Trading Journals and No Trading Journals

[tomorton]

I don't wish to take anything away from the excellent "Essentials Of 'Trading Journals" that heads the posts on the Trading Journals forum but I would wish to humbly add something.

We all know its a good idea to track why we entered a trade so we can review our performance later and learn from the experience. (Not that we all always do this, but we do know we should).

However, what about a journal for the trades you didn't take?

I've just started reviewing the trades last week and last month that I wasn't in and trying to understand why I didn't enter them. The best trades of the month stand off the chart after a couple of weeks and I can score off the ones I took using a conventional Trading Journal approach. But I'm hoping to learn something less obvious from a No Trading Journal - why didn't I get in this or that trade on this or that day? -
Did I not see the signal?
Was the trend ambiguous?
Did I incorrectly identify the price action?
Was I swayed by newsflow?
Was I already fully committed through other instruments?
Did I wait too long to enter?
Did I let previous gains or losses affect my new trade decisions?
etc. etc.

Actually, its early days so I don't even have all the right questions let alone the right answers but I'm hoping for some nuggets to come out of this.

Clearly, its easier if your trading focuses on a limited 'universe' of targets; I trade from 15 forex pairs using dailies. It also does mean you have to have a very clear picture in mind of what would be your trade set-ups (and this alone can be a useful exercise in discipline).

Hoping to post some conclusions in near future but meantime, has anyone already explored this approach and has some feedback to share?

 

[dbphoenix]

How much of this is a result of the number of instruments you follow?

Db

 

[tomorton]

How much of this is a result of the number of instruments you follow?

Db

It could be argued 15 is far too many. Other traders will want the whole of the FTSE All-Share. But even on one target instrument, it would be duly diligent to check trades that were not taken - if there are very good reasons, so much the better.

Actually, the 15 pairs would never generate 15 positions - 6 are EUR crosses and 6 USD. It would be brave to be long / short all 6 of each simultaneously and unusual to be long some EUR pairs and short others.

 

[hhiusa]

It could be argued 15 is far too many. Other traders will want the whole of the FTSE All-Share. But even on one target instrument, it would be duly diligent to check trades that were not taken - if there are very good reasons, so much the better.

Actually, the 15 pairs would never generate 15 positions - 6 are EUR crosses and 6 USD. It would be brave to be long / short all 6 of each simultaneously and unusual to be long some EUR pairs and short others.

1. He said 15 pairs not 15 position. 15 financial instruments is hardly too many to follow.
2. Trading a single or two financial instruments is like putting all your eggs in one basket. That would be ill-advised. Diversification is key and I don't mean by hedging position. Hedging involves pier Ritz which is worse than speculative risk.

I currently watch a little more than 1200 instruments between the NYSE, NASDAQ and ARCA.
I monitor all the constituents on the Nikkei.
Equities in the FTSE 100, Stockholm 30, Copenhagen 20.

That is not to say that you're going to have an open position in all of these. It just means I have a better chance of finding something to trade and have it be profitable.

 

[itspossible]

1. He said 15 pairs not 15 position. 15 financial instruments is hardly too many to follow.
2. Trading a single or two financial instruments is like putting all your eggs in one basket. That would be ill-advised. Diversification is key and I don't mean by hedging position. Hedging involves pier Ritz which is worse than speculative risk.

I currently watch a little more than 1200 instruments between the NYSE, NASDAQ and ARCA.
I monitor all the constituents on the Nikkei.
Equities in the FTSE 100, Stockholm 30, Copenhagen 20.

That is not to say that you're going to have an open position in all of these. It just means I have a better chance of finding something to trade and have it be profitable.

and your profits over the last 10yrs ARE

 

[hhiusa]

and your profits over the last 10yrs ARE

I have not been trading over the last 10 years. You could always look at my journal. :whistling

 

[itspossible]

I have not been trading over the last 10 years. You could always look at my journal. :whistling

 

[timsk]

. . . It just means I have a better chance of finding something to trade and have it be profitable.

Hi hhiusa,
Personally, I'm happy to accept this applies to you, But it certainly doesn't apply to me and, I suspect, to the majority of traders out there.

I only trade one instrument: the German Dax - and nothing else. Diversification has it's place and is especially applicable to certain markets - but not all. Traders of individual equities may well benefit from not having all their eggs in one basket. However, traders of an equity index, be it the S&P, EuroStoxx50 or Dax - might do far better to specialize in just one of the above - than to spread their focus across all three. That certainly applies to me.
Tim.

 

[tar]

Trading multiple instruments/markets helped me immensely , getting married to a single instrument is a disaster .

For example sometimes the euro is not trade-able tight ranges just noise acting like a p@@@ and sometimes it is very attractive clear and moving , so getting obsessed about the euro - or the ES ... etc - all the time isnt helpful at all i say that from experience .

What the majority of traders are doing should be questioned hence most of them lose . Ofcourse not necessarily to hold multiple positions for multiple markets simultaneously that's not what i meant .

 

[hhiusa]

Hi hhiusa,
Personally, I'm happy to accept this applies to you, But it certainly doesn't apply to me and, I suspect, to the majority of traders out there.

I only trade one instrument: the German Dax - and nothing else. Diversification has it's place and is especially applicable to certain markets - but not all. Traders of individual equities may well benefit from not having all their eggs in one basket. However, traders of an equity index, be it the S&P, EuroStoxx50 or Dax - might do far better to specialize in just one of the above - than to spread their focus across all three. That certainly applies to me.
Tim.

To me, the idiom "don't put all your eggs in one basket" is not to be applied situationally. It is applied to any situation.

This is backed up mathematically, by Nobel Laureate Markowitz and the hypergeometric probability distribution.

P(X=k) = f(k; N, K, n) = (K choose k)*(N - K choose n - k)/(N choose n)

To illustrate this point, I will show two examples.

Ex. 1
You buy one financial instrument. Your proability of success is 50/50 regardless of your trading style. The probability that one trade is succussful is 50%.

Ex. 4
You place 10 open trades. The probability that 1 trade is successful is 99.9999%. The probability that at least 4 trades are successful is 99.5%.

P(X<=4) = f(4, 10, 6, 10) = 0.995.

 

[tomorton]

Agree with Tim here hhiusa, I don't know how you're doing what you're doing.

I have found I could trade passably on equities or indices or forex or gold, but badly on a mixture of these. It might be a mind-set thing but that doesn't make it less real or unique to me. I did find trading the whole LSE was not good, trading FTSE350 members was OK, but I did better when I focused in on 38 forex pairs, and as I said, am now down to 15 majors.

That said, I did not do as well as I had thought I should when trading the FTSE100 index only, found sometimes I was 'forcing' trades out of it on premature or weak signals. Hoping to have found a happy medium.

 

[hhiusa]

Agree with Tim here hhiusa, I don't know how you're doing what you're doing.

Could you elaborate on this? I used math similar to the math that I just used in my last post.

If you do not want to read my journal, that is fine. It shows how I am doing what I am doing.

 

[tar]

That said, I did not do as well as I had thought I should when trading the FTSE100 index only, found sometimes I was 'forcing' trades out of it on premature or weak signals. Hoping to have found a happy medium.

Exactly ...

 

[tomorton]

Best trades I didn't take last week (with bias towards trend-following)

AUD/JPY – Friday – Bullish break-out from bull flag, closing at high of week and day: short-term long. I’m waiting for pull-back to new swing low or failure.

EUR/AUD – Friday – Bearish correction after ECB actions Thursday, lowest close of week. Don’t yet have a sure view of what the market thinks of ECB, waiting for dust to settle but have a limited long EUR/GBP.

GBP/JPY and GBP/USD – Friday – Bullish recovery from over-sold pound? Prefer to wait for another short opportunity or get into EUR pairs when that picture clears.

 

[hhiusa]

Best trades I didn't take last week (with bias towards trend-following)

AUD/JPY – Friday – Bullish break-out from bull flag, closing at high of week and day: short-term long. I’m waiting for pull-back to new swing low or failure.

EUR/AUD – Friday – Bearish correction after ECB actions Thursday, lowest close of week. Don’t yet have a sure view of what the market thinks of ECB, waiting for dust to settle but have a limited long EUR/GBP.

GBP/JPY and GBP/USD – Friday – Bullish recovery from over-sold pound? Prefer to wait for another short opportunity or get into EUR pairs when that picture clears.

If you trade the AUD/JPY, you need to first buy the GBP/AUD or GBP/JPY pair first in order to get some AUD or JPY. It seems like a roundabout way of trading, unless you mean that arbitraging from GBP/AUD -> AUD/JPY -> GBP/JPY was cheaper than trading the GBP/JPY. I could see how that it is possible.