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

Hi ikdenk,
That is one of the most gracious posts I think I have ever seen.
Thank you for taking the trouble to explain rather than react, and please accept my unreserved apologies for negatively misinterpreting your comments.

To answer your query about my having a 'one and done' attitude towards my trading sessions, yes indeed, I usually stop if the first trade is a winner. My financial ambition is just to get one net winning trade a week. Over a year that is 50 net wins, and at my 2% per trade account risk that is a 100% return on the account. So a winner on the day is a big step in such ambitions and I will stop at that point.

If I am to be completely truthful, however, I also tend to stop at that point as I find I get too defensive thereafter, wanting to protect that realised profit rather than trading naturally. That is a bad mistake, I think, so I just stop. You should treat each trade as a completely independent event but, human emotions being what they are, I find that difficult at least intra day.

Of course, I have many days where I start with a loser (I think my record is 11 days in a row!). Then I will trade on to try to get to a scratch on the day and come back tomorrow. If I really find I don't feel in tune with the market I'll just stop with the loss. If I end up with multiple net losers on the day, all I try for is to keep that net down number as small as possible. You want at all costs to avoid the massive blowout day, whether by taking a huge loss on an individual trade (that is faulty risk control and is a 100% no-no) or by a large number of individual losers. Losses and losing days are inevitable, just try to keep them small so the recovery is entirely and easily achievable in the days ahead.

Hi all,
Before I start trading this morning, I would like briefly to return to Medici's above question from post #515 that on refelection I do not think I really gave quite a full answer to first time, especially with respect to mechanical system trading.

I do not trade a mechanical system essentially because I find them too inflexible for the job in hand. The market is seemingly different every day though many price patterns and structures clearly repeat over and over through time. Same dog, different fleas, springs to mind! The problem is that they seldom exactly repeat and how they repeat changes with the market context that day. A mechanical system is, by definition, rigid rule based and I don't think can really cover all the possibilities without having so many rules & caveats that it is rendered rather useless. I have tried many times to develop mechanical systems as they have the huge advantage of taking emotions largely out of trading but, paradoxically, I think you need the emotions (or subjectivity at least) to interpret all the myriad of subtle differences the market presents for essentially the same pattern that I am looking to trade. Maybe AI will help, I don't know but I'm probably too old a dog (hopefully not with fleas though) to learn a new trick like that now.

Mechanical systems can work but you have to accept they are often not perfectly in step with the market due to their inherent rigidity, so you will have periods of perhaps large and prolonged drawdown due to this, e.g. a mechanical big trend following system in a churning market. I like to avoid significant drawdown at the acceptable cost (to me) of leaving a lot on the table. My psyche is more like a little sparrow nipping in and out quickly to pick up easy and consistent scraps, rather than a big crocodile who feasts large once every few weeks and stays without eating the rest of the time. A terrible analogy, I know, but I hope you get the idea, I can't immediately think of anything better!

Hope that helps.

Hi all,
All the talk in the early posts this morning about losing trades was bound to hit home and, inevitably, today began with a loser but happily later recovered; a good example of how your setup can't work every time:



The market opens above 22900 but immediately collapses to the 740 area where it looks to have double tested the low before heading back up. The double test and strength of the bounce to 860 interests me in a long - much the same as yesterday's successful chart look. A retracement that takes a double look at the big figure 800
level looks to fail and I am happy to try a long at 17 with a wider 20pt stop again in these volatile conditions. The stop is below the 00 level and the 1R target of 37 is well below the prior local high. So looks fine but is immediately blown away by the collapse in the very next bar and I am stopped for a -1R loss in no more than a minute! It looked a good entry to me, they can't all work. Please note the value of having and respecting the stop loss at 97 - the market fell directly to 13 before a bounce. That would be a -5R loss, you can't be taking hits like that and hoping to be profitable over time.

My incorrect market view causes me to stop and watch for a while, to get in step with the market if possible. We see the market enter a churning phase with several highs above 760. The inability of the market to hold past this mark - I count five attempts - eventually tempts me into a short at 55 on the fifth reversal. This happily wins me 1R at 35 and I call it a scratch halt for the day. Nothing gained but at least nothing lost, there will be chances for profit next time.

I should mention - apologies that I forgot to yesterday - that when adjusting the stop to 20pts rather than my usual 14pts, I also reduce the trade size by the same factor, i.e. by about a third. This means 20pts gained or lost at the smaller size has the same cash value as 14pts gained or lost at my usual size. I want to keep the risk exposure at 2% of the account per trade so trade size has to adjust in parallel with stop size. It is an important part of risk control.

great write up. thanks for sharing!
regards
goma

I am happy we have cleared up our misunderstanding.

Thanks for confirming that you stop trading after an initial win. I think that is one of the keys to profitable trading. Totally against the br0kers' interest of course, they want you to keep trading, hence always advertising 'opportunities' to trade, ever increasing instruments and now 24/7 Bitcoin trading (just think of the spread they are raking in there).

Thank you, it's a topic worth returning to as it's at the core of being able to trade with consistent profitability. So I thought I should add a few words on that. My simple view on the topic is that

Consistent profits require consistent behaviour, but such consistent behaviour doesn't come from mechanically and unemotionally following mechanical rules.

Why? You explain that well:


Which is why

Discretion, to a large part based on feelings and intuition, is required in order to be able to behave consistently.

Again you put that very well:


Yet

A system or strategy is required as a lens through which to understand the market, and to plan one's actions.

This in order to balance emotion and intuition with reason and a planned approach. And such a system can be based on a naked chart or indicators, but a deeply researched and forward tested system it has to be.

Still one needs in every moment to be watchful as to whether one is in sync with the market or not. And you put it so well in a recent post:


I have also dabbled in system development, and even been able to construct some really worthwhile ones. And I have to confess that all futures systems have been based on non-standard (i.e. not time based) chart types, so either tick charts or range bars. I've traded options using naked charts, but that's a different game than directional trading. And I have difficulties understanding why almost all the system creation efforts here on FF focus on time based charts and oscillators. Maybe someone could explain that.

Just to make the point, I thought I should share a chart of a 'system' I put together yesterday after being done for the day. It's based on Renko bars and trades Nasdaq e-mini futures. The snap below is of the US cash session yesterday and the time is Paris time. Looking at it I wonder - why make things more difficult than this?

Hi all,
Today's trading is an interesting comparison between caution and missed opportunity, all rather depending on your psyche:



Market opens at 8am and immediately collapses. There are a couple of failed bounce short opportunities around 23100 and 23050 on the way down but I am a bit too slow and cautious for them in this volatile opening. We then see a decent bounce from the low at 22970 up to 23050. I am not convinced the down move is yet over, so when price stalls around the 50 level for three successive bars then tries to push to 60 but fails I am happy to try a short at 50, with a wider 20pt stop and target again today. I watch the market immediately push up again to 68, just 2pts short of my stop at 70. It then reverses sharply and I am able to cut at 46 for just 4pts, 0.2R. Naturally, the market keeps then reversing back to test the old lows at 970, and subsequently moves even lower.

Had I held the trade there was a big profit available, it's 4R to the 970 low for instance. But I cut essentially for a scratch because I was so nearly stopped out for a 1R loss. Over cautious? Very possibly but it's a rule of mine not to try to make a silk purse out of a sow's ear. If the market proves you wrong - or at least your timing is out - then don't sit and insist your trade will be a winner, just cut it for a scratch or small loss if you are given the chance. I was here and I took it gratefully. It was the wrong move here, my original analysis was ultimately correct, but I have found that in such cases the market move is usually telling you your analysis was wrong and so my mentality changes from looking for a winner to trying to mitigate a loser.

It suits my cautious trading personality but it may not suit yours, many would have held on and be smiling now. I really don't mind leaving the profit on the table, it's the price I'm happy to pay for caution, it would really upset other traders with a different psyche to mine. You have to know what you are and structure your trading accordingly if you want to minimise internal emotional stress - and there is a lot of that in this game!

Hi all,
Quick trading day today but, despite being all over in under 50 minutes from the open, a reasonable illustration of patience and trade set up:



Market opens at 8am with some wild straight line moves that, despite me wanting to get involved, offer no obvious entry set up that I am looking for. I watch a few mental winners pass me by but I really want to stick to my method so I do my best to grin and bear it. Eventually, the market settles into a consolidation pattern in the 790-740 area and I note two attempts to get past 80, which also happens to be the prior high area since the open. All this resistance encourages me to look for a short, and on the third failure to do so in the consolidation pattern I am happy to try a short at 75. The stop is a wider 20pts again to allow for the higher volatility, putting the stop loss above prior highs whilst the 1R target at 55 is well inside the range, all good. Fortunately, it works quickly and I am happy to take my 1R at 55 though braver traders could have held on for a test of the range lows at 40.

This was a slightly risky trade as a push up to test the big figure 800 was always on the cards (it did so, bouncing off 40 to 840 shortly afterwards) but you generally have to take a speculative view at some point, the market is rarely that obvious in wanting to give you free money! If it had lost, then que sera sera, and console yourself that you were willing to take the chance and you at least followed your method diligently. They can't all win, that is why you bet small, practise sound risk control, and try to adopt a stoic type attitude to it all.

Hi all,
Quick early trading again today, the volatility in markets at the moment is presenting lots of opportunity. The two trades this morning are a decent lesson, first in frustration and then for mental flexibility:



Market opens at 8am, has a look below 22950 before a quick run to edge over big figure 22300 before reversing sharply back to 22940. This is typical market maker action trying to trigger buy stops at the round number 300 where they know orders sit, before reversing sharply to take easy money off the hopeful buyers at 300. Naughty perhaps, but all part of the game and you have to be wary.

Anyway, we sit and watch the market bounce off 40 to the 70 level before turning back down again. This looks like a failed bounce rollover that is my standard short entry setup, with a test and possible break of the 40 low to come. I get a poor fill at 55 giving a target of 41 (back to my usual 14pts stop today, volatility is a bit less than last week) just above the lows. I'd have liked a entry nearer 60 and so a target higher off the lows, and this proves to be crucial this time as the market gets me to 42, +13pts before reversing back up and causing me to scratch at 55. You can imagine I am a little frustrated - within 1pt of my target and a better fill on the entry would have seen me home with a quick +1R in my pocket. Still, it is what it is, so no hoping or cursing, take the scratch at 55. This proves wise as the market duly runs all the way back up to challenge the 300 level again. The scratch is annoying, to not tighten the stop to breakeven after +13pts and end up with a 1R loss would be reprehensible in the circumstances.

So, a scratch and a deep breath is taken as we continue to watch. The market makes a straight line run up to 300 where it unsurprisingly takes a slight pause. The strength of the bounce and run off the 940 lows convinces me the market wants to have a look at the prior high just under 320 so now I am happy to switch direction and try a long at exactly 00 as the pause reverses, stop 86 and target 14, still under the prior high. This time it works and I quickly get my +1R at 14; braver traders could have held on for more as the market ran up to above 40.

So, morals of the story today are to accept what the market does to you and keep to your method and disciplines, however frustrating it may be; and follow the market, do not predict it with a fixed view. I could have insisted the market was churning and wanted to go lower. This would have led me to a short rather a long around the 00 level and I would be nursing a loser. The market is always right, you are always insignificant in your views, so follow the market rather than your rigid beliefs!

Hi all,
An apparently simple trade this morning, but one that contains useful messages of entry patience and exit (over)caution:



Market opens at 8am with a run up to 23135 before reversing sharply into a downtrend. There is a clear failed bounce entry just before 8.30 at around the 23090 level but I pass on this one as there is important German PMI numbers at 8.30 and I do not want to be in the market until that is over and digested - the potential volatility around such numbers can too easily overwhelm my stop loss. No matter how committed a technical trader you may be (I trade 100% technically), don't let anyone tell you fundamentals don't matter; it is fundamentals that determine the market level at the end of the day, not squiggles on a chart.

So I sit and watch the 8.30 release not doing a lot to the market. There then forms a little consolidation in the 20-60 area but it is jumping up and down sharply so I don't rush to enter. Not until the third attempt to test the 60 level rolls over am I content enough to believe this is indeed a failing bounce and try a short at 52. I have my stop at 66 up above the prior bounce high, something that proves very handy as I have to suffer a final market thrust to 63 before the hoped-for reversal materialises. The decline is swift and I am happy to take my 14pt, 1R profit at 38, relieved that an 11pt move against me still delivered a final profit. I am not greedy in such circumstances when so fortunately let off the hook, but this time my exit was perhaps overcautious as the downward charge went all the way below the big figure 00 before staging another bounce. A lot left on the table but relief is more important to me than extra profit today, braver traders would have done very well indeed.

Don't rush your entries; sit, watch and wait for the setup to form as you want before jumping in. It is only natural to want to get involved as soon as you see a possibility but I have too many times seen the market do a last (or two) adverse gyrations and take out your stop before moving as you imagined to rush in any more. It still almost happened today despite my entry caution. Be patient and wait for the ideal setup, they are like buses after all - if you miss one, another will be along soon enough!