The Good, The Bad and The Ugly - A Real Trading Record

Good morning all,
Owing to a family commitment that has arisen, today, unfortunately, will have to be the last day of this journal for the immediate future as I will be taking a break from full time trading for an indefinite but probably somewhat extended period.

So, I will post this morning’s trades as I go along and finish off with a short review of trading in this now mini-journal. After last evening’s bonus nice winner we start today, perhaps predictably, with a losing trade in EUR/USD:



We see a well defined trading range that is broken modestly to the downside before returning sharply into the range. I am playing for an early morning fake break so going long at 84 on a 7pt stop at break low with a 1:1 target just shy of the range highs. This proves itself to be a fake move and I am suckered long as the down move re-establishes itself and I am taken out at the stop for a 1:1 loss.
Time for a coffee break and return to look for an opportunity to recover matters

Hi all,
It's not long before another opportunity presents, this time in GBP/USD:



We see three successive falling tops with the last one making a little triple top of its own. This combination is enough for me to try a short at 37 as the triple top starts to fall over. A 7pt stop above the prior high is sufficient protection here and a 1:1 target is above prior lows though right on the round number 30.

Price starts to fall away nicely and, because I am always a little wary of round number bounces, I bring to stop to breakeven as we near the target and, sure enough, a quick jump up takes us out for a scratch. After testing the triple top the market duly falls again to our target with us no longer aboard. Such is life, but as mentioned in previous posts, this is the cost of insurance and we must bear it with equanimity.

Hi all,
We try for a third time today, again in EUR/USD and, as you will see, with even more frustrating results than the previous scratch trade:



We see what looks to be an early morning fake move down that reversed into a nice move up to new local highs. I am thus looking for a long opportunity and, after a not unexpected pullback, I am happy to try a long at 89. A 7pt stop is below the pullback low whilst the 1:1 target is just below prior highs. Irritatingly, we are just stopped out on a last spike down for a 1:1 loss then duly watch price move on up to our target.

These last two trades well illustrate how frustrating trading can be sometimes. However, we have to balance this against experiences such as our trading earlier in the journal where we went a full week with no losers. You simply have to learn to take the rough with the smooth and maintain a level of emotional stability throughout.

So, three attempts this morning have resulted in a scratch and two losses. I am conscious of not feeling really being on the ball today so I think I will invoke a psychological stop and call it quits here for live trading. Thus, the next final post will be a brief review of all the trades posted in this journal to bring things to a hopefully tidy finish.

JTD +8.0% W10 L5 S3

A now final hi to you all,

As promised, a closing review of trading to date. Although I have only managed to post 18 trades over a couple of weeks, I think there is still enough there to give anyone interested in short term intra-day trading a flavour of what life on the coal face tastes like.

These 18 trades have been split 10 wins, 5 losses and 3 scratch trades. That is a win rate of only just over 55% but with an 8x R:R profit outcome, i.e. an 8.0% return on a fixed 1% per trade risk assumed.

This is rather above average and I would not like to give anyone the idea it is so comparatively plain sailing. The bonus 2.3R winning trade of post #56 could not normally be expected, and the loser count is a bit low, I’d expect one or two more ordinarily. Adjust for these and the return is reduced to perhaps 3%-4%, this being rather more realistic over the long haul, I’d think. And even this is with pretty favourable market conditions faced.

Still, hopefully you can see profitable trading is not impossible but you do have plod steadily on through poor patches as well as good - ignoring the rather lucky bonus winner mentioned, the last 6 trades in this journal have been L4 W1 S1, for example.

To close, I cannot stress enough that to be profitable over the long haul you need all of:

1. A sound method that suits you
2. Discipline
3. Risk control
4. Consistency
5. Emotional stability

How you bring all those things together is up to you. However you go about doing it, I wish you well. Good luck in your trading!
OTM

Thanks OTM -Excellent and welcome advice. I think I will also bow out with a final chart of two losers and one win.
Little and often is more achievable than aiming to hit the ball out of the park.
A great thread OTM and should be up there as must reads for aspiring traders. ( Sorry - no pictures of Ferraris or mansions)

Have a good Christmas OTM and many more to follow.

Thanks for this wonderful Xmas gift ... clean and neat method.... really hope to see more exemples next year
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edit: after reading your thread , i can say that the way you explain the way you look at chart is very concise and clear (and pleasant)

Thank you, Oldtraderman. Very clear and easy to follow trading journal. I'm trying to figure out how to approach 1 minute charts and your journal is really helpful.

Hi all,

After a few enforced months away from trading due to some family commitments I am pleased to say I am now able to return to the fray. Must say I've missed it but the markets are still here and waiting for me I see!

I intend to pick up this trading journal again and post a selection of my trades each day with comments and analysis for your enjoyment. I am a very short term day trader (typical trade duration 1-30 mins) taking multiple trades per day so it is not feasible for me to post trades in real time or post every single trade.

I will, however, post and analyse for you at least one sample trade per day and tell you how the overall trading for the day has gone so you can see what trading really is like at the sharp end. I trade for a living (and have done so for a decade now), it is my full time occupation and my primary source of income so what I do is a reality of the experience of day trading.

Though it is all very short term day trading the underlying principles, processes and disciplines involved are equally applicable to trading in any time frame in any active, liquid market so I hope there is something here for everyone. I have gained so much over the years from posts on this forum and elsewhere across the internet, this journal is my modest attempt to give something back by sharing my genuine experiences and thoughts as an experienced full time day trader without mystery, magic or promises of easy riches. I welcome all your comments and questions as we go along.

I'll start next post with a review of today's trading.

Hi all,

As I am easing my way back into the trading rhythm I have started by trading just the one market for now, the DAX equity index. This is a nice active, liquid, low round trip cost market in a time zone that suits me well (I am in London and prefer to trade in the morning), though all the trades would translate equally well in any major forex pair.

My charts are pretty minimalist, a plain black 1 minute HLOC bar chart with no indicators at all, just price. My view is that price gives you everything you need and indicators are mostly just different ways of looking at price that generate no extra value. So I keep it nice and simple.

I am not trying to predict price or 'understand' the markets in any way at all. All I do is observe what is happening and try to place a better than 50:50 trade at an initial 1:1 reward-to-risk ratio. If I can do this with good risk control, discipline and consistency i'll make decent net profits over time with a very acceptable drawdown profile. All my trades are sized so that I am risking 1% of my account at the initial stop, all trades are entered with a hard stop in place, absolutely no exceptions to that requirement.

That said, only made two trades today so I will post them both. First up was a loser:



Pre-market trading indicated a down trend so when the market opened with a modest rally that quickly stalled I was interested in shorting for at least a test of the prior lows. Entered on a break of the range that had formed only to find I was suckered in a fake break & reverse. Thus, very quickly stopped out for a full 10pt 1% loss.

There is no way you can know in advance whether such a break will work or be a fake but the combination of the pre-opening downtrend and the opening weak rally I have found over time is a better than 50:50 indicator of a break down so I was not unhappy to take this trade. Sadly, proof that you can't win them all and we are always dealing in probabilities, never certainties in trading. Still, the stop did its job in limiting the loss which we will see was very handy when we see what happens next in the next post.

Hi all,

We move on to the second trade of the day. It immediately followed the first so the same chart is just rolled on by a few minutes:

The fake break and reverse we endured as a losing trade of the last post is a good, i.e. better then 50:50, indicator of a directional market move. There was a clear fake to the downside followed by a swift reverse and breakout of the range on the other side. This is enough evidence for me to want to go long at the breakout so I am quickly long at 12048 with a 10pt stop well back inside the range. If the breakout is valid the market should not test this level.



The market duly immediately soars to over 12100 but I am happy to very quickly take a solid 24pt profit at 12072, just in case it is a momentary spike - not an unknown occurrence by any means. The trade nets me a 2.4x reward:risk so I am not greedy for more though more aggressive traders could easily have held on for longer.

Overall the two trades have netted me +14pts or 1.4% which is nicely more than my per trade 10pt risk so I am happy to call it a good day there. Note it is the risk control on the first trade - losing just 10pts on an adverse move that eventually went over 70pts the wrong way - that paved the way for the profitable day. When you are proven wrong just get out for an acceptable loss and start over. Sitting on growing loser, hoping for a recovery, doubling up, etc. are all bad strategies and you must eradicate them from your trading if you hope to win out.

Back tomorrow to see what happens then

Hello Oldtraderman,

Nice approach, simple and informative. Thank you.

the man is back great to see!

Hi tr0033,

Glad you find it useful, I will try to explain all my beliefs and processes more thoroughly as we go along. I don't claim them to be anything special, just that they suit me having been evolved over time, and they incorporate certain critical requirements that I think you simply must have in your trading, whatever form it takes.

Whether anyone agrees with them or not isn't really the point, I hope just to be able to show how you might go about developing your own set of robust processes and disciplines that ideally suit you.

Hi again shrips,

Yes, nice to be back trading. Hope you have been profiting nicely these last few months.

Hi all,

Have completed this morning's trading so a quick review. Three trades in total, a scratch followed by a 10pt loser followed by a 10pt winner, so net scratch overall. Evidence of the morning was that I'm not feeling quite in the groove yet so I'm happy to stop after recovering the loss. Flat on the day is never a crime for me and a psychological stop not to force things when you're not feeling 100% is something I would recommend to all. The markets will still be there waiting for you tomorrow!

As we had a winner and a loser illustrated yesterday, today I'll post the scratch trade for analysis;



The morning started quietly in a scrappy range established between 12115 and 12090. After the 12090 low we see an attempted run back toward the 12115 high which is approached via a spike that falls back into a small ledge of prices. Such a spike & ledge is a reasonable reversal trade if the ledge breaks down as it does here, idea being the spike has suckered some traders in. Thus, I am short on the ledge breaking at 12104 with a 10pt stop back at the spike high. This should not be reached if the idea is valid. The initial 1:1 R:R 10pt target is very achievable above prior lows.

We get a fall to 12096 for +8pts and I will move the stop to breakeven here. Once a trade achieves the majority of the initial target I will not want to take a loss on the trade. Unfortunately, we do see a quick bounce back to 2104 and I am scratched out. To add insult to injury the market subsequently does just get down to to my 1:1 target but I am long past worrying about it these days. To me it is the cost of insurance and I am willing to pay it because I am a conservative trader who worries far more about the downside than the upside.

Back tomorrow

Hi all,

It's been said that Thursday is the new Friday, and with Good Friday tomorrow it's going to be true for my trading this week. One of my psychological rules is to demo trade any Friday where I have a profit of greater than 1R (1 reward:risk or 10pts = 1% account gain on this week's position sizing) booked on the Thursday night. Well, I have +14pts this week so it's demo Thursday today on a short week and no live trading.
Reason for this is threefold: it takes away the worry of messing up a good week with a bad Friday; it's something of a reward for a good week; and it's good practice & development to demo trade every now and then.

But it's also a good moment to review the week's trading. Monday I just watched all day as it was my first day back after several months away; Tue & Wed went as follows (Win/Loss/Scratch):
Tue. 2 trades - L(-10) then W(+24)
Wed. 3 trades - S(0) then L(-10) then W(+10)
So the net is +14pts, +1.4%, which is above my minimum weekly target of +1% so I am happy enough.
Note the total breakdown is 2W 2L 1S for the five trades, i.e. no better than random but still made 1.4% net.

This is important. You must either have more winners than losers at average equal amount and/or winners bigger than losers on average at random 50% trade success if you want to be in profit. You can, of course, have a very low success rate if your winners are much bigger than the losers - this is a typical hard core long term trend follower's profile but it's a long way from my style of trading. One reason I don't like it is because so much depends on capturing just one or two big winners. That's too big a specific risk for me, I like more even trading. Also, the drawdowns for long term trend following can be deep and prolonged and I don't like the idea of that either.

That said, whatever your style, you have to find a way to get ahead when your trade selection is nothing special, because that's what it is going to be most of the time. And, naturally, also find a way to eradicate big, bad blow out patches as they do make life very uncomfortable. Never promised you trading was easy!

Have a good Easter all, back on Tuesday.

Hi all,

Hope you all had a great Easter. Back to a very quiet start in the markets but where I can show you an instructive set of three trades taken:


NB Apologies - last text box should read 'closed at 5' not 'sell'

The market opens with a modest slide down before settling into a small congestion area around 12210 to 12220. A failed break below 12210 tempts me into trade #1, a long at 13 with the stop at the morning low. A test of the range top at 20 is signal to move the stop to breakeven which is then duly hit for a scratch. Note that had it been left it would have gone to a full loser.

Undeterred, the subsequent bounce back up tempts me into trade #2, a repeat long at 13 with stop at 03. This also tests the 20 level so stop to breakeven again and we have deja vu as it falls bck to be scratched out again. Note this also eventually would have continued on to be a full loser.

Multiple failures to break the 20 level finally convince me of the wisdom to try a short so we sell at 15 with stop 25 above the local highs for trade #3. The 1:1 target - unike the prior two trades - is this time inside the range at 05 and this proves to be the winning formula as we get our +10 at 05.

All this demonstrates a few interesting things:
1. Probably shouldn’t have been trying to force trades in such a quiet market at all
2. You must protect your position when price reaches a resistance point
3. It’s much better to have targets inside such resistance points in the first place
4. Be flexible on market direction and let the market action guide you

Back tomorrow

Hi all,

Quick finish today as we enjoyed a successful trade of the opening volatility in DAX:

Market opens at 8am with a spike then retreat before another bigger breakout spike that also does not hold. Two sharp spikes is suggestive of a possible sucker move and quick reverse, not uncommon at the market open. We wait for another test of the round number 50 level to fail as additional confirmation before entering short at 46 on a 10pt stop just above the spike high. The 1:1 R:R target at 36 looks very achievable on the chart and we get there easily enough, actually closing for a bonus point with +11 at 35. Price raced on down to test 20 so we left a lot on the table but I am nervous of sharp reversals at the open.



An aggressive play for sure but note we tried to gain some security by:
- waiting for a 2nd failed test of the spike
- having the stop above the spike high
- not being greedy on the target in volatile conditions.

This is the kind of way you tilt probabliities in you favour, whatever the specific market circumstances - here it was the specifics of a market open. However and whatever you trade you need to set the trade up so you have the probabilities in your favour. It doesn't mean you will win this time - far from it - but it does mean you'll likely win out in net terms over a series of such trades. And that is what trading essentially boils down to.

Back tomorrow.

Hi all,

Up early this morning and a decent week thus far so decided to expand my horizons to some forex markets and longer timeframes, having so far focused on 1 min DAX. Three trades later I am net -7 on a winner (+10) and two losers (-10 & -7) for an excellent illustration of overconfidence! Still early days for me after my trading break and a salient lesson that you must take things in baby steps in trading, there are just too many market and psychological pitfalls waiting for you.
For your entertainment, here is one of the losers that includes a few useful points:



This is EUR/USD on a 5 min chart showing a established range of about 11162 to 11145. A third test of the low that rebounds back into the range tempts me into a long at 49. The stop at 39 is well below the range and the 1:1 target at 59 is inside the high so it all looks OK. The trade gets as far as +6 and just shy of where I would ordinarily look to move the stop to breakeven before a sharp reverse breaks the range on the downside. I cut manually at 42 to lose 7, not waiting for the hard stop to be hit as the trade has clearly gone wrong.

You can see from the chart the price does quickly rebound back to my entry so I could have gotten out for a scratch if I waited and not had the stop at 39, but such wishful hoping after your initial premise has been proved wrong is dangerous - what if price collapsed to 20 or worse in a straight line whilst I was wishing & hoping with no stop? A big loss of 3x or more of my planned risk, discipline and risk control gone, and I am on the inevitable slippery road to ruin.

To reiterate the key points here:
- Once a trade plan is proved wrong by the market, don't hang around and hope. Get out and keep the loss small!
- Don't beat yourself up if it recovers after you've taken the loss. Think instead how much worse it could've been.
- Always have a hard protective stop. Without one you place yourself at the mercy of the market and it really doesn't
care about you. Many trades will bounce right back but some will just go on and on and on and on the wrong way.....

Back tomorrow

Hi all,

Thursday closed night with the current week standing at 7 trades split 3W (+10, +11, +10) 2L (-10, -7) and 2S (both 0) for +14 pts net or +1.4% on the account at my 1% risk position sizing level, using a 10pt standard stop. This beats my desired minimum +1% weekly target so, as mentioned before, I am on a demo practise only Friday today with no live trading.

Note just how marginal this all is. Over the last two (admittedly short due to Easter) weeks since returning to trading the cumulative record is 12 trades for 5W 4L 3S, i.e.
- only one net winner in 2 weeks
- only 1 net winner in 12 trades
- a trade successs rate of 42%

Out of this, though, has been extracted +2.8% of account growth, +2.8R in terms of reward achieved to risk assumed, and with no meaningful drawdown suffered. Over time it builds up: +1.4% per week for 50 weeks is +70% pa uncompounded and that’s at just a very conservative 1% per trade risk level. In comparison, risk-free UK savings rates hover around 1% pa and the with-risk UK stock market dividend yield (currently at a 10 year high) is about 4.8% pa.

Trading is mostly like this: you grind along with a pretty random sequence of winners, losers and scratches but scrape a net profit out of it all through good risk control, discipline, and consistency in planning and executing your trades. Mathematically, in trading you don’t need to achieve that much to be pretty successful as long as you are consistent and don’t take huge losses along the way. That’s why you look to trade small, use effective stops and be close to paranoid about controlling risk if you want to be a consistently profitable trader over time.

Anyone can take a big punt and get lucky. But that’s not trading, it’s gambling and I’m certainly not here to do that. I want to be able to pay my bills this week, next week and the week after, not shine supernova bright today only to crash and burn spectacularly tomorrow.

Have a good weekend all, back Monday.