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Zach's Log
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Created: by Zachary Standley Attachments:182

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Zach's Log

  #41 (permalink)
Newport, Maine
 
Trading Experience: Beginner
Platform: NinjaTrader 8
Favorite Futures: MES, MNQ
 
Zachary Standley's Avatar
 
Posts: 174 since Sep 2018
Thanks: 264 given, 379 received

To generalize and simplify my thoughts as of late, there are two schools of thought on how to trade and/or approach markets that you could reasonably separate as their own sub-fields of trading, and both of them are necessary and incredibly valuable perspectives/methods: There's the concrete, data-driven way of making sense of price action in order to discover or confirm edge (I'm in this phase right now) that's "market deterministic", and then there's the seasoned/experienced, forward-testing discretionary trading that deals with technical analysis for decision making that suggests trading is a skill. Depending on your personality, you'll inevitably lean towards one camp v.s. another in prioritization, and I'm aware it's not this black and white as some of you traders are probably more balanced in this regard. This is equivalent to science v.s. art in a sense; the left hemisphere of the brain v.s. the right hemisphere of the brain (once again, it's not that simplistic- the brain is more complicated than that).

At the beginning of my career, I was very eager to start making money and to become consistent but I didn't want to do the grunt work (back-testing, analysis of the data, empirically finding potential edge, etc.) because I've always been more of an improviser/artsy type. I thought I would get away with not back-testing, that I could learn technical analysis and get some screen time under my belt and in due time I would become an excellent discretionary trader. Turns out I'm/was horse-shit. 30% win rate and couldn't hold my trades past 1:1. I did advance, evident through my trading log here, but even that wasn't enough- because I had a very hard time incorporating the hard science and proper psychology of trading; the patience to see if a system works, the discipline to follow the system to the T. Now here I am, putting in the hours towards the science, because I never truly utilized this approach/perspective in the first place.

Here's my goal right now: Discover potential edge through back-testing (be scientific). Find an edge for the three main market conditions: Range, Bull market, and Bear market. Once I have some sound results, I will return to SIM and test my possible edges out there. This may take quite a long time but I'm ready to really get the ball rolling. What I was doing in the past simply wasn't working, and the actions I'm taking now are promising as I'm doing something totally different. If you are a trader and haven't back-tested your strategy, please do so for your sake- I know back-testing isn't the end-all be-all and it's not as fun as trading, but it represents a rough idea of how your strategy will hold up in the market(s) in the long-run, given the sample size is large enough. Anyways, I guess what I'm trying to say overall is, don't neglect the science, the data (thank you iantg). It's radically important in trading.

To those who are interested, I'll keep updating this log on my back-testing progress.

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  #42 (permalink)
Newport, Maine
 
Trading Experience: Beginner
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Posts: 174 since Sep 2018
Thanks: 264 given, 379 received

First back-test results of an experimental strategy and set-up

100 trades were taken on the same pattern between March 20, 2018 and September 28, 2018. Each set-up/pattern was unique in shape and size, the only discretion there was, was in the determination of whether or not the set-up was developing (this was a minor mistake in retrospect). The entry was always in the same spot relative to the size/scale of the pattern with the use of Fibonacci retracements, and I always used a "stop loss". No discretion after entry.

R:R was always asymmetrical to the upside for every trade (1:1.5+ but most often 1:3). R:R was always custom as well and depended on the size of the pattern/set-up.

Win rate: ~34%
March win rate: ~64% (best month)
April win rate: ~32%
May win rate: ~23%
June win rate: ~33%
July win rate: ~16% (worst month)
August win rate: ~44%
September win rate: ~37%

Total winning trades PnL: $10,350
Total losing trades PnL: $10,237
Net PnL: $113
*Commissions not included*

Longest winning streak: 6
Longest losing streak: 10

"There's a qualitative difference in the appearance of the set-ups I acted on in March compared to July."

--------------------------------------------------------------------------------------------------------------------------------------

I'm analyzing the data and screening it to see what's common among the winning and losing trades. This strategy and set-up combination has potential as long as I can determine the negative determining factors and eliminate them and capitalize on the positive qualities of winning trades. A larger sample size wouldn't hurt either. I'm going to try to automate set-up selection as well in the next back-test, after I fully utilize and play with this information.

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  #43 (permalink)
Newport, Maine
 
Trading Experience: Beginner
Platform: NinjaTrader 8
Favorite Futures: MES, MNQ
 
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Posts: 174 since Sep 2018
Thanks: 264 given, 379 received


Alright so it's been too long since I posted here last. In the time I've been absent, I've been back-testing with a couple days off here and there because like I said, this is a very tedious process and to do this manually, breaks are required. I started a new back-test with some of the things I did correctly in the first one, and added some more specificity to my approach. Instead of discriminating set-ups/patterns by my own internal standards with somewhat vague set-up selection (compared to now, at least), I took what I learned from the first back-test and applied even more rigid entry conditions. I really know what I'm looking for now, so there's even more consistency in this back-test than the last- and it's 2x the size, making the back-test encompass 200 trades in total.

During this time/during the past 2 weeks or so, I haven't been watching price at the open of the ES or watching live price at all, for that matter. It's definitely a good thing to take a break and step back, and last time I was watching price I didn't trust my strategy and therefore I felt and thought that I didn't know what I was doing. I felt that I was very out in the open with only hopes that what I was doing would work, but in a sophisticated way. This back-testing is giving me solid ground to stand on- given that I actually have edge (it's promising so far) and I actually feel and think that I'll have more control over my trading because back-testing really puts trading into perspective.

When back-testing, you take these "trades" within 5 minutes or less of each other and you see the interaction of your set-up and strategy with historical price action over a period of months or years. You see all of the winning and losing streaks. You see that it's possible to lose 10 trades in a row and win 10 trades in a row and there's absolutely nothing you can do about the outcome. I've realized that you can only do so much and happenstance will take care of the rest- that's why developing a systematic, consistent approach matters a lot compared to haphazard discretion from a newbie trader.

I'll be dissecting this new data to find more clues as to where the edge is. I will be posting here more frequently as well- I've just been busy.

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  #44 (permalink)
Newport, Maine
 
Trading Experience: Beginner
Platform: NinjaTrader 8
Favorite Futures: MES, MNQ
 
Zachary Standley's Avatar
 
Posts: 174 since Sep 2018
Thanks: 264 given, 379 received

This journal has clearly become less of a priority the past couple of weeks; it's second to dealing with price data to discover edge. In the time that I've been away from direct trading, I've been putting in many, many hours towards doing what I consider to be the right thing for my trading career. Unfortunately, I do not have the same passion for scouring data as I do for trading in a discretionary manner; and this attitude has become ever more apparent to me over the course of the multiple back-tests I've done. In my absence I've had to re-do back-tests and re-establish my back-testing process more than once, because I discovered mid-back-test one evening that I was doing something totally wrong. How discouraging.

In this process I've fallen out of that passion that I used to have for trading in general, but just like a marriage- you cannot give up. Thinking about this lack of enthusiasm and apathy that I currently have, I equate it to being in a bear market. Life and trading is not always a positive process or is bullish. There's the other side that people refuse and neglect to talk about, for understandable but emotional reasons. With that being said, I will continue to work on my back-testing, as tedious as it may be, so I can reap the benefits of the time I've put in, in the future.

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  #45 (permalink)
Newport, Maine
 
Trading Experience: Beginner
Platform: NinjaTrader 8
Favorite Futures: MES, MNQ
 
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Posts: 174 since Sep 2018
Thanks: 264 given, 379 received

Since it has been so long, I've decided that I'm actually going to trade tomorrow the way that I left off: using if-then conditional clauses. I realized earlier that I don't have to not trade at all while going through back-testing, instead I could switch between trading systems depending on what the market is signaling and back-test later in the day. It's true for me that trading requires a certain level of personal engagement for me to want to continue trading, and damn, don't I miss it.

I'll be posting a log tomorrow!

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  #46 (permalink)
Newport, Maine
 
Trading Experience: Beginner
Platform: NinjaTrader 8
Favorite Futures: MES, MNQ
 
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Posts: 174 since Sep 2018
Thanks: 264 given, 379 received

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The reality of price action this morning was close enough to my main anticipation that I was compelled to enter, especially after seeing price fail to breach the 2831 area almost right out of the gate at 9:30. Because price didn't test the exact area that I anticipated was going to be breached (2831.75), part of me wanted to wait and see if price would continue to the upside, by edging up at least, in turn, fully verifying/meeting an important condition of my discretionary plan. This wasn't the case. Price instead dropped down past my entry line prematurely, and I was caught up for a couple seconds thinking if I should wait or not for further development, and if I would enter now, where would I enter?.. Waiting seemed like the wrong thing to do, because I realized it was a little past 9:30 and most of the action takes place around this time, and I would be hitting myself if I missed an opportunity because of a perfectionistic tendency mixed with some hesitation. Price hardly ever goes exactly to plan- so I entered short and had a heart attack. I forgot about how stressful this game is for me, I gotta work on that.

Price zig-zagged in and out of my favor, and ultimately it went in my direction 5 points or so, and I considered the possibility that maybe sellers will dry out, after I paid closer attention to the hesitation of my sentiment through volumetric bars. So I got out early with a $221.36 profit after seeing price creep to the upside some ticks. Like old times, had I waited longer, I would've met my profit target- but only if I could've withstood watching price go against me, hard. Anyways, there were definitely some problems as to how this plan was coordinated, and how I conducted my discretionary trading in general.

First of all, R:R was straight up inappropriate. The original plans RR was not even ok. I was risking 7 points to make 9, but because I had to change some stuff and had some emotions, I got in late and exited early which reduced my reward, while using the same risk/stop loss from the OG plan. So on paper I was asymmetrical to the downside. As you deviate from your plan and don't correct it or adapt it to current market conditions, R:R variables change. Had I been quicker, more attentive and more engaged, I could've made some changes which would've put me in a better situation.. Also, I know that technically my original R:R is acceptable, but I'm usually wrong, which makes it unacceptable in my case. 3:1 R:R and up does the trick for me.

Secondly, I didn't plan as meticulously as I used to. What I really liked to do not too long ago was to analyze and contemplate possible price scenarios at night time (I've wrote about this ad nauseum), around 7pm or so, and write those seemingly likely possibilities in my notebook. The next morning I would analyze the current state of the market and contrast what happened between the night before and the morning of. If a night-time plan came to fruition, I would extend that plan in the morning and consider it my "main plan". I would also come up with other price scenarios independent of other plans in the morning if I saw something new. I will be doing this again.

Lastly, I need to firmly re-establish some guidelines or place some boundaries in which I can act in a discretionary manner. For example, I shouldn't take trades like the one I did today- because in the long run, if I trade with such a tight R:R with my trading style and poor win rate, I will come out net negative. So I could experiment with some pattern/strategy schemas that would give me a great degree of flexibility, while maintaining positive R:R asymmetry on a consistent basis. I could also create a process of adaptation that accounts for situations that happen like today; meaning I could develop a personal-local framework that would bound me to correcting possible R:R discrepancies, in turn enabling me to create a second version of the "main plan" that more accurately encapsulates price action. This would be forced constant discretionary adaptation.

By the way, to clarify to some if not all of you, I did not entirely switch back to trading in a discretionary manner. I'm forward testing my discretionary trading (my if-then style of trading) through this log, and I'm back-testing a completely separate automated system too that you'll hear about. My primary focus IS that automated system, because honestly I trust automation more than my own way of trading- but I won't abandon the technical analysis that I've learned. It's better to have a bunch of tools rather than just one.

So to sum up and simplify: I'm forward-testing my discretionary trading and filling the holes of my process as I go/trade and I'm still back-testing a separate automated system.

Forgive me if this post is somewhat disorganized or confusing, I haven't written in quite awhile. I'll improve as I continue to write these logs.

Attached Thumbnails
Zach's Log-trade1.png   Zach's Log-trade-2.png  
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  #47 (permalink)
Newport, Maine
 
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The top green line in the screenshot above is where my stop loss would've been, and the bottom green line is where I would've entered. Profit target was the bottom blue line.

Today was basically a replay of yesterday plan-wise, except I created a discretionary condition for this plan: "Because I'm not so sure of [taking] this trade, I will allow myself to bail. If I get in and price stagnates around the 2807.50 area, I will exit." - Note: I love making these discretionary contextual conditions.

I had created 2 other plans, but I didn't have faith in either one of them because of how price was moving. The bullish plan became invalidated the more and more price hesitated to the upside. The other plan was bearish and accounted for movement past the profit target in the picture above. Anyways, I started watching the market a little bit before the open, and I watched price play out until 10:30am or so. Since there was no opportunities for me to act on, I took a shower, came back and there was still nothing. Yeah, it was a range day. I didn't take a trade.

I had some thoughts earlier after trading that I want to remember in the future. When I was trading a couple month ago, I felt obligated to sit at my computer and watch the market, however boring it may be. I didn't always feel like this, but if I was performing badly and was experiencing a losing streak, I definitely felt that way. Today, I was fine. I did not feel this way because I actually trusted my judgment for once, and I wasn't so emotional that I gave into FOMO. I know what I'm looking for, I know what I like to see and what works for me- although I'm not completely there-yet. I don't want to and actually shouldn't want to trade if price is behaving in a way that's almost threatening to me. I like to trade when candle-bars are tall and wicks are small, and when patterns are orderly. These qualities vary drastically and they're only musts to a certain extent in my case, especially if you add the concept of momentum to the mix.

The reason I wasn't confident in this set-up is evident visually. Just look at it. Could this trade/pattern of panned out? Of course, but that's not the point. I don't care about that, I don't care about a single trade that I could have acted on. I care about how comfortable and confident I am in the moment while trading and I care about certain set-ups that I know work for me- not all of them that exist. At this point I don't care if a "foreign" opportunity develops without me because I find solace within the patterns I consider to be "mine." I no longer have the urge to act on break-outs, because I learned that they don't do anything for me besides drain my account. Essentially I'm trading the way I want to trade and I'm trading in a way that "feels good." I'm still feeling it out, too.

With that being said, I had another idea that I thought might be very useful for my trading, and maybe your trading as well. This idea probably already exists since it's so simple. I could categorize set-ups/patterns on how they qualitatively look (if not roughly quantify variables), and depending on what rating I give it (1-3 for example), I could apply different R:R, I could apply a different set of rules to each trade depending on what rating it has. For example, the trade I would've taken today would be considered a 3, which is bad. I would risk small, and/or I would set the condition(s) that I can bail at any time. As for a trade with a #2 rating, I would restrict the conditions in which I could act in a discretionary manner, because based on the premise of this potential system, these ratings imply that the likelihood of success of each set-up/trade is higher, the lower the rating of the set-up. I may be implementing this idea.

Attached Thumbnails
Zach's Log-trade1.png  

Last edited by Zachary Standley; March 28th, 2019 at 04:03 PM. Reason: added some stuff
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  #48 (permalink)
Albufeira, Algarve, Portugal
 
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Zachary Standley View Post
I'm analyzing the data and screening it to see what's common among the winning and losing trades. This strategy and set-up combination has potential as long as I can determine the negative determining factors and eliminate them and capitalize on the positive qualities of winning trades. A larger sample size wouldn't hurt either. I'm going to try to automate set-up selection as well in the next back-test, after I fully utilize and play with this information.

Your journal is interesting. I was wondering if you separate your long and short entries to determine which entries are more profitable. I found in testing and live trading that the short side behaves differently than the long side, thus any strategy must be adjusted accordingly. Generally short movements exhaust themselves more quickly than long movements. I am curious about your approach.

~vmodus

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  #49 (permalink)
Newport, Maine
 
Trading Experience: Beginner
Platform: NinjaTrader 8
Favorite Futures: MES, MNQ
 
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Posts: 174 since Sep 2018
Thanks: 264 given, 379 received

The strategy that I'm currently testing, which is a more refined version of the strategy I was testing back then that you're referring to, is completely on the short side. I'm isolating a certain pattern/set-up interaction with a fixed but scale-able entry/exit schema, and if you look at my last last trade as of late, there's hints of what I'm doing through there. Once this strategy proves to be consistently successful, I will be looking to take advantage of long opportunities, possibly within the confines of this very pattern, and maybe using a very similar entry/exit method. There is still a lot to be done.


Last edited by Zachary Standley; March 29th, 2019 at 01:39 PM. Reason: made a mistake, check out the last trade I took. Not the one that I didn't take, yesterday.
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  #50 (permalink)
Newport, Maine
 
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Posts: 174 since Sep 2018
Thanks: 264 given, 379 received


Another uneventful day in the ES.
In preparation for the trading day, I created three different scenarios of price action a half hour before the open:
1. (Main): Price reaches the 2866 area but fails to breach resistance. Price regresses back down to the 2856 area. A range day scenario; taking advantage of regression to the mean.
2. Price covers the gap up by going down past the 2844.50 area, possibly going all the way down to ~2838.
3. Price breaks out to the upside, making higher highs, potentially reaching ~2875.

I was diligently watching price for an hour or so since the open, I know that at 10:30 I started yawning. Price was crossing scenario #1's tracks by the end of the session, but it did not get close enough to 2866 for me to want to go short. Price was slow, and range-y and didn't meet any conditions of any of my plans. I had even improvised a plan because of this, but then I thought it wasn't in my best interest to trade today given the low volume and hesitation/lack of follow-through. So I didn't enter. It seems that a good rule of thumb for me, is that if I'm bored and the market isn't all that "stimulating", I definitely shouldn't take a trade. I'm glad I didn't.

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