Static's Place

Well, I've finally decided to do it. I've started a trading journal. I'm going to update it as my time allows, and it should keep me honest. The purpose of this journal is to keep track of my emotions as well as my progress as I (hopefully) build my trading into a steady source of income for myself with minimal stress and worry. Trading should be fun right?.... right?

My story: I began trading about 2 1/2 years ago using an MA cross system on a GBP/USD 15 min and 1 hour chart. Needless to say with a small trading account and more balls than brains, I blew up my account within a couple months (looking back I'm surprised I managed to hold on to it for that long). I funded another account and managed to convince myself that Vegas tunnels were the answer, I traded that system with limited success, but I did find myself improving as a trader. I found that my entries were too nervous with either an MA cross or a price break of an MA (tunnel) so I began entering only on pullbacks. Fast-forward through a lot of reading and screen time (while maintaining an equity curve that looked like a sine wave) and that brings us to the current phase of my trading education. I am now a trend trader who has been trading profitably for just over 6 months.

I trade mainly Jacko's Method, but I pay attention to some more "recognisable" price action setups and use counter-trend trendlines to establish the continutation of the major trend. I will post a more detailed explanation of the methodology I use as I get time. Go check out Jacko's journal for an outline of how I am trading.

I am a member of Jacko's group and the last few months have been eye-opening for me. Watching a hugely successful trader was what I needed to kick my ass (or I guess my brain) into realizing that trading really isn't as complex as I have made it in the past.

Trading successfully is like Physics.

People think Physics is complex, or that physicists all think incredibly complex thoughts in order to solve extremely complex physics problems, when nothing could be further from the truth. Any (down-to-earth) physicist will tell you that their science is really the simplest of all sciences. It is founded on commonsense assumptions or laws, and those assumptions are taken very seriously. True, the outcome of those simple (and often commonsense) assumptions can appear complex, but in the end the conclusions flow from very simple ideas (or default positions) which can not be violated (the second law of thermodynamics for example).

Anyways, the reason I'm rambling on about physics is that I have come to believe that successful trading relies upon the same kind of foundation as physics. Success in trading for me seems to rely on a my ability to understand some simple ideas and then to apply them without fail to every trade that I take. I have finally figured out that if take these guidelines seriously then all I really need is courage to push the button and take the trade, and I will have a very good chance of success over the long run.

I suppose then that the basic assumptions that I work from should be stated if what I said is to have even the slightest bit of meaning. They are as follows (I reserve the right to add more later ):

1. ALWAYS trade with the long term trend.

2. ALWAYS trade with a stoploss (also read "have a plan for what to do if a trade goes against you").

3. Don't get scared or greedy, have a plan and trade the plan.

There it is. Pretty prolific. I'm sure it's the first time anyone has written this. hahah. Well, if nothing else than for my benefit, these are the ideas that I take very seriously. Of course, this is not really a way to trade, but it is the most critical aspect of success for me.

More to come later.

By the way, I only trade EUR/USD. And I have a limit buy order at 1.5250 with a 100 pip TSL. I will be posting reasoning, of course, but since it's 3:13AM local time (Hong Kong) I have an appointment with my mattress.

Update: My order was not triggered, it missed by 3 pips. Retracements are far and few between. It seems like we will see 1.5400 before we will see 1.5200.

So, what will I be looking for in a trade?

I will use only some basic technical tools in order to give myself the confidence to pull the trigger in the right direction. They are as follows:

1. Trendlines

2. S/R areas

3. Fib retracements

4. Price action (pin bars outside bars)

5. Round numbers

Basically, the more confluence in an area the better. Sometimes I will enter on non-round numbers but all my entries and thoughts will be based on round numbers. I will often wait to see the reaction a certain round number and then start buying after I see the reaction (usually a bit above the actual number).

However, I have found that usually I would have been better just entering with a limit order, rather than trying to fine tune my entry. When I try to fine tune, or try to get in at a lower price, I tend to either panic and buy higher than the number, or wait too long trying to get a lower price and watch the market take off without me. This is something I need to work on, but entering with limit orders suits me just fine... less stress!!

I will only be entering with only limit orders, I am looking to buy on dips and let the TSL close out my trades for me.

I have an order to buy at 1.5300 with a 100 pip TSL.

I consider this to be very aggressive, but I have been left behind too many times in this uptrend. The 1.5300 area is a 50 pip retrace from the current high and a nice round number. The market is having a tough time even putting in a 50 pip retrace. There is also a minor area of support there from the two attempts to break out earlier in the week. I just can't see a 100+ retrace any time soon. We will see how this plays out. If it fails, I have the AH to help me out.

I do not risk more than 2% of my account based on the 100 pip stop. My account is currently in profit, but not as much as it should be. I don't yet feel comfortable risking more than 2% (although I have made the mistake of doing so in the past). For now I am quite comfortable with 2%. \\

Once I figure out how to post nicely sized charts, I will be posting some. If anyone has any tips, it would be appreciated.

My order was filled at 1.5300. The market has since rose to 1.5370. My TSL is now at 1.5270 so my risk is now only 30 pips. I will let this run until the stop takes me out.

Update Mar. 7: Stop moved to 1.5329 - 29 pips locked in. Looks like my first trade on record is going to be a winner!! yippeee

Update Mar. 7: Stop moved to 1.5359 - 59 pips locked in. And still going.

Man, the strength of this market is really surprising me, even though maybe it shouldn't. We have seen only 2 - 100+ pip retraces in over a month. Maybe a good time to go short... haha... (I'm kidding) Should be an interesting NFP day though.

Since the point of this thing is to keep track of my emotions while trading, I am going to do something that I've never done before.

I have decided to always follow a mechanical method to exit my trades (according to Jacko's method of course), however, I have found at times I will manually close the trades thinking we have seen a medium term top. Sometimes this works, sometimes not.

So, what am I going to do about this? I find it annoying to be second guessing myself, when I've already made my plan. From now on I'm going to record every time I feel like violating the rules and we will see over time which method works best... the mechanical method (TSL).... or my intuition. I have my money on the mechanical TSL. But we will see.

For the record: I wanted to close today at a price of 1.5416 after seeing the spike up to 1.5459. We shall see what would have happened.

On another note: It looks as though I may be taken out soon at 1.5359. Profit taking after a looooong week probably. I'm so funny...

OK, trade # 1 stopped out at +59 pips. That is alot to give back percentage-wise, but what is my alternative? Sit and stare at the screen hoping to capture every pip. I only need to repeat this 4 times per month at 2% risk for a 30% (roughly) gain on the year.

My goal is to approach the market by first proving to myself that I can be consistent, and then by stepping up my leverage to increase my risk as opposed to increasing my risk by taking more trades (in other instruments).

Throughout my past couple years of trading, I have always wanted to look for ways to give myself more opportunities to trade because I though it meant more opportunities to make money. Add another indicator here, expand my trading parameters to in include X and Y... blah blah blah. Now I am concentrating on looking for opportunities to stay out and wait for a better price. I think my equating trading (as in being in a trade) with having a greater chance of making money was one of the major things holding me back. .. Just let it go man... hahah

Trades Taken: 1
Winners: 1
Losers: 0
P/L: 1.18%
My overall demeanor: Life is good!

Had I closed trade #1 at 1.5416 as indicated I would have made 116 pips. Almost double!

Running cost of not following my intuition: 57 pips

I would like to remind everyone that might glance at this journal that my trades do not represent those of Jacko's group. I trade at my own discretion, and I do some things differently. So, follow any of what I say at your own risk. I am relatively inexperienced.

I think we may see a retracement soon. The market has been so strong, but I don't see dropping to 1.5250 to be out of the question. We have lost a 4Hr trendline. Albeit, not a great one. I am waiting for a retrace, although we may not get one. Buying right now doesn't seem to make sense; price looks confused. I am interested in the 1.5250 area, but I'm not placing any orders yet.

Looks from that nasty spike to 1.5495 that we may have seen the medium term top here. I am expecting probably to see 1.5150 although that may be over optimistic. I will be watching closely for a place to get back in long.

I favour 1.5150 because it is near the 50% fib level of the rise from 1.4778 to 1.5493. There is also some strong support in that area from the channel that formed from Feb. 28th to Mar 5th.

Well looks that last spike was not the medium term top. The strength of this market still amazes me. I wonder if 1.5500 will hold.... for long. :

Well that easily broke the 1.5500 mark. Market is still looking very bullish. There is a possible bullish outside bar forming on the 4hr right now which would signal a possible continuation.

However, I am not going to jump in at these levels. (Currently 1.5586)

Trade #2: I have an order to buy at 1.5500 with a 100 pips TSL.

I will always have the AH as a back up plan if the trade ends up a loser. In retrospect I should have been willing to buy at 1.5300. I know some others did... great trade. The spike scared me off I suppose. We'll see how this plays out.

Again, I am obviously not following Jacko's method exactly, there are obvious departures, such as stop sizing.

Obviously my order at 1.5500 was not filled.

I have entered a long position at 1.5744 with 100 pip TSL. The reasoning behind the trade is that it is a nice 200 pip + retrace from the current high of 1.5903. It is a round number with a minor support just below at 1.5700. I became interested when I saw the exhaustion spike shoot down and touch the 1.5700 level and then make it all the way back to 1.5750.

It does appear that this may be the start of a bigger retrace, but I am willing to take the loss, and have an AH waiting for the eventual break of 1.600.

Nothing has changed in the fundamentals, now it's just a matter of buying at the right time, practicing good MM, and using the AH!!

Let the games begin.

Trade #2: Stop moved to 1.5665.

Update: Stop moved to 1.5690 (-54 pips if taken out)
Note: Not the healthiest looking trade so far. Might not be too much upside left... On the bright side, descending 1 hr trendline was pierced.

Update: Stop moved to 1.5731 (-13 pips if taken out)

I'm pessimistic about the 1.5750 trade. It is hanging around in the 1.5760 area, looking like it may shoot south and take me out. But, I will not close, I agreed to let the TSL take me out, and thats what I will do.

On another note. There seems to be a lot of discussion about how amazing Jacko's method was at catching the most recent blast through 1.5000. It seems like everyone is excited that they have been making money on this tremendous push upwards, and this IS a good thing.... bbbuuuuttt.... virtually any system will work in these market conditions.

Go ahead, overlay 10, 25, 50 EMAs on a 4HR EUR/USD chart and it would have given a buy at around the 1.4650 area, and you'd still be holding. Even if you were closing according to some criteria, and then reentering on pullbacks to, say, the 25 ema, you could have done very well.

The more aggressive traders have made a killing, but more than likely they will give back some when the market goes back to "normal" trading if they keep up that level of aggression.

Another thing I have been thinking about lately, is that Jacko's method doesn't magically provide trading success because round numbers or trend lines are "better" indicators of direction or even that simpler is always better, but rather because in his training and discussions he continually stresses the need to follow the trend with reasonable stops and use good money management. This is the strength of the approach I think. It is a continual reminder to do what you know you should be doing anyways!!!

I don't know if I explained myself properly.

Did I mention I love this method/approach?

Hahaha, doesn't seem like anyone is reading this anyways!!

Ah well, if anyone would like to discuss trend trading I'll be here for about a year.

Ok, I was stopped out at 1.5731 for a loss of 13 pips. The market has since dropped to 1.5613 and I have an AH order sitting at 1.5731 to buy with a 100 pips TSL.

Providing that my AH is not triggered first, I am a buyer at 1.5600 with a 100 pip TSL. Reasoning: this area is the 50% retrace of the move from 1.5279 - 1.5903. It is also near a trendline connecting the lows on march 11th, feb 26th and feb 20th.

The trendline does not exactly match the lows but it is close enough, and there were no closes below it.

It is also a round number.

Trades Taken: 2
Winners: 1
Losers: 1
P/L: +46 pips
My overall demeanor: Life is good!