my journal 2

This is a discussion on my journal 2 within the Trading Journals forums, part of the Reception category; Getting back to my 100 trades on the chart game: new rule. No need to wait when i lose, because ...

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Old Feb 6, 2010, 1:06pm   #181
 
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re: my journal 2

Yamato started this thread Getting back to my 100 trades on the chart game: new rule. No need to wait when i lose, because i get hyper even when I win. The rule will not be to wait one minute between trades because it doesn't make sense. The rule will be to wait at least ten click between trades. Each click is one week. I must not seize more than one trading opportunity every 10 weeks. If I do, it means I've switched into compulsive trading mode.

Thus, my one and only rule, on top of the stoploss rule: each trade must be more than 10 clicks apart from the previous exit. Each stock must be at least 5 minutes apart.

Both in real trading and in the chart game, I must find a way to avoid getting into a trading frenzy.

Last edited by Yamato; Feb 6, 2010 at 1:46pm.
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Old Feb 6, 2010, 1:16pm   #182
 
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re: my journal 2

If you are going to hold trades for 12 months, then the chances are that at some of the time you will be fully invested. Personally, I would avoid that unless you can neutralise market risk.

Let's say you 'diversify' all of your money amongst 20 long trades in the US market. As soon as the market takes a dive, it'll wipe out months or more profit. Stop losses may not help you when this happens.

You could, of course aim for 50% long trades and 50% short (as long as your shorts aren't on stuff like SKF which is inverse to the market). This will give you SOME cushion in the event the market takes a wild move in one direction or the other.
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Old Feb 6, 2010, 1:45pm   #183
 
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re: my journal 2

Yamato started this thread Yes, thanks for the advice. However the 12 months idea was just a hypothesis and I didn't even use it once. Also, I am always talking about the chart game, where diversification is not possible. Let's forget about this 12-months hypothesis altogether.
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Old Feb 6, 2010, 3:06pm   #184
 
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re: my journal 2

Quote:
Originally Posted by travis View Post
Yes, thanks for the advice. However the 12 months idea was just a hypothesis and I didn't even use it once. Also, I am always talking about the chart game, where diversification is not possible. Let's forget about this 12-months hypothesis altogether.
OK - fair enough ! Good luck with the next 'game'
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Old Feb 6, 2010, 3:59pm   #185
 
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Richard Dennis on emotions (from Market Wizards)

Yamato started this thread Richard Dennis on emotions (from Market Wizards), which is my biggest problem. He seems to adopt a solution I've been thinking of: let time pass between trades. As much time as necessary not to be emotional and affected by the previous trade.

Quote:
How do you handle a losing streak?
Cut back. If it is really bad, stop and get out.
Do you sometimes need to get away from the markets for a few days?
Generally, it just takes a day or two, but you do need to stop for a period of time. It is almost like a pitcher not balking. Before he throws the ball, he has to stop at least for that second. That is what I try to do—at least have a pause. It could be for just one day.
Quote:
So you are able to avoid the emotional trap?
Yes, but the flip side is that I also avoid the emotional elation when things are going well. There is no way to play just one side of that street. If you feel too good when things are going well, then inevitably you will feel too bad when they are going poorly. I wouldn't claim that I realized that after three years of trading, but after you've done it for twenty years, it either drives you crazy, or you learn to put it into perspective.
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Old Feb 6, 2010, 4:29pm   #186
 
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re: my journal 2

Yamato started this thread It's working so far. I'm up 100% on 10 different stocks. Lost a few times, and each time I am taking a break between trades, and a 5 minute break between stocks. During those short breaks I've been watching some short videos on youtube. I'll post my results once I'll get to 100 trades. I haven't lost control yet and let a small loss turn into a huge loss. I did feel some anger after each loss and felt rushed to make my loss back. Another time a 20% profit turned into a small loss because I wasn't happy with not getting out at the bottom (which to some degree you must accept if you let your profit run).
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Old Feb 6, 2010, 4:46pm   #187
 
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re: my journal 2

Yamato started this thread Still going ok. Up about 150% after 30 trades. Still 70 trades to go. Still haven't lost control over my losses. They happened, and I cut them. Not easy. Each time I am tempted to get mad at the market, just like in real trading. Keeping trades apart helps very much. I noticed that the temptation is to wait less than the 20 weeks I had decided to wait. It's like an addiction, that I develop immediately, and that compels me to trade more and more frequently, and that's how things get out of control: if I do that, I weigh my entries much less, and totally lose control if I lose. Thanks to this chart game, I have finally realized what exactly was wrong with my trading: rather than my understanding of the market, a latent addiction that is always there, ready to screw me.

Other than that, trading long and short, and I am wrong about once every 3 times, and lose when I am wrong less than what I make when I am right.

Right now I am not trading with a univocal system, but entirely discretionary: with the rules I mentioned above (stoploss, time between trades). If I'll manage to find a method to be profitable over 100 trades, which rule out luck, that will give me a lot of confidence for my real trading as well. Never before have I been able to be consistently profitable with discretionary trading. Maybe exactly because I was never able to wait long enough, for the right opportunities. Something my automated trading achieved from the start.

Last edited by Yamato; Feb 6, 2010 at 4:56pm.
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Old Feb 6, 2010, 7:30pm   #188
 
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One loss just got away (and luckily came back)

Yamato started this thread Still going, about 300% after about 50 trades. On one occasion, just now, I was distracted, frustrated... and lost control: one loss got away, and turned from just 2% to 50%... then I kept it open and it ended at -6%. The 100-trades series was saved but I do have to record this, that at trade #49, I didn't have the patience, calm and rationality to stop a loss at the -10% threshold.

But I cannot have any such moments. These situations may work out more than not, but are what causes me to blow out my account over and over again. You cannot, even once, let that loss get away from you. That's what makes automated trading so superior, in that it never loses its control over trades.
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Old Feb 6, 2010, 7:53pm   #189
 
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re: my journal 2

Yamato started this thread The more I look at it, the more the US $ Index's 5-day moving average seems to be the right filter for my automated systems:

http://futuresource.quote.com/charts...%2C5%2C5%29%3B

If I had followed such rule and reversed all their signals when the US $ Index was above its 5-day moving average, I'd have made a 100% monthly average profit for the whole 6-months forward testing period.

If I won't use it to reverse my trades (which might be a bit daring), I should at least use it to forbid my regular trades. It seems much better than the "no trading if past week unprofitable" rule, which was a pretty good rule to begin with.
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Old Feb 6, 2010, 8:59pm   #190
 
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re: my journal 2

Yamato started this thread At 52 trades, still profitable: over 300%. Basically one must catch his breath while trading and cannot ever be breathless or he'll pick his entry/exit carelessly.
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Old Feb 6, 2010, 9:32pm   #191
 
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re: my journal 2

Yamato started this thread http://stagevu.com/video/ajdxrcegjcer
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Old Feb 6, 2010, 10:16pm   #192
 
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huge return, but no total loss control yet

Yamato started this thread Here it is. Long and short trades. One loss got out of control, because I let it slip away, but I got lucky and from 40% it got to 5%. I still need to practice loss control, because I must really never let a loss get bigger than 10%. I did however manage to take breaks between trades and longer breaks between stocks, and that lack of trading frenzy and breathlessness is what enabled me to get to the end with a good balanced mind and such huge returns, which actually improved over time, because I learned to let profits run a little more.

Other than this, the return is huge: with 101 trades I made over 1000%, bringing capital from 10k to 120k. This cannot be randomness. This alone disproves the random walk theory.

snap1.jpg

Learning to control losses is my main objective
My aim for the future, is to repeat such 100-trades feats, end them all profitably, finish them within a few hours like I did with this one, get faster and faster at playing them but at the same time stay fully in control of losses by keeping myself detached emotionally, which, as practice increases, should require shorter breaks.

I finally found something related to trading where obsessiveness pays off
I am very satisfied. I finally found something in trading where my obsessiveness can be put to work and produce good results. Until now it was just obsessiveness at blowing out accounts. They say that practice makes perfect but until this game i never really found this to be true for trading. The more I traded the more I lost. However, with automated systems, i found my first field where my work produced results. Now, with this chart game, I found a second field. Maybe over time even with discretionary trading I got more accurate, but until I'll solve my stoploss problem all the accuracy in the world won't do me any good, since when I incur a loss until now I've always let it run forever.

My first profitable discretionary trading ever
This is turning out to be my first profitable discretionary trading. It's not exactly like real trading because time doesn't go by this fast and at your click, but it's close enough. Once I'll ace this chart game and particularly once I'll develop complete confidence that I can be profitable and learn to control my losses, then it'll be like for all those things you know that can be done, like juggling, riding a bicycle... once you can do it, no matter how much time goes by, you'll always be able to do it.

When you find out you can make money, you understand you can take losses
I believe the step number one, which already happened, was to really realize that I can make money by reading the charts, and I would say that this is pretty clear by now. The step number two, still in progress, is to learn to let your losers go. Since you are good at winning, you don't have to win each and every time, and should be able to accept that once every 3 times you will lose. Yeah, because this seems to be the case so far: i lose once every three times, and my losses are about one third of my wins (average of 7% vs 21%). So it goes like this, on average: plus three, plus three, minus one... and then all over again. If I keep my pace, and space trades apart, and keep these results, it should become natural to prefer taking one small loss and two bigger wins, rather than trying to have no losses at all and most definitely incur, within 100 trades, into at least one disastrous loss.

100 trades forces me to face losses, whereas just 20 trades did not
Yeah, this is why it was so important that i set my number of trades to 100. If you're not doing things right with just 20 trades, you could still get lucky, and if something goes wrong, you could still restart all over again. But 100 trades take you hours to be done properly, and you will definitely not get lucky. And if you're doing something wrong, it will show during those 100 trades. If you just hope to get lucky and get away with not using a proper stoploss, you'll end up starting over and over again for days before you can find a series of trades where your losses come back to your entry so that you get 100 profitable trades.

Here are all my trades, from biggest loss to biggest win:

-14.53%
-11.80%
-9.85%
-8.98%
-7.15%
-6.27%
-4.37%
-2.05%
-1.50%
-0.84%
0.00% (FLAT)
0.00% (FLAT)
1.03%
2.96%
6.22%
6.48%
6.64%
9.50%
12.42%
14.57%
14.73%
14.74%
21.24%
21.64%
23.74%
25.58%
31.17%
41.27%
43.22%
71.64%

Actually they're not always just one trade, because the trades are not listed by the chart game but just the stocks. But they're close enough to the proportion of trades, even though these are actually the groups of trades made on each stock.

I guess I'll be doing this 100-trades series no more than once a day, but always all within one day, and several times a week. I'll do it until i achieve full confidence in my profitability and full control of losses. I must never be even slightly tempted to let a loss run. And never make any careless trades.

Last edited by Yamato; Feb 6, 2010 at 10:58pm.
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Old Feb 7, 2010, 1:26am   #193
 
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re: my journal 2

Yamato started this thread I think I've made it. If, beginning on monday, I can start moving this practice of the chart game, over to the real-time IB paper trading account, then I'll have made the transition to real money. First I want to do a few more 100-trades like today. But two or three more should be enough. Or if necessary twenty more. What's important is that when I move to paper trading I have total confidence that I can be profitable and that my risk/reward and % of wins make me profitable. This enables me to cut losses, and once I do that, I can do it with the GBP as well. And if I make even just 50 dollars a day, then I could even quit my job. Obviously if it works it works and I can use more than one contract and so on.

I need to see if I can translate chart reading at a weekly level like on the chart game to chart reading at an intraday level.

Now, first of all, these are the weeks on the GBP: do they look like the weeks on the chart game? Yes, they do. So if I can make money on any stock chart, as I've been doing, then I can make money on the weekly GBP:

fsspon.png

Now, I suppose the lower timeframe will be similar, with the exception that spread and commissions will take away more of my gains. But not so much more to make me unprofitable.

Another thing: I need practice, lots of practice. With the chart game I can achieve practice by letting years and years go by on different charts. And this is just awesome. However I can't do that on the GBP in live trading. It'd take me years to learn plus I'd never be able to learn anything because my brain cannot learn anything at such a slow speed (it's like giving an answer, and then being told if it's right or wrong a few weeks later: you learn nothing). So since I cannot speed up the weeks, I need to lower the timeframe. I can't trade days either, nor hours, because they're still too slow. Proabably minutes make me feel they're too fast, and would make me deal with too many timeframes in order to find out s/r levels. I can probably use 5 minute candles, and try to learn to be profitable with them:

fsspon2.png

Now that I think of it, there is a great intermediate step whereby I can play those 5 minute candles a little faster to get some practice. It's the genesis software, which I've spoken about in earlier posts. I think this time I'm going to make it.
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Old Feb 7, 2010, 11:28am   #194
 
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re: my journal 2

Yamato started this thread STEP 1
Ok, here I am again. I will start another 100-trades series. It's quite tiring but I need to do it, in order to develop confidence and learn to use the stoploss. It's going to take a few hours (hopefully less than yesterday) and I will watch youtube videos between each stock and wait a few weeks between trades (not 20 because that's too many). After a loss, I'll try to wait a little longer.

STEP 2
After this 100-trades series, I will try to do the same thing on the GBP, with genesis software (I mentioned the software a few days ago). It's all set up already. I've downloaded months of data, set up the 5-minute timeframe, and I'll know nothing about the GBP on 5-minute timeframe (on a daily basis, I might remember what happened). Besides I will just look at candlesticks: not at dates, not at price levels... well, no, price levels I will look at, because the 100 ticks levels are important. I could also play the EUR in case I run out of history to play. If this works as well as STEP 1, then I'll slow it down to almost real-time. If I still make money with the 5-minute charts slowed down, then I am ready to paper trade on IB's account.

STEP 3
Paper trading the GBP for a few days, and then, if it works, I can start with real money.
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Old Feb 7, 2010, 12:04pm   #195
 
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re: my journal 2

Yamato started this thread I just checked out the GBP, ahead of time, and realized that spread and commission costs do not allow me to trade with 5 minute candlesticks. I am always there expecting the move to go further to cover my costs, and this greediness interferes with my appraisal of the markets: if it doesn't want to go there, it won't go there just because i have to cover my costs. I can't force price to go somewhere because it has to cover my commissions and spread costs.

So the timeframe has to be 15 minutes at least. But that, in turn, will interfere with my appraisal just as much as fixed costs, because i don't know how much i can slow down my appraisal before I forget what i was thinking or second-guess my thinking because i am there... that's the problem right there, because the market you can trade (due to commission and spread costs) moves so slowly that it hampers your reasoning.
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