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Good trades, bad trades, winning trades & losing trades
The reason short trades tend to be less profitable is that they usually occur during periods of higher volatility so stops are further away and getting a decent return to risk becomes difficult. Other than that uptrends can cause a price to more than double (or triple or quadruple, etc.), whereas with downtrends it can only move to zero (100% gain). For the Turtle system to work, you would need to stick to a longer term system. Shorter term systems just don't get the required return / risk multiples for this to work.
I think it was in Market Wizards where Stanley Druckenmiller mentioned that Soros just does not care about losers. He has the required self-confidence to know he can make it all back (and then some) on the next trade. Richard Dennis seems to share a similar trait. I am still working on acquiring it though
The Turtle system was really designed to capitalise on the home runs where a bigger position will capture a large trend. With systems like this the win% is less important. During the 70s when the Hunt brothers tried to corner silver, all you need for an excellent year was to get a big part of that move. To me it seemed like that was Richard Dennis's mindset at the time, but he has obviously changed what he is doing in recent years. To be fair though, most people are very uncomfortable with this attitude towards making money.
You're welcome. The Turtle system was my first foray into trading and I learnt quite a lot from it in those early years. Probably one of the reasons why I still enjoy discussions about it.
Can you help answer these questions from other members on NexusFi?
Markets are whipsawing around and I'm getting stopped out for losses on some trades and watching large profits disappear on news. I have stops in for every trade so my losses are all within acceptable limits and I am profitable for the year yet frustrated.
A few trades that I'm late in posting - all are closed.
Short ZL - closed for a small gain.
Long BP (6B) - closed for a small gain having watched large profits disappear in minutes on BoE commentary.
Long ZR - closed for a small gain. I won't be trading ZR anymore as the volume leads to huge slippage.
Short ZN - closed for a half size loss (well ahead of US NFP).
Long CT - closed for a half size loss.
Long AD (6A) - closed for a half size gain having watched large profits disappear in minutes on RBA inflation expectation release.
Long GCG - closed for a small gain even though the trend was still going as I went on vacation and couldn't monitor the trade.
The results of my back tests are weighing on my mind. I haven't followed my rules strictly and when looking at my back tests if I had I would have made less money. Draw downs are part of any strategy and attempting to eliminate them altogether will probably lead to disaster so I'm looking at how I can combine multiple strategies that are uncorrelated to improve average returns with less combined volatility. Considering my base strategy is trend following it makes sense to consider counter trend trading. I am also looking into volume profile trading which I have no idea how to back test so I am going to forward test it for a few months.
Getting ready for Brexit, feels like what ever the move is after the vote comes in it will continue for at least a few days. So if the vote is to remain then I will go long the pound and if the vote is leave then short. I also feel like gold will move up on a leave vote and down on a remain vote. Anybody else have any ideas?
I have the same sentiment as well AsymOlly, but based on my limited experience, I have decided to just stay the hell out for now due to "the craziness of it all." Dec GC seems to be undervalued as of today because of the news, but I am still trying to learn GC forward-month futures. Let's see what happens!
FX traders trading the GBP pairs must be going insane with this next upcoming week. I couldn't deal with it. God bless them if they can profit this mess.
So the Brexit vote has come out leave and the cable, GBP/USD, move has already happened, at least to a large degree. As so much movement was clear to happen during the vote I traded like an idiot madman, scalping ticks here and there. Luckily I have a very low commission on the cable future (I'm happy to share how to get but not sure if it would be advertising if I add it here), so my broker profited nicely and it wasn't too bad for me either, 100+ trades and I came out with an increase in my account size for the night.
Where to go from here? Wait for British markets to open? US markets to open for more downside? A short covering rally here? Soros predicted a drop far below where we are trading now but I don't have the account size he does to take big risks so fear I could be stopped out with volatility even on a single contract.
I was much more disciplined yesterday, one trade short 6B at 1.3430 and closed at 1.3420, scared of the volume and speed of movement. I then found my discipline and went short 6B at 1.3313 and held until it seemed there was support from what I imagined to be HM Treasury at 1.3180. I was happy to get the winning trades but happier that the second trade was a good trade as I let the winner run even when several pull backs were evident.
Today value for 6B is much higher, around 1.3350, so I can only imagine that HM Treasury waited for the initial down movement to exhaust itself and then started their support program. If that is indeed the case then for the time being it is working. The economy looks to have many struggles ahead so it's hard to see how this will play out.
Irrespective of Brexit I have again learned that trading is hard and the emotions of the trader are so important. I had a strategy planned for the Brexit and even outlined it on this journal. Then when it came time to execute I looked for additional confirmation and delayed the execution far longer than planned. At the same time I ended up taking 200+ trades on Thur/Fri. Doing an analysis of the trades I was cutting my winners short and taking losses out of fear instead of planning. I was pure retail scared kitten and looking back on it I am disappointed. Of course I made money because there is nobody that couldn't make money shorting the 6B on Thur/Fri last week but the strategy I had planned was both a good trade and a winning trade. Those are the trades that I need to take and hold to pay for the good losing trades and the inevitable bad trades I will take from time to time.
You really do get to learn about yourself as a trader and since I am trading alone it is easy to see what I need to work on. At this point I believe it comes down to confidence that the style, trend trading combined with volume profile, has an edge and it's just a matter of risk management and number of trading occurrences to ensure profitability. That confidence is hard to maintain in markets such as these.
I have found, on this journey to trying to be a successful trader, is that you also learn about your own self. It kind of dregs up everything about you, and can sometimes cause you to take pause about what you discover about yourself that you never knew. It's totally fascinating! Sigmund Freud got nothing on trading! Hah!
Great points HoopyTrading. I have also found that trading has changed me. It's made me a calmer person away from the desk, more analytical and less likely to react to little things.
Better than therapy with Freud and less costly too!
The pound has been steadily rising over the last 3 days but I just can't get on board and buy it. I have a strong suspicion the BoE or HM Treasury is behind the buying and their ammunition is limited. Meanwhile the news about companies planning to leave the UK or considering leaving/moving a portion of their business out is rising. So I am undecided on what level to sell the pound. Using a volume profile approach it seems that 1.3510 and above (the yellow box in the image) would be a good level
I'll be monitoring the situation to see if the level is hit and will looking to make a trade there. If anyone else can see a good level to short please shout it out.
I am experimenting with volume profile based trading on the pound. I took a few trades at 1.3347 short and closed for 20 ticks. The profile suggested I could get 37 (targeted 1.3310 VPOC) yet I was just fine with 20 at this stage. Just testing and so far so good.
As I am typing this the pound hit 1.3310. I know that being right at the start of a trading strategy can be a bad thing. Gives over confidence when even the volume profile is just an edge and appropriate risk management is the real way to make that edge turn into profits.
I am confident I am enough of a chicken to use appropriate risk management regularly. Now I just need to have the confidence to use appropriate size in my trades to ensure the winners are big enough to pay for the little losers.
