My journey to long term consistency

This is a discussion on My journey to long term consistency within the Trading Journals forums, part of the Reception category; Here I will post my trades for myself to monitor and the lessons learned with them. My current equity is ...

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Old Aug 31, 2015, 11:37am   #1
Joined Aug 2015
My journey to long term consistency

Here I will post my trades for myself to monitor and the lessons learned with them. My current equity is € 4.786,79 I once started with 9k but lost a lot due to not really knowing what I was doing But it's okay, I can afford to lose the money.

I am currently reading "The new trading for a living" and I probably will come up with a new trading system which I will first test on a demo account. As for now my system is that I only trade European stocks. Each month I look at the European Economic Sentiment Indicator Report to see what sectors in which country are likely to be bullish or bearish. Then I select a list of stocks in those countries and sectors that are available on my trading platform and put them on my watchlist. Then I look at the charts. If there is a steady rise (or decline) without too much volatility (hence steady) for at least 4 days I take a long (or short) position. I decide my stop loss based on the volatitly of the stock but never so that I can lose more than 2% of my equity. Whenever I start making profits I raise my stop loss accordingly and let my trade run. I should also start with adding to my positions when I am making profits but still need to research when I need to add to it. At what level of profit is the risk/reward ratio the best and at what level do I need to put my stop loss then? This is not yet well defined in my strategy but I'll need to do it ASAP.

I also monitor the S&P500 and whenever there was a market correction, or stuff that happens like now with China, I take a very small position when markets are recovering again. Stop loss levels have not yet been defined well here but due to high leverage I currently have no choice but to break my 2% rule. This will change when I add more equity.

I will run my trades through the Kelly Criterion and decide how much I should add to my equity and how big my positions should be and all. Basic idea here is to slowly add more and more money the more consistent I get.


I'm not going to go through the effort of posting all my previous trades (yet) but I will post all the trades I'm closing as of now and include the thingsI did right or wrong.

Lesson learned from my last 4 trades which were losers:

When something global happens like the China thing now --> close my positions even before they hit my stopp loss
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Old Sep 1, 2015, 5:40am   #2
Joined Jul 2015
Hi DrSafari, just wanted to say I read your intro post and it looks like you are attempting to obtain your financial independence for very similar reasons to why I am attempting it. Best of luck to you.

The only suggestion I have for you is to limit your potential drawdown per trade to less than 2% until you find something that works for you (if you haven't already...maybe you have since you indicate you started about a year ago in your intro). I am still not quite there myself after about 3 months.

Had I not limited myself to very small potential drawdowns from the outset I would be far worse off than I really am now. Not only did I start with about a quarter of my planned trading cash, I limited most of my trades to 0.5%-1% potential drawdown of that quantity (so effectively 0.125%-0.25% of my planned cash).

Being able to lose the money without much impact makes it a bit worse I think since there is less urgency to "get it right". I have ramped my trades up to approximately 0.5% potential loss of my trading cash. It is tempting to increase it since I can stand to lose a good amount with no significant impact other than the general suckage of loosing money, but I know this will be foolish until I have proved to myself my technique works. The main reason this would be foolish is because it would take away from the available cash I have when/if I do finally have a system that works...this in turn will make my journey to financial freedom longer. So...bad, bad, and more bad. Anyways...just my 2 cents...feel free to use that deposit on your next trade and let me know how far my 2 cents went :P.
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Old Sep 1, 2015, 9:16am   #3
Joined Aug 2015
DrSafari started this thread Hi Dr. Toad, thanks
I took a look at your journal and indeed we seem to have a similar goal.

As for your suggestion: 2% is my upper limit but not all my trades have a 2% risk. Most of them have a 1% risk and some 0.5%, 1 trade in 10 reaches my upper limit. It depends on how volatile the stock is. But maybe I should not select the 2% stocks yet for now.

I am not yet 100% confident about my system. I always added on to it. I first started using it in march of this year but I used bad timing so I added some indicators as to when to enter my trades. Then it went better but I still had louzy risk management. So after that I added better risk management. And now I'm making profits with it since three months. It's still not perfect so I probably can even increase my profits. But three months is not yet a sufficient time frame for me to be really confident in it. But it looks like it could be a good strategy.
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Old Sep 1, 2015, 10:23am   #4
Joined Jan 2006
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Originally Posted by DrSafari View Post
Hi Dr. Toad, thanks
As for your suggestion: 2% is my upper limit but not all my trades have a 2% risk. Most of them have a 1% risk and some 0.5%, 1 trade in 10 reaches my upper limit. It depends on how volatile the stock is. But maybe I should not select the 2% stocks yet for now.
Hopefully you don't mind me making a suggestion?

Have you considered that your %-risk per trade should not be driven by the volatility of the instrument that you are trading? You could consider a fixed percentage for each of your trades. For the volatile instruments you will most likely need a wider stop (in points/pips) thus the lot size for your trade should decrease. But your percentage risk should stay the same.

You might find out that your system works better for low-volatility instruments and worse for high vol instruments. If that would be the case you would generally lose 2% on the bad trades and gain 1% on the good trades. Not a good combo!



Ps Also seeing that you have 5k in your account, you might be fine to risk no more than 1% (50 euros) per trade. If you are with a broker that caters well for retail traders, then you should be able to arrive at the right trade risk regardless of stop size in pips. CMC would be broker where this would work well depending on what instruments you like to trade.
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Last edited by options-george; Sep 1, 2015 at 10:38am.
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Old Sep 1, 2015, 12:19pm   #5
Joined Aug 2015
DrSafari started this thread
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Originally Posted by options-george View Post
Hopefully you don't mind me making a suggestion?
Of course not

Quote:
Have you considered that your %-risk per trade should not be driven by the volatility of the instrument that you are trading? You could consider a fixed percentage for each of your trades. For the volatile instruments you will most likely need a wider stop (in points/pips) thus the lot size for your trade should decrease. But your percentage risk should stay the same.

You might find out that your system works better for low-volatility instruments and worse for high vol instruments. If that would be the case you would generally lose 2% on the bad trades and gain 1% on the good trades. Not a good combo!
Hmm good point. Only problem with my broker is that for some instruments I would have to put my stop loss way too narrow because the minimum amount of shares per trade is too high. But maybe I should avoid those for now.

Appreciate the input guys!
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Old Sep 2, 2015, 2:38pm   #6
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DrSafari started this thread After the china debacle I went long twice on the S&P500 index and made some profits. Both times it went through my stop loss after I had raised it above the break even point so that I made some good profits. I bought a third time a few days ago and now it's in the minus a lot. I put the stop loss level very wide so if there is no crisis I should be fine -> Market corrections won't stop me out where my stop loss is right now. I bought the smallest amount possible but the leverage is very high.

However, I now realise this is a foolish thing to do. If I keep doing this in the future eventually a crisis will come and I will be done for. For now I will keep the position, and hope there won't be a crisis. The harm is done anyway. I will now either lose pretty much everything or make nice profits. With a higher chance of nice profits so I'm keeping the position but I can't do this again. I won't take this trade into account either in my criterium to whether I should add to my equity or not cause it's a bad trade (if it turns out profitable).

I can only start doing that again when I can put an equally wide stop loss but that in case the stop loss get's hit not half my equity would be gone but only 5% or 10% or something or find a broker with less high leverage.

My journal and this forum is already helping me realise some stupid stuff I'm doing. Let's hope this works out and then forget this strategy for now.

Edit: what I can do to emulate this strategy is go long on a bunch of stocks that are in the S&P500 index. Due to the lower leverage I don't have to risk too much and I can limit risk to 1% per trade

Last edited by DrSafari; Sep 2, 2015 at 2:50pm.
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Old Sep 2, 2015, 5:44pm   #7
Joined Jan 2006
Good luck with your trade!

Are you keeping an online journal or is it just for your own records?
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And for a honest look into trading, check out my T2W member profile (published Dec2015)
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Old Sep 3, 2015, 10:05am   #8
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Originally Posted by options-george View Post
Good luck with your trade!

Are you keeping an online journal or is it just for your own records?
Thanks! Both actually. I'm keeping it for my self but I will be more consistent in writing in it on a forum than I would on a private word file or something... and it's more fun too. Another advantage is that people can steer me in the right direction or detect things for improvement.
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