Lee Shepherd's Trading Diary

[bustech]

That is one of the best, most open, honest and valuable posts that I have had the pleasure of reading.

Thanks

Peace and pips (or points)

x 2

Lee's post's are always a good read and a great education on trading in the real world.

 

[Vasco da Banana]

Anyway, as some of my previous (vented) posts in the month of May stated, I had a good losing month. The dax alone took me for over £5.2k. Dam these meerkats.

Managed to pull it back somewhat but still ended the month on minus £1.4k.

I am also expecting losses next month (June) as well and is expected in the region of around £1.5k. These are the best months to publish as it details just exactly what one needs to do when it comes to the classic saying 'Money Management'.

Money management is not just about managing your brokers account; it’s also a major part in how you deal with personal expenditure etc. How many people do you know could survive without being paid for 2 months in a row, worse still how many people do you know could survive not only no wages for 2 months but also having to still payout on living expenses PLUS paying into the markets just to add salt to the wound. In essence paying to go to work.

This in itself can have a major impact on how one trades moving forward:

Cautious trading means you miss out on those opportunities.
Over trading/aggressive behaviour means you frantically look for opportunities that simply do not exist.

In short, just do the job. You don't hear of city traders saying 'I've just had a bad trade, I'm going home to cry'. Rubbish, clear your head and get back on it. Do or die. Man up.

Someone recently joked about me coming to London and paying only a nominal fee for a room instead of something more grand, it did make me laugh but there is a serious point here. This is on the back of me taking £5k per month from the markets. Let’s look at how much £5k really is:

£5k per month is a total of (over 12 months) = £60,000 per annum. Not bad some will say. I say it is bad, very bad indeed in comparison to what I have to do and risk to achieve this.

Now take out a few months for drawdown’s of say £10k, that’s easily achievable and I’m probably being kind here, that leaves £50k, now take out the fact that we have to have an insurance policy in case that eventful black swan wipes us out. We need to build a pot from it so let’s take out, say, 20% of the yearly expected total – that’s £10k over the year; this now leaves £40k. What about a pension fund, take out another 10% and that’s another £5k off, this leaves in my pocket:

£35,000

Now what about compounding – interesting one as so many people harp on about it. How am I going to compound from this amount, well I do, but I do it by living a reasonably frugal existence, this means budget rooms when I’m out playing, there’s no tax relief here.

So if I compound just £5k per year, not a lot. That leaves me with a whole £30k per year or £2.5k per month. Half of what most people see I take from the markets each month. Oh in case we forgot, what’s a holiday or sick day? What about expenses and so on, are these all for free?

Now let’s look at what I do to win this money. All day and all night I am on it like a fly on the you know what. I live eat and breathe it. I am worse than an addict and even after all these years I still do not get bored with a single day. I truly have found my vocation in life. I am doing it for the enjoyment, not for the cash, this is secondary. I keep my eye on the trade and not on monetary figures, this is insignificant to me. It matters not how much a trade has just rewarded me or taken from me, what matters most is how much I pay myself at the end of each month, if I can at all.

So, when people band around making money from the markets with just 1 hour a day, make thousands per month blah blah blah, do it in 6 months yeah whateva, I hope you can now appreciate that with all the hours God sends, all the passion in the world and a healthy bank balance and plenty of experience........ It really is hard to make a living from trading the markets. If you don’t enjoy it or have the time and support for it from others, it makes it a million times worse.

Anyway, rambling on:

Results for this month (May)

Wins = 9 @ £3,884.37 average of £431.59
Losses = 10 @ £5,296.05 average of £529.60
Total trades = 19

Biggest win = £1,022.79
Biggest loss = £1,129.25

Win rate = 47.3%
Trade Ratio = 1:0.9 R/R
Monetary Ratio = 0.73

Net = £-1,411.68 (Minus)

Good luck for this month all. Screenshot for verification purposes but as normal a lot of data has been removed as levels are still in play. The one’s I have shown are now obsolete.

Actually, nothing needs to be taken out this month as all previous levels have now changed.


Word to self: I am only as good as my last trade. The next trade could be the series of events that blows the account.

Regards,

Lee Shepherd

One thing that puzzles me about the way you trade is the previous post about losing £5.2k on the DAX in a day. Surely this is a huge hit if you're aiming to make £60k a year?

 

[Lee Shepherd]

One thing that puzzles me about the way you trade is the previous post about losing £5.2k on the DAX in a day. Surely this is a huge hit if you're aiming to make £60k a year?

Hello mate,

This shouldn't puzzle you at all (a successful trader). Go back and re-read the post and check out the screenshot. Also take time to digest the ratio's I have gone to the trouble of supplying so that others don't have to.

Just to make it easier, that loss is one day. I don't operate one day a year. Also, my earnings are not expected nor is it my aim, they have been forthcoming year in year out with small steady increases. Again, just to remain grounded, I am only as good as my last trade statement. Who knows, I could go bust tomorrow.

Happy trading.

Lee

 

[trendie]

Top post Lee. (the one with the numbers!)

It is a reality-check post for newbies who think each month will be a winner.
And the need to plan for losing phases. And the need to manage ones money for those draw-downs.
Excellent post, deserving of all the recommendations it has garnered so far.

 

[Vasco da Banana]

Hello mate,

This shouldn't puzzle you at all (a successful trader). Go back and re-read the post and check out the screenshot. Also take time to digest the ratio's I have gone to the trouble of supplying so that others don't have to.

Just to make it easier, that loss is one day. I don't operate one day a year. Also, my earnings are not expected nor is it my aim, they have been forthcoming year in year out with small steady increases. Again, just to remain grounded, I am only as good as my last trade statement. Who knows, I could go bust tomorrow.

Happy trading.

Lee

Didn't say I was a successful tarder, just a curious one. I appreciate that there are numerous ways of making or loosing money (I've tried plenty of the latter), but being in the position of potentially losing nearly 10% of your account in a day seems dangerous. Your 'I could go bust tomorrow' remark is also a bit worrying, even if it's not entirely serious.

 

[DionysusToast]

Lee

Why don't you look for funding? It seems like you'd be better off with more capital.

There's LOTS & LOTS & LOTS of money out there looking for a home.

There's no medals for going it alone!

Pete

 

[DionysusToast]

Didn't say I was a successful tarder, just a curious one. I appreciate that there are numerous ways of making or loosing money (I've tried plenty of the latter), but being in the position of potentially losing nearly 10% of your account in a day seems dangerous. Your 'I could go bust tomorrow' remark is also a bit worrying, even if it's not entirely serious.

How is a 5k loss 10% of his account?

It may well be close to 10% of a years profit but any years profit is made up of winners & losers.

The only way to look at something like this is by looking at sharpe ratios and for all we know Lee could be close to 1.0, even with this hiccup.

 

[Hakuna Matata]

What interests me is that the losses on the DAX were made up 5 consecutive trades all done on the same day (if I have understood the statement properly).

Care to elaborate on this? Were they all the same trade idea? Or seperate mechanical signals that you just have to pull the trigger on? And so on...

 

[Splitlink]

Lee

Why don't you look for funding? It seems like you'd be better off with more capital.

There's LOTS & LOTS & LOTS of money out there looking for a home.

There's no medals for going it alone!

Pete

But there is independence.

 

[Lee Shepherd]

Didn't say I was a successful tarder, just a curious one. I appreciate that there are numerous ways of making or loosing money (I've tried plenty of the latter), but being in the position of potentially losing nearly 10% of your account in a day seems dangerous. Your 'I could go bust tomorrow' remark is also a bit worrying, even if it's not entirely serious.

Hiya Vasco,

Sorry mate, my post may of come across a bit strong. That's text for you.

I imagine you are thinking of it like this:

£60k per year (expected or otherwise), 1 day loss of £5.2k equals 8.6% drawdown on the expected yearly amount. In the usual scheme of things this would be huge and I would be on the way to certain death. But....We don't calculate drawdowns on expected earnings otherwise most of the time, most people would be in the minus negative infinity numbers...and that just doesn't stack up. We place draw downs on the account balance.

If this was true in fact or even in thinking it would shaft the person so far up their own a5se that their bowels would come out of their mouth. In other words it would affect trading performance moving forward.


However, try looking at it like this:

1 month trading with a loss of £1.4k = totals 2.3% draw down on the month of the yearly expected takings – now that sounds better. But like I said we don't place it on expectancy of earnings, drawdowns are done on account balance only to give a lifespan expectancy of the account against the trading plan. Plan for the worst.

Am I playing with numbers here? Well, yes I guess. That’s what we’re all doing. Am I kidding you or worse still myself....No.

The simple fact is that should I have given up on the back of that loss I wouldn’t have then recuperated money back and the loss on the month would have been...say....£5k loss with successive paper trades netting me the money that I took. You know what happens next. I take the next setup and it loses, repeat then rinse.

Your questions are very helpful to a lot I am sure as we only ever realise what we're up against when the money goes from our sweaty little hands.

With regards to the 'going bust' tomorrow line. Bear this in mind at all times and plan for it. You never know. One thing I do know for sure though, it keeps my feet firmly on the ground and my mind sharp knowing that tomorrow could be the start to an end. I am not invincible and neither is my trading plan.

Hope that helps.

Lee

 

[Liquid validity]

The only way to look at something like this is by looking at sharpe ratios and for all we know Lee could be close to 1.0, even with this hiccup.

Sharpe is the last thing I would use, from my own experience,
I personally think its largely worthless:

How The Sharpe Ratio Can Oversimplify Risk

Spotlight on the Sharpe Ratio: Part I - Seeking Alpha
Spotlight on the Sharpe Ratio: Part II - Seeking Alpha
Spotlight on the Sharpe Ratio: Part III - Seeking Alpha

I'm not keen on placing too much emphasis on individual metrics anyway.
For me the raw stats have more value.

 

[Lee Shepherd]

Lee

Why don't you look for funding? It seems like you'd be better off with more capital.

There's LOTS & LOTS & LOTS of money out there looking for a home.

There's no medals for going it alone!

Pete

I do get offers and have had many more in the past. They come up from time to time and depending on how I feel, I sometimes entertain them. However, with it comes a lot of grief.

I would recommend that if anyone wants to ever go down that line for extra income would be to get someone to ghost your trades and take the subs for you in return for commission. That would be my thinking anyway.

It sounds good, but one you have to split the profit in their favour when you do well and when you lose you get barraged with doubters and negativity. Imagine if you had funded me last month and this month statement showed a loss, next month will probably also do the same. At least with T2W I can switch off if I want. I don't have to answer to anyone but myself andthat alone allows me to take trades whether I think they will fail or not (that's a mental thing not fact).

Lee

 

[Lee Shepherd]

What interests me is that the losses on the DAX were made up 5 consecutive trades all done on the same day (if I have understood the statement properly).

Care to elaborate on this? Were they all the same trade idea? Or seperate mechanical signals that you just have to pull the trigger on? And so on...

Hi Hakuna,

You're asking me a question about my trading in the hope that you will learn from it. Thats what I figure you are doing anyway.

So, if you want to learn from it, great, I'll help you. Take another look at the statement and look closely.

Here's some help to the timeline:

The dax numbers were closed on 1 day for a loss of £5.2k. Check out the numbers and you'll see over a 500pt range. Check this against the graph and it will give you an idea on the trading history here. You'll see a lot more with the figures in front of you and a graph open.

Once you see this you'll see how close I was to not losing any of that money and the last month would have been an £8k profit one and the levels would still be in play, that being said, because they no longer in use, the statement is totally unedited, something that is rarely shown. These are the ratios that I work from. The stop was around 5530, check the time and day on the graph and you'll laugh when you see it. I was running off 100pt starter entries with 50pt entries near the stress.
You can see the trades were weighted to the upside.

 

[Vasco da Banana]

Hiya Vasco,

Sorry mate, my post may of come across a bit strong. That's text for you.

I imagine you are thinking of it like this:

£60k per year (expected or otherwise), 1 day loss of £5.2k equals 8.6% drawdown on the expected yearly amount. In the usual scheme of things this would be huge and I would be on the way to certain death. But....We don't calculate drawdowns on expected earnings otherwise most of the time, most people would be in the minus negative infinity numbers...and that just doesn't stack up. We place draw downs on the account balance.

If this was true in fact or even in thinking it would shaft the person so far up their own a5se that their bowels would come out of their mouth. In other words it would affect trading performance moving forward.


However, try looking at it like this:

1 month trading with a loss of £1.4k = totals 2.3% draw down on the month of the yearly expected takings – now that sounds better. But like I said we don't place it on expectancy of earnings, drawdowns are done on account balance only to give a lifespan expectancy of the account against the trading plan. Plan for the worst.

Am I playing with numbers here? Well, yes I guess. That’s what we’re all doing. Am I kidding you or worse still myself....No.

The simple fact is that should I have given up on the back of that loss I wouldn’t have then recuperated money back and the loss on the month would have been...say....£5k loss with successive paper trades netting me the money that I took. You know what happens next. I take the next setup and it loses, repeat then rinse.

Your questions are very helpful to a lot I am sure as we only ever realise what we're up against when the money goes from our sweaty little hands.

With regards to the 'going bust' tomorrow line. Bear this in mind at all times and plan for it. You never know. One thing I do know for sure though, it keeps my feet firmly on the ground and my mind sharp knowing that tomorrow could be the start to an end. I am not invincible and neither is my trading plan.

Hope that helps.

Lee

Thanks for the explanation. I think I get what you are doing, and obviously if it's worked consistently for you over a few years then you're well ahead of about 90% of traders, so well done. It's brave of you to share the warts 'n' all results.

I've tried similar ideas on demo and have had some promising results. Using real money and tighter control, however, I reckon I'd have too many of those 'nearly didn't make a loss' scenarios, like your black day on DAX, which would reduce me to even more of a gibbering wreck than I am already.

 

[Hakuna Matata]

Hi Hakuna,

You're asking me a question about my trading in the hope that you will learn from it. Thats what I figure you are doing anyway.

So, if you want to learn from it, great, I'll help you. Take another look at the statement and look closely.

Here's some help to the timeline:

The dax numbers were closed on 1 day for a loss of £5.2k. Check out the numbers and you'll see over a 500pt range. Check this against the graph and it will give you an idea on the trading history here. You'll see a lot more with the figures in front of you and a graph open.

Once you see this you'll see how close I was to not losing any of that money and the last month would have been an £8k profit one and the levels would still be in play, that being said, because they no longer in use, the statement is totally unedited, something that is rarely shown. These are the ratios that I work from. The stop was around 5530, check the time and day on the graph and you'll laugh when you see it. I was running off 100pt starter entries with 50pt entries near the stress.
You can see the trades were weighted to the upside.

Hi Lee,

As it happens I don't trade any more, and as such don't have the means to examine the DAX trades we are talking about. I only mention it out of curiosity.

Good thread though bud.