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Trading Small - Living Long


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Trading Small - Living Long

  #1 (permalink)
 
Mtype's Avatar
 Mtype 
Hungary
 
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Hi

I'm starting this journal because I'm experimenting with taking my trading into a possible new direction. I've been trading for about 6 years now, always with a very serious attitude towards it and with many ups and downs. I've tried many styles and products in the first 2 years and since then I'm mostly been trading very short term scalping style and yoyoing between Live, Sim and TST accounts on the ES without any considerable monetary success. Of course the life lessons have been immense.

At this point I'm fully committed to trading, however I'm questioning If investing all of my trading time into one style, one product and also a product that trades much bigger on the smallest possible size that I'm truly comfortable with is the best idea right now? I'm confident and proficient with journaling and reviewing all of my trades, so the reason I'm putting this journal in the public eye is that somewhere deep down I'm hoping that maybe someone who is more experienced than I am will be able to identify what might be wrong in my reasoning / approach.

A little bit about who am i and my background. My educational background is in engineering/finance and music as a hobby and now I'm learning programming, I can see how all of this fits into trading. At this point I can freely set my time, meaning I decided to pursue trading full time but gave up an outside monetary source for the time being, which could be causing a pressure to 'want' something from the market but this is the choice I made. I'm trading risk capital however it is in my mind that if it was gone it would be a challenge to re-balance (might be a belief though) and this fear many times can and does interferes with my actions in a short term discretionary environment.

Right now what I intend to do is to trade live, slower and smaller, practice the process, practice being present and trade with respect to systematic rules. I'm expanding my time frame, trade longer targets, give more space to each trade and work on understanding trade and money management better. Currently I'm trading the ES with lower than 1R and that is something I'm really questioning if it is a good idea, so all trades will have at least 1:1 risk - reward. I will look into multiple products which one would fit the most, so the first months will be very much experimental. I do have a trading process/system/framework that I'll be using and that is simple price action based trading.

I like to collect my trades into samples, right now with 20 trades per sample and I'm only tweaking things between samples not per trade and especially not when the trade is on, that is an error. Right now I'm used to trading a chart setup that would be equal to a 2-3 minute chart, so very fast and for the next sample I'll go 15m - 1h - 4h on various products on my forex account, with a low risk and next to it test multiple CFDs if they could act as my main trading product. ETFs can also come into the discussion, however I'm under the PDT rule so there is an activity limitation there.

The goal is consistency, patience and process. At this point I'm not lost but I'm not found either, so any help, comment or discussion is appreciated.

“Happiness is the meaning and the purpose of life, the whole aim and end of human existence.” Δ

“There is no path, but only a fool wouldn’t follow it.”
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  #3 (permalink)
 kevinkdog   is a Vendor
 
Posts: 3,647 since Jul 2012
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Do you have an edge? That is, rules/setup etc. that you are confident have been profitable, and should continue to be profitable going forward?

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  #4 (permalink)
 
jackbravo's Avatar
 jackbravo 
SF, CA/USA
 
Experience: Beginner
Platform: SC
Broker: Stage 5
Trading: NQ...uh..ES actually
Posts: 1,337 since Jun 2014
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Hey man...good luck with your journey. Here's something I've been thinking about regarding R:R. It seems to me that setting a random R:R is more important for systematic rather than discretionary trading. But if you're trading with discretion, a set R:R doesn't make sense to me. The reason is it's not taking into account how the market is moving, what the market structure is. What if your R:R is still within the acceptable movement against you because of how wide the market is?

I think if you're going to play with R:R on a discretionary level, you might consider that each trade has it's own R:R. Additionally, you can improve the R:R by setting a percent likelihood of the stop or target being hit. For example:
1R stop * 50% chance of being hit : 0.8R target * 80% of being hit
0.5 < 0.64 => take the trade

or something like that. Anyway, just a thought.

"It does not matter how slowly you go, as long as you do not stop." Confucius
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  #5 (permalink)
 
Mtype's Avatar
 Mtype 
Hungary
 
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Posts: 1,323 since Oct 2012
Thanks Given: 1,434
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kevinkdog View Post
Do you have an edge? That is, rules/setup etc. that you are confident have been profitable, and should continue to be profitable going forward?

Hey Kevin,

Thanks for the reply. At this point I believe so and I keep testing and simplifying the method I trade but who knows? How can I know if I truly have an edge?

M

“Happiness is the meaning and the purpose of life, the whole aim and end of human existence.” Δ

“There is no path, but only a fool wouldn’t follow it.”
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  #6 (permalink)
 kevinkdog   is a Vendor
 
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Mtype View Post
Hey Kevin,

Thanks for the reply. At this point I believe so and I keep testing and simplifying the method I trade but who knows? How can I know if I truly have an edge?

M

You can calculate it over a long period of time.

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  #7 (permalink)
 mrphr 
London
 
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Trading: .
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kevinkdog View Post
You can calculate it over a long period of time.

Over a long period of time or by the number of trades like from 100 to 1000 trades, 100 being the minimum all simulated on market replay as a discretionary trader, no?

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  #8 (permalink)
 kevinkdog   is a Vendor
 
Posts: 3,647 since Jul 2012
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mrphr View Post
Over a long period of time or by the number of trades like from 100 to 1000 trades, 100 being the minimum all simulated on market replay as a discretionary trader, no?

It has to be 1) objective, and 2) over long enough period of time to have some different market regimes in it.

Objective: I don't think Market Replay trades are totally objective. That is part of what makes discretionary trading difficult. Real money would be ideal, but is expensive if you do not have edge.

Period Of Time: It does not help much to have even 1000 trades over the past few months, because the whole markets could change tomorrow. But, if you had 1000 trades over the past 10-15 years, that would be significant.

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  #9 (permalink)
 
Mtype's Avatar
 Mtype 
Hungary
 
Experience: None
Posts: 1,323 since Oct 2012
Thanks Given: 1,434
Thanks Received: 1,763


jackbravo View Post
Hey man...good luck with your journey. Here's something I've been thinking about regarding R:R. It seems to me that setting a random R:R is more important for systematic rather than discretionary trading. But if you're trading with discretion, a set R:R doesn't make sense to me. The reason is it's not taking into account how the market is moving, what the market structure is. What if your R:R is still within the acceptable movement against you because of how wide the market is?

I think if you're going to play with R:R on a discretionary level, you might consider that each trade has it's own R:R. Additionally, you can improve the R:R by setting a percent likelihood of the stop or target being hit. For example:
1R stop * 50% chance of being hit : 0.8R target * 80% of being hit
0.5 < 0.64 => take the trade

or something like that. Anyway, just a thought.

Hey Jack,

Good idea. I'm definitely considering any viable R:R setup, basically what I'm saying is that I want to experiment with an R ratio that is not my usual 0.5, possible set it to at least 1 and at the same time allow the market structure to dictate where the stop / target will be.

“Happiness is the meaning and the purpose of life, the whole aim and end of human existence.” Δ

“There is no path, but only a fool wouldn’t follow it.”
Visit my NexusFi Trade Journal Started this thread Reply With Quote
  #10 (permalink)
 mrphr 
London
 
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Trading: .
Posts: 255 since Apr 2011
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kevinkdog View Post
It has to be 1) objective, and 2) over long enough period of time to have some different market regimes in it.

Objective: I don't think Market Replay trades are totally objective. That is part of what makes discretionary trading difficult. Real money would be ideal, but is expensive if you do not have edge.

Period Of Time: It does not help much to have even 1000 trades over the past few months, because the whole markets could change tomorrow. But, if you had 1000 trades over the past 10-15 years, that would be significant.

I totally agree with you about trading on live environment with real money during different market conditions. But for us discretionary traders unfortunately we do not have many options if we need to backtest and try some ideas so Market Replay is the best tool we have I would say.

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