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Spot FX Day Trading: The Jigsaw


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Spot FX Day Trading: The Jigsaw

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  #81 (permalink)
Bridgwater, UK
 
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Today's trades. A story of unrequited love between me and EURUSD, and a loser on EURJPY. That's me done for the month of January and (drum roll please.....) have returned -0.6% of the months starting equity; about 20 trades taken. I risk (on average) 0.3% per trade so this is like being two trades down. Not quite qualifying as a break even month, but not far off.

But a good month for testing things and learning, and oh so slowly and surely making progress in lots of areas - if not yet coming through with profit (I have not forgotten that is the point).

I had fun each day I traded and, whilst the set-ups need tweaking and my skills need sharpening, out there somewhere in the fog is a better place called 'Consistentlyprofitableland'. I've got the tickets, had the jabs, got the visa, now where did I put that map........

Tried again to post up the 'as it happens' video but, again, it's far too long and rambling. I'll keep these as personal education tools. This is the end of session summary, runs to about 7 minutes. I'll try to keep these to under 5min in the future.

Best things I did today:
  • Good analysis on EURUSD trade
  • Calmly exited a non-performing trade - no hope or panic in play
What did I learn today:
  • It hurts watching the bus you missed go, go, go

know thyself
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  #82 (permalink)
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Not trading today (tend to stay off on NFP days) but watching and mulling things over. I'm posting here to process some thoughts, so if you do read on, expect something close to nonsense.

I have taken to reading Nasim Nicholas Taleb over the last year or so. He has an interesting take on things which chime with my views fairly neatly. (So clearly I am falling into a confirmation bias trap, but I'm fine with that - the books are irreverent and make me laugh; it's worth being in the trap).

I got into his work as a result of getting into probability, which was a result of being totally baffled by trading and my lack of progress. In hindsight I was looking for ways to explain why I was doing so badly. (Hindsight bias - making a narrative out of possibly unconnected past events to explain. We do love a nice neat explanation don't we).

Probability gave me a nice excuse - I was just on a long string of poor trades, nothing to do with be bad trader at all. I'd even coded my strategies (or coded reality as close as I could) and Monte Carlo'ed to see that I was in the tails of the distribution.

My performance did not 'revise to the mean', but my interest in probability stayed.

And it has provided some solace - and helps stop me beating myself up. Here's how.

Which ever way you look at them, whatever assessment or model you use, markets are erratic creatures. Full of surprises. Sometimes extremely big surprises (we're talking 6 sigma big). They change, always.

I spent (gulp, this is embarrassing), hundreds of hours chasing a dream of automated coded strategies. Some very smart ideas (well I thought they were smart then) + no coding knowledge = obsessive behavior. End result, now I can code C# and a bit on MATLAB but have little use for it currently. I know about Monte Carlo testing, RWFA, cluster analysis, blah, blah, blah. What I really know now though is these things are just ways to tell me 'Mike, you know nothing'.

And since I accepted that I enjoy learning the code and the concepts for themselves, not as a bridge to some promised land.

I could see that good automation would get results, but need constant attention, and replicate really what humans do naturally. That is flex and adapt.

I have accepted that (and I'm stealing this from another futures.io (formerly BMT) post - sorry have forgotten the originator): trading is not a 'create and do' type of activity. This is the default human response, especially for men, in many situations where an answer must be found. No, trading for me is becoming a 'read and react' activity. Don't do much at all seems to be a sensible approach.

A string of losers or winners may be down to how I read and react or it may be nothing to do with it. I do get the idea that if I apply a 'method' with concrete rules time and time again, I should get results with a degree of statistical worth. Lucky me, I can perhaps put the results in nice frame and hang it on the wall for all to see. Trading is becoming a process of 'flow and flux'. I pass on signals, I take marginal ones, I tweak and adjust my 'rules'. Yes they are written down and I read them every trading day. But the section headed 'context' now runs to a few pages whilst the section 'entry rules', just a few lines, stays the same.

A good run does not make me a trading rock star, a losing run not a worthless idiot. It does not make me anything because the moment will pass and I will be me again shortly afterward.

Another liberating step for me - making the same point again - is that changing your tools/indicators (just like the honey pot of automation) - is self-defeating. As a wise Indian chief once said "We are all looking at the same herd of buffalo". I've picked my spot to look from and have made it my home.

Removing the need to be right is a long road, but as I slowly plod down it my head is clearer to think about rewards vs risks and protecting my capital and managing my money better. And most important to me to learn, develop, have fun and enjoy the ride.

I'm not trading today but have been at my screen since before the London open. Euro Dollar has just taken off on a 50 pip rip after a double bottom on resistance put in during the late Asian session. Awesome. I have no idea why that occurred, but fantasized about having a 15 pip stop with a limit entry 5 pips inside resistance, bagging a 3R winner in the space of 20 minutes and being 'one and done for the day'.

Ramble over.

Happy trading to us all.

know thyself
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  #83 (permalink)
London, UK
 
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mokodo View Post
I spent (gulp, this is embarrassing), hundreds of hours chasing a dream of automated coded strategies. Some very smart ideas (well I thought they were smart then) + no coding knowledge = obsessive behavior. End result, now I can code C# and a bit on MATLAB but have little use for it currently. I know about Monte Carlo testing, RWFA, cluster analysis, blah, blah, blah. What I really know now though is these things are just ways to tell me 'Mike, you know nothing'.

And since I accepted that I enjoy learning the code and the concepts for themselves, not as a bridge to some promised land.

I could see that good automation would get results, but need constant attention, and replicate really what humans do naturally. That is flex and adapt.

Don't worry about it, I went from 1991 to 2011 trying to code mechanical systems. In fact I still do, although only as a sideshow. Assuming I can become profitable, I believe I can make more money in the long run with mechanical trading having multiple systems. The mechanical systems will never have the same edge as a human, but having unlimited numbers of them, properly tested and properly balanced for correlation and position sizing, I think that's the ultimate way to go.

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

Interesting to hear you plans for your 'farm' of mechanical systems. I trade this manually now but it was probably the most promising of the automated strategies I developed. Feel free to play around with it.

Volatility breakout

ADX <12 (and tends to get better the lower it gets, around 9 is good but infrequent) BUT measured on a higher time frame. I tested trades on 15 minutes time series taking the ADX reading off the 30 or 60 minute series. Entry is a break of a 10 period swing high or low on the trading timeframe. A low reading on an internal like MACD seems to separate 'real' low volatility from spiky erratic chop - which often pinged the stop loss.

As I say I am trading this approach manually and very happy with it. All yours (or anyone else's).

know thyself
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  #85 (permalink)
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mokodo View Post
@Adamus

Interesting to hear you plans for your 'farm' of mechanical systems. I trade this manually now but it was probably the most promising of the automated strategies I developed. Feel free to play around with it.

Volatility breakout

ADX <12 (and tends to get better the lower it gets, around 9 is good but infrequent) BUT measured on a higher time frame. I tested trades on 15 minutes time series taking the ADX reading off the 30 or 60 minute series. Entry is a break of a 10 period swing high or low on the trading timeframe. A low reading on an internal like MACD seems to separate 'real' low volatility from spiky erratic chop - which often pinged the stop loss.

As I say I am trading this approach manually and very happy with it. All yours (or anyone else's).

Looks interesting and definitely worth crunching some data with. Why the 10 period swing high/low? Maybe I misunderstand your terminology. You mean the highest / lowest price in the last 10 bars?

You can discover what your enemy fears most by observing the means he uses to frighten you.
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  #86 (permalink)
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Adamus View Post
Looks interesting and definitely worth crunching some data with. Why the 10 period swing high/low? Maybe I misunderstand your terminology. You mean the highest / lowest price in the last 10 bars?

It's just the standard NT swing indicator set to 10. All that really does is track a channel top and bottom. I suspect there may be other ways to code to identify this, I just went with the most straight forward.

know thyself
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  #87 (permalink)
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Right. Sounds simple enough. It'll have to wait though, NT7 has just mullered my historical database and I need to do a restore.

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  #88 (permalink)
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Learning every day! A nice winner in SIM for a set-up I'm testing, but two losers on the cash account. My GBPUSD trade was just a wrong read of the structure. I said 'retest of down-channel resistance' market said 'lower high before going south'. My EURJPY trade was (just) OK on analysis but poor on execution, could have waited for another price rotation, but rushed it. Stopped out there - and then the trade went to the 1st target (posting the screenshot so I can rub salt in the my wounds!)

I find I currently uncover 'good news' even in losing trades or losing days. The self talk goes something like this "I did everything right apart from X and was a whisker away from a decent winner/decent day, etc". Trouble is I do believe the story I create in hindsight.

I used to be riddled with doubt mainly about whether I had the set-ups and skills to be a CPT (consistently profitable trader -I use the phrase so much, it's quicker to go with a TWA (three word acronym)). Now I am convinced I am close to getting the set-ups and skills. No doubt in my mind there. But my P&L performance is telling a difference story. Am I a) really close to posting some consistent profit and making a 'breakthrough', or b) delusional with unknown psychological factors at work. Or perhaps even worse, c) in a self-perpetuating cycle where the more I believe it's a) the more likely it's b).

I have not experienced this before. Anyone else out there have 'been there, done that, bought the tee-shirt' stories to share?

Best things I did today:
  • Stayed clam and very positive (but possibly delusional)
  • Some good reading of market structure
What did I learn today:
  • Don't skip the discipline, use the tick sheet on my trade cards on every trade
  • If I use tighter stops I could drill down to the 5 minute PA to work on entry timing

know thyself
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  #89 (permalink)
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mokodo View Post
I have not experienced this before. Anyone else out there have 'been there, done that, bought the tee-shirt' stories to share?

I think you'll find thousands of similar tales on this forum and on every other one that's ever been created. No trader escapes the requisite torture of the mind and all traders think they have/will/can find an edge that will stop it from happening.

Travel Well
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  #90 (permalink)
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Hi Mike,

my guess is that there is a limited number of mistakes you can make and then you start repeating them. Once you recognise that you are repeating them, you can try to work out why and start to do something about it.

Of course I might be wrong. There might be an unlimited number of ways of messing up, each trade creating a new one. Just playing Devil's advocate.

Of course I don't believe that. I believe the former. What do you do if it's the latter? I don't dare think about it.

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