!

I've trawled back through my journals and trade stats and can see another obvious problem. My trade plan is set-up to take on risk via stop placement to a maximum of 20% of the daily ATR(average of the last 14 days). So currently for the Euro that is no more than about 20 pips, and I can have tighter stops (to a minimum of 10 pips) if the price action allows for it.

Targets are then in two parts; 50% at x3R and 50% further out. So my whole approach is based on getting a trend day or a major swing in the day - and I very very rarely hold this long. In fact the only times I have are when I had to be away from my PC and had left the targets in place and returned to find the targets hit. I am often right on my game plan for the day and see trades I bailed out of making their targets - without me.

Only by making this change to trade management (or more accurately, lack of it) for a decent period will I be able to see the results and, if they are better, build my confidence in the change. So I'll be redrafting my trade plan making it far simpler and reward / penalise myself solely on my ability to stick to the process.

I am aiming initially for the 2 sets of 7 SIM trades as the first goal for sticking to the rules. Oh it sounds so easy.

1st of the SIM trades in play right now. Let's see how I do...

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  #148 (permalink)
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You've got a totally different approach to sim trading from me. I'm not going to try real trading until I've proved I can produce a climbing equity curve in my sim account. I know there's a big jump in emotional terms going from sim to real, but if I can't do it in sim, there's no point even trying it live.

You can discover what your enemy fears most by observing the means he uses to frighten you.
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  #149 (permalink)
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I'd give myself an 8/10 for this trade. Entry was a pull back to ice after a weak morning and a nice big supply wave on the tick volume. My read was to possibly get us down to 1.3000 as price settled after the big up move earlier in the week.

Entry was perhaps a little early. I had a 15 pip stop and rode out the little test up before price broke down. My first target was at 45 pips which was hit to the pip (level was an axis line for the last day). I then pulled in my stop as price congested prior to the US open. That stop was taken out for +20, so combined for a 2R winner. My second target was at 1.3010, which would had been hit if I had just left the targets in place.

Very happy with the process and my discipline today.

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  #150 (permalink)
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mokodo View Post
I'd give myself an 8/10 for this trade. Entry was a pull back to ice after a weak morning and a nice big supply wave on the tick volume. My read was to possibly get us down to 1.3000 as price settled after the big up move earlier in the week.

Entry was perhaps a little early. I had a 15 pip stop and rode out the little test up before price broke down. My first target was at 45 pips which was hit to the pip (level was an axis line for the last day). I then pulled in my stop as price congested prior to the US open. That stop was taken out for +20, so combined for a 2R winner. My second target was at 1.3010, which would had been hit if I had just left the targets in place.

Very happy with the process and my discipline today.

I assume you deducted two points from your perfect 10 because of your part 2 handling?

So you didnt move the stops to b/e either?

I'm not criticising, I'm just recognising the same thing I see in my trading. I do two part trades as well and I am dissatisfied with my trading plan definition for dealing with part two - officially I "manage it less strictly than part 1", which means essentially sweet FA. My history with part 2 trades is appalling.

Most of my part 2 trades are either exited at B/E or stopped out just like yours shortly before another big push in the right direction.

I have an idea to work out what the average bounce off an S/R level is and I'd put my part 2 stop a few points beyond that - the S/R level I mean is the one where the first target is.

"Average bounce" means the retrace before carrying on to break the level. I just need the time to go back over some historical charts and pull together some data to make a distribution curve of retrace sizes on S/R level breaks.

You can discover what your enemy fears most by observing the means he uses to frighten you.

Last edited by Adamus; July 13th, 2013 at 07:06 AM. Reason: just re-writing to clarify a sentence
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