The Trials and Tribulations of a Trainee Trader

mike.

Senior member
2,099 706
Can I take from that statement then at least it is possible with some hard work to actually do this.

Absolutely, just a lot harder than you imagine at the moment.

What's the difference between making a killing on demo platforms and doing it in real life, is it simply that having a smaller trading account limits you more (obviously I guess) or is it a more psychological thing - that even with a £20K real account it would not be possible to replicate the killing you made on a £20K paper account?

The psychological thing is the biggest barrier here, ill give you a example below of a demo trade i made that opened my eyes.


Rich

I made this demo trade over a year ago, to cut a long story short, I wanted to jump on the bandwagon of the facebook ipo due to all the hype that surrounded it, i had been very successful on many other trades over previous months trading from gut feeling with no strategy, so i saw this as a big earner.

My thought process was that:- facebook chose nasdaq to float on, I checked nasdaq on the daily and h4 charts and found it was in a noticeable uptrend, So, with one of the biggest ipo's going live at a certain time of day this baby is going to sky rocket. I went long on the nasdaq about 50-100 £/point, not sure which.

I often felt smug that i was choosing all these winners and making all this money with virtually no experience, a natural one might say, ha ha .

Anyway, price began to steadily fall leading up to the open time, I wasn't worried though because it was going to spike through the top of the screen very soon, I held in as it continued to drop, the open was delayed for whatever reason and price was still falling, I am about 3k down now with no stoploss, no money management and no strategy, destined to fail. As the ipo went live it tanked like a brick, so did the nasdaq.

So now im down about 7k, It then becomes damage limitation, I kept saying to myself once it rises back to "x level" im out, Price would come within a few points of this level then drop even further. I eventually closed out about minus 9k. The whole trade was wrong from the open, did it bother me ? No!, because its only demo cash, did i learn from it ? Absolutely.
 

richy96

Member
54 2
That's an interesting and sobering tale Mike

I could see myself right of now getting into the same problems

Only thing I would feel different is when you say 'Did it bother me? No! beacuse it's only demo cash'

From my point of view I can tell you now it would bother me - YES

Reason being if I can't get this paper account to work I probably will not trade live ever.

And it's something I want.

But I have to prove to myself I am capable first. If not I'll go back to antiques/collectables auctions and selling the goodies online - at least from prior experience I know I can make money on that as a 'sideline'

Seeing as we have a bit of an open rapport going here - or at least I would like to believe you are doing more than just 'humouring' me - how did you come back from that disaster and eventually go live?

Oh PS - not fully explained previously but something you said on an earlier post here regards risk management - has got me needing to go back and look at all my failed trades and do a bit of analysis regards P&L and maximum exposure levels . It's all tied in with my percentage risk on my demo account re my risk on my proposed live account, so I need to find out if I am on to something or not

PPS I mistyped my paper profits so far - they are £4916 or in other words not much short of a projected £1250 if I had used quarter sized positions on my proposed 'live' £5k account - well over double what I would have liked to achieve in 16 days.

This suggests to me if I could maintain this sort of performance then I can get away with about 1/8 the position sizes (or less) than I am now placing to generate my intended profit

So therefore I would be taking about half the current play account risk level on my quarter sized live account - or less.

I'm still yet to calculate if that would feel acceptable to me in real money terms

best regards
Rich
 
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mike.

Senior member
2,099 706
Firstly, every trader trades different, there is no right way but many wrong way's, so, find your own comfort zone, dont follow other peoples signals or strategies but work on your own.

ill explain my journey briefly, Firstly I traded various different instruments on demo using technical analysis.

When I did go live I finally settled for forex, why ? Probably because of its volatility and 24/5 market hours. I daytraded on a part time basis when i was off work and some evenings, vary rarely leaving a position open overnight, unless it was near my t/p and the stop was moved to b/e.

Due to this lack of free time, i was getting impatient sitting watching a trade all day and sometimes well into the night, I wanted to get stuck in and trade as much as possible with what little time i had.

I developed a scalping strategy which is still in its early days but am using now. It suites my trading style much better. I spreadbet the market due to the fact that its a great entry level vehicle to become involved using a small account size and i've not had a strong enough reason to move on to a forex broker as yet.

Everyone said that i would blow the account within a few weeks, well, i'm still here a year on, profitable, enjoying it and the laptop hasn't been thrown out the window as yet. :LOL:


P.S, A quote from a member on here that ill always remember. You mentioned earlier, "Is there much difference between a demo and when you go live ? "

Well...Imagine a close combat scenario, crouched behind a small wall in iraq taking incoming fire, Then compare that to playing call of duty.
 
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richy96

Member
54 2
Tahnks for that insight Mike - as ever I find this site a great source of things to ponder and think about. Yes I am trying to develop my own style but info and guidance are a good thing. cheers

Right then....

I've been thinking and I've done some math'matics! too lol

As I was only trading before going on holiday (will recommence tomorrow) I actually placed 29 trades over 16 days

23 were good
6 were bad

So my success rate was 79%

Now looking back at those bad trades and analyzing what would have happened if I handled them differently

The first one lost £151.66 but would have made me a profit of about £150 if I had let it run for four more hours (assuming I got out at the right time) max exposure would have been £600

So in breif
First One (CTrip)
Loss was £151.66
Potential Profit was £150 (four hours after I closed)
Max Exposure would be £-600

Second one (Pandora)
Loss was £301.35
Potential Profit was £804 (13 days after I closed)
Max Exposure would be -£1551

3rd one (Nat Gas)
Loss was £909.88
Potential Profit was £1050 (15 hours after I closed)
Max Exposure WAS -£908.88 (as I managed to close at exactly the wrong point!)

4th one (Nat Gas)
Loss was £1139.16
Potential Profit was £1645 (3 days after I closed)
Max Exposure would be -£3605 (eeek!!)

5th One (Nat Gas)
Loss was £827.26
Potential Profit was £630 (3 days after I closed)
Max Exposure would be -£3045 (eeek!!)

6th One (Pandora)
Loss was £98.26
Potential Profit was --- would not have made a profit yet
Max Exposure (so far!) would be -£2136


Now on my Paper account I have been setting a stop loss of £1000 or there abouts for Nat Gas (and a smaller stop loss of £200 for shares) though i haven't religeously applied these limits. The difference was intended to handle the more volitile NAt Gas Market and stay in position long enough to make some profits

As my paper account of £20000 is four time the size of my proposed live account (£5000) then my current stops would be the equivalent a £250 stop loss on Gas and £50 on shares

Assuming I took contracts of 25% the size I have been taking on my paper account all these six bad trades would still hit my stop loss of course


However......

Looking at my profits so far I have made a total of £4916 net profit (including the losses on the six bad trades)

Scale that down to my proposed live account That is a net profit of £1229

Now that was made over a period of 16 days but only 13 of those were trading days (I'm not counting Sat/Sun)

So my profit per trading day (scaled down to 25% for my live account) would have been £94.50 per day

My intended profit level is £40 per day so to be comfortable I would only need to place half the size positions I am now placing to achieve that profit and maybe a bit more.

So basically 12.5% the size of my current positions would need to be placed using my £5000 live account to generate £40+ per day, at my current performance level.


Now let's look back at the bad trades I made
If I placed the same positions with 12.5% the size, but kept my stop loss at £250 - so half the size positions with the same stop loss as before - and yes I realise it's 5% of my account size) and stuck religously to it then

Bad Trade 1: max exposure would have been £75
Bad Trade 2: max exposure would have been £193.88
Bad Trade 3: max exposure would have been £113.61
Bad Trade 4: max exposure would have been £450.53
Bad Trade 5: max exposure would have been £380.63
Bad Trade 6: max exposure would have been £267

So the first three would have been good trades, the last three would have all stopped out at £250 each assuming I didn't close them earlier

Additional profits from the bad trades that are now good because by taking smaller positions they didn't hit my stop loss... would be £2055.66 x 12.5% = £250.71 scaled to my live account

Success rate on positions placed so far would now be 26 good, 3 bad = 90%

So with all that lot reasoned out, and listening to what you say Mike (or at least applying my own take on it)

On my paper account I'm now gonna trade positions of 1/8th (12.5%) of my current contract sizes and set a fixed stop loss at £250 per trade - and let trades pan out to see if they profit, even if it takes some of them several days

Because my success rate has been high thus far, I want to try this as a trading plan for some weeks and see how it pans out. So let's call my paper account my 'simulated account' as I am henceforth trading it like a £5k live account

Oh With my other paper account - well I am gonna use that one to test new shares or commodities to see how they trade, and whether i can get a good success rate with these same stop loss levels, before trying them on simulated account

Let's face it if/when I go live I can still keep a paper account for testing so that seems realistic enough

Sorry for yet another long post while I deliberated this with myself, but I do find putting all this down in print helps ME to rationalise my own thoughts and maybe someone can point out any glaring errors I make.

Maybe it even helps or interests someone else to read this too so I'll keep posting

Whatever happens, it should be interesting.......

Rich
 
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mike.

Senior member
2,099 706
Your on the right track analysing all your trades, especially the bad ones.

What form of analysis are you using ? technical, fundamental or a mixture of both, to pick a trade and a entry ?

secondly, how many of the above trades were running simultaneously ? there's a lot of exposure when added together.
 

richy96

Member
54 2
OK that's nice to know

Re: simultaneous trades mmmm let me check that - from top of my head I once ran three trades (yes just before that huge - to me - jump in nat gas prices) but other than that normally only one at a time and occassionaly two, sometimes on different shares/commodities.

I'll get back with an exact answer
 

richy96

Member
54 2
Yep as I thought, I normally only have one position open at once, though I did have three positions opened simultaneously at one point

Regards method of placig trades - basically I am using technical analysis.

However in the case of Nat Gas I am only trading long as I expect sudden price jumps upwards if the Ukraine situation deteriorates further, rather than sudden jumps downwards - so I am trading long when the conditions in the technical analysis look promising. And ignoring short opportunities even if they look good.

So in that respect you could say I am using fundamental analysis too

On the shares it is purely technical analysis - I traded Pandora for several days before I even found out that it was not the Jewelery company. but an internet radio provider of the same name!!! :eek:

I'll make up a chart later and try to explain the trading system I am currently developing/using. Then someone can probably soot me down in flames :whistling

Anyway other than that, I placed the follwoing trade on Nat Gas yesterday evening as the indicators looked really promising. I meant to do this as though i was using my £5000 as discussed in the previous post.

However in a rush to get the position opened - which I did hit at pretty much the right moment if you look at the chart and allowing for the .004 spread on opening - I made a mistake of opening with 7000 contracts when my mathematics show I should have opened with 4375 contracts.

Actually in reality I would have to open with 4500 contracts as they are in lots of 500 and that is the nearest position size rounded up or down

So here is the first trade really sticking to my plan. And it worked nicely :)

Nat Gas
Opened long 7000 contracts price $4.686 on 05/05 @ 19:00
cost approx £200 (I must start noting these down as i can't get the data later)
Closed on profit call price $4.710 on 06/05 @ 05:20
Profit £96.59

Graph is attached, trade took place between points A and B

I think that looks pretty good - yeah if I extrapolate the line to point C then I could have made more by 07:30am but I am not dissappointed in the slightest, I placed my profit call where I best predicted it

I'll try another similar trade later today if indicators are good

Rich
 

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richy96

Member
54 2
Well I just completed my first week on my simulated account, trading as though this was a £5000 account which is the size I will open with if I do eventually go live

It wasn't a bad week overall - and I learned something real important too!

I've been trading Natural Gas, plus shares in Pandora, Ctrip and Abercrombie & Fitch

I've placed 15 trades of which only one made me a loss

The 14 good trades made me £369.50
The one bad one lost me £257.37

So I have a net profit of £112.13

My Trading success rate was 93.33% I made a couple of trades I was really happy with, three of my best four trades were closed on profit calls and I seem to do better using this method than sitting watching the trade as I tend to get nervous and quit out sooner than I should

I also placed two totally automated trades, placing order price, profit and loss calls and just letting the trade sort itself out

One thing I really did notice, placing trades for a smaller number of contracts relative to my account size has made things seem a lot less like a rollercoaster ride and actually quite relaxing at times.

The trade that lost me a lot of money was on Natural Gas which took a strong dive on Thursday around 3:30pm.

Now the interesting things is I did a google search to see if I could shed any light on my sudden misfortune and found out that on Thursdays there is a weekly announcement regarding gas supply and reserves and this week the levels were higher than the market expected - so of course the price fell suddenly.

http://www.eia.gov/naturalgas/weekly/
Storage build is slightly larger than market expectations. Market expectations called for a build of 71 Bcf. When the EIA storage report was released at 10:30 a.m., the price for the June natural gas futures contract fell 9 cents to $4.60/MMBtu on the Nymex. Prices continued trading around that level in the hour following the release.

Just looking back over the last few weeks, both times I have benefitted from sudden jumps in gas prices have been Thursday afternoons around 3:30pm!

So what did I learn, well I really need to know more about a market if I am trading in it and hope to be consistently successful. SImply but obvious.

I did previously post on this thread 'I'll keep a track of my progress on here and if nothing else it will give you all a good laugh when things go tits up for totally predictable reasons'.

Well sudden Nat Gas price jumps on Thursday afternoons should have been totally predictable. Not the direction of them, just the likelyhood of one occurring

OK so another lesson learnt - I'll make sure I don't have any open positions on Nat Gas on a Thursday afternoon - but I will make a point of watching what happens about 3:30pm GMT and see if I can jump onto the bandwagon if I see a sudden price shange occur.

If i had known before about these Nat Gas announcements I may well have had a 100% success rate on my first week of proper simulated trading, by simply making sure I was doing nothing at the critical time.

Rich
 
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mike.

Senior member
2,099 706
Well done Rich, looks like your coming on leaps and bounds, especially doing your due diligence on company profiles.

One concern is, and you know already what im going to say... such a huge loss on one trade, which nearly cancels out all the hard work from the other trades, learn to take small losses, If it goes against you, get out ! You can always jump back in when price starts to rise again. Don't sit and watch your account evaporate expecting price to turn any moment.
 

richy96

Member
54 2
Wasn't so much that Mike - as mentioned in my previous post Nat Gas suddenly bombed on me, no chance of a loss call - but at least I did a little reseach and now I have learned the significance on Thursday 3:30pm re: Nat Gas, and won't be caught with that particular one again! Not to say there are not plenty of other holes to fall in.
 
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SlowlyButSurely

Well-known member
324 38
Hi Richy,

I haven't replied in a while as I was hoping you would get on and do some trading and answer some questions for yourself which you seem to be doing. A lot of what you learn comes from yourself; talking about what you have done, what you could have done better and what went wrong. The answers often become clear once you get things off your chest and can be answered by yourself on reflection.

I will say though, often you need to really struggle and break before you have a moment of clarity. Once this happens you will better understand your mistakes and why risk management is so important if you are to become a successful trader. From there you will be able to continually build on your trading method. Keep at it on the demo and good luck with your learning!
 

richy96

Member
54 2
Cheers SBS & Mike
Yes you're right I do fing 'getting things of my chest' by rambling on about it using this Forum is a great way to help me figure things out

I also seem to do my best thinking at 4am if I wake up in the night - am I the only one who sometimes wakes up with a sudden moment of revelation in my brain? This morning I was late, it was 7am I did my best thinking before nodding back off for another couple of hours

OK so moving on, I've been tweaking my trading plan in my mind and today I am gonna get it all down on paper (or at least Wordpad LOL)

Basically this decribes:
What I am looking for in shares to trade
What I do when I find a promising candidate
How I set my entry point, my intended profit (probably using Profit Calls now as this seems to work better for me) and my stop loss
How to respond if a trade is going against me but has not reached my stop loss yet

So I actually have a plan. Yippee! It's based on what I was doing last week but with some refinements. Last week went well enough for a first real attempt

I couldn't have written this plan (or any other trading plan) a month ago because I really didn't know what I was doing - at least now I know enough to define what I think I should be doing - so that's progress.

Now then - if this plan works well for the next three or four weeks then I am gonna set it all down here so others can see what I am doing

If it doesn't work well, then I will try to analyze what is wrong and keep my methods to myself for a while (no point shouting about something that does not work eh?)

How will I define success in my own terms?

Well if I can make over £200 per week with a 90% ish success rate on trades, whilst only risking about 2% of my £5000 capital on any one trade and keeping my total exposure to less than 10% of my capital then I would say the plan works. I'm aiming for around £40 profit per trade.

If it does that I will explain how I am doing it.

In the meantime I'll post back if something exciting occurs

Thanks for the advice and encouragement so far

Rich
 
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SlowlyButSurely

Well-known member
324 38
Well if I can make over £200 per week with a 90% ish success rate on trades, whilst only risking about 2% of my £5000 capital on any one trade and keeping my total exposure to less than 10% of my capital then I would say the plan works. I'm aiming for around £40 profit per trade.

Hi Richy, so by risking 2% of £5,000 you will be risking £100 per trade to make a profit of £40 am I correct?
 

richy96

Member
54 2
Yeah roughly speaking that is correct

But like anything else threre is some variance

When i say 'risking' I mean my opening positions I take are for about £100 of contracts/shares per trade

The actuals risk I take depends when i close it

However my curernt trading plan depends on me allowing some 'waggle room' for trades so despite much advice I have read on here I am actually prepared to take a greater loss on a trade than I am likely to win - the upside being by allowing myself a little space to manouver I am hitting a 90% plus success rate so far

I have kinda this developed further. learning from last weeks experience - but not put into practice so far - with a couple of ideas how to limit those losses further if they occur yet still allow trades to reach thier potential profits

Another week coming up and I am looking forward to it - it should be interesting
 
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SlowlyButSurely

Well-known member
324 38
Richy how you holding up mate? Still got a 90% success rate or have you hit a few bumps in the road?

Have you managed to refine your strategy further?
 
 
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