trendie's Blog

Trendies Journal: Life 1 out of 9

First attempt to day-trade lasted 10 days!!
First week; made 222 points on the Dow.
Second week; lost 819 points.

Post Mortem:
Over-trading ( boredom trades )
I went from 1 - 2 positions, to 7 !!
On further analysis, I think I was thinking that the market wasnt going anywhere, so when it did move, I wanted to "make up" for the days when it wasnt moving anywhere.
I made the mistake of expecting the market owed me something for having to wait.
I can trade, but I lose discipline.

I have decided to call it a day on my first account.

I had a general idea of what I was trading, but I admit it was generally discretionary.
I also failed to accept what the mareket was telling me.
I had decided that trend was down, so when it edged up, I took it as an opportunity to SELL more cheaply.
I failed to identify a position where the trend had changed to UP.

I shall return.

Life 2 out of 9

I have been re-reading The Disciplined Trader by Mark Douglas.

I need to learn to trade before trying to make money.

One of the exercises is to identify a mechanical strategy, and follow the rules of that strategy irrespective of the behaviour of the market.
( this is an exercise to maintain discipline on a strategy when the drawdowns start, and to stay in the game long enough for the strategy to return to winning positions ).

My strategy, is the following;
Trend-Following Stop-and-Reverse.
( this strategy does not attempt to predcit tops of bottoms. It just follows the market ).

My mechanical strategy exercise is the following:
Dow Futures.
Trailing Stop of 70 points. Stop and Reverse.
If the 70 points gets hit, the next Stop and Reverse goes to 40.
Then, if the market allows the trade to build up, then the 70 points is re-instated.
NB: The actual trailing is 60 and 30. The extra 10 allows for the SB spread.
NB: the trailing stop is moved on every 10 point advance.

This exercise forces me to follow a mechanical strategy.
( no analysis ).
I have pre-determined stops so cannot dither on taking losses.
I do not need to consider complex adnd sometimes conflictiing analysis. ( this comes later ).

My objective: stay in the game longer than 10 days !!

NB: as in all the best computer games, if I can make 1,000 Dow points, I shall consider I have "gained" a life back !! Well, you can on Donkey-Kong, so why not the futures game.

Week commencing Oct 4th

I have initiated a SELL on the DowDec ( D4F ) at 10,243.
( for simplicity I shall call this 10,240 )
My stop-loss is at 10,310.
If the market hits 10,310, I shall initiate a BUY.

15:36: Initiate a DailyDow SELL at 10,244. SL=10,274 ( 30pts ).
21:00: CLOSED at EOD at 10,216: +28 points.

21:00: DowDec has SL moved down to 10,280.

Oct 5th - Tues

15:15:
The DowDec04 futures dipped below 10,170.
The SL therefore moved to 10,240. PHEW.
Has reached break-even.
A bit uncomfortable that I may be giving away 70 points per retracement.

20:45: discretionary SELL at 10,195; SL= 10,225;
SL got hit, = - 30 points.

The DowDec04 trade has its SL moved to 10,230.
Built in profit !!

Oct 7th

the DowDec04 futures has dipped below 10,130.
the SL moved to 10,200.
built-in profit of 40 points.

Oct 8th

The DowDec04 futures fell below 10,100. SL moved to 10,170.
Built in profit of 70 points. ( since Oct 4th )

16:35: DowDec04 futures dips below 10,080. SL moved to 10,150. Built-in profit of 90 points. ( since Oct 4th )

18:45: DowDec04 futures dip below 10,070. SL moved to 10,140. Built-in profit of 100 points ( since Oct 4th ).

19:20: DowDec04 futures dip below 10,060. SL moved to 10,130. Built-in profit of 110 points ( since Oct 4th ).

19:29: DowDec04 futures dips below 10,150. SL moved to 10,120. Built-in profit of 120 points ( since Oct 4th )

19:47: DowDec04 futures dips below 10,140. SL moved to 10,110. Built-in profit of 130 points ( since Oct 4th )

Oct 12th: This week closes with a profit of 130 points

Oct 11th - Oct 15th

Nothing Monday: Narrow Range 7 day.

Oct 12th: start the week at 10,110 from last week.
14:35: DowDec04 futures dips below 10,030; SL moved to 10,100.
14:45: DowDec04 futures dips below 10,020. SL moved to 10,090.
20:15: DowDec04 futures goes above 10.090. Loss of 20 points. Go Long. SL set to 10,050.

Oct 13th:
DowDec04 futures tops 10,110. SL moved to 10,070.
DowDec04 dips 10,070. Stopped out. Loss= -20 points.

SELL DowDec04: 10,060. SL = 10,130. ( 70 points )
DowDec04 dips to 10,030. SL moved to 10,100.
18:20: DowDec04 futures dips below 10,010. SL moved to 10,080.
18:25: DowDec04 futures dips below 10,000. SL moved to 10,070.
18:35: DowDec04 futures dips below 9,980. SL moved to 10,050.
18:45: DowDec04 futures dips below 9,970. SL moved to 10,040.
18:52: DowDec04 futures dips below 9,960. SL moved to 10,030.
18:55: DowDec04 futures dips below 9,950. SL moved to 10,020.
Oct18: Dow SELL should have been set at 10,070 !!! ( extra 10points)

Oct 14th:
16:20: DowDec04 futures dips below 9,940. SL moved to 10,010.
16:35: DowDec04 futures dips below 9,930. SL moved to 10,000.
16:45: DowDec04 futures dips below 9,910. SL moved to 9,980.
18:10: DowDec04 futures dips below 9,900. SL moved to 9,970.
19:15: DowDec04 futures dips below 9,890. SL moved to 9,960.
20:10: DowDec04 futures dips below 9,880. SL moved to 9,950.
20:15: DowDec04 futures dips below 9,870. SL moved to 9,940.

Oct 15th: observation: the Dow started by spiking around upto 9945. The DowDec04 stayed around 9910-9918 ( D4F )
I am still in although raw data would have chopped me out.
15:30 DowDec04 futures hits 9,940. Stopped Out. Profit = 120 points.
BUY DowDec04 at 9,930. SL=9,890. ( 40 points ) Risk= -40.
DowDec04 futures tops 9,950. SL moved to 9,910. Risk = -20.
17:40: DowDec04 futs tops 9,960. SL moved to 9,920. Risk= -10.
18:30: DowDec04 futs tops 9,970. SL moved to 9,930. Risk=0.

19:35: DowDec04 dips to 9,930. Stopped out for 0.
Trigger SELL at 9,930. SL = 70points (10,000). Risk = -70.
NB: need to revisit how I calculated entry of BUY. Maybe wrong !!
20:20: DowDec04 futs dips 9,920.SL = 9,990. Risk= -60.

Loss of 20 pts.
Win of 120 pts.
Loss of 60 pts ( actually open trade transferred to next week ).
Profit/Loss this week = 40 points.

Oct 18th - Oct 22nd

Oct 18th: trade carried over from last week: ( no risk, as loss taken last week )
SELL DowDec04 futs. SL = 9,990. Risk=0. SL=70pts
14:35: DowDec04 futs dips 9,880. SL=9,950. Rwd = 40.
14:40: DowDec04 futs dips 9,870. SL=9,940. Rwd = 50.
15:55: DowDec04 futs dips 9,860. SL=9,930. Rwd = 60.
15:58: DowDec04 futs dips 9,850. SL=9,920. Rwd = 70.
17:05 Stopped out: 9,920. Profit = 70 points.
reverse: BUY 9,920. SL=9,880 ( 40pts ). Risk = -40.
17:10: DowDec04 tops 9,930. SL=9,890. Risk = -30.
17:20: DowDec04 tops 9,940. SL=9,900. Risk = -20.
18:30: DowDec04 tops 9,950. SL=9,910. Risk = -10.
18:45: DowDec04 dips 9,910. Stopped out: Loss = -10.
reverse:
SELL DowDec04 at 9,910. SL=9,980 ( 70pts) Risk = -70.
19:35: DowDec04 dips 9,900. SL=9,970; Risk = -60.

Oct 19th: ( been away )
16:00 ( these are guesses based on charts )
DowDec04 obviously spiked 9,970. Loss = -60.
BUY DowDec04 9,970. ( 40 pts), SL=10,010. Risk = -40.
Spiked: Loss = -40.
SELL DowDec04 10,010. ( 70pts ). SL=10,080. Risk =-70.

16:05: DowDec04 dips 9,960: SL= 10,030. Risk = -20.
16:12: DowDec04 dips 9,950. SL= 10,020. Risk = -10.
16:18: DowDec04 dips 9,940. SL= 10,010. Risk = 0.
18:48: DowDec04 dips 9,930. SL= 10,000. Reward = 10.
18:58: DowDec04 dips 9,920. SL= 9,990. Reward = 20.
19:07: DowDec04 dips 9,910. SL= 9,980. Reward = 30.
19:13: DowDec04 dips 9,900. SL= 9,970. Reward = 40.
19:57: DowDec04 dips 9,890. SL= 9,960. Reward = 50.

Oct 20th:
14:32: DowDec04 dips 9,860. SL= 9,930. Reward = 80.
15:15: DowDec04 dips 9,850. SL= 9,920. Reward = 90.
15:22: DowDec04 dips 9,840. SL= 9,910. Reward = 100.
15:30: DowDec04 dips 9,820. SL= 9,890. Reward = 120.
15:43: DowDec04 dips 9,810. SL= 9,880. Reward = 130.
15:44: DowDec04 dips 9,800. SL= 9,870. Reward = 140.
DowDec04 tops 9,870. Stopped out: Profit = 140.
Reverse: BUY DowDec04 9,870 ( 40 pts ). SL=9,830. Risk = -40.
17:40: DowDec04 tops 9,880. SL= 9,840. Risk = -30.
SL hit. Loss = -30.
SELL DowDec04 at 9,840. ( 70 pts ) SL = 9,910. Risk = -70.
19:25: DowDec04 at 9,830. SL = 9,900. Risk = -60.
19:40: DowDec04 at 9,820. SL = 9,890. Risk = -50.
20:20: Am away tomorrow, therefore if SL hit, no Reverse trade.

Oct 21st: I guess I got hit: Loss = -50 points !!

Oct 22: back in the game.
If DowDec04 goes above 9,910, then BUY. If DowDec04 dips 9,850, then SELL.
14:55; DowDec04 futs dips 9,850. SELL. SL=9,920. Risk = -70.
15:17: DowDec04 at 9,840. SL = 9,910. Risk = -60.
15:37: DowDec04 at 9,830. SL = 9,900. Risk = -50.
16:21: DowDec04 at 9,820. SL = 9,890. Risk = -40.
18:20: DowDec04 at 9,800. SL = 9,870. Risk = -20.
18:43: DowDec04 at 9,780. SL = 9,850. Risk = 0.
20:20: DowDec04 at 9,760. SL = 9,830. Reward = 20.
20:22: DowDec04 at 9,750. SL = 9,820. Reward = 30.

Oct 25th - Oct 29th

Last week; total return around 50 points.
( Won = 70, Loss = 10, Loss = 60, Loss = 40, Won = 140, Loss = 30, Loss = 50, Won = 30 )

New week;
SELL ( from last week ) DowDec04 at 9,750. SL = 9,820. Reward = 0.

3-week assessment

Interesting 3 weeks so far of this experiment.
If I take the first week as a blip, that is, 130 pojnt gain a bit unusual, then the average of the other 2 weeks seems around 45 points per week.
I am taking my losses !!!
However, the parameters were arbitrary.
( I think the 70/40 Stop-Reverse is biased in the direction of the main trend, but what if the trend changes ? )
I think I may be onto something.
I am wary of losing 70 poitns before being stopped out.

I need to identify something more dynamic as triling stop.
( eg; if the market stops trending, and starts going sideways, narrow the stop, as it may be ready to reverse ).
I will spend this week assessing this.

Week Nov 1st - Nov 5th

restart test this week.
Past 4 weeks positive trerritory. ( 200+ points )
Curiosity to see if this really works.
Entry signal:
IF the price is higher than open after 1 hour, BUY.
ELSE SELL.
SL = 70pts. Stop and Reverse.
SL moved every 10 pts move.
WIll be also adding discretionary moves.

PS: have also started to use Price Channels instead of Moving Averages. ( they seem to account for volatility better and more immediately )
PPS: Also will remove intermediate event lines to tidy up the page.
All prices D4F DowDec04 futs.

15:30: Dow lower than start of day.
SELL 10,000 ( actually 10,002 ): SL = 10,070: Risk = -70.
LOSS = 70.
SL hit. BUY 10,070. SL = 10,000. Risk = -70.
16:40: whoops. SL should be 40. SL = 10,030. Risk = -40.
16:20: SL hit. SELL 10,030. SL = 10,070. Risk = -40.
LOSS = 40.

18:28: SELL dips 10,020. SL = 10,060, Risk = -30. ( may change this to 70 )

Today: LOSS = 110.

Nov 2nd

SL 10,060 hit. LOSS = 30.
BUY at 10,060. SL = 10,020. Risk = 40.
Tops 10,070. SL = 10,030. Risk = 30.
Tops 10,080. SL = 10,040. Risk = 20.
Tops 10,090. SL = 10,050. Risk = 10.
Tops 10,100. SL = 10,060. Risk = 0.
Tops 10,110. SL = 10,070. Reward = 10.
15:25: Tops 10,120. SL = 10,080. Reward = 20.
16:35: discretionary: SL = 10.090. Reward = 30. ( next Stop-and-Reverse will be for 70 pts )
19:50: Dips 10,090.
GAIN = 30.
SELL 10,090. SL = 10,160. Risk = 70.
19:52: Dips 10,080. SL = 10,050. Risk = 60.
19:56: Dips 10,040. SL = 10,110. Risk = 20.
20:26: Dips 10,030. SL = 10,100. Risk = 10.
20:28: Dips 10,020. SL = 10,090. Risk = 0.
20:47: Dips 10,000. SL = 10,070. Reward = 20.

Todays Total Net: 0
( this is the day the Dow moved up 80, then fell 100 !!! )

Nov 3rd

( continued from y-day ) SELL 10,000. SL = 10,070. Reward = 20

Project halted.
Pre-market moves spiked too high. Strategy did not account for this. Either I need to account for key days, such as non-Farms, etc, and NOT trade, etc.

I need to assess the events, and perhaps call this life 2 lost !!
Finished for week, re-evaluate plan etc.

Dec 30th 2004 - New years Resolution

Actually, my tests were reasonably good.
Positive results.
Took losses. ( believe me, this is a big deal for me )
I may re-start the test in the New Year with real money !!
However, I have a couple of ideas that may make this blind-trend-following a bit more reactive to intra-day events.
( as a taster, I may have 2 positions, but one is a profit-target, and the second is left to run as per normal ).
I need to make it react to shorter ranges ( perhaps use ATR of pivot-points as markers ).

Will identify new rules, amendments and start new test ( I think this is test 3 ) in 2005.

2005: Trend-Following Stop-and-Reverse v2

Here we go: I have around 3 weeks of continuous trading before my next project, so good time to get a good run of results.

Instrument: Dow-30.
Mechanism: D4F Daily Futures. ( 5-pt spread )

Rule 1: Enter Dow-30, and place a 70-point trailing stop.
( even if you enter randomly, and choose wrong direction, max loss is 70 points before rules put you into correct direction )
Rule 2: On trailing stop being hit, reverse trade, and re-set 70-point trailing stop.
Rule 3: If at end of trading day, the day turns out to be a NR-7 day, treat tomorrow as breakout, and trade in direction of breakout of todays High/Low. ( ie; reset S/R to the High and Low of NR-7 EOD )

NB: Only a full 10-point move is counted. ( ie; if entry is at 10,470. Then the stop-loss is only moved up when the price moves 10 points to 10,480, etc )

Discretionary 1: On each trigger of a S/R, 2 positions can be opened, The first position is closed after a profit-target of 40-points. The other is run as per above rules. ( problem is 70-pt risk for 40-pt reward )

There are other rules I would like to add, but I will do this as I go along.

NB: I am trading D3Fs own price quotes, rather than the underlying. It makes monitoring the situation easier.

General Notes: I have been observing how counter-trend can be profitable ! Also, the ease of observing 1-2-3 formations.
Also, I am beginning to have my doubts about "mechanical" systems. Some discretionary analysis can give you an edge. By its very nature, it may be difficult to quantify !
Also, I am beginning to see the value of pullbacks, although you cannot guarantee them. ( the strong moves may not give you a pullback ! )

Dow: w/c Jan-31 2005

08:08: SHORT Dow: 10,480: Stop-Loss = 10,550. Risk = 70.
16:00: Dow spikes 10,470. SL=10,540. Risk=60.
20:19: Dow spikes 10,460. SL=10,530. Risk=50.

Feb-01:
16:35: Dow exceeds 10,530. Loss=50. ( accum total - 50 )
16:35: LONG Dow: 10,530. SL = 10,460. Risk = 70.
16:53: Dow spikes 10,540. SL = 10,470. Risk = 60.
17:08: Dow spikes 10,550. SL = 10,480. Risk = 50.
21:24: Dow spikes 10,570. SL = 10,500. Risk = 30.
( did this late, as I was away from screen )

Feb-02:
16:12: Dow spikes 10,580. SL = 10,510. Risk = 20.
16:59: Dow spikes 10,590. SL = 10,520. Risk = 10.
19:21: Dow spikes 10,600. SL = 10,530. Risk = 0.
19:24: Dow spikes 10,620. SL = 10,550. Reward = 20.

Feb-03:
21:10: Dow closed as an NR-7 day. Treat as breakout.
Since the lower S/R would be 10,550, where I am already at, no need to move the SL up ! ( leave as is )
NB: Also was an Inside Day, as well as Bearish Harami.
So, if Dow spikes 10,550, will take extra discretionary SHORT with 40-point Profit target.

Feb-04:
15:43: Dow spikes 10,630. SL = 10,560. Reward = 30. ( carried on up. )
16:05: Dow spikes 10,640. SL = 10,570. Reward = 40.
17:51: Dow spikes 10,650. SL = 10,580. Reward = 50.
18:40: Dow spikes 10,660. SL = 10,590. Reward = 60.
19:01: Dow spikes 10,670. SL = 10,600. Reward = 70.
19:02: Dow spikes 10,680. SL = 10,610. Reward = 80.
getting fidgety, dont want to lose my gains, narrow up SL to 40 pts.
19:13: reset SL = 10,640. Reward = 110.
more fidgetness. discretionary tighter SL by 10 points.
20:02: reset SL = 10,650. Reward = 120.
20:27: Dow spikes 10,690. SL = 10,660. Reward = 130.
20:35: Dow spikes 10,700. SL = 10,670. Reward = 140.
20:43: Dow spikes 10,710. SL = 10,680. Reward = 150.
20:45: Dow spikes 10,720. SL = 10,690. Reward = 160.
OK - had enough for this week !!
Trade closed out at 10,714. Reward = 184.

GBP/USD: w/c Jan-31 2005

Thought I would split the trades listing.

SELL: 1.8837: Stopped: 1.8802: Win = 35. ( + 35 )
SELL: 1.8829: Stopped: 1.8849: Loss = 20. ( + 15 )
SELL: 1.8835: Stopped: 1.8856. Loss = 21. ( - 6 )
SELL: 1.8858: Stopped: 1.8878. Loss = 20. ( - 26 )
SELL: 1.8869. Stopped: 1.8824. Win = 45. ( + 19 )

( Didnt realise FX would be so demanding !! )

Feb-01:
( SpotOn £Trader triggered a SHORT. ( paper-trade ) )

SELL: 1.8813: Stopped: 1.8793: Win = 20. ( + 20 )

Feb-02:
SELL: 1.8834: Stopped: 1.8860: Loss = 26. ( - 26 )
( I have the unerring ability to short at the bottom. It was a 1-2-3 pattern )
SELL: 1.8853: Stopped: 1.8873. Loss = 20. ( - 46 )
( I seem to have a ( loss-making ) fixation for shorting )

Feb-03:
SELL: 1.8854: Stopped: 1.8848. Win = 04. ( + 04 )
( had wine with lunch. closed out sell when in fact, I was trying to reset the OCO parameters )

£-trader: at some point today, £-trader triggered a S/R. ( -100 ).
Now LONG.
Unless I am very much mistaken, the S/R has been hit again. ( - 100 ).
Max of 2 trades for this week played: weekly total: LOSS = 200.

w/c Jan-31 2005 Review

Dow: 2 trades: ( 1 win, 1 loss ) Net = + 134.
NB: the NR-7 rule seems somewhat redundant. Although it triggered, the overall benefit was limited.

GBP/USD: £-trader closed for max loss of -200. ( 2 S/R trades )
GBP/USD: discretionary;
9 trades: ( 5 wins, 4 losses ) Net = -3.

Overall: not bad on the Dow, but tediously slow to enact. Quite liked the GBP/USD, but need a bit more discipline.
Am still learning to take losses, something I need more work on.

not a bad week trendie...

shame about the £-trader loss..

i take it you were short before the news spike?

fc

GBP/USD: w/c Feb-07 2005

SELL: 1.8682. Stopped: 1.8712. LOSS = -30. ( - 30 )
BUY: 1.8712. Stopped: 1.8701: LOSS = -11. ( - 41 )
SELL: 1.8701. Stopped: 1.8680. WIN = +20. ( - 20 )

NB: I think I fixate on SHORTS because I made most money on them !! Am now exercising LONGS as well to enforce the idea that money can be made going LONG and SHORT.

Feb-08:
SELL: 1.8545: Stopped: 1.8575. LOSS = - 30. ( - 50 )
BUY: 1.8575. Stopped: 1.8545. LOSS = - 30. ( - 80 ) FCUK!!
SELL: 1.8560. Stopped: 1.8590. LOSS = - 30. ( - 110 ) A disturbing pattern is emerging here.
NB: need to re-evaluate decisions. Are my decisions bad, or am I not leaving enough room for trade to breathe ?

NB: £-trader triggered a SHORT today.

Feb-09: SELL: 1.8545: Stopped: 1.8595. LOSS = - 50. ( - 160 )
NB: £-trader triggered a S/R: ( - 100 ) ( now LONG )

Feb-10:
SELL: 1.8612. Stopped: 1.8532. WIN = + 80. ( - 80 )
SELL: 1.8590. Stopped. 1.9540. WIN = + 50. ( - 30 ) ( effectively had 2 positions open simultaneously. )

Feb-11: at some point y'day, £-trdaer got whipped again !!
Max loss sustained: ( - 200 )

SELL: 1.8685. Stopped: 1.8670. WIN = + 15. ( - 15 )