my journal

[Yamato]

Hmm, this is beautiful, but I am always keeping in my mind this incessant question: how is this helping my trading? I will now comment it as I read it, because it completely applies to me. But I will also ask at the end "how is this helping my trading?", because this is the reason I didn't want to read this book to begin with.

Deceptively easy: yes, I noticed, and I wrote it in this journal, just like he phrases it.
Feels invincible, loses everything: yes, it applies to me.
Money in a hurry and freedom: all said here.
Enjoying the challenge: yes, said it here.
Loner looking for risk: yes.

Advice? I don't know. Maybe, don't let trading deceive you into thinking it's easy. Yeah, but I knew this already. It feels good to read a book that says exactly what I think, but what's the point? Let's keep on reading. I won't quote everything or it will take me too long to read. As I said, I will just write down the advice he seems to be giving me.

So far this is what I got out of it: renounce to the short-term pleasure you get from impulse trading. And yes, this sounds good, but did I have to read 10 pages to get one sentence out of it?

 

[Yamato]

The trouble with self-fulfillment is that many people have a self-destructive streak. Accident-prone drivers keep destroying their cars, and self- destructive traders keep destroying their accounts. Markets offer unlimited opportunities for self-sabotage, as well as for self-fulfillment. Acting out your internal conflicts in the marketplace is a very expensive proposition.

Yeah, he may be talking about me above, and here:

Traders who are not at peace with themselves often try to fulfill their contradictory wishes in the market. If you do not know where you are going, you will wind up somewhere you never wanted to be.

Ok, the part that follows, about fantasies and myths, does not apply to me at all. Finally something I am not doing wrong.

It'll be a miracle if I finally, next week, start respecting my own rules. A miracle. He talks about losers and what they do, and he's right again about what I do: i take risks that are too big. No stoploss means that I'm willing to risk everything I have in order to make 250 dollars, that is usually the money I consider enough to close my position. My rules definitely take care of this problem of risking too much (my entire account to make 250 dollars, that's what I risk each time I place a trade).

He talks about good traders being realistic. Why do i keep on writing here and truly thinking that I will never have a losing day? Am I being unrealistic? I don't know, maybe. Somehow I really feel confident that I will not have any negative days, and that I can turn into a very good trader as long as I use those simple rules I listed. We will see in a little more than 24 hours. I can't wait. Trading discretionary is a lot of fun to me, it's like playing risk, the strategy game.

Wow, sometimes he really contradicts himself. This is just one instance:

"They expect to lose a large amount of money before making any!" and "Amateurs neither expect to lose nor are they in any way prepared for it" are two sentences that cannot be written about the same people, and yet they are: he's talking about the bad traders, the amateurs. I am thinking that maybe his English was poor in 1993 and he had someone else help him write his book, and somehow some mistakes were caused by the fact that two different people worked on the book. Otherwise I don't know how to explain this, maybe he's not totally logical, or he forgot what he wrote a few sentences earlier, or he wrote the two sentences in two different days...

 

[Yamato]

Good, here I can't help laughing because I know how wrong he is. Thanks, Elder, for spreading false information about automated trading systems. I can't lie so I am glad you're doing it for me: "automated systems do not work". Thanks for keeping people ignorant and unprofitable. Because few people are reading my 800 posts, but many are reading your first chapter.

I still have to read some advice on what I should be doing other than "stop gambling".

 

[Yamato]

Wow, we do agree on these questions: I've asked myself the same questions on this journal. However, wouldn't the same questions apply to your books? Why are you selling books if you can make money from trading? Maybe because you enjoy explaining things and helping people? Or becoming famous? Why couldn't they be doing the same? But then you could object that those systems are not explaining anything and are not giving fame to the people selling them, and I would agree.

 

[Yamato]

Well, this is not my case. I don't like running trading systems. I like better to trade myself, and lose, but the systems work, so that's the only good thing I've done so far.

 

[Yamato]

Now Elder talks about "personality cult", "trade gurus": it doesn't apply to me at all. If anything I have the opposite problem, that I don't listen to anyone. Funny how he talks against trade gurus, but he's become a trade guru himself, hasn't he?

 

[Yamato]

I like what he says about the "stool" with three legs, on page 17:
1) psychology
2) system
3) money management

As far as my automated trading, everything is ready. My last problem was money management.

As far as my discretionary trading, I had none of them. Zero. Because psychology was obviously wrong. The system wasn't profitable at all (top and bottom picking). Money management was bad as well (doubling up when losing).

For the future discretionary trading, I got the system, psychology means following the rules, and money management is not an issue, since I will only trade 1 contract.

 

[Yamato]

I am going to take a break. I am going to skip the long part on market gurus because I don't see how it would benefit me: I have nothing to do with them, never cared to... I don't even know who they are. Actually for a long time I haven't even known anyone's opinion on the market other than mine. It's always been a relationship between me and price. Besides, I am running out of patience. Even the parts that most apply to me, while being totally interesting, didn't give me any precise advice for my trading.

When I'll come back, I'll have to resume from page 24, "Self-destructiveness".

 

[Yamato]

New discretionary system version

ENTRIES if:
1) you haven't lost over 250 dollars for the day (from discretionary trading)
2) the 15-period 15-minute ma is in favor
3) the 15-period 1-minute ma gets crossed by price (in favor)
4) your entry and your take profit are both 1/5th away from any pivot lines
EXITS
Bracket order of 20 ticks. You can exit early if you wish, but not increase the distance of the stoploss.

-----

This because if the trading goes as planned, there'll be no problems because I'll be up for the day. If it doesn't, there's no reason I should trade more, with the risk of losing control. Every week I won't lose more than 1300 dollars with this method (100 ticks + commissions). This is just great if it happens, because:

1) so far I've had weeks where I lost over 4000 just due to my discretionary trading
2) if every time I incur a loss, I can't engage in revenge trading, and I have to wait another day before trading again, first of all I won't do any revenge trading, and second of all I will think twice before making a trade

This requires at least the discipline that I respect the above simple rules. If I don't do that, it'll be losing and losing just like in the past 12 years. And everyone is tired of this self-destructive behaviour, even the readers, writing me private messages and everything.

 

[Yamato]

this part of Elder's book is all about me: thanks, wprins

From here on, I won't even comment any more because it would take me ages to finish this first chapter, as I completely identify with this part:

So, after all, I have to thank wprins for insisting so much to make me read this book. It looks like I might get something out of this part.

 

[Yamato]

Ok, just one more quote, because it totally describes me and I owe it to all the readers who might have similar problems as me. This is too interesting not to be quoted:

So... finally it is clear to me that even if the only advice from this book for me is "don't gamble", as I understood from its introduction, such advice is quite important, and may be everything I needed. Chapter one may contribute to my profitability. I am calling it "chapter one", because, once again, I am not going to read the entire book, and if I have to recommend Elder to people, I'll say read "chapter one". Or maybe what will make me profitable is the fact that I am willing to make efforts, efforts which permitted me to read chapter one. It's my willingness to change something that will make me profitable, the same willingness to change that made me give this book (this chapter) a chance.

 

[Yamato]

He even talks about the problems I had with my father

Ok, starting tomorrow, I will write down, here, all my discretionary trades as I prepare to make them.

 

[Yamato]

Reading pages 30, 31, 32, 33 of the book now, on the comparison between alcoholics and compulsive gamblers, addicted to trading like drunks are addicted to alcohol, both in denial. It all applies to me. Very interesting book. Hopefully I'll get something out of it by tomorrow. Tomorrow I'll post my trades here, and my state of mind before making them. I'm having fun doing this. Maybe I am not a really bad case of compulsive gambling after all (I also created all the systems while being a compulsive gambler), or maybe I have hit the so-called "rock bottom".

Anyway, given my plan, to be followed in all its rules, my trading should go like this: the worst I can lose is 250 dollars (20 ticks). The best is not limited. I can make all the trades I want, as long as the rules of the system are all there.

If I keep on following such a plan, it is very unlikely that I'll lose 250 every day even for a whole week. Very unlikely. Firstly, because I know better. Secondly, because I'll modify my system and make it even stricter.

But the big challenge is to follow the rules. Because if I lose on the first trade, I'll want to make it all back, and if I'll win, I'll think I am god and that I don't need to follow any plan, and so that I can trade any future I want, not just the EUR, and use any rules I want. That would be the end of all good intentions. That would mean that I am still totally powerless in front of my compulsive trading addiction. It would mean that with the market closed I say one thing, and with the markets open, I turn into a drug addict, which is far worse than a drunk. We'll see soon, we'll know in less than 24 hours. I'll document it all live here, as usual.

 

[Yamato]

"...he may never take a loss greater than his predetermined risk"

I'm liking it. It's good. Also because my system is in line with what he's saying.

 

[Yamato]

good point, it's good to read it once again, rephrased

Here he goes again, with the same concept, at the end of the short sub-chapter, at the top of page 37:

 

[Yamato]

I am on page 38-39, and he says how you should take emotions out of trading. I don't agree with this. I want to win tomorrow, and winning will make me happy. I crave to win, and as long as I respect those rules, the worst that can happen is that I lose 250 dollars tomorrow, which is still a victory because I will be within my "businessman's risk", as he calls it. I don't see why I should take the joy out of my trading. As long as it doesn't interfere with my rules, I am going to feel proud and happy that I was so good as to make the right trade.

Ok, here we go... another 4 pages and I'm done with the book that turned my trading around (I am exaggerating a bit), together with my willingness to change. The other two chapters, two and three, will be entirely read for entertainment and curiosity, because this AA, gambling-related chapter is exactly what I needed, and all I needed.

 

[Yamato]

Hmm... he forgot to list the 12 points of AA... or maybe I'll find them later in the book.

I am done. I read the whole first chapter. Maybe it added something to my thinking, maybe not. Let's see what tips I can get out of it:

1) Admit you've been a gambler
2) Stop gambling, by, day after day, never taking a loss greater than your predetermined risk

That's all basically. Thanks, Elder. Maybe if you wrote a post with these two lines on a forum, I wouldn't have gotten your point and would have replied "the usual psycho-bull****", but since you wrote 20 pages explaining this point, I understood better. Yes, it was worth reading it. Thanks, wprins.

Had Elder posted these two principles on this journal, I would have called him a pretentious sonuvabitch, but now I am saying thanks to him.

Tomorrow I'll go to work and print chapter two and three, and read them in the bath tub or on my way home. But for entertainment because now I have everything I need to be profitable.

If I'll follow my plan, at the end of next week I should be at either 5k (because now I am a bit over 6k), or, as i hope, at about 8k. I am hoping to make about 500 dollars every day, except for two in which I'll break even. My systems will also place a couple of trades, and so I could even be as high as 9k. I am ready to be at 20k by Christmas. Yeah, because if this stuff works, I'll make about 2k per week, plus what systems make. But let's not be too optimistic either. I'll be at 14k by Christmas, and I will be very satisfied if that happens, because it will mean more than doubling in one month.

I can't wait to be a profitable discretionary trader in control, for the first time after a 12 year long trading career as a compulsive gambler.

 

[Yamato]

attached pics of Elder's excerpts missing because of my mistake

Small accident with the pics of the book. Sorry everyone. I guess you can't remove attachment or they won't show in your post. When I posted them they were all showing, but things are different two hours later and from a different computer. I am really sorry. I guess they were either in my cache or get deleted after a few hours. They were from pages 0 to 41 of Elder's book, "Trading for a Living".

 

[Yamato]

Going over tomorrow's plan

I will now go over my trading plan for tomorrow, and will have to review a little bit my system as well (as long as I don't do it during a trade it's ok).

Here's my system right now:

ENTRIES if:
1) you haven't lost over 250 dollars for the day (from discretionary trading)
2) the 15-period 15-minute ma is in favor
3) the 15-period 1-minute ma gets crossed by price (in favor)
4) your entry and your take profit are both 1/5th away from any pivot lines
EXITS
Bracket order of 20 ticks. You can exit early if you wish, but not increase the distance of the stoploss.

CONCEPT OF STAYING AWAY FROM PIVOT LINES
I am using this concept of "your entry and your take profit are both 1/5th away from any pivot lines" which has to be defined better and first of all explained to all of you. I'll never go against the trend, because I'll only trade with those two averages in favor of my trade, therefore, if price is approaching/passing a pivot line on its way up or down, I will go LONG or SHORT (never viceversa).

>10 TICKS AWAY FROM APPROACHING PIVOT LINE
Now: when price approaches a pivot it either bounces or slows down, entering an area of uncertainty. I want to make sure that my take profit is placed before that area. So my new rule will not be 1/5th because we never know how big is the distance from pivot to pivot. It will be 10 ticks away. So, new rule: take profit has to be >10 ticks away from approaching pivot.

>10 TICKS AWAY FROM SURPASSED PIVOT LINE
By a similar reasoning, when we're close to a pivot, even after surpassing it, price will hesitate before taking off into the unknown area beyond the pivot. It will linger around the pivot line for hours sometimes, in a tight range. So I don't want to be caught in that range, so I want my entry to be >10 ticks away from that pivot line. I should be using percentage of daily range or distance between pivot lines but sometimes there are no pivot lines and at some hours (and my system can trade in all hours) of the day daily range values don't mean anything. So I am using absolute ticks.

Also, very importantly, this 10-ticks requirement includes a situation, unimaginable, where you could actually respect the rule, but start a trade BEFORE an approaching pivot line planning to end it AFTER surpassing that same pivot line. That would totally unreasonable.

So here's my new, more precisely defined, system:

PRO-TREND DISCRETIONARY SYSTEM
HOTKEYS
Set up hotkeys: "B" for "buy 1 at market" with 20 ticks bracket order, "S" for "sell 1 at market" with 20 ticks bracket order, "C" for "close position".
----------------------
CHARTS
SET UP THESE EUR.USD@IDEALPRO CHARTS ON IB'S TWS:
2 DAYS OF 15-minutes CANDLES WITH PIVOTS and 15-period moving average
4 HOURS OF 1-MINUTE CANDLES WITH 15-periods moving average
----------------------
ENTRIES if:
1) you haven't lost over 250 dollars for the day (from discretionary trading)
2) the 15-period 15-minute ma is in favor
3) the 15-period 1-minute ma gets crossed by price (in favor)
4) your entry and your take profit are >10 ticks away from any pivot lines
EXITS
Bracket order of 20 ticks. You can exit early if you wish, but not increase the distance of the stoploss.

 

[Yamato]

Tomorrow's situation

I CAN DISCARD SIGNALS BASED ON ANY IDEAS
Mind you, I can always decide to discard signals, based on anything I observe about the markets (discretionary part). But if I make any discretionary trades it will be according to signals in all the rules present in my system.

I CAN EXIT EARLY BUT NOT LATE
In the same way, I can exit early (before the 20 ticks bracket order) any trade, but I not beyond the 20-ticks of the bracket order. Also, I cannot start a trade if my loss exceeds 250 dollars in one day. Which could mean that I start a trade if my loss is say 240 dollars. That's ok. My final loss could even go up to 490 that way. That's all within the plan. No tricks played on my plan.

LET'S PREPARE FOR TOMORROW...
Let's look at the chart we'll set up, even if they're different from what we'll see tomorrow. Let's pretend it's already tomorrow, and act likewise.
CHARTS
SET UP THESE EUR.USD@IDEALPRO CHARTS ON IB'S TWS:
2 DAYS OF 15-minutes CANDLES WITH PIVOTS and 15-period moving average
There's no tomorrow yet on TWS' chart, but this will be the chart settings I'll use tomorrow:


4 HOURS OF 1-MINUTE CANDLES WITH 15-periods moving average
This, too, is Friday's chart. But the type of 1-minute chart will be the same tomorrow.


If these charts were representing now and if now it were tomorrow, I could go LONG at the next 1-minute 15-period moving average bullish crossover, because entry and exit would be >10 ticks away from pivot lines, and because price is above the moving average in our 2 days chart.