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Mistake/Slippage Journal

  • #1
  • First Post: Jul 6, 2008 3:25am Jul 6, 2008 3:25am
The power of compounding magnifies every trading mistake we make and slippage we experience. If one has a system with a CAGR ("Compounded Annual Growth Rate") of 30%, a negative trading mistake of $10 from a trade today would result in $137.86 lesser profits at the end of the next 10 years.

In this journal, I will record my weekly trading deviation. I define the trading deviation of a trade as:

(Pips gained in live trading - Pips gained in backtesting) / Distance of stop loss

In my backtests, I assume trading costs of 2 pips for EUR/USD, 3 pips for USD/CHF, 2 pips for USD/JPY, 4 pips for GBP/USD, 4 pips for USD/CAD and 7 pips for GBP/JPY.

As a example, I put on a USD/CHF trade with a stop loss of 50 pips. In my live trading, I was stopped out for a loss of 54 pips. In my backtesting, I will be stopped out for a loss of 50+3=53 pips (distance of stop loss plus cost of trading of 3 pips). My trading deviation for this trade is:

[-54 - (-53)] / 50 = -1 / 50 = -0.02

  • #2
  • Jul 6, 2008 3:54am Jul 6, 2008 3:54am
Quoting orange
The power of compounding magnifies every trading mistake we make and slippage we experience. If one has a system with a CAGR ("Compounded Annual Growth Rate") of 30%, a negative trading mistake of $10 from a trade today would result in $137.86 lesser profits at the end of the next 10 years.

In this journal, I will record my weekly trading deviation. I define the trading deviation of a trade as:

(Pips gained in live trading - Pips gained in backtesting) / Distance of stop loss



In my backtests, I assume trading costs of 2 pips for EUR/USD, 3 pips for USD/CHF, 2 pips for USD/JPY, 4 pips for GBP/USD, 4 pips for USD/CAD and 7 pips for GBP/JPY.




As a example, I put on a USD/CHF trade with a stop loss of 50 pips. In my live trading, I was stopped out for a loss of 54 pips. In my backtesting, I will be stopped out for a loss of 50+3=53 pips (distance of stop loss plus cost of trading of 3 pips). My trading deviation for this trade is:





[-54 - (-53)] / 50 = -1 / 50 = -0.02






Are you saying the live trade had 1 pip slippage?
If you took a 54 pip hit on a trade why would you want to keep a Journal of 1/2700 th of that trade? (54 / 0.02)
Maybe I am missing the point. Would'nt be the first time.
Polishing my crystal ball
  • #3
  • Jul 6, 2008 3:58am Jul 6, 2008 3:58am
Report for the week 30/06/08 - 04/07/08

Trading deviation: +0.10909

A total of 9 trades were closed this week. One trade has a negative deviation of -0.1072. It resulted from a rare slow connection to my broker. After submitting my order, it took around 2-3 seconds before the trade was executed. By then, the market had went a few pips away.

I had noticed that the platform was a bit slow and the connection bar on the platform also showed poor connection quality. A good choice may have been to take the trade with my backup broker. But then, this slow connection issue could have given me a positive deviation instead!
  • #4
  • Jul 13, 2008 5:51am Jul 13, 2008 5:51am
Quoting 30XTCi
Are you saying the live trade had 1 pip slippage?
If you took a 54 pip hit on a trade why would you want to keep a Journal of 1/2700 th of that trade? (54 / 0.02)
Maybe I am missing the point. Would'nt be the first time.
Hi 30XTCi,

In a backtest of one of my systems that had 1445 trades over the past 9 and a half years with an average stop loss of 54 pips, a constant 1 pip slippage per trade versus a constant no slippage per trade will result in an ending account balance that is 1/3 lesser. This is assuming that one uses a fixed fractional money management approach.
  • #5
  • Jul 13, 2008 6:13am Jul 13, 2008 6:13am
Report for the week 07/07/2008 - 11/07/2008

Trading deviation for the week: +0.16603
Trading deviation since start of thread: +0.27512

A total of 18 trades were closed this week. One trade has a negative deviation of -0.14688. It occurs from a USD/CAD trade.

The stop loss of the USD/CAD trade was triggered during news time. As my broker widens spreads during news times, it is my practice to increase my stop loss distance to be in line with the spread increase to avoid my trades from being stop out prematurely.

The scenario above does not occur too frequently and I certainly hope that this infrequent trend will continue! Overall, I find the low spreads during normal times, good executions, good swap rates and interest on account balance offered by my broker to more than make up for the increase in spreads during news.
  • #6
  • Jul 20, 2008 10:23am Jul 20, 2008 10:23am
Report for the week 14/07/08 - 18/07/08

Trading deviation for the week: +0.14130
Trading deviation since start of thread: +0.41642

A total of 7 trades were closed this week. Nothing too negative!
  • #7
  • Jul 24, 2008 10:02am Jul 24, 2008 10:02am
I created a blog at Blogger which is accessible via the link below. Feel free to visit it!
  • #8
  • Jul 27, 2008 10:55am Jul 27, 2008 10:55am
Report for the week 21/07/08 - 25/07/08

Trading deviation for the week: -0.07147
Trading deviation since start of thread: +0.34495

A total of 7 trades were closed this week. One trade has a negative deviation of -0.13148.

It occurs from a GBP/USD trade whose stop loss whose hit during GBP news time. Again, I increased the stop loss to be in line with my broker's spread increase and the stop loss level was sliced through like a knife through tofu.
  • #9
  • Jul 27, 2008 11:19am Jul 27, 2008 11:19am
The attachment shows a comparison of the rollover rates between IB, Oanda and MBT that I performed on 25 July 2008.

As IB's interest rates are in tiers, big size traders will have much better rollover rates. The attached calculation is based on a trader who trades just 1 standard lot (100,000 units).

As I am not allowed to post website addresses, you can find the links to websites where I got the logic and information to perform the calculations in my blog.
Attached Image
  • #10
  • Aug 3, 2008 7:51pm Aug 3, 2008 7:51pm
Report for the week 28/07/08 - 01/08/08

Trading deviation for the week: -0.01997
Trading deviation since start of thread: +0.32498

A total of 6 trades were closed this week. Nothing too negative!
  • #11
  • Aug 11, 2008 12:58am Aug 11, 2008 12:58am
Report for the week 04/08/08 - 08/08/08

Trading deviation for the week: +0.50373
Trading deviation since start of thread: +0.82871

A total of 8 trades were closed.

A painful mistake was made this week. I mistakenly failed to take a trade that I should have! I thought that I had already made the trade so I switched off the alarm on my trading platform. 12 hours later, when I realised that it was not the case, the trade was already more than 150 pips in the black! Terrible.

The trade is still on. Any profits made by this trade will be reported as a negative deviation when the trade is theoretically closed.

In the future, should there be a missed trade that is in the black when discovered, I will immediately take the trade with a reduced position size.
  • #12
  • Aug 18, 2008 1:14am Aug 18, 2008 1:14am
Report for the week 11/08/08 - 15/08/08

Trading deviation for the week: 0
Trading deviation since start of thread: +0.82871

No trades were closed this week. The missed trade from last week is theoretically still ongoing, and in profits! Any profits from the missed trade will be reported as a negative trading deviation when the trade is closed.

To avoid such errors from occurring again, the following safety measures have been implemented:

 

  1. Automated program to send emails, sms and sound alerts when trades should be taken;
  2. Automated program with full trading capabilities to be used in emergencies;
  3. 2 internet service providers;
  4. 2 brokers;
  5. 1 fully charged pda with internet access to both brokers; and
  6. Data backup to a second computer everyday and to an external storage device every week.

  • #13
  • Aug 25, 2008 2:28am Aug 25, 2008 2:28am
Report for the week 18/08/08 - 22/08/08

Trading deviation for the week: +0.01111
Trading deviation since start of thread: +0.83982

Just 1 trade was closed last week. The missed trade is still going strong! La la la.
  • #14
  • Aug 28, 2008 11:30am Aug 28, 2008 11:30am
Zurich Axioms by Max Gunther

I just came across this book and find it relevant to trading. You may like to do a search on the title with Google. Below is a description on the book by Amazon:

"If you want to get rich, no matter how inexperienced you are in investment, this book can help you. Its message is that you must learn neither to avoid risk nor to court it foolhardily, but to manage it - and enjoy it too. The 12 Major and 16 minor Zurich Axioms contained in this book are a set of principles providing a practical philosophy for the realistic management of risk, which can be followed successfully by anyone, not merely the 'experts'. Several of the Axioms fly right in the face of the traditional wisdom of the investment advice business - yet the enterprising Swiss speculators who devised them became rich, while many investors who follow the conventional path do not. Max Gunther, whose father was one of the original speculators who devised the Axioms, made his first capital gain on the stock market at the age of 13 and has never looked back. Now the rest of us can follow in his footsteps. Startlingly straightforward, the Axioms are explained in a book that is not only extremely entertaining but will prove invaluable to any investor, whether in stocks, commodities, art, antiques or real estate, who is willing to take risk on its own terms and chance a little to gain a lot. contents Introduction: What the Axioms Are and How They Came to Be The First Major Axiom: On Risk The Second Major Axiom: On Greed The Third Major Axiom: On Hope The Fourth Major Axiom: On Forecasts The Fifth Major Axiom: On Patterns The Sixth Major Axiom: On Mobility The Seventh Major Axiom: On Intuition The Eighth Major Axiom: On Religion and the Occult The Ninth Major Axiom: On Optimism and Pessimism The Tenth Major Axiom: On Consensus The Eleventh Major Axiom: On Stubbornness The Twelfth Major Axiom: On Planning [The 16 Minor Axioms appear within each of the chapters on the Major Axioms]."
  • #15
  • Aug 31, 2008 10:14pm Aug 31, 2008 10:14pm
Report for the week 25/08/08 - 29/08/08

Trading deviation for the week: +0.10951R
Trading deviation since start of thread: +0.94933R

Nothing much. But a super ultra massive blockbuster negative deviation is sitting patiently waiting to be reported!

Diversion
Having profitable system(s) is a necessity. Having profitable system(s) that you like is an edge. Mastery of self is an edge. Happy family and friends is an edge. Having a trusted trading partner is an edge. Rehearsal of trading and trading contingency plans is an edge. Trading experience is an edge. Trading contacts is an edge. Continued learning is an edge. Edge edge edge...... etc etc etc!
  • #16
  • Sep 8, 2008 1:21am Sep 8, 2008 1:21am
Report for the week 01/09/08 - 05/09/08

Trading deviation for the week: 0R
Trading deviation since start of thread: +0.94933R

Nothing!
  • #17
  • Sep 15, 2008 3:06am Sep 15, 2008 3:06am
Report for the week 08/09/08 - 12/09/08

Trading deviation for the week: -31.95861R
Trading deviation since start of thread: -31.00928R

A missed trade several weeks ago lead to this massive negative trading deviation. I would attribute this missed trade to my laziness and lack of discipline.

While the initial few weeks had been agonising as the missed trade got more and more and more and more......and more profitable, soon the pain clears and one just got to make sure that the missed profits had been well-spent by learning from one's mistake thus taking concrete actions to improve oneself and one's trading process.
  • #18
  • Sep 22, 2008 1:07am Sep 22, 2008 1:07am
Report for the week 15/09/08 - 19/09/08

Trading deviation for the week (Slippage): -0.05678R
Trading deviation for the week (Mistake): 0R

Trading deviation since start of thread (Slippage): 0.88916R
Trading deviation since start of thread (Mistake): -31.95522R

What a week! My beloved broker raises spreads like nobody's business , prices move up and down so quickly and the price of gold jumped so much in a few hours!

If every week is like this, I will have chronic hypertension soon! Time is a factor in the compounding function and it is important for a trader to maintain good health and live longer and happier!
  • #19
  • Sep 29, 2008 4:12am Sep 29, 2008 4:12am
Report for the week 22/09/08 - 26/09/08

Trading deviation for the week (Slippage): +0.05372R
Trading deviation for the week (Mistake): 0R

Trading deviation since start of thread (Slippage): 0.94288R
Trading deviation since start of thread (Mistake): -31.95522R

Nothing much!
  • #20
  • Oct 6, 2008 10:30am Oct 6, 2008 10:30am
Report for the week 29/09/08 - 03/10/08

Trading deviation for the week (Slippage): -0.00278R
Trading deviation for the week (Mistake): -0.12374R

Trading deviation since start of thread (Slippage): +0.9401R
Trading deviation since start of thread (Mistake): -32.07896R

A never-experienced-before situation arises which requires a calculation to be made. I oversimplify the calculation leading to a larger than needed position size and hence a -0.12374R of trading deviation (mistake). Sometimes, things are not as simple or as straightforward as they may appear to be!
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