Max Pastukhov's Trading Journal

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Old Mar 17, 2018, 8:27am   #1
Joined Feb 2008
Max Pastukhov's Trading Journal

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 Mar 17, 2018, 7:12pm   #2
 
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Good start. I hope you can keep going this well.
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Old Mar 18, 2018, 2:42pm   #3
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Originally Posted by Pat494 View Post
Good start. I hope you can keep going this well.
Thank you! Me hope too
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Old Mar 23, 2018, 8:37pm   #4
Joined Feb 2008
Second Trading Week

Max Pastukhov started this thread It was an experimental week, so you should not judge it depending on its profits or losses.

I did a lot of entries testing some ideas. The main goal was to find if I can trade my idea techinically, without my intervention. Unfortunately (and Iím not even surprised about it), I canít trade my idea as a robot.

I found that I always lost money when I tried to trade technically, then got them back using manual, intuitive approach. The system itself helps to trade profitably but you still need to find correct entry and exit points. By the way, most part of the last weeks profits were made using intuitive entry point at the end of the week, too.

This weekís turnover was huge: I earned $73 and lost $116. Taking into account my first week profit of about $30, Iím negative about $12 since I started to trade real money, not demo.

On the other side, almost all losses (about 70-80%) this week were experimental. I just acted as a robot, doing nothing even when I clearly felt that it was wrong. Then I made some money back using intuitive approach for finding entry points, then lost yet another portion on technical experiments.

So, what did I find during my experiments?

1. I can occasionally catch huge wins. The highest win I got this week was about $40. I was close to catching $55 and I felt that it was right but I refused to do anything (I was a robot) until it was too late. Whatís more important is that accumulated losses during this position were something about $10, not more.
2. I canít make random entries into the market and hope that they will be profitable. If I enter in the morning (as I did for 3 days in a row), not at some expected move point, I always got reversal. Losses wasnít huge but there were plenty of them. These test morning entries were the main source of my overall losses this week. On top of that, being in the wrong position, I missed good moves when they finally happened.
3. I should limit number of stops I get for each level. Sometimes market enters a channel which causes some levels to hit stops 8-10 times in a row. You can play with various stop limits at my calculator to see the difference, especially in terms of reward/risk ratio.
4. I should wait for big moves, sideways market kills all levels and all profits.
5. I found good price levels at odd numbers which donít get hit by stops too often. As a clue, try something like 19/69. They are easy to enter and track, too.
6. I got used to entering the market with stop orders, not in a FOMO mode. I no longer have an urge to enter the market immediately. I just set up pending orders and wait. Itís much better from statistical standpoint because you get filled only when market moves into your direction. The goal is to be positive all time you are in a position.
7. I got used to closing plenty of positions with small stops. It was hard at the very beginning but now I no longer feel bad when I see released losses grow. I know that I will get them back later, when I close the final position.

As a conclusion, the idea is great. It enables to get good reward/risk ratio when you find good entry points and wait for enough long to close the position. On the other side, I canít develop a trading robot which will do the work for me. Speaking honestly, I didnít believe that it was possible, I just needed to prove it to myself in practice and see it live.

Whatís next?

I feel that itís time to focus on using my trading idea with intuitive entry and exit points. I already proved to myself that it can be effective. The most motivating part was looking at $55 unrealised profit at my terminal

This weekend I will automate self-training of my setup using simulator, then spend some time polishing entries and exits on historical data.

Next week I will no longer experiment but focus on results. I will trade for a few hours a day, then spend the rest of my time practicing entries and exits in the simulator. I hope that it will finally make the difference
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Old Mar 26, 2018, 4:18pm   #5
 
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I like your scientific approach to learning, the experiments sound successful in that they yielded lots of information.

Setting up automated trading strategies is extremely difficult and will often yield different results than manual trading

A way that i am starting to think about automated trading, is to reverse engineer my thought process on every entry and exit point that i make.

For example, program a long list of conditions that all have different weights, and when some combination of conditions are met, a buy order is placed at a calculated price. It would also help to have some conditions build on other conditions to be more significant, or cancel them out completely. I include things like time, technical signals, and even % change in price as conditions.

Interested in seeing how your automated trading plays out
Will
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Old Mar 26, 2018, 4:49pm   #6
Joined Feb 2008
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Originally Posted by weissblitzen View Post
I like your scientific approach to learning, the experiments sound successful in that they yielded lots of information.

Setting up automated trading strategies is extremely difficult and will often yield different results than manual trading

A way that i am starting to think about automated trading, is to reverse engineer my thought process on every entry and exit point that i make.

For example, program a long list of conditions that all have different weights, and when some combination of conditions are met, a buy order is placed at a calculated price. It would also help to have some conditions build on other conditions to be more significant, or cancel them out completely. I include things like time, technical signals, and even % change in price as conditions.

Interested in seeing how your automated trading plays out
Will
Thank you for the feedback!

This weekend I finished what I planned and tried to test my idea using historical data. Unfortunately, I wasn't able to get positive results. It seems that my skills as a market predictor are still close to zero

Yes, my approach gives great RR ratio when using good entry and exit points. But I can't get it to work on random or manually selected entries.

I get great results when I know in advance that something strong will happen pretty soon. Something like news releases or macroeconomics data updates. I get them from investing.com economical calendar. When I enter at these points, I usually get great results. I'm also able to feel when it's a good time to exit.

But, here comes a good thing: while looking for ways to improve entry and exit points, I found Bollinger Bands. From my first experiments it seems like a good way to generate entry/exit points, not relying on news events.

I plan to implement it in my simulator today and test it tomorrow. Then I can tell if it works for me, or not

As for the automated trading, I'm against it. From my previous business I know that everything you can automate loses efficiency. It means that you should avoid automatable areas of expertise.

I prefer to automate self-training, data analysis and trade execution. But I strongly believe that human+AI will always win agains pure AI.

I want to combine the best from both worlds. It's the goal.

I see my future as a playing expert with a set of great tools that help me to trade, not replace me as a trader. I doubt that I can automate my part of the work and I have no such goal

My personal journey isn't about developing yet another all-dancing all-playing trading robot. I want to learn, practice and automate my work which will gradually improve my own performance.
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Old Mar 26, 2018, 5:27pm   #7
 
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I expect you will soon be in profit as your ideas are sound.
My advice is to stick with the ones that show profits not the losers.
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Old Apr 1, 2018, 7:45am   #8
Joined Feb 2008
Third Trading Week

Max Pastukhov started this thread This week was full of experiments and learning. I tried to polish entries and exits, tested new ideas and tools.

From a financial point of view, I’m negative about $70 this week. It means that I’m net negative about $86 since I started to trade real money. While it sounds awful at a $100 account, I feel happy

Here is why:

1. By limiting an initial urge to start big, I was able to cut my losses from the very beginning. If I decided to start with $10,000, it will be just terrible to lose $8,600 at the very first month. I will continue to follow my rule of doubling profits, not losses, because I’m still not sure that it’s the final step. It may happen that the next week will be ”experimental” as well. And the next… And the next…

It means that I will need to earn at least $86 before I increase account size.

On the other side, this time I’m absolutely sure that I will become profitable at the end. I see some big profits from my setups, I just need to be more patient, limit risks and don’t limit profits, learn and practice. I don’t know when it will finally happen, but I’m not in a hurry by any means.

2. I finally overcome the urge of being in the game all the time. Now I patiently wait until the right time to enter the market. I did numerous tests to prove that it’s the only solution. Random entries kill all future profits.

3. I clearly understood the mechanics of my system. While it was just a purely theoretical idea at the very beginning, now I see its potential. In short, my approach enables me to gradually build a huge position with small risks.

Why it’s so important?

I don’t need to bet on the direction of the move. I’m able to reopen in opposite directions multiple times until the strong move finally happens. The cost of this trial and error is so small compared to the profit target that I always feel confident. I don’t worry when the price hits initial stops because it’s just a place where I open into the opposite direction.

If the price goes against me, I take linear losses. When the price goes into the right direction, I get exponential profits. It enables me to be wrong most part of the time and still get some profits at the end.

4. I decided to limit the number of levels when I enter the market. My attempts to build huge positions killed all profits when the price gets stuck at some resistance or support point. Now I build just 10 levels and don’t worry about the rest.

When I’m able to do it at the beginning of a strong move, I don’t worry about the future because price rarely strikes back to my position. And, even when it strikes back, it just means that it wasn’t a good entry point. I should just close what I have built so far and wait for the next opportunity.

5. I managed to compress building the position almost 2 times without taking extra risks. I built it at fixed increments of 50 pips at the very beginning, now I do it every 25-30 pips with tight stops. The hard stop is still 50 pips, but it’s an emergency stop for some unexpected events. I rarely wait for it, I usually close the level at about 25 pips.

6. I switched from static orders to manual execution. And, the more I practice it, the better I feel the market, the better RR ratio I get. I’m able to feel when it’s a good time to open, or not. Or when it’s a good time to close at -25 pips or should I wait for extra 2-3 pips. I feel that with earning more experience I will be able to polish this part to get much better results even if I don’t touch anything else.

7. I finally understood that I should limit not only stop size, but total cost of building the position. If I followed this simple rule, I had a chance to be $200 positive, not $86 negative. More than a half of my overall losses were generated by a single position in a flat market this Thursday. An expensive but valuable lesson. I’m happy that I met such situation at the very beginning, not after I increased my account size.

I found that something around $5-$10 for a single market entry is more than enough to prove if it’s the right entry point, or not. If I lose about $5 and see that the price still moved nowhere, I should just take this loss and wait for the next day.

It’s important not only from the risk management perspective. As a side effect, it gives me clear money management rules:
– limit a single position to $5 loss it I get less than 5 levels at the end
– limit a single position to $10 loss in any other case
– limit myself to a single entry per day to avoid getting multiple losses in a row on a sloppy market
– limit position size so that maximum daily risk doesn’t exceed 5% of my account at the very beginning, or just 2% when I grow bigger. This way I will lose 50% of my account only after 5 weeks of consecutive daily losses. It will be a good time to question my overall trading idea

8. I developed a simple exit rule: at the end of the trading day, not at some predefined take profit target. From my experience I clearly see that it’s the best choice. I should not limit profits in any way, even if sometimes price will reverse in the middle of the day. It’s the easiest way to get the maximum RR ratio.

Yes, it’s hard to see profits go from $50 to zero. On the other side, it gives me a chance to hit something like $150 or even $300 on some days with a $10 risk. An enormous RR ratio, by any means. And, even when the price reverses, I can still cover my risks by moving stops to breakeven.

9. When trying to explain my idea to other people, I got a lot of criticism. Experienced traders don’t like an idea of not trying to predict the direction of the market.

I don’t argue with them because it doesn’t matter for me. If they are able to earn from their predictions, I’m just happy for them, honestly. For me, personally, I have no other choice. With so little experience in the market I have no other option, rather than building a system that is forgiving for all my newbie mistakes.

On the other side, I don’t want to stay ignorant until the end. As I learn and practice, I expect to become better and better in analysis and feeling of the market. It will gradually improve RR ratio even further.

I plan to do a lot of experiments in the future, trying to find better entry and exit points. It’s just not the right time. I’m sure that newbies should start with developing the right approach to risk management and money management, develop discipline and earn feeling of the market with practice. And, only when they are able to limit their greed and hope, to cut losses and let profits grow, to fight FOMO and avoid overtrading, it will be the right time to look for better entries and exits.

When looking for profitable traders, I was amazed on how simple are their trading setups. It doesn’t mean that I can copy them and become a profitable trader in an hour. It just means that my focus should be on some other areas which are much harder for the newbie than getting into the market at a pullback, for example.

10. I found the difference between my ”Trading Against the Average Joe” and popular ”Trading Against the Crowd” approaches.

My approach is focused on building right personal habits. Picturing some poor guy whose money I’m taking from the table is just a psychological trick. I don’t believe that I’m robbing somebody. Even if there is some loser on the other side, it’s he who is responsible for the loss.

I’m not trading against the crowd, I’m trading with it. I’m not trying to outsmart the market, I’m trying to profit from its behavior. The market is always right, I can’t win if I’m trading against it.

Yes, we can see at Oanda sentiment indicators when other traders get wrong. The market sometimes behaves like he is cheating you. It takes your stops at the moment of reversal, it reverses few pips before your TP level, it changes the direction immediately after your entry, etc.

It’s not because there is some bad guy laughing at you. It’s because we, as humans, think and behave in the same way. We look at the same charts, read the same news, react to the same events and patterns. When I think deeper about it, I lose any illusion that there is a way to outsmart it. I can’t outsmart myself

11. When talking to other traders, I discovered Bollinger Bands. You may laugh at me, but it was a breakthrough moment.

In the past 10 days I was puzzled why price suddenly bounced or moved sharper without any obvious reason. Now, when I added this indicator to my charts and learned about it a bit deeper, I see that it’s one of the most popular tools between traders. It’s fun to see how the price reacts to its levels.

I see that people heavily use it in their trading systems but I’m still not ready to use it for my own entries and exits. On the other side, it made my trading easier because I no longer get nervous when the price hits moving average or channel sides on M1. I also pay close attention to the moments when it happens on higher timeframes.

12. I made an interesting observation when analyzed the most profitable trades. I clearly see that I need more volatility. The more volatile is the market, the higher is RR ratio of my trading system.

I found that EURUSD isn’t the most volatile pair on the market. I may try to test other options next week. I’m still not sure, but I feel that it’s worth to try.

13. When analyzing past trades, I found that spreads are critical to my system. I use tight stops which means that I’m just a single spread far from the stop immedately after I opened the position. If I can find a way to get better spreads, I can instantly improve my RR ratio.

After looking for options, I decided to switch to another account type: ECN with market execution. Yes, I will pay commission for each and every trade this way which makes almost no difference from the financial side. I will still lose a lot on entering the market, but I hope that I will compensate it with lower number of stops hit.

For example, from $86 I lost total, about $26 were paid for spreads alone. When I do some maths for the new account, I see that I will pay about the same at the end. The only difference is that about half of it will be paid as commissions. On the other side, I will be able to save a significant part of the other half on stops.

So, I switched to another account, this time at $520 initially. It’s the minimum amount of money required for this account type. It doesn’t mean that I will increase position size. I will trade as if I’m still at the initial $100 account.

Taking into account that I decided to double my profits, I will need to make at least $520+$86 before I make any extra deposits. And, at $10 max daily risk I need about 50 trading days, or about 2.5 months to blow it up to zero

As for the next week, I don’t expect it to be promising. I will trade on a new account with market execution which will be different from instant execution I have got accustomed to. I feel that I need one or two trading sessions just to make the switch.

I also plan to test other, more volatile pairs. It may happen that I will get higher RR ratio this way. On the other side, I will need to start virtually from scratch in this case. I learned a lot about EURUSD this month, something like GPBUSD or USDJPY is a black box for me.

I feel that I should better start with getting used to the new account and market execution types first. Then, only after I feel that it’s comfortable to trade again, I will test some other pairs.

So, thank you for reading such a long story

Please give me some feedback, especially if you are a consistently profitable trader. You can help both me and other newbie traders around, who are watching this show.

Last edited by Max Pastukhov; Apr 1, 2018 at 7:52am.
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Old Apr 1, 2018, 3:55pm   #9
 
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Joined Mar 2004
Quote:
Originally Posted by Max Pastukhov View Post
This week was full of experiments and learning. I tried to polish entries and exits, tested new ideas and tools.

From a financial point of view, Iím negative about $70 this week. It means that Iím net negative about $86 since I started to trade real money. While it sounds awful at a $100 account, I feel happy

Here is why:

1. By limiting an initial urge to start big, I was able to cut my losses from the very beginning. If I decided to start with $10,000, it will be just terrible to lose $8,600 at the very first month. I will continue to follow my rule of doubling profits, not losses, because Iím still not sure that itís the final step. It may happen that the next week will be ĒexperimentalĒ as well. And the nextÖ And the nextÖ

It means that I will need to earn at least $86 before I increase account size.

On the other side, this time Iím absolutely sure that I will become profitable at the end. I see some big profits from my setups, I just need to be more patient, limit risks and donít limit profits, learn and practice. I donít know when it will finally happen, but Iím not in a hurry by any means.

2. I finally overcome the urge of being in the game all the time. Now I patiently wait until the right time to enter the market. I did numerous tests to prove that itís the only solution. Random entries kill all future profits.

3. I clearly understood the mechanics of my system. While it was just a purely theoretical idea at the very beginning, now I see its potential. In short, my approach enables me to gradually build a huge position with small risks.

Why itís so important?

I donít need to bet on the direction of the move. Iím able to reopen in opposite directions multiple times until the strong move finally happens. The cost of this trial and error is so small compared to the profit target that I always feel confident. I donít worry when the price hits initial stops because itís just a place where I open into the opposite direction.

If the price goes against me, I take linear losses. When the price goes into the right direction, I get exponential profits. It enables me to be wrong most part of the time and still get some profits at the end.

4. I decided to limit the number of levels when I enter the market. My attempts to build huge positions killed all profits when the price gets stuck at some resistance or support point. Now I build just 10 levels and donít worry about the rest.

When Iím able to do it at the beginning of a strong move, I donít worry about the future because price rarely strikes back to my position. And, even when it strikes back, it just means that it wasnít a good entry point. I should just close what I have built so far and wait for the next opportunity.

5. I managed to compress building the position almost 2 times without taking extra risks. I built it at fixed increments of 50 pips at the very beginning, now I do it every 25-30 pips with tight stops. The hard stop is still 50 pips, but itís an emergency stop for some unexpected events. I rarely wait for it, I usually close the level at about 25 pips.

6. I switched from static orders to manual execution. And, the more I practice it, the better I feel the market, the better RR ratio I get. Iím able to feel when itís a good time to open, or not. Or when itís a good time to close at -25 pips or should I wait for extra 2-3 pips. I feel that with earning more experience I will be able to polish this part to get much better results even if I donít touch anything else.

7. I finally understood that I should limit not only stop size, but total cost of building the position. If I followed this simple rule, I had a chance to be $200 positive, not $86 negative. More than a half of my overall losses were generated by a single position in a flat market this Thursday. An expensive but valuable lesson. Iím happy that I met such situation at the very beginning, not after I increased my account size.

I found that something around $5-$10 for a single market entry is more than enough to prove if itís the right entry point, or not. If I lose about $5 and see that the price still moved nowhere, I should just take this loss and wait for the next day.

Itís important not only from the risk management perspective. As a side effect, it gives me clear money management rules:
Ė limit a single position to $5 loss it I get less than 5 levels at the end
Ė limit a single position to $10 loss in any other case
Ė limit myself to a single entry per day to avoid getting multiple losses in a row on a sloppy market
Ė limit position size so that maximum daily risk doesnít exceed 5% of my account at the very beginning, or just 2% when I grow bigger. This way I will lose 50% of my account only after 5 weeks of consecutive daily losses. It will be a good time to question my overall trading idea

8. I developed a simple exit rule: at the end of the trading day, not at some predefined take profit target. From my experience I clearly see that itís the best choice. I should not limit profits in any way, even if sometimes price will reverse in the middle of the day. Itís the easiest way to get the maximum RR ratio.

Yes, itís hard to see profits go from $50 to zero. On the other side, it gives me a chance to hit something like $150 or even $300 on some days with a $10 risk. An enormous RR ratio, by any means. And, even when the price reverses, I can still cover my risks by moving stops to breakeven.

9. When trying to explain my idea to other people, I got a lot of criticism. Experienced traders donít like an idea of not trying to predict the direction of the market.

I donít argue with them because it doesnít matter for me. If they are able to earn from their predictions, Iím just happy for them, honestly. For me, personally, I have no other choice. With so little experience in the market I have no other option, rather than building a system that is forgiving for all my newbie mistakes.

On the other side, I donít want to stay ignorant until the end. As I learn and practice, I expect to become better and better in analysis and feeling of the market. It will gradually improve RR ratio even further.

I plan to do a lot of experiments in the future, trying to find better entry and exit points. Itís just not the right time. Iím sure that newbies should start with developing the right approach to risk management and money management, develop discipline and earn feeling of the market with practice. And, only when they are able to limit their greed and hope, to cut losses and let profits grow, to fight FOMO and avoid overtrading, it will be the right time to look for better entries and exits.

When looking for profitable traders, I was amazed on how simple are their trading setups. It doesnít mean that I can copy them and become a profitable trader in an hour. It just means that my focus should be on some other areas which are much harder for the newbie than getting into the market at a pullback, for example.

10. I found the difference between my ĒTrading Against the Average JoeĒ and popular ĒTrading Against the CrowdĒ approaches.

My approach is focused on building right personal habits. Picturing some poor guy whose money Iím taking from the table is just a psychological trick. I donít believe that Iím robbing somebody. Even if there is some loser on the other side, itís he who is responsible for the loss.

Iím not trading against the crowd, Iím trading with it. Iím not trying to outsmart the market, Iím trying to profit from its behavior. The market is always right, I canít win if Iím trading against it.

Yes, we can see at Oanda sentiment indicators when other traders get wrong. The market sometimes behaves like he is cheating you. It takes your stops at the moment of reversal, it reverses few pips before your TP level, it changes the direction immediately after your entry, etc.

Itís not because there is some bad guy laughing at you. Itís because we, as humans, think and behave in the same way. We look at the same charts, read the same news, react to the same events and patterns. When I think deeper about it, I lose any illusion that there is a way to outsmart it. I canít outsmart myself

11. When talking to other traders, I discovered Bollinger Bands. You may laugh at me, but it was a breakthrough moment.

In the past 10 days I was puzzled why price suddenly bounced or moved sharper without any obvious reason. Now, when I added this indicator to my charts and learned about it a bit deeper, I see that itís one of the most popular tools between traders. Itís fun to see how the price reacts to its levels.

I see that people heavily use it in their trading systems but Iím still not ready to use it for my own entries and exits. On the other side, it made my trading easier because I no longer get nervous when the price hits moving average or channel sides on M1. I also pay close attention to the moments when it happens on higher timeframes.

12. I made an interesting observation when analyzed the most profitable trades. I clearly see that I need more volatility. The more volatile is the market, the higher is RR ratio of my trading system.

I found that EURUSD isnít the most volatile pair on the market. I may try to test other options next week. Iím still not sure, but I feel that itís worth to try.

13. When analyzing past trades, I found that spreads are critical to my system. I use tight stops which means that Iím just a single spread far from the stop immedately after I opened the position. If I can find a way to get better spreads, I can instantly improve my RR ratio.

After looking for options, I decided to switch to another account type: ECN with market execution. Yes, I will pay commission for each and every trade this way which makes almost no difference from the financial side. I will still lose a lot on entering the market, but I hope that I will compensate it with lower number of stops hit.

For example, from $86 I lost total, about $26 were paid for spreads alone. When I do some maths for the new account, I see that I will pay about the same at the end. The only difference is that about half of it will be paid as commissions. On the other side, I will be able to save a significant part of the other half on stops.

So, I switched to another account, this time at $520 initially. Itís the minimum amount of money required for this account type. It doesnít mean that I will increase position size. I will trade as if Iím still at the initial $100 account.

Taking into account that I decided to double my profits, I will need to make at least $520+$86 before I make any extra deposits. And, at $10 max daily risk I need about 50 trading days, or about 2.5 months to blow it up to zero

As for the next week, I donít expect it to be promising. I will trade on a new account with market execution which will be different from instant execution I have got accustomed to. I feel that I need one or two trading sessions just to make the switch.

I also plan to test other, more volatile pairs. It may happen that I will get higher RR ratio this way. On the other side, I will need to start virtually from scratch in this case. I learned a lot about EURUSD this month, something like GPBUSD or USDJPY is a black box for me.

I feel that I should better start with getting used to the new account and market execution types first. Then, only after I feel that itís comfortable to trade again, I will test some other pairs.

So, thank you for reading such a long story

Please give me some feedback, especially if you are a consistently profitable trader. You can help both me and other newbie traders around, who are watching this show.
You have posed to yourself many valuable points, mainly in money management.
Of course there is the old chestnut of a problem to consider and that is entries and exits.
__________________
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Let your hero loose.
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Old Apr 1, 2018, 4:43pm   #10
Joined Oct 2015
Hi thanks for the update. You are a new trader, probably just making the typical mistakes which traders make and which are more damaging in the beginning with limited track record. If you went from +30% to -86% in half a month obviously your trading plan needs improving.

An idea to consider: slow down and trade less frequently (on a higher time frame?), it will give you more time to get back to your senses and notice when something is going wrong.
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Old Apr 1, 2018, 4:51pm   #11
Joined Feb 2008
Max Pastukhov started this thread
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Originally Posted by Kaeso View Post
Hi thanks for the update. You are a new trader, probably just making the typical mistakes which traders make and which are more damaging in the beginning with limited track record. If you went from +30% to -86% in half a month obviously your trading plan needs improving.

An idea to consider: slow down and trade less frequently, it will give you more time to get back to your senses and notice when something is going wrong.
Thank you!

That's exactly what I found so far
The main reason for all these losses were random entries.

On the other side, at the end of the last week I finally forced myself to stick to the entry rules. Hope, this week will be better. This time I will definitely be patient.

As for the position size - it's relative. When I told you that I lost 86% of my deposit it doesn't mean that I lost 86% of trading money. I started small so this loss is about 0.86% of total money I prepared for trading.

My rule is to double profits. It means that I will not deposit any extra risk money until I first recover these first losses plus make at least twice the amount I have at my account at the moment.

Right now, I have about 5% of risk money at my account. I will not risk more than $10 per day which means that my daily risk is just 0.1%. From the money management point of view, I'm absolutely safe
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Old Apr 2, 2018, 3:20am   #12
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Max,

IMHO having read your postings I am of the view that there are a number of problematic issues. Unfortunately some of your statements are either self contradictory or cryptic, it is difficult to provide specific comments. I will therefore limit my comment to your risk management approach since there is sufficient clarity for me to project where your problems are likely to be.

Here are the facts as I understand your situation :
You have set aside $10,000 trading capital but limited initially your broking account deposit to $100 to work on proof of concept. It has not worked out after 2 weeks and you have to recapitalise your account to $520 but nevertheless maintaining a hurdle goal of not increasing your risk capital until it is met.

The results from your 2 weeks of trading suggest to me that you are being incongruent between your risk capitalisation goal, your position sizing methodology and your overall trading strategy. The problem I believe you are in such a state is because you are developing your pillars independently without considering how they will reconcile into a coherent viable trading approach.

I will unpack what I mean. Trading is about making money while managing the downside i.e. risk. In order for things to work out in a coherent manner we have to first establish primacy. It is the primary driver that dictates how the rest unfolds. Every trading strategy requires a degree of capitalisation. When it is insufficient it is call undercapitalisation. The fact that you had to recapitalise after two weeks suggest that there is an inherent problem. Assuming your trade strategy is sound, it is either a position sizing issue or a capitalisation issue. If you are already trading at the minimum position size allowed then it would by process of elimination suggest it is a capitalisation issue. In other words it is non sensible to set an arbitrary initial capital without considering what the trade strategy actually entails. I understand your goal is to minimise risk but it has to be done in the context of a capitalisation sufficient to execute your trade strategy. Now that you have recapitalised to $520, the same question still remains - is it at a sufficient level? This leads me to my second observation. You have set a $10 daily limit to minimise risk from overtrading. This is probably useful but also has its limitation. Importantly, the limit should be set in conjunction with your trade strategy and not as an arbitrary limitation which can be counter productive. It is unclear to me what trade strategy you are following but it seems to require multiple attempts to get set. For example, if you are locked out for the day after multiple attempts because of a daily limit and just before an actual move in your favor then such a lock out procedure may be detrimental. Finally, your capitalisation level should take into consideration how you intend to scale your capital eventually. Since you are just starting out you should take the effort to lay out a sound process that will facilitate scaling of your trading eventually. For example, say your current strategy trading at minimum position size requires $500 capital to execute then if you grow your trade capital to say $800 but if you wish to double your position size you know you need $1000 of capital. There are many variations to it but giving it some thought upfront will lay the right foundation to easily scale your process eventually.
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Old Apr 2, 2018, 8:28am   #13
Joined Feb 2008
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Originally Posted by Brumby View Post
Max,

IMHO having read your postings I am of the view that there are a number of problematic issues. Unfortunately some of your statements are either self contradictory or cryptic, it is difficult to provide specific comments. I will therefore limit my comment to your risk management approach since there is sufficient clarity for me to project where your problems are likely to be.

Here are the facts as I understand your situation :
You have set aside $10,000 trading capital but limited initially your broking account deposit to $100 to work on proof of concept. It has not worked out after 2 weeks and you have to recapitalise your account to $520 but nevertheless maintaining a hurdle goal of not increasing your risk capital until it is met.

The results from your 2 weeks of trading suggest to me that you are being incongruent between your risk capitalisation goal, your position sizing methodology and your overall trading strategy. The problem I believe you are in such a state is because you are developing your pillars independently without considering how they will reconcile into a coherent viable trading approach.

I will unpack what I mean. Trading is about making money while managing the downside i.e. risk. In order for things to work out in a coherent manner we have to first establish primacy. It is the primary driver that dictates how the rest unfolds. Every trading strategy requires a degree of capitalisation. When it is insufficient it is call undercapitalisation. The fact that you had to recapitalise after two weeks suggest that there is an inherent problem. Assuming your trade strategy is sound, it is either a position sizing issue or a capitalisation issue. If you are already trading at the minimum position size allowed then it would by process of elimination suggest it is a capitalisation issue. In other words it is non sensible to set an arbitrary initial capital without considering what the trade strategy actually entails. I understand your goal is to minimise risk but it has to be done in the context of a capitalisation sufficient to execute your trade strategy. Now that you have recapitalised to $520, the same question still remains - is it at a sufficient level? This leads me to my second observation. You have set a $10 daily limit to minimise risk from overtrading. This is probably useful but also has its limitation. Importantly, the limit should be set in conjunction with your trade strategy and not as an arbitrary limitation which can be counter productive. It is unclear to me what trade strategy you are following but it seems to require multiple attempts to get set. For example, if you are locked out for the day after multiple attempts because of a daily limit and just before an actual move in your favor then such a lock out procedure may be detrimental. Finally, your capitalisation level should take into consideration how you intend to scale your capital eventually. Since you are just starting out you should take the effort to lay out a sound process that will facilitate scaling of your trading eventually. For example, say your current strategy trading at minimum position size requires $500 capital to execute then if you grow your trade capital to say $800 but if you wish to double your position size you know you need $1000 of capital. There are many variations to it but giving it some thought upfront will lay the right foundation to easily scale your process eventually.
Thank you, you are right that my system definition sounds cryptic

It's because of my approach. I'm a software developer who got used to the agile methodology. It means that I start with some simple and ugly prototype, then polish it by incrementally adding features depending on the feedback.

In trading I started with a simple idea "Trading Against the Average Joe" which means that I'm focused on doing all the right steps in order of their importance (money management, risk management, patience, developing high RR ratio, execution, journaling and analysis, entry and exit rules, automation, etc).

As you can see, I gradually move towards the points you mentioned (entry and exit rules). For now they are vague and simplified: I enter only on high-volatility news events and exit at the end of the day. I have almost polished execution, now I'm polishing journaling/analysis part. Entry and exit rules will come next.

Nevertheless, I can see from the last 3 weeks that my system can be profitable even with this simple entry/exit set. I closely analysed all my trades to find that it's enough to limit the daily risk to become profitable. Yes, I will miss some good trades this way, but it's more important to avoid high losses like the one in the last week.

Last week I had 2 profitable trading days, about +$60 total. If I just limited the risk to $10 per day, I had a chance to become $30 positive, not $80 negative. And, if I waited until the end of the day, not closing at some random TP level, I had a chance to be $100 positive.

I also did the same calculations for the last 3 weeks: total missed profits is something around $300-$400 on a $100 account. That's why I'm so excited

It may sound like I'm doing some random trades but I'm just "debugging" my system from the most important parts to the least important ones. The event that caused the big loss last week was a "bug" I "fixed" by adding daily loss limit.

Even if I will eventually find that my trading setup is invalid, I will just replace it with another set of entry and exit rules. It's like an addon or a module in a software product, nothing special about it. I will still need to "debug" and polish it.

I way be wrong in dividing trading into small independent parts. Even in this case it's just a testing and debugging process which will eventually result in joining two or more of this "modules" into a single one.

Thank you for your feedback!

I understand and formalize my approach and system much better when I hear objections and advices.

Last edited by Max Pastukhov; Apr 2, 2018 at 8:34am.
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Old Apr 8, 2018, 9:31am   #14
Joined Feb 2008
Fourth Trading Week

Max Pastukhov started this thread Yet another big losing week, I’m down yet another $82 on $520 initial account.

Why so much if I decided to limit my daily risk to $2?

I followed my risk management and trading rules for the first 3 days of the week. Every day I entered the market exactly according to my plan. The market was slow and moved nowhere at my entry points, so I just exited when losses reached the predefined daily limit.

Tired from these empty entries, during which I accumulated about $8 in losses, I decided to test yet another approach - decreasing distance between entry levels, so that I need much less price movement in order to get the same profit as before.

As I told you, I managed to compress distance from 50 pips to just 20 pips, then to about 10 pips which enabled me to get the same lot size in just 100 pips, not 500, as its initial version. The losses became smaller, too, because I lost not 50 pips per failed level, but just 10.

So, this time I decided to compress it even further, to 5 pips. I did it at the end of the third trading day, being disappointed with bad entry points from my previous approach.

It’s funny that I managed to make 2 good entries in a row, making back all previous weekly losses. Motivated by these quick and easy results, I decided to take a break and do something big next week.

So, next day I started with a feeling that it will be quick and easy to use this approach. I didn’t even bothered to analyse the market, but just entered it randomly and started to accumulate positions, taking plenty of small losses because I tried to compress levels from 5 to 2-3 pips.

This ”work” got all my attention, so I didn’t look at my account balance for some time. I was sure that these small losses I get will not amount to something big at the end. I felt that I can easily get them back after I build a big position before some good market move.

At first there were minus $10, then $20, then $30. At the same time, I built about 20 pyramid levels which gave me up to $20 per every 100-pip move, so I felt safe. I accumulated about $40 unreleased profit at about $30 total loss. Still positive, yes?

The funny thing was that it represented just 300-pip move where just 100 pips back may kill half of my unreleased profit. It finally happened, so I got $30 losses with just $20 unreleased profit. Too little to close, that’s what I thought at the moment

The price went back and forward, I accumulated even more losses. If it just bounced back to my first entry point, I would just take the loss and go away. But it constantly gave me a hope to get back to the same level and even higher. I reminded myself that potential profits are so big that they can easily cover all losses I got so far.

For example, if price moved for 500 pips, I had a chance to get $100. At 1000 pips - $200. So, my $50 risk still looked like a good deal

I continued to accumulate losses, waiting for the price to go higher. At some point I got tired and closed the position, getting back $16 at $50 total loss. You will laugh, but the price immediately went higher, to a point where I had a chance to be more than breakeven for the day.

I decided that the idea was solid, I just closed the position too fast. I decided to give it yet another try, this time building the position with the patience in my mind. But, this time price just moved up and down for several hours, never giving me a chance to see even $20 of unreleased profit.

I gave up on $82 in losses. After final analysis I found the reason why I missed. It was just pure luck that I earned some money with this approach the day before.

The reason was simple: with 4-5 pips spread and 4 pips comission I used 10-15 pips wide stops, adding to the winning position every 2-3 pips. So, when the price went back, I got about 20 pips of losses for every 2 pips. It was 10 times more than in all my previous experiments. From a statistical standpoint, I played an absolutely losing game, 10 times worse than entering the market with a full size at the very beginning, which I decided to avoid at all costs.

I still like the idea of adding to winning position, I should just do more maths and testing next time

So, I decided to stop trading for this week, because I clearly reached all possible daily loss limits. Instead, I focused on looking for good entry points. I’m disappointed with my previous news-based idea because it rarely plays out as expected. I feel that it was pure luck that I got good results in my first trading week.

Here is what I decided to try at the very first iteration of looking for entry/exit points:

I noticed that the market always goes against me when I’m absolutely sure. If I was right 50% of the time, there is nothing I can do about it, it’s just random. 100% wrong means that there is something big there. It’s not that I’m the unluckies person on Earth, it’s that we all look at the same charts, read the same news and make the same trading decisions. These crowd-initiated decisions make the market move in a counterintuitive way.

I feel that trying to analyse the market manually will lead me to the same crowded places. I did read trading forums, chats and public/private analysis/predictions for enough time to see that they are far from being statistically strong.

On the other side, I don’t want to build a statistics-based trading robot because this way I will go into yet another crowded place as well. From my observations, more than a half of Forex players either try to develop yet another MetaTrader expert or pay somebody to code it for them. From what I read recently, quants get into the same trap I told about a week ago: when something is automatable, it loses efficiency and margin to a point where it becomes obsolete.

I want to combine the best from both worlds: calculate and visualize market stats, automatically find some setups, but let me make final analysis and decisions. This way I will both develop great tools and evolve as a trader.

I started to work on pattern recognition/analysis engine inside my simulator to calculate odds and find better setups. One of traders I followed in the past called this approach ”working as a slot machine against the market”.

I’m writing this report after I finally got first positive results. What I have got so far doesn’t find entry points yet, but just dynamically estimates probabilities and RR ratios, optimizing and visualizing them live. It alone protects me from about 80% of bad short-term setups. What looks like a great opportunity when looking at the raw chart alone rarely pays out as expected

Yes, these first results are still statistically insignificant, but I feel that there is plenty of room for optimization and experiments.

I plan to polish this idea in the simulator first, using statistical pattern analysis as a model for finding entry and exit points, then trade it in a demo account until I see some profits at the end of the day, only then I will return to trading live account. As usual, I plan to trade as I have just $100, independent of my current account balance.

On the other side, I don’t want to stop trading real money because I lose motivation when simulating or trading demo. So, I will trade real account on the next day after I get any demo profits according to my trading system. And, if I get my limited losses in the real account, I will trade demo the next day again. Taking into account potential losses at $3 per live trading day, it’s a reasonable price for my motivation

I don’t expect the next week to be profitable, but I will definitely avoid costly experiments this time. I can’t even call what I did this week an ”experiment”, it was clearly a mistake. On top of that, I violated my own risk management rules, so I have no excuses.

While it’s easy to promise to follow some rules, I feel how hard it is to actually do it. It takes some time and experience, you can’t just ”learn” or ”understand” them. You need to be beaten hard to feel what they actually mean.

I feel great, by the way. While I got yet another losing week in a row, I’m still happy that I didn’t take much bigger risks at the very beginning. I missed a chance to lose all my money twice in two consecutive weeks.

Instead, my current losses are just 1.5% of my total risk capital for this venture. At this loss rate, even if I will make these huge and costly mistakes each and every week, it will take about 3 years to get rid of it. Plenty of room to learn


So, I will continue to trade small, following my core rule ”adding to the winning position only, by doubling weekly profits” when I finally get some.

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, I’m profit-negative, but I’m still in the game

Last edited by Max Pastukhov; Apr 8, 2018 at 9:34am. Reason: correcting some details
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Old Apr 8, 2018, 2:45pm   #15
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Originally Posted by Max Pastukhov View Post
.....While it’s easy to promise to follow some rules, I feel how hard it is to actually do it. It takes some time and experience, you can’t just ”learn” or ”understand” them. You need to be beaten hard to feel what they actually mean....
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.

Last edited by Kaeso; Apr 8, 2018 at 2:50pm.
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