The purpose of this journal is to try out a strategy that seems theoretically profitable. It is based on Macks scalping strategy but with changes made.
For those who are unaware of the strategy, I refer you to his youtube channel, website and various threads on this forum about it.
I learnt the technique a few months ago and practiced it and attempted a Topsteptrader combine using it and failed. This will be my attempt to simtrade it before trying to trade it in real time.
I believe most people fail at Macks technique because of the negative Expected value from the Traders equation. (check Al Brooks material) This leads to a situation such that we need twice the winning trades than the losing trades just to break even. So many people learn it, attempt it, even get to a point where they are scalping out profitably in >60% trades and still losing money. Thus they give up on it.
I was on the same track but decided to go through all the videos and talk to Mack before quitting and was motivated to give it another try. Still I am not at a level where I can pick >75% winning trades so I have made some changes to it hoping I will be successful. This will be me testing out that theory. I will lay out my reasoning but its all theoretical now so dont decide to follow it in what might be a textbook case of the blind leading the blind.
Now Mack deplores the traders equation and I understand his reasoning. His thinking being that scalping >90% is possible (him doing it being the only reason he needs). Also, if you think about it, if you are correct about the direction of the trade, enter after a signal bar with the price moving your way with room to get out and no significant support/resistance in the way, the probability that the trade will move 4 ticks in your direction than 8 ticks in the other direction is enormous.
While I agree with it, Im still relatively novice at picking out winning trades so my changes to it will be a 6 tick stop making sure I enter on a limit order after the signal bar and movement that would trigger the stop order such that I get a 2 tick Stop Loss order before the signal bar. This undercuts the 8 tick thing I mentioned before but if that stop is hit, Id be wrong in my read of the market anyways so what does it matter.
Thus my traders equation would reduce my risk to less than 60% compared to the ~66% under Pats prescribed strategy.
Ill also be implementing an anti-martingale betting strategy recognizing I have good days and bad days. Also, I have noted the slower market movement late in the day along with a better understanding of the price action for the day helps me a little. Thus I will be increasing my trade size after every winning trade and quit after the third losing trade limiting my loss for the day.
Besides, Ill take all valid entries with more than one reason to enter which would include:
support/resistance
2nd entries with trend
Failed 2nd entries with trend
Trendline entries (shorter term)
Lot size (increased after every 2 winning trades)
3 (1 runner)
5 (2 runners)
10 (4 runners)
I will be posting the traded chart for the day starting tomorrow and many marked charts randomly taken from previous trading days and trading them by marking my entries (arrow key to advance time not replaying in real time) to get a quick experience. For both charts I will be laying out I marked but not traded)
PS: this journal is more of a diary written in a public forum to keep me motivated, honest and fast forward my learning. But I will welcome comments from more experienced traders.
Especially anyone using a bet sizing strategy considering Im new to using that in my trading.
I really wanted to use Martingale betting strategy (double after every loss) and quit after the win. But the huge loss potential of the strategy (despite regular small profits) discouraged me. I guess Im not that confident in my skills to use it now. Also Id really like to know its viability in this case which is suspect.