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

Hi Alexey,
Yes, exactly that. What's important is not the absolute precision of it all - I've mentioned before that trading is not rocket science - but just to know you have robust risk control that will keep your losses small, come what may.

Over precision is a little pointless anyway here as things like price slippage on executuion will always mean you can't be decimal place perfect; and many contracts have discrete step sizes in allowable position size so you can only be approximating at best.

Hi all,

Though it's the Ascension Day public holiday in Germany today, the DAX is open normally so trading continues. After yesterday’s losing grind, today was rather more easy going with a simple opening winner. That’s the way trading typically goes, of course, and you have to learn to plod steadily on with equanimity through rough and smooth alike.

I will show today’s sole trade, a fake break and reverse setup that you have seen a few times already here:


The market opens at 8am with a small drop to 11880 before jumping up to just break the prior high and test the round number 11900 level. This swiftly reverses as a spike that all looks suspiciously like a fake breakup so I am tempted into a reverse short trade at 93. The stop at 103 is above the highs and the 1:1 target at 83 is just inside the prior low #1, so it's OK as a setup for me. The spike & reversal prove valid and I am happy to take profits as it approaches the prior low, exiting with the momentum netting an extra couple of pips at 81 for +12 net. Price continued down to test the next prior low #2 around the 70 level, a realistic target for braver traders but not market cowards like me!

I hope by now you have seen in this journal that I trade a few basic setups over and over again. They're the ones that I like, understand well, and feel incorporate a solid edge I can consistently exploit. You can make good consistent profits only trading one or two clearly defined setups in just one market. You are specialising and that helps make you focused and skilled in that niche; it’s a far better arrangement than blasting away like a shotgun in all manner of ways in all directions. Consider what works best for you and focus in on honing that. There is no magic method out there, it’s what you can make out of any basically sensible method that really counts.

Hi all again,

After today’s trade this short week to date stands at +2.7% / +2.4R on 6 trades split W3 L2 S1. As this gain is above my minimum desired 1% weekly target it means tomorrow will be a demo only practise Friday.

It also means I will finish May having posted a decent sample of 44 trades in the 7 weeks since I resumed this journal. The account is up over 20% in that time, achieved with risk held at 1% per trade, a worst drawdown of just 2%, and the trade success rate a modest 50% exactly, split 22W 13L 9S. Nothing so special or risky has taken place yet, even allowing for an inevitable fallow patch along the way, the account is well on track for a 100%+ pa compounded return on opening capital. The final updated trade summary spreadsheet is attached.


I am conscious now that I am beginning to repeat myself somewhat in my postings. This is not such a bad thing - consistency in trading does essentially mean doing much the same thing over and over in a disciplined and risk controlled manner - but the value of further postings will diminish; it’s just going to be more of the same. So I think I may call time on this journal here and leave it a reference record for anyone interested.

I hope what is here gives a pretty good snapshot of how trading really is, at least at my coalface. I have tried in this journal to show you what I do and why I do it in an honest and complete way - the good, the bad and the ugly - not just highlights of the best bits. You don’t have to like or agree with my style of trading and you certainly (and probably quite fortunately) are not me, but this is not the point. Whatever kind of trader you are, and whatever kind of personality you are, I hope this journal shows that you can make trading work for you if you are willing to work at it. I certainly have no innate personal trading gift and possess no magic trading secret.

You can make decent money trading without taking big risks and without needing to be born a trading wizard. But you do need a sound method that suits you, operated with unfailing discipline, consistency, excellent risk control and good emotional stability. I’m not saying it’s easy - it isn’t, and I have alluded many times in this journal about the considerable practical, emotional and psychological demands that trading presents. It certainly proved a lot harder than I thought it would be when I so confidently started out. It has taken me several years and a fair few losses to learn how to play this game tolerably. But it can be done if you are willing to put the work in, learn intelligently and adapt appropriately as you go along. Whether that happens for you is largely down to you.

You can be sure that I shall keep on trading in much the same way in my happy, risk controlled little furrow and I hope this journal might have helped your trading in some tiny way. It’s helped me, too. Having to describe, explain and justify everything I do has been a great discipline for me. And thanks so much for all the comments and appreciation I have received collectively from you along the way, it’s been a pleasure.

I wish each and all of you the very best fortune in your trading future. Just remember to control that risk and keep those losses small. Best of luck!
OTM

Thank you Oldertraderman, I've enjoyed your thread. Your obviously a nice guy who knows what he's doing so just the type of thread that would appeal to anyone trying to get on the right path. I'm about to switch banks to gain the 175 reward, would you recommend any course or books that helped you along the path or should I put it on a horse? Lol.
Anyway, I wish you the best and thanks for the advice.

Hi falloverpete,
Many thanks for your kind words, it's been a pleasure doing this thread.

As for what helped me along the path, I wouldn't say any one thing was decisive but what definitely helped was to read widely, especially from successful real traders. There is tons of stuff available for free and as you read and absorb more and more, you begin to tease out the common points and principles that all the successful traders seem have in common. Even some of the rubbish is worth reading as a contrast so you readily understand what not to do. I wouldn't pay for any courses, most of them to me seem to be written by people who clearly don't really trade, and most of what they say of value has already been said for free by better people before them.

After that, just keep trading in demo/tiny size until it comes to you. There really is nothing like experience and it's also a journey of self discovery, you'll soon find out where you are lacking (in a trading sense!) as an individual, and then you just have to work at it to improve yourself and your methods until consistent, disciplined behaviour and controlled risk is automatic second nature. At that point you have a chance of making steady money.

Finally, don't know much about the donkeys, my speculative desires are fully satisfied by trading. That said, I did once meet someone who used to be a NASA scientist but gave it up to be part of an organised horse betting syndicate. They made pretty much all their money in the months of June-September when, apparently, horses tend to run more to form because of the better weather. Then he spent his winters sitting on the beach in the Caribbean enjoying his winnings, so I'm loathe to dismiss it out of ignorance. Best of luck whichever path you choose!

Sorry to see you call time on things here - though I completely understand your reasoning.

Perhaps drop in if anything particularly out-of-left-field strikes or even just to do a once-a-month update or running-score?

Anyway, it's been a nice, refreshing, place to visit every day and I wish you all the best going forward (you won't need luck, you're well beyond that).

Thanks so much for your time and contributions, your thread is a diamond, and I know I will review it. Simple, effective, and profitable! What more is required.

Cheers Again
Helena

He doesn't feed you a daily fish but has taught any intelligent reader how to fish. Now the reader has to go away and fish - getting more proficient with the passage of time and experience.
But like Lem says, above - any new thoughts or musings -should they occur to you -then please pop in and share.
Meanwhile - thanks for a brilliant thread.

Good morning Oldtraderman.

I came over your thread and and found some neat and well discribed easy system included "diary".
Really worth reading it.





Guido

Hi Guido,
Many thanks for your kind comment, I hope there is something in there useful for you.
It's not so much a packaged system as a real-life snapshot record of my daily trading, though I hope it should be possible for a reader to discern what I am up to, and why, at least in a general way.

I see good trading essentially as being able to both identify better-than-random opportunities and then consistently exploit them in a disciplined and risk controlled manner. I think most traders with any experience will be able to find opportunities, the markets are far from 100% random. The more difficult part is effective exploitation and is where I see most traders fail, usually out of poor risk control which in turn usually has its underlying roots in an emotional/psychological inability to accept losing - but losers are inevitable in a probability based environment such as trading.

This is why this journal is peppered to the point of boredom with comments about the importance of controlling risk and handling the inevitable losers well. If a trader can't do these two things effectively I think there is little chance of long term survival.

Best of luck with your trading!

1- study the markets until
2- you are able to identify a better than random opportunity and
3- exploit it efficiently with
4- risk management
5- ACCEPT LOSS. WASTE PRODUCT IS INEVITABLE. DONT GRIEVE OVER IT (this is in bold as it's the hardest bit)

I think that's the holy grail right there. Your 2nd paragraph, paraphrased. THE ANSWER. I took a screenshot of your response.

Identify, respond appropriately, repeat. Mantra. So good !

Hi all,

I trust you all have been trading well since I last posted in June, having recorded a few weeks of my trading for your reference and entertainment.

Since then I have received several requests around the subject of how to develop and operate a trading method so I thought I'd pick up this thread again for a few weeks to set out out and then report the actual trading over time of a simple, fully disclosed trading method. Anyone with a basic knowledge of trading can follow it and I believe it is operable on any active, liquid market in any time frame as it is based on a fundamental and enduring principle of price action.

I will show my trading of it on a daily basis in the DAX market on 1 minute charts as this is my personal default market and time frame at present.
I welcome all questions and comments, the idea of this exercise being to show how a simple method can work well as long as:
1) It makes sense as a basic principle; and
2) It is operated with discipline, consistency and good risk control.

Next post will outline the method

Hi again,

On to the method. I want to keep things really simple because it illustrates the important things better that way, and because I want to show it doesn't have to be complicated to work well. As I have mentioned in the past, trading is not rocket science.

So, the method will be trading just a single principle of price action on a chart: Sharp false breaks of rectangle price patterns.

A price pattern rectangle is just that, a rectangle / box / consolidation area on a chart where price is seen to be bouncing around between clearly defined boundaries. We look for the box to form and then get broken, apparently decisively, only for price to immediately snap back into the box. We trade the reversal for a minimum 1:1 risk:reward ratio. Here is a pretty clean example I traded from earlier this week:



I will use a standard 10pt stop & initial target for these trades and what you see is all there is too it. Simple enough I hope!

It works because the basic principle of price action being exploited is the tendency for markets to test a previously established extreme and then either blast off or reverse back. If it blasts off we will not be on board as we enter only a reverese back into the previously established box; if it does come back we follow the reverse which - if we are right - should not look back so we can have the stop just beyond the extreme of the false break. Equally, the target should ideally be within the box (towards the other end) so we are not asking the market to do anything dramatic to make a good profit - just reverse a bit for us.

Please note carefully: It is not an infallible method, nothing is. That is why ALL trades have a hard stop, no exceptions.

All we want is more winners than losers by a modest extent. Over time the net winners build up to create a solid return with comparatively low drawdown. For example, if you average only 1 net winner a week risking just 1% of the account per trade the account is up 50% pa, uncompounded and unlikely to suffer a drawdown over 10%. This is a very solid result for something so simple, and it is not asking to achieve anything too exceptional in a daytrading environment.

Next post I'll begin reporting my trading experience each day so you can see how it works in practice.

Hi all,

First trade in live action, just completed:



We see a small box form with a low boundary at 49 and then a break below it to 46 that immediately reverses back. This drags us in long at 50 with a slightly onerous target at 60, right at the other edge of the box, normally I'd like the target inside so it's easier for the market to get to, so this is something of a forcing trade.

Indeed, we see price just fail at 59 so we move the stop to breakeven for safety. We are fortunate to be kept in the trade but finally get what we want. +10 at 60, just touching for a brief moment. Proof that we were forcing things here is shown by the subsequent fall back through the box but we are luckily out.

So, not the best trade, a bit squeaky tight for comfort but I hope you get the idea.

I'll finish each post with a running record summary in win / loss / scratch format and a spreadsheet summary at the end of each week so the trading record is there for all to peruse.

Record to date: W1 L0 S0

Hi all,

Before I close up today, a few words on the ideas of discipline, consistency and risk control, all mentioned in the opening post #172 as being key in making this or any trading method work.

What exactly do I mean by these things? I’ll explain briefly in the context of how I operate this rectangle false break method:

Discipline & Consistency
Essentially means sticking to the method through thick and thin. To trade I need all the following conditions in place:
- a clear rectangle price pattern on the chart
- an obvious break that immediately reverses
- a stop that will be beyond the break extreme
- an initial target of 1:1 risk:reward still inside the box

If I don’t see these things I don’t trade. Every time I do see them, I trade. No second guessing or predicting, just follow the method as and when you see it on the chart.
That way you don’t tie yourself up in to knots as to what to do, and you don’t let the market push you around. You trade only when you want to, on your terms.


Risk Control
Trading is a probability exercise, a numbers game. We do not deal in certainties, only speculative opportunities. Because they are at best speculations many of them will fail so we always need to protect ourselves. Hence a hard stop on all trades at a point where the market should not get to if the trade is good.

If we are proved wrong the stop takes us out for a pre-determined loss. No procrastinating, no giving it a bit more room or any other such nonsense - just get out and take the loss.

Park your ego, it has no place in trading. Losses are inevitable so keep them small and always under strict control. Remember, we are just trying to have a few more winners than losers over time, nothing more ambitious than that.

And because losses are inevitable and frequent, we must keep trade size small. I only risk 1% of my trading account per trade at the stop. This way I can’t really get into any real trouble if the method has any validity at all. My drawdowns will be small and I will never be in the position of risking my trading account on a single trade.

Never average down losers. The maximum risk of the trade is set at the outset when I fix my trade size and stop loss point. For me, a 10pt loss = 1% risk and that is that. I don’t want to try to “rescue” losers, I just want to keep them small. A loss is just an inevitable and inherent cost of business in trading, not an insult to your intellect.


I hope that sets all that out OK for you. Back tomorrow.

Welcome back. My trading has improved markedly after trying your approach iterated in your previous posts. Look forward to reading your posts again

Happy to see you again posting here! Always well explained trades and overall trading topics!

Hi turnip 15,
Nice to hear you're still going strong and I'm relieved my previous posts helped your trading. I would have felt bad otherwise!

This time around, in an attempt to answer questions I've received, I'm just going to trade one simple (but nice) pattern in one market to show it doesn't need genius to turn a decent profit over time with limited risk. Really, almost any sensible pattern of price behaviour will do, what is more important is how you go about trading it - discipline, consistency and good risk control!

Hope it will help further.

Hi alexgvr,
Relieved to see at least one person is happy I'm back again for a while!
I will try to explain the underlying concepts and reasonings behind my trading approach in more detail as I go along so readers can benefit from my experience and multitude of mistakes over the years. Hopefully, at least some bits of it will be useful to everyone and help to improve their trading.

Hi Oldtraderman
Good to see you back posting!
I found this potential setup on GBPUSD yesterday. Would this classify as a valid entry?
Cheers