CHECKstar's Lie Trading Journal

After two years since I first started studying technical analysis and trading and one year of solid demo trading, the time has come to open and fund a live account.

Before I go any further, I just wanted to explain why I decided to make the move from demo to live. Whilst I have had some success in trading a demo account, the real reason why I have decided to step up my trading is much more personal. I had been working in FX operations for a major bank for three years, waiting for a chance to move into the dealing room, after coming close on a number of occasions, I was sent on secondment to work on an FX sales desk. To keep it short, I loved it. When I returned to back office, I decided that I needed to get greater exposure to the rest of the bank. I applied and got a job that will expose me to the investment banking section of the bank - however just as I got the job a trainee trader position came up on the FX spot desk. I was frustrated as I felt that I would have been one of the strong contenders for the job.

It was at that point I decided that whether or not I get a job working on a trading desk, I will become a trader. So this is the next step in my journey to become a full time trader.

A bit about myself - I am 25, an honours university graduate (in Economics) with a post grad diploma in applied finance. Like I said before I have 3 years of FX operations experience, and some experience working in a real dealing room. I am under no illusions that this will be easy.

The money that I have used to finance my trading has come from a poorly performing investment - that said, my number one priority will be to retain my capital (like my sig says 'a good trade is when I break even').

My trading technique will initially focus on short term time frams - I like to trade after work from Australia - so I can normally catch the late morning of the London session straight though to NY's opening. My method is based on Phillip Nel's 5 min system - with my own twist. In addition I will make discretionary trades based on chart patterns and support/resistance/trendlines. (you can normally find me in the 5 min chat room also).

Each trade I make I will be posting here, along with a chart. Whilst I do keep the info in a trade blotter that tracks my progress, I feel that it would not only help me to stay honest but also would help my growth as a trader to post each trade on FF.

Anyhow, I look forward to sharing my trades with the good people of FF from here on end.

Ok, first trade went just how I expected - I lost!

Sold EUR @ 1.35955, had a TP of 15 points and a SL of 6 points. Got stopped out on an aggressive pullback.

Why did I enter the trade: I had a pull back into the zone. I was a bit 'iffy' about a possible divergence of MACD and RSI.
What I have learned: I need to wait for all of my indicators to line up, not just one. If I have conflicting indicators, wait for further confirmation.

http://img440.imageshack.us/img440/3811/charthb6.jpg

Quickly after trade #1 I jumped into trade #2...

Sold EUR 1.36014 on the 3rd of July... quickly realised that it was not going anywhere and bailed out at break even. Glad that I did, since price went up fairly fast afterwards!

I didnt get any pics on this one.

Ok, So I saw a great upward trendline on EUR with price respecting it 3 to 4 times. on the next move towards it price dropped below before popping back up. As it I pulled the trigger and bought at 1.36129 with a TP of about 10 to 15 points (I was realistic because of the 4th of July weekend) and a stop at the bottom of the last candle 1about 1.3607. Anyway, once in the position I started to doubt my reasons on entering and bailed out at break even.

As I watched price slowly move up, I instantly regretted it, then realised that I would much rather be out of good a trade wanting to get in then been in a bad trade wanting to get out!

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Ok, so I don't really consider myself a news trader. In fact I normally try to avoid trading around news time, this is with the exception of interest rate announcements. To me they are the easiest of the news announcments to understand, and I was lucky enough to have seen these events take place from a banks dealing room.

So here comes trade #4. BOE had just announced a rate rise - which the market and priced in a 75% chance of happening. Price quickly went south - I am assuming shorts trying to cover their position. I saw an opportunity - the spread had just gone down from 20 points to 9 and prices had turned around and was heading back up. I managed to get in long @ 2.01492 with a SL at the low of the spike.

As price thundered up I quickly moved my stop to b/e making the trade risk free (my favorite kind of trade! )

Price spiked at 2.02 then stalled. I was hoping to TP at 2.0210. As price slowed down, I brought my stop up. It was taken out at 2.0190. Made 40.8 points and overall 10% for the day - so I called it quits for the night!

What did I learn from this? Well if I find my self in the same position, wait for price confirmation of the spike - like in this case waiting for price to turn around and start heading back up. Also, don't get greedy and trail price with a stop. If you look at the chart, if I didn't get out when I did, I would have had almost half of the profits disappear.

All in all I am quite happy with this result and will enjoy the rest of the night kicking back and relaxing!

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40 pips for 10%??!

You might want to learn something more from this. What you are doing now is reinforcing bad trading behavior. You make conclusions & they worked this time, so you think they are right for the next times.

3 things I'd like to comment on:

1.) No trading around news releases, give it at least 30-60mins to settle down.
2.) 10% with a 41 pip win? And your spread was 9 at the time? So by opening your trade you were instantly @ -2.2% Account value? That doesnt sound right to me. Lower your leverage if you value your account.
3.) the 2.02 level worked as heavy resistance on 3rd & 4th july. If you want to TP at that level, you put your TP a few pips below that level instead of above it.

Thanks for the comments. In all serious I am taking them very seriously and am going to digest it over the weekend.

Today I had that feeling... the manager of the commodities desk once told me it was called 'analysis paralysis'. I have been told that it comes in may forms. Today it came to me in this form.

I was sitting there watching CHF follow a nice upward sloping trend line that had been respected many times, heading towards a resistance level of 1.22272.

Price did penetrate that level, reaching a high of 1.22253, quickly popping its head over the level of resistance before turning right around. In addition the indicators suggested that it was over bought at this level.

So here I was about to short, when that little voice came into my head and said "no, wait for more confirmation, wait for a penetration of the trend line". So I whimp out of the trade and wait for a penetration of the trend line. When it finally did price was at 1.21893. I was again going to hit the 'sell' button when that voice came back, second guessing me;

"Don't get in now, price will just turn back up"

So I sat, and watched price drop another 20 or so points.

I never did take the trade. Instead I thought it was a good opportunity to come here and write down my thoughts and feelings (I can't believe how girly that sounds!)

So what have I learned?

1. When price reaches a point of resistance, trading against the move could be looked upon as a 'low' risk trade - and as long as I stick to solid money management (ie not risking more then 2% on the trade), I should expect more wins then losses.
2. Additional confirmation to price action, ie indicators showing overbought/oversold and penetration of well established trend lines should reinforce my original opinion.
3. Don't second guess myself. If I have solid reasoning for entering a trade, I enter it and not listen to that little voice.

I guess everybody needs to overcome these inner demons that second guess our decisions, and I am going to make a conscience effort to take note of it.

At the end of the day however, like I said before, I would rather be out of a good trade wishing that I was in then in a bad trade wishing I was out - but it still sucks to miss a trade because you can't pull the trigger!

http://img444.imageshack.us/img444/2182/chartqe3.jpg

OK, so I have always had this risk management spreadsheet that I have been using while demo'ing, but as it got long in the tooth I made adjustments and it just wasn't doing what I needed it to day (ie work in JPY crosses, etc), so I went back to the drawing board.

Basically it is a position calculator and trade blotter in one.

The first tab is where I put in my variables such as CCY, Entry price, stop loss and if I want my take profit. It then picks up my account balance from the second tab (the trade blotter) and tells me the biggest position I can take out while only risking the maximum % I am willing to (I have it set to 2%).

This works quite well with Oanda, as you can have any trade size you want.

The second tab is where I enter in the trade details for my blotter - basically fill in the date, method, ccy. then for each entry fill in the rate and amount (+ for long and - for short positions). It allows for up to 4 entries on any trade (for a while I was experimenting with a 1 minute pyramiding technique). When you close out the trade enter in the closing price in the close rate tab and the rest is calculated for you.

I have posted it here in the hope that somebody might find it useful. It wont be for everybody, as it makes a number of assumptions - such as your account balance is in USD, and you only trade dollar crosses. But it maybe useful for a few people out there.

Let me know how you go anyways...



(I only trade dollar crosses, in particular EUR, GBP, CHF, AUD and JPY if you want to add any more ccy's to it, you need to add it to the CCY lookup table and if it is quoted directly or indirectly)

Entered into the following trade; bought gbpusd @ 2.01481 with a stop six points away. In hindsight, I probably should have put the stop seven or eight points away from entry (just below the most recent lows). Entered because price came into 'the zone'. However what I was not looking at was the fact that the 50 ema had flattened out somewhat. I was anticipating the MACD histogram ticking up to help time an upwards move, but really I need to not anticipate - but rather react to confirmation. That said, the loss on this trade was quite small due to my revised risk management, so that is defiantly a big plus.

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Ok, so at the moment I am reading a book called 'Trading Rules' by WIlliam F Eng. It is one of those books that you can just tell this guy has been there and done that. His words are like those of the old school traders that I have been fortunate to have spoken to.

Whilst I am only halfway through his book, I feel that I have already taken a lot away from it. He describes his experience as a noob trader trading his own account in the bond pit of the CBOT (I so wish there ware still open out cry exchanges in Australia!). Anyway, he seems to be a strong believer in squeezing every tick out of a trade. That is something that I think I need to work on.

The 5 minute strategy that I am using, suggests setting your stop loss at 6 points, and TP at 10 to 15 points. I have already scrapped the idea of a fixed stop loss - I would rather have it just below the last lows and adjust my position accordingly. I am now tinkering with the idea of scrapping the fixed TP, but rather once in a trade follow price action more closely and keep raising the stop. There is something I feel somewhat more comforting in my mind of having price reach a high, pull back and touch my trailing stop, rather then reach a high, take out my take profit, then continue higher. This is exactly what happened today.

Today of all the pairs that I watch, I saw the best setup on EURUSD. My first signal was to buy at 1.36513 with a stop just below the last lows at 1.3642. Price was in the midst of a strong uptrend, had just respected a trend line, and was in 'the zone'. So I pulled the trigger. And... nothing happened. One of the rules that has been adopted in the form is that if nothing happens after 5 to 6 bars liquidate your position. This makes sense to me since this trading method is dependent on quick entries into fast moving trends. So I closed out at 1.36452. A small loss, but I was confortable taking it.

Then approx 30 mins later a second signal came. RSI touched the 'oversold' line and had turned up, MACD had just crossed, MACD Histogram had been ticking up, the 10 and 21 EMA started to diverge and price had just shown a doji. All together this was more then enough for me to hit the 'buy' button and I got in at 1.36505.

This time price did move fast and I was able to move my stop to break even (this I try to do once price has closed 6 points above my entry). At this point, with my trade at breakeven, I added to my position, managing to get in at 1.36593 (placing my second stop at the same point as my first). I could see price moving fast and I was just about to move my TP up (set for 1.3665) when price punched through the barrier, closing out my positions for a nice profit.

That said, this is only my second profitable trade so far. When I saw price continue onto make a high of 1.36778 - a little over 12 points more then what I closed out, it made me wonder what reason I had to get out of my position. Why close out at 15 points if the move has more steam left in it? And more importantly, if I hadn't closed it out when I did, where would I have closed it out.

I think I would have closed out my position at around 1.3670. The reason? Well I think it makes sense to move the stop to just below the low of the last bar. This would have kept me int he trade another two candles.

What have I learned?

1. Patience is the key.
2. Let my winning trades ride out longer.
3. Closely monitor and manage my open positions.

http://img407.imageshack.us/img407/4260/chartjg5.jpg

Ok... so I think I have a real problem with trying to anticipate market moves. This is a classic case. There I am looking at USDJPY, seeing a nice ascending triangle form.

Price pops its head above the top resitance line before coming back with reasonably long wicks. This should have been my first warning I - the long wicks. Price then comes back into the triangle before popping its head over the resistance line again. This time I see a nice long green candle, and jump aboard the 'buy train' - bought at 122.196 - almost the exact height that the last peak above the resistance line made! I kept telling myself "wait for confirmation - let it close above the last high", but what did I do? Tried to anticipate the market action!

This is something that I have identified before, and something that I really need to watch. I am more scared of not getting in before rather then after. I know this is the wrong attitude. What I need to do is try to trade more like figure b, and not like figure a (below).

Anyhow, I had my stop at 122.077, but didn't have as soon as I realised what a stupid mistake I made I closed out the position at 122.12.

http://img181.imageshack.us/img181/7811/figureyi0.jpg

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Hi!

Good luck with this. I know you will soon see the futility of trading ticks on a 5 min chart, but this looks like a great journal.

Good luck!
-A

Ha, so it's been a few days since I have posted here. Since my last post I have had a couple of small losers (which were acceptable as it was within my risk tolerance) and a few break even trades. I am still undecided whether I should be posting every trade I make here, or just the ones that I can really identify that I can take something away from it. I suppose that I should be taking something from every trade I make - however I have noticed that I have been making the same stupid mistakes over and over.

Anyway, to keep you guys up to day, I am currently down by a little under 4% of my starting equity. That is a result of 10 losing trades, 2 wins and 2 break even trades. While my hit rate most definently needs some work, I am happy that I have been able to keep my losses to a small percentage of my account, and I hope that that is the step towards becoming a professional trader.

What this has told me is that while I am disciplined enough to cut my losses, I need to make sure that when I do having a winning trade I need to make it count. Which is an excellent segway onto todays lesson.

Lesson of the day, don't get distracted when placing your orders! This might sound like I am stating the obvious or having a laugh, but I made a major mistake today. Here I was, taking a conservative approach to my entries. I wanted to get into a short position in EURUSD and was waiting for all the stars to align (that been moving averages been the correct angle, RSI coming out of an 'overbought' state and MACD histogram turning down [indicating sellers are starting to take back control of the market]). So there I sat for about 45 mins patently watching my charts when finally the signal comes and I sell @ 1.37861 (actually I could have timed it better to sell a few ticks higher - but that is neither here nor there) with a stop just above the last high of 1.37922. All is going well, price moves more or less sideways for about 30 or so mins (with a slight downwards bias). I am quite comfortable with my position as nothing has changed to indicate that the market conditions have changed.

So while patiently watching my position I give my girl friend a phone call. So here I am chatting away, when I decided that I should tighten my stop. OANDA allows you to alter your orders either two ways - directly moving it around on the chart or keying in the numbers on the trade ticket with the latter been much more accurate. So I decide to bring the stop in by a couple of points. However there is where things went wrong, because I was distracted on the phone I made the stupid mistake of changing my stop to the current market price, rather then my desired price! This stopped me out at a loss of 1.7 points!

What hurt more was the fact that the market then moved about twenty points down!

So todays lesson is that trade management is just as an important part of trading, and deserves 100% of my attention. I should not be treating it in the fashion that I did today and have nobody to blame but myself.

This could have been quite costly, so I am thankful that it only cost my 1.7 points!

Anyway I am here watch

Ok, so it has been a while since I have posted here, and that is mainly due to the fact that I have been sitting on the sidelines waiting for the 'right' trade to come my way.

Yesterday I saw a lovely setup occur on cable that I was going to short - whilst I was about to pull the trigger, my platform decided to have a minor heart attack and freeze. By the time that I got everything back up and running price had already moved 15 or so points from where I wanted to enter so I stayed on the sidelines. I think when I first started I would have been quite upset about 'missing' a 'winning' trade (although just because it initially moved in my favor, I recognise that I could still have made a hash out of it!), but now I am starting to realise that there will always be another one.

Part of this attitude has come from the book that I am reading at the moment - The Disciplined Trader: Developing Winning Attitudes by Mark Douglas. I actually tried to read this book about a year or so ago, but couldn't relate to much of what was said. At the time I put this down to me only demo trading and not having real money on the line, so I put it aside until I started trading a live account. So now I am reading it again, albeit through new eyes. Let me just say that although I am only halfway through it - I am relating to much of what the author is saying. I am sure that I will have much to say about this book as I make my way through it.

Anyway this brings me to one of the realisations that I made the other day - each trade I need a minimum expectation for each trade I make. This has lead me to make some modifications to my risk management spreadsheet that I posted earlier. It also lead to me making the following mistake on this trade.

I got excellent signals to go short EURUSD @ 1.37731 - of particular interest was the price action that I saw at this point - three candles with the same highs. I did pull the trigger and price pretty much moved straight down. However when I put in the sell order I also included a TP - being my minimum expectation (this was 1.37496). Price quickly approached this point and before I had the chance to move my stop loss to this point and give my tp some room, my order was executed. What I think should do next time is mark on the chart my minimum expectation and then move my stop to that point once price hits it. That said I did clean up 23.5 points, which is not too bad.

On the point of price action, I am making a very conscious effort to pay very close attention to price action now (I made a post about on the topic here). Really it should be my number one indicator. I am learning... albeit slowly

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I was quite eager heading home tonight from work to jump online and watch that beautiful ballet of candlesticks, however when I logged on I saw quite choppy and jagged markets. I followed GBPUSD with a sharp drop in price from 2.0490 to a tad under 2.0430, however as I write this price has retraced back up to 2.0466... similar story with EURUSD (except that the angle of the 50 EMA is in the 'no trade zone' and price has retraced more the 100% of the previous dip).

I am taking my spare time and trying to use it productively by 'reading' the candles as they appear to practice identifying high probability price action.

As I write this the US Core Durable Goods Orders new just came out - I really need to learn a bit more about some of the different news announcements and their possible implications. In the meantime, I am going to call it a night - because as far as I am concerned - anything can happen tonight.

Funny thing is when I first started I would have been greatly agitated not been able to enter a trade, and I probably would have tried to squeeze a trade out of the night (and judging by my analysis - probably would have resulted in a loss). That said, I am concerned that this attitude of sitting on the sidelines at times maybe a partially driven by fear of losing - something that (as I am learning) can be a fatal mistake for a trader. However, at the moment I am feeling justified in my decision to sit this one out - but it is something that I am going to monitor closely.

Anyhow I am off to bed (I have the feeling that I have a long day ahead at work tomorrow and I suspect that I will probably have to stay back and might miss some golden opportunities). Good night all.

-CHECKstar

Ok, so I have finished The Disciplined Trader: Developing Winning Attitudes by Mark Douglas and boy has it opened up my eyes. A lot of the things that was said, i may sound strange, but I have always thought that way to some certain extent - my mind could just never articulate it to my brain - if that makes any sense at all (most likely not!).

One point that the author makes is that beginners (ie noobs like me) should really focus on specialising in only one type of market behavior at first. This can be done by choosing a very simple system and sticking to the rules. This not only an exercise in building an understanding of the markets and practice in earing consistent profits, but is also a discipline exercise (ie can you stick to a system - through the good times and the bad).

The idea of one market behavior really struck a chord with myself. As already stated, I am trying to trade using the methodology outlined by Phillip Nel here. However I have been naughty and have been trying to put my own twist on it. I have also made a few trades outside of the system. After reading the point of learning only one market behavour I went back over my trade blotter to see how I have done (I keep a fairly detailed record of my trades, including what method I used to enter the trade), and guess what? The best results where when I stuck to the system!

So guess what I am going to do from now on? That's right, try to stick to the one market behavior and the one system (for now).

To be honest, I am having moments now when I am trading and I am almost feeling like I am in 'the Zone' - this doesn't happen often, but it has happened a couple of times. How do I describe 'the Zone'? Well it is that same feeling that I used to get when I played video games that I knew inside and out (before you roll your eyes and think to yourself "who is this child?" please read on!). Back in the day I used to play a lot of video games. When you get to that stage when you know the game inside-out, back-to-front, you can pick up the controller, play and not even be consciouses of your actions.

Likewise, you stick to your strategy. For example, if you come to an end of level boss, you know that each boss has their own individual weakness. For example, it could be the chest. You can only attack the boss when the chest is exposed. While it is not exposed, you are normally just defending against attacks, waiting for the chest to be exposed. The second that it does you act and attack. Normally this goes on for a fair bit, but my point is there is no point to attacking the boss unless his weakness is exposed and the odds are in your favor. Trading with a system, to me anyhow, is starting to become like a fight with an end of level boss. I am now sitting there waiting for the odds to come into my favor, and when it does that is when I attack. When I think of it in terms like that I find it much easier to follow the system.

Anyhow that is my two cents, let me know if you agree or disagree.

Anyways, as for my trades. I made two today. The markets were quite quiet waiting for the US employment figures, but once they were released the majors started to trend.

My first trade was to short USDCHF @ 1.20165. I closed out at 1.20025 for 14 points. At the time I was quite happen (as I made the more then the minimum amount I expect from each trade) until I saw it reach 1.19352!! Anyway a lesson learned, don't trail too closely.

I think I did learn from that one, because the second trade for the night was to go long EURUSD @ 1.37430 and close out at 1.37725 for a nice 29.5 points - much better.

Both times price found support on the 10 EMA so price action was a major factor in entering the positions.

Sorry about my lack of charts tonight, but it is 1am here, and I need to get to bed.

Also guys, let me just say that I am quite chuffed that this thread has cracked the 1,000 views. I would have never have thought that this would get so many views, and I am very thankful to you guys out there who is following my journey as I learn to become a trader. Please don't be shy guys to comment and put in your two cents.

Cheers

CHECKstar

Ok, so I am never, ever going to trade any JPY crosses! I have been burned by that evil currency so many times now it is not funny. End of story.

In actual fact I have been trading quite crap over the past week. Quite a bad week for myself. That said I have been sticking to my rules. If it wasnt for my MM rules, I would have totally burned out my account. What has really been getting to me is the number of trades that i have entered, price moves in my favor, I move my stop to break even, and then I get stopped out at break even, only to see price to immediately revert to the move that would have made me points. It has been the story all week actually.

When I say I have been sticking to my rules, I do tell a lie, one rule that I have not been following so strictly is my rule to move my stop once my position has made me a x%. This I think has been my undoing this week. My greed has got the better of me. I hope I have learned my lesson.

So I look back over my account I find my self pretty much where I started. I have been up and I have been down. It is quite disappointing after almost 2 months to see my account where I started, but then again, it is much better then been in the red. In fact I remember reading somewhere on this forum the steps to becoming a trader - and the halfway mark is been able to break even, not yet skilled enough to make money, but able to control my money management and maintain my account. Anyways I will see where I am at the 6 month mark!

So while looking back over my account, I found the following points:

1. In 50 trades I have had 13 wins, 12 break even trades and 25 losses.
2. My wins are evenly distributed throughout the week, however my losses are highest on Mondays, Tuesdays and Thursdays.
3. My trading performance got much better when I aimed for a fixed percent gain per trade. My performance started to slide when I got greedy and tried to exceed this level.

What can I say from these results, well I think for sure I am over trading. Its easy to think of the trades that break even as 'not counting' but really they do, because when I first enter them, I am taking a position with risk associated with it - so I need to make every trade count. It reminds me of something I heard about how marksmanship has declined since the introduction of automatic weapons - back in the day before automatic weapons, people needed to make each shot count, and thus they had to make each shot count (you only have a few rounds in each clip). I need to clearly work on my marksmanship and not depend on trades breaking even.

Anyways, I am going to work on this idea and hopefully I can close this month up above break even.

Hi Check

Don't worry about the yen and its crosses right now. The EURJPY is one of my favourite pairs. Since a few days ago I think the markets are ??? I don't know what to call it. I usually use a 15pips SL but that is not good enough in such a volatile market. Can you image - 400pips down and then 200pips up in almost one day.

Just today I've tried to enter the $Y based on a 15min system and price was moving so fast (no news release) I just couldn't enter - "invalid price" was the message from the broker. I had to enter with the limit order. I exit just 4 minutes before the Michigan news release with 28pips profit. In that 4 minutes before the news release it moved another 30pips - just unbelievable.

Stay focus and stay with you rules - my 2 cent.