TraderT - My Trading Journey

What does it take to be the 5% who profit from the vast majority of 95% of traders? I continually ask myself this question daily and weekly, and how i can reach my goal of trading to financial freedom.


Background
I entered the world of trading over 2 years ago with a lack of the understanding of cutting losses fast and letting winners run, demand-supply, money management and expectancy ratio. I traded many instruments (stocks, forex, options and futures) without following a fixed method. It was of course, a humbling experience, and quite psychologically damaging.

All this while, i pursued my thirst for knowledge and voracious reading of books on trading, particularly technical analysis. Each book will show how a fixed indicator will give you an entry, and viola, within a short period, the trade turns profitable, and how to take profits. Alas, those were static charts, and all the knowledge picked up, could not be turned into profitable trading.

Then i stumbled onto Market Wizards by Jack Schwager, and was fascinated by the stories of these successful traders, some of whom have phenomenal records, that is only surpassed by the Forex signals and software that are hawked out there in the market. Yes, imagine how many newcomers enter Forex with hopes of making 1,000% to 10,000% profits from a small stake. If Bruce Kovner, Michael Marcus, Ed Seykota and Dan Zanger can do it, so can someone else out there, you may counter.

The author concludes that there is no holy grail to trading success, as the methods employed range from purely technical to purely fundamental, but there were many common denominators, such as a a driving desire to become successful traders, and having to overcome significant obstacles to reach their goal. Many of them have blown up accounts before, and for some, it was a fortunate break that made them their first large profit, which launched their trading careers.


Last updated 2010:
Fast forward to today - i've gained a preference for books written by real traders and psychology books. More on that in future.

My equity curve looks like the chart of Nasdaq stocks from their dotcom peak, or financial companies from their peak till now. Beaten down but not dead, and attempting to rise from rock bottom.

While chatting with a trading friend today, i remarked that "an edge is easy to find. The most difficult thing is to follow and execute the edge always, meaning sticking to it in times of losses", and one's "trading methods needs to allow you to hold onto your winners". "Only trade when there is an edge, i.e. when there is a setup, and always ensure your SL and TP are determined beforehand".

Also, the rule of money management is an understated rule, to risk 1-2% max of one's account for each trade. Afterall, profits are a function of Effort + Discipline, multiplied by Capital. With no capital, there is no trading opportunity, hence survival and minimizing losses is key.


Trading Methods
1. Trade reversals and pin bar price action - i've only just embarked on this journey, and hope to learn more from j16 group and those who read price action astutely.

Charts used will be 1 Hr, 4 Hr and Daily, though i may use lower TF for entry. For starters, i will be aiming to take 1 good setup per day.

2. Continue trading a fully mechanical method, which is based on an open range breakout method.

The emphasis will be on how well the trade was executed and managed, and less on the money gained or lost. I will not second-guess the market, and never lower my stops.


Update as of April 2016:
Fast forwarding to April 2016. There have been many changes to my life, and here i am trading a few mechanical methods by Seneca Pilot.
1. GBPUSD London close - take the previous day London close price, and take the first trade off the bounce the next day (beginning from Asian session - Tokyo open onwards). Risk is 20 pips + spread, target is 20 pips.

2. EURUSD opening breakout - take the 12pm-3pm price range (timezone is GMT+8), and draw the high-low window. Wait for the first 1hr candle to CLOSE outside of the window, then put a pending order in the direction of the breakout. Risk:reward is 1:1. From past observation, target is 20-30pips.

3. High-impact news trading - use the 15min newsbar, and trade the first breakout of the newsbar. Or if the next bar is an inside bar, trade the breakout of the inside bar. Risk:reward is 1:1, from past observation, target is 1/2 to 2/3 of the newsbar. Only use this for very high impact news (NFP, ADP, ECB).

Risk per trade is US$70, though in the first week of April i have been using a small risk for some trades.


Rules to follow
1. Always stay with your strategy. Never change your strategy even if the outcome is positive from a case of not following your strategy.

Judge the success of your trades based on whether you followed the strategy, not based on the outcome.

2. Before entering any Trade:
- Always Trade with a Definite Plan
- Ensure there is a clear-defined, rational reason for entering a trade
- Complete the decision-making process before entering a trade (this includes stoploss and target profit)


Inspirational threads:
38 Steps to being a Trader

J16 summary by Jduester - pin bars and price action

TRT on Trading for a Living - excellent post


Inspirational quotes:

Winners don't quit and quitters don't win.

"As soon as you truly commit to making something happen, the "how" will reveal itself." Tony Robbins

A journey of a thousand miles must begin with a single step. - Lao Tzu

There is no such thing as failure. There are only results. - Tony Robbins

There's always a way - if you're committed. - Tony Robbins

"Life is not measured by the number of breaths we take but by the places and moments that take our breath away." - Anonymous

“What separates the 1% from the other 99% is a lot of hard work. It’s perseverance. You have to love to do it.” - Tom Baldwin

If you can't change your fate, change your attitude. - Amy Tan

"Thinking well is wise; planning well, wiser; doing well wisest and best of all." -Persian Proverb

From Muhammad Yunus and Others: if you want to think big, start small

"Success is not final, failure is not fatal: it is the courage to continue that counts." - Winston Churchill

You don't have to see the whole staircase, just take the first step. - Martin Luther King, Jr.

Failure is only the opportunity to begin again more intelligently - Henry Ford

"If you can't face a little failure now, sooner or later you'll face the mother of all failures" - Ed Seykota

"Only those who will risk going too far can possibly find out how far one can go." - T.S. Eliot

"Don't take action with a trade until the market, itself, confirms your opinion. Being a little late in a trade is insurance that your opinion is correct. In other words, don't be an impatient trader." - Jesse Livermore

"Successful traders always follow the line of least resistance. Follow the trend. The trend is your friend." - Jesse Livermore

"A prudent speculator never argues with the tape. Markets are never wrong-- opinions often are." - Jesse Livermore

"The big money is made by the sittin' and the waitin' -- not the thinking. Wait until all the factors are in your favor before making the trade." - Jesse Livermore

"I'm more concerned about controlling the downside. Learn to take the losses. The most important thing about making money is not to let your losses get out of hand." - Marty Schwartz

"The way to build superior long-term returns is through preservation of capital and home runs...When you have tremendous conviction on a trade, you have to go for the jugular. It takes courage to be a pig." - Stanley Druckenmiller

"It's not the mathematical skill that's critical to winning, it's the discipline of being able to stick to the system. There are very few people who can develop the skills to get the edge, and far fewer still who can withstand the losses emotionally and stick with the system. Probably only one in five hundred people has the necessary discipline to be successful."

-------------------------------------------------------------------------------------------
This journal will be a diary of thoughts, ideas, actual trades taken, and possibly trading records.

When to stop trading? Here's a guideline penned down.

Period : Max Loss ; Target Profit
Daily : - 3% ; + 6%
Weekly : - 8% ; + 16%
Monthly : - 16% ; + 32

Assumption: Risk max 1% per trade, Reward-risk ratio should be min 2:1. Max 3 trades per day.

For daily, if there are 2 consecutive max losses, reduce positions to half. Stop trading if daily max loss is hit (- 3%).

For weekly, if there are 2 consecutive daily max losses, reduce positions to half. Stop trading if weekly max loss is hit (- 8%), and re-evaluate trades for rest of week.

For monthly, if there are 2 consecutive weekly max losses, reduce positions to half. Stop trading if monthly max loss is hit (- 16%), and re-evaluate trades for rest of month.

Most importantly, if daily/weekly/monthly target profit is hit, consider putting a "stoploss" of 50%. E.g. if account is + 16% for the week, stop trading if it comes down to + 8%.

Trade 31-Aug, USDCAD
Short 1.1080 (SL 1.1096), cover 1.1053 & 1.1042
Risk 1%, Reward 1.9%

Reason: 4 Hr chart showed strong resistance around 1.11
Lesson: As partial profit was taken, need to ride profits of the remainder half

Interesting observation: there was a sudden spike up (1st circle) to the previous high, before the selling started. Almost immediately, there was a spike downwards in the next 5 min candle.

Will continue to watch market depth and current bid/ask price and size (am using Interactive Brokers), and may try to learn VSA.

Trade 1-Sep, GBPJPY
Long 150.08 (SL 149.75), closed 150.19 - scalp trade as the geppy hit resistance at 150.35.
Risk 1%, Gain 0.3%

Trade 2-Sep, USDCAD
Short 1.1083 (SL 1.1105, TP 1.1032), closed 1.1032
Risk 0.5%, Reward 1.16%

Entry was first high at 9am EST (see chart. Ignore the timings as i'm using Fxpro for charting, hence the odd timing). Was looking at charts with a few friends when i noticed the loonie was approaching the same resistance as Monday, hence took the same trade. TP was chosen as there was intraday support above 1.100.

Looking good TraderT. I'll be checking in on you now and then. I agree with most everything you said in the first post, although I use slightly more aggressive money management.

I wish you all the success you can handle!

Hi TraderT,
Keep up the good work.

Two thoughts:
1. It is perhaps not the safest trade even to scalp into resistance. If it is thought to be good resistance (i.e. it has held as resistance twice before, or has held as support once and then laster as resistance) then percentage wise I would say playing a (scalp or bigger move) bounce off the resistance is propably better.

2. In Your first post you talk about risk:reward. That is all very well in books, but I have found it to be a psychological burden.
The problem is that when you enter a trade, all you can control is your risk.
Now there are many high probability trades where you a logical target would be smaller than 2x your risk. Don't make the mistake that I made (and occasionally still do) of trying to stretch the target and end up getting stopped out because of thinking that it had to be a larger profit or bust.

Hope to see you around,
Ian

Me again,
I was just wondering which ORB you are trading? Very few ORB's have a predefined r:r.

Nearly all my live trading can be considered to be ORBs, though I tend to think of some as NRBs. I also trade a variation of the Turtles.

More specifically I trade some specific Assian Session breakouts, a Weekly Open breakout ( Joel Rensink's FirstStrike), Joel Rensink's One Night Stand (the Turtle variation) and a variation on StevieT's London Open reversal.

There are a few of us here at FF trading the 2 Joel Rensink free systems see my thread or geoffrod's thread for more details.

Cheers,
Ian

Thanks for the comments. The geppy was a scalp on 150 support. It hit the resistance of 150.35 and lower several times, hence trade was closed.

Long 150.08 (SL 149.75), closed 150.19 - scalp trade as the geppy hit resistance at 150.35.

Very good point, discretion will need to be used and one has to be flexible.
My trading plan usually involves taking partial profits if it hits > 1 R, and letting the remainder ride and move to BE if safe.

Also, for discretionary trades, risk:reward is only a guide, TP should be a function of:
(a) intermediate support/resistance pt, either based on previous swing low/high or round number
(b) price action and candlesticks
(c) if it's a counter-trend, trend continuation, or range trade. If counter-trend, i may take profits at 38.2 or 50% retracement.

Experience in live trading is something which i'm trying to build up on.

I trade Ace's 4 hr weekly method and StevieT's London Open reversal. As i consider them mechanical methods, am not reviewing results here, though i do take partial profits for StevieT's method and move the stop closer to BE depending on S&R levels. Hope to learn more from the experienced folks around. Cheers.

Trade 4-Sep, USDJPY
Long 92.354 (SL 92.154, trail step 15), closed 93.00.
Risk 1.2%, Gain 3.23%

NFP trade. This was a risky one which turned out well. Using VSA, i waited for selldown to slowdown, before taking a long 2 candles after the volume peaked (white volume bar). Price reversed up from there, trade closed automatically via trailing stop.

Trade 4-Sep, AUDUSD
Short 0.84583 (SL 0.8483), closed 0.8483.
Risk 0.746%, Loss 0.746%

Took this at 1030am EST on the basis of strong resistance at 0.8476 holding (looking at 4 hr and daily chart). Price moved down abt 17-18 pips, before creeping up and breakout to take stop.

steviet's euro method
Hi Ian

Thanks for leaving a comment on my journal. I'm trying to trade steviet's euro method, but i would like to protect some profits. Mind i ask how you protect your profits, and at any point do you tighten SL to lock in some profits?

For today's trade, i took the short, but made the mistake of moving SL to BE out of fear of losing the profit, but ended up becoming stopped out, before the downtrend resumed. I'm reading PeterFM's old thread, whereby advise was given not to move SL to BE too quickly, which seems a comfortable but not the best choice.

Thanks in advance. Cheers.
__________________
TraderT - My Trading Journey

Hi, I thoiught it would be a good idea to answer you here, then we may both benefit from examining my though processes.

Please note that Steve's results are better than mine.
So why do I spend more time and effort for worse results?

Well, I trade several systems/methods which have large runs of sequential losses. So I really don't want to add another one to them - in case they all go wrong at the same time! This means that I am prepared to (potentialy) have smaller losses (and fewer of them) but also smaller wins (and fewer of those too).

WHat I try to do are 2 things
- Get a better entry (or not enter if I don't like the Price Action).
So if the Frankfurt Open is too close to the London Open I don't enter. Just a few pips can mean the you would take a long with one broker, but a short with another.
Also if the F.O. direction starts reversing too early (i.e. before 45 minutes, then I don't trust it.
But if it starts to reverse just before London Open then I enter at London Open. Or if it does not sart to reverse, I wait until it does show signs of at least a small reverse before entering (usually at a slightly better price).

- The other thing I do is to manage my Stop Loss (or hopefully my Stop Profit). Most trades need some space to breathe, yet I don't want to lose the full 1% unless it goes against me from almost the start. So I usually have 2 Sl moves before going to BE. The first one is at around +15 pips, when I move my SL to -15 ; at around +20 pips I move it to -10; then at +30 pips I move it to BE. Then if it goes to about +40 and I move to +5.

After that I just rely on PA S&R, so it varies every day. But I do look for potential reversal spots and usually tighten up my stop - so if it bounces too hard off them I am taken out (like today).

I hope this gives you some ideas.

Ian

That certainly makes sense. Smaller profits and losses mean a smoother equity curve.

Thanks for the idea. My preference is for a more "hands-off" approach to cutdown on monitoring, so will probably shift stops based on the hourly candle (i.e. above the swing low/high).

Thoughts
1. Discretionary trades were executed with risk-reward predetermined before trades were placed, and generally avoided scalping or taking positions in the middle of nowhere.

Stats:
Trades: 5 (4 wins, 1 loss)
Risked: 4.446%
Nett gain: 5.844%

2. Mechanical trades
Traded the dollar-yen Japan opening a couple of days. On hindsight it was a hasty decision, after doing a visual backtest for only 1 month.

Steviet's euro method was traded too. On Friday the stops were hastily shifted to breakeven to "protect" a small gain, and ended out being stopped out before the major move down before NFP.

Lessons Learned
1. Ride the winners - When picking a major top to short (like the Loonie twice last week), after partial profits are taken, the remaining position should be given more room to run. The loonie retraced off the resistance levels considerably more than the comfortable profit that was quickly taken.

2. Keep it simple for mechanical methods, and avoid moving stops to breakeven too quickly, unless the trade has moved at least 1.5 R.

3. NFP trade was a bit risky on hindsight. But it was one of those instinctive things whereby the idea of the trade lit up the moment the selldown stopped on lower volume. Will absolutely not trade this again, until and unless more backtest and research are done.


Mechanical Trade Ideas
1. Spent some time on the weekend to manually backtest steviet's method to the Dollar-yen opening, results are average for July & August (5.9% and 4.6%, from risking 1% per trade), and decent for June (15%). Will do further backtest with filters, before evaluating whether to trade this or not.

2. Read about an alternative London opening method based on the Frankfurt-London range. Backtested it for 2 months and the results are quite mediocre. Again, this requires a larger sample size of backtests before the method can be fairly evaluated.

Hi,
I am just wondering if you are suffering from unrealistically high expectations. Have you really thought about what is a really good average or consistent return?

How high a yearly % do the professional hedge fund managers/traders make consistently?

How high an average % did Warren Buffett make in order to become one of the richest men in the world?

How much is 6% per month compund as a yearly %?

Answers: Less than 30%, less than 30% and 100%.
And you call that average!!!
Don't believe the Hype Salesmen - get real (or you will get killed in the market by overtrading or overleveraging).

Ian

Dollar-yen Tokyo opening

Original method:
Pips %
April 209 6.53
May -230 -7.19
June 480 15
July 191 5.97
August148 4.63
Total 798 pips 24.94 %

Method with filter:
Pips %
April 2588.06
May -63-1.97
June 1123.50
July 2337.28
August1695.28
Total 709 pips22.16 %

Notes:
1. % gained is assuming 1% risked per trade, which involves opening 2 positions, i.e. 0.5% risk per position.
2. Stoploss used is 16 pips, which in a few cases, would have hit stoploss first (if spread is >=2). An alternative is to use stoploss of 15 pips + spread, which would mean slightly lower gains.
3. 1st TP 25 pips, 2nd TP 50 pips. Tried an automated method of using trailing stoploss for the 2nd position, but results did not differ much.
4. Filter check: Avoid long if opening candle price is below all 3 EMAs (21, 55, 200) and all 3 EMAs are consecutively stacked on each other, on 1 hr chart.

Caveat: i have yet to start live trading this method, and backtesting was done manually.

Comments are welcome.

Noted your points. 30% annual return will beat most hedge funds, was mainly concerned with drawdown.

I have tested a slightly longer period and published 5 mths of results. Let me know your invaluable comments if any.

Hi,
Your backtesting looks great except for that one month. Your filtering also works well apart from ruining that one big winning month.

I am barely past the novice stage in tweaking systems to get better results. However it seems clear to me that you need more data, because you have one very large winning month and one large losing month.

One of the techniques for dealing with outlying results is to discard them. In this case that doesn't leave you enough data.

Any system with fixed TP levels as well as a fixed SL will react very differently in periods of low volatility and periods of high volatility. So it might be an idea to base the SL and TP upon a % of the previous week's range. Alternatively you could have either a different TP /SL for June,July,August from that you use for the rest of the year (since these are typically the months with much lower volatility) - you might consider a time based close for months excluding June,July,August.

I have been looking at U/J reversals at the NY open (only visual backtesting so far) and it also looks promising (but early days yet). I have been testing with a time based close - you should be able to guess what it is (just think of Steviet). I am working on coding it into an EA (when I get time) in order to do longer and more thorough backtesting.

Ian

Trades done for the week
Discretionary trades were top & bottom picking. Was less active this week due to eMini class all week till Thur.

9-Sept EURJPY
Short 134.089 (stoploss 134.35) closed 133.973
Risk 0.75%, Gain 0.33%.
Reason: Overhead resistance zone of 134.2-134.35

Was fiddling with the buy stop and accidentally entered a market buy order to close position. Boo-boo.

10-Sept USDCHF
Long 1.04075 (stoploss 1.03850), closed 1.04075
Risk: 1%, Gain 0%
Reason: Bullish engulfing outside bar (BUOB) after oversold condition (RSI < 30). Stopped out at breakeven after a bearish engulfing outside bar (BEOB).

Stats:
Trades: 2 (1 win, 1 BE)
Risked: 1.75%
Nett gain: 0.33%

Lessons Learned
It is absolutely important to "plan the trade, and trade the plan". Watched the Europe opening on Wed and Thur but did not take any trades without a clear plan.

As such will be including some broad analysis on a few majors for the following week.

Outlook for Cable

On the weekly TF, there is a divergence and possible H&S developing. Left shoulder shows strong overbought conditions, the Head was less overbought, and the right shoulder is developing.

H&S will be invalid if cable closes above 1.688-1.69.

Outlook for Euro

On the weekly TF, the euro is strongly overbought (RSI 78.8), last seen during the 1.58-1.6 high. If it makes another high this week and approaches 1.465-1.47, it will be a low-risk, large-reward short.

Alternatively, look for bearish engulfing outside bar (BEOB) to enter short positions.

possible BEOB on a possible swing high? Nice.

Thank you for the suggestions. Unless i have a further backtest period with positive results, will not be trading this method. The markets will always be there, so there is no hurry to execute methods without a proven track record. Another point: the dollar-yen is subject to many wild fluctuations, so a fully mechanical method based on pre-opening direction seems a tad too random.

On the other hand, i do like the FSP-method and have seen backtested results, though i'm not looking to trade this at the moment.

Interesting idea - looking forward to your results.

Thanks for dropping by and the J16 summary notes. Will be studying this over the next few weeks.