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12/30/15 Wednesday
Live Trades: 1
Day’s P/L: -$4.60
One trade on CL: 0t.
-Total reasonable movement +25t, -2t.
-Good trade location but it sat around entry for longer than I was comfortable so I moved to BE and was taken out. The positive is that it made it to +1R and more.
70% of the last 25 trades have gotten to 1R so my trade selection has improved. Keeping this up should help with the confidence to stay with trades longer.
Thanks for your detailled journalling of your trading journey!
I haven't completely read it yet, but your method looks a lot like the way I'm trading and inspires me to continue with it. I also realize I still have a long way to go :-)
By the way, I stumbled into your quote on page 8 exactly one year ago:
12/31/15 Thursday
Live Trades: 1
Day’s P/L: -$74.60
One trade on CL: -7t.
-Total reasonable movement +1t, -25t.
-Unfortunately the last trade of the year was a 7 tick loss. Looked to jump on board a resumption to the downside. Market decided to rally strongly. Tried to get on board long later but did not get filled.
Monthly Recap December 2015
Live Trades: 16
Month’s P/L: $247.70
Starting balance for the Month: $3191.69
Withdrawals for the month: $0
Deposits for the month: $0
Ending balance for the month: $3439.39
Beginning account balance from first live trade on 3/10/15: $3000.00
Total Withdrawals: $0
Total Deposits: $0
Total Gains/losses from 3/10/15: $439.39
Starting to trade a bit more but still struggling with confidence in my read of the market. Watching the 1 tick chart has helped to get a better feel for price action and activity at the moment of truth. There is a certain look that a potentially successful trade has on the one tick chart just before takeoff. It is not the best solution but it is something to use for now until I can explore other things. More on that in the year's summary to follow...
Year in Review 2015
Live Trades: 165
Year’s P/L: $439.39
Starting balance for the Year: $3000
Withdrawals during the year: $0
Deposits during the year: $0
Ending balance for the year: $3439.39
Beginning account balance from first live trade on 3/10/15: $3000.00
Total Withdrawals: $0
Total Deposits: $0
Total Gains/losses from 3/10/15: $439.39
If I was working for hourly wages I’d be making about $0.25 an hour. The thing that keeps me going, and what I tell my wife, is that my income as a futures trader has the potential to increase exponentially, and, like bamboo, will suddenly shoot skyward in a burst of growth. She tells me that, unlike bamboo, once she gets her hands on it, it won’t be sticking around long!
Thanks for the reminder GruttePier!
I wouldn’t exactly say, “What happened? “, but I’m not ecstatic that another year has passed without much in the way of tangible results. My system didn’t completely blow up and, sans commissions, in 165 trades I took $1000 more from the market than it took from me. I’ll need to do a lot better than this to feel progress as a trader.
The year started with what I thought was a well devised and developed plan, and a vow to get off sim. It took the better part of three months to work up the courage to take that first live trade. From there my equity curve declined $828.95 (-28%) then popped back up to $683.46 above the starting balance (+23%). From equity trough to equity peak was a gain of 73% and the good feeling that accompanies a strong comeback from a significant deficit. My trade decisions to this point consisted of simple (too simple?) analysis, extreme patience and lots of gut feel. During it all, I had the distinct feeling that I was leaving a lot on the table. And so, with confidence on the rise, I decided to take a sabbatical for a couple months and go back to sim to test out how robust my system really was. This little excursion proved to me that, no, I can’t just take every trade, and that the manner in which I qualify trades needs much refinement. The damage to my confidence on this detour carried through to the end of the year, where I am slowly digging out from the realization that the way I read and trade the market is not as robust as I would have hoped.
Looking at the numbers, my best performers were:
GC: $491.60
NG: $759.60
ZN: $703.36
Interesting in that these are instruments that not a lot of folks (at least on futures.io) day trade.
Does this mean I should drop the worst and adopt the best? Perhaps, but I am not ready to go there. I would really like to work out the issues on CL and the equities since these instruments tend to be the most active on a day to day basis. NG, GC, and ZN have their moments but are not always doing much worthy of trading. Perhaps this is why I can spot opportunities on these more easily.
During the year I came up with a way to measure the quality of my trade locations. I call it the Total Reasonable Movement (TRM) of price from entry. It is sort of a cousin of MFE and MAE but it is independent of whether or not I am still in the trade. I record how far price reasonably moves in my favor before hitting my initial stop area. I make a value judgement as to whether a pullback is too deep to hold through, thus the “reasonable” part of the TRM. The idea of TRM is to form an objective look at the quality of trade selection by tracking how often and how far price moves in my favor compared to how often it moves against me. After all, successful trading depends on picking trades that move in our favor often enough to pay the bills and tuck some away. With these objective numbers the trader can evaluate their trade selection in a number of ways.
For example, of the 165 trades taken:
-Price reached +1R 56% of the time
-Price reached +2R 28% of the time
-Price reached +3R 15% of the time
Looking at these numbers one could reasonably conclude that my edge (at least of the trades I had the courage to take) is very slight, and that managing trades with any kind of confidence with these numbers will present a challenge. While expectancy is greater than zero at +1R, it drops below zero for +2R and +3R. I have come to the conclusion that for a retail trader to be successful they need to be picking trade locations where price reaches +1R 65% of the time or more. This is not to say that the trader will win 65% of the time, but if price is getting to 1R 65% of the time, there will be more flexibility in trade management. Price will also be reaching +2R, and +3R and +4R more often, creating more opportunities to hold runners. Not coincidentally, the TRM of my bests performers were also the highest in regards to reaching +1R: NG (65%), ZN (65%). Needless to say, it is incumbent upon me to figure out how to pick better trades in 2016.
To move to BE or not to move to BE? That is the question:
Of the 165 trades, about 50 were break even (minus commission). I took them at BE in a variety of ways. On some, I moved my stop quickly based on price action or my confidence level at the time. On others, I let price play around before moving to BE. Overall, moving to BE didn’t really hurt me much since only about 60% of time on those BE trades did price reach 1R in its Total Reasonable Movement. This means that if I held every trade to either +1R or -1R I would be slightly ahead. However, I would only be ahead if I took all profits at 1R, leaving no opportunities for runners. This was not enough to warrant the extra stress of taking a bunch more 1R losses. Until I get to 1R more often I will continue to manage trades like a nine tailed cat in room full of rocking chairs.
Many of the bad habits that plagued me in the past are almost completely purged from my system. I say “almost” because I want to be ever diligent of not backsliding. Every so often I will read of a trader that goes along with seemingly superb discipline only to blow up like Mount St Helens in a single day. Lack of discipline, fading strong trends, overtrading, revenge trading, trading with no purpose, trading on a whim, f—k-it trading, and other account destroying habits are all but gone. I cannot recall many trades in 2015 that were not taken for what I thought were legitimate reasons according to my plan. Sure, some looked terrible in hindsight, but in the moment, there was purpose to nearly every trade. One can write paragraphs on the reasons for a trade, but in the end, if the reasons are wrong, results will be no better than flipping a coin, and in some cases worse.
Left over is the one big one, lack of confidence. As the numbers show, this lack of confidence is not without merit. When price only goes your way 50% of the time, and not very far at that, there is no reason to expect to fully embrace every trade. I continue to believe that the root cause of most psychological problems in trading is a lack of true, deep down, subconscious belief in the trader’s ability to read the market for positive expectancy (at least it is for me). Most of the time, this lack of belief is warranted. I would venture to guess that of the 95% of the traders that fail, most do so because they never really find a robust and consistent way to read the market effectively. While things like psychology and money management are important, the dirty little truth that many traders are reluctant to acknowledge is that when you are going long when you should be going short (and vice versa), or getting in when you should be staying out (and vice versa), good things are not likely to happen!
Therefore, my task for 2016 will be to find ways to improve trade location. Not looking for the Holy Grail here, just trying to move the odds more in my favor, to pick more winners and give my losers a fighting chance. I need to reduce the amount of entries that go almost nowhere (currently about 30%) and find the locations that have more upside. To accomplish this, one area that I will be exploring is order flow, the driver of all market movement. I will be looking at various order flow techniques to use in conjunction with my current tools to find better trade locations, fine tune entries, and make better decisions on whether or not to engage the market at any given juncture. Other than Cumulative Delta and the activity of time and sales, I have largely stayed away from delving into the nuances of order flow. I am now ready to take it to the next level.
I have attached two Sierra Charts Stats sheets because I took trades on two different computers during the year.
No trades. Did a lot of studying on Footprint charts over the past few days and watched them live in action today. First impressions were good. I've understood how order flow moves the market through my study of CD charts, but I wasn't ready to take on the level of detail that a footprint chart offers. I am ready now. The concepts jive with my beliefs, so I think there is promise.
If you are looking to increase your 2R and 3R winning trades, why are you looking at order flow techniques?
Too my understanding, these are techniques for picking short term trading opportunities with limited profit potential.
This will likely increase your 1R winners, but not increase your 2R and 3R winners perse.
Shouldn't you be looking for ways to determine significant from insignificant price levels instead, so you will increase your % of 2R and 3R winners?
I'm trying to understand your reasons for choosing order flow here, not trying to argue or anything :-)
Two trades on CL: -16t. I spend three days on a new concept and think I’m an expert. Happens every time. Both trades were against the larger trend. I had no business taking either one. Neither trade fit my qualifications but I thought I could “read” the footprint. Pure hubris. I know better than this!
Right now I'm looking at footprint as an order flow tool to help determine significant price levels and enter at the right moments off those price levels. From what I have seen Footprint can be used on a variety of time frames and can be quite effective at finding levels. I'm looking at 8-15 tick stops with 20-45 tick targets. I'm not really interested in staring at the Dom to scalp a few ticks, which may be what you were referring to. Aside from today's trading, which was a disaster, the idea is to find key levels where price has the potential to travel and use footprint, or something else, to help determine if the trade is worth taking. Maybe I'm off base. Don't know.
One trade on NG: +20t.
-TRM +24, -7.
-Stayed with this trade for a while due to indications in order flow that it had a good chance of continuing higher.
