The Trading Journey of Lurker

[lurkerlurker]

Trading Issues, Then and Now

Last May, I identified the following issues.

Trading Issues​

• Poor money management
• Trading against the trend
• Over reliance on discretion for entries and exits
• Failure to confirm trends and setups on longer timeframes
• Poor use of stop loss orders (too close, or too far away) - placing them for the wrong reasons
• Overtrading

I've solved all of those problems, and discovered a few more.

Money management is fixed - no more than 30% at a time, no more than 10% per trade, size accordingly. No more than 10% on highly correlated positions.

Trading against the trend - some of my setups are taken against the trend at swing highs/lows, but awareness of trend is built in to my strategy. I'm not blindly shorting rallies or buying declines mid way through because I think the market has moved to far, too fast.

Discretion for entries has been all but eliminated. Obviously there is some input in deciding whether to trade, but now I only take trades which conform to the one setup I am using. I am not trading multiple setups, and am no longer buying what I "think" will go up.

Failure to confirm trends - now I am always aware of the trend, and I am more conservative with my targets trading counter trend. Further, I am also always aware of the daily TF and important long term S/R levels prior to and during a trade. I also now don't go lower than H1.

Stop loss orders are now perfect on entry, and adequate during a trade (trailing stops).

Overtrading is no longer an issue. Last month I placed 44 trades. In the bad old days, sometimes I would trade as much as this in a day or week. Some days I take no trades, and other days there are many setups. 2 trades per day watching 25 instruments on an hourly TF is okay (there are 600 bars per day, and if 2 of them give entry signals....)


My discipline is still not what it should be. Further, I need to sort my exits out - I panic and take profits too soon.

Two things I now do which improve my discipline:

Only check trades at the turn of each hour. This makes me far less twitchy.
Not look at open P&L - as I have defined and accepted in advance the maximum risk, there is no need to check financial statements when in a trade.

More will follow - I am enjoying seeing how far I have progressed. I have much more work to do in order to improve, but if I can stick to my trading plan for the full three months and improve my discipline while making pips I'll be very happy indeed.

 

[Fresian]

Hi Lurker,

Nice work on your journal and great progress...congrats!

Not sure if I missed it somewhere but was just wondering what your trading hours are?

Cheers and keep up the good work.

 

[lurkerlurker]

Gambling

Today, I have a problem with gambling.

Prior to 7PM I had taken 4 setups. Short Dow before NFP, long Crude on a pin bar, and short EUR/JPY on a pin bar.

Already frustrated at making the same mistake I made in September and covering my NFP trade far too soon and for no technical reason, I was further annoyed to lose my crude trade. These should have been two signs that I am not in the correct frame of mind to trade today. Exiting for an emotional reason - being right, profit taking, fear of making a loss. Then getting angry at the market for a losing trade. I need to accept that losing trades happen. I have a system, and losing trades are a part of it. They are not a reason to vent at the market.

The crude oil trade cost me £255 - this was my 10% risk level. I should know better than to risk as much on an oil trade - it is more volatile and should have 5% max - 10% is for forex.

Annoyed at missing out on the earlier Dow trade, and annoyed to have given back 1/4 of my profits, I took a punt on the Dow.

This was gambling. I had no entry. This isn't a market I trade. I didn't really have a signal except something which resembled an hourly pin bar, but which never "triggered". I lost 37 Dow pips including spread at the same £10pp as I did the NFP trade on.

Gambling cost me £370 today

The crude oil trade was fair enough. It was a proper trade and happened to be wrong. Sometimes it doesn't hurt to risk a little when you are ahead - that is how profits are made.

However, the Dow trade was inexcusable. When taking my loss, I decided that I am not in a fit mental state to trade today and therefore I was forced to close my EUR/JPY position. When I went back into my platform to get the P&L numbers for this post I realised that I was so stressed and distracted that I "covered" my EUR position twice, causing me to reverse. Going flat cost me £6.

Reckless mistakes caused by trading in the wrong frame of mind cost me £6 today


Profits made from good trading: £1080
Losses made from bad trading: £255
Losses caused by trading mistakes: £376
Net P&L for the day (not important): £449

I am very very lucky. Thankfully my proper trading was good enough to cushion the blow from my recklessness. £449 is a good day for me and represents a 25% increase in equity which I feel I do not deserve (and I probably felt like I didn't deserve the £1k profit either!!!).

I can only come to the conclusion that I am working out some personal issues in the markets. There are perhaps some specific reasons for doing this which I won't go into here. However, the fact remains that I am not in a fit state to trade. In addition to any personal issues which may have contributed, the following has caused me problems in trading:

Missing out on the GBP/CHF short a few hours after the BoE minutes. (trading platform issue, when I got a price it was 7 pips worse than entry so I didn't take it) - missing out

Getting short GBP/JPY twice and taking less than 10% of the total move. (fear of losing)

Covering everything far too quickly. (fear of losing)

Inadequate sleep, bad sleep pattern, poor concentration, being slightly unwell.

I have worked extremely hard and made a lot of sacrifices to learn how to trade. My only consolation for today is that I did not seriously damage my account, and I have more trading capital now than I did yesterday. However, this is a small victory. I broke my rules. I broke my rules regarding exit on the NFP Dow trade, and broke my rules regarding entries when I gambled. I exceeded my daily loss limit. I lost 1/6th of the peak value of my account.

I irreparably damaged my track record which now shows impulsiveness and poor money management.


I usually hold myself to high standards and expect a lot. This has served me well in every area of life except trading. I understand what I have done wrong. I will need a lot of time to heal from this. Until such times, I do not belong in the markets. I am taking a break from all trading for one week.

I'll still check T2W during this time. If anyone is feeling particularly wise or patient, I would appreciate some comments. I feel that it is important for me to publish this here. I am sorry for deviating from the plan.

Interestingly, I'm reminded a lot about what Douglas says about feeling we don't deserve the money, finding ways to give it back, etc. Also about playing out issues in life in the markets at great financial expense.

 

[Trader333]

Short Dow before NFP

Why did you go Short before the announcement ? To me that is more of a gamble than all other things you did. I traded the news and did very nicely but there is no way I would try and out guess what the news would be.


Paul

 

[Mathemagician]

Taking a break is an excellent decision when emotions come into play. Just be sure to resist the temptation to get back to trading before your stated cool-off period is completely over. I have confidence that you will rebound and return to good form.

jj

 

[rathcoole_exile]

the biggest satisfaction that I can derive from this is the transformation of Lurker from the bad old days. he never would have recognised his errors, would have hung in for more losses, gambled more in an effort to recover and still probably wouldn't have undertsood what he'd done wrong. he'd still be casting about for people, systems, brokers to blame.
taking it on the chin, acknowledging your brief deviation from your Path and openly identifying your errors says a helluva lot about how you've matured as a trader Tom, and probably about how trading successfully is making you into a more mature person as a whole.
Put this behind you, don't dwell on it or let it depress you - but don't make the same mistakes again ! that's how the human race evolved. keep up the good work

 

[Tileman]

Lurker,

Seems as though you could have just as easily halved your account yesterday as made money which surely represents poor risk/money managment.

Regards
Graham

 

[lurkerlurker]

Lurker,

Seems as though you could have just as easily halved your account yesterday as made money which surely represents poor risk/money managment.

Regards
Graham

Thanks for the reply, but at no time did I risk more than 10% on a single position. I agree however that I ignored my maximum daily loss limit and kept on trading through it.

My usual risk / MM rules is no more than 10% on a trade, no more than 30% in all open positions, and no more than 2 losing trades per day.

I've backtested my system and it has a win rate of >80% so I am happy with that sort of risk.

However, on Friday I broke every rule in the book. It was a disaster, and I'm having some time off!

 

[Tileman]

Lurker,

Surely your risk on your NFP trade was alot greater than 10% or am i missing something ?

Graham

 

[DaxDestroyer]

Today, I have a problem with gambling.

Prior to 7PM I had taken 4 setups. Short Dow before NFP, long Crude on a pin bar, and short EUR/JPY on a pin bar.

Already frustrated at making the same mistake I made in September and covering my NFP trade far too soon and for no technical reason, I was further annoyed to lose my crude trade. These should have been two signs that I am not in the correct frame of mind to trade today. Exiting for an emotional reason - being right, profit taking, fear of making a loss. Then getting angry at the market for a losing trade. I need to accept that losing trades happen. I have a system, and losing trades are a part of it. They are not a reason to vent at the market.

The crude oil trade cost me £255 - this was my 10% risk level. I should know better than to risk as much on an oil trade - it is more volatile and should have 5% max - 10% is for forex.

Annoyed at missing out on the earlier Dow trade, and annoyed to have given back 1/4 of my profits, I took a punt on the Dow.

This was gambling. I had no entry. This isn't a market I trade. I didn't really have a signal except something which resembled an hourly pin bar, but which never "triggered". I lost 37 Dow pips including spread at the same £10pp as I did the NFP trade on.

Gambling cost me £370 today

The crude oil trade was fair enough. It was a proper trade and happened to be wrong. Sometimes it doesn't hurt to risk a little when you are ahead - that is how profits are made.

However, the Dow trade was inexcusable. When taking my loss, I decided that I am not in a fit mental state to trade today and therefore I was forced to close my EUR/JPY position. When I went back into my platform to get the P&L numbers for this post I realised that I was so stressed and distracted that I "covered" my EUR position twice, causing me to reverse. Going flat cost me £6.

Reckless mistakes caused by trading in the wrong frame of mind cost me £6 today


Profits made from good trading: £1080
Losses made from bad trading: £255
Losses caused by trading mistakes: £376
Net P&L for the day (not important): £449

I am very very lucky. Thankfully my proper trading was good enough to cushion the blow from my recklessness. £449 is a good day for me and represents a 25% increase in equity which I feel I do not deserve (and I probably felt like I didn't deserve the £1k profit either!!!).

I can only come to the conclusion that I am working out some personal issues in the markets. There are perhaps some specific reasons for doing this which I won't go into here. However, the fact remains that I am not in a fit state to trade. In addition to any personal issues which may have contributed, the following has caused me problems in trading:

Missing out on the GBP/CHF short a few hours after the BoE minutes. (trading platform issue, when I got a price it was 7 pips worse than entry so I didn't take it) - missing out

Getting short GBP/JPY twice and taking less than 10% of the total move. (fear of losing)

Covering everything far too quickly. (fear of losing)

Inadequate sleep, bad sleep pattern, poor concentration, being slightly unwell.

I have worked extremely hard and made a lot of sacrifices to learn how to trade. My only consolation for today is that I did not seriously damage my account, and I have more trading capital now than I did yesterday. However, this is a small victory. I broke my rules. I broke my rules regarding exit on the NFP Dow trade, and broke my rules regarding entries when I gambled. I exceeded my daily loss limit. I lost 1/6th of the peak value of my account.

I irreparably damaged my track record which now shows impulsiveness and poor money management.


I usually hold myself to high standards and expect a lot. This has served me well in every area of life except trading. I understand what I have done wrong. I will need a lot of time to heal from this. Until such times, I do not belong in the markets. I am taking a break from all trading for one week.

I'll still check T2W during this time. If anyone is feeling particularly wise or patient, I would appreciate some comments. I feel that it is important for me to publish this here. I am sorry for deviating from the plan.

Interestingly, I'm reminded a lot about what Douglas says about feeling we don't deserve the money, finding ways to give it back, etc. Also about playing out issues in life in the markets at great financial expense.

Hi lurker
I don't know you, but here my thoughts after reading this post.
As you are 100% clear about what you should do and know your mistakes, IMHO you SHOULD NOT take a break from the markets! You were awarded by trading after your rules and gave half of it away on "personality"
So, if you were my friend, I just told you to write down your rules, peg it to your screen and follow them! As you traded well, don't stop! But remember, even good trading does not always help you against your errors, so just stick to your rules!

Only in the case, your rules prove to be flawed, STOP trading!

Have a nice Sunday and a successful trading day MONDAY

Cheers Carlos

 

[lurkerlurker]

Lurker,

Surely your risk on your NFP trade was alot greater than 10% or am i missing something ?

Graham

My risk on that was 10%. Also, bear in mind that due to the consensus estimate and how other markets were behaving, the maximum downside reaction was about 3x greater than any feasible upside reaction. I had a tight stop in place, so I'd be out 10% with slippage.

Generally my published trading plan refers to my ordinary "pin bar" type trades. I have a different system for trading news alongside my regular system. The news trading happens less than once per month, and relies on several factors.

Thanks for the input on my thread.

 

[lurkerlurker]

Hi lurker
I don't know you, but here my thoughts after reading this post.
As you are 100% clear about what you should do and know your mistakes, IMHO you SHOULD NOT take a break from the markets! You were awarded by trading after your rules and gave half of it away on "personality"
So, if you were my friend, I just told you to write down your rules, peg it to your screen and follow them! As you traded well, don't stop! But remember, even good trading does not always help you against your errors, so just stick to your rules!

Only in the case, your rules prove to be flawed, STOP trading!

Have a nice Sunday and a successful trading day MONDAY

Cheers Carlos

Hi Carlos

Thanks for your post. The reason I have chosen to take a break for a week is that I am still emotionally affected by the effects of my loss of discipline last week. I don't like losing money - I can tolerate it when losses are part of a winning system, but I might as well have set fire to that money as it served no purpose losing it. Hopefully I'll learn not to do it again - even so, it was an expensive lesson.

After a little break I'll be ready to get back into it. I know what I did wrong, and I have a profitable system, but I risk a lot if I start trading again when I am not in the correct mindset - ie emotionally detached. If I were to trade tomorrow my focus would be recovering the money I wasted by gambling on Friday.

One week out of the year won't kill me. At the close on Friday, my weekly profit was twice my weekly profit target for 2008 so I'm fine.

 

[lurkerlurker]

Another T2W member sent me a link to an interesting article, which happened to be on an interesting website. I later read this, and thought of T2W!


"Use peer pressure to your advantage

Humans are social animals, and much of our behavior is driven to both serve, lead and gain acceptance from our peer group. Use this fact to your advantage. Don’t be shy about your goals. Keeping them secret helps no-one. Tell your family. Tell your friends. Tell your co-workers. It shows that you are someone who is motivated and could help inspire others to start setting some more compelling goals themselves. People are far more likely to follow-through on a goal when they have other people keeping them accountable. You also never know who in your peer group might have some insights that could help you achieve whatever it is you are after (physically, financially, etc.)."



From Set Higher Standards

 

[DaxDestroyer]

Hi Carlos

Thanks for your post. The reason I have chosen to take a break for a week is that I am still emotionally affected by the effects of my loss of discipline last week. I don't like losing money - I can tolerate it when losses are part of a winning system, but I might as well have set fire to that money as it served no purpose losing it. Hopefully I'll learn not to do it again - even so, it was an expensive lesson.

After a little break I'll be ready to get back into it. I know what I did wrong, and I have a profitable system, but I risk a lot if I start trading again when I am not in the correct mindset - ie emotionally detached. If I were to trade tomorrow my focus would be recovering the money I wasted by gambling on Friday.

One week out of the year won't kill me. At the close on Friday, my weekly profit was twice my weekly profit target for 2008 so I'm fine.

If you think so, do it and then keep following your gameplan. Take care!

 

[lurkerlurker]

If I had held my Dow short into MOC, I would have made £3,118. I ended up with 1/6th of that.

I've made this mistake twice now - once in September, once last week. There was no reason to exit all day. All important local support levels had been taken out on a spike which showed no possibility of fully retracing, and the market began to trend down all day.

US30 Cash Cash 04/01/08 10S 13,112.000000 12,800.180000 3,118.20

 

[lurkerlurker]

Revisions

I am posting some revisions to my published trading plan.

Today, I lost 230 pips on gold. I shorted because of the daily pin. I put my entry about 20 under the daily pin to avoid fake outs, and put my stop about the same above. I got taken out. I tried to pick a top in a parabolic blow off. I had serious reservations about the trade, but felt the system demanded that I take it. I must take the signals, and not allow too much discretion. However, aside from trading the news, results from my regular trading have been pretty dismal.

I have had a few losing trades. If it were not for the profits generated from my news trading, my account would be down 20%. I am going to modify my plan until further notice.

Modifications as follows:

Reduce maximum risk per trade to 5% from 10%. This gives me twice as many bad trades before my account disappears.

Reduce maximum account risk to 5% from 30%. This means that I can only have 1 position open at a time.

Reduce timeframe from daily to hourly bars. I used to be allowed to trade both, but I've not had enough experience with the daily bars to make them work. I was making money on the hourlies, so I will go back to that. My account is too small to support the wide stops anyway, especially with the reduced risk limits.

Quality of setups. I know the trade has more chance of succeeding when there is "confluence". The gold trade only had the "pin bar" setup. These "pins" cannot be taken in isolation. They mean nothing in themselves. They are only valid where it shows that established S/R, or a retracement level, has been respected. Price action setups require evidence that the market is more likely to do one thing other than the other. An isolated bar on its own provides no such assurance. You cannot predict what the market can do next, but you can see how it reacts to S/R etc to be right enough to make money.

I took a low quality setup, and bet 10% of the account on it. I should not have done this. As CV pointed out, it was largely to do with parabolic exhaustion moves. Also, I'm aware of the fundamentals which are bullish - sovereign wealth, commodity funds, weakening dollar. Bernanke was due to speak today as well. Everything was bad about this trade. It was at a top with no resistance level in sight. Not a good setup. In hindsight, a terrible setup.

So, I will be more selective about future setups. I will ensure that the "pin" bar setups I take have other supporting TA or price action. S/R zones, fibs, etc. I'll also try and keep the fundamentals in mind.

I said I'd only trade currencies. XAUUSD is basically a currency, however I'll stick to the other crosses for now.

So, I'm reducing position size and overall risk after a losing streak. This is sensible. I've taken stock of my mistakes, and am ready to move forward.

I know some will criticise and rightly point out I didn't keep to my week break. However, I feel I have resolved the issues from last Friday and there was no reason to stay out of the market. When I saw setups according to my plan, I took them.

The plan is now modified to make it less likely that I will take such a "poor setup" from a TA viewpoint again.

Comments welcome.

 

[Dinos]

Hi Tom

Ouch, not nice, very sorry to hear about the loss, I know everybody has their own style and we all perhaps try and use each others knowledge to help one another. fwiw, I don't take any trade of the daily charts, the highest I use is the one hour chart, looking at your trade, I agree the daily suggested sell, however I would have taken the trade off the hour at 12.00 @ 885, the reason I'm specific about the time is I use stochastic set at 14,3,53, the fast crossed the slow(53) at this moment, the trade would have been closed at 13.00 @ 866.5 on the stoch advancing beyond the 20 (oversold) line, a profit of 193 pips.

Simply, by adding an indicator to the pin bar, you can give yourself a trading advantage imo.

 

[firewalker99]

I am posting some revisions to my published trading plan.

Although you can't revise your plan each time you lose a couple of trades, at this point I'm inclined to say your risk parameters need some refining indeed.

Reduce maximum risk per trade to 5% from 10%. This gives me twice as many bad trades before my account disappears.

Reduce maximum account risk to 5% from 30%. This means that I can only have 1 position open at a time.

That sounds a whole lot more sensible than risking 10% on a single trade;
Remember if you lose x% of your account, you need 100*[100/(100 - x%) - 1]% to make up for that (which is more than the percentage you lost). For instance if you lose a third of your account you need a 50% gain to get back up to the same level.

Reduce timeframe from daily to hourly bars. I used to be allowed to trade both, but I've not had enough experience with the daily bars to make them work. I was making money on the hourlies, so I will go back to that. My account is too small to support the wide stops anyway, especially with the reduced risk limits.

The higher the timeframe, the wider the stops... so if you're not yet comfortable with daily TF why not trade the hourlies for real and papertrade the dailies?

Quality of setups. I know the trade has more chance of succeeding when there is "confluence". The gold trade only had the "pin bar" setup. These "pins" cannot be taken in isolation. They mean nothing in themselves. They are only valid where it shows that established S/R, or a retracement level, has been respected. Price action setups require evidence that the market is more likely to do one thing other than the other. An isolated bar on its own provides no such assurance. You cannot predict what the market can do next, but you can see how it reacts to S/R etc to be right enough to make money.

This is about filtering your trades for high probability ones. In the end you might realize you have to skip a number of trades, but if this means ending up with far more wins than losses, why not?

I took a low quality setup, and bet 10% of the account on it. I should not have done this. As CV pointed out, it was largely to do with parabolic exhaustion moves.

Yip, parabolic moves are really typical, you see them in all kinds of markets near the end of the bull market. Stay on the long side and you'll do fine. Go short and you'll get burnt. It's just not worth the risk imo.

 

[lurkerlurker]

Hiatus

I'm taking a break from live trading until further notice. I may decide to resume my above trading plan, or not. However, with the exception of a mistake on NFP day the other week I think I've done pretty well following the plan so far. However, I am still lost and should not be risking capital at this time.

I managed to stick to what I said I'd do for 5 weeks! Part of that was a holiday. And I made serious mistakes on one day....


Many thanks to everyone who has contributed to this thread and my trading development.

 

[firewalker99]

Hiatus

I'm taking a break from live trading until further notice. I may decide to resume my above trading plan, or not. However, with the exception of a mistake on NFP day the other week I think I've done pretty well following the plan so far. However, I am still lost and should not be risking capital at this time.

I managed to stick to what I said I'd do for 5 weeks! Part of that was a holiday. And I made serious mistakes on one day....


Many thanks to everyone who has contributed to this thread and my trading development.

I think your feeling of being lost comes from trying to understand WHY price moves and at the same time trying to trade it profitable.

I've had similar problems in the past. And at some points I still do to be honest. Especially when I am wrong. But then I need to re-align my view of the market with the market reality and admit that I've made a wrong analysis. But price is never wrong, it's just the trader that is.

On the other hand, a lot of people ignore the WHY and just act on mechnical signals. If it works for them, that's fine. But I never felt comfortable doing that, I always felt the urge to dig deeper and trying to understand the flow of buying/selling pressure. Not to say that I now do completely. Far from. But I'm a lot further down the road than a year ago.

All the best lurker, I'm sure you are dedicated enough to continue this journey.