xXTrizzleXx's Journal [AMENDED]

Beginner Questions
1

[B]Introduction[/B]

Hello again to everyone! I am continuing the preparation for my move to a Live Account within a few months, and thus it is imperative that I keep a Trading Journal to track my trades, so that I can analyze them in the future. I am perfectly aware of the shortcomings of a demo account, regarding the limitations it will have on my psychological development, as I am not trading real money, but I will ensure that I will open a demo account with the [B]same amount of capital[/B] as I will open my Live Account.

A Trade Plan is an essential component to the success of any Trader. As such, I will outline my exact Trading Plan, addressing issues such as Position Sizing, Entries and Exits. My Trading Plan was influenced heavily by the teachings of [B]Mr. Tymen Wortel[/B], who has been so generous of his time to educate us all in this thread, entitled, “The finest in trend trading”.

I know that it is important to stick to one’s system, and I firmly believe that I have the discipline to do just that. I welcome any comments, criticisms and praises you may have, as it can only serve to bolster my Trading Plan and enhance my development as a trader.

2

[B]Why is this Journal [I]amended?[/I][/B]

When I began my initial journal, I had not one Trading Plan, but two. Over the course of the past few weeks, I have come to the realization that [B]it is not necessary to have more than one[/B] - I prefer to select and remain with just one, and hone and perfect it, until I eventually master it.

Both of the Trading Plans were excellent methods of positive expectancy, but psychologically and financially, [B]they were completely different beasts![/B]

[ul]
[li]The DNA Method, yielded a high Win:Loss ratio, and adequate Risk:Reward, to prevent large draw-downs from accumulating. It also presented me with a higher frequency of trades. As I have dabbled in Poker, I know it is [U]advantageous to play as many positive expectancy hands as possible[/U], and thus I see the increased trading frequency as an [B]advantage[/B] of this method. This method specialized in short-term trades, and so the prevailing trend does not impact on this method significantly.
[/li]
[li]The Macro Method, yielded a high Risk:Reward ratio, but unfortunately the Win:Loss ratio suffered as a result. This would result in large draw-downs being produced, and because of the type of Money Management I employ, when the winning trades finally do come along, they are only a mere fraction of the initial account size due to the large draw-downs, which would have been experienced. This type of method had a reduced number of trades, since only long term trades in the direction of the prevailing trend would be taken. It also meant that in ranging market, my account would take a thrashing.
[/li][/ul]

Both of these methods are wonderful! However, a trader’s mental capital is something which must be carefully guarded, and if one is not able to trade a method psychologically, then no matter how successful it is, said trader will be unable to maximize profits and minimize losses.

I have thus opted to choose and stick to the [B]DNA Method[/B] of trading the Bollinger Bands.

3

A great start to your amended thread, [B]xXTrizzleXx[/B]!! :slight_smile:

Your enthusiasm here is an encouragement to all new traders who read this thread. :slight_smile:

I trust that this thread will go the same way as that of [B]o990l6mh, Honorary [/B][B]FX Member[/B], who started a log like this one as a total beginner and developed into a trading giant who became very worthy of his FX Membership. :cool:

I look forward to you becoming a trading giant on this forum and someone who new traders coming on to this forum can look up to and see as a potential mentor. :slight_smile:

4

[B]What are your goals?[/B]

The purpose of this Journal, will not [I]particularly[/I] focus on the number of pips made, or the percentage return on investment each month. While these are also important, it will primarily be used to:

[ul]
[li]To develop a customized Trading Plan, optimized to be compatible with my individual persona.
[/li]

[li]To develop a state of mind which reflects [B]consistency,[/B] [B]risk awareness,[/B] [B]thinking in terms of probabilities,[/B]and [B]responsibility for the outcomes of my trades.[/B]
[/li]

[li]To master my Trading Plan, to the point where it can be executed [U]flawlessly[/U].
[/li][/ul]

5

[B]Memorable “Ah-ha” Moments[/B]

Here, I will keep a list of matters which may seem trivial to most, but which have set into my mind, and revolutionized by trading paradigms. The list will be updated, as time goes on.

[ul]
[li]Trading is an [I]endeavor founded upon probabilities[/I]. Like flipping a coin, individual results do not matter as much as the overall picture. Thus individual trades are simply steps along the journey, and cannot in any way dictate the strength of a method. This can only be done by examining the results of a [B]series[/B] of trades!
[/li]

[li]Following from the above point, losses are [B]largely irrelevant,[/B] and should be treated as the cost of doing business. No business or successful trader has been void of losses or losing streaks, so why try to avoid them? It is psychologically much more rewarding to accept them as normal occurrences in the grand scheme of trading.
[/li]

[li]The market is the sum total, of an innumerable number of variables. At any given point in time, the market is [B]always[/B] going to be different, and thus future actions [B]can never be predicted.[/B] However, using stringent rules as outlined by our Trading Plan, we can capitalize on high probability set-ups, to hopefully swing the odds in our favor by those few essential percentage points.
[/li]

[li]There is no need to [B]fear[/B] the unpredictability of the market. With proper money management and position sizing, we can ensure that we remain afloat for long enough to see our trading method bear fruit. It is very improbable for us to lose [B]50 trades in a row,[/B] and yet by risking 2% of our account per trade, we are giving ourselves room to do [B]exactly that![/B]
[/li]

[li]Win:Loss and Risk:Reward are intertwined in a complex relationship. However, they are like supplementary (or is it complementary?) angles, in that they always add up to the same thing at the end of the day. Thus if we seek to increase our Win:Loss ratio to avoid losses, our Risk:Reward ratio [B]will inevitably suffer as a result,[/B] and vice-versa.
[/li]
[/ul]

6

[B]The Format of the Journal[/B]

With comments, criticisms and suggestions spread throughout them, the trades will follow a particular format:

[ul]
[li]The charts of each trade will occupy [B]ONE[/B] post. The post will be updated with the progress of the trade as time goes on. This will be done to keep everything in one place for clarity and ease of reading. Thus, to check on the status of a particular trade, simply go to its post.
[/li]

[li]At the end of each trade, a summary will be given at the bottom, for quick future reference. It will include the pair, trade direction, entry price, take profit targets, stop-loss values and overall outcome of the trade.
[/li]

[li]My mental state as at the time of the trade will also be noted, so I can investigate further the effect of a trader’s mind on trading.
[/li][/ul]

7

[B]Without Further Ado - The Trading Plan[/B]

[B][U]Markets[/U][/B]
Several currency pairs are chosen to increase the probability of detecting trades:

-EUR/USD
-GBP/USD
-AUD/USD
-GBP/JPY
-EUR/JPY
-USD/JPY
-USD/CHF
-USD/CAD
-EUR/GBP
-GBP/CHF
-EUR/AUD
-EUR/CAD
-AUD/CAD
-AUD/NZD
-NZD/JPY

[U][B]Position Sizing[/B][/U]

A strategy using 3 contracts will be used for all trades. The sum of all 3 contracts will be no more than 2% of the account balance, as evaluated at the beginning of each trading period, which is 1 month.

[U][B]Time Frame[/B][/U]

The 8H Timeframe will be traded.

[B][U]Entries[/U][/B]

Two Bollinger Bands are used, one with Standard Deviation set to 1.0 and the other set to 2.0.

[ul]

[li] Entries will be made employing a system which uses an Orthodox Count Back Line method.
[/li]
[li]Only begin drawing the CBL from candles which touch the Outer Bollinger Band. If the CBL extends too close to the Middle Bollinger Band, then cut it in half. [I](Too close meaning more than midway between Standard Deviation 1.0 Band and Middle Bollinger Band)[/I]
[/li]
[li]Bollinger Band bubbles and sausages [B]will not be traded[/B], until Point P has been reached, as they reduce the Win: Loss ratio. Point P is the [B]point where the retrace of Price Action hits the Outer Bollinger Band[/B], as can be seen in the post below.
[/li][/ul]

[B][U]Stops[/U][/B]

[B]Initially:[/B] Set what I call a “dynamic” stop-loss upon entry of the trade. To see how this can be done, view the post below.

[B]Trailing Stop:[/B] Upon hitting the Standard Deviation 1.0 Bollinger Band nearest the Outer Bollinger Band, [B]move the stop-loss to the entry position (BREAK-EVEN)[/B]. Upon hitting the Outer Bollinger Band, [B]move the stop-loss to the Middle Bollinger Band[/B], and [U]adjust its position with each successive candle close.[/U]

If you are stopped out [B]INITIALLY[/B], use the candle which stopped you out as criteria for another CBL entry. If however this second entry is stopped out as well, evaluate whether or not a Bollinger Band Bubble or Sausage has formed. If it has not formed, then feel free to enter once again. If it has formed, [B]stay out of the trade until Point P has been reached[/B].

[B][U]Exits[/U][/B]

[ul]
[li]The Middle Bollinger Band will be the site of TP 1.
[/li][li]The Outer Bollinger Band will be the site of TP2.
[/li][li]Let the final contract run, allowing it to eventually hit your “trailing” stop, for TP3.
[/li][/ul]

When initiating the trade, set the Take Profit target immediately at the present height of the desired target Bollinger Band. Monitor the trade, and if price hits the Bollinger Bands before the Take Profit lines, close the trade (since the Bollinger Bands are repainting indicators, and can move).

[B]Alternatively, you can use the Parabolic SAR to exit, as explained beautifully by Tymen, here! [/B]

[B]EXIT ALL TRADES BY THE MARKET CLOSE ON FRIDAY![/B]

8

Useful Information and Tactics - Part 1

The Mystical Point ‘P’

When I spoke of price moving to Point P after a Bollinger Band bubble or sausage, I was referring to the Point P indicated in the following diagrams. These diagrams are courtesy of Tymen!

816×449

816×451

821×453

821×452

9

[B]Useful Information and Tactics - Part 2[/B]

[B]Setting the “Dynamic Stop-Loss”[/B]

Starting from the left-most arrows, the key is as follows:

Red arrows indicate extreme candles.
Yellow arrows indicate the pre-extreme candles.

[B]Dynamic Stop Loss 1[/B]
To set this dynamic stop-loss, we do the following:

[ul]
[li]We note that the extreme [B]candle’s body[/B] - defined as the colored portion, representing the difference between the open and close - is [U]smaller[/U] than that of the pre-extreme candle.
[/li]
[li]Thus, according to the Orthodox Rules of the CBL, we will set the CBL at the low of this candle.
[/li]
[li]To set the the stop-loss, we calculate the size of [B]the extreme candle’s body,[/B] and then [B]divide it by two.[/B]
[/li]
[li]We then add this to the high of the extreme candle, as our Dynamic Stop-Loss.
[/li]
[li]Whenever a candle closes between the region between the [B]high of the extreme candle[/B] and the [B]dynamic stop-loss,[/B] we [B]close the trade, and consider ourselves stopped out.[/B]
[/li]
[li]As long as the candle does not [B]close[/B] within the region between the [B]high of the extreme candle[/B] and the [B]dynamic stop-loss,[/B] we [U]remain[/U] in the trade.
[/li]
[li]The purpose of the dynamic stop-loss that we have set here, is to serve as a protection from sudden spikes, power, internet or computer failures. If it is hit, then the trade will be canceled.
[/li]
[/ul]

[B]Dynamic Stop Loss 2[/B]
To set this dynamic stop-loss, we do the following:

[ul]
[li]We note that the extreme [B]candle’s body[/B] - defined as the colored portion, representing the difference between the open and close - is [U]larger[/U] than that of the pre-extreme candle.
[/li]
[li]Thus, according to the Orthodox Rules of the CBL, we will set the CBL at the high of the pre-extreme candle.
[/li]
[li]The CBL line is reasonably far from the middle Bollinger Band, and so it [B]is not[/B] cut in half.
[/li]
[li]To set the the stop-loss, we calculate the size of [B]the extreme candle’s body,[/B] and then [B]divide it by two.[/B]
[/li]
[li]We then add this to the low of the extreme candle, as our Dynamic Stop-Loss.
[/li]
[li]Whenever a candle closes between the region between the [B]low of the extreme candle[/B] and the [B]dynamic stop-loss,[/B] we [B]close the trade, and consider ourselves stopped out.[/B]
[/li]
[li]As long as the candle does not [B]close[/B] within the region between the [B]low of the extreme candle[/B] and the [B]dynamic stop-loss,[/B] we [U]remain[/U] in the trade.
[/li]
[li]The purpose of the dynamic stop-loss that we have set here, is to serve as a protection from sudden spikes, power, internet or computer failures. If it is hit, then the trade will be canceled.
[/li]
[/ul]

[B]Dynamic Stop Loss 3[/B]
To set this dynamic stop-loss, we do the following:

[ul]
[li]We note that the extreme [B]candle’s body[/B] - defined as the colored portion, representing the difference between the open and close - is [U]larger[/U] than that of the pre-extreme candle.
[/li]
[li]Thus, according to the Orthodox Rules of the CBL, we will set the CBL at the low of the pre-extreme candle.
[/li]
[li]The CBL line is reasonably close from the middle Bollinger Band, and so it [B]is[/B] cut in half.
[/li]
[li]To set the the stop-loss, we calculate the size of [B]the extreme candle’s body,[/B] and then [B]divide it by two.[/B]
[/li]
[li]We then add this to the high of the extreme candle, as our Dynamic Stop-Loss.
[/li]
[li]Whenever a candle closes between the region between the [B]high of the extreme candle[/B] and the [B]dynamic stop-loss,[/B] we [B]close the trade, and consider ourselves stopped out.[/B]
[/li]
[li]As long as the candle does not [B]close[/B] within the region between the [B]high of the extreme candle[/B] and the [B]dynamic stop-loss,[/B] we [U]remain[/U] in the trade.
[/li]
[li]The purpose of the dynamic stop-loss that we have set here, is to serve as a protection from sudden spikes, power, internet or computer failures. If it is hit, then the trade will be canceled.
[/li]
[/ul]

10

[B]Useful Information and Tactics - Part 3[/B]

[B]Position Sizing with the “Dynamic Stop-Loss”[/B]

Position Sizing with the "Dynamic Stop-Loss follows the normal procedure. It just means that sometimes you will close the trade for less than 2% of your account’s risk. :slight_smile:

[ul]
[li]First, calculate the number of pips between your dynamic stop-loss and your entry line.
[/li]
[li]Next, find out the dollar value of those pips - for example, for EUR/USD, the value is $0.10 per pip when working in Micro-Lots. (it is preferable to work in Micro-Lots, because it offers you greater flexibility with your position sizing, and prevents asymmetrical compounding/leverage. For a more detailed explanation, see this post.
[/li]
[li]Multiply the two to get the dollar value of the amount you are risking for the trade.
[/li]
[li]Calculate 2% of your account balance, and divide it by the above figure, to get the number of micro-lots, that you should enter the trade with.
[/li]
[li]Divide this number by 3, to get the size of each contract that will be used.
[/li][/ul]

Here is a worked example! It assumes that a long trade is being on taken on EUR/USD, with an orthodox, one candle CBL.

Open of extreme candle = 1.4980
Close of extreme candle = 1.4960
[U]Size of candle body = 0.0020; 20 pips[/U]
[U]Half of candle body = 20 pips / 2 = 10 pips[/U]

Entry (high of extreme candle) = 1.5000
Low of extreme candle = 1.4910
[U]Placement of dynamic stop-loss = 10 pips below the low = 1.4900[/U]
[U]Distance between entry and dynamic stop-loss = 1.5000 -1.4900 = 100 pips[/U]

Dollar value of 1 pip in micro-lots on EUR/USD = $0.10/pip
[U]Dollar value risked for the trade = 100 pips * $0.10 = $10[/U]

Account Size = $10,000
2% of the account = 0.02 * $10,000 = $200
[U]Total position size = $200 / $10 = 10 micro-lots[/U]
[U]Position size [B]per contract[/B] = 10 micro-lots / 3 contracts = 3.33 micro-lots per contract[/U].

11

Lookin forward to seeing some of your trades :D. Be sure yo post pictures of entries and why you entered. BBands have to be one of my favorite indicators:D.

Goodluck

12

[B]xXTrizzleXx’s Journal is now Officially Open![/B]

With the preliminary posts now completed, I believe I can now proceed with my journal. :slight_smile: I am however wondering if I should bother scouring my charts for potential trades, as it is nearing Friday, and as I close all trades by the market close on Friday, the trade might not have been given sufficient time to move. Perhaps I shall wait until next week to begin - patience pays great dividends. :slight_smile:

Welcome to the journal [B]Tymen![/B] Many thanks for your encouragement, and your provision of this excellent trading method, and I hope I my thread will soon become as useful as [B]o990l6mh’s[/B] own. :slight_smile:

Hey there [B]hellogoodbye4201![/B] Welcome to my journal, and rest assured that I will do exactly that! More power to the Bollinger Bands!

Happy pipping to all!

13

It is a pleasure following your evolution!

It makes me happy to see someone who treats this as the business it is. You’re certainly displaying the intelligence and stamina needed to succeed.

I’ll be following your new thread with interest!

15

Many thanks for the kind words, [B]o990l6mh![/B] The journey to become a consistent trader is made much easier with encouragement from respected individuals like you. :slight_smile:

Happy pipping!

16

DNA Trade 1

My first trade, is a [B]LONG[/B] trade on the [B]EUR/USD[/B]. Entry was made at [B]1.2590[/B] using a one candle CBL, drawn from the candle indicated by the yellow arrow. The stop-loss was set at [B]1.2549[/B] according to my Trade Plan. My first profit target is the middle Bollinger Band, where I will close 1 out of my 3 trade contracts.

Mental State at the time of initiation: Somewhat groggy; I just woke up. :slight_smile:

The trade was stopped out, and unfortunately I could not adhere to my Trade Plan and re-enter using the stop-out candle as criteria for another CBL, since I was asleep! :stuck_out_tongue:

[B]Trade Summary[/B]
Pair: [B]EUR/USD[/B]
Direction: [B]LONG[/B]
Entry Price: [B]1.2590[/B]
Take Profit Targets: [B]N/A[/B]
Stop-Loss Values: [B]1.2549[/B]
Overall Outcome: [B]-123 pips[/B] (all 3 contracts); [B]-2%[/B]

17

You go Trizzle -

I found your original journal a few days ago, followed the conclusion of that to another - I assume it is this one -
I just want to congratulate both you and me - as your first trade posted, I have actually take at exactly the same price :slight_smile: how cool.

at posting time you should be in profit , albeit not by much, but it is positive.

18

What is CBL?

19

hellogoodbye - i sent a p.m.

20

Thanks for your support [B]PerchTird[/B]! Encouragement is an invaluable yet intangible asset, that pays dividends in any trader’s quest for consistency! :slight_smile: I hope that you were able to profit from the trade, or were able to snag the profit which would have been available from a re-entry! :slight_smile:

Happy pipping!

21

Hey there, [B]hellogoodbye4201[/B] sorry for not clarifying it earlier, but the CBL refers to the Count-Back Line, which is a method of entry which was presented to us by [B]Tymen[/B] in his thread, “The Finest in Trend Trading”. The thread in itself spans [B]hundreds[/B] of pages, which I do recommend reading through when you have the time, but to get a quick summary to be able to jump right into the action, might I suggest downloading some summary pdf files from Merchantprince’s DNA Website. The summary files can be found on the left, under “Essential Downloads”. Hope this helps.

Happy Pipping!