HSI Journal

Hi ET99,

My rules are about all about risk control, nothing related to the market opportunity.

My setups for enter and exit is related to the market opportunity, such as trend continue or reverse, etc. As you pointed out in your last post, I need to have clear setups even if I cannot computerize them. Thanks for your comments.
 
I am trying to lead you to think as a trader: Your rules must facilitate trading.

What happens if you did 5 successful scalps. YOu have built up a small war chest. Now the market presents itself that it will make a strong rally. What would you do?

What happens if after exiting a trade for 100pts, you realized the market is running out of steam and will be making a big drop. Do you wait 10 minutes?


I am not saying your rules are wrong. You have to make that decision. What I want you to do is think about the purpose of the rules -- are they for trading? or are they rules for the shake of having some rules?

You have recognized your problem as overtrading. I don't know the validity of that prognosis. But as a trader, your job is to trade. If you made a loss, your job is to find out what analysis that caused you to make that mistake. Stop trading will definitely cured the possibility of making the same loss, but it will also cut you off from making a profit.
 
Hi ET99,

First of all, I highly appreciated you for your advice and your comments!

An experienced and very disciplined trader may grasp most of the opportunities that the market offers without using rigid risk control rules. I am far away from reaching that.

As a learning trader, I try everything that I think may improve my performance and make my equity curve growing more smoothly. I know myself that I lack discipline, so I need some very rigid rules to keep my emotion in control. As I gain experience and become more disciplined, I may loosen my rules in some degree and allow myself more flexibility to treat my own rules.

I understood that a trader must stop making the same mistakes. But in reality, I did repeat the same mistake again and again. This is one of the main motivations that I tried to make rules and strictly follow them.
 
I trade ES myself, but I think this general rules are for everyone: without a well thought out trading plan it's impossible to have decent rules to follow, without decent rules to follow it's impossible to have discipline in your trading ...
(you may have in money-managenent, but that's another thing)
So like some other person said: it's necessary to really define and know the reasons why you are doing something otherwise I'm afraid you're just are gambling with some money management. This will have you automatically have some rules to follow and something to focus on regarding your discipline.
You need reasons for entries, exits, stoplosses ...
 
Quote from HSI_Trader:

Hi ET99,

First of all, I highly appreciated you for your advice and your comments!

An experienced and very disciplined trader may grasp most of the opportunities that the market offers without using rigid risk control rules. I am far away from reaching that.

As a learning trader, I try everything that I think may improve my performance and make my equity curve growing more smoothly. I know myself that I lack discipline, so I need some very rigid rules to keep my emotion in control. As I gain experience and become more disciplined, I may loosen my rules in some degree and allow myself more flexibility to treat my own rules.

I understood that a trader must stop making the same mistakes. But in reality, I did repeat the same mistake again and again. This is one of the main motivations that I tried to make rules and strictly follow them.
More...

I noticed you keep stressing your lack of discipline....if you don't mind, may i ask do you think you have an edge in the market in the first place ?

If you don't have an edge.. no amount of discipline will make you profitable.

And maybe you are not discipline because you have no faith in your setups in the first place ? And thus its a confidence issue rather than discipline ?

cheers
 
I admire people who can read price action.

But in today's highly computerized environment, there is no need to confine to reading price alone. Many indicators, even basic ones like MACD and Stochastic, can provide lots of insightful information.

Each to his own, you must use what works for you.
 
Thanks all for your valuable inputs. I have been thinking your suggestions, comments and questions.
I think that I should honestly answer the following questions to myself:

1. Do I have a qualified trading plan?
I have a trading plan. However, it may not be a qualified one as ET99 pointed out. The weakest part of my plan is related to my setups. Why I don't make it clear, at least, to myself? I tried, but didn't get it yet. The reasons are two folds. The first one is that I even don't have a clear picture in my mind; the second is that my setups largely depend on my instant feeling about the market strength and weakness.

2. Do I have an edge?
I'd say that there was a slight odd favor on me based on my last year's trade records. Was that an edge or just plain luck? I think it was more likely edge rather than luck. Did my edge work only on certain market condition? I don't know. I haven't traded long enough to be able to draw a conclusion. Do I have an edge now? I believe I still have an edge, but nothing to support my faith. My P/L at the end of this year will tell whether I have an edge or not?

3. Do I have faith in my setups?
Yes, I have. Otherwise, I won't trade the way I traded. Am I confident on my setups, especially each enter/exit? No, I don't. In which case, I'll lose my faith in my setups? If my maximum drawdown exceeds 25%, I shouldn't have any faith left in my setups.

4. Why I made so rigid money management rules?
I learned my lesson in a hard way. I lost about 40K (10K each time) in several days by overtrading, fighting market or fighting myself. I got hurt badly. That was the mistake I cannot afford to occur again financially and emotionally. That was the main reason
I started this journal. I think I know my weakness.

5. Why don't I use indicators?
Different indicators with varying parameters may fit different market conditions. However, which indicators to use largely depend on an individual trader's discretion or judgment. There are several reasons why I haven't use indicators in my real money trading:
a) I wanted to keep trading simple,
b) My brain had a hard time to interpret the signals provided by indicators. I didn't have enough brainpower to process them while I was watching charts and reading price.
c) I feel no urgent needs for myself to use indicators at this time. I may try paper trading using indicators later.

6. Why I choose discretionary trading other than system trading?
It was basically because I didn't lose money on discretionary trading and I feel comfortable about them most of the time.
 
Well I've been MIA for a bit due to this US Market. Working on a bond desk has got me doing back flips...not always for a good reason.

But back to the discussion.

I think there are some valid points being offered here. ET99 is great at breaking down the structure of a trader and keeping your mindset focused on your goals and overall strategy.
I think HSI trader is doing a great job in developing his strategy. I believe he has 75% developed his actual strategy and that may be why he doesn't have 100% faith in it. It is because of this lack of full faith that he may be pulling away from his rules in trading outside his box. But I also believe this will help him find out what does/and doesn't work. In that way he is actually helping to fully develop his strategy.
This is only my opinion from what I read on the posts and mean no bad by it. In fact I only have good stuff to say.
That being said, once you have full faith in your strategy and you know that you wins will outweigh your losses (based on your strategy), then you will WANT to stay within those rules. You will be fine with your losses (that you hopefully cut short) because your wins will come out more. There is your EDGE!!

Good Trading

ICE
 
Hi Iceburrg,

Thanks for your encourage! Both of my setups and money management rules have been evolving. I hope that I may get them to a relatively stable status some time later this year.

I followed to my rules and made only four trades today. I saw the weakness of HSI at open and went short. Its weakness didn¡¦t last too long, so I covered my short. I then bought three times. One of them worked well.

Trades:
2008-01-21 09:45:21: S (1) at 24470.0, 2008-01-21 09:49:59: B (1) at 24460.0, P/L = 8.8
2008-01-21 10:05:00: B (1) at 24423.0, 2008-01-21 10:14:56: S (1) at 24569.0, P/L = 144.8
2008-01-21 11:13:42: B (1) at 24454.0, 2008-01-21 11:15:29: S (1) at 24491.0, P/L = 35.8
2008-01-21 11:50:45: B (1) at 24614.0, 2008-01-21 12:01:38: S (1) at 24629.0, P/L = 13.8


Total P/L = 203.2, P/L Per Trade = 50.8, Total Commission = 4.8
 

Attachments

Quote from ET99:

I admire people who can read price action.

But in today's highly computerized environment, there is no need to confine to reading price alone. Many indicators, even basic ones like MACD and Stochastic, can provide lots of insightful information.

Each to his own, you must use what works for you.
More...
Quote from HSI_Trader:

6. Why I choose discretionary trading other than system trading?
It was basically because I didn't lose money on discretionary trading and I feel comfortable about them most of the time.
More...
I will give you one example.
Last week, there was one trade we entered around the same time. It was a short trade. The market did not drop immediately after we entered. It hang around for a moment or two; you decided to exit with a small profit that covered your commission.

But the MACD had turned, therefore I held.
 
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