Nowler's Trading Journal

This is a discussion on Nowler's Trading Journal within the Trading Journals forums, part of the Reception category; Originally Posted by Nowler Strategy Update: I am going to try address my drawdown by reducing my trade size from ...

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Old Oct 8, 2017, 2:52pm   #33
 
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Quote:
Originally Posted by Nowler View Post
Strategy Update:

I am going to try address my drawdown by reducing my trade size from 4% to 2% and with a view to add another 2% if the opportunity arises.

Since I bumped it up to 4% I have been doing well but my drawdown is too much. Hopefully by only jumping in at 2% and then adding the other 2% when in profit from the first 2% will reduce my drawdown.

Will this work?
You'll have to test to know :-)
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"If you don't find a way to make money while you sleep, you will work until you die." Warren Buffett, CEO of Berkshire Hathaway.

My number 1 trading rule: EDUCATE YOURSELF!

Before you trade even single penny on the stock market, please spend the time and educate yourself by back testing different trading strategies and ideas - go to eBay and search for "historical stock market data", you can buy 20 years of data for less than $100 - that's all you need to start.
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Old Oct 8, 2017, 3:24pm   #34
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You'll have to test to know :-)
Seems so

A few more hours and then time to plan for the week ahead.

A few markets of interest are the USD SGD, CAD SGD, GBP USD and Brent Crude.

I was expecting both the USD and the CAD to steam on against the SGD but perhaps I was too early jumping on long on the CAD last week. Or maybe I was just wrong... Maybe this week will be when it does it...

I'm keeping an eye on the oil and observing how it manifests on the charts of petro-currencies such as the CAD for example. Oil is an important commodity! It would be foolish to disregard its sway on the world's economies.


EDIT:
I have also decided to take the information bestowed upon me and am going to focus on keeping this account for building a record and my other sub account for the experimental/testing trades. That sub account has very little in it and is really only being used as a way to directly hedge, so I'll just keep the testing of strategies over there.

Last edited by Nowler; Oct 8, 2017 at 5:58pm.
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Old Oct 8, 2017, 11:33pm   #35
Joined Sep 2017
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Originally Posted by Brumby View Post
If you can achieve 30 % return with a drawdown of 15 % or less, every fund in the world will line up to engage your services. If you can deliver a smooth equity curve with limited drawdown, you can offer your signal services through copy trading.
So what would be the lower limit of performance which would still be reasonable in terms of a prop firm hiring me? Keeping in mind my only third level education is a Bachelor's in Psychology.

I understand that it would be difficult to say and they would also be looking for level headedness etc... but lets just say a middle of the line prop firm...

Last edited by Nowler; Oct 8, 2017 at 11:44pm.
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Old Oct 9, 2017, 2:58am   #36
Joined May 2012
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Originally Posted by Nowler View Post
I would appreciate it, yes, sir.
If I refer to your equity curve, I can see some recovery from Sep 18. Your recent postings reflect a more positive tone and optimism in achieving a positive return in trading going forward. It is obvious that the more recent results were driving your attitude while ignoring historical draw downs. That is recency bias i.e. a much higher weighting based on more recent performance even though it is relatively short. Confirmation bias is essentially similar. You refer to your more recent results to support your preferred view but ignoring the totality of your track record. In other words, you are seeking data that supports your view and discounting those that are contrary.

Quote:
Originally Posted by Nowler View Post
Strategy Update:

I am going to try address my drawdown by reducing my trade size from 4% to 2% and with a view to add another 2% if the opportunity arises.

Since I bumped it up to 4% I have been doing well but my drawdown is too much. Hopefully by only jumping in at 2% and then adding the other 2% when in profit from the first 2% will reduce my drawdown.

Will this work?
The higher the risk you take the greater the scope is for drawdown. You can't ignore natural laws. The most important equation in trading is the ability to trade with a positive expectancy. Your equity curve is a reflection of that expectancy. For example, if your trading is in the negative zone the greater the risk you take, the steeper the angle of descent you will experience with your equity curve. If you take on less risk, that equity curve decline will be smoother but it will still continue to decline. The only way to turn it around is to be able to trade in the positive zone. Adding risk just accelerates the curve depending on which side of the zone you are in.

Quote:
Originally Posted by Nowler View Post
So what would be the lower limit of performance which would still be reasonable in terms of a prop firm hiring me? Keeping in mind my only third level education is a Bachelor's in Psychology.

I understand that it would be difficult to say and they would also be looking for level headedness etc... but lets just say a middle of the line prop firm...
In trading, the only thing that matters is your trading track record results. You can have a dozen Phd's to your name and it means zilch if you can't deliver. The most important piece is a smooth equity curve.
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Old Oct 9, 2017, 5:57am   #37
Joined May 2012
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Fingers crossed the next week offers me a few good opportunities. I'm expecting the USD/SGD to offer up a few long opportunities. Perhaps even just longing it on Monday and riding it until Friday or until some big releases if there are any
There was a news wire that came across my terminal last week that the Singapore Reserve Bank is expected to make a major announcement on Oct 15 (from memory). There is some speculative news that the SRB might surprise the market with a rate hike. If true, will be market moving on the SG. The rest of the research is up to you.
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Old Oct 9, 2017, 5:39pm   #38
Joined Sep 2017
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Quote:
Originally Posted by Brumby View Post
If I refer to your equity curve, I can see some recovery from Sep 18. Your recent postings reflect a more positive tone and optimism in achieving a positive return in trading going forward. It is obvious that the more recent results were driving your attitude while ignoring historical draw downs. That is recency bias i.e. a much higher weighting based on more recent performance even though it is relatively short. Confirmation bias is essentially similar. You refer to your more recent results to support your preferred view but ignoring the totality of your track record. In other words, you are seeking data that supports your view and discounting those that are contrary.


The higher the risk you take the greater the scope is for drawdown. You can't ignore natural laws. The most important equation in trading is the ability to trade with a positive expectancy. Your equity curve is a reflection of that expectancy. For example, if your trading is in the negative zone the greater the risk you take, the steeper the angle of descent you will experience with your equity curve. If you take on less risk, that equity curve decline will be smoother but it will still continue to decline. The only way to turn it around is to be able to trade in the positive zone. Adding risk just accelerates the curve depending on which side of the zone you are in.
Thanks very much for the reply mate.
I still don't quite understand how drawdown works. Specifically, how my drawdown can be up around 55% even in recent times... I have been making money in recent times and my trades have not really been going much against me either...
I did have over 6 trades going at one time (last week or the week before) and that resulted in about 35-40% of my margin being used but this wasn't for long...I'm almost certain not for as long as my drawdown has been at 55% in recent times. So why my drawdown remains so high is beyond me.

While I appreciate your explanation of how I am exhibiting recency and confirmation bias, I do however have to bring a few things to your attention. Of course I am going to exhibit what seems like recency bias. I only started trading nearly 5 months ago, with the last month being profitable. You can call this recency bias but I call I common sense. I'm obviously going to put more weight in this final month because it's where I learned how to be profitable... before that I was making stupid mistake by the bucketload and losing money. In my eyes this is not recency bias. I am not disregarding the early months, I am just acknowledging that I was a bad trader then and that I am much better now. I have been very open about my losses. Not disregarding, underplaying or hiding anything.

This argument against confirmation bias is also similar to the above one about recency bias. I would even argue that it's simply confirmation, not confirmation bias. I was losing money because I was trading wrong... the more examples of right and wrong I accumulated the better I could judge what did and did not work out.

Maybe you're right...
I will be sure to keep an eye on it.
A psych degree definitely doesn't exclude me from making such errors. So I will watch out for it. Thanks for the heads up


Quote:
Originally Posted by Brumby View Post
In trading, the only thing that matters is your trading track record results. You can have a dozen Phd's to your name and it means zilch if you can't deliver. The most important piece is a smooth equity curve.
Yes, I understand that my friend.
What I am wondering is, what sort of record would be barely enough to get into a middle of the line prop firm?
Generally speaking of course

For example:
Would 5% annual growth be enough? more? less?
Does drawdown have to be no more than half the annual growth?

Last edited by Nowler; Oct 9, 2017 at 6:50pm. Reason: typos
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Old Oct 9, 2017, 6:43pm   #39
Joined Sep 2017
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Quote:
Originally Posted by Brumby View Post
There was a news wire that came across my terminal last week that the Singapore Reserve Bank is expected to make a major announcement on Oct 15 (from memory). There is some speculative news that the SRB might surprise the market with a rate hike. If true, will be market moving on the SG. The rest of the research is up to you.
Thanks for the heads up!
I was set to work out some mid to long-term plan for the USD SGD, so this is very interesting indeed. I will proceed with caution
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Old Oct 9, 2017, 7:10pm   #40
Joined Sep 2017
Nowler started this thread Current Trade

Currently short on the AUD/USD with 1.7% margin used.
The Aussies have a release in about 7 hours or so... what I now need to figure out is how the market is going to react to this.
Even good news can cause a negative reaction seemingly...

I feel it's highly likely that the USD will gain on the AUD for a while, but will this news cause a move that will take out my stop, or will it ping my take profit... decisions, decisions, decisions...

As it stands, I'll leave it alone
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