Max Pastukhov's Trading Journal

This is a discussion on Max Pastukhov's Trading Journal within the Trading Journals forums, part of the Reception category; Originally Posted by Kaeso You started out wanting to trade against An Average Joe and perhaps now you realize that ...

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Old Apr 8, 2018, 1:50pm   #16
Joined Feb 2008
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Originally Posted by Kaeso View Post
You started out wanting to trade against An Average Joe and perhaps now you realize that there is one inside you

Don't over-analyse everything, focus on the few things which are important.
Yes, this idea gradually evolved into fighting the Joe inside myself

What are the most important things, on which I should focus, in your opinion?
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Old Apr 8, 2018, 2:13pm   #17
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Yes, this idea gradually evolved into fighting the Joe inside myself

What are the most important things, on which I should focus, in your opinion?
You are not doing particularly bad by the sound of it. Too much text for me to go through tbh, i haven't got all day! All I could gather was that you were over-analyzing, perhaps start by doing that less.
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Old Apr 8, 2018, 4:33pm   #18
 
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...........As I can clearly see and prove with my account balance, the most important part of trading is risk management. I don't expect that my current idea will be the final one, but I have a chance to try more until I stick to something that actually works. Yes, Iím profit-negative, but Iím still in the game ..........
You join the band of average joes who are searching for ďsomethingĒ that works. Maybe youíll eventually discover that this elusive ďsomethingĒ is you .
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Old Apr 8, 2018, 10:43pm   #19
 
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Max - thank you for this thread. Really enjoying your journey so far so please keep the log coming. As a relative newby myself giving it another go,it’s fantastic reading and an interesting insight. Good luck!
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Old Apr 9, 2018, 6:41am   #20
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You join the band of average joes who are searching for “something” that works. Maybe you’ll eventually discover that this elusive “something” is you .
I absolutely agree with you that this "something" will be myself. I'm not looking for the Holy Grail in any shape or form.

On the other side, I see it in a slightly different way: I started with the most critical parts (risk management, psychology, discipline and execution), intentionally leaving the least important ones for the future. As you can notice, for the last 4 weeks I didn't try to predict the market, didn't jump from one idea to the other, but just executed a single trading strategy in various forms.

Yes, I lost some money but I also learned some important skills:
- I felt how important is risk management, I have no desire to take big risks anymore, I no longer want to risk even 0.3% of my risk capital at any given day, while before that I was willing to risk up to 10%
- I can patiently sit and wait for the best entry point for several hours, I no longer jump into the market immediately after I launch MetaTrader, as I did before
- I got used to taking small losses and patiently waiting for bigger profit targets, I feel highly uncomfortable when I see unreleased loss, not unreleased profit
- I got used to mechanically executing a system which makes plenty of released small losses, waiting for a bigger profit. It may sound like a bad habit, but I feel that it was a valuable exercise.
- I proved to myself that adding to winning positions is great, while adding to losing ones (aka 'averaging losses') is devastating
- I started to journal all my trades in a video format with my voice comments for future analysis, highly recommend it to other newbies (I use opensource OBS Studio)

The cost of this learning was about $170 total and a single month of my time. I feel that it's a bargain

Now it's time to look for better trading setups than the random one I used during the very first stage. Yes, it will take some time and plenty of experiments, too. I don't hope that I will find something profitable in a few days or even weeks. Trading is a competition between the best.

On the other side, by my previous learning/exercise I got a chance to execute any trading idea almost perfectly, not sabotaging it with fear, greed, useless hope, poor risk management and lack of patience. I can also improve characteristicts of almost any setup by adding to winning positions as well.

Last edited by Max Pastukhov; Apr 9, 2018 at 7:48am. Reason: grammar
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Old Apr 9, 2018, 11:17am   #21
 
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Originally Posted by Max Pastukhov View Post
I absolutely agree with you that this "something" will be myself. I'm not looking for the Holy Grail in any shape or form.

On the other side, I see it in a slightly different way: I started with the most critical parts (risk management, psychology, discipline and execution), intentionally leaving the least important ones for the future. As you can notice, for the last 4 weeks I didn't try to predict the market, didn't jump from one idea to the other, but just executed a single trading strategy in various forms.

Yes, I lost some money but I also learned some important skills:
- I felt how important is risk management, I have no desire to take big risks anymore, I no longer want to risk even 0.3% of my risk capital at any given day, while before that I was willing to risk up to 10%
- I can patiently sit and wait for the best entry point for several hours, I no longer jump into the market immediately after I launch MetaTrader, as I did before
- I got used to taking small losses and patiently waiting for bigger profit targets, I feel highly uncomfortable when I see unreleased loss, not unreleased profit
- I got used to mechanically executing a system which makes plenty of released small losses, waiting for a bigger profit. It may sound like a bad habit, but I feel that it was a valuable exercise.
- I proved to myself that adding to winning positions is great, while adding to losing ones (aka 'averaging losses') is devastating
- I started to journal all my trades in a video format with my voice comments for future analysis, highly recommend it to other newbies (I use opensource OBS Studio)

The cost of this learning was about $170 total and a single month of my time. I feel that it's a bargain

Now it's time to look for better trading setups than the random one I used during the very first stage. Yes, it will take some time and plenty of experiments, too. I don't hope that I will find something profitable in a few days or even weeks. Trading is a competition between the best.

On the other side, by my previous learning/exercise I got a chance to execute any trading idea almost perfectly, not sabotaging it with fear, greed, useless hope, poor risk management and lack of patience. I can also improve characteristicts of almost any setup by adding to winning positions as well.
fwiw I think your approach is very sound. In particular, your willingness to take losses whilst they are small and putting risk management at the centre of things.
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Old Apr 15, 2018, 9:40am   #22
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Fifth Trading Week

Max Pastukhov started this thread As I told previously, I've already polished the most important parts of trading (risk management, taking small losses, waiting for bigger profits, adding to winning positions, not to losing ones, patience and execution), now it's time for the least important part (looking for entry and exit points, aka "trading system").

I started with analyzing tick data, hoping to find a number of good trading ideas. I developed an algorythm to find similar price patterns in the past using Dynamic Time Warping, calculated their outcomes and built a dynamic tool to visualize real-time results.

I was inspired with its initial performance because it clearly gave me the right direction for the next few minutes. Not always right, but statistically significant. I was even able to trade it in my simulator at a breakeven level, at least covering spreads and comissions.

I started with just few days worth of analysis, then I decided to dig deeper and did some speed optimizations. At the end, I was able to analyze 3 years worth of tick data in 60 seconds, tick-by-tick. But, the more patterns I found, the closer their outcomes were to random distribution. At first I thought that my algorythm was wrong: while it gave me correct statistical parameters, patterns I found looked not the same or even close to each other.

I spent several hours doing various tests until I found the correct answer: the problem wasn't in the algorythm itself, it was in the data. Tick data is just noise, there is no clear signal in it. My first good results were due to the fact that my algorythm always told me to act according to a current short-term trend. But, when I got to a higher level of analysis, I returned back to random results, as statistically expected.

Taking into account spreads and comissions, there is no way to trade profitably on tick data. Signal/noise ratio is too small to look for the statistical advantage.

Then I moved to a higher level, trying to do the same trick with 1-minute data, then with 5-minute data, etc. This time there were no suprise for me to get the same results. Yes, signal/noise ratio slightly increases as we go higher, but not in a way that gives a chance to build a robust statistical model. It seems to me that Forex daytraders are trying to trade pure noise. It's the main reason why their win/lose ratio is close to 50%.

Then I went even higher, trying to find a timeframe where I can develop some kind of statistical advantage which will be able to, at least, cover risks. I finally found the one, but it's not for daytraders. D1 is the lowest timeframe where you can build something statistically significant. If you don't believe my, look first at H1 chart, then at D1. While H1 seems much better than M1, it's still highly noisy.

I believe that there are some people who can trade profitably on H1, or even on M15, but it's not the way I want to go. While trading less frequently sounds like earning less, it's exactly the opposite. You can earn much more on a clear rare signal with high RR ratio, than on some frequent noise where you will always stay close to breakeven. If you are an expert in lower timeframes, just look at higher timeframes and imagine what may happen if you stay in some of your winning position not for few hours, but for several days, weeks or even months...

So, I clearly understood that daytrading isn't for me. I want to trade on daily charts, entering the market 1-2 times a month for 1-3 weeks, at least. It perfectly fits good habits I acquired during the very first stage of my self-education: taking small losses and waiting for bigger profits. It also gives me plenty of free time to live my life and do some other work I enjoy, like researching the market, organizing and automating my work.

It doesn't mean that I will stop looking at lower timeframes. I still need to polish entries and exits. I want to avoid huge stops associated with trading on higher timeframes. I feel that there is still plenty of room for experiments and automation.

As for trading results for this weeks, they are mixed:

I decided to start with a demo account before going live, so I entered perfectly into the market this Wednesday using my "Anti-Joe" approach. I spent just about $10 to build 0.1 lot position which gives me $10 for every 100 pips. At the moment I'm writing the report, I'm demo-positive about $50, $40 net. The target is about $120, or even more. Even if the price will finally go back, I will still be breakeven.

But, according to FOMO, I decided to enter into the same direction this Friday on my real account. It wasn't a perfect entry in any way or form, just a hope to get the very first positive week as fast as possible. Yet another reminder to look for perfect entry setups, not for "good enough" ones

So, I'm $40 demo-positive and $30 real-negative at the same point

I will no longer try to enter the market in imperfect points, I will just sit and wait for the perfect setup. On the other side, taking into account much higher targets, I increased my risk per position to $30, or about 0.3% of my total risk capital. I also feel that I should find a way to add to winning positions smarter, not mechanically. It's what I will try to polish on the next entry point. I expect it to happen in 1-3 weeks.

What's next?

I will continue to develop my simulator, waiting for the next perfect setup on the daily chart. This time I will focus my tool on polishing long-term trading, not scalping. I hope to find a better way to add to winning positions before I enter the real market again.

I also want to look closer at commodities and stocks. If I decided to trade on daily charts, I can find much more opportinities there, than within these 2.5 highly corellated Forex currency pairs.

By the way, I'm not disappointed about switching from daytrading to longer-term trading. I feel that I can earn even more than I initially expected. The reason is simple: with much higher RR ratio and much less less volatility on my account balance I will be able to gradually increase risks and profits to a point, unreachable in daytrading.
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Old Apr 22, 2018, 8:43am   #23
Joined Feb 2008
Sixths Trading Week

Max Pastukhov started this thread So, yet another disappointing week. I'm down $246 this time. There is just $159 left from my initial $520 account. Combined with the prevous account losses, I've already lost about 4% of my initial $10,000 risk capital.

As I told you previously, I found that I don't like day trading. I want to focus on long-term trading. This time I tried to use my "adding to winning position" approach in long-term trading. I increased my risk limit to 1% of my total capital. There is no point in betting 0.1% on something that I planned to keep for weeks or even months.

So, I built long position on EURUSD looking at monthly charts. It failed in 2 days. Yet another attempt to build the position in the same direction failed at the end of the week.

Then I stopped and did deep analysis of all my trades since the very beginning. Here are some conclusions I draw:

1. I should not "add to the winning position" mechanically. While it can theoretically increase RR ratio, it greatly increases risks of entering into the market. When I add 10 levels at 20 pips each, I move average entry point about 100 pips from its perfect level. It means that I will get both less profit and higher loss when the price reverses, not even taking into account plenty of small losses from price fluctuations along the way.

There is nothing wrong with increasing winning positions, but all these extra entries must be treated as absolutely independent ones, with their own risks. I must pay even more attention when I add to the position than when I initially enter, because some amount of move into the positive direction increases the probability of reversal.

From the execution point of view, keeping track of multiple positions is hard and nervous. When you enter the market at the perfect point, you can move your stop to the breakeven level, then relax. But, when I'm constantly adding more and more, I'm always under pressure. I will avoid using this technique for some time, until I become profitable with solid separate positions.

2. Risks are much more important than any potential profits. My focus should be on minimizing risks, not on maximizing profits.

All these weeks I did everything to maximize RR ratio, even when it increased current risks. The idea was simple: if I trade like a slot machine against the market, I will be green at the end. The only problem is that it can take longer than I initially expected. Much longer

It's not enough to minimize total financial risk in any given position like I did before. Yes, it was a good idea to start with just 5% of my total risk capital because other way I had a chance to lose it 4 times in a row. This time I should pay more attention to minimizing execution risks as well.

I understood that I should look at any trading opportunitiy in a different way: instead of looking for the best reward/risk ratio, I should focus on the ones with the minimum risks, even if their RR ratio is lower.

"Perfect setup" is not the one where I can make 500 pips with 100 pips risk. It's the one where I can make 100 pips with 30 pips risk. And, when I finally made my target 100 pips, it may be a good idea to wait and see if the price can go even higher, to the same 500 pips as in the first example

3. Forex is a ranging market, not a trending one. There is no point in building long-term positions here. Taking into account intraday fluctuations, it's hard to find a good entry point for longer-term trading. Nobody is accumulating Euro for retirement

For me it means that I don't want to focus on the Forex market anymore. I decided to go into the stock market where I can keep positions from 3 to 30 days, at least. This time I no longer have a desire to become a day trader.

4. I need to analyze the market much deeper than I did before. I had a chance to avoid all these losses if I invested these 6 weeks not into trading but into harvesting and analyzing the data. Yes, I learned some good lessons but their cost should be much lower.

I decided to delay trading real money in the stock market until I become absolutely prepared. Taking into account zero leverage, high comissions and clear statistical requirement to build a portfolio to minimize "black swan" risks, I can't experiment with $100-$500. I need to put all my $10,000 at risk this time, or I will not even cover transaction costs.

This time I plan to invest at least 8 weeks into learning and developing an analytics system which can give me mathematically correct real-time visual answers to all questions I can get along the way. Something like: "What is the corellation between two given stocks in 2017?" or "What will be the difference between 2016 and 2017 if I use this particular trading idea?", for example.

Only after I get this system in place, I will practice trading demo for the next 8 weeks. The cost of mistake is too high for me this time to carelessly risk real money.

5. Yes, it sounds boring to not trade for 4 learning/development/demo months in a row. I feel that I need some minimum practice to preserve my internal motivation.

I found a solution that sounds good for me: I can start building my analytics system for the Forex market at the very beginning. Its core features will be the same for both markets, the only difference will be in data sources and some market-specific reports.

I expect to find some Forex trading ideas which I will execute using minimum lot possible, no longer trying to increase position size or to grow my account exponentially. Just as proof of concept, risking about $0.20-$1 per day 1-2 times a week. $159 left will be more than enough for this purpose.

But, even if I become a profitable Forex trader in the end, it doesn't matter. I decided to go into long-term stock trading, I need Forex just to test and polish my system and ideas. It's also interesting for me to compare statistical characteristics of Forex and stock markets.

So, in short, I will focus on analytics this time. I don't plan to trade next week, or even the week after that. On the other side, I will share some interesting facts and stats I discover along the way. Maybe they can help those of you who decided to focus on the Forex market.
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Old Apr 22, 2018, 11:40am   #24
 
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Keep going

Good start! Keep going and yes, just imagine how it will grow, just step by step.
Slowly, no rush - first is control over yourself and this infinity of possibilities.
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Originally Posted by Max Pastukhov View Post
Finally, there is something I can share

So, few days ago I started to trade real money, after simulated trading for a few weeks, then a week of trading on a demo account. I planned to trade demo for a few weeks, but soon I found that I have no emotional attachment, so I skipped this part.

I started with a small $100 real trading account at Alpari (standard.mt5 account).

I trade a setup I called "Trading Against an Average Joe".
Here are more details about it:
http://www.trade2win.com/boards/fore...erage-joe.html

In short, I was able to make about 30% in 4 trading days trading like a robot, just as a proof of the concept.

Here are more details and screenshots:
https://pastukhov.com/2018/03/17/first-trading-week/
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Old Apr 22, 2018, 12:27pm   #25
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Originally Posted by Max Pastukhov View Post
So, I built long position on EURUSD looking at monthly charts. It failed in 2 days....
huh? i'm thinking you've got your position sizing all wrong. How could building a position on a monthly time frame have been stopped out in two days? newbie alert!

Click the image to open in full size.

dont over-analyse and over-complicate things, as i already said, you are just making basic, typical mistakes
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Old Apr 22, 2018, 2:47pm   #26
Joined Feb 2008
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huh? i'm thinking you've got your position sizing all wrong. How could building a position on a monthly time frame have been stopped out in two days? newbie alert!

Click the image to open in full size.

dont over-analyse and over-complicate things, as i already said, you are just making basic, typical mistakes
I absolutely agree with you

To tell you the truth, it was "all-or-nothing" gambling: I've already decided to move into the stock market, so it was a quick-and-dirty ignorant way to make some final resuts at Forex to close this chapter for me. Even if it played out as I initially expected, I would still be not happy with ANY results to stay at this market.

On the other side, here I underanalyzed: if I built some simple stats I had a chance to find that breakouts happen much less often than pullbacks. So, this "lesson" had some good consequences for me at the end. Anyway, it's not an excuse for me.
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Old May 26, 2018, 3:49pm   #27
Joined Feb 2008
7th-11th Research and Development Week

Max Pastukhov started this thread Today is the day

I finally invented something that actually helps me to trade better.

It was a hard journey filled with a number of failed experiments. I spent a lot of time with data analysis, did a lot of statistical experiments, tested a lot of ideas. I built a complex in-house data analysis system, downloaded and processed about 5 terrabytes of data (custom FTP server was even built along the way to handle the load). I even developed some MetaTrader indicators along the way.

At the end I came to the conclusion that all tools I can develop must have the core component: an experienced trader as their user. Yes, some of my indicators had pretty good short-term predictive power but they still canít be used on autopilot. I still need to analyse the market before making the final decision.

So, instead of digging into the data even deeper I decided to take a break and find a way to become a better trader by myself. There is no sense in developing all these tools until I become able to use them effectively.

I already told you that I developed in-house trading simulation tool some time ago. I hoped that after I spend some time playing at a high speed, I will develop a better sense of the market. It didnít work out so I gave up and focused on data analysis.

This time I decided to give it yet another try. I thought about the music school I attended in my childhood. While I hated it, it gave me some basic violin playing skills. I learned not only the violin itself, but the right systematic approach to learning: a lot of practice, starting with the simpliest exercises, gradually increasing their complexity.

So, instead of playing my simulator in a Ēfree flightĒ mode, I decided to develop some lessons and exercises, starting from the most obvious trading setups. The idea was to start small and gradually develop some basic trading skill.

It was just pure idea at the very beginning. I quickly developed quick-and-dirty algorithms and interfaces to try it as quickly, as possible. I didnít even expected it to become something big. The goal was to fail faster

But, after playing with it for about an hour, I started to notice the difference. While I was almost always wrong at the very beginning, I got more and more correct entry points over time. My stops became tighter and tighter as well.

Then, after I returned back to real-time trading, I found that my trading style changed as well. I no longer rushed to enter by the market. I started to create limit orders with small stops at better levels than before. I became patient and greedy

So, I spent more time polishing this part of the product. It took me almost 2 weeks from the idea to the moment when I was able finish an hour-long exercise in just 10-15 seconds. It means that I can get a day worth of practice in just few minutes. The subconscious does the rest.

Itís still an experimental tool, so I decided to trade demo account until I get at least a single month of profitable trading. I expect to return to trading real money in about 2-3 weeks.

Iím still using and polishing the product for at least 6 hours a day, but I also feel that itís time to share it with other traders as well.

Itís in beta, itís free, but it will take some time to get used to. I feel that itís not for everyone because it requires patience. So, donít even download it if you donít want to invest at least 10 hours of your life into boring training. Itís not fun to analyse the market and place orders again and again.

On the other side, it really helped me and I hope that it may help some of you as well. Please tell me if you get some ideas along the way, especially if they are about new lessons and exercises.

More details and download links are here:

https://forexsimulator.org/

As the final disclaimer: It comes with no guarantee, itís boring and full of bugs, it may not work for you and you may just waste your time. Like the music school in my childhood
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Old May 26, 2018, 4:27pm   #28
FXX
Joined Oct 2017
You know for a small fee you can buy forex tester which can apply more strategies and you can access many years worth of data and is stable.



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Old May 26, 2018, 4:37pm   #29
Joined Feb 2008
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You know for a small fee you can buy forex tester which can apply more strategies and you can access many years worth of data and is stable.
Yes, I know about Forex Tester, I almost released my product on the year they released, told about it recently.

The very first version of my product was similar to Forex Tester but I found that it's ineffective. If it was effective, I would just release the clone of Forex Tester and relax

The main problem is in unsystematic learning. While (theoretically) you can apply more strategies in the free-flight mode, it's not effective from the learning point of view. It's just "testing", it gives you no new skills.

My product, on the opposite, develops these skills. You don't need any strategy in your mind before using it. When you come to the music school, you expect it to give you something, not to just test if you already have the talent.

By the way, you can still use my product in the same way you use Forex Tester. It comes with huge historical data sets as well.

As for "stable", I was just joking. I spent a lot of time testing and polishing it before the release. When I'm talking "beta", I mean that I need to get proof that the product actually helps to trade not only from myself, but from other traders as well. It has nothing to do with bugs or features.

PS: The beta stage will end after I get at least 30 testimonials from other traders. I don't expect people to beleive me as a developer, so I don't even show my trading stats until I get similar results from others. I want to show the average performance, not the peak one. Until that point, you don't even need to pay for the product. It's absolutely free. On top of that, all beta users will get free lifetime license even if they aren't satisfied with the product.

Last edited by Max Pastukhov; May 26, 2018 at 4:47pm. Reason: added more information about the beta version
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Old May 26, 2018, 6:30pm   #30
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hey max

i offer you the highest complement i offer to any new trader ....you are willing to learn and are tenacious and flexible.....excellent

now the bad news ........it doesnt take weeks to master these things ...it takes years i'm afraid..........so just getting your expectation into alignment i hope buddy

everythign must come together and will do in time ........all i suggest is you spend as much screen time just watching the market you are specialising in........you will need to find your edge but in truth there are only a handful of core things that work ...sometimes........the rest is experience and picking your timing to perfection

good luck buddy

N

Hint - market timing is all .............the best systems in the world are not being sucessfully beta tested on EA's .......most of them have discretionary elements that cannot be replicated......therefore the beta testing proves useless........
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