The Trading Journey of Lurker

firewalker99 · May 26, 2007

lurkerlurker said:
If you really want to know what the system would have done with better money management, it would have taken a 1 trade loss of around £40 on the last contract of the day. The averaging down would not have happened, and a position would never have been allowed to run £300 into the red, before exiting near the close at £-150.

My post contained a rather rhetoric question, as I have a pretty good idea about what your results would've been if you stopped out at the normal price. The reason I typed that was to help you focus on that fact in particular. It's something you should remind yourself of. Why did I lose? The answer to that question should not lead you to look elsewhere or try and develop a new or other system. The answer to that question is to look to yourself and your inability to execute the plan.

lurkerlurker said:
Why didn't my emotions get in the way? If I knew that, I'd have no problems, but here are some guesses.

By the looks of it, probably because you had a more laid-back mindset.

lurkerlurker said:
When I entered my trades I was confident in the outcome, and fully prepared to be stopped out. When I had losing trades, I ensured the loss was acceptable and then simply ignored them until the evening review. I exited when I felt the market had told me "enough". I did not get greedy (or fearful of losing profits - I simply covered). My order execution was pretty spot on, and fairly automatic. I did not sit and think about putting in orders, I just did them.

Now print this text and put it next to your keyboard or screen each time you hesitate or doubt yourself.

lurkerlurker said:
When you can trade without emotions interfering, why is that? Confidence in your system, or something else?

Confidence gained from backtesting and papertrading. My confidence level isn't always high, for example I've run into a losing streak not that long ago that got the better of me. It can suck you in, like a black hole. I stopped trading live and papertraded to get more focused again. It's a continuous process and you need to work on yourself all the time. Once you start to lose confidence you start to hesitate: you miss entries because you want just that more confirmation or you skip trades because you've had already 5 losers and you feel the next trade will probably be a bad one too. Obviously that's the big winner then...

lurkerlurker · May 27, 2007

Great post firewalker. Someone once said (and I've read so much recently to correctly attribute this) that "if you didn't take that trade because you were stopped out on the last one, it is time to stop trading and dust off your copy of Trading in the Zone".

Thanks for drawing my attention to the key points. I was wondering about the nature of your question (thinking that the already confessed £12 profit chasing at the EOW was pretty obvious).

I'm in the paper trading phase. I've decided to "earn" the minimum deposit for a DMA SB account with my current CMC SB account. After my papertrading phase, I am going to return to SB having learned as much as possible about myself, my system, and the causes of P/L streaks.

If I can meet this goal, I can reward myself with low commissions and a better platform, confident in the knowledge that I was profitable with less odds. Blaming the high commissions seems an excuse right now.

Thanks again for the feedback - you're a real diamond mate!

zigglewigler · May 27, 2007

lurkerlurker said:
I finally recognised that, and wired my money back to my bank and decided to paper trade for a little while.

Thank goodness for that. I was hoping that someone would come along and tell me I don't need to look at this blank page trying to think about how to formulate a trading system. Could you please point me to a Dax/YM/ES/Z system which works? A few I could choose from would be better. When I am satisfied as to what system works best for me, I can backtest and paper trade for a few weeks.

I'll look into spread, volatility, and margin for the ES vs the YM for my SB accounts. I don't anticipate returning to SB for very long. See my earlier post (SB markup paid > total loss). The tax man can **** off for now though - I'd consider trading DMA through a SB wrapper with one of the offshore SB firms which hedge. 1 point spread on the YM.

If you trawl the forums, read some books, you'll find plenty, but most won't suit you, eventually a style will match your personality, it took me at least two years to realize day trading did infact suit me after which I've never considered anything else.

You then can play around tuning things to your liking. I developed my system once I discovered that always being in the market(or as often as possible) suited my temperament, but this was after alot of time spent with traditional support and resistance methods, where breaching a line in the sand repeatedly seemed irrational concluding that the 'is it, isn't it?' position frustrated me too often.

So you could start with simple MA crossovers, at least get used to applying something that others use, the key though is to get your psychology right.

As regards ES or Ym, I wouldn't bother, go for ER2, the emini Russell, go direct to IB or similar, forget the 'tax free' SB b*llsh*t, with crap spreads you'll struggle to make any money to be taxed in the first place.

firewalker99 · May 27, 2007

zigglewigler said:
As regards ES or Ym, I wouldn't bother, go for ER2, the emini Russell, go direct to IB or similar, forget the 'tax free' SB b*llsh*t, with crap spreads you'll struggle to make any money to be taxed in the first place.

Although I think ER2 has some lovely moves, I think YM is a safer bet in terms of putting money on the line. If you trade IB, let's compare the two markets:

YM
- margin requirements: 1406 USD
- tick size: 5 USD (1 full point = 5 USD)
- average daily range: about 50-100 points
=> Maximum average daily range in terms of USD: 5 x 100 = 500 USD

ER2
- margin requirements: 2000 USD
- tick size: 10 USD (1 full point = 100 USD)
- average daily range: about 10-15 points
=> Maximum average daily range in terms of USD: 100 x 15 = 1500 USD

Basically you can lose a lot more on ER2 in terms of %.
Suppose you have a stop on YM of 10 points (50USD), than you would risk 3,55% of the required margin for that position. A similar stop on ER2 of 1 point (100USD) means risking 5% on a single trade. Obviously the rewards are much bigger too... that's why I like ER2

lurkerlurker · May 27, 2007

With all due respect I'll stick to the YM market for the time being. I'm not looking for bigger risks or heavier margin requirements. Frankly £2.50 per tick is really quite enough for me, and I won't risk that papertrading.

Is the account requirement for IB still $5k or equiv? I'd rather stump up £2,500 now than £5k for TWF or FuturesBetting. (anyway, the tax aspect isn't that important - I'll pay the trading stuff as CGT, not IT, and move back to SB when I hit my allowance for this tax year).

Thanks for the replies. I'll paper trade the YM and consider an IB account.

zigglewigler · May 28, 2007

firewalker99 said:
Although I think ER2 has some lovely moves, I think YM is a safer bet in terms of putting money on the line. If you trade IB, let's compare the two markets:

YM
- margin requirements: 1406 USD
- tick size: 5 USD (1 full point = 5 USD)
- average daily range: about 50-100 points
=> Maximum average daily range in terms of USD: 5 x 100 = 500 USD

ER2
- margin requirements: 2000 USD
- tick size: 10 USD (1 full point = 100 USD)
- average daily range: about 10-15 points
=> Maximum average daily range in terms of USD: 100 x 15 = 1500 USD

Basically you can lose a lot more on ER2 in terms of %.
Suppose you have a stop on YM of 10 points (50USD), than you would risk 3,55% of the required margin for that position. A similar stop on ER2 of 1 point (100USD) means risking 5% on a single trade. Obviously the rewards are much bigger too... that's why I like ER2

ER2 is going to be more profitable, no question. But it is a heavily speculated beast and can be harder to read.

But where's the fun in safe?

lurkerlurker · May 28, 2007

zigglewigler said:
ER2 is going to be more profitable, no question. But it is a heavily speculated beast and can be harder to read.

But where's the fun in safe?

I apprecaite your thoughts, but I'm not looking for "fun". I'm looking to grow my account steadily. When my account is big enough that a trade with a tight stop in the Russell would be premitted by my MM rules, I'll give it a shot! Until then, the YM will do me!

lurkerlurker · May 28, 2007

firewalker99 said:
It's a holiday weekend so I thought I'd give you some reading materials to study

I've been reading all weekend and my eyes feel like they are about to start bleeding today. It is early, but I'd forgotton why dark room/bright screen is a bad idea - until now.

I think I've pretty much covered the journal stuff. I've also come to a decision regarding new accounts. I'm going to either go broke (lose my risk capital), or break even spreadbetting. When I break even (back to £1500) I will add the other £1000 and get an IB account. I've decided to paper trade the system when I have one.

Instincts tell me the system will have few rules, allow a fair bit of discretion, and work mainly from price with few if any indicators. TA will be employed (S/R levels, maybe a moving average, trendlines) along with a few candle patterns on the 5 min. I am wondering to what extent the ES leads the YM, and will consider looking into that.

I will ensure that the specifics of each trade are written down at the entry, and the stoploss is set when entering the trade. These trades will be on paper for a little while. The wide spread and the bias will be a problem, but if I cannot profit against them I should throw in the towel - I have made profits before. If I make back my £1500 I will be ready to "graduate" to futures, and will be comfortable with a $5/tick lot size.

Something is pulling me back toward the FTSE too. I could consider paper trading that in the mornings before the YM opens. I've done quite well on that in the past, although some days it just won't move. 2 point spreads are okay on the FTSE.

I've come to the conclusion that I am fairly terrible at position trading. I shouldn't really scalp with a SB company, except on "choppy" days (some of those I have done well on in the past). (I'm waiting on FireWalker to post some charts, which I will annotate with my entries and exits from my trading log above)

When I put funds back an an SB account, I will only return the £240. That gives me margin for a few FTSE and Dow trades with reasonable stoplosses. Paper trading should show positive expectation in this time. Hopefully I can start bagging a reasonable number of pips. The amount of spread I have paid enrages me at this point in time, however this is something I will just have to tolerate for awhile longer.

My long term plan is to go DMA with IB (when my spreadbetting wins justify the larger contract size) and have a sharp upturn in my equity curve due to reduced commissions. I will consider TwoWayFutures or FuturesBetting when I hit my CGT limit (I don't think they can do me for trading futures under Schedule D as it isn't any form of trade, and I've no professional employment experience in trading). As long as the betting is tax free, I'll stay with that. Otherwise, back to direct access as an offshore limited, paying myself income at the nil rate band, quarterly dividends to myself and the HMRC, national insurance, and trading my own account up to my CGT limit. That just about covers the next few years.

In terms of taking money out of the markets, I'll state my observations. I'm not target setting, as I have found that destructive, but on the basis of a fixed £1pp (no scaling in or out), I don't think it is unreasonable to consider the following as feasible, per week, net of losses:

FTSE: 40 pips
Dow: 80 pips

Keeping the size to £1pp until I either wipe myself out or double my equity balance (in 2 weeks). (before the naysayers jump in, I lost more than £240 in less than a week trading £1pp) When my balance hits £480, I'll scale in/out for a maximum position of £3 on the FTSE and £2 on the Dow, whilst keeping the same pip estimates.

Taking into account a fortnight for paper trading, another fortnight to increase stake size, I'd give it 12 weeks in total to recover my £1500 and hit the futures. This is just an estimate, I'm not trying to take silly risks to keep to targets, but returning that amount in 10 weeks seems reasonable. That is a target of £1360 in 10 weeks of real trading, or £27 per day. This may seem too ambitious to some, but it is something to work towards and nothing more.

Looking forward to getting back into this, although with £140 loss limit before I have insufficient margin to trade the Dow, I had better have a tight plan and some good track record on paper.

firewalker99 · May 28, 2007

As requested

The charts for 23 April - 27 April of
YM and Z

cash prices

firewalker99 · May 28, 2007

As requested (charts)

These are the charts futures price (including volume)
for April 23-27 YM and Z

aq requested 1-min time frame

The date of each chart is mentioned in the filename (if you right-click on the image and choose save image as...)

lurkerlurker · May 30, 2007

Entries and Exits, and a new Trading Edge

Thanks to firewalker for providing charts.

I'm not too sure how much this will be useful any more. I've annotated the charts (a little messily in kolourpaint) with my entries, exits, and a few little observations. Nothing staggering about these trades really - a few good entries and exits based on price information, and half the textbook of trading mistakes.

Seems like my plan of using analysis of my best week to fix my problems was a little flawed.

Now for the good news.

Windows 2000 in VMWare + NinjaTrader (free edition, all features but order execution) + OpenTick (free ECBOT feed) = real time price and volume information for the ES and the YM! (Possibly time and sales info also).

Going to check this out during live market hours tomorrow, but I'm looking forward to the edge it will give me over just looking at the SB price in the absence of volume info. I've put a screenshot of my desktop with NinjaTrader running with the OpenTick feed and the T&S info.
I think that if the above works as planned during market hours, I'll have some of the best tools of the trade to go after the market with. Now I just need to fix my trading psychology and work a little more on a method, and I'm set.

I'm still in two minds about this "method" and backtesting stuff though. To what extent must I formulate a method to trade this market? How detailed must the method be.

Right now, it is something along the lines of:

Look at price and volume. Use and indicator or two if it helps. Use the 100EMA. Buy when you think price will go up, sell when you think price will go down. Be aware of the relationship between price and volume.

Too vague?

I notice the YM was a doji on the daily chart today. I'm off to the Dow thread now. Looking forward to live trading time tomorrow!

firewalker99 · May 30, 2007

lurkerlurker said:
I've annotated the charts (a little messily in kolourpaint) with my entries, exits, and a few little observations. Nothing staggering about these trades really - a few good entries and exits based on price information, and half the textbook of trading mistakes.

My first impression is that you have some fairly good entries that go in the right direction, but you exit them much too quickly, hence leaving a lot of points on the table.

Also in the days that you lost a lot of points, you've held on to loser much longer than normal...

So basically turn that around and you might be starting to make to profit already!

lurkerlurker · May 30, 2007

Adrift

I am hoping that there are some people here who still follow this thread (although even if there aren't, I can rely on my regular contributors).

I have never been so frustrated at any point in my trading "career" as today. I have not used real money for a week, so the losses aren't bothering me. People keep making reference to a trading plan, system, method, strategy, etc. I don't have one and don't know where to start with one.

I'm not being deliberately lazy or obtuse, I have some appreciation of the challenges inherent in futures trading, and I do not have a lottery mentality. I think my foray into this field has had some successes all things considered. However, i do not have one of these "systems" which apparently is a prerequisite for success.

Other members have commented that, for example, you must have a system which a non trader could follow to pick trades, etc.

I do not know where to begin with this - how detailed does the system need to be - if someone could post some sort of example or advice I would appreciate it.

It does not even need to be a profitable system - just something to give me a guideline as to the sorts of things I should include. I have no idea where to go with this - my previous attempts at formulating a method have been a waste of time, and I've made the mistake of trading by the seat of my pants more than once.

I feel as though I have encountered an insurmountable barrier. I've read as much as I care to on the subject, and yet the basics seem to elude me.

What if I were to say buy / sell on moving average crossovers. What if I pick an instrument and slot some numbers into the indicators. Is that a system? This all doesn't make sense to me.

I am so deeply frustrated with my inability to even understand the nature of the puzzle which I require to solve I am incapable of expressing it coherently here.

If I could ask the following of any wise reader who is still with me this far:

I wish to trade the YM on an intra day basis. What must I do before I can paper trade, and what must I do before I can put on trades with actual money? Please over explain this and labour the important points. Specifically, how do I decide on entries and exits? (I think I'm okay on money management)

Atilla · May 30, 2007

lurkerlurker said:
I am hoping that there are some people here who still follow this thread (although even if there aren't, I can rely on my regular contributors).

I have never been so frustrated at any point in my trading "career" as today. I have not used real money for a week, so the losses aren't bothering me. People keep making reference to a trading plan, system, method, strategy, etc. I don't have one and don't know where to start with one.

I'm not being deliberately lazy or obtuse, I have some appreciation of the challenges inherent in futures trading, and I do not have a lottery mentality. I think my foray into this field has had some successes all things considered. However, i do not have one of these "systems" which apparently is a prerequisite for success.

Other members have commented that, for example, you must have a system which a non trader could follow to pick trades, etc.

I do not know where to begin with this - how detailed does the system need to be - if someone could post some sort of example or advice I would appreciate it.

It does not even need to be a profitable system - just something to give me a guideline as to the sorts of things I should include. I have no idea where to go with this - my previous attempts at formulating a method have been a waste of time, and I've made the mistake of trading by the seat of my pants more than once.

I feel as though I have encountered an insurmountable barrier. I've read as much as I care to on the subject, and yet the basics seem to elude me.

What if I were to say buy / sell on moving average crossovers. What if I pick an instrument and slot some numbers into the indicators. Is that a system? This all doesn't make sense to me.

I am so deeply frustrated with my inability to even understand the nature of the puzzle which I require to solve I am incapable of expressing it coherently here.

If I could ask the following of any wise reader who is still with me this far:

I wish to trade the YM on an intra day basis. What must I do before I can paper trade, and what must I do before I can put on trades with actual money? Please over explain this and labour the important points. Specifically, how do I decide on entries and exits? (I think I'm okay on money management)

The first trading plan you had was a good one.

I tried it my self. I thought 8-21 DEMAs and cross overs worked well.

Why not go back to paper trading that. 1 - 5 - 15 - 1 hour charts. + Lots of disclipine.

Note down your trades and see.

You can also try 1 - 4 hour and daily charts on same system.

Stop all your research and reading. Concentrate your efforts on one system and as I say document. Don't sit and watch it however.

Check when markets open and come back every couple of hours.

Rome wasn't built in a day or few months but burnt down in about 7. Learn from history eh?

Don't forget what ever you do in life enjoy the view.

If you are not enjoying life at the mo. Change it. You have absolute power.

ceydababy · May 30, 2007

Systems....

Glad to see you are still sticking at it Lurker...Pardon my ignorance but what exactly is the YM Market ???

I am glad to hear you don't have a lottery mentality !! That could be dangerous...Anyways all jokes aside.

Firstly, a system will contribute to your success but certainly doesn't guarantee it. FW posted a while back the elements that makes up a succesful trader. I will post my opinion on this here

45% System, 50% Trader using the system, 5 % Luck

There are a few systems posted on T2WIN....

Buy over the 100sma and sell when the price crosses back over.

That is a trading system right there.....see how simple it is.

I am not suggesting you use that, but it is just an example of a trading system that is in use by members on this board.

I was reading the FTSE thread and a guy on there has developed another simple but effective system. The guy had tweaked the MACD and would buy the MACD crosses when the RSI was over 50 and sell when the MACD Crossed on the down side with an RSI under 50. Believe it or not this guy was very profitable using this system...see how simple it is ??

If I were you, take a couple of days off trading. Hit some books...nice and simple ones. A few I would recommend are:

Jack Schwaeger - Basics of Techincal Analysis
The Dummies Guide to Techincal Analaysis.

Both explain very basically the fundamental elements of mastering TA.

When reading these books have " I WANT A SIMPLE TRADING SYSTEM" deeply ingrained in the sub concious. See what gems you can pick out.

If you are feeling a bit subdued the books to read are

Market Wizard Books by Jack Schwaeger (PURE INSPIRATION)
Reminisciences of a Stock Operator by Edwin Lefeurve (PURE PURE INSPIRATION)

I think the key to developing a system is realising that you are never going to get a system that works EVERY TIME. It took me a while to accept that but remember with effective money management you could in theory make a stack of money off a system that returned only 50% winning trades.

I personally look for the following

2 out of 10 trades (LOSERS...Pre determined stop before I open a position. I KNOW how much I am going to lose and I don't MOVE that stop for love nor money)

2 out of 10 trades (Break Evens...generally the market shoots up, comes back and my nerve goes)

6 out of 10 trades (WINNERS....I am taking a profit, I aim for at least 20 points on Brent)

IF I am managing to beat that I am very happy...However, as long as I am maintaining that ratio I am very happy.

Hope this has been of help

2468steve · May 30, 2007

lurkerlurker said:
I am hoping that there are some people here who still follow this thread (although even if there aren't, I can rely on my regular contributors).

I have never been so frustrated at any point in my trading "career" as today. I have not used real money for a week, so the losses aren't bothering me. People keep making reference to a trading plan, system, method, strategy, etc. I don't have one and don't know where to start with one.

LL,
Please,this is not a criticism,just some polite advice.....
I get the impression that you are trying to find what is not there.....a system which will tell you where the market is headed...Reading through some of your posts you appear to be your own worst enemy,adding indicators here,taking indicators away there,snatching +1 pip fearful of turning a loss,and losing -10 hoping for a gain...etc
The more indicators you try to implement in your trading the more cluttered and confusing your trading becomes..resulting in uncertainty and loss of confidence...then you'll get freeze finger, not taking a trade you see because of the uncertainty,,,you'll see the market go the way you expected and feel gutted that you were right but missed out...so you chase it and inevitably Mr.Market will whipsaw you out...this pisses you off even more,and you go onto the next system/signal/indicator.....

my advice would be go back to basics and forget for now all these so called fandango,fluffer valve indicators....PRICE,PRICE,PRICE !!!
Use basic support,resistance,and unclutter your head...this way and with just price to think about you know exactly where you stand....today for example you could have picked up the Dow around 13450,10pts above recent support...a pretty good risk/reward trade..admittedly the markets were tanking at the time and to pull the trigger would have been hard,but you know exactly where to get out if wrong....upside on that trade 170 points
Start by getting this right and then,and only then,add indicators if it can improve your results....
I can't emphasize enough the importance of PRICE.....I've met old time traders who only traded off ticker tapes....PRICE....no RSI,MACD,OBV or any of that...nothing,PRICE only
Personally I only use Price/volume nothing else...... and will check Williams %R for confirmation.....but primarilly price/volume only
Stick with it because you will get there in the end...one day you'll wake up and everything will fall into place....but start with the basics.The most simple methods are normally the best......

cheers

barjon · May 31, 2007

lurkerlurker said:
.............. People keep making reference to a trading plan, system, method, strategy, etc. I don't have one and don't know where to start with one..........................

..............What if I were to say buy / sell on moving average crossovers. What if I pick an instrument and slot some numbers into the indicators. Is that a system? ..........

............... Specifically, how do I decide on entries and exits? (I think I'm okay on money management).............

lurker

1. for the full monty work through this - http://www.trade2win.com/media/knowledge/tim-wilcox/T2W_Trading_Plan_Template_2005.pdf

2. yes, that's a system - might not work though

3. define them. eg: i'll enter when the high of the bar causing the crossover is exceeded by x points.

exits are more difficult imo and your options are to exit to a points target or to define the market action that will cause you to go.

hope this helps your search

jon

lurkerlurker · May 31, 2007

barjon said:
lurker

1. for the full monty work through this - http://www.trade2win.com/media/knowledge/tim-wilcox/T2W_Trading_Plan_Template_2005.pdf

2. yes, that's a system - might not work though

3. define them. eg: i'll enter when the high of the bar causing the crossover is exceeded by x points.

exits are more difficult imo and your options are to exit to a points target or to define the market action that will cause you to go.

hope this helps your search

jon

Thank you very much for the linked document especially, and the advice. Regarding exits, I have more reading to do, not least firewalkers excellent thread on the matter (though that speaks more to position sizing). I am in the process of working through that document, but I am taking most of today off from trading related stuff, so I will post the first half now and the more complex bit later.

lurkerlurker · May 31, 2007

Trading Plan, Part One

Why Trade?

I have been interested in the financial markets for as long as I can remember. Trading represents a worthwhile personal challenge, an opportunity to study and learn more about the markets while participating in them. I also have a personal curiosity regarding what I could achieve as a trader, both financially, and in terms of a track record. I am still considering the far out option of managing Other Peoples Money some day...

What sort of trader am I?

Certainly an aggressive intra-day trader. I wish to devote around 10 hours per day to trading, not including preparation and review. I wish to trade for a living some day. I do not feel comfortably holding overnights in volatile markets and have no interest in slow markets. My current risk capital does not permit me to hold overnights. Day trading gives me the opportunity to reach to what the market tells me as it happens, as opposed to spending a few hours a week considering positions.

Strengths and Weaknesses

This will be a difficult one.

Strengths...given my poor track record and lack of a plan I am going to come back to this later to give a proper answer, rather than just fill in some meaningless words here.

Weaknesses. Poor discipline – inability to stick to a plan while in a trade, or formulate a plan before trading. Letting losses run or failing to define a loss. Panicking exits and taking profits too soon. Overtrading, perhaps through boredom, or due to revenge trading. Emtional trading. I'm generally a “high achiver” quite accustomed to success and with an expectation of being correct most of the time. Perhaps some ego issues here.

Discipline to be improved by adherence to a sensible plan I intend to formulate. Emotional issues to be removed by the use of paper trading until confidence in a strategy can be achived.

Are you in the right frame of mind to trade?

During live trading and paper trading, I have traded when;

overtired
stressed
distracted by issues in my life
busy
suffering from an inability to concentrate
after 2 nights without sleep
on the telephone
suffering from a bad flu

I've never traded with a hangover! I have never consumed alcohol while trading.
From the outset, I have failed to take advantages of the freedoms of full time trading. One of these is not having to work every day. Due to habit, I have gone to my “new job” while not in a suitable condition to perform effectively.

This plan will include a checklist of personal conditions which must be met prior to trading. Discipline will be important here, as I am fearful of missing opportunities and this gives me a compulsion to trade.

At this juncture, I feel the example answer cannot be improved upon and I therefore incorporate it below:

I will only trade on days when . . . (I am rested, relaxed and not distracted by work or family
etc. I will be guided by my trading plan and I will adhere to it rigidly. It will help to prevent me from
making trades that are poorly conceived and executed; i.e. trades that are based on gut feeing and
motivated by fear and/or greed).
I will not trade on days when . . . (I am feeling off colour, hung over, particularly tired or when
I am mentally distracted by other events in my life).

Financial Targets

I'll work this one out when I can reasonably predict something based on the strategy I adopt. Tempted to pencil in “1% per day” here.

Annual Trading Goal

My annual trading goal is to have a track record of executing a strategy in a disciplined and efficient manner. I wish to have achieved an edge trading index futures. I need not have recovered my losses at this time, or broken even, although this would be highly desirable. I wish to be able to review my P/L, trade frequency, and other relevant statistics and consider that significant progress has been made. I would wish to be able to realistically consider trading for a living at this stage. For the longer term view, I would hope to be comfortable enough to attempt to hold overnight positions on my chosen instruments, and to trade on a longer timescale.

Okay, reward is mentioned in the document, so just for fun (although I have no expectation of making such profit, and even if I do not, if I achieve the goal that will be its own reward).

I would dearly like to visit the Cayman Islands. My reward for achieving these goals will be a one week stay in George Town, Grand Cayman, to include snorkelling and copious amounts of rum punch. Should my profits not permit this, I'll spend a week in Jersey instead (similar enough island, and I had a jolly good time there a few years ago). I don't travel nearly as often as I should.

Monthly Trading Goal

To have returned results consistent with my plan. Achieving a good work / life balance and not let the markets interfere with my personal time. achieve a win loss ratio of 3:1.

Weekly Trading Goals

Discipline, discipline, discipline. To plan the trade, trade the plan, and execute efficiently without hesitation or stress. When I achieve this goal I will reward myself by not worrying about causing myself stress related illnesses while trading!

Daily Trading Goals

Much as I appreciate the value of goal setting, can we get to the bit where we actually make the plan? Will come back later

Markets!

Trade the YM on an intra-day basis. Research the merits of Dax trading in the AM. Both markets provide sufficient volatility and do not appear overly tricky to trade. Timeframes – a 5 minute chart for entries and exits, and a 15 minute chart for general trend / bigger picture. 1 minute charts.

Currently spreadbetting, looking to move to Direct Access on the futures with IB. Long term plan – TwoWayFutures / FuturesBetting (tax reasons, comparable costs)

Trading platform – brokers software, with an eye on an OpenTick feed

Pre market

Check for release of numbers. Check trend of overnight index futures. Review yesterdays performance. Consider how to trade in the current day.

Hour by Hour Plan

TBC

Attitude to Risk

Accepting of the risk associated with intra day trading. Not risk adverse when trading properly. Extremly risk adverse after painful losses, so strict use of stops and discipline breaks after losses required.

Looking to risk a maximum of 2% per trade, one trade at a time.

Hardware / Broker Risk

I have a paper copy of emergency numbers to call to close spreadbets. It will take all day for them to answer the phone, and I will probably be stopped anyways. Hard stops in the market will mitigate this. Multiple computers with relevant software. 1 ADSL line, no backup connection. Maybe consider backup dialup....

Strategy Risk

Will stop after 10% drawdown (or 5 losing trades), and review this “strategy” which I still don't have.

Risk Management

Look for 2:1 reward:risk trades and above. The remainder TBC.

Stops
Maximum of 2% risk per trade. Move stop to breakeven when prudent to do so.

When to Stop Trading

First loss after hitting profit target.
After three losing trades.
When the market is extremely choppy, or does not produce appropriate setups.

position sizing

£1pp initially. 1 contract when moving to the futures. No adding to this at this time – will review in the event of my trading capital increasing to the extent I could carry multiple positions with a sensible stop while risking 2% or less.

Exits

Need to read firewalker's excellent thread on the matter, and perhaps Elder Alexander's “Entries and Exits” again. Trailing stop below relevant highs / lows, breakeven stop where appropriate, or exit near a profit target will do meanwhile

More to follow....

Italics represents an unfinished area, will fill more in later

Hope this aids anyone who is reading this, and anyone who wishes to give some advice.

firewalker99 · May 31, 2007

lurkerlurker said:
... People keep making reference to a trading plan, system, method, strategy, etc. I don't have one and don't know where to start with one.

Other members have commented that, for example, you must have a system which a non trader could follow to pick trades, etc.

I do not know where to begin with this - how detailed does the system need to be - if someone could post some sort of example or advice I would appreciate it.

There are a lot of free systems available if you don't want to start from scratch. However it's my belief that developing a system of your own, backtesting it and papertrading it until you get the confidence you need to go live, will pay off in the end. As it is your system you will know how to tweak and adopt it to suit different market situations.

Anyway, let me give you some fairly simple examples of what a system can look like. Each of these examples however requires you have a clearly disambiguate definition of each concept (resistance, crossover, triangle...)

1) When price reaches a resistance level and on the 15-min chart forms a shooting star candle, go short on the previous bar. This system requires you clearly define what resistance is and what a shooting star candle looks like.

2) When MACD crosses over into positive territory, go long and exit when MACD reverses to the 0 line again. Stop out immediately if the next bar doesn't move in the right direction.

3) Look for a triangle pattern: it consists of higher lows and lower highs, converging into a single point. Take your trade in the direction of the breakout of the triangle and stay in the trade with a trailing stop.

Considerations
All of the above can be a solid basis for a system, but you need to realize you need to backtest each of these. You need to refine the parameters until there is not a single doubt to act when the setup appears in real time. You need to determine to market you are going to trade this on (YM I guess), the timeframe, the specifics. For example:

What is resistance? What MACD value? How big does the triangle need to be? How many bars? How do I see higher lows and lower highs in realtime? Am I focused enough to determine a setup in realtime.

Backtesting isn't just looking at a chart and identifying setups. You need to either replay the chart or read it from left to right. You need to have lots of data, not days or weeks but months. Hundreds of charts. Hundreds of trades. It requires a lot of time and hard work. Trading is after all a business. There's no such thing as a free lunch (although I'm already giving away lot's of freebies here

)

The Trading Journey of Lurker

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