my journal 2

This is a discussion on my journal 2 within the Trading Journals forums, part of the Reception category; http://www.dailyfx.com/calendar/inde...|&importance=|...

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Old Feb 10, 2010, 8:33am   #241
 
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re: my journal 2

Yamato started this thread http://www.dailyfx.com/calendar/inde...|&importance=|

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Old Feb 10, 2010, 8:38am   #242
 
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re: my journal 2

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Old Feb 10, 2010, 8:47am   #243
 
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Old Feb 10, 2010, 9:24am   #244
 
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Old Feb 10, 2010, 9:47am   #245
 
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re: my journal 2

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Old Feb 10, 2010, 2:50pm   #246
 
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the discretionary problem

Yamato started this thread It all boils down to this question: how many trades can you handle rationally?

1) In IB paper trading (identical to real trading), I cannot handle even one trade, because boredom is too much with prices in real-time, slow and all. I would make random trades out of boredom.

2) In the chart game, a lot of stuff happens (as much as you want, since you click and make time pass), so no boredom can interfere with my rationality. What does interfere with it is frustration from a loss. In this sense, I can handle about 5 groups of ten trades. Beyond 10 trades sequences or beyond 5 sequences of 10 trades, I lose control from stoploss frustration, lose rationality and start screwing around and not using stoplosses. Also, wins will happen and make me too confident, and hooked to the game and unable to reason.

3) In real trading, the boredom of #1, from the slowness of markets (since you cannot trade in the faster timeframes due to fixed costs), is not an issue because the excitement from investing real money keeps you awake. However, the losses' frustration of #2, is even more an issue because losing real money makes you even more upset. So I'd say I can handle one trade, if I am lucky. In the past, I've been good at handling the first part of the trade, "getting in", after which I usually lose control. But at times I even felt rushed to get in, as soon as I looked at the chart, without being in control of waiting and without even analyzing the situation.

Summary: I am not ready to trade more than once a week with real money. I need to practice #1 and #2 for months and months.
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Old Feb 10, 2010, 3:26pm   #247
 
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re: my journal 2

Yamato started this thread Click the image to open in full size.

http://en.wikipedia.org/wiki/U.S._Dollar_Index

I am thinking hard on how to use the DX on my automated systems because that may very well be my only way out of the banking job that I have.

I've talked more about it here:
http://www.trade2win.com/boards/trad...ml#post1050056
http://www.trade2win.com/boards/trad...ml#post1051292
http://www.trade2win.com/boards/trad...ml#post1052392

Another thing I noticed is that in the past few years the EUR has been rising much more slowly than falling. That explains why my systems made less money than they later lost (when the EUR was falling).

Now I am thinking of reversing those systems, and the problem is: do I tie them to past week's results and reverse the signals if it was negative? Or do I tie them to the DX?

Tying them to the DX would solve many technical problems in my forward testing data. On the other hand reversing the signals based on last week's performance produces better results (by 20%) and is a more adaptive rule: we don't care why exactly the systems lost, or rather we care, but we want signals reversed even before we find out why. Because the reason could change but we still want to make money even without understanding it.

So I set out to tie systems to the past week's performance. This is all on excel. Now the problem here is that if I have a cell that says "reverse signal if last week unprofitable", this is what happens, week after week:

1) normal system makes money
2) normal system gets traded again (no problem so far)
3) normal system loses money
4) normal system gets reversed and loses money
5) normal system gets reversed again even though it was the reversed system which lost money (problem)
6) say now that #5's reversed system made money: normal system will get used (problem) despite the fact that it was the reversed system that made money

This means that the cell which worked correctly in keeping the system from trading when it lost money, does not work to reverse signals. Furthermore, if I reverse signals, I will have all my results screwed up, because I won't know in the future which system produced what results.

These are just technical problems and not related to trading, but I am not capable of solving them neatly. I could solve them roughly but I would screw up my work and records.

Maybe I'll just use the regular system for now, and keep it from trading after a red week. But also add an extra filter, that keeps it from trading when the DX is above its 40-day average, like right now:

http://futuresource.quote.com/charts...C40%2C40%29%3B

fsspon.png

When and if my cousin (the physics student) will join my efforts, I will finish this work, or maybe I'll ask help to one of my programmer friends.

Great steps ahead have been made thanks to forward testing and to the chart above (DX or EUR is the same concept). Until now the typical situation was that, while the dollar was coming down my systems were making almost 100% return a month and I was treating all my colleagues to the restaurant. But I didn't know why. Then each time the dollar started going up (and I didn't know why nor when because I didn't even have any forward testing in place), I'd ask the same colleagues to treat me to the vending machines. Another thing that happened was that suddenly I noticed that from 30k i was starting to come down... and I'd repay my debt to the bank very quickly (done it twice), just in time before losing the rest of my capital partly thanks to the dollar going up but even more thanks to my discretionary trading, which I used to try and help my systems, but disastrously.

Now at least I should be done with disastrous discretionary trading, and I definitely won't resume automated trading with real money (paper trading always) until I see the dollar crossing below that 40-day average (see pic above). But that might not happen for another year, so I'll have to come up with something. Probably within two days I'll have found a trick to reverse the systems without screwing up my forward testing.

Last edited by Yamato; Feb 10, 2010 at 4:13pm.
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Old Feb 10, 2010, 4:22pm   #248
 
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re: my journal 2

Yamato started this thread Objectives for now.

Keep practicing the stoploss, trying to increase the irrationality threshold, beyond which I lose control, from 10 trades in a row to more and more, until it becomes second nature.

Try and practice on IB simulator which more closely resembles real trading.

Keep working on that DX/past week profitability formula (see post above).

Make one small trade per week on the GBP to see if I can stay in control with real money. Before doing it, study everything you can: news release time, trends, correlated markets... everything you can. The more you study and think and wait, the more likely you're to succeed on that trade. It doesn't work like this for everything, because in other situations focus is better than variety.
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Old Feb 10, 2010, 4:42pm   #249
 
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7 rational trades without losing my temper

Yamato started this thread I haven't lost it, but I was definitely tempted to start it all over again and to ignore a stoploss. Maybe the entries were wrong. It doesn't matter. What was successful about these 7 trades were the exits. I didn't hope. I made no use of "hoping": I stayed in until to me it made sense to stay in the trade. After a majority of losses, I was just about to lose control though. I think this is the way to go. Never make one trade outside of rationality. When you start hoping and praying, it's time to stop (as I heard in some video, maybe seiden's or someone else's here on the t2w video section). And this is exactly what I did this time: I kept my cool until the seventh trade and stopped just before I'd lose my rationality. My rationality could only last 7 simulated trades: that's how deeply I mind losing, that's how much it upsets me.

snap1.jpg

The entries might have been wrong and against the trend as usual, but that's not the point. As long as your trading is rational, it's even ok to lose. The problem of hoping and praying within trading is a bigger problem of having no edge. If you stay rational you can see that you don't have an edge, but if you're hoping and praying it means you're in denial and all the edge in the world won't do you any good, because each loss will wipe you out, while you're in denial. Regardless of how rare.

I remember hearing or reading somewhere else that if you're in a trade and you don't know why, it's time to get out immediately. This is what I did at each time I click a week ahead in the chart game: each click meant I knew I was in that trade for a reason and the reason was that I believed that the odds were with me. I could even have been incredibly unlucky and that could be why I lost. It doesn't always have to be because of a bad entry. You could lose while being right about the method. That's what's being so difficult to understand for me.

Anyway. I lasted 7 trades. As soon as I'll feel ready for more rational trades, whether with an edge (as I think I have) or not, I'll do more. What matters is not posting beautiful returns. I don't have to impress anyone (I always try to do that, and to be told "good job"). What matters is that the trades I post were all rational. Every clicking of "Time-lapse" button must be motivated and carefully weighed. If I click it is because I believe in staying in that trade for one more week and I believe that an extra week is more likely to bring me money than take it from me (in the long run, since, depending on my risk/reward and wins to losses ratios, it could make sense to have more losses than wins).

Last edited by Yamato; Feb 10, 2010 at 4:47pm.
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Old Feb 10, 2010, 5:02pm   #250
 
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re: my journal 2

Hi Trav,

I've been applying set of rules for some time:

2 losing trades and I'm out of trading for the rest of the day
high probability trades max risk 2%, speculative 1%
max loss per day 4%
2 days with 4% loss and that's end of trading for at least one week

This way I'm forced to look for only good set ups and be patient
Quite frustrating if I have 2 losing trades and have to wait for the next day to resume trading. At the same time there is a limit how much I can lose and that makes me more relaxed when entering trades.
If I have less than 2 losers per day I can trade as many times as I like, so overtrading doesn't bother me.
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Old Feb 10, 2010, 5:23pm   #251
 
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re: my journal 2

Yamato started this thread Yeah, pretty good, huh? I had the same rules and so of course they sound healthy. The problem was that when I won, I traded more and beginning on the second trade I ended up not following the stoploss because by that second or third trade I felt like god. I'll try to give it another shot. Thanks for sharing information about your rules.

Anyway, here's another 8 rational trades:

http://www.chartgame.com/trackrecord.cgi?8634gd-86,3

This time they were overall profitable. However, just the same, after 8 trades, I got tired.
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Old Feb 10, 2010, 5:25pm   #252
 
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re: my journal 2

Yamato started this thread http://stagevu.com/video/owrixieztino
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Old Feb 10, 2010, 7:46pm   #253
 
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10 entirely rational trades

Yamato started this thread That's it. All I could handle emotionally was 10 fully rational trades, where each candle I let go by was a rational decision and not a gamble: no hoping or praying involved.

http://chartgame.com/trackrecord.cgi?84btr5-1,4

snap1.jpg

A couple of situations made me realize that the emotional enemies I'm facing are two: losses, and, almost as painful, missed profits, when you get out on a stoploss and then it goes your way one candle later. That throws me off balance and could cause revenge trading.
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Old Feb 10, 2010, 8:28pm   #254
 
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excellent trader... I hope to learn from him

Yamato started this thread Ok, I don't know if this guy is one of the readers, but he turned 10k into 2.5 millions, so I will check out all his trades for sure:

http://chartgame.com/trackrecord.cgi?6q299o-0

He doubled up exactly 8 times within 300 trades. Now this definitely proves that the markets are not random. And that he doesn't have a problem with either stoploss or missed profits, nor getting excited about being so good.

Actually I did even better during my 100 trades here:
http://www.chartgame.com/trackrecord.cgi?8634gd-24

However, there's a difference. I was constantly fearing that I might screw up and have to start all over again, and that's why I stopped at 100 trades, because I couldn't go any longer without screwing up. Whereas, with 300 trades, it's obvious that this guy can consistently keep this up, without fear of losing control and ruining everything. This guy is in control and knows what he's doing. I know what I am doing only half of the time, the other half of the time someone else takes over, a junkie.

Last edited by Yamato; Feb 10, 2010 at 9:33pm.
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Old Feb 10, 2010, 8:44pm   #255
 
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emancipate yourself from mental slavery...

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how long shall they kill our profits while we stand aside and look...
Some say it's just a part of it: We've got to fill the book...


http://www.letmewatchthis.com/watch-...e-Is-Unwritten

Last edited by Yamato; Feb 10, 2010 at 9:43pm.
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