Small time relative newbie taking small steps

Well, here goes. I'm going live. Still have a lot to learn, but with the help of this and other forums, and lots (and lots and lots) of reading, living and breathing FX on a daily basis, I'm taking the (small, conservative) plunge.

The following posts will be some background info and commentary. I will make every effort to keep this journal alive, both with trades and thoughts/ramblings.

I'm a small-timer, low-roller, whatever you want to call it... I have a full-time job, and I'm entering the FX world to supplement my income. I don't have the capital to be in this game full-time (though someday I hope to be), so for now, what I'm hoping to pull from the market is a few hundred pips per month, just to help make things a little easier on our family.

For the past 6-months, I've been lurking here (and on other forums), reading, learning, watching what the "pros" do. I've developed a few different trading systems that I will be using (based solely on price action). I'm sure there are others that are probably doing the exact same thing I as do as far as the specifics of the systems go, though none of them were taken entirely from anything I've found posted anywhere, or read in any eBooks - at most, I can say one of them is a "hybrid" of some strategies I've found, modified to suit my trading schedule. During these six months, I've maintained a demo account with OANDA which has not had a losing month yet. My worst month was a 4% return on my initial balance, my best was a 76% return. But, I'm a realist - I fully expect there will be losing months in the future, and have set up my money management plan to be prepared to deal with them. I am comfortable enough with my systems to believe over the long haul, I should be successful. This is the basis for my entering the market with a live trading account.

My strategy is simple. Each month, I will withdraw half of any profit my account made that month, leaving the other half in, on top of the existing balance to compound. Hopefully, over time, this will mean my account steadily grows, even with a withdrawal each month (assuming, of course, every month has at least some profit). My money management strategy is conservative - I use the OANDA platform, which I like because it gives me the ability to specifically define the lot size I want to trade for any single trade. So, for each trade, I determine my TP and SL in pips, and use OANDA's PIP/Profit calculator to figure out the lot size, with my goal being that if I am stopped out, my loss will be no more than 3% of the value of my account. The TP amount (in $) is whatever it is, based on the lot size. This allows for larger value (in $) trades as my account grows, and smaller trades if I run in to a losing streak (which, so far, my longest has been 4 consecutive losing trades) without changing the actual calculations (in PIPs).

My overall success rate for the three systems combined has been 74.13% winning trades since June of 2007. I don't fully understand the concept of "drawdown" (though I have read about it and have a conecptual understanding), but to address that, the lowest balance I've ever had in my demo account was about 80% of what it started out with. Today, the balance is just under 180% of what the starting balance was over the 6-months I've been demo trading - following the same strategy of withdrawing half of the profits made at the end of the month and letting the rest stay in and compound (thus increasing the $ value of each future trade). Had I not made any withdrawals each month, the demo account would have nearly tripled by this point in time.

While the OANDA platform isn't as flashy as VT-Trader or MT4, it has what I need. As I said above, my systems are based entirely on price action, so I don't need the ability to plot all sorts of geometric shapes all over my charts and manipulate them in every way known to man. I need to see the current price, and what it's done over a period of time. Any platform that lets me plot candlestick charts and horizontal lines will work with my "systems".

So, what are my systems? Well, I don't intend to share the specifics - my purpose for this journal is to keep a record of my trades, with commentary at times, that I can review later. Hopefully it may also provide some insight to others in my shoes 6-months ago - just starting out and looking for some help getting things off the ground. Don't get me wrong - I don't claim to be a "master trader" or anything like that. I'm just offering this as some insight for others in to what a "regular guy", a small-timer in this for some part time extra cash is doing. As I said above, the "systems" I use are based entirely on price action. There are three basic systems that I follow - one is a day-trading system (typically I open and close trades using this system the same day), and I apply it to only three specific pairs, EUR/USD, USD/CAD, USD/JPY. Occasionally, a trade may carry over to the next day, but normally it will either close (hit TP or SL) by the end of the day, or I will manually close it. My second system can be more of an intra-day system, it is based on an hourly chart, and trades can remain open from one day to the next (it's about 50/50 as far as closing the same day or carrying over). The third system is based on the daily charts, and while a particularly good (or bad) trade can open and close in the same day, trades using this system are generally open for several days. The second and third systems can be applied to any pair.

All three of my systems are subjective to some degree. Mostly, I arrive at the entry, TP and SL by using the same calculations each time, but once a trade has been executed, I will sometimes modify SL or TP, or even close it out entirely based on a number of factors that can't be defined as hard and fast "rules". This is one reason why I really can't share these systems - they're not entirely mechanical, and make many assumptions during the life of a trade.

Again, I will point out that I am a small-timer... I try to minimize risk. I don't want to be over-exposed. Therefore, I will never have more than one trade for "System 2" and "System 3" open at any one time. Even if another trade sets up, if there is already one open, I will not enter the new setup. For "system 1", I may have one trade for each of the three pairs open (if they set up) each day. So, at most, I will have five trades open at any one time. Usually less. And when a trade closes during any given day (win or lose), I won't look for another opportunity to enter a trade based on that system. Even if it's 10am and a "system 2" trade closes, I'm done with "system 2" for the day, regardless of whether or not another setup occurs later the same day.

So, this is the heart of what I do every day. First off, I am generally in my office by 7:30am (US Eastern Time: GMT-5) and leave work around 5:00pm. My trading day revolves around my full-time job. I normally do not trade on a day I am not in my office (vacations, US Holidays, day off with my family, etc). There are also some days that I have exceptionally busy days planned at work, during which I will not have even a few minutes to watch my trades - on these days, I will not trade so as to minimize the risk of not monitoring certain trades.

So, here is my routine:
When I arrive in the office in the morning, the first thing I do is look to see if there are any trades still open from the previous day (any of my three systems) and make any adjustments that are necessary to them. Once that's been done, I look to see if anything closed out overnight since the last time I monitored my trades (if any were open when I last checked in the night before), and if so, document them.

Once any "house cleaning" from previous days' trades has been done, I'm now focused on any new trades for today. Depending on how close to 8:00 it is, I do one of two things... If there is still at least 10-15 minutes to go before 8:00, I start to look for any setups for my "system 3" trades (based on the daily charts). If I already have a "system 3" trade open from previous days, there's nothing to do here, since I won't be looking to open a second one. If there are any setups (some days there are none, some days there are more than one), I look for the "best" one. My "system 3" is very simple to spot setups, so my morning "system 3" routine generally takes no longer than 10 minutes to find any setups, evaluate them if there are more than one, and place an order if there is a trade to be made.

Now I wait until 8:00 - "system 1" time. At 8:00, I look at each of the three pairs that I run "system 1" against, and identify my entry targets, TP and SL for each. Once done, I will enter limit orders (sometimes in both directions if they set up that way). This whole process for all three pairs usually takes no more than 10-minutes in total. Then, I'll start looking for "system 2" setups (assuming there is not already a "system 2" trade open). If there are any, again, I'll look for the best one, and enter an order. Finally, if there wasn't time to look at system 3 setups before 8:00, I'll do that now, too. That's it.

After my early morning routine, I am now basically in "set it and forget it" mode. When possible, I will check in a couple of minutes past each hour for the rest of the day. What I'm looking for is if anything closed out (TP or SL), and I'll modify my trade-tracking spreadsheet (I maintain documentation on every trade I do) with closed trades. During this "check in", I will also look at my "system 2" trade (if I have one open) and make any adjustments that are necessary ("system 2" is usually the only trade I'll adjust during the day - typically, it would be to change a sort of "mental trailing stop"). Finally, if any "system 1" trade that was entered as a limit order has executed and there was a second limit order in the opposite direction for that pair, I will cancel the order in the opposite direction. With this journal now alive, I will also modify the journal as part of my hourly check-in process.

The next critical time for me is 4:00pm. I do a few things here... First, the same hourly check-in that I've done any other hour I'd been able to check in earlier. Look for anything that closed since the last check in and document it, and then adjust my "system 2" trade as necessary. Also at 4:00, I re-evaluate any "system 1" trades that are still open. Since this is the last official check-in of the day (sometimes I do check in at night, but only if I have time, so I consider 4:00pm the official end of my trading day), it is now time to decide if any "System 1" trades that remain open should close or be carried over. A lot of this decision is again based on my "feel". Usually a good rule of thumb is anythng that is in profit will be closed for the profit, and anything that is down will be left open to either turn around or hit the original SL. Again, this is only for "system 1" trades. "System 2" and "System 3" are expected to carry over, so I generally leave these two alone (maybe a slight adjustment, but I normally don't manaully close either).
That wraps up my trading day. At 8:00am the next morning, I lather, rinse and repeat.

I will try to use a common format to post the updates to this journal that related specifically to trades. I will occasionally throw in some commentary, but for trades, my entries will look something like this, with a line for each trade:

ENTER (System 1): EUR/USD Long at 1.4637. SL = 1.4600. TP = 1.4685

MODIFY (System 2): GBP/USD Short. SL = 2.0200 (was 2.0230). TP = 2.0155 (no change)

NO CHANGE (System 1): USD/CAD still in Long. SL = 1.0100. TP = 1.0204

CLOSE (System 3): CAD/JPY at 109.85 (hit SL). Total P/L = +17 pips. Monthly running total = -11 pips.

I think the lines above are pretty self explanitory. I will refer to all gains and losses in pips as opposed to dollar amounts.

I will begin logging all of my trades on Friday, December 7th (no, I do not change my systems or strategy based on news).

So, here we are on what was to be Day 1 of posting my live trades in my new journal, and a massive traffic jam caused me to arrive at work at just after 9am instead of my usual 7:30.

As a result, I missed my 8:00 "System 1" trades. Since system 1 is dependant on 8:00am action, I will not be entering any system 1 trades today. As the days goes on, I will still be looking for system 2 set ups if I have the chance to check in.

Well, all in all, I guess this was a rather boring first day. I checked for potential "system 2" trades, and came up with nothing. Since it's already Friday afternoon, and while I'm not necessarily opposed to holding a position over a weekend, I'm not going out of my way to open something new this close to the end of trading for the week.

That said, I'll begin again Monday morning...

One potential System 3 trade has been idenfied:

A limit order is in to buy EUR/CHF at 1.6590

If/when this trade triggers, it will be logged in the format above as an active trade.

Several potential System 1 trades have been identified. When triggered, they will be logged here.

ENTER (System1): USD/CAD Short at 1.0049. SL = 1.0142. TP = 1.0020

NO CHANGE (System1): USD/CAD Short at 1.0049. SL = 1.0142. TP = 1.0020
ENTER (System1): USD/JPY Short at 111.62. SL = 112.54. TP = 111.46

Rocky start to the USD/CAD trade, but that's why system 1 has some long protective stops built in. Hopefully it will stabilize and come back in the right direction. Meanwhile, a second System 1 trade has triggered.

NO CHANGE (System1): USD/CAD Short at 1.0049. SL = 1.0142. TP = 1.0020
NO CHANGE (System1): USD/JPY Short at 111.62. SL = 112.54. TP = 111.46
ENTER (System3): EUR/CHF Long at 1.6590. SL = 1.6530. TP = 1.6674

System 3 trade has now been triggered. The two System 1 trades are both still in, both are losing right now, but I'm still hoping they'll come back around.

There has not yet been a System2 trade identified yet today, so if I'm able to check in, I'll be looking for one of them as well.

Hi,
just a quick note on something I noticed in your posts. I see in your 2 current positions you are risking 93 pips to make 22 on the U/C position and you are risking 92 pips to make 16 on the U/J position......these are both in excess of 4 times more risk than reward.

this is the opposite of what you are looking for in risk rward...you should be risking 20 to make 50+

If you risk 93 to make 16 you will need to be right about 90% of the time to make any money.

Just a little something to look at.


Many Pips

Thanks swingtrade..

What you say is true for my "System 1" trades. The stops are really only "safeties" in case things go really bad really fast (since I typically don't monitor my trades).

System 2 and System 3 use much tighter stops.

In general, "system 1" does have a very high rate of success - partly due to the stops being where they are. Tighter stops would have surely stopped one (or both) of my current system 1 trades out already today. There have been many times (I'm hoping today proves to be one of those days), where trades like these two have turned around and ended up in profit when all was said and done.

All that said, as I keep going with these systems, there will certainly be some tweaking. This would definitely be one area to look at...

Hi,

I know I was merely pointing out the obvious however when I saw the word "hope" it kind of threw me off....I don't generally use that word in a trading context because when I do it, it usually means that I am getting my a$$ handed to me and have refused to see the inevitable

Best of luck and Many PIPS

Hehehe... I hear ya.

Gotta have hope

I'm also dealing with pretty small lot sizes - so when I do have one of these stop out (several, even) it won't put me out of business.

Not much happening in the past few hours. Most likely, I will not check in again until my 4pm "end of day". Here are the trades that are currently open:

NO CHANGE (System1): USD/CAD Short at 1.0049. SL = 1.0142. TP = 1.0020
NO CHANGE (System1): USD/JPY Short at 111.62. SL = 112.54. TP = 111.46
NO CHANGE (System3): EUR/CHF Long at 1.6590. SL = 1.6530. TP = 1.6674

After some bouncing around and teasing the stops, the three trades combined right now are at -36 pips. Still watching for them to come back in the right direction.

My first full day of "live" trading is complete. USD/CAD seemed to take off in the wrong direction almost immediately after the order was triggered. USD/JPY got close to TP and reversed. Both are still in as the day ends, and at only -15 and -7 respectively, I will leave them both in. Partly because I typically leave any system 1 trades that are still open at 4pm open if they are not in profit, and also partly because I am not planning on being in my office tomorrow morning, and as a result, will probably try to check in at least once tonight (at which time I may modify any or all of these).

As for the System 3 trade (EUR/CHF), it is currently at +3, and I will leave that one alone too. No System 2 trades were identified today. So, the day "officially" ends as follows:

NO CHANGE (System1): USD/CAD Short at 1.0049. SL = 1.0142. TP = 1.0020
NO CHANGE (System1): USD/JPY Short at 111.62. SL = 112.54. TP = 111.46
NO CHANGE (System3): EUR/CHF Long at 1.6590. SL = 1.6530. TP = 1.6674


Monthly running total = 0 pips.

As I said above, I will be out of the office in the morning, and will therefore not have any system 1 trades tomorrow. I will adjust my system 3 trade as needed if/when I get in (or it will run to either TP or SL), and I will also look for system 2 trades once I'm in the office.

Very fast update this morning, since I won't be in the office for several hours. Leaving both of yesterday's System 1 trades alone (they're both down again), and made a change to the open System 3 trade:

NO CHANGE (System1): USD/CAD Short at 1.0049. SL = 1.0142. TP = 1.0020
NO CHANGE (System1): USD/JPY Short at 111.62. SL = 112.54. TP = 111.46
MODIFY (System3): EUR/CHF Long at 1.6590. SL = 1.6590 (was 1.6530). TP = 1.6759 (was 1.6674).

I'd like to manage the system 3 trade a little differently, and would if I was going to be able to monitor it more. For now, SL is at break-even, and I'll adjust again later.