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A TopStepTrader's Humble-Pie-Way: A TST Combine Journal of iqgod's "Take 2"
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A TopStepTrader's Humble-Pie-Way: A TST Combine Journal of iqgod's "Take 2"

  #91 (permalink)
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Having a profitable strategy is no consolation!

If I enter too early, where is the strategy?

And I did for corn today!


If I exit when I see teeny profit instead of holding till target, where is the strategy?

And I did that for corn today!


If I enter too early, hold till profit shows up.... and even though now the price action is screaming "WAAAIT, I am going to your target SOOOON" - I sell.

That is akin to weeding out your pretty plants as soon as they sprout buds - instead of letting them flower I nip them buds and all!

Three lessons for me today!

Having been here I understand your feeling of frustration and it's so easy to grasp the insanity of it at the end of the day, yet so difficult to act appropriately in the heat of the battle.

And remember, it's when those pretty flowers start to die, when the petals wilt and fall off (a normal retrace on the way to a profit target), that's when the fruit begins to appear and ripen! Your goal is to harvest that ripe luscious fruit and when the flower is dying it feels like it's all over, but the good stuff is just beginning.

Think about it: When price makes a normal retrace in a trending move it's flushing out the weak hands (the ones who fearfully exit for a tiny profit) and attracting contrarians, both of which will then become an additional force to push price back in your favor when the trending move resumes.

And if the trade does fail and hits your stop loss: Was the trade based on your positive expectancy plan? If it was, you accept that cost of admission from the start.

A trader who more than doubled his account in a year with a 48% win rate and 2x reward to risk drove me nuts when he let a trade come within a couple ticks of his target and stop him out for the full loss. I asked him why not take the profit a couple ticks early or at least move the stop to break even? And he told me something I didn't understand then (I had no plan for my trading, just loose guidelines), but fully understand now. He said that after 8 years of experience he learned that the best overall results come from leaving his stops and targets alone. By messing with that he is on a slippery slope that reduces his proven edge.

If you continue to struggle with cutting the winners, I would recommend NLP or hypnotherapy to redirect this dangerous habit that feels right at the time into a positive habit that feels wrong but produces consistent profits.

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  #92 (permalink)
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Day 14: Official Daily Trade Report from TopStepTrader

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  #93 (permalink)
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Day 14: A Combine is Not Good For Mental Health


Is a combine injurious to mental health?

Is trading in general injurious to mental health?

Answers to both: Yes.*

*Conditions Apply

(read the end of this post for those conditions)


What happened today that I am raising such questions?


As I said yesterday, the combine journey has been one of the most fruitful sub-activities I have done in the overall trading journey.

However, while trading corn I uncovered the root cause of some of the problems I am facing.

I put on a short position early in the session, close to the opening (after 8AM).


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This is a review of the mental states I went through and the correlating belief system that causes self-inflicted damage during each step, an important part of my journalling:


Step 0: I am usually hooked up to my emWave2 which let's me know in real-time when I am in coherence or not. However today I chose to trade without it.

Belief system that came into play: I suspect this is part of some inherent inner tendency to want to lose.

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Step 1: I saw a reason to go short but the setup had not confirmed itself YET I went short.

Belief system that came into play: I am smarter than the market. The 'I know what will happen' fallacy.

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Step 2: Did not take the quick small loss. Rather I rather commendably guessed that the market will go around 30 ticks higher and then slowly grind itself down and then go below my entry point. Moved my stop to 40 ticks. Close to daily loss limit.

Belief system that came into play: Same as above - believing in the 'knowing' fallacy.

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Step 3: Note that the market did reverse where I predicted it would, forming a perfect double top. Stayed on the edge of will it / won't it hit my stop.

Belief system that came into play: There was the thrill of the market behaving as I wanted it to. I held in fascination - ready to melt in the arms of the market (i.e. allowing it to hit my stop) for behaving like I wanted it to. 'Giving something because it had obeyed me, like a faithful spouse!'. Mixing a business and a weekend thrill.

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Step 4: Should I exit now? Should I exit now? - questions.

Belief system that came into play: Positive reaffirmations that considering the sum total of my observations the market is now headed lower by a huge pinbar obstructs the last mile above my entry price - i .e. I realized that the market may not trade down BELOW my entry price TODAY.

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Step 5: The market did come back to almost my entry price BUT I did not cover because I wanted to have atleast a one tick 'winner' to place in my combine statistics. Horrible mistake built upon the foundations of previous mistakes. Instead of exiting at a -$50 loss I expected further downmoves against all logic, against what the tape was telling me.

Belief system that came into play: This is the most important part here for me - two systems activated inside -
1. A belief in 'magic' - this is the childhood belief that lingers into adulthood e.g. Santa Claus exists! A false belief that a prayer will be granted without having the 'preparedness'.
2. A belief that 'hard work HAS to pay'. At this point I had held for close to four hours!!!!! I felt that the market MUST pay such a patient trader as myself. I had endured so much, watched the tape till the point of fatigue (bad decision!) that I felt the market 'owed me' atleast a one tick profit.

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Step 6: The market moved away a few ticks from the lowest price it had just printed. Now I felt I should be covering as I had lost the best price to cover - I was 'calculating the pennies lost' when in fact the market had given me pounds back after going up 30 ticks and coming down 25 :-)

Belief system that came into play: Sounds embarrassing to post on a public forum but it was STINGINESS!! I wanted to haggle with the market to the last tick possible - usually a good idea for peak performance but NOT in a losing trade!

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Step 7: The market came back AGAIN around four ticks higher than it had offered me. Didn't cover.

Belief system that came into play: STINGINESS continues. Sheeesh! How I want those two moments back now - if only I could go back and gently click the flatten button there!

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Step 8: Now the market had moved out of the bear trend channel and would head higher before moving lower. Few minutes left. TST timings allow grain trading between 6:00 AM to 1:30 PM so thought I would cover at the last second of 1:30 PM. Now I was praying and hoping in the earnest

Belief system that came into play: Stubbornness. Thrill seeking. Same two beliefs as in step 5 (magic works / hard work always pays).


By now, dear reader, I hope to have presented why trading needs me to be 'at the top of my game'.

Now coming to the 'conditions' that apply to make trading and combines a process that is injurious to mental health.

Starting a combine without already being on firm ground can be devastating - trading is an exercise in self-mastery and endurance. Actually starting a combine is of use only to someone who already possesses the necessary mental toughness.

Mental state management and trade management requires discipline to tolerate and endure emotional pain


A trader hopes for the best but prepares for the worst. If you haven't done exercises to prepare for the worst, then doing a combine is not auto-magically going to make you a better trader. Nothing can help a trader if he doesn't have a firm base to build upon.

BUT... if the mental toughness has been gathered, the willingness to work hard and long and without remuneration (initially) is all okay then the freedom of becoming a trader is worth all of the above.

And finally what exactly did the combine do to my mental state?
Answer: Combines are powerless creatures, the person who inflicts damage is the trader. I am my own worst enemy. So instead of trading well I concentrated on statistics and thus instead of process goals I focused on statistics improvement goals - an important lesson re-learnt today.


Last edited by iqgod; April 20th, 2013 at 03:07 AM.
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  #94 (permalink)
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Now I'm feeling embarrased

After posting the above I am feeling rather embarrassed at posting the worst trade ever I took in this combine - with an impatient entry, a huge MAE, with hope and praying thrown in, the plan thrown out and finally encountering freezing moments The last part I thought I had conquered atleast in this combine going by the patient entries and well planned trades that I am yet to document - serves well to remember that there exists that one black swan trade along my career that I need to intensely plan for and be watchful against.

Quoting from a recent book:

If you play a game with unlimited liability, you will go broke with a probability that approaches certainty as the length of the game approaches infinity.

Tthe probability of experiencing a cataclysmic loss on a position today may be extremely small. Yet if you trade long enough, eventually this probability, too, would be realized.

So make up your mind that you are going to quit trading unlimited liability vehicles altogether if and when your account equity reaches some prespecified goal. If and when you achieve that goal, get out and don't ever come back.

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  #95 (permalink)
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Trading success is within you

If you are reading this to learn something then learn this: Trading success is within you

If you stare at the book long enough as if its God i.e. you literally watch the market trade, you start learning how to trade! Getting into the scalping 'zone', its almost as if the market were a dancing partner - you let go when the market dips you, and the whole process becomes intuitive, subliminal and a flowing melody.

It takes an incredible amount of preparedness to reach that yoda stage.

The few moments I enter 'the zone' its complete bliss, and it is a place of peace not otherwise found in this world.

Thus its not really out there (books / gurus / indicators / courses), its inside you. Or rather, to take out the mysticism, ITS YOU.

When in the zone you also know when to avoid trading - i.e. there is a time to patiently watch and a time to click in a fraction of a precious moment - the tape speaks to you mind and you KNOW. The purposeful waiting, the sublime fleeting moment wen you know what is to be done, and then you know exactly when to do it.... what more can I ask for?

All my work currently is on ME. The ME in the equation is the only variable. The rest as they say - the markets keep repeating themselves over and over again. Those who don;t get it feed those who do at that particular moment. And 'getting it' is in you, not out there on the chart or DOM.

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Sharing My Plan

Over this weekend I will share the plan I am using for the combine.

This journal is a good place to lay it down post by post.

Single Focus Points


Sharing the complete plan lock stock and barrel in a single post will most likely drown the specificness of parts of it that may do good service to me as I look them up again; more important, a reader taking in a plan part by part will be a better critic of components rather than the plan as a whole.


Each post will contain one specific actionable part of the plan.

That will allow both me and you, dear reader, to stay focused.

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Combine Plan: Part I: Section 1

A Request : I would appreciate if you please "thank" individual posts only if you feel they add value, so everybody including myself can weed out the unnecessary, trivial and obvious. Value areas, not volume!

Combine Plan

Part I


Section 1


PREPAREDNESS


My formula:

(MY STRATEGY + MY MONEY MANAGEMENT + MY CAPITAL) * ME = MY TRADING PERFORMANCE


Note that everything adds up but is multiplied by ME. The ME is the most important.


This means that I prepare exactly enough but I do not overprepare.

Overpreparation alerts me that I am striving for 'perfection' - this is an elusive goal that cannot exist in an efficient market.

As soon as conditions are created that put probability on my side I am ready to begin.

Prologue

Previous shortcomings:

These are what are aware of and we build upon these before attempting anything else:

1. I am susceptible to NOT take a loss and allow it to grow bigger and bigger and averaging down. Such big losses have nibbled away large chunks of my capital.

2. I am susceptible to passing over the big winning trades and taking the losers because in real-time they look so 'obviously profitable'. I get a gamblers kick out of every winning trade.

3. I am susceptible to overtrading.

4. I am susceptible to not following my trading plan and trying to get ahead of the trade by premature entries. Sometimes this is hard to distinguish between intuitive early entries, but in any case the way to overcome this is to be consistently early or consistently wait for confirmation. Consistency with everything is my key.

5. I allow large winners to feed my ego.


Last edited by iqgod; April 20th, 2013 at 11:50 AM.
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Combine Plan: Part I: Section 2

A Request : I would appreciate if you please "thank" individual posts only if you feel they add value, so everybody including myself can weed out the unnecessary, trivial and obvious. Value areas, not volume!

Combine Plan

Part I


Section 2


PURPOSE OF THIS PLAN


Coming Strategically Prepared

This plan exists to put probabilities in my favor.

This plan allows me to confidently say that I know what to do and how to do it and when to do it.

Decisions: How I have decided that I have come prepared

Steps:

These are what I did before attempting a single trade:

1. I have discovered what works.

2. I made certain myself that it does indeed work.

3. I have this written plan and that everything I do feeds off this tiny document.

4. I have prepared enough. That allows these:

- I know what my risk will be (market based + money management based)
- I know when to feel confident that my trade is complete (stop hit or target hit).
--- I am guarding myself against exiting winners too early. This is a big problem area.
----- How? I am not sure of the HOW I will go about letting trades be. I would appreciate help.
- I know my guidelines for entering a trade.
- I know my guidelines well enough to not enter yet.
--- Rule of thumb: I need to spend more time waiting that entering quickly.
- I know when to step aside. (specifics: news, increased volatility, thin markets, incomprehensible price action)
- I know when I am not in a position to trade. (lack of sleep, anger, ego- wanting to prove myself in the markets)

5. I realize that markets are dynamic and that my method will have its ups and downs. Winning a combine does not make me a winner and losing a combine does not make me a loser.
- I know in advance what will be the conditions that will cause me to alter my methodology.
--- Losing trade after losing trade in an unprecedented consecutive manner
----- I will first determine it is not ME but it is the market before changing anything.
----- Change will be slow and gradual and not sudden whimsical dumping of my strategy.


Last edited by iqgod; April 20th, 2013 at 12:03 PM.
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Combine Plan: Part I: Section 3

A Request : I would appreciate if you please "thank" individual posts only if you feel they add value, so everybody including myself can weed out the unnecessary, trivial and obvious. Value areas, not volume!

Combine Plan

Part I


Section 3


MONEY MANAGEMENT


My formula:

Entry is simple:

RISK = 1% of MY CURRENT CAPITAL

Even if within above risk parameters put on only a Single lot TO PREVENT CATASTROPHES based on previous experiences.

Even if there are postive urges to ADD to a winning postion it is not allowed in this plan.

Exit is preset at 20 ticks

Stop loss is preset at 10 ticks



In Defense of My Money Management Strategy

- I have done the groundwork to lay down a winning strategy.
- Money management is simply a pillar in a three-legged stool supporting my strategy.
--- Money management cannot make a losing or bad strategy
----- e.g.countertrend quick scalps where hesitation of milliseconds is the difference between a loser and winner.

Commitment to my money management approach

This is what I am aware of about this strategy and we build upon this always:

1. The combine registration fee is money that I can afford to lose. It has been written off the day I enroll for a combine. If I lose it I will still maintain my peace of mind. Period.

2. I will always use my MM strategy because I am not making random entries and exits. Thus I will risk my capital without hesitation.

3. I am susceptible to overtrading and also get exhausted/wron out so I will stop trading for the day after five trades (win or lose).
- Side note: I have not been able to follow this in this combine

4. I allow large winners to feed my ego. Hence I will limit my wins to 20 ticks. This is also a VaR computation that puts probability on my side on average (I will know when there are exceptions. I will not shy away from a trailing stop in extraordinary conditions for a larger profit just to justify this rule.)


Last edited by iqgod; April 20th, 2013 at 12:04 PM.
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Combine Plan: Part I: Section 4


Combine Plan

Part I


Section 4


GOALS


Notes to Myself

- I take every signal that my strategy says is a valid signal.

- I have lot of courage to do that. It is not blind courage, it is backed up by my commitment to my trading because of many things:
--- studying the markets every day. Reading up price action material EVERYDAY before starting up my trading platform.
--- I have commitment. I read at least one full chapter Al Brooks Reading Price Charts Bar by Bar each day. I skim through more pages and charts quickly as much as time will allow (described more in my 'Time Table' section of this plan)
--- I trust my methods. Over the years I have developed firm conviction
--- I trust myself to be mindful and stay in present tense
--- AND most importantly - I have courage because I use stops. Not using stops is NOT courage.

- I only think about what is POSSIBLE (the only thing that is possible is that I FOLLOW MY PLAN).
--- I am not unrealistic even at the back of my mind (e.g. doubling my account in a few months)

- I stay in my trade till it is appropriate to get out

- Current goal is to strictly allow trade to take out stop or reach target. Why does this a rule for myself? Here is the WHY
--- Why? I adore my winners. I can take twenty winners in a row and yet fail in trading! I need to HOLD and have faith in my system.
--- Why? I need to be detached from results from the outcome of a single trade.
--- Why? I will not have unrealistic expectations that every trade will reach my target before taking out the stop.




Progressing

A Design of Steps Necessary to Achieve Process Goals

NOTE: These MUST NOT be solely on paper to look nice in a plan.

I commit myself to doing the steps outlined below.

How?

I have made a time table and follow that time table.


[TODO: Add the timetable here in tabular format]
_________

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