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I might Win a Tablet but I might just get rich trying
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I might Win a Tablet but I might just get rich trying

  #1 (permalink)
Trading for Profit
Launceston, Tasmania, Australi
 
Futures Experience: Intermediate
Platform: IG, ETrade, Commsec
Favorite Futures: EUR/USD, Aussie, ASX200
 
Posts: 78 since Nov 2010
Thanks: 25 given, 63 received

I might Win a Tablet but I might just get rich trying

OK, the title of this journal is tongue in cheek in one way but when you think about it, might also be true.

Long Story Short - I have been trading for probably 6 years now but never very well. Since I was retrenched about 4 years ago I have been trying to make a living from it and trying to eke out my savings at the same time. I have been lucky in that I read a few very good books in the beginning so I learnt how to position size and set stops etc right from the outset which has preserved my capital to some extent but over all I am down quite a decent chunk of money

Probably the last year or so have been when I reached some understanding of how I might do this on a long term basis with my super fund but that won't keep me out of having to get a job and I don't want to do that if at all possible.

I started day trading 6 months or so ago with the view to earning a crust while I wait for the long term stuff to pan out (I estimate it will take at least 15 years) but keep chopping and changing and that, probably more than anything else, is restricting my profitability.

I figured if I start this journal I might win the $600 but, more importantly, it will force me to concentrate on one thing for a month which may be way more important than a nice shiny iPad in the long run

I may not make a trade every day but I will try to stick something interesting in here on the days I donít. Tomorrow Iíll outline my current style

Cheers

Nick

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Last edited by Nickemp; February 28th, 2011 at 04:09 AM.
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  #2 (permalink)
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  #3 (permalink)
Trading for Profit
Launceston, Tasmania, Australi
 
Futures Experience: Intermediate
Platform: IG, ETrade, Commsec
Favorite Futures: EUR/USD, Aussie, ASX200
 
Posts: 78 since Nov 2010
Thanks: 25 given, 63 received


Back again Ė or should I say Ė Captains Log Star date March 1 Ė Day 2

What is my style? Thatís a good question. Of late my attempts at day trading have had me trying many different things. I am at heart a trend follower and that suits me quite well for my long-term stuff but trading currencies short term seems to get me into a knot.

What I am trying to do here isÖ

  • Trade only EUR/USD
  • Trade 5 or 2 minute chart
  • Trade only on the side of the longer term trend as defined by looking at the hourly chart for a bigger picture view and using the 20 and 40 MAs on my trading chart
  • I donít really use indicators so itís just price action and the standard candles (pin bars, inside and outside bars etc)
  • Trade pullbacks into the MAs and breaks from channels or triangles. My goal is to get at least an average of 10 pips a day but preferably 20 to 40 pips a day. I am trading a very small account but I have calculated that if I can consistently get at least 10 pips a day I can do well in the long run (more on that later)
  • I am based in Tasmania, Australia (GMT + 10). NZ open to Europe open is my normal daytime and tends to be generally quiet and range bound so I usually try to get my trades either early morning to get the NY close or late evening to get Europe and London open.
  • I trade my currencies using CFDs and pay between 2 and 3 pips spread so Iím usually trying to capture at least 10 pips on a trade but 30 or 40 is much better if I can avoid being too chicken.

If I had to admit my faults thus far they would be

  • Running stops too tight so being right but not having a position left any more because the noise gets me
  • Being a bit snatchy so grabbing a small profit then watching a great profit get away from me.

I think both these stem from my fear of losing. I probably have other faults and I would appreciate having them pointed out to me but please be gentle.

Speaking of faults Ė here is the continuation of yesterdays price action. You can see that I had the right trade but my 15 pip stop got me chopped out while my more normal 20 pip stop might have just kept me in that one for a 30 or 40 pip profit.

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  #4 (permalink)
Elite Member
Zagreb, Croatia, Europe
 
Futures Experience: Beginner
Platform: Dukascopy
Broker/Data: Dukascopy SA
Favorite Futures: forex
 
Posts: 110 since Jan 2011
Thanks: 55 given, 71 received

wish you good luck! will keep reading you,

cheers,

ivan

The markets are non-linear, dynamic systems. Chaos analysis has determined that market prices are highly random with a trend component. The amount of the trend component varies from market to market and from time frame to time frame.

Manus J. Donahue III
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  #5 (permalink)
Trading for Profit
Launceston, Tasmania, Australi
 
Futures Experience: Intermediate
Platform: IG, ETrade, Commsec
Favorite Futures: EUR/USD, Aussie, ASX200
 
Posts: 78 since Nov 2010
Thanks: 25 given, 63 received

A little Ho Hum

Captains Log Star date March 2nd Ė Day 3

Well, yesterday was a bit frustrating. I missed my morning session having a very rare sleep in and then stared at the screen for 4 hrs watching nothing happen in a tight(ish) range until toward the end when it crossed the range twice then finally started trending. By then it was 8pm here and I was done and off to find a glass of wine and some dinner. By the end of March daylight saving will have ended in the soutern hemisphere and started in the northern so I get a better run at the London Session without keeping unsociable hours. Iím looking forward to that.

A trading buddy of mine (thanks Mark) saw my chart from the first entry and pointed out that using the last swing low would be better a keeping me in the trend. That puts my stop further away again so decreases my position size but probably increases my strike rate. It seems to me that higher win rate systems can be less profitable but the journey is easier. As he pointed out, FX does tend to back fill a bit so a trend can be intact even though there has been a bit of consolidation.


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  #6 (permalink)
Trading for Profit
Launceston, Tasmania, Australi
 
Futures Experience: Intermediate
Platform: IG, ETrade, Commsec
Favorite Futures: EUR/USD, Aussie, ASX200
 
Posts: 78 since Nov 2010
Thanks: 25 given, 63 received

Much Better

Captains Log Star date March 3rd

That was a better day although the nature of the move meant I nearly missed it. My initial impulse was that the EUR was falling and I should be looking for shorts but a squiz at the hourly chart and I saw that it was really rising and had fallen back to the 200EMA but had just made a green HA Candle. Although HA candles occasionally flip colours red, green, red etc quite often the change is the start of a new trend.

The MAs crossed bullish then I saw a new high and a bit of daylight above the MAs, Then a retracement right into the MAs and an entry. The trade went nicely from there and I didnít need that wide stop at all but I think Iíll stick to that type of stop from now on.

Un fortunately that change of stop setting means that even though this was a larger pip profit than Mondayís loser it was a smaller dollar profit. Thatís what inconsistency brings you so I will aim to be more consistent from now on.

It turned out that this one was going further than the 40 pips I used as my target but I rarely use a target of more that 40 pips. I havenít seen many runs do better than that. The nature of the trail stop on the platform I use is that it steps up the trail amount after a minimum number of pips. On the EUR the minimum is 10. If they let me use 5 pips minimum I probably wouldnít set a target.

There were 2 news Items in the timeframe of the trade. The high impact news was 8:30pm my time Ė As long as my trade is at least break even before the news (it was) I keep the trade, otherwise I kill it. I donít do new trades within Ĺ hour of a high-impact news and I donít bother trading at all on non farms payroll day

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I might Win a Tablet but I might just get rich trying-4-eur_usd-.png   I might Win a Tablet but I might just get rich trying-3-eur_usd-.png  
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  #7 (permalink)
Trading for Profit
Launceston, Tasmania, Australi
 
Futures Experience: Intermediate
Platform: IG, ETrade, Commsec
Favorite Futures: EUR/USD, Aussie, ASX200
 
Posts: 78 since Nov 2010
Thanks: 25 given, 63 received

Snooooze

Captains Log Star date March 4th

As so often happens a really good trend is followed by consolidation. I couldnít find an entry for my style of trading between 3pm and 8pm when I quit for the night. Not much changed after that so I donít feel like I missed anything.

Itís a bit tedious watching and waiting and often at times like this I have been tempted to try other systems and techniques to avoid boredom but now I read a book because I found that, too often, the diversions were paying away my profits on my main style.

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  #8 (permalink)
Trading for Profit
Launceston, Tasmania, Australi
 
Futures Experience: Intermediate
Platform: IG, ETrade, Commsec
Favorite Futures: EUR/USD, Aussie, ASX200
 
Posts: 78 since Nov 2010
Thanks: 25 given, 63 received

Captains Log Star date March 5th

I mentioned earlier in the week that I donít trade Non Farms Payroll days so I did no trades yesterday. That means last week I had 1 win, 1 loss and the week was basically a scratch. Thatís OK and doesnít worry me much although I do expect better.

I havenít been trading like this for long so my results arenít much different from last week




**Most of these numbers below are self-explanatory. I will give you my take of the ones that may not be (to some of you) at a future stage

This is a very small sample and probably the most worrying thing is the Avge win Vs Avge loss. This is partly my fear taking control and making me snatch at profits rather than letting the trade play out. That gives me a high win rate but Iím not actually getting much money like that. This is partly what I hope to address by laying my trades out in public like this.

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  #9 (permalink)
Trading for Profit
Launceston, Tasmania, Australi
 
Futures Experience: Intermediate
Platform: IG, ETrade, Commsec
Favorite Futures: EUR/USD, Aussie, ASX200
 
Posts: 78 since Nov 2010
Thanks: 25 given, 63 received

Losses in a row

Captains Log Star date March 6th

Naturally I donít trade Sundays to Iíll use this space today to foam at the mouth about trading matters I ponder.

Anyone who has traded more than a little bit has had this experience. You have been plodding along following some system or other and for quite a while everything has been going nicely. You win, you lose, you win again but generally each week the equity is growing and the sun is shining.

Suddenly each losing trade is followed by yet another one and they start building up on each other like a train with far too many carriages while you are sitting at the railway crossing wondering if there is any end in sight.while the storm clouds roll in and the hail starts falling.

At times like this itís important to know what constitutes normal. If you know the win rate of your trades you can quickly calculate what a normal string of losses might be. The formula for this is

Possible losses in row = Log(No of trades) / Log(1-win percent)

So if you do 20,000 trades and your win rate is 60 percent it is

Log(20,000) / log(1 Ė 60%) or 11 losses in a row.

What this means is that even though the outcomes of your system are normal you might start thinking something is wrong. Most people typically canít stand more that 5 losses in a row so they start seeking Ďimprovementsí and this is what lies at the heart of the beginners cycle.

Another use for this information is in systems evaluation. It is important that we find systems that match our personality, there is absolutely no point in adopting a system with a 30% win rate, no matter how profitable, if we canít wear more that 10 losses in a row. The flip side of this is that there is not much point adopting a system with a 90% win rate if it only offers three trades a year

** Spreadsheets do this easily using the built in functions Excel looks like this ď=LN(20000)/-LN(1-Q7)Ē

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  #10 (permalink)
Trading for Profit
Launceston, Tasmania, Australi
 
Futures Experience: Intermediate
Platform: IG, ETrade, Commsec
Favorite Futures: EUR/USD, Aussie, ASX200
 
Posts: 78 since Nov 2010
Thanks: 25 given, 63 received

To B(acktest) or not to B(acktest)


Captains Log Star date March 7th

There are many approaches to back testing and sim accounts from not bothering at all to running endless models and tests each with a new tweak or twist.

My personal approach is fairly laid back, especially with FX trades. While Iím happy to run back tested models for stocks (in fact I run my stock portfolio(s) using purchased signals from exactly that) when it comes to FX I just donít think that works. This is partly to do with the 24 hour nature of FX where there is no real end of day, its hard to get the opening price of the next bar etc etc but mostly because Iím using FX for day trading purposes.

Rather than back test I like to look back over a period of time and mentally run the trades. Apart from the fact that you should know whether a system makes sense in terms of profitability you really want a gauge of how it will affect you mentally while you are trading it. If Iím happy with that I will then trade it in a live account. I donít do simulators because, aside from the fact that they donít necessarily give a true simulation of the market, I canít get a feel for the trades unless I have real money on the line.

I will cover just how I do this next weekend.

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