onedrop riddims

So, I will be funding an account later this week to start live trading based on recent success paper trading (two months -- a few sessions per week, with +80% profits and relatively small drawdowns). While technically I experienced drawdowns up to 10%, I did not have any losing trading sessions. We'll see if that trend continues...

I do not follow a mechanical system. Been there, done that. I do not use predetermined stop loss or take profit, I follow the rhythms and riffs of the PA and my intuition. Not everyone is gonna like that or be able to follow along, but hey, that's what works for me. In my experience, mechanical trading leads to inconsistent and unsatisfactory results. That is not to say it doesn't work for some people, but I think it is more important to be agile and adaptive on the battlefield, which most "systems" don't really allow or encourage.

Props to FTI for getting me on the right track with all this. If you have not read his thread at least once through, you should do so (IMO). I do not claim to trade "FTI's method" if such a thing exists, but I learned from him how to trade consistently in a style that works for me. And I have a lot of room to grow, which is part of my reason for starting this journal. I think we can all learn from each other.

Well until the trades start rolling, I'll write a bit about my trading strategy (later).

Ok, here to sum it up:

1. Follow the trend
2. Buy low, sell high
3. Leave no man behind

I only have one indicator on my charts now (linear regression channels), and I use it to help visualize the trend, and volatility within the trend. This covers points one and two. I am usually trading the 1M or 5M charts, but always in context of higher timeframes 4H, Daily, Weekly. As a trade matures I will often shift to 30M chart, still referring to higher timeframes for context.

Now the question of leaving no man behind comes down to money management. The conventional wisdom says to cut your losses short. This is fine, but leads to drawdowns, which are the nemesis of effective MM. Drawdowns prevent geometric account growth, and can wipe out weeks of good trading in a run of bad sessions. As a rule, I do not tolerate any losses (thus, "leave no man behind"); every trade must be closed for at least a small profit. Occasionally I am forced to break this rule, however I do not consider a trading session to be over until it ends in profits. This is to prevent/eliminate true drawdowns, keeping forward momentum more consistent.

Instead of closing bad positions, or just waiting and hoping that price will turn back around, I perform rescue operations. This is the practice of opening additional positions on price retracements in order to pull the trade's base line back from enemy territory. Another, more positive, way to look at it, is to take a "losing" trade as an opportunity to establish a stronger position (it is best to keep the very notion of "losing" out of mind altogether). Then when the trend resumes, I close out weaker positions in order to reduce exposure, leaving the stronger positions open to cover the risk of opening additional new positions.

I basically follow the same approach during winning trades; open additional positions on price retracements and gradually close out weak positions to reduce exposure. This allows a strong position to be built up, and also do some scalping, adding little profits along the way to a larger victory.

I usually aim for 1%-5% profit per trading session. Losing trading sessions are unecessary and undesireable. At worst, I will accept a breakeven trading session. Drawdowns during an open trade are usually less than 5%, although sometimes I get a bit aggressive on my rescue operations.

My biggest challenge is going to be fighting undercapitalization. I have to be careful not to open too many positions during a rescue operation. 3-5 should be max, although in demo I sometimes have 10-12 positions open at once. So this will be something to work on, and a possible cause of failure.

Staked out a position @ 168.638 (17:45 GMT)

Mood: cautious, watching for 4H wave to turn back south

Edit: moved base to 168.694 (21:30 GMT)

Don't have time to babysit this trade, and PA is not supporting a short position.
Close out for small profit @ 168.65 (23:30 GMT)

Should've stayed in that one

But after a few skirmishes tonight, and a plummeting usd/jpy, up 5% (no losing trades)

Ok, there's no way I'll be documenting every trade.

Here is an example trade. Most of them don't go this smoothly, but this gives an idea of my general approach.

Up 15% so far (no losing trades).

Thanks for sharing, Onedrop!

Solid stuff.

Best of trading to you!
Brent

P.S. One question: Do you ever use the regression channel to trade
sideways market action or only rising and falling trending?
I guess that you probably leave it alone.