2018 Trading Account Experiment

Hi,
The purpose of this thread is to launch a 2018 trading account experiment using a fully disclosed trading system with a full audit trail and accessible to anyone interested.

I have of late been posting on FF advice and comments from experience without providing any hard evidence of trading ability to back the words up. I have been trading my own account full-time for a living for the past almost nine years now, with a short-term, intraday methodology on 5 minute charts. I have not posted this to Trade Explorer as my dealing platform does not support it, and it is impractical for me to post trades on the forum in advance given the nature of my trading. I have also for some time had the belief that my intraday principles could reasonably successfully translate to longer timeframes. This experiment attempts to resolve both these questions.

I shall run a real trading account on this thread using daily charts and posting intended entries and exits in advance, to be actioned via standing market orders. This will create a verifiable audit trail and I will provide a brief summary of the current account position (up to the last closed trade) at the end of each post. To keep me motivated I shall commit a £10,000 account to the venture, though position size will be such that maximum risk per trade (yes, all trades will incorporate an inviolate hard stop loss order in the market) is just 1% of the account. I am not looking to make any meaningful money on this experiment, I shall be continuing my mainstream intraday activities in parallel. No additions or withdrawals will be made and the position size will remain at a 1% risk of the account balance at the time of the trade. Hopefully, this will grow with time!

As with my intraday trading, I will be trading just three markets: EUR/USD, AUD/USD, and USD/JPY but using only daily charts here. I am UK based and I intend ordinarily to post only in the evenings UK time, once I have finished my daytrading activities. I shall try to explain clearly the rationale for each trade as well as post-trade analysis so as to become a useful trading journal. The thread doesn't as a necessity require participation from anyone else but I will be happy to take any comment and questions from anyone who might be interested.

PLEASE NOTE: This is an experiment and I cannot give you any confidence as to the likely outcome. I will trade carefully and diligently in accordance with my established methods but I have never before traded forex on anything beyond intraday on a 5 minute chart. It will be a good learning experience, hopefully a successful proof of principle and an enjoyable ride but I really cannot promise you anything at all. It is almost certain that I shall get off to a shaky start as I learn the ropes of the daily chart timeframe but there is no escaping this learning curve.

My next post will start with a brief description of my intended trading strategy.
I shall be looking to start live on 2 January 2018.


Account summary: Balance £10,000 (+0.0%) No. Trades YTD 0

Hi,
Before live trading commences in January, it might be useful to outline in general terms the trading strategy that will be employed. Several salient points can be made:

1. Only three markets to be traded: EUR/USD, AUD/USD and USD/JPY. They are all liquid, active and low round trip cost markets. Markets that do not meet these criteria are simply providing additional obstacles which need not be faced. Ideally, the more markets the better as it increases opportunity but I will limit to these three at least initially as they are my mainstream intraday trading markets that I am most familiar with.

2. Daily timescale candlestick charts will be the sole means of analysis. I only get confused by multiple timeframes and daily charts are convenient for the kind of low in-trade management type trading that I envisage for this experiment. You could just as well use bar charts but I am most familiar with candles.

3. The charts will be clean with nothing on them except the candles. I am not a great believer in indicators, they are almost all derivatives of underlying price and I have yet to find one that operates better than random over a large sample. Thus, I focus on pure price action only.

4. I also only focus on technical price action without regard to fundamentals. I envisage most trades will only last a few days at most and I do not believe fundamentals are generally very reliable indicators in this timeframe. Price will tell us what we need to know efficiently enough.

5. The core concept underlying trade selection is only to take trades that are with the current dominant trend, and after a counter-trend retracement is believed to have failed. If the market is trapped in a trendless range then perceived failed breaks of either end of the range are acceptable entries. What constitutes a trend, a range, a failed retracement and a failed range break are simple eye-balling subjective price action judgements.

6. The entire position for all trades will be entered and closed in one go. I can find no net advantage overall in partial openings and closings so I go with the cleaner and simpler approach.

7. Risk control is primarily managed in two interdependent ways: each and every trade or order will have alongside it an inviolate hard stop loss order; and the position size will be calculated such that the maximum risk at the hard stop is 1% of the account balance at the time of the order being placed. There are no exceptions, risk control is paramount.

8. Initial stops will be set at a price point where the price structure suggests the original rationale for the trade likely no longer holds. The stop loss is hard and mandatory: hit the stop, cut the trade, no questions asked. Should a trade accumulate an open profit the stop is likely to be moved closer to current price, but never further away.

9. Profit taking exits are softer. Profits will generally look to be taken on any favourable expansion candle or price spike; or whenever a profitable trade appears to have run out of steam, all again decided subjectively from the price action alone.

Phew! Think that’s quite enough for now.
Live trading commences 2 January.

Account summary: Balance £10,000 (+0.0%) No. Trades YTD 0

Thanks Marc for starting such interesting experiment. Your trading approach is real deal among full of crap threads here. You mentioned in several posts that your Risk/Reward is almost 1:1 with winning ratio 55%. Do you plan to stick to 1:1 R/R Ratio or with softer exits it can float ?

Anyway I wish you great start and profitable finish.

Subscribed

Hi Ihor,

Welcome to this thread though I suspect you may be ploughing a lonely furrow!

I can assure you that I do actually trade for a living. I can't claim anything I do is the real deal but at least what I have set out within post#2 is pretty much a complete and robust trading system that is grounded on successful market-tested principles. I know it doesn't appeal to many because it doesn't give a rigid black box mechanical EA you can simply plug in then count the cash rolling in, and it requires discipline, unwavering risk control and losers to be unceremoniously cut but, sadly, that is the nature of trading. I'd like it easier, too.

As for the performance statistics, funnily enough my results for 2017 have been a 56% win rate at almost exactly 1:1 reward:risk, so I have consistency if little else! This is what I achieve on my intraday trading and I honestly don't know if it will be the same here. The longer timeframe will permit winners to run on further but will also expose me to volatile market moves from scheduled major economic announcements, overnight spikes and the like, something I never face intraday as I am always flat at these times. Thus, the stops here will have to be relatively wider than I trade intraday. I won't be taking trades unless I feel there is at least 1:1 realistically available but the exit process will be a little softer, at least at the outset.

Finally, don't expect a great start, I am going to be finding my feet and comfort level for a while so, in deference to your strap line, remember: Non omne quod nitet aurum est!

Have a great Xmas, starting live 2 January

Subscribed, btw why you dont create TE too ?? . Good luck in 2018!

Hi Cryptofunk,

A warm welcome to you also; that's now 2 more than I expected!

To answer your question, as mentioned in post #1 my trading platform doesn't support TE. I did actually look at transferring to mt4 and link through that but, to be honest, it was all too confusing for me (I come from the pre-internet age, if anyone can remember that!) and I really don't want to mess around with multiple platforms.

Thus, I will simply post here as I go along but all entries and exits will be posted in advance to be actioned with standing market orders so everything will be verifiable.

Happy Xmas to you, starting live 2 January

Marc, check if FXBlue can be used for your experiment, eventually?

I think more people like you here, will make it really damn good place!

The only problem of being opened and honest at places like FF, is those reverse back engineering dildo loving little bastards...

Hi MoneyZilla,

Thank you for the suggestion, I've not heard of FXBlue but I shall take a look.

It is in fact very fitting you checked in here as it is your trading contest challenge thread (very enjoyable!), along with the spare time I have around Xmas after quitting serious trading for the year, that pushed me over the edge to actually start this experiment and, hopefully, demonstrate to a modest degree that it's not fully 100% windbag talk, there is some genuinely profitable trading lurking in a dark corner somewhere.

I must also thank you for your advice:
The only problem of being opened and honest at places like FF, is those reverse back engineering dildo loving little bastards..

Very good and, sadly, very true! Fortunately, I was an institutional equity fund manager for many years before turning self-employed forex trader and so I am very accustomed to just about everybody beating the crap out of me, fairly and otherwise, for my performance numbers. You certainly can't please all of the people all of the time!

Happy Xmas and best wishes with your own venture.

Hi,
This will be my final introductory post before trading commences in January.

I want to stress at the outset the notion that trading is fundamentally an exercise in probability. A trading edge just means you have something that tilts the probabilities in your favour. If you have an sound edge, bet small and consistently and don’t do anything stupid, i.e. let a loss run away from you, you will win in the long run.

You can’t worry unduly about the outcome of a single trade; it’s practically random despite all our high quality analysis. You have to keep ploughing on, trade after trade with a real ‘rinse & repeat’ mentality and let the probability take care of itself. You can also now appreciate why you have to have confidence that your method does have a positive edge. Here, the edge is essentially that we go with the flow, easier to swim with the current than against it. And that is pretty much all there is to it; just about all the rest is risk control.

However, the probabilistic nature of trading means you will have to endure losing streaks. My personal record to date is 11 successive losers and (separately) 15 losers out of 16 trades. Being that bad takes real talent. You can see why I risk 1% of the account per trade. If I haven’t scared you off by now you’re possibly either a bit slow or simply not listening. Either way, it’s your fault if you return in January so please no complaining to me when I post loser #10 on a streak. By then I’ll probably be rooting for a new personal best in any case.

With that happy thought, I wish you all a merry and peaceful Christmas!


Account summary: Balance £10,000 (+0.0%) No. Trades YTD 0

Hi,
Happy New Year to all!

I hope you have all had an excellent holiday break. Apart from my liver now being in need of urgent medical attention I am good to begin trading in this 2018 Trading Account Experiment. The new trading account has been set up and is live.

Post #1 in this thread gives you the background to this folly, post #2 holds a summary of the trading strategy to be employed here, and post #9 includes a modest but important insight into the true nature of trading.

As all my trading for the past eight years has been intraday on 5 minute charts and this experiment is on daily charts, inevitably I will be feeling my way somewhat with the early trades here. So perhaps you shouldn’t reach for your dealing button straight away though I will be taking all trades live on this account. Let my losses be your free learning, you can always in due course subscribe in gratitude to my inevitable forthcoming Trading Fund Replenishment crowd funding exercise.

Pleasantries completed, on to business. The next three posts will set out my initial analysis and current trading possibilities in turn for each of the three markets being followed.

Account summary: Balance £10,000 (+0.0%) No. Trades YTD 0

Hi,
We start with the price action analysis for the daily chart of AUD/USD:



I see a downtrend that was halted by a consolidation, followed by a false break to the downside which reversed, trapped some shorts, and led to the current uptrend.
Resistance around 7900 is likely to be tested if the uptrend is good. We are potential buyers with the flow if another consolidation forms, is tested, and any reversal is seen to fail, with an initial target of 7900 and a stop below the low of the consolidation.

NB The pattern of a consolidation - false break - sharp reversal, in my experience is a strong one: it is reasonably obvious, it traps some traders the wrong way, gives a well defined logical stop and often leads to a strong momentum breakout through the other side of the consolidation. You will find us trading this pattern a lot as this thread progresses.

Alternatively, our current uptrend could itself reverse as a sucker rally to the bigger prior downtrend. We’d then expect a test of the 7500 low and we would look to join the ride down at an appropriate point.

Either way, please note we are waiting on the market to give us a lead and a decent entry point, we are not looking to force our prediction on the market. It, not us, is the 400 lbs gorilla here and it will do whatever it wants.

So, a waiting game for now. Next post is EUR/USD analysis

Account summary: Balance £10,000 (+0.0%) No. Trades YTD 0

Hii marc, goodluck for next days.
I hope you can take a dreams

Hi,
We now turn to the price action analysis for the daily chart of EUR/USD:



Here I see a downtrend that was halted by a double bottom which led to a new uptrend, punctuated by a retracement that held at support around 11700. Market has now broken up in a new upleg and running towards resistance at old highs around 12100.

It is perhaps a little late to try to jump on board the current upleg now, a safer play is to wait and see if we get a false break of 12100 that traps some longs, and we would look to short with the flow on the way back down.

So, again, wait and see for now.

Next post looks at USD/JPY


Account summary: Balance £10,000 (+0.0%) No. Trades YTD 0

Hi,
Our third and final analysis is the price action analysis for the daily chart of USD/JPY:



This market looks like it has been meandering aimlessly for some while inside a wide range between roughly 11100 and 11500. There is some possible intra-range support at 11200 for the current movement down. A fake break and sharp reversal back up from this level might tempt me into a long with the new momentum.

Alternatively, a conclusive drop below this support would get me expecting a test of the 11080 range low and we then would be looking for a short as the sellers would then be in control, though there isn’t a lot of space for a window of opportunity for us.

Again, wait and see what happens.

You may well have already noticed in these first three charts that the analysis leads to a lot of waiting and seeing. We examine the chart, envisage possible/likely scenarios from here, and then look to see if anything might offer the kind of trade we are looking for.

We do not want to shoot blindly from the hip, nor do we want to enter trades based on nothing but our predictions. We wait to see if the market will offer us a good trade. If it does, we enter without hesitation and gracefully accept the consequences; if not, we sit on the sidelines and wait some more.

We only want good trades, i.e. only those which are fully in accordance with our method. Good trades won’t win anywhere close to every time but I do have to feel that they are good to be taken. My essential mental check before I take a position is: Am I happy to lose on this trade?

Anyway, back tomorrow after my intraday trading for an update.


Account summary: Balance £10,000 (+0.0%) No. Trades YTD 0

If it can help

Hi ichwan29,
A warm welcome to this thread. I am rather hoping that some sound trading and the law of large numbers over time will make needing luck redundant, but it never hurts to have some on your side.

I look upon trading something like playing backgammon. It is a game of both luck and skill but if you play steadily and correctly for long enough, the luck evens out and the skill makes the difference. Whether or not this thread ends up displaying any net positive skill is, of course, the question!

Hi parisboy,
A warm welcome to you also.

Thank your for your chart, I can only surmise you like trading with envelopes. As explained briefly in post#2 above, I am not much of a believer in any of the standard indicators. They may well have value to many but, sadly, not for me. I am a simple soul and easily confused, so I much prefer just using the core price action on the chart which has served me well enough over several years, at least on the intraday scale.

That said, I've known many profitable traders whose screens look like a jumbled mess of multi-coloured spaghetti to me but they made money with it. To each his or her own, I guess!

HI Marcmarc it is just because this way you can

- classify rationally the different trends you see on the chart
- define a good approximation of the maximum possible Price Action Up or Down
- then evaluate the quality of your entry and your Risk Reward

Hi,
Back for the daily review. For the situations of the three markets set out in posts #11, #13 and #14 updates are:

AUD/USD : Waiting to see if a consolidation forms around 7800. If it does and is tested successfully, i.e. market resists any real retracement and starts up again we will look to go long probably in the 7810-20 area.

EUR/USD : Has backed away from highs at 12100. Looking for either a test break of 12100 or evidence that the current back-off accelerates down to become a true trend change which we could then look to join.

JPY/USD : Currently testing possible intra-range support at 11200. What happens here will determine whether we want to look for a long or short, could be either right now.

I confess I am already(!) finding this daily chart timescale a bit slow compared to the intraday trading I am used to but patience is a virtue and we will get a trade on sooner or later.

Back for a further update tomorrow

Account summary: Balance £10,000 (+0.0%) No. Trades YTD 0

Hey Marc! I've read a couple of your posts across the forum and appreciate your input and thoughts. I'll be keeping an eye on your journey here.

Just a suggestion, I'm sure you've already considered this but adding more pairs would increase the potential trade setups. I trade off dailies and watch 25 pairs or so. Of course many are closely correlated or inversely correlated but it allows you to either diversify across them with a similar setup or go with the best looking option.

I believe you stated on a different post you only have a 56% at a 1:1 RR, I'm curious how that's working for your bottom line. Trading a 5 minute chart would probably only give you a couple setups a day, even on a busy month it seems you'd have to be trading a seven figure account to pay the bills.

I believe you said you managed a fund as well, would like to hear more about your experiences there as well if you care to share.