High Quality forex trading end-of-day by michal9

No trades closed today.

Today is the pre-planned mid-Feb 2014 checkpoint!
Full three months have passed since I started a forward-test of this method on demo, after previously backtesting it bar by bar on historical charts.

The success criteria are... met :-) I am profitable! (at least on demo ;-)

My accout is 29% up with 6% max drawdown, in 3 months.
Unfortunately last 5 trades net outcome is negative, but this has happened before, so I believe this is normal.

I intend to move to live trading with this method... given this result, according to my plan, in line with what james16 wrote about treating this as a business.

Wish me luck in a move to live and join me in celebrating the 3 months profitable on demo ;-) while consistently following my trading plan. I am happy I did.
I still need to do a full review of the journal, this weekend.

Have a nice weekend.

Wish you best of luck for your live trades.

[off-topic reading]

What would General Patton say if he talked to his traders?
Here is how I imagine it.

Credit.
I wrote this post based on a similar post on the fxmonster.pl blog. And I used the origianal speech transcript found on the Internet and in wikipedia.

Enjoy ;-)
Thanks.

Thank you, I will certainly need it, among other things :-) Thanks a lot.

Following the plan -
I performed a thorough analysis of my trading journal

The journal is attached – list of all trades – put together today, to see what was next and perform a what-if analysis. The journal covers a period from Nov’13 to date, full 3 months of trading (considering Christmas break).

The attached journal is a spreadsheet with each trade, chart screenshot with entry and exit, and an outcome of a what-if if I traded it differently: e.g. with a larger stop, with a TP order more far away, with scaling-out, etc. (unzip attached, spreadsheet file in ms excel format) (by the way, I am curious to hear your feedback on this analysis approach).

Findings

Would it be better if I place my TP orders in a way to get more than 2R? Yes. In case of 17 out of 67 trades, a TP at more than 2R, on average 4R, would be filled. In case of 5 trades only, a trade would end up as a -1R loss instead of a 2R TP (so net -3R impact, 5 times, so -15R, while wider TP gives is 17 times roughly additional 2R (4R vs. 2R), so +17*2=34). Of course this is just estimates and no guarantee of future results ;-) Also, sample size may be too small. But this is also my general subjective impression.

Would it be better to place a wider stop? No. Indeed a few times I would have avoided a loss if I placed a wider stop, but it would have to be really wide and usually would require scaling out as well (i.e. closing half of the position at 1R) which is both complex, time consuming and kills the R ratio.

Would it be better to place a closer stop? No. In cases it would give even better R, but does not seem needed. Although I may scale down a little bit on adding „a few pips”. Usually, it seems, a trade either works (in which case a stop is „safe”) or it does not work at all (in which case, stop is hit anyway, regardless if I add 5 or 15 pips buffer).

Would it be better to place even more aggressive entry? No. I mean trying to buy even lower or short even higher. In cases it would give a fantastic R, but it kills the probability of a winner. And I prefer a system with somewhat high %winners to avoid losing streaks which are psychologically hard to stand and make it very hard to follow the system with high quality.

Would it be better to scale out? No. Again, there were cases where, had I closed half the trade at 1R, I would avoid a loss. But in a greater scheme of things, it seems not to add. And it requires exactly twice as much work on order entry (each position requires two orders if I want to set & forget). So I am not going for it. Although it is a viable approach to minimize %losers.

Would it be better to trail the stop on half of the position? No. This is an idea to „let the profits run”. Do not have a TP order at all for half of the trade and just move the stop to occasionally get a windfall profit. It looks nice and among 67 trades there were 11 cases where trailing the stop would be better, but there is a big but: it requires a lot of additional work, is complex, requires having two orders (in my case), it is psychologically hard (you need to accept giving back a lot of paper profits, creates significant equity swings, even larger than initial stop). So, even though there were cases I would theoretically get a 6R if trailed the stop (although never know how I would do it), I will pass on this approach at this time. Maybe later once I am more advanced and confident to an extent that I will really not worry about giving back a lot of profit.

Conclusion
I am going to start trading this method on a live micro account. I plan to use $25 risk per trade, equal dollar risk per trade position sizing algorithm.

One change I will make vs. past 3 months is to place TP orders around next Supply & Demand level instead of a fixed 2R. The TP orders should be, following this change, around 2 to 4R. As a result, I expect a higher average R-ratio, better overall profitability and unfortunately a slightly higher percentage of losing trades (inherently some trades that would-be winners with 2R, will turn out to be -1R losers). I will stick to set & forget method, but I may occasionally move a stop to break even if the trade is almost at TP.

My next planned checkpoint is May 15th, 2014, i.e. full 3 months of trading this live on a micro account. At that time, I will perform a full journal review again. If I am profitable, I will slowly increase the position size. If I am not, I will find out why & fix it.

I will continue posting my trades here. As always, I welcome your comments to learn from you.
Thanks.

No trades closed today.
No volatility, probably becasue of the U.S. holiday.
This was the first trading day of the SDH1 system on a live account, I placed orders on Sunday evening. Let's see how they get filled and closed.
I will post.

Hi Michal,

thank you very much for your kind PM.
Looking at your file I wonder why you dont keep trading gold instead of pairs? ...Kidding.
To be +ev within 80 trades on a demo account is s.th different making it live trading bigger units. Anyway it is a start to be profitable on demo.
In my opinion you should go to micro account and trade for another 1-2 months. Key is to increase lotsize slowly and continously...it will be big enough shortly, be patient.

I like trading the H4 or Daily, I'm on your side on this fact ... doesnt matter which strategy you use, only matters it is working or not, If yes, never change a winning team or running system.
I dont have any time right now to check your file.

I wish you good luck.

PS: Try not to spend a lot of time in any trading forum, it will affect your mindset and trading. Place your trades, drop in once a week and check for your buddies, but place your very own and individual trades.

Best,
Jonas

Thanks a lot Jonas. Yes, that's what I am going to do ;-) (live micro, slowy increasing if profitable, trade my method)

Two losing trades today.
First two live trades. Both losers. That's OK.

Interestingly, one of them, had I traded it like I did before on demo, it would be 2R winner.
But I went for a slightly more aggressive entry and 3R after a journal analysis.

This makes me wonder if I should go back to exactly how I traded on demo, to try to get a comparable result first.
On the other hand, one trade means nothing. On the other hand, a sample size on demo also wasn't very large.

Will see.
Not much to show for on my fx book, but screen is below, too. I selected a custom time period from Feb 15th, 2014.

Today there is one winner on AUDNZD.
Nice looking one, isn't it? Three other trades are opened, in a set & forget mode.

Almost recovered yesterday's two losses with this one trade, as it got me 2R with equal dollar risk per trade.
Of course, still, a sample size of 3 trades means nothing ;-) but at least I am glad I have not started with 6 losers in a row, which was the longest streak on demo.

One winner today and two break-even trades.
I normally do not have break even trades in my system becasue I do not move the stop, trades are either losses or 2R TP.

But yesterday I did a manual intervention to two trades. Why? I placed initial TP order at 3R, and trades went up to 2R and reversed. So, both would be 2R winners if I traded as per original sys. But , after my journal review I noticed I would have been more profitable with 3R. But trades reversed, so I moved the stop to BE, and, as one could expect, they got stopped out today.

Decision: I go back to original system as I traded in demo version, i.e. 2R TP. My objective is not to make as much money as fast as possible. No. My objective is to learn to become profitable consistently trading my method on a small live account. There will be rather no break-even trades anymore ;-)

EURJPY is a nice 2R winner. Note it is a 4H chart. I traded it on 1H, but level was long ago so I switched to 4H to make it visible.

Overall makes it a net little plus for now. Moving on. It is just a start of the 3 months test of SDH1 on live.

One losing trade closed today, EURAUD.
And one small winner closed by hand, EURUSD. It had a very nice entry, but it missted the TP 2R level by 1 or 2 pips, as seen on chart, and I do not want it to stay for weekened, so I have just closed it.

It was not the best supply level, but I decided to take this trade becasue it was also a strong resistance level, and a round number, and recent demand level did not hold which I interpreted as a bearish bias, and there was a nice bearish pinbar on daily on a day before. Well, confluence is not a guarantee ;-) That's OK.

One trade is open, couple pending orders in place, weekend ahead and the game is on.

Summary of the 1st week of SDH1 EOD method live trading is plus $22, while 1R is $25. Anyway, this is a too small #of trades to conclude anything.
Have a nice weekend!

That's great. At least, first week is in green

Excellent trading journal. Keep up the good work.

Thank you FX_California and Alifari. Your positive comments are very encouraging.

I wrote an article on my blog about different setups people may use to open the trade, as they are building their trading system.
A touch of the SD level, which I am using here, is one of many setups that can be applied to open the trade.
I explore many others in my post, many of them I spent many weekends on testing ;-) And I regret nothing, as it was a great learning.

Two losing trades today, USDCAD and NZDUSD.
That's OK.

NZDUSD took out my stop and reversed... this happened to me many times already and likey will happen many times again. I accept this reality. Some time ago after a situation like this I was frustrated, I was thinking of changing my system to have wider stops, etc. Curretly, my task is to execute the system with high quality. If it is not profitable after 3 months with high quality execution, I will think of changing it.

(it is hard to see on chart, but if you look closely you see the vertical red line... this shows the path of the trade, from limit entry, directly to a stop exit).

Two other trades are open, one missed its TP level by 1 pip are reversed... let's see how it will close... I moved SL up a bit at TP closer a bit, too.
Four orders are in place... some will likely be deleted soon as the market moved too far away already.

That's it for today.

One winner today, EURJPY.
This is a trade where yesterday I moved the TP and SL a bit closer... I am glad I did... otherwise it would have been stoppped out at a -1R loss.

One other trade is almost at at TP level... so I moved the SL closer. While I truly believe in set & forget method, at the same time... if there is an open trade that has 10 pips to TP and 50 pips to SL... not moving the stop is like risking 50 pips to make 10 pips... which does not make much sense... although probability is higher; anyway in evident cases I move the stop, e.g. if the trade is in 1.5R in profit while TP is at 2R.

I performed some additional manual backtesting of S&P500 and it seems my system should work there, too. So I consider adding SPX to my traded markets.

While I will add a market or two, I continue to trade one specific system (my SDH1 EOD), one specific setup (touch of the SD level), one specific trade management method (set & forget and manually trail the stop in some cases), one position sizing method ($25 risk per trade). I stick to ONE system to get good at it.

A few more orders are still on, but looks like in some cases the market moved on without me, and I will not chase it. I will patiently wait for the next level to form.
I care very litte on when and why and whether it will be a demand or supply level that will form. I do care about my ability to trade this level with high quality. That is what I intend to do :-)

Hell Michal,

Following your progress with interest. Thank you for posting.

May I suggest that you share your myfxbook results via the myfxbook website and maybe post a link here.
It would make it easier to follow your progress, and save you pasting screen shots here.
I understand if you do not want to as it may be you see it as a security risk.

Regards,
Jim

Hello Jim,
Thanks a lot for your comment and a suggestion to share the link to myfxbook.

Yes, I wanted to do myfxbook link, but this account has some history... which I do not want to show because this is a history of testing of a different system, so it could be misleading. Not to mention that I was not profitable in the previous test ;-) (but my money management was great so losses were very small, anyway; and I learned a lot)

If I share a link, it will show all history. I do not want that. Now I am doing a "custom analysis", choose a date of Feb 15th, which is the moment I started trading live this specific system, so it shows the results for this system only.

Do you know any other method? Of course I can open another account, but I have too many different micro accounts at different brokers already ;-)

So, please bear with me like this, and after one or more quarterly checkpoints, if I am consistently profitable in trading this sys, I will likely open a new account for this system only, increase the position size, and I will be able to link myfxb to it. Fair?