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Are you sure you're a Day Trader?

  • #1
  • First Post: Edited Mar 23, 2016 3:36pm May 26, 2007 9:44am | Edited Mar 23, 2016 3:36pm
I recently happened upon a website that the article below was taken from. Whilst written from the perspective of an equities trader, for me the questions raised still apply to FX afficionados. I am essentially a fledgling trader, and to-date moderately successful, despite the fact that I often lack the confidence and conviction that my successes were as a result of my own correct technicals and fundamentals analysis. Consequently, after reading this guy's article, I found myself asking the question; "'is my psychology suited to the short time frames I am trying to trade?".

It is my aim to start a personal league table of my day trade results versus what I might have achieved by taking the longer term view. I will then, depending on results, stay as I am, change tack or cut my losses accordingly.

I hope some of you find this guy's reflections as equally thought provoking as I did.

{ copyrighted content deleted by staff }
  • #2
  • May 26, 2007 10:31am May 26, 2007 10:31am
Nice story, very informative and well written

Unfortunately, I cannot fully answer your question at the very moment, cause I do not focus on one time frame, there are trades that go back as far as last two months, there are trades that I close after half an hour, it's all about following my trading plan.

Of course trading lower tf's is harder than daily or weekly charts, but as long as I'm disciplined, it works and makes profit
  • #3
  • May 26, 2007 10:45am May 26, 2007 10:45am
Quoting Dexis
Nice story, very informative and well written

Unfortunately, I cannot fully answer your question at the very moment, cause I do not focus on one time frame, there are trades that go back as far as last two months, there are trades that I close after half an hour, it's all about following my trading plan.

Of course trading lower tf's is harder than daily or weekly charts, but as long as I'm disciplined, it works and makes profit
Dexis, assuming that you are successful, it seems to me that you are one of those blessed traders. Able to identify a trade no matter what time frame.
I am passionate about FX and along with many others would pay handsomely for a bottle of the type of nous you obviously possess.

Thanks for your reply.
  • #4
  • May 26, 2007 11:57am May 26, 2007 11:57am
Aye good article, I'm still unsure to tell the truth, while I have great success demoing on the lower time frame charts. I have yet to prove that live. I do think it might be good for me to at least demo on some longer time frames and check the results.

I currently stick to 4h or less, although I do look for daily support, I currently lack the patience for the long term trades, but I'll get there. I'm still going through the fear/greed part, just opened my live account less then a month ago after demoing for year. It's sickening how many killer trades I've pulled out of because of fear, even when my system told me to stay. If I would have stuck with the trades I started, I would be up well over 1,000 pips this month, instead I'm down 90. I was told by many how different it is live even when it's a dollar per pip. I wish I would have given the advice more attention, I kind of had the attitude "not me". But I know what the problem is now and I'm trying to get a handle on the problem. At least I know my money management and technical part of my trading are sound. I've found you can have a great trading strategy and money management, but with out conquering your emotions it's all meaningless.
  • #5
  • May 26, 2007 2:41pm May 26, 2007 2:41pm
Quoting shadeslay
I currently stick to 4h or less, although I do look for daily support, I currently lack the patience for the long term trades, but I'll get there. I'm still going through the fear/greed part, just opened my live account less then a month ago after demoing for year. It's sickening how many killer trades I've pulled out of because of fear, even when my system told me to stay. If I would have stuck with the trades I started, I would be up well over 1,000 pips this month, instead I'm down 90. I was told by many how different it is live even when it's a dollar per pip. I wish I would have given the advice more attention, I kind of had the attitude "not me". But I know what the problem is now and I'm trying to get a handle on the problem. At least I know my money management and technical part of my trading are sound. I've found you can have a great trading strategy and money management, but with out conquering your emotions it's all meaningless.
Just remember that everyone goes through this bit of anxiety. I don't care who you are, but every trader I've talked to about how they started, they all had that initial nail biting experience (myself included of course). It's more of an exercise in trusting yourself, trusting your judgment of the system you picked, and trusting your discipline to carry through with it. Be aware of the person who trusts themselves endlessly, they have the strength to do anything.
Never underestimate the powers of the Force.
  • #6
  • Edited May 27, 2007 5:47am May 26, 2007 2:43pm | Edited May 27, 2007 5:47am
There is one thing I would like to share with you guys, it's a simple excel sheet, and it takes only 2 minutes to enter the data.

Once you open the document you'll find three columns

1. Trade Number [nothing to be changed here ]
2. Profit pips [enter the numerical value of profit/loss of the trade, for example 5 or -2
3. Enter the maximal amount of pips that could have been squeezed from the trade for the time period (for example, you profited 4 pips, but if you were to hold, the maximum profit would be 9 pips.) (assuming you are daytrader the period would be 1 day, hence time frames from 1minute to 1hour in metatrader)

http://img512.imageshack.us/img512/1186/effiab8.gif

BOTTOMLINE >>> TRY TO KEEP THE EFFICIENCY PERCENTAGE MORE THAN 20%. Yes, it's that simple, try to keep it more than 20%, that's all

Here are the promised % interval descriptions:

0 - 10: You are quite good at entering the trade, but it seems that you are happy just by getting a few pips and getting out. The market has a lot more to offer and single or multiple losses will hurt your account for sure. Try to squeeze a little more from the market by waiting a bit longer, moving your SL according to price action. Also, it's a smart move to look for better entry positions.

10 - 30: You know when and why enter the trade, you as well try to analyse why order should be closed or SL to be moved, not to mention your exits are logically explained, meaning your account will grow and single loss trade will not affect your account in the worst way. Multiple losses, though, can do more harm and they should be avoided. Having that in mind, filter out and trade only high-probability trades, keep your cool and keep your patience, move SL, TP targets, use trailing stops to get to the next level.

30 - 60: That's the spirit! Having multiple consecutive wins and a few small losses, you let your profits run, cut losses short, your P/L statement is happy, you know the psychological part of trading, the drawdown of account is small, and you are trading your way to financial freedom. I have'nt proven this yet, but I believe most of succesful traders belong right in this category.

60 - 90: This is the interesting part. You almost perfectly enter the position and almost perfectly close it. Losing is the word you don't know, and even if there is one or two losing trades, the losses are so small your account drawdown should not be more than 2%. If you really can go this far, you can start using higher leverage and make your journey faster, much faster. If you manage to keep yourself in this interval after 100's of trades, you are already a millionaire.

90-99: I personally don't believe anyone can reach such heights. If you belong here, it means 99% of your trades are profitable and you enter and close them exactly where they should be entered and closed.

100: You are the market.

Comments always welcome
Attached File(s)
File Type: zip Efficiency.zip   3 KB | 521 downloads
  • #7
  • May 26, 2007 4:31pm May 26, 2007 4:31pm
Quoting Dexis
BOTTOMLINE >>> TRY TO KEEP THE EFFICIENCY PERCENTAGE MORE THAN 20%. Yes, it's that simple, try to keep it more than 20%, that's all
Huh. This is interesting, because your losses get counted in the final efficiency score (theoretically, you could have a negative efficiency with enough losses), so not only are you trying to get a decent chunk of the market movement, but you want to limit losses as well.
  • #8
  • May 27, 2007 4:26am May 27, 2007 4:26am
Thanks for the spreadsheet Dexis. I'll give it a try.
  • #9
  • May 27, 2007 5:48am May 27, 2007 5:48am
I have updated % interval descriptions, please look above to my previous post.
Thanks and happy trading
  • #10
  • May 27, 2007 6:07am May 27, 2007 6:07am
Quoting Dexis
I have updated % interval descriptions, please look above to my previous post.
Thanks and happy trading
Dexis, a question for you about your example graph above. Have you included the spread in your pips profit (15)?

Also, if the trade goes the other way and you cut or get stopped out, how do you enter the figures in the spreadsheet. For example, -5 pips loss and max pips dropped was -30

Thanks,
  • #11
  • May 27, 2007 6:52am May 27, 2007 6:52am
Quoting goonergonebad
Dexis, a question for you about your example graph above. Have you included the spread in your pips profit (15)?

Also, if the trade goes the other way and you cut or get stopped out, how do you enter the figures in the spreadsheet. For example, -5 pips loss and max pips dropped was -30

Thanks,
The spread is included, it means that for example 15 pips profit is gross profit. In other words, do not mind the spread, just type in the profit or loss after the trade was closed.

Regarding the max pips, you need to enter the maximum profit that could have been achieved taking exactly the same position. Basically, there can only be positive values in the max profit cell. Let me demonstrate this by including a sample chart:

http://img508.imageshack.us/img508/9274/effi2ba2.gif


As you can see, the maximum profit from entry point was 79 pips, but let's assume trader has holded a position for a bit longer and ended up losing 48 pips.

The values are as following:
Profit Pips: -48
Max. Trade Profit: 79

If we enter these values in the spreadsheet, and if this is the first trade we get an efficiency percantage of -60.76% .

Market was ready to give you 79 pips since you entered the trade, but you ended up losing 48, the penalty is negative efficiency value.
  • #12
  • May 27, 2007 7:42am May 27, 2007 7:42am
Quoting Dexis
The spread is included, it means that for example 15 pips profit is gross profit. In other words, do not mind the spread, just type in the profit or loss after the trade was closed.

Regarding the max pips, you need to enter the maximum profit that could have been achieved taking exactly the same position. Basically, there can only be positive values in the max profit cell. Let me demonstrate this by including a sample chart:

http://img508.imageshack.us/img508/9274/effi2ba2.gif


As you can see, the maximum profit from entry point was 79 pips, but let's assume trader has holded a position for a bit longer and ended up losing 48 pips.

The values are as following:
Profit Pips: -48
Max. Trade Profit: 79

If we enter these values in the spreadsheet, and if this is the first trade we get an efficiency percantage of -60.76% .

Market was ready to give you 79 pips since you entered the trade, but you ended up losing 48, the penalty is negative efficiency value.
So, if you sold and it reversed almost immediately, say after 8 pips profit and you ended up with a -50 pip loss the values are as follows:
Profit Pips: -50
Max. Trade Profit: 8

Thanks.
  • #13
  • May 27, 2007 8:32am May 27, 2007 8:32am
Quoting goonergonebad
"'is my psychology suited to the short time frames I am trying to trade?".

It is my aim to start a personal league table of my day trade results versus what I might have achieved by taking the longer term view. I will then, depending on results, stay as I am, change tack or cut my losses accordingly.
If you plan to stick only to longer term forget that table. It's a totally different approach. You'll have obvious entry/exit points targeting at least 50 pips. Now I trade daily from H4 and Daily and if I decide to enter a trade that gives about 50 pips I get those pips because that is so obvious, if it is 200 I take 200. No more cat and mouse with volatile moves out of nowhere on M1, M5...

If ure interested I can explain later but if you read this you should also get the picture: http://www.forexfactory.com/showthread.php?t=27286
  • #14
  • May 27, 2007 8:46am May 27, 2007 8:46am
Quoting goonergonebad
So, if you sold and it reversed almost immediately, say after 8 pips profit and you ended up with a -50 pip loss the values are as follows:
Profit Pips: -50
Max. Trade Profit: 8

Thanks.
It's exactly as you described
  • #15
  • May 27, 2007 8:59am May 27, 2007 8:59am
Quoting Hadrys
If you plan to stick only to longer term forget that table. It's a totally different approach. You'll have obvious entry/exit points targeting at least 50 pips. Now I trade daily from H4 and Daily and if I decide to enter a trade that gives about 50 pips I get those pips because that is so obvious, if it is 200 I take 200. No more cat and mouse with volatile moves out of nowhere on M1, M5...

If ure interested I can explain later but if you read this you should also get the picture: http://www.forexfactory.com/showthread.php?t=27286
Hadrys, may I ask what your typical R:R ratio is when taking a trade? And what do you describe as "so obvious, if it is 200 I take 200" ? How do you know it's gonna be 200 and not more?

Thank you, and happy trading
  • #16
  • May 27, 2007 9:41am May 27, 2007 9:41am
Quoting Dexis
The spread is included, it means that for example 15 pips profit is gross profit. In other words, do not mind the spread, just type in the profit or loss after the trade was closed.
Yeah, the traditional "efficiency score" I've seen is basically the amount of money you gained (ie: sum of wins minus all losses) divided by the amount of money you gained plus money you would've had if there were no spread and no commissions. What the traditional efficiency does is measure how much money you're wasting due to over-trading (usually a problem with scalpers). Usually, you'd want this measure of efficiency to be at least 65-70%.

However, I find your measure of efficiency a little more useful because it factors in how much of a trend move you're catching, how much opportunity you've lost by cutting profits short, and how much your losses are cutting into profits.
  • #17
  • May 27, 2007 9:57am May 27, 2007 9:57am
Quoting bluebuddha
Yeah, the traditional "efficiency score" I've seen is basically the amount of money you gained (ie: sum of wins minus all losses) divided by the amount of money you gained plus money you would've had if there were no spread and no commissions. What the traditional efficiency does is measure how much money you're wasting due to over-trading (usually a problem with scalpers). Usually, you'd want this measure of efficiency to be at least 65-70%.

However, I find your measure of efficiency a little more useful because it factors in how much of a trend move you're catching, how much opportunity you've lost by cutting profits short, and how much your losses are cutting into profits.
Thank you for insightful comments, bluebuddha
  • #18
  • Edited 12:06pm May 27, 2007 11:29am | Edited 12:06pm
Aye it's a good method, it's how I enter in my trade journal. Total move, how much I caught, what mistakes I made and what I could improve. I like to keep it detailed so when I go over it I know what motivated me to trade the pair and how I faired.

Currency –
Time (entered/exited) –
Entry Signal –
Enter/Exit – 1.3356/1.3386 (30)
Total Move – 1.3356/1.3398 (42)
Mistakes made? -
What can improve? –
Exit Signal –
  • #19
  • Edited 12:44pm May 27, 2007 11:57am | Edited 12:44pm
Guys, you can as well open up your account history and enter the last 10 or 20 or maybe 50 trades (the more the better, altough it would take some time) to get the picture where you are and what needs to be improved
  • #20
  • May 28, 2007 2:55am May 28, 2007 2:55am
Quoting Hadrys
If you plan to stick only to longer term forget that table. It's a totally different approach. You'll have obvious entry/exit points targeting at least 50 pips. Now I trade daily from H4 and Daily and if I decide to enter a trade that gives about 50 pips I get those pips because that is so obvious, if it is 200 I take 200. No more cat and mouse with volatile moves out of nowhere on M1, M5...

If ure interested I can explain later but if you read this you should also get the picture: http://www.forexfactory.com/showthread.php?t=27286
Hadrys, I have not tried longer term trading yet, but I intend to run a demo account in parallel with my live account where I make several small trades each relevant day (not today though). I understand your point about the spreadsheet with regard to longer term validity. I see Dexis table as a way of confirming to me if I am really hacking it on the shorter term stuff.

I will check out the thread you advise as I actually think I am probably better suited to the longer term trades.

Thanks
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