my journal 2

[Yamato]

At every stoploss that I apply, I am learning to kill the hope within me, to close a losing trade as a reflex action, and not see it as a loss of money, just like they train soldiers to shoot, without seeing the target as a human or they will hesitate. Pull the trigger immediately, as soon as you see a loss, before you realize you're saying goodbye to a little bit of your money.

I need a lot more training. A lot more. Weeks of this stuff, at least. If not forever. I must not start trading with real money until cutting losses for me becomes a reflex action. The same should be for entering, but that's easy for me, so maybe I should train to do the opposite and hesitate before I enter.

 

[Yamato]

Pulling this type of stoploss trigger should be the first part of all trading training. Much sooner than being right and developing an edge, one should be trained to exit with losses. As they say in that song, you've got to lose to know how to win.

 

[Yamato]

Only when you start trading systematically with a stoploss do you realize exactly how good your chart reading is, and how good your skills are. And what the odds of every choice are. You will never find out how good a strategy is if you have no stoploss and win 9 times out of 10 and then lose everything on your tenth trade. Maybe that is a good strategy, maybe not. You'll never know and you'll blow out your account over and over again without finding out, ever.

 

[Yamato]

Another thing I am learning, as I practice the stoploss and blow out simulated accounts, is not to think in terms of high and low, or even overbought and oversold, but in terms of support and resistance. Did we reach support? No? We're going down? It doesn't matter if we're oversold... we'll keep going down until support. Did we have a breakout above resistance and we're going up without any resistance in sight? It doesn't matter if we're overbought. Chances are that we'll go higher.

However it does not matter if I develop an edge or not. I am just training myself to use the stoploss over and over again, hundreds of times, and simulation works because I find it just as hard to use in simulation as in real trading. Besides, if you look at my past 100-trades series (and similar) you will see that I did have an edge and correctly predicted 8 trades out of 10. But that doesn't mean that I can safely trade, because a couple of losses are enough to throw me off balance and making me switch into revenge trading mode, and blow out the account within a few trades if not just one trade. The stoploss is the foundation of any trading strategy and you should not start trading until you're totally used to it. You are going to be unable to build up your capital without that foundation.

I thought that with automated trading things would be different, and that the system would take care of everything. It did. Until I let it do it. Then I started postponing exits, and some of those postponed exits produced bigger losses, then I doubled up... I blew out my account a few times, account which a few times was more than tripled by my automated trading. So this means that even if you're doing automated trading you must have understood and fully digested the stoploss, because otherwise you'll prevent your system from exiting... and basically your capital will never be safe unless you've mastered the use of the stoploss. You must learn to not take losses personally before you start any trading. Maybe the same applies to every area of life, like girls. If you take losses personally, you're not going to take risks with girls for fear of rejection, and similar behaviours at work... and so on and on. I guess I fail in every single field where I am not guaranteed success before I start.

Anyway, I remember when I was six years old and was being taught judo the first thing they were teaching us was to fall. Days and days of falling. I guess in trading it's the same. I can't believe i am realizing this after 12 years. At the end. Ok, let's pretend I am beginning now. I was just warming up for the first decade.

 

[Yamato]

Using a stoploss means learning to not cheat yourself and not hope. It means admitting to yourself that you were wrong. Maybe that's something which is hard to do for some of us. Maybe we don't like to admit we were wrong. Maybe I am one of those guys.

Another thing that should become a reflex action is reading support and resistance. Getting your stoploss hit so many times that understanding support and resistance becomes second nature.

Here's the last stoploss practice session for today. Same rules as before, and this time I didn't even blow out the 10k account:



The tough part with real trading, which I am already simulating on IB paper trading account right now will be that I can't click and make time pass. As a consequence there might be hours when nothing should be done. Can I wait? That's another training that will require a few thousand trades on this chart game: waiting.

 

[Yamato]

Here's something more I am understanding. The questions you have to ask yourself each time you look at a new chart on the chart game are:

1) is it a zigzag (s/r bouncing type of thing)? play accordingly and bet on bounces
2) is it just going up or down (breakout type of thing)? play accordingly and bet on continuation

If it's a zigzag, it could be up or down, but if you have to play immediately you can't wait for the right zig or zag, but have to play the one that looks most probable. So it might even be a down move in an upward trending zigzag.

If it's not a zigzag but it is just going straight up or down, you can't risk it and bet that it will change suddenly just because you're a top or bottom picker. Most of the time it will not.

With these things clear in mind and a 10% stoploss/takeprofit, you can be profitable at the chart game, on any stock (4 years of weekly candles), and can trade as soon as you're presented with any situation. I'll set out to prove this.

 

[Yamato]

In this frantic sequence of trades, applying the stoploss all the time, I find this song a useful reminder:

Each time I incur in a loss, I should say to myself: stop! in the name of love (for my money).

 

[Yamato]

big doubts...

The thing that confuses me the most is timeframes. You look at one timeframe and it looks one way in terms of trend and s/r levels. Then you look at the higher timeframe and it looks different. Then higher and it looks yet another way... when do you stop? Ever? Just two timeframes are confusing enough.

Here's a look at the EUR forex (not the future) on different timeframes:

5 minutes


15 minutes


60 minutes


4 hours


2 days


2 weeks


3 months


If I had a huge screen, I could just use one single chart with 5 minute bars that would extend for 3 months. But then I would want to see the whole 10 years. Is there a method to not go crazy with different timeframes?

It doesn't matter. I'll find out what works. Number one rule: stoploss. Until I haven't learned to do it as easily as I breathe, no point worrying about anything else.

 

[Yamato]

set and forget

interesting video

 

[Yamato]

Another good link on the US Dollar Index:
http://en.wikipedia.org/wiki/U.S._Dollar_Index

 

[Yamato]

it's hopeless...

The more i practice, the more accurate i get
The more accurate i get, the more i get into it
The more i get into it, the less i can use the stoploss
The less I can use the stoploss, the more i lose

The more i practice... the more i lose.

Just a while ago, I was acing the game. Made 200% return on the first stock, and similar on the following... by the fourth stock i was at 50k from the initial 10k. Well, guess what. I made a mistake: started losing... and the hell with the stoploss. I started praying that it wouldn't ruin my good streak of trades, and let it run till it took 50% of my account. By then I was so upset that I just quit the game. Exactly the same thing happens with real money. If I play like ****, using the stoploss is easy, and I can blow out my account within half an hour and hundreds of trades. If I play well, I will triple the account within a few trades, then quit when I incur a losing trade and almost blow out my account on it. So if I play well, I get into it, and lose everything. If I play poorly, I still lose everything. Whichever way, I lose everything. I cannot...

I cannot be in control of myself. I cannot handle losing. Losing makes me so insecure and unstable that I won't be able to appraise the chart correctly for the next ten trades.

The best thing would be if I could make 10 bets and leave, and then come back find out that 7 bets made money and 3 bets lost money. Then on the next day, I'd feel confident because overall I was right.

What screws me is the single bet and putting all my hopes in each single trade.

But then again, if I made 10 trades, I would trade carelessly because I'd feel they will all be good overall, so I don't need to try.

If I don't try, I am relaxed, but I lose. If I try, I am tense, I usually win, but as soon as I lose once, I feel like shooting someone. I feel wronged by the market.

I am considering quitting altogether. I can't seem to find a good balance.

Even paper trading alone is pissing me off. It's clearly impossible that I'll be able to handle real trading any time soon.

But of course I am not quitting trading. I would completely focus on automated trading. However it feels like crap to have to quit discretionary trading, after failing at it for 12 years. I failed so much at it, that I blew the winnings coming from automated trading.

One thing I learned: paper trade until you're profitable
From this whole experience I did learn one thing: paper trading closely mirrors my real trading, so there's no point in starting to trade again until my paper trading is calm, in control, and profitable. And possibly methodical and almost entirely mechanical (even when manually executed). What I did learn is that I won't lose any more money in trading because I won't start trading with real money until I will be ready. And I will know when I am ready just like now I fully realize that I am not ready, even by just playing the "chart game": I am clearly not ready. In these facts:

1) No clear method. I don't have any profitable rules written down, nor in my head. No clear ideas on what I should do. Yes, if I am in a good mood, I can definitely be profitable, but that comes and goes very quickly, and if it goes, I'll lose everything on the next trade, without any warning.

2) No stoploss habit and discipline. I don't have the certainty of using the stoploss, because I am not in control of my actions, once I get into trading. Particularly if I am doing well.

3) One profitable week with 10 daily trades. I didn't even produce a profitable week with 10 trades per day on IB paper trading account, trading a future that I would trade in real time with real money. That would be a minimum requirement before starting again. Behind me, there's 12 years of discretionary losses, unprofitable month after month. I can definitely wait one week of profitable paper trading before starting again. But that doesn't happen. That week never takes place.

 

[Yamato]

I have a great anxiety and energy to spend to try and change my life:

1) I don't like living with my father
2) I don't like working at the bank

If I quit the bank, I can move to the sea. I must find a way to quit job and quit house. That mother ****er just wished me goodnight again, by calling my name out loud, each mother ****ing time. We're just two in this house, why does he have to call out my name each time he says good morning, "good morning, travis", "goodnight travis", "hi, travis". **** you, man. You don't have to call my name each time. Each time I hear you I get a stomachache. If you call my name you give me insomnia. Each time he says "goodnight", I reply "goodnight" and then whisper "**** you".

Anyway, I must quit this place and this job. But what can I do? Trading discretionary is out of the question with this state of mind. My anxiety, my restlessness, my dad's voice, my desire to kill my boss... all these things interfere with my trading. A loss triggers all these feelings within me and I feel like killing the market, whereas it's a bunch of other people whom I should have killed earlier in my life, but I didn't and now I take it out on the market and on my own capital.

So discretionary trading is out of the question until I will have this state of mind, which could be forever or at least until I am here.

Yeah, because to get out of here, I need to trade, but if I am here I can't trade, so there is no way out.

The only way out is automated trading. Strictly automated without any intervention by me.

I wish I had that 13k I had when I started talking about this stuff in the Fall. Now I've got nothing thanks to my last attempts at trading discretionary. I blew it all.

I remember someone here, a reader wanted to give me his money, and luckily I didn't take it, because I would have lost it. And I remember I told these guys: do not try to teach me discretionary trading because it will be my ruin. But hell no: everyone had good advice: "it's easy", "do this, do that"... eventually I gave in, started again, lost everything.

I would have done it anyway probably. But it didn't help. This goddamn journal is a good thing for the discretionary trader, but not for the automated trader, who should just stay away from trading and trading forums, because he doesn't need... But I guess I wasn't fully automated either. Besides more good than bad came out of it.

Not that I am ending it here. Just a summary of the last four months, because that's how long I've been writing.

The possibilities now are two:

1) Making one trade a week on the GBP, just trades that I'm absolutely positive about, with a 90% probability of winning.

2) Taking my third loan from my bank, taking the usual 10k out, and trying to triple it again, then paying the loan back immediately, as I did in the past. This time I wouldn't blow it like I did before, by trying to "help" my systems.

Of course, no one can be sure that this time I wouldn't lose everything I borrowed and be screwed for the rest of my life. Who knows. It could happen.

The safest thing would be to trade the GBP once a week, only when I am absolutely positive. But guess what. That means that I could miss a stoploss, because that is what happens when I am absolutely positive about a trade. That's when I blow out my account.

Whatever I will do, I must remember not to kill myself nor kill anyone around me. That's the number one thing. Because if I die, then I can't get to the bottom of this thing. And if I go to jail, I won't be able to trade either. I want to get to the bottom of this thing. If it cannot be profitability with discretionary trading, at least profitability via automated trading, and I mean profitable every month. With the proper money management, and using only the good systems, and the us dollar index filter it can be done.

Plan:

1) Do not kill anyone
2) Do not kill yourself
3) Keep going to work as usual
4) Keep practicing the stoploss
5) Keep paper trading and do not invest real money until you're profitable

 

[Adamus]

Plan:

1) Do not kill anyone
2) Do not kill yourself
3) Keep going to work as usual
4) Keep practicing the stoploss
5) Keep paper trading and do not invest real money until you're profitable

Dude, you think you've got it bad? Well, somebody gave my journal a rating of 1 ! Can you dig the public humiliation?

But seriously, everyone has issues with their dads. The simple answer is, just accept them for what they are, humour them, live with it and every once in a while you might have to tell them, without anxiety or stress or anger or bad feeling, "look old man, thanks but give me a bit of slack here". Don't forget, you're the daddy now :cheesy:

Try to work out why it annoys you that your dad calls you by your name, and then deal with it. You want to be a trader - this sort of psychology has got to become chicken feed for you.

Looks who's talking, I know, not exactly Mr Trader 2010 but I'm just trying to help.

Oh and don't borrow the money to trade with, for the love of God! That's breaking Trading Rule # 3 or something.

Ps same applies to the boss as does to your dad. Should be like water off a duck's back. You've got a mission. It's 106 miles to Chicago, we've got a full tank of gas, half a pack of cigarettes, it's dark, and we're wearing sunglasses. Hit it.

 

[Yamato]

Good advice. It sounds reasonable. I had reached the same conclusions on my own, during my healthy states of mind. The problem is that I can blow out my account with just 5 minutes of unhealthy state of mind.

I don't know if I want to go to chicago. With the tank full of gas I could set myself on fire maybe.

Let me know if you want to do some work together on the systems. I am a big fan of automated systems, as you might have read.

 

[Yamato]

Damn... these whores are screaming. The neighbouress is hosting some fellow whores and they are all yelling at each other and have been doing so for about an hour. This made it really hard for me to stay in control. Probably they're just "talking", according their own low vulgar rude habits and manners. Otherwise I would have heard a gunshot by now.

Anyway, I kept in control for a few stocks, then, as can be seen from the picture below, I lost it and my loss went wild:



This could very well happen in real trading. Unless of course I keep my trades down to one trade per day. Then maybe the neighbouress, the thoughts about my dad, the boss and all my enemies won't bother me and interfere with my trading. I hear voices. Sometimes real sometimes imaginary. Right now they're real: the neighbouress and fellow whores screaming. Other times the disturbing voices are the disturbing memories of all the abuses I had to put up with in my life: from dad, and all impolite people I came across. Being a polite person, I was brought up to not fight back and avoid confrontation. However this is what maybe now is disturbing me while trading: all the abuses are coming back to my mind and my ego is screaming for revenge. Every time I take a beating from the market, it's as if my ego said: "not again! I am not taking any more **** in my life". Then it proceeds to get mad at the market... and get killed basically. It might be healthier to bang on the wall, ring their bell, and call them whores. Or go there with an axe. These whores are still yelling. It's really pissing me off. I want them dead. Right now. It's interesting that I am someone who can withstand any type of stress and abuse and I don't explode, nor show any signs of being upset, but at the same time I totally lose control when I am trading. I am in control with people and out of control with trading. I never kick objects either, nor get mad at the screen, program... nothing like that. I am calm and in control. When trading instead I can't make over 50 trades in a row without failing to respect the stoploss. And I am talking about simulation. WIth real money, make it 5. So that means I'll need to last thousands of trades of complete stoploss discipline to be positive that I can use it with real money.

 

[Yamato]

More stoploss training, with random entries

That's it. I have noticed that I cannot care about the trading game and use the stoploss at the same time.

The more I care, the more I win and get into it, but then I always fail to use the stoploss as soon as I incur a loss, because it bothers me too much to ruin my positive sequence of trades.

So here's what I will try: trade randomly, in a random direction, totally carelessly. Then if the trade exceeds 10% of loss or 10% of win, I'll close it. I'll do this for the next few hundreds trades. Today, tomorrow, and the next few days. To see if anything good comes out of it.

 

[Yamato]

It's ok. I can do it.



I am going to use the genesis software now, to try and be profitable on the GBP, and make it go by one hour at a time. I found that the optimal timeframe is one hour candles and I found that I can play them on any future I want on their Trade Navigator software. I will do it now. It's certainly not the same as stocks. The GBP moves differently.

My training with the stoploss will have to continue for months. I can't get used to the idea of inflicting myself a wound, which is what taking a loss feels like. I think this is what I'll do (since I can use without caring, I can't keep on practicing with random trades): I'll try my best for 5 stocks at a time. If it works and I use the stoploss, then I'll try my best with 6 stocks, 7... and so on until it becomes a habit.

 

[Yamato]

Did my share of practice and stoploss training for today.

Brought the 10k to 20k. Didn't fail any stoplosses. I am satisfied. Over 30 trades on about 10 stocks and did not fail one stoploss, with plenty of losses to test my nerves and my temper.



In the meanwhile, on the IB paper trading account, which closely mirrors the real account for costs, timeframe, and everything else, I only spotted one opportunity and failed my trade. I will only get another opportunity in hours or maybe tomorrow. This is what makes it so different and difficult: waiting. On the chart game I can select the right opportunity among weeks and weeks of charts, and if you play the weekly charts commissions and spread costs are irrelevant. Here if I try to see opportunities at this rate, I'd have to trade the 1-minute charts, but I can't because commissions would kill me. That's why people get leverage and trade stocks, using stock-scanners, so they can pick the best opportunity among thousands of different situations. However, I am not ready to do that. I don't have any knowledge in that area. I might end up doing automated trading, because it is going to be really hard to trade once a day or even less.

One thing I should definitely stay away from is trading with real money. Anything is allowed as long as I am paper trading. But i must not resume my trading with real money until I have solved all these problems.

I've also received the US Dollar Index data from disktrading, and next weekend I will backtest all my systems with the Dollar Index filter. I am making progress, very slowly, but I am moving forward. One step ahead every decade. By 2050 I should be profitable.

By the way:
http://en.wikipedia.org/wiki/U.S._Dollar_Index

The dollar index is mostly based on the EUR, so it might have been a total waste of money to buy it (15 dollars), because the rationale of my systems failing is basically this: i've 15 systems on JPY, EUR, GBP that mostly just go LONG. No wonder, when the EUR and the others are going in a downtrend, those systems lose money. Why didn't I think of this before? I've backtested those systems for ten years and thought they wouldn't fail because ten years is a long time: BUT the EUR has done nothing but go up for 10 years. Big problem. Look at this DX chart:



I will simply backtest the EUR systems like this: if price is below 5 day moving average, then stay out, or even reverse signals. Similar for the GBP, JPY and so on.

 

[Yamato]

Ok, I've been testing the "EUR long term trend filter" (see post above). The EUR systems don't improve but that is not a proof that the idea is wrong, since the test period is just the past ten years, where things have gone well for the EUR (it's been rising towards the USD).

So, what do I do? I would need 20 years of data, but: it would be slow, I don't have the data, the data doesn't exist because the EUR didn't exist.

I can't reverse my systems just based on 6 months of forward testing. But I can definitely keep my systems from trading when the EUR is going down.

I can't do everything to perfection. I don't have the means. But the principles have to be good. No addictions, no trading addictions. Paper trading. Backtesting. These can be followed even with my limited means. And they guarantee no losses.

 

[Yamato]

Anyway, i came up with a side-invention: the DX (US Dollar Index) filter. If we're above it, we can only go SHORT on the EUR and correlated markets. This will help me with my intraday trading. It will always tell the most probable direction: opposite the DX.

For example, now we're crossing below the DX, so from now on and for a while, all EUR-GBP-JPY-ES-CL trades should be LONG.



However right now we're still above it, so we should either stay out or actually look for SHORT trades on the EUR, even though I think we've reached bottom for a while. Another thing we could look at is where we are with regards to the pivot line. If we're above it, and below DX, it's safe to go LONG, and viceversa. All other situations, stay out? Who knows.... man, this is harder than I thought. Twelve years of this stuff and I still didn't figure out a way to make money. Anyway, my prediction for this week is that my systems will not make money as a group. And I am saying this because we're still above the 8-day ma on the DX.