I'm not sure what really brought me back to this forum but I'm guessing it has something to do with me doing reasonably well lately.
I began writing my mini articles as a way to consolidate the knowledge I had learned before getting stuck into a new trading firm. I had a LOT of time on my hands before I started, now I'm pushing 12-13 hour days of pretty intense trading and rarely have time to kick back.
Anyway this post is entirely selfish - as it should be in my opinion!
After trading for more than a year I'm still down on my account, after costs of around $4500 per month - however I've started to turn a corner recently and I'm covering those costs and more - It's a time to reflect and push harder to maintain the momentum.
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So let's get started.
First 3 months
For the first month we traded the demo accounts, all the other guys decided to trade the Gasoil spreads while I opted to mainly trade the Sugar spreads - at the time it was pretty volatile and I could hold onto my winners for a few ticks while confidently cutting my losers for a small loss - confident that I'd find a big winner to cover the losses and more. It worked well for a few months and I thought I'd cracked the trading game! Big mistake :O
Markets changed and I moved onto the Gasoil spreads after 3 months as the seasonal volatility of sugar died down.
Next 3 months
So I transitioned into trading Gasoil which is what 80% of the guys on the floor were trading at the time. I also experimented with rapeseed, milling wheat and cocoa. Still complexly oblivious about how to trade spreads.
Next 6 months
After studying about how to trade outrights from years of reading trading books and watching videos I developed a trading strategy that relied upon using the outright moves as a leading indicator for a correlated spread move - as once an outright starts going up, the outrights towards the front of the curve generally move more than those at the back of the curve.
So, for example I would buy DEC13 Gasoil and sell DEC14 Gasoil based on breakouts of the front month which at the time of writing would be SEP13 Gasoil. Generally the moves would be correlated and if I got on early I could make a decent profit without much risk.
Last few months
In the last few months I've definitely adapted my strategy to take into account the market environment. The spreads don't always correlate with the outright, it depends on the time of the month and the general liquidity of the market. The closer to a months expiry the stronger the correlation and the tighter the outright ranges the lower the correlation. The more likely it is that a big spread paper order could dominate the market regardless of the outright moves.
It's at this point that I started experimenting with different position sizing for higher conviction trades.
I also moved on from trading Gasoil to trading Brent Crude spreads as the DECDEC moves could be up to 70-100 ticks in a day rather than 5-10 in Gasoil.
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So long story short I transitioned to the most outright correlated markets that had the largest ranges. I got better at determining the environment and I established what trades were high conviction enough to put more size in. I think this is what fit best with my personality.
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The best advice I could give to someone starting out is that it will take a LONG LONG time to get to break even. You have to make the same mistakes at least half a dozen times before it finally sinks in - it's best to keep a really self-aware understanding of yourself in the form of a journal so you can see patterns quickly. Also - check out the Al Brooks Video trading course - took my understanding to a whole new level.
Any questions feel free to PM me or ask on here.
Best case scenario you guys ask questions that push my understanding so I can reach the next level and at the same time I can give you a decent answer that will help you on your way or contribute to a discussion
Wingz
