2012 Journal

A

aus_SPIder

Hi All

Having finally become reasonably profitable over the past few months (after many years of trying to trade) I have decided to keep a journal to help me out on my trades and also to pay back some of the immense help that i've gotten from elitetrader and other various traders in my life. It also helps me grind it day after day. When i signed up for trading i thought it was going to to get my heart racing. Then i figured that most of my money is made by sitting on my ass and going to sleep :(

Trading Strategy
The exact trading strategy I use will not be revealed, however it is not a very difficult strategy. I pretty much use the same S/R and pivot points that the rest of this forum uses. Nothing special.

I trade 2 systems at the same time.

System 1: Short term volatility based reversal strategy. Average holding period is around 48 hours

System 2: Longer term trend following strategy. Average holding period is approximately 5 to 10 days.

I use 2 indicators (9 and 18 ema) and the remainder is price action only. I primarily trade on the 4hr timeframe.

I have backtested both systems over the past 20 years and combined they give the following characteristics:

Combined System Characteristics:
Win: 48%
Breakeven: 10%
Lose: 42%
Profit Factor: 2.5

Money Management
I run very tight money management. Maximum 0.5% risk per trade and maximum 5% open risk across all open positions. Open risk is a function of both open trades and the correlation across markets.

Each 10% drawdown results in a furthur 10% reduction of trading capital.

I have defined stops and entries, position sizing is dependent on the size of the stop, the type of trade and the current "feel" that I have of the market. The size of the stop dictates around 60% of the position size, and the type and feel i have the trade dictate the other 40%.

Results
For privacy reasons, I will post my results in pips and in % of account.
 
Outlooks:

EUR/USD Analysis:

Currently in a choppy uptrend. I'll sit this one out for a while and wait for an upside breakout at around 1.3293. Given the choppyness, i would put a small position in at 1.3293 at 0.25% risk and pyramid if it goes furthur.

Currently a breakout at 1.3131 will signal a reversal and a possible downtrade.

USD/JPY Analysis:
Currenty in a downtrend. Downside breakout of 81.95 will signal furthur decreases, however its likely to chop around for another day or two before hitting this level.

AUD/USD Analysis:
Was in downtrend, however possibly looking a reversal over the next 8 hours. A break above 1.0491 will signal a possible change to an uptrend. A break below 1.0370 will signal a continuation of the downtrend.


Open positions:
USD/JPY: Short at 82.62, Stop at 82.79. Looking to exit at breakeven given the choppyness.
 
Some trade statistics for this year are included

AUD/USD
number of trades: 26
Win/draw/lose: 16/3/7
Profit factor: 2.0
Total pips: 315

Comment: quite a few choppy periods in the AUD/USD this year which lead to some losses and volatility in my equity curve.

USD/JPY
number of trades: 20
Win/draw/lose: 15/1/4
Profit Factor: 11.7
Total pips: 645

Comment: Some pretty sweet, smooth trends this year so far on USD/JPY.

Consolidated Return
Total trades: 46
Win/draw/lose: 31/4/11
Profit factor: 3.42
% YTD return: 29.4%
Max DD: 2.5%

These are pretty amazing figures this year. Note that these are small sample sizes and based upon my trading experience from last year are likely to drop a bit over the next 1-2 months.

Last year I posted +58.2% with a 9.2% drawdown.

I'm also adding EUR/USD into the mix, as i've usually just traded the asian session.
 
For everyone making a trading system, I recommend the following simple principles

Trend Trading System
1) Define a trend
2) Enter a trend
3) Trailing stop

Backtest element 1 separately to 2 and 3. Acrary had a brilliant post on backtesting trading systems (can't really be bothered finding it. use the search button).

I recommend you make a method of defining a trend and then go back and classify the maximum up and down movement in each "trend". Determine whether your definition of trend movements are statistically significant from "random" movements.

Once you've defined a trend, then have a look at all your defined trends. What is the maximum up/down movement? Which method allows you to capture the greatest % of the swing? Note that the bigger your stop, the higher the % of the trend you'll catch, but you'll also give up more when you decide to take your profits.

Entry: Breakout/retracement based entry.
Stops: trailing or fixed profit target. I like the former because it allows me to get some pretty big moves on the board :)

Using large stops is not suicide. This is where money management comes in. Many trend systems trade on big stops which can kill your equity during volatile periods. Think of your account in terms of units, where 1 unit is equal to 1% of equity. Large stops require less size to maintain constant % account risk.
 
Quote from aus_SPIder:

Outlooks:

EUR/USD Analysis:

Open positions:
USD/JPY: Short at 82.62, Stop at 82.79. Looking to exit at breakeven given the choppyness.
More...

Exit at 82.62. 0% profit. Breakeven.

No open positions atm
 
In terms of Brokers, I use Oanda and Interactive Brokers. This is because sometimes my trades require <1 standard lot/a few microlots.

E.g position size of 124,000 units. I would trade a standard lot with Interactive brokers and 24,000 units with Oanda (which allows everything to 1 lot)

This way I get perfect position sizing :)

I'm an accountant by trade so consolidate my accounts into 1 every night and look at consolidated figures. Rofl, about the only use i've ever had for my CPA.
 
Quote from aus_SPIder:

New trade

AUD/USD buy at 1.0491 stop loss 1.0423

Looking for a quick reversal and exit on establishment of a new uptrend.
More...

Trade 2:
AUD/USD buy at 1.0491 stop loss 1.0423. Exited at 1.0528.
Result: 37 pips, +0.13% equity change

Trade 3:
USD/JPY buy at 83.00 stop 82.69. stop hit at 82.69
Result: -31 pips, -0.25% equity change
Comment: I was right about the reversal, but it came quite gradually and hit my stops before resuming its course. ah well, these things happen

Trade 4:
USD/JPY sell at 82.69 stop 82.94. stop hit 82.94
Result: -25 pips, -0.18% equity change
Comment: looking for a continuation of the downtrend after the failure of the reversal. However pretty much got chopped away overnight as there was no movement in the london/new york session. Took my loss and moved on.

Trade 5:
AUD/USD buy at 1.0546 stop 1.0502. stop hit 1.0502
Result: -44 pips, -0.2% equity change
Comment: looking for the first breakout in the newly established uptrend which was created after my successful reversal trade in trade 2. didn't happen and price collapsed. Will wait for the first retracement and see if it pushes up.

Net of the first 5 trades: -63 pips, -0.65% loss from peak equity.

well I did jinx myself that my run this month couldn't last on this forum! lol
 
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