For the last few weeks I haven't posted my trades but have gone through ups and downs. I broke my trading plan over and over. I broke my trading plan because I was afraid that it wouldn't work. Looking back it would have been very profitable and my scared trading was just profitable. I know my fear is due to insufficient back testing of my strategy, so now I'm working on a way to test it properly and give me the confidence to trade it as designed.
An example that is eating at is NQ and ZN. I was long both from earlier in the week and while my stops weren't hit and both were going my way I exited after the NFP came out. Had I stayed with my trades I would have more profit and would be better prepared for drawdowns to come.
I'm beating the market even though I don't have the SP500 as my benchmark. If I was losing money I might learn the lesson properly. It's starting to sink in and I'm ready to view each trade as a bullet once fired can't be altered. Fear of losing profits is a bigger risk than a few losing trades.
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NG feels like a disaster in the making. Short NG has been a much better trade in the past year but there is a breakout signal to the upside so I take it. Risk management is in place, stops set GTC with an amount I'm willing to risk. This is the key, I need to be willing to risk a loss in order to make a gain. HG was off to the races as soon as I put it on, feels good. NG is slowly moving against me as I type, feels less good.
Must not touch it, the bullet is out of the gun.
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NG made a strong come back today but HG is the real performer crashing much lower. NKD is also performing nicely. New trade for today is short SB @ 0.1463.
It's generally times like these that I have a tendency to take profits even though the trend is still running. Today I will resist the urge. The system works and I will be rewarded for following the working system over the long run.
The biggest question for me now is how security selection will affect my performance over time. I am getting multiple signals that I am not taking due to high correlation to existing positions or volatility that would put stops outside my risk tolerance. I haven't yet been able to model that in my back testing so that is next on my list. I downloaded AmiBroker and started learning AFL to improve my back testing capabilities.
NG has come nearly all the way back so that is nice to see but now NKD has taken an overnight (day time in Tokyo) huge gap up and is causing significant pain. SB performing well and happy that it's not as volatile as the other guys right now.
New trade for today is long ZN @ 130'29.
I'm strongly considering closing the NKD trade due to the news that the BOJ will increase their purchase of stocks and ETF's as a means to support the Japanese economy. It's clear that news is driving the index future up. It's getting so close to my stop that I'm doubting my decision to not take the trade off much earlier when it was clear the news was driving this move. The rationale for not taking the trade off earlier was that news is included in all my back tests and over the long run this is a profitable system so no touch.
As I write this post HG is shooting up and I am tempted to close. MUST RESIST!
Hard markets with nearly all positions reversing trend and losing money. Stops not hit so still in the trades.
2 new positions today long S @ 921 and short ZW @ 451 1/4. Both not doing so hot out of the gate but I would be happy with some slow movers that stay in the direction of the trend.
The markets have been just wild whipsawing back and forth making life uncomfortable for this trend follower. I wanted to smash my phone to bits looking at the price action for ZN, NG, NKD and HG during the Asian session. It's just so frustrating to watch profits disappear in a flash.
I listened to Jerry Parker, Turtle Trader, on chat with traders yesterday and he made some great points about trend following. He talked about the importance of sticking with your system and getting used to being uncomfortable. I'm not nearly there but I've missed out on enough profits by either closing a losing trade before my stop was hit or taking profits for fear of losing gains to keep me trading strictly with my system now.
Last edited by AsymOlly; April 11th, 2016 at 05:10 PM.
Reason: typo fix
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The market is full of air gaps these days. I have been on both sides of these moves but it is so stressful watching profits disappear in an instant or watch losses get very close to stop losses in a day. ZS moved rapidly in my favor, up, but NG, HG, ZN and NKD all took me to the woodshed. Stops not hit but it hurts like hell. In the span of a few hours half of this year's profit just vanished. I may also wake up and find it all back (but not likely).
From a fundamental perspective I don't understand why HG is rallying. NKD makes sense because BOJ governor Kuroda claims he'll do anything to save the Yen and Japanese economy but HG seems beyond reason to me.
I opened a new trade and now I'm at my position max, long CT @ 6160. CT has been a widow maker for me as it is extremely volatile but I'm trusting my system.
Great point on Jerry Parker and feeling uncomfortable. Here is a link to his performance although you will need to register with IASG - Chesapeake Capital : Diversified - IASG. I will point out that he was the only Turtle to target lower volatility returns and he still recommends getting used to feeling uncomfortable. I wonder how Richard Dennis felt whenever he bet his left nut.
With regards to backtesting, you can get a trial copy of TradingBlox and it already has the Turtle system built in. So no need to program anything and you have a lot of comfort that the code is correct. Other than frequenting their forums in the past, I have no affiliation with them.
Regarding market selection - yes, it is pretty important however it is difficult to determine in advance which markets to trade. Which is why most trend-following managers try and trade all markets. Unfortunately that is probably part of the reason why these funds have not performing that great as of late.
A final note would be that understanding why things move may be a hindrance to trend trading. Generally, when markets make big moves these moves are not understood by most and only become obvious after the fact. Usually people will comment that the move is overdone, etc. Just look at when Greenspan made his "irrational exuberance" comment. Therefore, most of the time wanting to understand why something moves could just lead to exiting good trades prematurely.
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Just got stopped out of ZW @ 456. The one day move was too big and bounced me from the trade. Very close to getting bounced from NKD. That loss would hurt and will most likely come to pass if not now then tomorrow when Tokyo opens and piles on from this massive move.
I am uncomfortable and taking trades based on system signals alone. I named this trade journal good trades, bad trades, winning trades & losing trades because I know that good trades can be losing trades and today I have a lot of them.