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CookieMonsta's discretionary trading journal
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CookieMonsta's discretionary trading journal

 
Singapore
 
Trading Experience: None
Platform: MetaTrader 4
Favorite Futures: Spot Forex
 
Posts: 63 since Dec 2018
Thanks: 2 given, 48 received

CookieMonsta's discretionary trading journal

Hi all,

This is my discretionary trading journal.

So in this first post, I will be outlining the main strategy I use, I have been sharpening my skills for a few years, but recently, about a month ago, is started to incorporate spreading /long short portfolio strategies as a basis to manage portfolio volatility.

Specifically, "hedging" on the same pair is pretty much a special case of a 100% correlation long short with 100% volatility fit with the assets being trades. As with all pairs trading or long short portfolio, majority of the risk comes from the spread tearing risk and asset correlation and volatility correlation differences. As all currencies are linked in some way, it's sometimes hard to use cross currencies to manage it expecting a 100% fit in terms of correlation and volatility.

Well if you have options this works too, in the sense that you are creating locks with it, specifically, locked positions sensitive only to interest rates, the generic form is similar to box spreads.

Using the spot forward relationship is an acceptable way to do this.

This strategy is a technical strategy and can be done if it fulfills the requirements of having good instruments to manage with.

I perform price action analysis on the D1, H1 charts mainly and use the M5 to manage trade. The main strategy is to be fading market turning points.

I will scale in and scale out as I see how the market's perform and unfold.

As for the money management, there is a per day daily limit, divided by 2, as a 2 trench loss limit, when trench 1 is reached, trench 2 is deployed to try to salvage trench 1. But if both trenches are reached, the entire loss will be taken. Also the daily loss limit can be either percentage risk or fixed risk limit.

The idea came from how market makers having to take the other side of the trade, manage negative selection portfolio trades, which is done by having a positive selection portfolio and this effectively becomes a long short portfolio, which may be market neutral, or tilted abit here and there depending on how they feel the market is reacting.

Market makers, may use this to generate alpha from relative volatility differences and also may use this to protect against broader market runs. But this does not protect against the tear in relative value differences in the portfolio's various assets. Hence my use of the same pair ( it mitigated such issues from the start).

Part of the major management strategy for this strategy is mitigation of volatility exposure of the portfolio.

Regarding the use of stoploss, there is no stoploss used but instead a hedging stop is used mainly for discretionary purposes and also as a way to trade and exploit stophunts.

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Singapore
 
Trading Experience: None
Platform: MetaTrader 4
Favorite Futures: Spot Forex
 
Posts: 63 since Dec 2018
Thanks: 2 given, 48 received


An example of the trade, but the market went very much against me, but with the hedging, manage to exit with a small profit.
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Singapore
 
Trading Experience: None
Platform: MetaTrader 4
Favorite Futures: Spot Forex
 
Posts: 63 since Dec 2018
Thanks: 2 given, 48 received

So, specific issues that I am working on, letting my winners ride, as I find that I am not letting my winners ride as much as I should have.

 
 
Singapore
 
Trading Experience: None
Platform: MetaTrader 4
Favorite Futures: Spot Forex
 
Posts: 63 since Dec 2018
Thanks: 2 given, 48 received

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Next, I will be showing some techniques which I have discovered could help to manage positional exposure, and its effect on exposure to volatility.

The significance of doing this in a few swings is that you are alternating between a lock and a long exposure. But of course, real trading is rarely this clean, so usually you have to leave some extra positions for errors and sudden turns by markets.

The above is an alternating sequence which can be used in conjunction with dollar cost averaging meant to handle run away markets.


Last edited by CookieMonsta; December 18th, 2018 at 06:03 AM.
 
 
Singapore
 
Trading Experience: None
Platform: MetaTrader 4
Favorite Futures: Spot Forex
 
Posts: 63 since Dec 2018
Thanks: 2 given, 48 received

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Next, I will be showing what happens when dollar cost averaging a position gets too large that the per pip dollar delta gets too high that it can become dangerous to manage such a position, especially when position is negative. And when that happens, you have to make a choice, there are a few options

1) take a loss
2) decide to enter trench 2 to try to salvage position
3) continue at this risk level and try to manage out of it.

In today's case, I have taken a loss, as it wasn't a big loss, primarily because today was profitable and I had other positions tanking the loss, and also, the position size was getting fairly large then per 10pips I would easily reach trench 2. Also, after taking a loss, yesterday's profits would still comfortably be able to handle today's loss

The real catch to dollar cost averaging is, understanding volatility, and it's effects on the portfolio, as well as once you are near your loss threshold, how do are you going to lighten your risk level so at least you don't blow your account up.

Partly also that, usdjpy has a very very strong h4 down thrust and we are near a D1 support, and below is a huge cluster of stops, if it tanks the stops can cascade and causes a huge push downwards, and it's never good to carry a position heavy enough to cause issues with your risk management guidelines into such types of scenarios.

just to clarify, my position in focus is usdjpy and after the final average in, its 0.50 lots, which i think is kind of large, and also i was down $70+ on that entire position but since i had booked around $50+ for the day, the damage wasn't that great, and since i don't really want to let my position's dollar delta from getting out of hand, a loss of $20 was taken for today, as for the withdrawal, please ignore it, it is profits left over from yesterday as i run a wallet system, and only keep a nominal of $1000 in the main trading account, the rest are capital buffer put else where, it is done as a measure against sudden spike slippage so in that case, it would margin call and liquidate the $1000, so the rest of my capital are safe.


Last edited by CookieMonsta; December 18th, 2018 at 09:45 AM.
The following user says Thank You to CookieMonsta for this post:
 
 
Singapore
 
Trading Experience: None
Platform: MetaTrader 4
Favorite Futures: Spot Forex
 
Posts: 63 since Dec 2018
Thanks: 2 given, 48 received

Now the derivation of the strategy, main the volatility study was glimpsed from studying this website.

https://forexop.com/martingale-trading-system-overview/

The article has done a study on why martingale is a bad strategy and in that of itself will definitely lose the entire account.

Afew reasons why I am skeptical about why the article is not very correct in its analysis of martingale systems.

1) However, what the article did not cover, was volatility, which is the reason why so many basic martingale systems lose money overall, because it was not done properly as the system exposes the account to too much volatility.
2) The article suggests there is no risk management tied to it.
3) Its basically trading against the trend, especially against major term trend changes, for example, buying into h4 dips only to find out d1 has also turned against the position and yet, continuing to add to it
4) Not letting winners ride.

Now, 2, 3 and 4 are basically bad trading practises in the first place, why would i do that?

The only reason why you would average into a position can only be because you believe its either a pullback, or it is range bound, or you think you have the muscle to add more and trade out of it, but you still have to have a risk limit.

Now for 1, this is probably that the expectation martingale can dig you out of a hole, which is wrong, as now your relying on how much capital you have to dig yourself out, and that creates a hugely lopsided risk reward ratio.

Position cost averaging can only help you correct a mistimed position, or a position which is sufficiently close enough that averaging in can help you out, say a 10 to 20 pip move can let you off the hook.

And here is the catch, understanding the above points and knowing that i can hedge, i can create locked positions when the markets run against me, as per the above simulation, and keep managing within that.

So effectively, martingales or position cost averaging in general has executional edges, in that it can adapt your position to volatility, and hedging can tone your position's exposure to volatility down, but it in and of itself does not have directional edge, which is that your analysis has to be right in the first place, if the direction is wrong, then you still have to have a loss limit to bail you out.

So with the above, comes the derivation of the position cost averaging and hedging method combined together as a way to manage trades. effectively, the entire point is that by hedging out on say 25pip loss, the market can go against you 200pips and you only really have to average in later and do 12.5pips after taking off the hedge and your break even for the day, anymore and you will be in the profit. the entire ideal is decorrelation of portfolio's volatility exposure from market's volatility through discretion and specific techniques.

so lets say we are at 100.75 for pair ABC, im long 1x, and when price goes to 100.50, i hedge 1x short, locking in 0.25, and market drops to 99.75, effectively dropping 1.00, and now it seems like price is reversing, i take off my shorts for 0.75, and go long 1x, now im long 2x, and price goes back to100.25, and i liquidate all. so now i have +0.75 from the short, -0.50 from 1x long and +0.50 from 1x long, effectively i made +0.75 while maximum drawdown intratrade is 0.25, maximum dollar delta is 2x. if i were to use a stoploss, i probably would have lost, maybe -0.50, if i averaged in my exposure will still be -1.00 maximum drawdown. so this creates a positive risk reward ratio on top of being able to adapt to volatility and also being able to average the position out for a better cost basis.


Last edited by CookieMonsta; December 18th, 2018 at 10:25 AM.
 
 
Singapore
 
Trading Experience: None
Platform: MetaTrader 4
Favorite Futures: Spot Forex
 
Posts: 63 since Dec 2018
Thanks: 2 given, 48 received

This morning's trades, managed to turn in time and trade both ways.
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Singapore
 
Trading Experience: None
Platform: MetaTrader 4
Favorite Futures: Spot Forex
 
Posts: 63 since Dec 2018
Thanks: 2 given, 48 received

The easiest way to improve your trading skills.

Everyday at the open of a session, look at price charts on 5mins and 1hr and daily, and fade a turning point, then take it out again when it turns again. Can be done in demo or live account, that's a way to improve feel for price action. Then factoring in news.

Do it for at least 3 to 6 months and you should see your skill improve in reading price action. Then comes the trade management strategies(more advanced ones like scaling in and out and spreading).

Now for futures, it will be their opening times, but for Forex, you can use Tokyo open for jpy, EUR or GBP would be London and USD is new York.

Mark difference between Forex and futures is, Forex is continuous, so usually for Forex, london's open is the most important one, new York open is carried position from London and Tokyo is well, usually isolated as it's prior to an opening to London. Different openings have different traders hence difference price action types barring news or special events.


Last edited by CookieMonsta; December 18th, 2018 at 11:53 PM.
The following user says Thank You to CookieMonsta for this post:
 
 
Singapore
 
Trading Experience: None
Platform: MetaTrader 4
Favorite Futures: Spot Forex
 
Posts: 63 since Dec 2018
Thanks: 2 given, 48 received


Analysis for usdjpy, for today.

Tonight we have fomc.

Usdjpy had a extreme trend yesterday as well as the day before, this morning, they hunted stops at 112.25ish zone, but there is no follow through.

Dealers and traders who did the move yesterday should be looking to
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