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The HSI Index Futures Scalping Experiment


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The HSI Index Futures Scalping Experiment

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  #11 (permalink)
Brisbane, Australia
 
 
Posts: 134 since Nov 2013
Thanks: 40 given, 219 received

Open down 1100 pts (4%) - scary.....so waited it out until things calmed down....good discipline today...posting my trades is making me more patient as I want to enter stupid trades.
Zero errors.
New stats window
(1-Lot) D WTD MTD YTD
Tot_Ticks 35 82 117 117
Tot_R 1.75 4.1 5.85 5.85
Tot_$USD 228 533 761 761
Expect_R 0.44 0.24 0.28 0.28
ProfitFactor 10 2.4 3.0 3.0
%Win 100%82% 86% 86%
%Loss 0% 18% 14% 14%
%BrkEven *0 4 4 4
#Trades 4 21 25 25
%Errors 0% 14% 12% 12%
Total TradingDays= 4
Tic=$US6.50 * BrkEven(scratch) trades are effectively
ignored from all performance calc's


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  #12 (permalink)
Brisbane, Australia
 
 
Posts: 134 since Nov 2013
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Will try this snipping tool in Windows to convert Excel image to Jpeg..looks much better. Fixed the WTD fields and assume a 100% win rate defaults as a 10 for Profit Factor..


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  #13 (permalink)
Brisbane, Australia
 
 
Posts: 134 since Nov 2013
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Done and dusted...good patience today..reporting on this journal has really improved my discipline...
Missed my opening trade but a pat on the back I did'nt chase it..

Stats


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  #14 (permalink)
Brisbane, Australia
 
 
Posts: 134 since Nov 2013
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I've been in and out of the markets since 1995 but originally got started (like many of my generation) after watching WallStreet the movie back in 1987? when I was at Uni studying business and in that time I've had an interesting journey working for investment banks in London, Hong Kong and Tokyo...until late 2012 when we moved back to Oz to raise the family.

My trading journey started in late 95 in London (yep thats 25years ago now) after starting my IBanking career in London it was there that the thought of an all encompassing algorithm that could be fed with live data over mutliple markets to generate multiple trading orders and resultant profits would add up.(I wish I could go back and give myself an upper cut but of course its too late).....but what lead me to the algo "solution" the internet had really only just started and trading on it was in its infancy and very unstable. Read below.

In London 1995 I had purchased dozens of "trading books" from the huge book shops that existed in those days (before amazon had started shipping internationally) and borrowed even more from the London Business Library trying to accumulate as much trading information as I could when I stumbled upon William O'Neals - "How to make money in stocks" - I was fascinated and promptly opened my first brokerage account and bought $2000 worth of amalgamated holdings (an Australian stock) paying 2.25% brokerage based off the cup and saucer formation that matched in the book after pulling up the daily chart on Bloomberg ....I made $400 on my first trade and was smitten! I'm gonna get rich! I eventually closed that account for a loss but the thrill of that first win had changed me..I had lost my faith somewhat in technical analysis at this point in time but my direction changed again once I'd read the works of Larry Williams....his thoughts on how to build an algo (simple by today's standards but cutting edge in its day drew me towards the quant method...I highly recommend his books as you always learn something from Larry...his opening range breakout method (ORBO) was amazing at the time. I had to test it myself. This is the method he used to turn $10k into $1M+ - fully documented and legit.Look it up.

So after being transferred to Hong Kong with the Bank I purchased the latest top-spec DELL PC and Tradestation 2000i around 1997? and got to work....coding and testing most evening's when I had free time I must have tested hundreds of ORBO systems and done millions of optimisations...the results looked great on daily bars but I always had this nagging doubt about the true results without testing on intra-day bar data - in those days is was expensive to get and hard to find...my thought was that trading this system without proper data was pure gambling...lots of internet trading forums were raving about the results....so dell-boy opened another futures account to trade a basket of index futures - each morning I emailed the orders...the results were not there and I got the shits with this process quickly as my broker had to manually monitor and place the bracket orders and after he screwed the orders a few times and subsequent true-ups I got sick of dealing with human brokers directly - they have good intentions but they are crap. I closed that account down after 3 months without seeing any of the expected gains...my brokers human errors accounted for that.

At the same time I wanted a long term algo to diversify the short-term index futures "gains" LOL - I realised over time that if you wanted to trade long term you needed a portfolio ala like the turtles system with Richard Dennis and not much off-the-shelf software existed to do the dynamic position sizing and tracking back in the early 2000's...TS2000 could only do single market analysis and was useless...lots of side products came along which tried to merge the single market results into a portfolio but they were clunky and wasted lots of time....over time I got frustrated in my attempts and was sucked into the Dark-side and paid $2000? for Dean Hoffmans's Synergy trading system (blackbox - ie I did not get a copy of the code) after looking at the back tested results (which looked amazing of course) and traded that with a $100k capital through Striker in the late 1990's ...the volatility scared the crap out of me as the account was up 30% in the first 3 months then dropped back to the starting balance over the next month so I pulled the plug and liquidated the account at break even vowing never to trade a blackbox system ever again...lesson learned.

Its now the summer of 99 and the trading journey takes a new twist during the Tech bubble.....Part 2 next.

Why am I writing this....so you can learn from my mistakes as evidenced above are many!

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  #15 (permalink)
Brisbane, Australia
 
 
Posts: 134 since Nov 2013
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Another good day - 4/4 - had a bit of fun on the last trade..3rd trade was excellent - followed the rules...really didn't want to extend my stop loss level (increase risk)

Stats are looking good....the experiment's conclusions are becoming obvious now...the concept works.

As you can read from Part 1 - I've failed a lot in trading so please learn from my failures. After reading the other Trading Journals I can see most are following the same struggles that I followed earlier in my trading journey so I thought I could contribute something to the forum by sharing my past struggles. It has not been easy to get to this level of accuracy/discipline. A level I did not think was possible to be honest.



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  #16 (permalink)
Brisbane, Australia
 
 
Posts: 134 since Nov 2013
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Tonight's bedtime reading....as you will read below life has it's ups and downs...just like the markets.
For some strange reason I'm finding writing this strangely relaxing even though it's been a painful journey so far and only going to get harder as you will read below.

In the middle of 1999 I was laid off from the US bank I was with in HK as they couldn’t make any money after the Asian Currency Crisis (they made a ton during the event a year earlier) so I decided to use my time wisely and give it a crack at trading full-time (LOLOL)……why not how hard could it be? the US stock market was on fire and all you had to do was go LONG any stock (just about) and you made good money…..stupid me wanted to be a futures day trader so I signed up to an expensive chart service called Aspen Graphics linked to my Interactive Brokerage account and away I went….I used all the GREAT indicators that existed , Momentum , Moving Averages, RSI etc etc etc – funnily enough these are the same ones that exist today and are generally useless for most traders….some might have made coin from them but I guess they are in the minority, even in those days the easy money had been mined away by the baby quants at the time.

I bought the most expensive trading book (it had to be worth it right?) at the time on Amazon - “Street Smarts” authored by Conner & Raschke….and traded the methods listed inside….but I thought I was smart as I always tried to back-test(roughly back of the envelope method) every idea first BEFORE ever putting real money on the line….

I studied and traded all hours of the day and night and eventually my health took a hit as I gained 20 pounds in under 3 months trying to pay the bills from my day trading account…talk about pressure…having a partner who was a Cathay flight attendant bringing home excess tubs of Haagen Dazs ice cream every weekend was NOT good for my health.

The Hang Seng futures contract in those days was still pit traded locally (electronic trading started June 2000) so you had to call in your orders….tight tops under 50 ticks were basically ignored so it was really hard to trade unless you were in the pit or had a big trading account balance….after getting my arse handed to me I thought I’d do the night-shift(10pm-4am) and trade the ES mini which had just started gaining traction…needless to say I got hammered in that market as well BUT I did have one epiphany…..

I realized that without a back-tested proven method that had an “edge” you will get exposed and eventually blow your account – it’s not if but WHEN…it was inevitable…..shortly thereafter I had a screen moment when I just entered my first or second electronic ES order through IB - outright position , no stop or target – I froze realising I had no game-plan I had no proven strategy , no EDGE!! Hence from that day forward I promised myself to never trade without an edge……I closed the trade for a 8 tic loss then spoke to a few head-hunters the next day and within a week was interviewing in Tokyo for my next job and essentially my home for the next decade+…

I wish I could tell you more war stories of success and failure but I landed at a good investment bank that was expanding rapidly and my wages and bonus’s rose yearly which enabled me to invest the surplus into real estate that would eventually fund my lifestyle back in OZ when I eventually planned to return……

During those years in Tokyo I threw in the towel trying to invest on my own and with the Banks Compliance trading restrictions you essentially could only trade FX which I had “no edge” at the time and so I invested in a mates Hedge Fund as a proxy……it essentially turned into Dave’s(not his real name) Day trading account for Kospi futures & options (Korean exchange – it had bigger option volume than the CME in those days – pre GFC – Koreans are a bunch of gamblers) but he was good, having traded in the pits of Chicago previously….we eventually got cashed out with a 15% net return (after paying his Tokyo rent + office expenses) as Dave headed back to the west coast US of A to continue plunging his own money….to this day he was one of a handful of traders (of the dozens I’d work with in the Banks and known over the years) that could actually make money. I hesitantly look back on that hedge fund investment, although profitable and fun investing with mates as a huge wasted opportunity because if I had used that capital + mortgage to buy Real Estate in Oz I would have made a 1000% ROE instead…doh!! Harry Hindsight is an amazing trader…..LOL!!

Eventually I got promoted to a senior role and had my own office (I was a slow learner on how-to-kiss-ass) I then spent all my spare hours coding and testing looking for alpha, it was hard work with little to show for my efforts…..so by the mid 2000’s I was heavily investing into residential real estate with tax breaks that would help me retire in my forties. I certainly had NO chance of making a living of the derivative markets at this stage of my life…in fact I was in the hole, not a huge amount as a % of my net worth but enough to annoy me given the thousands of hours (and failed attempts) I’d invested so far searching for the elusive ALPHA….was it really this hard to find an algo or method that would enable me to sit back on the beach and count my trading profits? Damn you markets!!

Shortly there after the Great Financial Crisis had arrived and boy did everything change…

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  #17 (permalink)
Brisbane, Australia
 
 
Posts: 134 since Nov 2013
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September 15, 2008 is a special day for me as not only was it the Lehman Bankruptcy date it essentially signaled the beginning of the end of my Banking career…. where were you at this point in history? I was back Oz at the time spending time with my Father who has just been diagnosed with a fatal disease that would beat him over the next 6 months….Dad’s passing signalled the bottom the market and was the perfect time to load UP on equities but I was still reconciling with his passing and work at the Bank had changed for the worse…

We were now working 12 hour days for weeks on end dealing with the Lehmans legal claim that involved thousands of derivative trades between my Bank and Lehmans at the time….it was a pure shit-show that never seemed to end. When you are on conference calls with the SEC on behalf of the Bank you realise your job sucks as one screw-up and it’s a CTA (Career Terminating Event). Luckily, I never screwed up but it was time to start thinking about plan B. I was heavily long Real estate that was doing well but my personal trading was zero at this time but I was still coding, researching and testing and running real-time simulation’s using opening range breakouts that were giving amazing results with the increase in volatility in the markets due to GFC….I told myself if I had to bail-out of Banking I would run my ORBO model and live on those returns – fingers crossed.

The last straw that broke the camels back was when in March 2011 the Fukushima earthquake flooded the 2 reactors back-up generators causing Reactor 1 & 2 to meltdown spraying radioactive contamination into the atmosphere only 200kms away from where I was living and working……almost immediately in Tokyo there was a rush for fuel and water…..these sold out that afternoon, all public transport was shut down and everyone essentially had to walk home…luckily I had my motorbike to get home for the 10km journey, but it did take twice as long as the entire city was grid locked. A lot of work colleagues slept in the office as they had no practical way of getting home….another lifestyle shit-show had begun as within a couple of months we now had to buy imported water and imported fish/meat as the local supply was contaminated…even if the Japanese Government told you everything was ok the portable Russian Giger counter (developed after the Chernobyl incident) that I had purchased on Amazon was telling me otherwise….the birth of my Daughter was only 2 weeks prior and with a 18 month old Son it was time to activate plan B and think about getting out of Tokyo and moving back to Oz for the kids education and away from this contaminated environment.

Plan B was essentially activated when we purchased the family home whilst in Tokyo over the phone via auction….I tried to secure a contract before auction but the prick of an agent knew I was keen forcing me to buy at auction, I paid just under full price compared to my valuation report but my timing was good as that was the low in the market during the GFC and it’s risen about 30% since then. Within 5 months I would have resigned from the Bank and moved the family back to Oz…..Plan B was about to be executed.

For the next 12 months once back in Oz in 2012 I built and coded an automated ORBO system that ran on the Interactive Brokers API with Excel as the execution platform (I never studied coding so it was hard going) ….it would collect the first tic price of the day for each market then add on your breakout level, then automatically send your bracket orders out and wait for your execution…..you would either have a 1R loss or a 2R profit or something in between as it sold on the close on each trade….I just happened to run my last monthly live data simulation during a spike in the markets and the model generated impressive results giving me the confidence to switch it on LIVE….being a greedy idiot, I had it configured to run on the Asian index’s (Kospi,Hang Seng SPI, Taiwan) +JGB bonds, then for the US session ES, Gold, Oil, Nasdaq…..I thought I was diversified…the markets taught me otherwise as my account slowly bled away over time and I soon realised the results were not within the bounds of historical testing, the GFC volatility spike had passed as the markets entered a lower volatility environment – the model no longer worked - I had to turn it off or IB would do it for me if I ran out of margin…..as I said to myself – NOT AGAIN FFS!!

I licked my wounds to fight another day thinking I thought I had the markets solved….I was still a long way from success in that asset class, but I did have more success in the commercial property space locating a couple of funds to invest my spare capital into that paid between 6.5-10% annual returns with low volatility…..these investments would come to essentially fund my family expenses going forward to this day….so I had succeeded at real estate investing why couldn’t I succeed at trading derivatives? At least I didn’t have to feed the family from my trading profits otherwise they would have starved a long time ago.

Now it’s near the end of 2014 and I’m looking for ONE GOOD TRADE so I put on a large position in USO (oil etf) – the historical chart was bouncing off the $30 level since 2011…it’s got that support level - right? The fundamentals are good – yadda yadda etc…so plunging in at $30 entry price I rode it all he way down to $15 before I slapped myself in the face to realise I was wrong and flattened the position and another $25k down the toilet……trading was really starting to suck as I wondered if I should forget about trading and move on. NOT AGAIN FFS!!

Part 4 - I promise it will get better..

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  #18 (permalink)
Brisbane, Australia
 
 
Posts: 134 since Nov 2013
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a few interruptions today at home...market was moving fast otherwise...lots of opportunities.



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  #19 (permalink)
Brisbane, Australia
 
 
Posts: 134 since Nov 2013
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4/4 today....no distractions at home..1 break even
Better frame of mind...more aggressive.


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  #20 (permalink)
Legendary Market Wizard
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nice job @Godzilla !

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