Nowler's Trading Journal
- Thread starter Nowler
- Start date
Strategy Update:
I am going to try address my drawdown by reducing my trade size from 4% to 2% and with a view to add another 2% if the opportunity arises.
Since I bumped it up to 4% I have been doing well but my drawdown is too much. Hopefully by only jumping in at 2% and then adding the other 2% when in profit from the first 2% will reduce my drawdown.
Will this work?
I am going to try address my drawdown by reducing my trade size from 4% to 2% and with a view to add another 2% if the opportunity arises.
Since I bumped it up to 4% I have been doing well but my drawdown is too much. Hopefully by only jumping in at 2% and then adding the other 2% when in profit from the first 2% will reduce my drawdown.
Will this work?
You'll have to test to know 
Seems soA few more hours and then time to plan for the week ahead.
A few markets of interest are the USD SGD, CAD SGD, GBP USD and Brent Crude.
I was expecting both the USD and the CAD to steam on against the SGD but perhaps I was too early jumping on long on the CAD last week. Or maybe I was just wrong... Maybe this week will be when it does it...
I'm keeping an eye on the oil and observing how it manifests on the charts of petro-currencies such as the CAD for example. Oil is an important commodity! It would be foolish to disregard its sway on the world's economies.
EDIT:
I have also decided to take the information bestowed upon me
and am going to focus on keeping this account for building a record and my other sub account for the experimental/testing trades. That sub account has very little in it and is really only being used as a way to directly hedge, so I'll just keep the testing of strategies over there.
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Likes:
Lee Shepherd
So what would be the lower limit of performance which would still be reasonable in terms of a prop firm hiring me? Keeping in mind my only third level education is a Bachelor's in Psychology.
I understand that it would be difficult to say and they would also be looking for level headedness etc... but lets just say a middle of the line prop firm...
I understand that it would be difficult to say and they would also be looking for level headedness etc... but lets just say a middle of the line prop firm...
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If I refer to your equity curve, I can see some recovery from Sep 18. Your recent postings reflect a more positive tone and optimism in achieving a positive return in trading going forward. It is obvious that the more recent results were driving your attitude while ignoring historical draw downs. That is recency bias i.e. a much higher weighting based on more recent performance even though it is relatively short. Confirmation bias is essentially similar. You refer to your more recent results to support your preferred view but ignoring the totality of your track record. In other words, you are seeking data that supports your view and discounting those that are contrary.
The higher the risk you take the greater the scope is for drawdown. You can't ignore natural laws. The most important equation in trading is the ability to trade with a positive expectancy. Your equity curve is a reflection of that expectancy. For example, if your trading is in the negative zone the greater the risk you take, the steeper the angle of descent you will experience with your equity curve. If you take on less risk, that equity curve decline will be smoother but it will still continue to decline. The only way to turn it around is to be able to trade in the positive zone. Adding risk just accelerates the curve depending on which side of the zone you are in.
In trading, the only thing that matters is your trading track record results. You can have a dozen Phd's to your name and it means zilch if you can't deliver. The most important piece is a smooth equity curve.
The higher the risk you take the greater the scope is for drawdown. You can't ignore natural laws. The most important equation in trading is the ability to trade with a positive expectancy. Your equity curve is a reflection of that expectancy. For example, if your trading is in the negative zone the greater the risk you take, the steeper the angle of descent you will experience with your equity curve. If you take on less risk, that equity curve decline will be smoother but it will still continue to decline. The only way to turn it around is to be able to trade in the positive zone. Adding risk just accelerates the curve depending on which side of the zone you are in.
In trading, the only thing that matters is your trading track record results. You can have a dozen Phd's to your name and it means zilch if you can't deliver. The most important piece is a smooth equity curve.
Likes:
darktone
There was a news wire that came across my terminal last week that the Singapore Reserve Bank is expected to make a major announcement on Oct 15 (from memory). There is some speculative news that the SRB might surprise the market with a rate hike. If true, will be market moving on the SG. The rest of the research is up to you.
Thanks very much for the reply mate.
I still don't quite understand how drawdown works. Specifically, how my drawdown can be up around 55% even in recent times... I have been making money in recent times and my trades have not really been going much against me either...
I did have over 6 trades going at one time (last week or the week before) and that resulted in about 35-40% of my margin being used but this wasn't for long...I'm almost certain not for as long as my drawdown has been at 55% in recent times. So why my drawdown remains so high is beyond me.
While I appreciate your explanation of how I am exhibiting recency and confirmation bias, I do however have to bring a few things to your attention. Of course I am going to exhibit what seems like recency bias. I only started trading nearly 5 months ago, with the last month being profitable. You can call this recency bias but I call I common sense. I'm obviously going to put more weight in this final month because it's where I learned how to be profitable... before that I was making stupid mistake by the bucketload and losing money. In my eyes this is not recency bias. I am not disregarding the early months, I am just acknowledging that I was a bad trader then and that I am much better now. I have been very open about my losses. Not disregarding, underplaying or hiding anything.
This argument against confirmation bias is also similar to the above one about recency bias. I would even argue that it's simply confirmation, not confirmation bias. I was losing money because I was trading wrong... the more examples of right and wrong I accumulated the better I could judge what did and did not work out.
Maybe you're right...
I will be sure to keep an eye on it.
A psych degree definitely doesn't exclude me from making such errors. So I will watch out for it. Thanks for the heads up
Yes, I understand that my friend.
What I am wondering is, what sort of record would be barely enough to get into a middle of the line prop firm?
Generally speaking of course
For example:
Would 5% annual growth be enough? more? less?
Does drawdown have to be no more than half the annual growth?
I still don't quite understand how drawdown works. Specifically, how my drawdown can be up around 55% even in recent times... I have been making money in recent times and my trades have not really been going much against me either...
I did have over 6 trades going at one time (last week or the week before) and that resulted in about 35-40% of my margin being used but this wasn't for long...I'm almost certain not for as long as my drawdown has been at 55% in recent times. So why my drawdown remains so high is beyond me.
While I appreciate your explanation of how I am exhibiting recency and confirmation bias, I do however have to bring a few things to your attention. Of course I am going to exhibit what seems like recency bias. I only started trading nearly 5 months ago, with the last month being profitable. You can call this recency bias but I call I common sense. I'm obviously going to put more weight in this final month because it's where I learned how to be profitable... before that I was making stupid mistake by the bucketload and losing money. In my eyes this is not recency bias. I am not disregarding the early months, I am just acknowledging that I was a bad trader then and that I am much better now. I have been very open about my losses. Not disregarding, underplaying or hiding anything.
This argument against confirmation bias is also similar to the above one about recency bias. I would even argue that it's simply confirmation, not confirmation bias. I was losing money because I was trading wrong... the more examples of right and wrong I accumulated the better I could judge what did and did not work out.
Maybe you're right...
I will be sure to keep an eye on it.
A psych degree definitely doesn't exclude me from making such errors. So I will watch out for it. Thanks for the heads up
Yes, I understand that my friend.
What I am wondering is, what sort of record would be barely enough to get into a middle of the line prop firm?
Generally speaking of course
For example:
Would 5% annual growth be enough? more? less?
Does drawdown have to be no more than half the annual growth?
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Current Trade
Currently short on the AUD/USD with 1.7% margin used.
The Aussies have a release in about 7 hours or so... what I now need to figure out is how the market is going to react to this.
Even good news can cause a negative reaction seemingly...
I feel it's highly likely that the USD will gain on the AUD for a while, but will this news cause a move that will take out my stop, or will it ping my take profit... decisions, decisions, decisions...
As it stands, I'll leave it alone
Currently short on the AUD/USD with 1.7% margin used.
The Aussies have a release in about 7 hours or so... what I now need to figure out is how the market is going to react to this.
Even good news can cause a negative reaction seemingly...
I feel it's highly likely that the USD will gain on the AUD for a while, but will this news cause a move that will take out my stop, or will it ping my take profit... decisions, decisions, decisions...
As it stands, I'll leave it alone
Attachments
Well the release went against me a bit.
I put a fib on the high/low on the 1hr chart and moved my stop loss back behind the 38% level.
As you can see, the price spiked through the 38% level but stopped just short of my stop loss.
If it's going to hit it then it's going to do it soon.
EDIT:
I was very tempted to sell into it again.
If I had of, it would have been with the same amount as the initial trade.
Lets see how this fairs out...
I put a fib on the high/low on the 1hr chart and moved my stop loss back behind the 38% level.
As you can see, the price spiked through the 38% level but stopped just short of my stop loss.
If it's going to hit it then it's going to do it soon.
EDIT:
I was very tempted to sell into it again.
If I had of, it would have been with the same amount as the initial trade.
Lets see how this fairs out...
Attachments
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I cannot remember the exact reason for getting into the trade as I don't always write my trades down but for the most part my reason for going short on the AUD/USD was price action. As per the attachment to this post; you can see where I sold in and to the left of that again was the high that I didnt think it would go beyond. After the bullishness of the USD last week, I expected the USD to pull on against the AUD, I still do actually but perhaps I was too rash jumping on that trade when I did. Perhaps I should have waited for some US economic release...
I also did a little reading and from what I gathered, the US could very well raise their interest rates soon but the Aussies, while their next bank rate move might actually be an increase, I wouldn't be till 2018. That obviously wasn't the main reason I got into that trade. The price action was what reeled me in... the rest was confluence. In hindsight though, I think I should have closed that trade before the AUD release. I am typically in and out of a trade in a few hours. That on the other hand was placed Sunday night GMT when the Aussies were starting their Monday 8am session. I feel I should stop doing this and wait till at least 8am GMT when the London folk are on.
I wouldn't have used just the 1hr for making the decision. I would have been going between the 5min, 15min, 30min, 1hr and 4hr.
I'm a bit embarrassed to say that I'm not actually sure how the MACD works.
I understand what it stands for but personally when I use it, I am looking to see if the momentum is with me (that the histogram bars are increasing and on the side of the zero line that the trend/trade is going). Again, I am unsure if i'm using it right, but I would also like the MA lines of the MACD to be jumping the zero line also. To me that would indicate a higher probability of success. Am I using this wrong?
EDIT: I am kinda aware that if the price makes a higher high but the histogram of the MACD doesnt, then this is divergence? And the price is likely to fall? The opposite is true for the other way around?
I need training!
I am a blank slate with nothing tying me down... I am willing and ready to plough hours and hours into learning how to trade correctly...I just need to find that opportunity to gain some form for training or a mentor. Being self-taught is nice, but often I am doubting myself on whether I am learning the right things, or learning them the right way.
I am literally ready to move at a moments notice if the opportunity arises
I also did a little reading and from what I gathered, the US could very well raise their interest rates soon but the Aussies, while their next bank rate move might actually be an increase, I wouldn't be till 2018. That obviously wasn't the main reason I got into that trade. The price action was what reeled me in... the rest was confluence. In hindsight though, I think I should have closed that trade before the AUD release. I am typically in and out of a trade in a few hours. That on the other hand was placed Sunday night GMT when the Aussies were starting their Monday 8am session. I feel I should stop doing this and wait till at least 8am GMT when the London folk are on.
I wouldn't have used just the 1hr for making the decision. I would have been going between the 5min, 15min, 30min, 1hr and 4hr.
I'm a bit embarrassed to say that I'm not actually sure how the MACD works.
I understand what it stands for but personally when I use it, I am looking to see if the momentum is with me (that the histogram bars are increasing and on the side of the zero line that the trend/trade is going). Again, I am unsure if i'm using it right, but I would also like the MA lines of the MACD to be jumping the zero line also. To me that would indicate a higher probability of success. Am I using this wrong?
EDIT: I am kinda aware that if the price makes a higher high but the histogram of the MACD doesnt, then this is divergence? And the price is likely to fall? The opposite is true for the other way around?
I need training!
I am a blank slate with nothing tying me down... I am willing and ready to plough hours and hours into learning how to trade correctly...I just need to find that opportunity to gain some form for training or a mentor. Being self-taught is nice, but often I am doubting myself on whether I am learning the right things, or learning them the right way.
I am literally ready to move at a moments notice if the opportunity arises
Attachments
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