100 Trades Analysis

Quoting ItalianSharp

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good points.

nevertheless, keep in mind that being emotional is not bad. here is another myth about trading: those traders that are emotional, that get pissed off after losses or enthusiastic after wins are going to lose in the long run for lack of discipline. that is utter BS in my opinion. you can be emotional and disciplined at the same time.

Unfortunately you won't find many articles nor books that talk vastly about this issue.

Since it's christmas time and you decided to take time off the markets to enjoy some readings, here is a book that every trader should read:

Enhancing Trader Performance (Wiley, 2006) by Brett N. Steenbarger, Ph.D

This guy is awesome. I remember reading one of his articles about trading psychology and its 3 myths:

Myth #1: Emotions are at the root of trading problems.

Myth #2: Anyone, with dedicated effort, can get to the point of trading for a living.

Myth #3: The main cause of trading failure is a loss of discipline.


I agree with all of the above. There is one very successful trader I know personally that is VERY EMOTIONAL and at least once a month even loses his discipline and overtrades. I once saw him lose well over $7,000 in 2 hrs! He came back more disciplined after the weekend and made it all back by wednesday.

Myth #2 is also true. I dont think anyone can make it in trading. I think trading is like playing pro sports at the highest level. How many of us could possibily compete against Federer or Nadal in tennis? Or against the Bears defense in football? Or against Ronaldinho or Kakà in soccer? Just think about it. Trading is very difficult because when you start off as a newbie you must be able to play in the majors against the best traders in the world. There are no minor leagues were you can make some experience.

On a separate note, how are the books on candlesticks going?

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Quoting hilmy83

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The candlestick books are going great. I'm on 'more reversal patterns' chapter of nison's latest book. My God, 50% of this book is charts which i like

But the more I read and the more I look at charts, the more I LOVE candlesticks. My idea as of now is to look at the weekly for a set up and switch to daily for the trigger to trade. It's so simple. I just need more experience to come up with clever money management techniques to go with each patterns nison described in the book.

Since he said some patterns are more 'potent' than others, I feel I should risk differently for each pattern...man I can't wait for this f'ckin month to end so I can get to trading again

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Quoting ItalianSharp

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Yep, different position size for different patterns and setups is the key in trading.

Although the 1-2% rule or whatever other %s are good to start off for beginner traders, as you improve your skills and develop your trading style you should be able to identify those setups that give you a higher % vs those that give you a lower %.

For instance, when i trade countertrend setups i only go no more than 50% of my regular size. This is just a simple example, but position sizing is very important if you want to maximize your profits and become more efficient in your trading. It also is very dangerous to apply if you dont have a clear trading style tested out thouroughly.

I had some discussion with someone in the james16 thread a while ago about position sizing. This "i-know-it-all" trader recommended to use a fixed % of capital for each trade and adjust that % for every new trade.

If you choose to do so, you believe that every single trade you make has the same probability of success, which is totally unrealistic because market conditions change continuously.

For instance, the same pattern signal may appear and indicate trend continuation, countertrend, exhaustion of current trend, or simply choppiness. I personally find it insane to risk the same amount of money under choppy market conditions vs trending market conditions.

If you listen to those traders inamoured with the fixed % of capital rule, they'll tell you that each moment in the market is unique and bla bla bla...we can't predict the future based on patterns from the past, etc...

Although I believe each moment is unique, trading is a game of probability and our job as traders is to be able to objectively evaluate our probabilities at any given point in time. We shall evaluate our probabilities BEFORE we enter the trend and AFTER we have entered the trade and adjust our trade management accordingly.

The fixed % rule makes me feel like you are purchasing lottery tickets and you never know which ones are the winners...you are just spending money to participate in the lottery...

With all respect, those who use fixed %s of capital are either newbies or don't really know what they are doing with their system...i.e., they aren't familiar with their trading style and with the type of market they are trading.

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Quoting hilmy83

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do you have any other book that talks about money management and position sizing exclusively or is 'improving trading performance' good enough?

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Quoting ItalianSharp

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perhaps i wasn't clear in my post.

the book i suggested is primarily focused on psychology. the author tackles the common psychological issues a trader comes to face in a very unique and different way as opposed to most of the psychological books that are commonly promoted within the trading community.

the money management and position sizing i am currently using does not come from a book but from sharing ideas and experiences with professional traders.

there is no exact law that can be applied to MM or PS. first you need to find a trading style that suits your needs and only then are you allowed to tailor the optimal MM and PS around it.

What i wrote above were just ideas you can work on as your trading style becomes more clear and as you become more familiar with it.

hope i was clear enough this time.

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Quoting mccullek

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Intersting thread Hilmby! What is really interesting to me is the fact that you have made money with 60% losing trades and only 40% winning trades. That confirms one of the major rules in trading. You don't have to win more than you lose, simply cut your losses short and let your winners run. That's always been easier said than done, but your analysis seems to confirm this rule more than any other.

I started using candlesticks about 10 years ago, and I can't even look at bars any longer. Once you get used to the candlesticks, you can get a feel for price action at a quick glance. It makes it much more visual for me anyway.

Good luck with your project. I will continue to follow this thread and I look forward to the results of your 100 trades.

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Quoting moonchild

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I have done some reading on candlesticks and have not been impressed with the clarity of thought of some of the authors. Could you tell me which books you found most useful and clearest? Thank you.

As a result I have gone back to James16 style bar trading. It would be nice to be able to add candlesticks to it in a disciplined fashion.

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Quoting moonchild

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Pardon me for being confused and asking for clarification. In your last post, you indicate that this is the first time you are using candlesticks to make your trading decisions.

What were you using before? and if not candlesticks, why did you change?

Thank you for the clarification because I have been following what you are doing. Really a very good job so far even if I was often on the other side of the trades. Despite that, often we both won.

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Quoting hilmy83

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i used various methods in previous trades. Moving averages, heiken ashi, my modified fozzy, etc. All of them proved to be profitable. I wanted to use candlesticks because price tells you more of what traders are doing and how they feel. You truly get a view of the masses mindset when you look at candlesticks. So righ now I'm only using candlesticks, fractals and pivots. And yes, thi is my first time trading off candlesticks alone..and it's gonna be a journey of learning

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Quoting ItalianSharp

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Make sure you give your candlesticks learning enough time to kick in your brain. Candlesticks patterns and formations are very visual and have an immediate impact on your eyes, yet it takes lots of time to learn how to use candlesticks properly and efficiently.

My advise is:

1. if you use candlesticks as your primary trading method, dont be too strict with your rules. Candlesticks are not an exact science and they just dont work with mechanical trading.

2. always focus on the CONTEXT of candlesticks patterns. you'll often find that certain hammers tend to fail whereas other hammers tend to have a high success rate. You need to focus on the context to get your answers.

3. focus on what happened BEFORE the candlestick patterns. try to always put yourself in the shoes of those who have control of the market at any given moment. for instance, if you get a hammer in the middle of a range-bound market is not the same as getting a hammer after a steep decline that seemed to stop at an important previous support.

4. do not trade candlestick patterns alone. with this i mean, do not enter the market just because you see a valid pattern signal. always try to analyse the context surrounding the signal and carefully evaluate probabilities and risk/reward. Sometimes you'll get valid pattern signals that imply too much risk for very little gain. Just pass on.

5. be PATIENT. candlesticks are great and you can develop your own patterns once you understand how they work and how to use them. give yourself time and you'll reap the rewards in the long run.

hope this helps.

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Quoting ItalianSharp

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Make sure you give your candlesticks learning enough time to kick in your brain. Candlesticks patterns and formations are very visual and have an immediate impact on your eyes, yet it takes lots of time to learn how to use candlesticks properly and efficiently.

My advise is:

1. if you use candlesticks as your primary trading method, dont be too strict with your rules. Candlesticks are not an exact science and they just dont work with mechanical trading.

2. always focus on the CONTEXT of candlesticks patterns. you'll often find that certain hammers tend to fail whereas other hammers tend to have a high success rate. You need to focus on the context to get your answers.

3. focus on what happened BEFORE the candlestick patterns. try to always put yourself in the shoes of those who have control of the market at any given moment. for instance, if you get a hammer in the middle of a range-bound market is not the same as getting a hammer after a steep decline that seemed to stop at an important previous support.

4. do not trade candlestick patterns alone. with this i mean, do not enter the market just because you see a valid pattern signal. always try to analyse the context surrounding the signal and carefully evaluate probabilities and risk/reward. Sometimes you'll get valid pattern signals that imply too much risk for very little gain. Just pass on.

5. be PATIENT. candlesticks are great and you can develop your own patterns once you understand how they work and how to use them. give yourself time and you'll reap the rewards in the long run.

hope this helps.

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