Successful Trading and Compounding

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Update for week 13 ending Oct 29, 2011 :

-100$ for the week. Basically flat, was in risk-control mode (rather shock mode that i destroyed the result of all the last few weeks hard work), so no ES trading :)....which means fx trading this week was flat.

Weekly Stats:

1. Week PL: -100$
2. Start Equity: 2.5k
3. End Equity: 2.4k
4. Maximum equity run-up: 2.4k
5. Max Win day as % of that day's start equity: 12%
6. Max Loss day as % of that day's start equity: -10%

Below stats are from Journal start day:

1. Total PL: -5.2k
2. PF: 0.75
3. RoI: -68%
4. Max. DD: 82%
5. Current DD: 70%
6. # of winning days 48%, # of losing days 52%
7. Av. win day: 15%
8. Av. Loss day: -14%
 
Update for week 14 ending Nov 29, 2011 :

+1400$ for the week. Wow what a week, started Monday being up 70% on Japanese intervention, followed it Tuesday being up 40% - nailed the euro decline. Decided to withdraw 1100$ from the account to make sure I don't lose the winnings. Being stupid, started trading ES again to lose 1000$ over the next 3 days.

Weekly Stats:

Withdrawal: 1100$

1. Week PL: +1400$
2. Start Equity: 2.4k
3. End Equity: 2.8k
4. Maximum equity run-up: 5.8k
5. Max Win day as % of that day's start equity: 70%
6. Max Loss day as % of that day's start equity: -22%

Below stats are from Journal start day:

Withdrawal: 1100$

1. Total PL: -3.5k
2. PF: 0.84
3. RoI: -48%
4. Max. DD: 82%
5. Current DD: 52%
6. # of winning days 47%, # of losing days 53%
7. Av. win day: 17%
8. Av. Loss day: -14%

As a good method to protect some of my wins, I have decided that I will do regular withdrawals every month or every 2 months. For stats calculation purposes, I am going to treat withdrawal as spare cash lying in my bank account, which means that I am going to add all the withdrawals to Total PL and am going to use withdrawals to compute DD as well. So, lets say after 3 months, my account equity is at 6k, and lets assume my maximum ac equity was 10k, so my current DD should be 40%. However, if I have withdrawn 2k, I would report my current DD as 20%. I think this is a fair method to compute stats.
 
Alright, time for a 3 month (14 week) analytical summary:

1. My total PL (taking care of deposits/withdrawals) has been -3.5k.

2. My futures PL: -4.8k. So, had I not traded futures (primarily ES and QM and some others), trading only FX, my total PL should have been +1.3k.

3. COMMISSIONS: 6.5k. My average trading size in fx should be close to 50k (my rough estimate), on which I am paying full round-trip 5.00 USD commissions. Had my average trading size been 100k (which would have been the case with a slightly larger account), my commissions should have reduced by 50%. Lets assume worst case, my commissions reduce only by 30%. So, I should have paid 4.6k in commission. So, net net with this 30% reduced commission and without futures trading, my cumulative PL should have been 3.3k Not bad at all, on an account of around 7k. Who says you can't make money trading FX :)
 
Above cont.


4. Another important point to note is that I have traded ES mostly when my account equity has been >3.5k/4k. On most occasions, when I have traded ES, it has contributed to fast losses of money which means I have come back and fallen in the range of 2-3.5k equity. While trying to increase account equity up from that range (2-3.5k), I have been trading only FX, and have been successful more often than not. Making 10% on 3k is 300$, whereas losing 8% on 5k is 400$. So, making higher percentage at a smaller account size makes you less dollars than losing lesser percentage at a higher account size. This explains why my average win day is 17% compared to average loss day 14%, still I am so down for the quarter. This also means that only looking at my fx trading, my average win:average loss day ratio should be significantly more skewed than 17%:14%. I will later try to create a synthetic equity curve for my account had I not traded any futures contract.

Attached is the withdrawal adjusted equity curve. Sorry for bad handwriting, but I thought writing it down in pictorial form should help me more than just crunching numbers and identifying the reasons for my losses.
 

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One very very important thing for getting success in trading or any other endeauvor is that you must have a plan. And more importantly, you must actually follow the plan, for otherwise the most well prepared plan in the world also doesn't mean anything, if not followed.

What is needed to follow a plan is that your psychological stuff and your core beliefs should be aligned with the plan; otherwise you will waver from following your plan.

My systematic strategies have been thoroughly tested (Monte Carle etall everything - I reckon my analytics is at least better than 20% Chicago CTAs.) I know even if I am trading a 500k account, running only my systematic strategies, I will not stop and keep trading even after a 60%, 80% drawdown - unless I decide that fundamentally market structure has changed which makes my strategy unworkable. I have so much confidence in my strategy and so a 60%, even an 80% DD is absolutely within the ambit of my trading plan.

However, when I started the journal, my trading plan had no place for discretionary trading. After identifying my core belief is that I can trade successfully in a discretionary fashion, I decided to modify my trading plan to incorporate this reality of my thinking, so that my trading plan is aligned with my core beliefs. Around 6 weeks back, I identified 19 different trading setups and developed a plan to trade them in a discretionary fashion. Had immediate reduction in the account volatility.

One of my core beliefs, rather a wish that I have identified now, after a lot of losses, is that I want to trade ES intra-day and be successful at it. Over the last few weeks, I have a feeling that my understanding of ES market has been increasing with time.

However, to prevent further damage to my account, I have decided that I will cease all ES trading in my real account and move to a sim account. My aim is to be profitable on 6-8 out of 10 days. If I can achieve this, it will add a huge amount of diversification to my account equity, since win rate is <40% for most of my strategies. I am aiming for 60-70% positive days coming from ES alone.

From next week onwards, I will also report results of my sim ES trading. I will put in a lot of work on this ES trading, and approach it completely seriously. So that eventually when I am successful in this, I get the same results in live trading as sim trading.

EDIT: Just to clarify, I am going to continue trading FX in my real account and only move trading intraday ES to my sim account.
 
Update for week 15 ending Nov 11, 2011 :

-300$ for the week. Last week I decided to move all my ES trading to sim. Broke the rule, lost 500$ trading ES in live account. So, again had I not traded ES, I would have been up 200$ for the week.

Now, as a control system, I have asked my family to remind me everyday that I must not trade ES. I am sure this will keep me from myself from losing money.

Otherwise, caught 160 pip short move in AUD. Very Good trade. Errors caused me 350$. Otherwise, week would have been positive even with ES trading. One error on Friday cost me 200$ and loss of internet connection for 10 minutes cost me 150$.

An interesting statistic that show that I am letting my winners run whereas cutting my losers short - is the average of Max Win day and Max Loss day as % of that days start equity. Below are the comparison:

Week 1-7
Average (Max Weekly Win Day) 15%
Average (Max Weekly Loss Day) -23%

Week 8-15
Average (Max Weekly Win Day) 41%
Average (Max Weekly Loss Day) -24%


This Weekly Stats:

Withdrawal: 0$

1. Week PL: -300$
2. Start Equity: 2.8k
3. End Equity: 2.5k
4. Maximum equity run-up: 3.2k
5. Max Win day as % of that day's start equity: 65%
6. Max Loss day as % of that day's start equity: -35%

Below stats are from Journal start day:

Withdrawal: 1100$

1. Total PL: -3.8k
2. PF: 0.84
3. RoI: -52%
4. Max. DD: 82%
5. Current DD: 56%
6. # of winning days 47%, # of losing days 53%
7. Av. win day: 18%
8. Av. Loss day: -14%
 
Update for week 16 ending Nov 18, 2011 :

+600$ for the week. No trades on Monday due to internet issues. Traded ES again and lost 500$. So, had I not traded ES, I would have been up 1100$ for the week!! I promise myself once again, that I will not trade ES unless I have at least 10k USD in account equity and back-tested trading strategies on ES.
This Weekly Stats:

Withdrawal: 0$

1. Week PL: +600$
2. Start Equity: 2.5k
3. End Equity: 3.1k
4. Maximum equity run-up: 3.1k
5. Max Win day as % of that day's start equity: 26%
6. Max Loss day as % of that day's start equity: -18%

Below stats are from Journal start day:

Withdrawal: 1100$

1. Total PL: -3.2k
2. PF: 0.87
3. RoI: -43%
4. Max. DD: 82%
5. Current DD: 48%
6. # of winning days 48%, # of losing days 52%
7. Av. win day: 18%
8. Av. Loss day: -14%
 

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I have been profitable on <50% of trading days.

I have been very impressed with the consistency of Lescor and also good equity curve of RoI journal. I thought those guys have so much consistent equity curve because they are trading multiple strategies over more than 10 stocks every day. Since I am trading only 2-4 currency pairs, I should aim to maximize returns and not worry too much even if I have 3 losing months in a year.

However, after reading the thread "Can it be done", I have been very positively impressed and have been wondering if I can do it myself. So, I have decided that I am going to scalp primarily Euro and see after 10 and 30 trading days how it goes.

Methodology: Look at 5 and 30 min chart, recent price movement, support/resistance areas, time of day, and form a bias about the next 30min bar and day's direction, and then trade in that direction and occasionally retraces against that direction. Basically, I am saying my edge in scalping is the back-testing research that I have done on Euro price movement, and my 3 yrs screen time experience. I will see how it goes - will either modify and continue or stop after 10/30 days of result.

Minimum stop of 20 pips, occasionally up to 40-60 pips. Target mostly between 6-12 pips.

Will report results for scalping separately for next few days to see how I am doing, since in one day, I will have enough sample size. If I am successful, my scalping PL should be positive on > 70% of trading days. Already started this Thursday. Results below.

Thursday
# Trades: 19
% Win: 100%
Total pips w.o comm: 127
Total pips with comm: 117.5

Friday
# Trades: 33
% Win: 85%
Total pips w.o comm: 30.5
Total pips with comm: 14
 
Update for week 17 ending Nov 25, 2011 :

+2300$ for the week. First week, in which I made money on all 5 trading days. Wow....it felt good. Also, I am currently in my longest winning streak: 8 positive days in a row. Never thought I can have such a winning streak!

This Week's Stats:

Withdrawal: 0$

1. Week PL: +2300$
2. Start Equity: 3.1k
3. End Equity: 5.4k
4. Maximum equity run-up: 5.4k
5. Max Win day as % of that day's start equity: 22%
6. Max Loss day as % of that day's start equity: +4% => no losing day this week :)

Below stats are from Journal start day:

Withdrawal: 1100$

1. Total PL: -900$
2. PF: 0.96
3. RoI: -12%
4. Max. DD: 82%
5. Current DD: 20%
6. # of winning days 51%, # of losing days 49%
7. Av. win day: 17%
8. Av. Loss day: -14%
 

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