Chinook's EUR/USD (E/$)Mumblings
- Thread starter chinook
- Start date
I strayed away from my trading plan today. I was short biased (that's OK). If I traded according to the plan, I would have taken only two short trades and lose about 16-20 pips. I took four short trades and lost about 26 pips. Actually, in terms of loss, it's not a big difference. However, the plan doesn't let me short over a certain threshold. And while waiting to get short, I might have switched to the long side during a pullback. "The plan" is devised so that it prevents me from going against the market direction no matter what my bias is.
Ahhh the elusive "plan", so logical, short and simple on paper yet its imbecile operator manages to stray away from it often
Ahhh the elusive "plan", so logical, short and simple on paper yet its imbecile operator manages to stray away from it often
Quote from chinook:
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Ahhh the elusive "plan", so logical, short and simple on paper yet its imbecile operator manages to stray away from it often
I guess your system has a fair amount of discretionary triggers, so there will always be room for "operator error" ?
I am almost all discretionary - trading after fairly complex mix of signals, or just "when I feel like it". I call it discretionary, although if I got identified and modelled many enough patterns/hints I could start calling it a system too.
20-20 hindsight is perfect always, but today was that typical "trending day" if you look at RTH, and not the overnight session. But when it comes down to it - FX is not really similar to index futures - and not overly dominated by US traders, so I guess it's global 24h.
So what in your system was interfering with it identifying the emerging trend, or at mid-day, the unfolding trend ? Is it based upon directional bias at the start ?
I must say that when I woke up this morning, I was still partial to a short bias, but when I saw that spike up and read comments, analysis .. then started watching the orderbook ... I quickly got a up bias for the day. I guess it also was partly a reaction to yesterday - and that might be how it was for many other traders in the market too.
I guess curl didn't have one of his best days either. Not a great day for me - on the other hand not to bad a result for me who is a bad trend-trader. It kind of adds to my lowered confidence after yesterday.
I also remember when I did 100+ perfect trades in sequence, one of the most powerful impression I had was a lot of fear for doing something wrong. I guess that's a healthy thing - when it comes to the equity - and a bad thing for your physical health as far as anxiety goes.
My system has two entry parts. Part 1 is the long, short or flat decision which is discretionary--this is of course a blend of art and science. It is based on mainly volume and correlated instruments and some other factors. Part 2 is the actual entry trigger which is quite mechanical. For instance, I'm not supposed to take short trades over my adaptive MA even if I'm short biased. I overrode it twice today.
The volume threw me off today. After the sharp sell off before US open, the pull up volume was weaker. Mainly I got short biased due to that. Actually 3 of my trades made money before getting stopped out. One was even +17 ticks at some point before turning into -8 but the volume was low during the pull up so I stuck with it... But anyway, even if I had a strong short bias, the system told me to wait until the price breaks down certain level.
You mentioned stress and anxiety in trading in your last sentence. In a way, I ended up coming up with my system so that the stress will be minimal. That's why it's kind of longer term. The more I follow the ticks, more stressed out I get.
BTW, curl got himself banned--It looks like he interrupted several threads same way. I have no idea why would anyone enjoy doing something like this
The volume threw me off today. After the sharp sell off before US open, the pull up volume was weaker. Mainly I got short biased due to that. Actually 3 of my trades made money before getting stopped out. One was even +17 ticks at some point before turning into -8 but the volume was low during the pull up so I stuck with it... But anyway, even if I had a strong short bias, the system told me to wait until the price breaks down certain level.
You mentioned stress and anxiety in trading in your last sentence. In a way, I ended up coming up with my system so that the stress will be minimal. That's why it's kind of longer term. The more I follow the ticks, more stressed out I get.
BTW, curl got himself banned--It looks like he interrupted several threads same way. I have no idea why would anyone enjoy doing something like this
I was wondering how discretionary you are trading your system, it was partly to trya and understand if you can do any backtesting on your system.
If you can't backtest, then simulation is the only way until it sits well and "perfect" (as good as it gets) in execution.
I understand that you want to remove the fear and stress from the trading. I was wondering if you can actually utilize at least fear as an emotion to filter and recalibrate trades to your advantage. After a period of losses, a feeling of capitulation sets in which can create a carelessness further compounding losses.
Like I said earlier, I have had seven figure drawdown doing investments (yup, that's more than $1M). I guess I have learned a little from that experience ... but one thing is watching something that is at good profits turning into a lot (!) less. Then you got to ask yourself: why did you let that happen ?
When I got around to learning something about drawdowns from my stock investing ... I think fear was something that I now cherish as something sane and healthy. Watching 1M trickle between your fingers when you only have a few is not ... completely rational ... whatever the reason.
I think I would characterize a single trade at +17 turning into a -8 as something similar. At +17 intraday .. you can absolutely afford to raise your stop above break-even.
Look at Thomson today - they raised their stop to 1.2590 I think it was - from the 1.2545 entry (or what it was). They had a stop at 1.2520 or around there before that, and below 1.25 on the initial entry I think. They did that because of the changing market conditions.
How adaptive is your system to changes ? Are the only adaptiveness your entries, while the exits are completely mechanical ? I.e discretionary entry and trying to match that with a mechanical exit ?
How much is good enough for markets that have been trading in so completely tight ranges for a very long time ? They only move big on the numbers, or sometimes on stops outside the US session, and trying to catch those intraday is like playing roulette on a specific number - in my view. It is very risky.
Going for large intraday moves would mean you would have to have very good scaling and money management. How about the old - take half of those profits at some predefined target - then let profits run - or stop easily ?
I'm having a go at this because I think trying to "capture the essence of the whole day" would be inherently difficult. It's like you would be predicting a rise or a fall for the day with no clear entry nor cut-off.
What is the central philosophy behind the system - the thing you want to model and capture ? If that objective is extremely difficult in itself - how can you improve on the problem ? Can you limit it down to something more tangible, comprehensible and possibly define it ? IF you can IDENTIFY it fully - then you have a chance of DETECTING it - and then you're half-way there.
Put some hard limits in there too ... 17 points is quite good on a single move - even though you are trying to capture the large move of the day.
Remember every day is different, and you need to be able to re-calibrate your trading and adapt to the changing conditions. Sometimes this involves time passing - whereby you can identify a possible target in creation.
Sorry for getting so abstract.
I can't backtest it since the entry direction decision is kind of fuzzy. But the entry triggers and trailing stop are mechanical.
I don't have problems with losses from trades that were taken according to the plan. But losses from impulsive trades create exactly what you were describing--a feeling of capitulation setting in.
Oh man, that's a lot of money to erode. I guess it was a quite painfull experience. But I've been in similar however smaller boat. My stock erosion were around $100k+. That's why I ended up spending lot of time in short term trading.
I also overrode my rule which says move the stop to b/e+1 tick once the profit is 16 ticks! Once I go discretionary, It's harder for me to switch back.
Let me briefly describe it here:
1) Entry direction: Fuzzy. Long. short, flat decision based on volume, "local" correlated instruments (like bonds, crude oil, GBP etc...), price action like higher highs, lower lows etc...
2)Entry trigger: Mechanical. Long(short) entry only if within three ticks over(below) adaptive MA or after 16 ticks pullback
3) Initial entry Stop: Fuzzy. Max initial stop=12 ticks. Usually set couple ticks away from local min/max
4) Trailing stop: Mechanical. It's based on local volatility and adaptive MA. TS clearly displays what the stop should be.
Plus the scaling in part...
Overall it's a simple system.
..............
Remember every day is different, and you need to be able to re-calibrate your trading and adapt to the changing conditions. Sometimes this involves time passing - whereby you can identify a possible target in creation.
Sorry for getting so abstract.
I tried to come up with a more adaptive system but it got complicated. I came up with this final plan after monitoring my mental state and stress levels in real-time. I accept the fact that I'll lose money or breakeven on most days. However, I'll keep the loss small by risking small. Once in a while, I'll catch a nice trend and milk it by scaling in while always keeping my risk constant. For instance, no scaling in without securing the stop on the initial entry to breakeven.
Once I finalize this plan, I'll go multi instrument with ES, ZN and EURUSD and possibly others. It'll be easy to slightly modify such a plan for different instruments.