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

  • #441
  • Jan 17, 2022 2:57am Jan 17, 2022 2:57am
Hi all,
Wasn't planning on posting today but my trading at the open today I feel is worthy of sharing as a good illustration of the discipline and risk control required if you want to be a trader; and how experience can really help in all of this:

Attached Image (click to enlarge)
Click to Enlarge Name: Germany 40_20220117_08.25.png Size: 15 KB


Market opens at 8am around the 15960 level (off the top of this big scale chart) and immediately drops off to test and form, not unexpectedly, a consolidation box around the big figure 900 level. Now, as the consolidation box has formed after a downleg I would normally look for a short trade here as that is trading with the current flow, but the opening gyrations can be anything plus sharp bounces off big figures are common, so I am less fixed in my viewpoint here. It happens we first see a test of the 96 low at 8.14am and as the market just dips below and snaps back and I am tempted long at 02 with my usual 12pts hard stop and soft target. It gets as far as 11 and +9pts before reversing back sharply and I scratch on the return to 02 - there is after all obvious risk of another downleg here. As it happens the market did carry on down and would have just stopped me out fo a -1R loss at 90 if I had held on and hoped. This test of the 90 level also immediately bounced back and tempted me into another long, this time at 97 back inside the consolidation. This second trade works and I immediately make my 1R profit at 09 on the continuing snap back.

What I want you to see here are a few points:
- my willingness to risk a loss by taking the long trades; you don't ever know what will happen, it is always only an educated guess
- that this risk of the guess proving wrong is controlled by virtue of a predetermined hard stop in place
- my scratching the first trade as it reversed; you have to follow the evidence the market presents regardless of your trade hopes
- my willingness to have a second go; if it is a valid setup for your method you have to act regardless of prior experiences.

If I had not been willing to take these really quite uncertain trades, or if I had not acted correctly (for my method) to scratch the first trade, my net +1R outcome for the morning would not have been realised. The reason I want to highlight all of this is because I know that in my earlier years I would not have managed what I just did here. I would have either not taken the trades or left the first one to drop to a -1R loss. My ability to manage it without any real internal stress today is entirely due to experience: I know from long experience that these trades are OK to take in aggregate. They may well not work out today, further downlegs are extremely common but as a trader I have to take trades with unknown and uncertain outcomes. As long as they fit my method, I control risk and manage the trades appropriately I know from experience that I will be OK over the long haul.

The moral: spend a long time trading in tiny size until you build up the necessary experience and internal confidence that you will be OK as long as you trade steadily according to your method - and know you will unwaveringly be able to do this!
  • #442
  • Jan 17, 2022 5:44am Jan 17, 2022 5:44am
Quoting OAPDave
Morning Oldtraderman Nice trade and good summary once again May I just ask you Does (certain Numbers) or (Looking) left play any part in selecting a trade {image}
Hi OAPDave,
Yes indeed, both are things I'll confess to.

It is obvious from any thoughtful study of price action that markets do not act in a truly random fashion, and one observation that supports this is that the market so often races to and then bounces off or at least pauses at obvious round numbers; previous clear high and low points also. So I will take note of such levels and factor them into my overall price action analysis. Today's trading was indeed an example of that. However, I do not look at pivot levels, fibonacci levels or anything of that sort, I have never seen any evidence that supports these are better than random over a large sample.

Looking left, by which I take to mean considering the previous price action, again yes. That said, I am not a dedicated follower of charts or technical analysis, there are too many problems with seeing patterns that are not really there, seeing only what you want to see, and ignoring false positives. But the previous price action clearly tells you something, I think of it as a pictoral record of what buyers and sellers have been doing recently. For example, if looking left shows a market in panic freefall you'd be well advised to be looking for shorts, not longs.

Hope that helps to explain
  • #443
  • Jan 17, 2022 5:59am Jan 17, 2022 5:59am
Quoting Oldtraderman
{quote} Hi OAPDave, Yes indeed, both are things I'll confess to. It is obvious from any thoughtful study of price action that markets do not act in a truly random fashion, and one observation that supports this is that the market so often races to and then bounces off or at least pauses at obvious round numbers; previous clear high and low points also. So I will take note of such levels and factor them into my overall price action analysis. Today's trading was indeed an example of that. However, I do not look at pivot levels, fibonacci levels or...
Thank you appreciate your reply
  • #444
  • Edited 2:52am Jan 18, 2022 2:40am | Edited 2:52am
Hi all,
Having posted unexpectedly yesterday, I feel obliged to do so again today to show how to trade a very similar opening the right way this time:

Attached Image (click to enlarge)
Click to Enlarge Name: Germany 40_20220118_08.23.png Size: 17 KB


Market opens at 8am at the 80 level and immediately collapses before forming a first consolidation in the 20-40 area, all very much like yesterday except that this time we are not at a big 00 possible support/bounce off number so I am definitely leaning to the short side here to trade with the immediate flow. Thus I only look at the top end of the box, wait for a failed test of the first box high at 43 before taking a short at 40. The stop at 52 is well above the box, the target at 28 is well above the bottom. So trading with the flow and easier for the market to hit the target than the stop, exactly what we like to see in a trade. We get an immediate 1.25R profit to 25, not wanting to test the range lows at 20. This was rather a mistake as the market collapsed all the way to 740, leaving a modest 85pts or 7R on the table for braver traders than me to capture! Still, a nice trade and very textbook.

Please note the difference between yesterday and today in these rather similar openings: that the consolidation today was not at an obvious support/bounce level and this is enough to change my thinking from being OK long or short (yesterday) to wanting a short only (today). You always want to trade in the direction of greatest probability; as an old bond trader friend of mine is fond of saying, "Always best to sit on a horse in the direction it is going." Well, he is Australian so we'll have to forgive him that...
  • #445
  • Jan 18, 2022 2:50am Jan 18, 2022 2:50am
Hi Oldtraderman
With that winning trade banked, have you finished for the day now. ?
  • #446
  • Jan 18, 2022 3:05am Jan 18, 2022 3:05am
Quoting OAPDave
Hi Oldtraderman With that winning trade banked, have you finished for the day now. ?
Hi OAPDave,
Yes, I am done. I know rationally I really should just trade my full session each day and tot up the net outcome at the end but I find that, once ahead, I tend to get too defensive and loss averse to carry on trading properly. Ideally, you should be able emotionally to treat each trade as a completely independent event irrespective of what has happened previously, but I find I just can't manage this effectively once I am ahead. This is not an ideal trait but it is a part of me that I am unable to change so I have learnt just to live with it and adjust my trading habits accordingly.
  • #447
  • Jan 18, 2022 3:15am Jan 18, 2022 3:15am
Quoting Oldtraderman
{quote} Hi OAPDave, Yes, I am done. I know rationally I really should just trade my full session each day and tot up the net outcome at the end but I find that, once ahead, I tend to get too defensive and loss averse to carry on trading properly. Ideally, you should be able emotionally to treat each trade as a completely independent event irrespective of what has happened previously, but I find I just can't manage this effectively once I am ahead. This is not an ideal trait but it is a part of me that I am unable to change so I have learnt just...
You have my total respect for that reply
  • #448
  • Jan 18, 2022 9:51am Jan 18, 2022 9:51am
Quoting OAPDave
{quote} You have my total respect for that reply
Big smile on that one, how many times overconfidence takes over the trigger finger only to turn a profitable day into a loss for the day.
  • #449
  • Jan 19, 2022 2:46am Jan 19, 2022 2:46am
Spotted this one
Attached Image (click to enlarge)
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  • #450
  • Edited 8:55am Jan 19, 2022 4:00am | Edited 8:55am
Hi all,
I am conscious that the trading posted the last few days has been easy running, the market conditions have been rather friendly for the method being used. However, just to show that sometimes you need to work a lot harder, here are the 5 trades I needed to get a result today:

Attached Image (click to enlarge)
Click to Enlarge Name: Germany 40_20220119_09.36-1.png Size: 23 KB


From an 8am open at 15650 and an early test of the 30 level (not shown on the chart) the market moved into a sustained uptrend before levelling off into more churning conditions from about 8.40am, as per the chart above. Based on the usual idea of a consolidation box forming, seeing a fake break of it and entering on the way back through the box, I had four successive trades that all got to +9pts or better on a 12pt target before reversing on me and coming back to scratch me out for no gain/no loss on the stop protectively moved up to breakeven. To prevent a very messy chart I have only marked on today the fake break levels I was trading off in each case, I am sure by now you can work out the actual consolidation boxes yourselves. Eventually, at the fifith attempt a trade kept on going to net the full 12pts +1R initial target. So, four irritating scratches, all with good profits before reversing on me, before the winner arrived. Sometimes you just have to have a lot of patience, discipline and perseverence to net your profit.

Of course, I could have taken good partial profits in each case as the moves stalled, and/or I could have left the stops where they originally were so the minor reversals didn't take me out before price carried on as intended. These are both viable trade management strategies, as is the one I actually employed. What you choose is largely a function of your psyche and risk tolerance, the important thing is to stick to the one you do choose and stay both consistent and disciplined. Naturally, you may well adjust and adapt it over time - that is learning from experience - but at any given moment you should be clear and firm as to what you are doing, however the market treats you.
  • #451
  • Jan 19, 2022 4:14am Jan 19, 2022 4:14am
Quoting Oldtraderman
Hi all, I am conscious that the trading posted the last few days has been easy running, the market conditions have been rather friendly for the method being used. However, just to show that sometimes you need to work a lot harder, here at the 5 trades I needed to get a result today: {image} From an 8am open at 15650 and an early test of the 30 level (not shown on the chart) the market moved into a sustained uptrend before levelling off into more churning conditions from about 8.40am, as per the chart above. Based on the usual idea of a consolidation...
Oldtraderman
Yet another excellent and honest summary, I have seen and read your thoughts on keeping your charts as free as possible from clutter but For me a grid of some sort just keeps me focused that little bit better
Please keep up your summery I think the are great in pointing us in the right direction
Attached Image (click to enlarge)
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  • #452
  • Jan 19, 2022 5:11am Jan 19, 2022 5:11am
Congestion, but to big to be covered by a 12 pip stop I guess
Attached Image (click to enlarge)
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  • #453
  • Edited 6:42am Jan 19, 2022 6:28am | Edited 6:42am
Quoting OAPDave
Congestion, but to big to be covered by a 12 pip stop I guess {image}
Hi OAPDave,
You need a stop that is appropriate to the market conditions and your style of trading. If the market is swinging 50pts then the stop possibly needs to be bigger than 12pts. That said, it rather depends how you are trading. For example, if you are looking to take a fake break & reverse right at the edge of a range then the fact the range is 50pts deep is largely immaterial; what matters to you is how far a fake break goes before reversing. If that can be covered by a 12pt stop then you could still use it.

More generally, my standard 12pt stop is based on nothing more than it being 10x my 1.2pt round trip cost for the DAX40. If the stop is less than 10x I feel you are giving yourself too big a cost hurdle to overcome. Consider if the round trip cost was 6pts and you used a 12pt stop: your 1R gain = 12pts and you would need to make 18pts gross to get that net, compared to only -6pts of room before the stop took you out for -12pts net. That is too big a cost hurdle to overcome. At a 1.2pt spread I have 10.8pts of room to lose -12pts and need 13.2pts gross to make 12pts net; that looks rather more mangeable and the wider the stop the less onerous any given cost hurdle becomes. I like to trade with a tight a stop as is reasonably possible (so that the 1R target is easily achievable), hence I settle pragmatically on 10x the spread as my minimum 1R stop/target amount.

Overall point of this is that your stop must be appropriate to your market and your style of trading. There is no inherent ""right" answer but there certainly is a definite "wrong" one!
  • #454
  • Jan 19, 2022 6:38am Jan 19, 2022 6:38am
Quoting Oldtraderman
{quote} Hi OAPDave, You need a stop that is appropriate to the market conditions and your style of trading. If the market is swinging 50pts then the stop possibly needs to be bigger than 12pts. That said, it rather depends how you are trading. For example, if you are looking to take a fake break & reverse right at the edge of a range then the fact the range is 50pts deep is largely immaterial; what matters to you is how far a fake break goes before reversing. If that can be covered by a 12pt stop then you could still use it. More generally, my standard...
Thank you for your helpful advice, makes complete sense
  • #455
  • Jan 20, 2022 2:12am Jan 20, 2022 2:12am
Quoting Oldtraderman
Hi all, I am conscious that the trading posted the last few days has been easy running, the market conditions have been rather friendly for the method being used. However, just to show that sometimes you need to work a lot harder, here are the 5 trades I needed to get a result today: {image} From an 8am open at 15650 and an early test of the 30 level (not shown on the chart) the market moved into a sustained uptrend before levelling off into more churning conditions from about 8.40am, as per the chart above. Based on the usual idea of a consolidation...
Cool, you trade pure price action on 1m timeframe. Do you use volume profile or other order flow tools to confirm price actions?
  • #456
  • Jan 20, 2022 3:08am Jan 20, 2022 3:08am
Quoting zkchyo
{quote} Cool, you trade pure price action on 1m timeframe. Do you use volume profile or other order flow tools to confirm price actions?
Hi zkchyo,
Welcome to the thread. Yes, I trade pure price action, completely pure to the extent I use only price, not volume or any other technical indicator. Price is what in the end I actually trade, not volume or anything else, and for me it tells me all I need to know. Other indicators are mostly just other ways of looking at price and don't really add anything to my party, especially as most of them lag, price of course does not.

That said, volume is not price based and is actual market raw information so I can see the benefit of looking at volume in longer timeframes, the presence or lack of accompanying volume on a price move would give you some genuine extra market information as to the nature of that move. At the 1 min level, however, I can't see volume is accurately telling you anything in most cases.
  • #457
  • Edited 3:59am Jan 20, 2022 3:40am | Edited 3:59am
Hi all,
Another very friendly market to operate in today, and the trade I made is interesting both as a study of market analysis and as an illustration of how a particular trading method makes particular demands of a trader:

Attached Image (click to enlarge)
Click to Enlarge Name: Germany 40_20220120_08.55-2.png Size: 25 KB


The market opens 8am at atound the 820 level, makes a quick failed test of the prior high above 50 before rushing into a 80pt fall down to below 780. This gives us a primary downtrend highlighted by a green line on the chart, but is followed by a modest consolidation in the 80-00 area and then a run up to above 20. This in turn gives us a current uptrend, also highlighted in a green line, before consolidating again in the 10-20 area.

So the question looking at about 8.35am is: which trend do we trust, the first primary downtrend or the current uptrend from the 80-00 base? This decision is important as it will guide us whether to look to trade short or long from the 10-20 consolidation box. The downtrend is bigger but the uptrend is more current and does feature a breakup from prior consolidation, so both are potentially valid. I decide, admittedly mostly from gut feel, that I will try a short after the market tests the 20 level and drops back, entering short at 17. But I am wary and as soon as price dips back to the 10 level I am quick to move the stop to breakeven in case of a bounce off this number. That duly happens and I am scratched out at 17. The run back up, however, stalls at the prior high above 20 and I am thus happy to try another short, this time at 19 as it falls back a second time. Happily this trade works out and I quickly take my 1R profit at 07. The market does roll over and continue back down to fresh lows, so the decision to follow the primary downtrend was correct today at least, other days we will not be so fortunate!

I hope you can see how your market analysis will often be somewhat ambiguous, there is a case to be made both ways. I would prefer to simply sit on the sidelines in such situations but it is rare that the picture is 100% clear for us so often you have to make an educated guess and go with that. You can trade more defensively on such occasions - as I have done here - but it well illustrates that trading is indeed a game mostly of inherent uncertainty.

Please also note that my method being used here of trading fake breaks & reverses with cautious trade management requires me often to have multiple goes to realise a profit; it took two trades today and five yesterday (see post #450) to net two winners overall. That's a trade success rate of under 30% but it also had no losers, 5 scratches and 2 wins. If I had not moved the stops up to breakeven I would have actually had an outcome of 2 winners in 2 trades over these two days. I trust you can see that your precise trading method can make a big difference to the outcome of your trading over the exact same market action. You must ensure you utilise a method you are happy with, I prefer to be cautious and accept the reality of many frustrating scratches as a consequence of this. You will have a different psyche and must trade accordingly.

After an excellent week to date, I will treat myself to tomorrow off and a long weekend instead.
  • #458
  • Jan 26, 2022 3:24am Jan 26, 2022 3:24am
Hello fellow old trader!

I was wandering thru the FF wilderness and saw the ligth from your abode. Thought I'd pop by and say hi. Congrats and fingers crossed on your keeping this place an informative yet peaceful thread. As far as I can tell, no sign of ego flaring and name calling Like owner, like thread, I suppose.
Myself, I am of the old gen now, I suppose, entering my 6th decade. Tradewise, I use a minimal set of tools, on M5, mainly candles breaks as triggers, %risk as entry/exit, average range, MA. I admire the skills it takes to trade on M1 using volume and order flow footprints, etc... If I were more proactive... It's like watching talented athletes or performers, impressive as a spectator.

Anyway, thank you for reading, hope you don't mind if I drop by sporadically. I am a lousy/lazy explainer of my own trades, so it would be just to check on yours and maybe concur if I'm lucky lol

Cheers!
  • #459
  • Feb 1, 2022 3:08am Feb 1, 2022 3:08am
Hi all,
I'd like to show you my trade this morning as an illustration of how my method has (I like to think so at least!) an inbuilt measure of safety incorporated in it so I can be OK even when my market analysis is actually wrong:

Attached Image


The market opens at 8am with a big run up, finally topping out at 86 before dropping sharply to a low at 57, these extremes marking out my first consolidation box as shown in orange on the chart. We see an attempted rally above 70 before a renewed drop to the 50 level. Because of the big opening upward surge I am inclined to be looking for a long and so as the test of 50 immediately bounces back up to my consolidation box I am happy to try a long at 57. The stop at 45 is below the 50 low and the 1R target at 69 is easily achievable if I am right. I do indeed rapidly get my profit and am out, then watch to see the market roll over above 70 and fall to fresh lows below 40.

So I was actually wrong in thinking the market was still bullish, it was actually rolling over and made a new low before it made a new high. But, because my method operates on tight stop/small target basis, I am not greedy for bigger profits, and I am willing to try to enter at the edge of my perceived consolidation ranges rather than wait for the presumed confirmation of a fresh breakout, I am still able to turn a profit on a market analysis that was actually wrong.

Now, please be clear, I am not advocating that what I do is a great method, it isn't, it is just a reasonable method that happens to suit my psyche and the way I look at markets. The point is that it is a conservative method with a measure of safety built in that allows me to profit rather than lose when trades are not perfect, as here. It probably accounts for most of the net edge my method generates for me, it certainly doesn't come from any genius of my market analysis. Whatever method you use, it is a good idea that it is robust in this way, that you can often still win or at least lose less or scratch when the market proves your idea wrong. You really don't want to be relying solely on your having a superior market analysis, that is something rather hard to obtain and then sustain over time.
  • #460
  • Edited 2:56am Feb 4, 2022 2:46am | Edited 2:56am
Hi all,
I'll finish the week with a quick post highlighting the value of trading with the trend:

Attached Image (click to enlarge)
Click to Enlarge Name: Germany 40_20220204_08.29.png Size: 28 KB


Market opened at 8am in an obvious downtrend, actually had been steadily dropping from the 15500 level at the start of pre-market trading at 7am. Thus I am really only interested in a short right now, it is unwise to try to fight such a strong trend. I wait for a modest consolidation to form in the 90-70 area as marked in the orange box on the chart. We first see a dip below 70 and quick rebound but this is a setup to ignore today due to the strength of the trend. Soon enough there is a similar failed test at the other end of the box above 90 and this time I am happy to try a short at 87. An immediate +1.25R profit is taken at 71, not wanting to test the bottom of the box. This proves to be a rather overcautious move as the market continued to race down with the trend to the 15230 level, leaving a modest 140pts or almost 12R of extra potential profit on the table. Moving the stop to breakeven and then letting it run with a trailing exit would have been the smarter thing to do here.

That disappointment aside, the point to note is that whenever you see a strong trend you must only trade in the direction of the trend, it is indeed your biggest friend. Taking the first setup long and trading without a stop would have been rather expensive this morning!
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