Kefada's Trading Chronicles

I have been trading for a while now. About a year. Not long enough to be called a veteran but I guess it's long enough for me to have enough knowledge and experience for me to be able to write my own journal.

I guess I should start by recapping the previous trading year.
I first became interested in trading at the end of December 2020, seems like yesterday, I cant believe we are now in 2022. Like any other typical beginners, I entered this 'game'(I viewed it as a game when I started out) with wild dreams. I wanted to get rich quick which meant I had unrealistic expectations and wanted unrealistic accuracy from poor systems I found on YouTube (I currently believe there is no good trading advice, system or traders on YouTube, they are all trying to sell something to gullible new traders, I almost fell for it as a new trader - 'almost' because I never bought a single course probably because I like reading than watching, I have seen my friends who are starting forex fall for courses though and its impossible to change their minds that they are better off without the courses from gurus and signals)
I obviously made all the mistakes new traders make, jumping from system to system, following tips and signals, no money management etc. (I probably still make some mistakes but I know I am better than when I started out)

As I writing this journal I guess I should link some trading journals that shed some light for me on the truth about trading.
Clemmo's Trading Odyssey
Profit Farmer's My Way To Highway

I guess they are not as many as I thought they would be, I will add forums and posts that helped me out then
The Finance Book Club
Objective Thinking and Trading

LOL, I swear I thought there were loads of them. I spend so much time reading posts on this site and this is the list I could come up with? Honestly, most of the posts here is garbage but you will occasionally find gold in the trash. I'll add more once I go through my FF notes.
I aim to provide gold for myself and anybody who'll ever read through my posts. I'll only post what I have independently validated. I am not an expert but an honest trader trying to survive and ultimately make profits trading.

The following are the evaluations that I should do before using any trading system
-The system should be simple (simplicity in design)
-should not have loads of variables (not too flexible)
-Clear entry and exit rules
-This is not a must but I like systems that don’t use indicators, if they do should only have few indicators preferably only one and with no adjustable parameters (I haven’t come across such an indicator yet)
-Small stops(it manages loses well, reduce stoplosses as the trade goes my way, and sensibly small stop losses if it goes against me or shows when to exit if a trade goes wrong)
-Clear on when to take profits, obviously a good avg win to loss ratio
-I personally prefer trend trading but I could adopt counter trend if I find a simple counter trend system that fulfils the above requirements
-I want to gain enough experience and knowledge to be able to develop my own systems and also automate them
Since I am yet to do that I tend to avoid that are being sold or overly popular

Just finished reading a book, The Universal Principles of Successful Trading by Brent Penfold, and I realized although I have had a good run the past few months, I have been trading blindly without knowing my probabilities like risk of ruin, expectancy, win to loss ratio.
I’ll no longer trade ignorantly. I recommend everyone to read this book.
Here is a good summary of the book, I recommend reading the summary after you have read the book for yourself Summary

Risk Of Ruin
-It’s the statistical concept that tells traders the probability of them being ruined—This accumulative loss is referred to as the ‘‘point of ruin.’’
-Should always be at 0% or close to 0%
I’ll be using the following formula

U for me = 25 (which is the number of units I am using in my fixed units money management system)
Why 25? Because, without considering any more factors Risk of ruin of a system with an accuracy of about 53% is reduced to 1% at around 20units

Attached Image (click to enlarge)

Now let’s also consider any other factors that affect risk of ruin
1. Accuracy
The more accurate your method is the lower your risk of ruin
The image below shows the effects of raising win rate from 56% to 63%,
1% Risk of Ruin now starts at 9units

Attached Image (click to enlarge)

The system I am using the creator(Ralffe) claims that it has a 80% to 90% accuracy on the daily chart and reduces as you lower the TF. I have been using it for a year and I doubt if this statement is true, I think its around 70 to 80 percent on daily but I’ll calculate this accurately later on.
Link to the system: SAFE - KISS

Another factor is:
2.Average Win to Lose Ratio

Attached Image (click to enlarge)

Preferably a risk to loss ratio above 1.5, I’ll do a min of 2.0 to be more safe (I believe my system can achieve this but I’ll collect data to check my systems numbers later on)


Limitations of Risk of Ruin
• It is only a statistical measure and it doesn’t guarantee you’ll avoid risk of ruin because it’s dependent on its inputs. If they suffer, so will your account
• It is not static and changes from trade to trade
• It has no practical value for actual trading.
• Don’t trade if your RoR is above zero


Positive Expectancy
-Another statistical measure I should always know
- refers to what I can expect to earn, on average, for every dollar I risk in a trade.
Expectancy Formula

- To be able to calculate methodology’s expectancy, I need to know how often I win and also lose, the size of my average winning and average losing trades
- Expectancy trumps average win to loss, and accuracy
- A system can have a high expectancy if it has a high win to loss even when it has low accuracy as long as it finds enough opportunities to trade.

We all know that the holy grail doesn’t exist but:

Attached Image (click to enlarge)

-The author recommends doing something called TEST (Thirty Emailed Simulated Trades) but I’ll just do backtests using the Soft4fx program.


MONEY MANAGEMENT
-I’ll use the fixed units money management strategy and if I am able to grow my capital, I’ll switch to fixed percentage.
I’ll obviously have max total risk which will be a %ge of the account balance (I think 5% is good) and determine if I’m still within my risk capital limit.
Fixed units formula

Attached Image (click to enlarge)

Fixed Percentage Formula
- trade less (reduce position size) when you lose and trade more (increase position size) when you wi
So as to be able to
-survive by avoiding risk of ruin
- earn big profits by generating geometric profits
-Obviously drawdowns will be recovered slowly due to asymmetrical leverage during a series of losses (ability to recover from a loss decreases with each loss)

Attached Image (click to enlarge)

Attached Image (click to enlarge)

TRADE PLAN
-I also need a trade plan (trading business plan) but I won’t display that for the public
· Clear instructions on how to enter, place stops, and exit
· Should be simple and clear
· Validated using TEST (I guess Demo/Real Live trading could validate too)
· Calculated risk of ruin

Since I am a mechanical trader/ automated mechanical trader, I have to follow a rigid inflexible plan
·Rules-based strategy which may not be deviated from
· No discretion (Remove all/as much discretion as possible)
· No subjectivity
· Automatic and Systematic
· Must take all trades dictated by the system
Following these will make it easy to automate the systems
-For this to work I need to be
· Disciplined
· Consistent
·Don’t forget about Maximum Adversity (I guess this means I should be pessimistic)
· Think for myself (Just because someone, an ‘expert’ or the majority believes it doesn’t make it true)
· Validate Independently
· Remain a skeptic until I validate it
·Try everything(methodologies,ideas,theories,money management) and discard what doesn’t work(I could make a huge list of the things that I found don’t work in my one year experience with the markets).Knowing what doesn’t work in trading is almost as good as knowing what works.
· Avoid predicting the market.
- Astrology
- Gann
- Geometry
- Cyclic Analysis
- Elliot Wave Theory
- Fractal Analysis
- Fundamental Analysis
· Avoid the intellectual trap
- The appeal and challenge of solving the markets puzzle where one believes complexity is the best (I have learnt from experience and some people/books that the market is mostly random so there is no ‘puzzle’)
·Avoid having too many degrees of freedom
- Supports dislike for indicators
-Most indicators are derivatives of price that contain adjustable parameters (an abstraction on top of an abstraction)
·Ensure logic supports your methodology
- I should research on momentum, I could use it as evidence/logic here
· Keep it Simple
- Minimize parameters
- Basic simple systems work best
·Use Stop Loses
- Initial, Trailing, BreakEven, Dynamic or Time Stops
-Avoid Large Stops
· What about TakeProfits
- This one is not a must if the strategy has an exit like the system I am currently using

PSYCHOLOGY
·Manage the four horsemen of trade ruin
- Greed
- Hope
- Fear
- Doubt
·Psychology is the glue that holds money management and methodology together.
·The consensus view is you need ‘unlock’ your subconscious mind to unlock your potential which is bullshit. The talk of ‘limitations’ and ‘unlocking’ your potential is silliness.
·Psychology only becomes an issue when ‘the subconscious mind is not satisfied that the trader knows what he or she is doing on the conscious level.
-Most traders are clueless - and the subconscious will let you know about it.
· Hope happens when not using correct MM and expectancy.
· Greed happens when you want unrealistic expectations and unrealistic accuracy
· Fear is caused by the pain brought about by the markets maximum adversity. Reduce fear by systematic trading
· Doubt is brought by being clueless. I guess being clueless brings all these.

Pre-Order Placement Checklist
-whether a setup exists
-my entry and stop levels
-my exit instructions
- the dollar risk per contract/position size
- whether I’m within my financial boundary’s risk capital limit
- what my position or trade size is.


· Debit my profit and loss spreadsheet with my expected loss. At this point I should have accepted my expected loss.
· Focus on risk management, rather than how much money you can make trading

Prepare A Monthly Report
·Summary of Financial Benchmarks
·Monthly Trading Result
·Accumulative Result
·Account Balance

I now need to do backtests of my system to have enough data to calculate my probabilities.
I want to trade 3 TFs, Daily, H1 and H4.
I am going to backtest the year 2020 since I didn't trade that year.
I'll backtest each timeframe separately while ignoring other timeframes (Not sure if this will be an advantage or disadvantage though).
The data collected will be used to determine the probabilities...This will take a while especially the H1 TF

I f'd up a bit. Forgot to save the backtest simulation before closing so I can't continue where I stopped at. I was testing the SAFE-KISS strategy on H1. The plan was to to do a complete year backtest of 2020. I was done with 5months before closing. I guess thats enough data to make decisions. Things werent looking good. Expectancy was negative -$27 for every dollar risked. The risk reward ratio was also low at 0.9. Obviously risk of ruin will be high with these results so it's obvious this system cant be used on the H1 chart. Yes Ralffe warned about using other TFs other than Daily but I have to confirm for myself. Next I'll test H4 and then Daily.

I was trading a standard lot, no risk management and all trades were taken regardless of the risk. Total P/L for the 5 traded months was about -$20000. Definitely a red flag.

My Huge confidence in the system is starting to dwindle but maybe switching to higher TFs where false exits and entries are supposedly(I haven't confirmed this) less will increase my confidence.

It's been 3 months since I wrote anything here.

Well, life took an unexpected turn. I am now more of a freelance programmer than a Forex trader. I have been working for @Clemmo17, creating mql4 bots for him and I realized I have a knack for it. I guess I have always had a knack for it since I began programming 10years ago, just for fun but I have never got paid for it before.

Currently, I can only code in MQL4(the languages that I can use in trading). I am currently learning and practicing C++ so that I can also learn MQL5. Later on I might add Python and Pinescript. I can already program in Java but I am not sure if it can be used in financial markets.

I've been thinking about my future with the financial markets. I am now switching to trading using mostly EA's. So I'll spend most of my time creating and testing bots and trading the ones that show promising results. I could use the conditions from the previous post to determine whether EA's are ready for live accounts. I guess I'll use my programming skills to fund the accounts.

Wishing you all the best for every step of your journey.

Hello all,
I'm looking to learn MQL5 and was wandering if anyone can point me to a good course. I have coded few things in Pine Script, but rather basic stuff. I do have some basic understanding of coding in general.
Many thanks!

Thanks

The only books in mql5 I could find are by Timur Mashnin and Andrew R Young. They are good for learning basics but they are a bit outdated.
I would recommend learning C++ first as that is the language MQL5 is based on.
You will find links to the books, user guide, mql5 reference in the link below https://www.mql5.com/en/forum/224425

Thank you, will have look at those.