Successful Trading and Compounding
- Thread starter gmst
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About consistency - With more experience, it is really sinking in me how important being consistent is for running a successful trading operation.
I lost 'lots' of money in August, but have been profitable every month since then. I am hopeful I will end December also profitable. That will be 4 months out of 5 profitable.
However, on a weekly basis, I am positive 10 weeks out of 20. On a daily basis also, positive on only 50% days. It really sucks to make money on a week, only to lose it the next week. Ignoring the first 4 brutal losing weeks (after which I have got my act together), I have been positive on 10 out of 16 weeks, for a 63% weekly win rate.
GOAL: I am setting a new goal today - to increase my weekly win rate to at least 75%.
How I am going to approach this:
I went through the last 20 weeks trading and one finding is pretty interesting. For the last 20 weeks, whenever I won on >= 3 days in a week, then my weekly PL was positive. If I won on <=2 days in a week, my weekly PL was negative. Above condition was true for 18 weeks out of 20.
So, going forward, I will strive to have at least 3 positive days in a week. This APPROACH is going to modify my trading as follows:
1. I will trade cautiously on Monday and Tuesday with the aim of being profitable on these 2 days. In dollar terms, as soon as I am up 400-600$ on these 2 days, I will be extremely choosy in further trades and likely won't trade anymore for the day, unless market presents an exceptionally good opportunity.
2. If I am positive on Monday and Tuesday, I will trade more freely on Wed and Thursday. If I am positive on 3 or 4 days by Thursday eod, then I will push my luck and trade more freely on Friday trying to make more than 800$ on Friday. Because even if I lose money on Friday, more likely than not, I will end the week positive.
This approach is similar to having a daily PL target. Probably not the best way, as I might miss out some good opportunities when I am trading cautiously, but I guess it will make my equity curve more smooth, thus reducing DD and making the effects of compounding more useful over the longer term.
A CONCRETE GOAL:
For the next 5 weeks, I aim to be positive on 4 or more weeks AND for the next 10 weeks, I aim to be positive on 8 or more weeks.
I lost 'lots' of money in August, but have been profitable every month since then. I am hopeful I will end December also profitable. That will be 4 months out of 5 profitable.
However, on a weekly basis, I am positive 10 weeks out of 20. On a daily basis also, positive on only 50% days. It really sucks to make money on a week, only to lose it the next week. Ignoring the first 4 brutal losing weeks (after which I have got my act together), I have been positive on 10 out of 16 weeks, for a 63% weekly win rate.
GOAL: I am setting a new goal today - to increase my weekly win rate to at least 75%.
How I am going to approach this:
I went through the last 20 weeks trading and one finding is pretty interesting. For the last 20 weeks, whenever I won on >= 3 days in a week, then my weekly PL was positive. If I won on <=2 days in a week, my weekly PL was negative. Above condition was true for 18 weeks out of 20.
So, going forward, I will strive to have at least 3 positive days in a week. This APPROACH is going to modify my trading as follows:
1. I will trade cautiously on Monday and Tuesday with the aim of being profitable on these 2 days. In dollar terms, as soon as I am up 400-600$ on these 2 days, I will be extremely choosy in further trades and likely won't trade anymore for the day, unless market presents an exceptionally good opportunity.
2. If I am positive on Monday and Tuesday, I will trade more freely on Wed and Thursday. If I am positive on 3 or 4 days by Thursday eod, then I will push my luck and trade more freely on Friday trying to make more than 800$ on Friday. Because even if I lose money on Friday, more likely than not, I will end the week positive.
This approach is similar to having a daily PL target. Probably not the best way, as I might miss out some good opportunities when I am trading cautiously, but I guess it will make my equity curve more smooth, thus reducing DD and making the effects of compounding more useful over the longer term.
A CONCRETE GOAL:
For the next 5 weeks, I aim to be positive on 4 or more weeks AND for the next 10 weeks, I aim to be positive on 8 or more weeks.
20 weeks have passed by since I started this journal, so I thought I will post a summary of all my trading attempts till date.
Nothing to be very excited about, but it sure looks that in 2011, I have finally got my act together and am on my way to make sure I don't have a blowup again. My initial attempts at trading in 2009 happened when I was very raw at this game.
Nothing to be very excited about, but it sure looks that in 2011, I have finally got my act together and am on my way to make sure I don't have a blowup again. My initial attempts at trading in 2009 happened when I was very raw at this game.
gmst, I did not realize you had a journal - well done on going for the introspection. NS4 Fan gave you awesome advice, read & review periodically.
I just read your journal in one sitting, and things that pained me: 19 strategies? Focus on the best ones, sounds as if you have the stats for that. Trading is simple right, no need to over-complicate or overload your decision making process.
Trading ES, no no no. ES will eat newbies up. At one point you made a 'rule' to only trade it with equity amt X and then you made a new rule to trade it with Y. Then not-great-things happened. Just because you have a rule doesn't make it safe, document assumptions about that rule. (That I don't take inordinate risks, but the more specific you are about your assumptions the better, if the assumptions don't ring true, don't make the rule).
If you have a decent enough amount of ES trades so far regular account / demo whatever, analyze them! Are the winners coming from fading gaps? From mid-day chop? Last hour reversals? Focus on those plays, implement rules, best trades are mid-day chop scalps, etc. Lie in wait for the great trades, stay away from any urges to deploy your capital just because you are not in a trade.
Have you looked at YM? Each point move is far less than ES, it's got a decent ATR. I used to trade this before ES, less expensive in the tuition department. $5 tick size move. Moves 1 pt. Throw up a line chart overlay of all three equity e-minis YM/NQ/ES. How are they moving, all three in sync, or NQ is lagging behind and suddenly techs pull the markets in, etc. In this way you can trade the ES via proxy of sorts at certain times. Still have your regular time-frame ES and YM charts up for entries/exits. ES is way too much risk to take on. i.e. A 1% drop in the ES would be the equivalent of how much of a drop in an account of say $3,000? I know you know this, it's a stunning number/%.
Doing fantastic analyzing your success/failures. Keep it up. The thing is, and this is important, you have to last in this business. The lessons you learn about yourself, what strategies work, discretionary 'gambles' etc have to, must be inexpensive. Keep yourself in the game, reduce size. Reward yourself in VERY small increments or hubris can whack you in the head. I've met hubris personally.
Stay alive, lower your risk.
I just read your journal in one sitting, and things that pained me: 19 strategies? Focus on the best ones, sounds as if you have the stats for that. Trading is simple right, no need to over-complicate or overload your decision making process.
Trading ES, no no no. ES will eat newbies up. At one point you made a 'rule' to only trade it with equity amt X and then you made a new rule to trade it with Y. Then not-great-things happened. Just because you have a rule doesn't make it safe, document assumptions about that rule. (That I don't take inordinate risks, but the more specific you are about your assumptions the better, if the assumptions don't ring true, don't make the rule).
If you have a decent enough amount of ES trades so far regular account / demo whatever, analyze them! Are the winners coming from fading gaps? From mid-day chop? Last hour reversals? Focus on those plays, implement rules, best trades are mid-day chop scalps, etc. Lie in wait for the great trades, stay away from any urges to deploy your capital just because you are not in a trade.
Have you looked at YM? Each point move is far less than ES, it's got a decent ATR. I used to trade this before ES, less expensive in the tuition department. $5 tick size move. Moves 1 pt. Throw up a line chart overlay of all three equity e-minis YM/NQ/ES. How are they moving, all three in sync, or NQ is lagging behind and suddenly techs pull the markets in, etc. In this way you can trade the ES via proxy of sorts at certain times. Still have your regular time-frame ES and YM charts up for entries/exits. ES is way too much risk to take on. i.e. A 1% drop in the ES would be the equivalent of how much of a drop in an account of say $3,000? I know you know this, it's a stunning number/%.
Doing fantastic analyzing your success/failures. Keep it up. The thing is, and this is important, you have to last in this business. The lessons you learn about yourself, what strategies work, discretionary 'gambles' etc have to, must be inexpensive. Keep yourself in the game, reduce size. Reward yourself in VERY small increments or hubris can whack you in the head. I've met hubris personally.
Stay alive, lower your risk.
Satchel, Thanks a lot for your response. Definitely re-enforces a few things like the N54 Fan advice and the absolute need to stay in the business. Yes, now I think I have 2 months of ES trading experience, probably its a good time to go back and look at all the trades I did in detail. I am not sure about winners, but it will surely help me identify losers, since more often than not, I have lost money on ES. :eek:
Actually, I have never traded YM before, but now when you say it, it makes sense to me. Given small tick size - it should be a good place to start before graduating to ES.
Great advice on 19 setups also - yes after sometime I also realized that its way too much to keep track of and trade. Many of these setups overlapped also. Now, I take trades based on a confluence of these set-ups, so technically they are still 19, but practically maybe 5 to 7. Thanks again!
Actually, I have never traded YM before, but now when you say it, it makes sense to me. Given small tick size - it should be a good place to start before graduating to ES.
Great advice on 19 setups also - yes after sometime I also realized that its way too much to keep track of and trade. Many of these setups overlapped also. Now, I take trades based on a confluence of these set-ups, so technically they are still 19, but practically maybe 5 to 7. Thanks again!
Update for week 21 ending Dec 23, 2011 :
-100$ for the week.
Went short AUD at 0.99 and it climbed till 1.02 the next day. I reversed position and went long at 1.004 and added to the position when I was 80 pips in the money and closed the position right around top (near 1.02). Very good trading - to be completely wrong initially on the direction, but being flexible and changed the bias when proven wrong by the market and kept the position overnight to reap the rewards. Was down 1000$ by Tuesday end, and would have been up around 400-500$ by the end of week (not including ES trading - which lost money). So, slightly negative week, but overall fx trading was good this week as well.
This Week's Stats:
Withdrawal: 0$
1. Week PL: -100$
2. Start Equity: 4.3k
3. End Equity: 4.2k
4. Maximum equity run-up: 4.3k
5. Max Win day as % of that day's start equity: 21%
6. Max Loss day as % of that day's start equity: -23%
Below stats are from Journal start day:
Withdrawal: 1100$
1. Total PL: -1900$
2. PF: 0.93
3. RoI: -26%
4. Max. DD: 82%
5. Current DD: 33%
6. # of winning days 50%, # of losing days 50%
7. Av. win day: 16%
8. Av. Loss day: -14%
-100$ for the week.
Went short AUD at 0.99 and it climbed till 1.02 the next day. I reversed position and went long at 1.004 and added to the position when I was 80 pips in the money and closed the position right around top (near 1.02). Very good trading - to be completely wrong initially on the direction, but being flexible and changed the bias when proven wrong by the market and kept the position overnight to reap the rewards. Was down 1000$ by Tuesday end, and would have been up around 400-500$ by the end of week (not including ES trading - which lost money). So, slightly negative week, but overall fx trading was good this week as well.
This Week's Stats:
Withdrawal: 0$
1. Week PL: -100$
2. Start Equity: 4.3k
3. End Equity: 4.2k
4. Maximum equity run-up: 4.3k
5. Max Win day as % of that day's start equity: 21%
6. Max Loss day as % of that day's start equity: -23%
Below stats are from Journal start day:
Withdrawal: 1100$
1. Total PL: -1900$
2. PF: 0.93
3. RoI: -26%
4. Max. DD: 82%
5. Current DD: 33%
6. # of winning days 50%, # of losing days 50%
7. Av. win day: 16%
8. Av. Loss day: -14%
gmst
so far you have been describing what you did profitably or not so,
is it too much to ask,
to just show us a snap shot of your trading screen?
so we would have a better understanding of what you described?
and perhaps, would be able to follow you and cheer you along on your good days and to provide a shoulder for you to lament as well?
personally, it is rather meaningless to read about a progression or regression, without being able to actually have a visual reinforcement.
would you be able to and willing to do that for us who are not very smart in reading or listening, pls?
thx much gmst, wishing you and yours a very prosperous new year--year of the dragon.
Gmst,
bottomfishing.
hoping prices will rise.
but patience was very less.
I wanted to be long.
by now, I had decided that I am going to lose.
but I had lost my chance.
I might be able to make a decent run.
I will lose this much amount in a year, which is a huge improvement.
I might be able to end up.
Just that don't expect much.
call for an uptrend in USDJPY didn't pan out much.
A low conviction trade.
I had hoped to be careful about my risk.
I am not happy with myself.
I am not executing it correctly.
so I don't know how risky they are.
I think that might be true.
trying to go long thinking.
below 15% daily loss limit.
irresponsible 'on the moment' kind of trades.
I had severe doubts in my mind about the usefulness.
Mistook a trade, thinking it was a strategy trade, when it was not.
While I was in the trade and it was going against me, I decided to give this trade a larger room and risk a high % on this trade.
Had I captured that move, end results would have been much better.
...................................................
this is why you were failing at the game.
you wrote all of the above in your thread and there is more.
until you get this all under control, burning your dollars in a bonfire will be the easier task.
" we all get what we want from the market, some win, some lose.
some win by losing............."
ed seykota
cheers,
shop
bottomfishing.
hoping prices will rise.
but patience was very less.
I wanted to be long.
by now, I had decided that I am going to lose.
but I had lost my chance.
I might be able to make a decent run.
I will lose this much amount in a year, which is a huge improvement.
I might be able to end up.
Just that don't expect much.
call for an uptrend in USDJPY didn't pan out much.
A low conviction trade.
I had hoped to be careful about my risk.
I am not happy with myself.
I am not executing it correctly.
so I don't know how risky they are.
I think that might be true.
trying to go long thinking.
below 15% daily loss limit.
irresponsible 'on the moment' kind of trades.
I had severe doubts in my mind about the usefulness.
Mistook a trade, thinking it was a strategy trade, when it was not.
While I was in the trade and it was going against me, I decided to give this trade a larger room and risk a high % on this trade.
Had I captured that move, end results would have been much better.
...................................................
this is why you were failing at the game.
you wrote all of the above in your thread and there is more.
until you get this all under control, burning your dollars in a bonfire will be the easier task.
" we all get what we want from the market, some win, some lose.
some win by losing............."
ed seykota
cheers,
shop
Hello,
Thanks for following.
I will describe my screen arrangement for you. Extremely basic. For Fx, I have 5m, 30m and daily charts of Euro and 30m and daily chart of Aud on my screen and 1hr and daily chart of Yen. Only price, no indicators. This is the stuff I make money on. For ES, where I lose money, I have 5m ES chart (rth) with 20 EMA and 1hr ES chart (globex), Both these charts have volume displayed.
About posting trades, I do around 100 roundtrip trades per day - around 40% would last 10 seconds to 5 minutes. So, pure scalping. So, I don't see any benefit from posting trades, other than wasting my time and reader's time.
My purpose from this journal is to be more systematic, disciplined and to ensure that I don't blow up, to learn how to handle risk and grow my account steadily. If this journal turns out to be successful, the main purpose it will serve will be to illustrate journey of a blow-up prone trader, to a boom and bust cycles level trader (where I currently belong imo) to a consistently profitable trader. The emphasis needs to be on record keeping, in-depth analysis, identifying errors and market conditions/behavior patterns which lead to losing money and eliminating them and instilling iron-clad discipline to follow one's system rather than on trade-setups or edges or things like that.
FWIW, I have multiple well proven edges but I am still not consistent because I am not disciplined to follow them.
Shopster,
First I must salute the effort you have made to go through so many of my posts and dig out those statements and post them here. Just awesome work, I am amazed ! However thinking over what you have posted for more than a day, I have been trying to understand what message you want to convey to me.
All the quotes you have posted were written in a context. The context would have needed positive statements, negative statements, statements describing my stupidity, my analysis, my inability to follow my system etc etc. So, I kind of 'guess' that probably you are pointing out that I need to improve primarily on psychological front ?? Am I right.
It will be very helpful if you can please write in plain English what message you are trying to convey. Because no doubt you have spend a lot of time going through the journal, and I do want to get benefit from your insights. Thank you !!
Edit: Reading it again, it seems that you have made a very fine list of many of the mistakes that I have done - in terms of psychological errors, not following the plan, bad execution etc. Basically everything. If this is what you mean - once again thanks a lot. Yes, if I am smart, I should not repeat those mistakes, especially when someone has taken the time to point them out to me in such a wonderful way.
First I must salute the effort you have made to go through so many of my posts and dig out those statements and post them here. Just awesome work, I am amazed ! However thinking over what you have posted for more than a day, I have been trying to understand what message you want to convey to me.
All the quotes you have posted were written in a context. The context would have needed positive statements, negative statements, statements describing my stupidity, my analysis, my inability to follow my system etc etc. So, I kind of 'guess' that probably you are pointing out that I need to improve primarily on psychological front ?? Am I right.
It will be very helpful if you can please write in plain English what message you are trying to convey. Because no doubt you have spend a lot of time going through the journal, and I do want to get benefit from your insights. Thank you !!
Edit: Reading it again, it seems that you have made a very fine list of many of the mistakes that I have done - in terms of psychological errors, not following the plan, bad execution etc. Basically everything. If this is what you mean - once again thanks a lot. Yes, if I am smart, I should not repeat those mistakes, especially when someone has taken the time to point them out to me in such a wonderful way.
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