Open thread for critique of <trade2finind>'s ongoing performance

[trade2finind]

I thought that I'll start a new thread about my ongoing trading performance. What I will try to do is to post on a periodic basis (hopefully as close to daily as possible) my performance (using daily charts) for that day on the instrument I traded. I will state when I entered and exited and then explain my actions. All this will then be open for constructive criticism (please) as to what I should have done to better my performance.

Besides trying to better myself as a daytrader, the point of this thread is to hopefully assist other traders in similar situations to myself (please see my profile for a little background info). I know that there are a lot of experienced traders in this forum kind, willing and patient enough to help others and hope that I can learn from you all and see what exactly I'm doing wrong in terms of strategy, finding an edge, TA analysis, RR ratio, trends, entrance/exit points, psychology, etc. At the minimum I have basic money management in place and a good stop loss system so I think that my trading can be salvaged somehow, sometime. Still, I know that I need guidance because I don't want to be nickel-and-diming my account away.

Thank you in advance and I hope to post my 1st chart shortly! Your inputs are very much appreciated.

 

[trade2finind]

13 Oct 2009

Just a little more background: I'm trading warrants based on the Hang Seng Index (HSI). As such, I will show the charts of the call/put warrant(s) involved along with the HSI for the day.

Today was not good. I traded 3 times all on the same call warrant. The morning session appeared to be an upward trend, so I decided to buy a call warrant (1st [email protected]) after the strong green candle. Unfortunately, I got somehow spooked because in my simple mind it wasn't rising fast enough and soon afterwards sold at the same price, so I lost on the commissions.

My 2nd trade was similar to my 1st and now clearly an uptrend mkt ([email protected]). However, I lost my nerve again and [email protected] for minor profit.

Lunch session started at 2.30p and I wanted to believe in the continuation of an uptrend. HSI did drop below 21,600 but held its ground and rebounded. I used the red line as a support line and thought that it was a sign of rebound so I bought my 3rd [email protected] on the major green candle crossing it. Soon after, there was a very small rise but HSI then plummeted and I got [email protected].

In hindsight, I was right entering into the 1st trade but could not control my emotions. The latter 2 trades I really had no business entering into. I also do not know if I'm seeing the trendlines properly.

When entering into each trade, I had a RR ratio planned for -4/+6 ticks, but of course I didn't stay disciplined. Please critique how I am doing it wrong. Thanks.

 

[GammaJammer]

I think you're doing what's known as 'picking up nickels in front of bulldozers'. The market's going up and down large amounts and you're trying to nick a tick here and there without really having a coherent plan to nail down the reasons why it's going up and / or down.

Plus you are probably paying away a bid / offer spread as well as potentially fixed comissions on top?

I think you need to do two things;

1) Have a coherent plan rather than vague ideas.

2) Trade longer term. Much longer.

Hope that helps

GJ

 

[timsk]

Hi trade2finind,
Based on this small number of trades, it looks to me as if you're chasing the market and entering late. This wouldn't matter so much if you had a wider stop loss and were trading a longer term view. However, it appears you like to get out quickly if proved wrong which doesn't give you much 'wiggle room'. Therefore, you'll need to time your entries much better than you're currently doing. I suggest you add a moving average to your chart. If the MA points up, look to go long within X points of it. If price has extended beyond X points above it, then sit tight and wait for it to pullback. Conversely, if the MA points down, look to go short within X points of it. If price has extended beyond X points beneath it, then sit tight and wait for it to pullback to it. What I've described is known as the 'greater fool theory' and this simple technique - although not perfect (nothing is!) - will help to ensure that you don't get caught out by it in future.
Tim.

 

[trade2finind]

Hi trade2finind,
Based on this small number of trades, it looks to me as if you're chasing the market and entering late. This wouldn't matter so much if you had a wider stop loss and were trading a longer term view. However, it appears you like to get out quickly if proved wrong which doesn't give you much 'wiggle room'. Therefore, you'll need to time your entries much better than you're currently doing. I suggest you add a moving average to your chart. If the MA points up, look to go long within X points of it. If price has extended beyond X points above it, then sit tight and wait for it to pullback. Conversely, if the MA points down, look to go short within X points of it. If price has extended beyond X points beneath it, then sit tight and wait for it to pullback to it. What I've described is known as the 'greater fool theory' and this simple technique - although not perfect (nothing is!) - will help to ensure that you don't get caught out by it in future.
Tim.

Thanks. I prefer intra-day trades as I don't feel comfortable leaving positions open overnight. Is there only one type of MA indicator? How does it compare w/ RSI? It sounds similar? Much appreciated, I'll do more research on MA.

 

[timsk]

Thanks. I prefer intra-day trades as I don't feel comfortable leaving positions open overnight. Is there only one type of MA indicator? How does it compare w/ RSI? It sounds similar? Much appreciated, I'll do more research on MA.

It doesn't compare with RSI at all! Essentially, a Moving Average (MA) is simply an adaptive, dynamic trendline, ideal for lazy people like me who can't be bothered to draw them in by hand. There are lots of different kinds; simple MA, Weighted MA and Exponential MA being among the most common. Any of these will do. Just set the period to a level so that, roughly speaking, the higher lows (in an uptrend) and the lower highs (in a downtrend) are at - or near - to the MA. Have a play and you'll soon see that, potentially, you could have got in at a more favourable price and one that wasn't later stopped out.
Tim.

 

[trade2finind]

^I've just read some more about MAs. Seems worth a shot. Thanks again.

 

[trade2finind]

14 Oct 2009

Bad entry, longest 51 mins in my life. Lucky only lost 1 tick. RR ratio remained -4/+6 but had to close my position since I do not leave things open during the lunch break.

EDIT:
My reason for getting into a put warrant was because I thought that it was heading for a downtrend after 11.30a. There really was nothing substantial to justify this...just because the HSI appeared to be going down and was below MA was not enough for me in hindsight to enter. I also should have been conscious of the support line at ~21,738 around 10.16a. Stupid entry on my part as the HSI rose almost 2% for the day and I didn't get a bite. Argh.

 

[pedro01]

Can you also write up the reason you entered the trade in this log.

Sorry the other thread got derailed - but you do need to understand that it is important that you are able to understand when your win rate is better than a random win rate.

In the case of 4:6 - if you have 40% winners or less - you entry is no better than random.

Also consider that your potential risk should vary for each trade. Perhaps for instance, if the ATR is 2 ticks, then you may consider 2 * ATR as your maximum risk. In that case your stop loss is 4 ticks. In more volatile markets, you will have larger stops and in less volatile markets you have smaller stops.

Your position size should be adjusted to. In fact, Trader333 had an article on this recently : Article on position size/risk management

Other ways of setting the stop loss - look for the last area of support/resistance or the last swing low - just be aware that a these are common places to put stops and so it's not going to be your little secret !

 

[trade2finind]

Can you also write up the reason you entered the trade in this log.

Sorry the other thread got derailed - but you do need to understand that it is important that you are able to understand when your win rate is better than a random win rate.

In the case of 4:6 - if you have 40% winners or less - you entry is no better than random.

Also consider that your potential risk should vary for each trade. Perhaps for instance, if the ATR is 2 ticks, then you may consider 2 * ATR as your maximum risk. In that case your stop loss is 4 ticks. In more volatile markets, you will have larger stops and in less volatile markets you have smaller stops.

Your position size should be adjusted to. In fact, Trader333 had an article on this recently : Article on position size/risk management

Done, please see my previous post now edited; and no problem - I know it can be frustrating when you're trying to help and then get sidetracked by other people. Thanks for the link: I'll check it out later.

Other ways of setting the stop loss - look for the last area of support/resistance or the last swing low - just be aware that a these are common places to put stops and so it's not going to be your little secret !

Tell me about it! Here is a call warrant I was looking at for the day. I assume (and please correct me if I'm wrong) that the MM decided to take out all the stop orders at around 10.40a: it was vicious as the HSI didn't do anything to warrant that, I don't think. This may have affected me subconsciously to become wary of getting into the call warrant.

EDIT:
Next time the MM decides to do that, it is advisable to jump in and buy right after it kills all the stop orders? Is that a high-probability move?

 

[timsk]

Next time the MM decides to do that, it is advisable to jump in and buy right after it kills all the stop orders? Is that a high-probability move?

trade2finind,
It might be, but only if it is part of your trading plan and it's something you've tested and know how to trade. By which I mean - precisely where to enter, set your stop and exit. If you don't know these things, then it's really just a knee jerk reaction and, likely as not, you'll end up chasing the market and compounding your losses.
Tim.

 

[trade2finind]

trade2finind,
It might be, but only if it is part of your trading plan and it's something you've tested and know how to trade. By which I mean - precisely where to enter, set your stop and exit. If you don't know these things, then it's really just a knee jerk reaction and, likely as not, you'll end up chasing the market and compounding your losses.
Tim.

Yes, for sure I'll perform more due diligence. 1st time I've seen it happen in real-life. That must have been painful for those who got stopped. It's tempting to enter, so I'll definitely look into that more.

 

[trade2finind]

15 Oct 2009

DOW passed 10,000 so it definitely influenced the morning rise in the HSI. However, I thought that it was too high and waited for it to plateau, settle down and bounce again. I entered what I thought was a resistance line (dark green one) upon a green candle piercing it, but was too early (again). It dropped 2 pips before rebounding and I exited w/ 1 pip profit. If I held on it would have been 3 pips but my bad entry ruined it for me. Afternoon session I thought it would drop and it did but only after the initial spurt up. Luckily I waited and held off buying a put but couldn't help to buy a call once 2 successive green candles appeared, the 2nd one of which pierced the old support/new resistance level. It was too tight of an entry and I was fortunate enough to exit w/ 1 pip profit when I felt that there was pressure at the old resistance line (red).

I decided to only post the HSI chart since the warrants are based of it anyways.

 

[trade2finind]

16 Oct 2009

Today was a wild ride. HSI opened high but immediately dropped. I just couldn't get a good reading so was a passive observer during the morning session. I expected it to continue to rise in the afternoon but HSI performed another massive drop. This time I waited for what was near the bottom and made an entry. It proceeded to rise and, finally, a free trade! My trailing stop was in effect but since my entry point was too high, there was really not too much room for movement. I got stopped for 2 pips profit. Eventually, the HSI did rally for a potential 5-7 more pips if I held on, but I try never to let a profit turn into loss. Overall, a good day to learn more about myself and my trading.

 

[timsk]

Hi trade2finind,
What is your set up and entry trigger? If you don't want to answer this publicly - no problem - just so long as you can answer it! I see you've added some kind of moving average which I hope you're finding useful. The interesting thing about your latest chart is that you closed out your trade at the point where you would have entered it a week ago! I completely understand why you closed where you did - because you feared price would pull back - which it duly did. With the exception of the massive fall circa 14.30, for the most part, price will bobble around the MA. What you need to do is to find a way of being comfortable with price retracing against your open position so that you're not spooked out of trades early - as in this case. An idea you might consider would be to trade two contracts and close half your position where you did and then raise your stop to break even on the other half which would have enabled you to ride the afternoon mini trend. Knowing that you're not going to lose anything will ease the pressure to exit the trade too early and miss out on letting a profitable trade run.
Tim.

 

[trade2finind]

Hi trade2finind,
What is your set up and entry trigger? If you don't want to answer this publicly - no problem - just so long as you can answer it!

I'm not sure I follow what is meant by 'set up' and 'entry trigger'? Can you please explain? I just thought that the HSI was hitting a bottom and it can't go any lower. It was rebounding off the 21,902 support line and breaching the 21,927 resistance line. I was confident when buying a call warrant today based partly on above and also because the rapid decline after 14.30 did not seem sustainable.

I see you've added some kind of moving average which I hope you're finding useful. The interesting thing about your latest chart is that you closed out your trade at the point where you would have entered it a week ago! I completely understand why you closed where you did - because you feared price would pull back - which it duly did. With the exception of the massive fall circa 14.30, for the most part, price will bobble around the MA. What you need to do is to find a way of being comfortable with price retracing against your open position so that you're not spooked out of trades early - as in this case. An idea you might consider would be to trade two contracts and close half your position where you did and then raise your stop to break even on the other half which would have enabled you to ride the afternoon mini trend. Knowing that you're not going to lose anything will ease the pressure to exit the trade too early and miss out on letting a profitable trade run.
Tim.

The MA is good but I still haven't learned enough to fully exploit properly reading it. I'm still exploring what type of indicators I need for my trading so it's touch-and-go. I'm going to try trading 'naked' next week.

Trading closes during the HK 12.30-14.30 lunch period and I rarely leave positions open because I know given the volatility of the HK mkt, it will usually not be a smooth transition from morning to afternoon, and today was not exception! With HSI warrants, one day does not necessarily relate to another, unfortunately. This is especially the case since the warrants I trade vary day-to-day and my positions are always closed by end of day. I like the idea of having >1 position but I'm not advanced enough to monitor more than 1 so I'll have to stick w/ 1 trade at a time for the time being.

Btw, your comments are very much appreciated!

 

[timsk]

Hi trade2finind,
You're a bit of an enigma! You give the impression of being pretty new to trading and yet you're trading warrants which is a most unusual place for a newbie trader to start!

I'm not sure I follow what is meant by 'set up' and 'entry trigger'? Can you please explain?

For a trader who bases their decisions on technical analysis (TA - i.e. charts), a 'set up' is a recognisable chart pattern that, when formed, has a reasonable probability of moving in the desired direction. An example might be price closing above/below a support/resistance line or a trend line. A 'trigger' is the detailed, specific event that will cause you to enter a trade. In the above example, price closes above a resistance line (but below the candle high); the trigger to enter a long trade might be on the breach of the candle high. This is just an example, there are endless examples of both.

I just thought that the HSI was hitting a bottom and it can't go any lower. It was rebounding off the 21,902 support line and breaching the 21,927 resistance line. I was confident when buying a call warrant today based partly on above and also because the rapid decline after 14.30 did not seem sustainable.

Have you ever heard the quote: "The market can remain irrational longer than you can remain solvent" by John Maynard Keynes? No, well you have now! If this is the only basis of your trading, I suggest you stop right now as you will lose your money. It might take a while and you might do okay for a time but, eventually, you will be a net loser - that's guarenteed.

The MA is good but I still haven't learned enough to fully exploit properly reading it. I'm still exploring what type of indicators I need for my trading so it's touch-and-go. I'm going to try trading 'naked' next week.

I do hope you're paper trading and not using real money? If not, please give your money to me - I'll put it to better use (in the pub).

Trading closes during the HK 12.30-14.30 lunch period and I rarely leave positions open because I know given the volatility of the HK mkt, it will usually not be a smooth transition from morning to afternoon, and today was not exception! With HSI warrants, one day does not necessarily relate to another, unfortunately. This is especially the case since the warrants I trade vary day-to-day and my positions are always closed by end of day. I like the idea of having >1 position but I'm not advanced enough to monitor more than 1 so I'll have to stick w/ 1 trade at a time for the time being.

Apologies, I didn't explain myself clearly enough in my last post. You only ever have one position running at any one time. You start with 2 contract and sell one (assuming you're long), leaving the other to run. It's just one trade - not two. The only variation is that the second part of the trade is half the size of the first.
HTH.
Tim.

 

[trade2finind]

Hi trade2finind,
You're a bit of an enigma! You give the impression of being pretty new to trading and yet you're trading warrants which is a most unusual place for a newbie trader to start!

LOL, yes. I chose this path because these types of warrants are extremely liquid and could be volatile. I'm lazy in the sense of not wanting to do any FA as I don't want to focus on any co's one stock, hence I decided to trade the HSI. I'm also choosing to daytrade instead of longer term, which is another enigma, I suppose.

For a trader who bases their decisions on technical analysis (TA - i.e. charts), a 'set up' is a recognisable chart pattern that, when formed, has a reasonable probability of moving in the desired direction. An example might be price closing above/below a support/resistance line or a trend line. A 'trigger' is the detailed, specific event that will cause you to enter a trade. In the above example, price closes above a resistance line (but below the candle high); the trigger to enter a long trade might be on the breach of the candle high. This is just an example, there are endless examples of both.

In that case, my setups and triggers are pretty much like that, looking at chart patterns and trying to decipher. In addition to other things, I also study historical patterns of the HSI and read up on local news, etc. However, HSI is different from overseas indices and way more volatile and seemingly w/o reason on its trending patterns at many times.

Have you ever heard the quote: "The market can remain irrational longer than you can remain solvent" by John Maynard Keynes? No, well you have now! If this is the only basis of your trading, I suggest you stop right now as you will lose your money. It might take a while and you might do okay for a time but, eventually, you will be a net loser - that's guarenteed. I do hope you're paper trading and not using real money? If not, please give your money to me - I'll put it to better use (in the pub).

That's a great quote, thanks! Yes, I totally understand that. I'm live trading but w/ extremely small amts since demo trading is just not the same. I've been maintaining my a/c so far, have alright money mgt, so I'm doing ok for now (knock on wood). I'll keep at it and see how it goes. I know for sure only to risk a extremely small percentage of my a/c on any 1 trade and am disciplined at stoploss.

Sure, I'll treat to you a drink in a HK pub if you're ever in town!

Apologies, I didn't explain myself clearly enough in my last post. You only ever have one position running at any one time. You start with 2 contract and sell one (assuming you're long), leaving the other to run. It's just one trade - not two. The only variation is that the second part of the trade is half the size of the first.
HTH.
Tim.

Ok, so do you mean, say, I make one buy of 100 shares, and then just shed, say 50, if it goes long? If yes, I'd still get confused w/ what commissions and other expenses would be involved and what I'd need to make on the remaining portion in order to profit. Seems a bit complicated for my simple mind that's why I just buy/sell the same amount.

 

[trade2finind]

19 Oct 2009

Today was frustrating. I watching the whole morning the HSI going up and up and up but still didn't make a move. The afternoon was similar, but with a strong opening but then a sideways mkt for nearly an hour until another upward break. I went in with a call after things settled down but again got spooked out w/ only 1 pip profit. I did predict that HSI would not break 22,250, since that was the highest pt for last week (and highest level since last Aug).

I just can't find my edge. Can someone please help?

 

[timsk]

I just can't find my edge. Can someone please help?

Hi trade2finind,
You can lead a horse to water, but you can't make it drink.
Your problem is that you haven't found a proper set up and trigger. Your 'edge' will always allude you until you do. If your set up and trigger are properly defined, it would be the common denominator on all your trades. Once you've done this, you will then be able to produce a set of trades with meaningful stat's. Most importantly, you need to know your win : loss ratio and the ratio of average win : to average loss. Unless your trades are consistent, governed by the same set ups and entry triggers, these stats's will be difficult to produce and, any that you do produce, will be of little value. Your style appears to be too loose and vague, based on your interpretation of what you think is happening - or about to happen - in the market. A very successful trader with many, many years experience may be able to do this, but it's virtually impossible for new and inexperienced traders to trade this way. Most people on T2W have tried it (me included) and, in the 7 years that I've been a member of this forum, I've not come across a single person who claims to be consistently profitable using this approach. In fact, most blow up their accounts. Of course, you just might be the one person to buck this very consistent and unfaltering trend. . .

Tim.