my journal

[Yamato]

I traded my usual CME futures, the CL (it's becoming a CME future) and the GBP. By the way...


NEW METHOD OF DISCRETIONARY TRAVIS TRADING: with the "STOPLOSS"

After a few months, I have realized that no matter how many disasters I get myself into, I am very very close to discretionary profitability, after only 12 years of trading. I decided that I won't quit it after all I've been saying against it. Yes, even with those disasters that make me lose 2000 dollars, I then make it all up, little by little. I am almost at breakeven point. I don't see why I shouldn't try to make profitability.

The big novelty will be the "stoploss", a concept I've invented just a few minutes ago. I will have to know how much I will lose at the most from every given trade I plan to enter, and I will have to enter that "stoploss" (from "stop" and "loss") in advance. Yes, because my problem is not getting trades right. I am right on most of my market calls. The problem is that 20% or less of mistakes that cause me losses of 2000 or more dollars. Stoplosses do not have to be fixed. I can even say in advance that I am willing to accept a loss of 1000 dollars. The point is that I just have to be totally ready for that loss, so that I won't risk a bigger loss, by letting it run further for fear of losing, of seeing that -1000 materialize.

I can do it. I am very close to being profitable. My specialty are those trades where I go long on an oversold market, at about this time. I rarely am wrong on those. As I said about 20% of the time. Oh, and on the GBP, since the contract is small, I can even double up on losers (only many points lower).

What's been important in making me decide to try discretionary trading in an official and guilt-free way is that I realized that with 10k my automated systems aren't going to go anywhere and I need to help them reach 20k at least. I've been stuck at 10k for months and months.


ONE INVENTION IS NOT ENOUGH: I AM INVENTING THE "TRAILING STOP"

I am going to use this, the "trailing stop". It will both function as a way to keep my losses from being too big, and my wins from being too short, which is my tendency. Also, I am always looking for the beginning of a new trend, so there's no point in taking profits early, since I am looking for big profits and not small. We'll see how that goes. Today it made me lose some on the CL only because the trailing wasn't wide enough. New method for me then, it's all clear now: TRAILING STOP. In my quest to reach a capital of 20k.

I DON'T HAVE TO LOSE 2000 TO REALIZE I WAS WRONG
After all, the whole thing revolves around this concept: I get a majority of trades right, but the small minority that I get wrong make me lose 2000 apiece. Well, I don't have to lose that much to realize I was wrong, and if I can get that realization from just a loss of 300, then I'm set and I can win. But most of all: my plan comes first. I have to know ahead if I am planning to exit at all in case of loss, or if I'll stick to my trade no matter what, and if it's worth it to lose 2000 in case I am wrong. Planning ahead, that's all I need to do, and evaluating whether, with such plan, it makes sense to enter. If I can keep that loss down to 300, even in case I don't exit at all, then my discretionary trading will finally be profitable.

 

[Yamato]

 

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[Yamato]

 

[Yamato]

Lying in bed. Listening to the Norah Jones videos I posted, this beautiful girl. Over and over again. Quiet peaceful music, if it weren't for the idiots clapping and yelling.

Came back from dinner at my neighbouress, as usual. I fell asleep on her couch as usual while watching tv. This is my social life.

I overate as usual and now I have a stomachache that keeps me from sleeping.

Norah Jones is perfect for writing. It gives you the perfect pace. Especially this song, "you'll be on my mind... forever". Don't why I didn't come. I don't even know what the words mean, but it sounds good.

Battery only at 50% but that means over four hours to go. I can take my time writing and digesting before having to go to sleep because my batteries ran out.

People are trouble. Mp3s and movies are good. I can turn people on and off as I wish. MSN is good. I can block people, i can stay disconnected. Real people unless really polite and sensitive are trouble. Today a colleague told me "why don't you come visit me more often? For a cigarette break and we could talk about politics as we used to do...". I said, spontaneously, "People are trouble. I stay out of trouble".

My command of english sucks. I wish I could express more. But I don't wish it so much that I would read anything to learn more.

This one's pretty good, too. Let's see if I can hear some words of it... by Norah Jones...

Baby I didn't mean to hurt you...

It never rains when you want it to... you humble me... you humble me, lord...

It's interesting to hear this young girl sing about such topics as "i heard you kicked the bottle", when she hasn't experienced any of this stuff probably... maybe someone wrote it for her. Anyway she's a good person so I am glad she was successful. All artists are good people. Good people are people I like, people who don't hurt me. Sensitive people. Intelligent people. I am afraid of the other folks.

The loud people, the crowds, the rude people. Norah Jones is my kind of people. The people clapping at her are not. Clapping is a wild beast's expression of approval. We should stop clapping and acting like monkeys.

Surprise, surprise
Never something I could hide
When I see we made it through another day

And I say hooooo, oooooo, oooooo, oooooo
hooooo, oooooo, oooooo, oooooo
hooooo, oooooo, oooooo, oooooo
Do you?

Still pretty bad stomachache. I stay away from the loud people and from the crowds by not going to soccer games of course, by not going to weddings of course. I don't mind funerals at all. Those are quiet. I stay away from clapping people by not going to concerts or theaters or the opera, of course. I stay home. I keep people coming here under control. I monitor everything in the house. I don't open windows. "Come in with the milk" kind of lifestyle.

Round 'n round
Carousel
Has got you under its spell
Moving so fast...but
Going nowhere

Up 'n down
Ferris wheel
Tell me how does it feel
To be so high...
Looking down here

Is it lonely?
Lonely
Lonely

Did the clown
Make you smile
He was only your fool for a while
Now he's gone back home
And left you wandering there

Is it lonely?
Lonely
Lonely

She's got this in common with Simon & Garfunkel - something similar in her music and performance (that I can't describe because I am no expert) and the fact that she sounds in concert very close to her recordings. Nice quiet music... Oh no, people clapping again. Animals.

I met my old lover on the street last night. She seemed so glad to see me I just smiled. And we talked about some old times and we drank ourselves some beers, still crazy after all these years. Still crazy after all these years.

I’m not the kind of man who tends to socialize, I seem to lean on old familiar ways. And I ain’t no fool for love songs that whisper in my ears. Still crazy after all these years.Still crazy after all these years.

Four in the morning
Crapped out
Yawning
Longing my life away
I’ll never worry
Why should I?
It’s all gonna fade

Now I sit by my window
And I watch the cars
I fear I’ll do some damage
One fine day
But I would not be convicted
By a jury of my peers
Still Crazy
Still Crazy
Still Crazy after all these years

Still digesting after all these hours.

 

[Yamato]

GOOD! FINALLY SOME SERIOUS DRAWDOWN...
Weighbridge was right, or whoever said it, that my forward testing drawdown, as time went by, would have increased to weeks of drawdown and then to even one month of drawdown. It was a reasonable prediction: more time, more events happening. (Even if your systems were crappy, if you've forward-tested it for less than a month, how are you going to have a whole month of drawdown?). This week was my second straight drawdown week. Overall, last week I've lost 5500 and the previous one 1000. So, after 18 weeks of forward tests on my dozens of systems I have gotten 4 red weeks so far, giving me exactly one red week per month on average. But now, these two combined weeks are giving a negative balance for November. I am glad my system is not infallible after all. It seemed too good to be true. Now my system is more human, but it still makes money.

... BUT IT'S STILL ALL UNDER CONTROL...
Still, this is nothing. Lost 3500 so far for the month of November. And next week I'll probably recover from it. I have yet to see a red month in my forward testing. What I had not seen until today was two straight red weeks. Now my biggest drawdown in terms of dollars is this two week long 6500 loss.

GOOD THING I USED MONEY MANAGEMENT AND DIDN'T TRADE ALL SYSTEMS
Now you know why I say that I can't trade my systems with just 10k. Had I traded all of them in the past two weeks now I'd be at 4k instead of being at about 10k. I do not regret using a tight money management which didn't allow the worst systems to trade, although I did lose money for the week even just trading my "good" systems.

TIMEZONE PROFITABILITY IS EVENING OUT
Also, interestingly, as the weeks roll by, and as the systems increase in number, the day of the week's profitabiliy (see picture below) tends to even out and to change, meaning that I can't really rely on it too much, at least now that I have all these systems. I used to have unprofitable trading on Tuesday and Thursday afternoons. Now this has changed, also thanks to Weighbridge, who advised me to change the formula from total loss on a given time zone to average loss per trade on a given time zone, which makes more sense. Now the bad time zones are... just Tuesday afternoon pretty much, and that might change and disappear as well.

 

[Yamato]

REASONING ON PIVOTS

A friend of mine told me to use pivots. I had always thought they sucked, but today I looked at them, and they seem to work, at least on the EUR. Daily pivots I mean. Now I am thinking of a way to exit and other things...

PIVOTS WILL INTEGRATE WELL WITH MY DISCRETIONARY TRADING
I am already pretty good at picking entries and pivots are going to make my entries that much more accurate. My mistake until today was that in those bad entries I made, I lost everything. Now with pivots I can be confident that I'll be right and use tighter stops (actually I didn't use any stops before), that will probably almost never be reached.

My entries tend to be late in the day, when chances for reversals increase, especially in highly overstretched days. Now adding pivots to this is just perfect because they alos have a lot to do with predicting reversals.

Pivots work simply because some people follow them. If some people follow them, then more people will follow them because even if they don't believe in pivots, they don't want to be screwed by those who believe in them and act according to them. So these other people, non-believers, will still take a look at them and act accordingly. So ultimately they just work. Because the reversals will take place, and even those like me who thought they sucked are going to have to admit a reversal took place and act accordingly (though they won't even now that they are entering where the pivot is).

ONLY TRADING THE EUR
By the way, I just looked at the GBP, and they don't seem to work there. So, once and for all, my market will be just the EUR. Let's focus on that alone.


EXITS FOR A PIVOT STRATEGY

FORGET TRAILING STOP
Now if pivots work everything changes also for exits, because markets do not move in a trend anymore but rather in a trend from pivot to pivot. So we can't use a trailing stop, which would be best with a regular trend. Also because i noticed that sometimes prices come back before really taking off. So forget trailing, especially until the trend bouncing off the pivot point hasn't taken off.

THEN WE'LL NEED A FIXED STOPLOSS
Then, now that the trailing stop is ruled out, what stop do we use? That is simple. Since we're not using a trailing stop, we're going to need a stoploss, a fixed one. I'll place that about 40 ticks below my entry, which should be at the pivot point.

FORGET THE TAKE PROFIT, TOO?
We still need an exit for when the trade works out. A take profit would come to mind, at the next pivot level. But that is not good either because we don't want to cut our profits.

So how do we exit? Sizable profit? That's an emotional take profit... ok, I got it. I will implement a trailing stop only after a sizable gain is in place, in other words, I will enter a traling stop only after the market has taken off.... naw... this is too complicated.

CHANGED MY MIND: I'LL USE A WIDE TRAILING PROFIT FROM THE START
I will implement a very very wide trailing profit from the start. So that it will unlikely go off if the market comes back, and it will be good to let the market move around as much as it wants during both the early phase and the later phases of the move. I'll use 50 ticks. This way, since the market will most likely go my way at the start, if my trade goes badly, I'll lose maybe 30 ticks. And if my trade goes well, I'll make 200 ticks. Then all I have to worry about is that I predict correctly at least one trade every 5. Yes, I'll be looking for 200 ticks moves. But especially I don't plan on being wrong more than 50% of the time. All done. Hopefully this new method will take me from unprofitability to profitability and I'll finally see my capital increase to 20k, which I need for my systems.

CHANGED MY MIND YET ANOTHER TIME: FIXED STOPLOSS AND ACTIVATE TRAILING LATER
It always goes up and down a few times before taking off, like the Wright brothers airplanes. So I will let it do whatever it wants at the start and then activate a trailing stop, once I am making at least 500 dollars and I am a few hours into the trade. That's good also because it will allow me to have a tighter stop. Now I wonder if I can do such a thing on TWS. It's going to be hard.

Damn, if this system will work, I'm gonna have to automate it, too. What a pain in the ass...

 

[Yamato]

Nightmare, problems digesting all I ate, french toasts again... woke up thinking about death and other sad thoughts... it doesn't happen often but now I am screwed because I'll have to go to work in a few hours and I don't know if I'll be able to go back to sleep. Getting up is nothing compared to staying in bed awake and thinking about death. And this is connected to trading: if I have to die, at least I want to live my way and not have to go to work as well, on top of dying. So it's connected to pivots as well, because hopefully they will be that extra ingredient I was missing for profitability with my discretionary trading. My trading systems are good but they have a huge drawdown compared to what i can do with discretionary trading when I am at my best. I'm going to have to work hard with discretionary before I can get to 30k and let my systems take care of everything.

 

[Yamato]

All right, since I was up, I took advantage of the situation, and started a trade short on the EUR. I believe it's very overbought and I started it regardless of pivots. Besides it's higher than any pivot level, but those don't count much because it's still sunday in Chicago.

I first used TRAIL MIT mother ****er that went off and made me lose a few dollars. Then I had to reopen my short trade and now it's making money, lots of it. I said to myself "screw the trailing mit" and screw the trailing as well. That friend of mine told me he didn't like trailing stops and he was right. I am wright instead, like the wright brothers, who didn't know how to build airplanes. They built crappy ones that crashed all the time.

Anyway, for once in my life I built a good airplane because it's not taking off, but since I am short, it can crash all it wants.

Anyway, I am using a stoploss, placed at 1.4962.

Should I adjust it? That friend found time to tell me about pivots, which was good and tell me about another dozen things but didn't tell me about how to exit.

We didn't even find time to discuss if it's a good strategy to adjust stops manually, and let them follow the trade. As usual, I'll do things my way.

 

[Yamato]

CALLING IN SICKAll right... screw them all. I can't go. I've only slept 5 and a half hours. I feel like ****. Today I am calling in sick. In the meanwhile my position has gone down to 1.4919 and back up to over 1.4940, that means that a 20 ticks trailing stop wouldn't have worked and would have gotten me out of a good position with a profit of zero. Good thing I understood that early on. Now it came back down and it's showing a good profit again.

NOW IT'LL BE LIKE BUYING A LOTTERY TICKET
It's like buying a lottery ticket, only much better. My stoploss is about 200 dollars. If that goes off, I lost. If I made a good call, I'll make 2000 dollars. I can afford to buy 10 such lottery tickets. The problem with me was that until now it was the reverse: my lottery ticket was potentially costing me 2000 and I was always taking a profit of 200 out of every winning trade.

WITH PIVOTS I KNOW HOW FAR IT WILL GO
What's changed? Pivots. I used to be in the dark about how long the trend I had spotted from the start would continue: now I have one more tool to know that it will continue for a while. I'll be looking for trades that last a whole day almost, and the price I'll risk to pay will always be about 30 ticks. It's going to take a lot of work to identify these opportunities with a sufficient level of accuracy, but I will only need 5 of these to gather enough capital to let my systems trade properly, and then I'll finally be able to rest.

Now, with pivots, I know how far it's going to go. Most likely.



Look above. I thought that today I wasn't using any pivots, but if we count for sunday night the pivot levels of friday, then it's bouncing right against R1. And I am going to exit at S2, at about 1.48, with a profit of almost 2000. Yeah, maybe I am just dreaming as usual.

WHERE THE HELL DO I GET OUT?
Yeah, maybe I'll get out before that, but if it ever gets to that, I'll get out for sure, with a take profit. But that's a long way from now. I still have to let it run for 10 hours, about. Yes, because time matters. I am talking as if I were teaching, but I don't know much about this. For one thing I don't know how to exit. I am still very unsure between:
1) trailing and
2) take profit, or a
3) manual stoploss that I lower at each time.

I FIND IT HARD TO ACCEPT THAT I CAN'T CONTROL THE MARKET
The point is the market is less predictable that I, control freak, am willing to admit and accept. Maybe that's what kept me from being profitable for so long. I tried to control the market... somehow I irrationally (the control freak is irrational) expected to be able to control the market.

HOURLY CHARTS ARE BEST
Now it's making 100 dollars about. What's keeping me from exiting now? I am expecting to make more. What's keeping me from lowering my stop to break even? It could go back up. Am I being rational and reasonable? I think so. With this kind of trading, it's best to look at candlesticks with an hourly timeframe.

 

[Yamato]

believe it or not... i raised my stoploss right before it was reached.

 

[Yamato]

believe it or not... i went short yet another contract... all the worse things i could do... now it's win or bust. as usual...

 

[Yamato]

PIVOTS + TIME

Ok, got it. Figured out. It's pivots + time. Time has to be right. The time for reversals is 9 AM CET, and 9 PM CET. Hour more hour less. If the pivot is reached by that time, you can safely enter a position in the opposite direction and buy your 500 dollars lottery ticket (40 ticks stoploss). Today I've done it earlier.

 

[Yamato]

...COMING UP WITH A FORMULA
Which means what? Which means that I'll be staying short (I've got my answer on how to exit!) until 9 PM tonight, and exit sooner should I see that it has reached a round number (1.48), a pivot level (S2), or that it's starting to reverse. I'll be making about 4000 today. That's a lot of money. That means I'll be able to trade many more of systems by the end of the week. Plus I've got yet another system to add, but this one I will first discretionary trade for a while. Then I'll automate it.

Oh, and i forgot: it has to be overstretched. At least +100 or -100 ticks. Otherwise stay away from it.

Summary:
time (9 am or 9 pm) + pivots (S2 or R2) + overstretched (-100 or -100) + reversal pattern (increasingly shorter legs)

What did I do wrong today?
1) time
I didn't wait (typical of me).

2) pivots
Ok: we were beyond them

3) overstretched
I didn't wait till it was enough (typical of me)

4) reversal pattern
I didn't wait to see one and anticipated (typical of me)

Basically the usual old stuff due to my impatience and craving for action, maybe to forget that nightmare I had.

But what about now? Would I enter now (yes) and would it be reasonable according to these above-mentioned rules?

1) time: yes

2) pivots: yes

3) overstretched: yes

4) reversal pattern: not yet

I will have to add yet another factor. Best if there's a bias compared to the EUR's twin, the GBP. If the GBP has risen much less, that's an extra factor in favor of a short (viceversa for LONG).

So, recapitulating, these are going to be my principles (not requirements because they don't have to all be met at once), in order of importance:

FINAL SUMMARY OF OVERSTRETCHED DISCRETIONARY SYSTEM
1) overstretched (-100 or -100)
2) time (9 am or 9 pm)
3) pivots (S2 or R2)
4) reversal pattern (increasingly shorter legs)
5) EUR/GBP difference in favor of trade

 

[Yamato]

Now. Yesterday R2 pivot level has just been reached. The reversal pattern is still not there. I bet you this is it.

 

[Yamato]

I sure wish I weren't already short since 6 am and weren't seeing -750 on my account for my open positions. If that were the case, I'd go short right now. I was impatient as usual. Next time I'll have to go through that checklist I wrote. However I wonder if I will, because I've written checklists like that one for years, and I never looked at them later. I only write them but I don't read them. Just like I must have written somewhere "don't eat too many french toasts". But it may be even worse if I didn't write them.

 

[Yamato]

It must also be stressed that thing has been going up non-stop for almost 24 hours. That's why this approaching fall will last at least 12 hours, and will be big in my opinion. Plus, I think we still have to fall for having reached 1.5. I don't know how much we'll fall but I believe we'll fall for the next 12 hours.

 

[Yamato]

UPDATED PRINCIPLES FOR OVERSTRETCHED DISCRETIONARY METHOD

1) overstretched in ticks (>150 ticks top-bottom)
2) overstretched in hours (>18 hours going up or >12 hours going down)
3) time is right (9 am or 9 pm)
4) pivots (touched S2 or R2)
5) reversal pattern (increasingly shorter legs)
6) EUR/GBP difference in favor of trade (>50 ticks apart)

Yes, #2 is surprising, but that's how it is. The EUR rises not as if it were a currency, but as if it were a stock, slower than it falls. I would have expected it to be the same, but I understand why it isn't like this: probably because of how the dollar is correlated with the stock indexes.

So as a consequence if I am right I can't expect the fall (in my favor) to last as long as rises last (even longer than 24 hours).