Can Trading Work for Mere Mortals? I'm About to Find Out. Follow My Updates

Beginner Questions
1

OK, after 2 years of paper trading and painstaking data entry consisting of 13 years of back data for 12 separate currency pairs, I decided to take the plunge 2 weeks ago!

System is completely mechanical and putting aside the odd anomaly where wntry signal coincides with news events, I do not trade the news, and I utterly ignore fundamentals.

Trade 4 hourly time frame ALONE. Trading between 0800 and 0000 GMT. (Thereby ignoring 0400 signals… I do need to sleep)

I am very unsure as to whether the whole thing is a con, if I am honest. I say this because my paper trading is absurd:

Success Rate over 13 years of back data: 70% (69.7%)
Success Rate over 1 year of paper trading: 73% (72.6%)
Risk Reward Ratio (re: 1’356 Trades): 0.77:1 (This is an average, my system consists of trailing stops).

If it was this easy, why isn’t everybody doing it? Anyway, I am about to find out using 3% of equity per trade.

[B]First things first. I am not entering into this venture believing I will be rich quick. Of the 13 years I have an equity trail for (via back testing), on 9 of those years, I am still bobbing around Break Even until month 6, even though compounding and the randomly distributed nature of returns always ensured I was in much profit by the end of the year. If I am at BE, 6 months in, this is a success as far as I am concerned.[/B]

I am posting it on here because I am sure others are in 2 minds as to whether to put their money on the line. If this works for me, it will work for anyone who undertakes the same due-dilligence and implements a purely mechanical system. If going live fails a purely mechanical system like this (one that bombs the demo)… stay away from it ha. I am your guinea pig.

I want people to get an insight into the kindo of emotions an inexperienced trader can go through, to either draw inspiration (or scorn) or at least reference from when you, yourself go live.

Wish me luck! I will be updating regularly.

GOD! I AM EXCITED.

Error | Myfxbook

2

Looking forward to hearing the results good luck

3

[B]First Update[/B]

OK, so:

First Trade was a successful one but not to the degree I would have liked! I have left pips on the table, people, and for this I am annoyed with myself. I have allowed psychology to get in the way of the system and in doing so, have been left frustrated.

As you can see from the attachment, I have won £114 (net) but I pulled out before the trade continued on to what would have been an £880 profit :frowning: F***** annoyed with myself. That said, the buzz is still amazing. It really is.

The AUDUSD went against me and I ended with £886 loss, which does not bother me in the slightest. Losses happen, I can absorb this loss and will not lose sleep over it. Returns are randomly distributed and I [B]WILL[/B] be up sooner or later.

[B]On Monday 28/7/2014[/B]

OK, so I am an idiot. That losing trade actually effected me more than I thought it did and even though I can absorb the loss I am STILL frightened about the market! In doing so I have ignored the GBPUSD and AUDUSD signal by looking for reasons not to enter outside the parameters of my system (I checked the D1 time frame) and both hit what would have been profit levels!!! [B]SO GOD DAMN ANNOYED.[/B]

I have decided that it is just too early to put 3% on the line and have therefore entered into the EURUSD long with 2% instead.

[B]I WILL NEVER AGAIN IGNORE A SIGNAL. EVER EVER EVER. I [U]WILL[/U] STICK TO THE BLOODY SYSTEM. FOR F**** SAKE[/B]

I swear, I promised myself that psychology would play no part in this. I was wrong. It does, and now it is up to me to conquer it. This whole venture will bloody fail if I do not conquer it.

2% for the foreseeable.

Please find 2 attachments. First statement showing you the one win and one loss with trades currently open.

Second attachment is an account summary to date. £770 trading deficit. £687 down gross (Rollover included).

NEXT WEEK WILL BE A BETTER WEEK.

Error | Myfxbook

4

I think you’ve hit the nail on the head here in your first two posts. Backtesting = Mechanical, Live/Forward Trading = Human! :slight_smile:

Ever thought about getting this programmed into an EA or something similar? I know everyone man and his dog can say “trade without emotion” but I think it’s one of the hardest things to do.

5

Not yet, mate.

I am very sceptical about the whole thing if I am honest! I am going to see if this thing works first. I have a horribly cold feeling that it is a big fat con, and it is impossible to actually make any return on the markets unless one is a whizzkid, and that I aint.

At the moment, I am finding that every trade I enter into, the entry point becomes a resistance line! I am suspicious but hopefully it is utter paranoia and nothing more. I have not started very well, that loss hit me hard man, and have missed 2 potentially successful trades worth £1800 between them! This is why I posted this, to show everyone whether this works or not, I really hope it does because the backtesting is incredible! Just gotta beat the fear! Hopefully it was beginner jingles and they have diminished.

6

I’ve found (through lots of toiling) that’s it’s all a psych game in your own head. For every “fear of missing out” trade (I/you/everyone) takes that’s invalid and doesn’t work, that rocks your boat so then you second guess your “valid” trade and miss out on your real profit.

Atleast with something like an EA, you could back test it and just let it run it’s course. Takes the emotion out of the game. I know lots of people here trawl for EA’s, when red crosses blue, buy etc… But I mean an EA with smart, time restrictions on when to trade, position sizing etc…

I like to treat it like a science with hypothesis to be proved/disproved, but the (sad) bit is once you’ve found a profitable method (like it seems your results show), then it’s the “human error” element of whether it can be executed. (which I hope it can!)

8

Maybe even go “right down” in % until you can replicate the back-tested results. No need to be psyching yourself out. My opinion on this caper, once you “crack the nut” properly, like if you had a positive system with minimal draw-down that could be executed properly, the skies the limit. (theoretically!) :stuck_out_tongue:

11

It is quite amazing what happens with a person when live trading.

Will wait for more results.

12

Is this a live account with real money on the line? Are you comfortable sharing how much you deposited?
Great thread idea, but generally these kind of threads die out within a few months or less.

13

Yep, as the thread says! Went live and deposited into the broker, £15’000 but I have a £30’000 equity base. I know that might be more than what most people will deposit here but the emotions and actions will be the same whether the account is larger or smaller. Either way, we all want it to work.

What do you mean,’ they die out’, fella? For the next year or so I will be updating regularly. I want others to draw on my experience before deciding to jump in or not or as they trade. If I pull out, I will explain why, and if I make money I could be a much needed confidence boost for others.

14

Keen to see how this develops, I’d still wind the risk % right down until you can replicate the mechanical entries (only my two cents worth). Check out myfxbook.com which provides a good journal/stats package (free) that lets you know how you’re getting on.

15

Congrats for taking the plunge. I used to do exactly what you are doing, trading the 4hr charts and just missing one signal due to the need for sleep. I also did backtesting and got very encouraging results.
However, real trading works totally differently. First, I realised that I did not factor in swap rates on backtesting, and because when trading 4hr charts, sometimes I needed to hold my trade for a week or more, thus with some brokers and certain pairs and the direction of trade, the swap rates could kill you before you even think about profits. Next, because of the length of time I had to hold my trades, I always do not know if I should set my stop loss to breakeven just before news announcements, and again due to the length of my trades, there would be definitely news announcements happening while I was still in a trade. Sometimes I would set to breakeven then miss a huge profit. Sometimes I let the trade run but end up losing when price completely turns around due to the news announcements. Lastly, when I am in a trade, I can’t really do the set and forget thing, I would check my trade once in a while, like say ever half an hr. So sometimes I would spend like 3-4 days on a trade without it going anywhere, only for it to either turn around and atop me out, of I had to get out due to some announcements. So I would feel that I just wasted those few days. Thus even though my system gave decent gains on paper(2-3%) per myth, I thought that it was just too difficult to carry out in real world conditions. I now trade off the 5 min charts, based on the 1hr trend. I don’t worry about swaps, and most of my trades take less than 2 hrs. So these is from my personal experience. I am not saying it cannot work for you, but just something to share. All the best!

16

Thanks for your thoughts.

> Missing signals at 0400 is factored into my hypothesis testing and back testing results. 94% of signals are acted upon.

> Swap rates? re you talking about Rollover deposits/deductions?

> As explained earlier, I ignore news events, utterly and wholly. Reacting to new incurs discretion. The whole purpose of this system is to circumvent that issue. Sometimes it goes against me, but the majority of the time it does not (in testing).

> The average winning trade in backtesting was 7.3 days. Average Loss was 5.4 days. Holding a trade requires patience! My AUDJPY has been in play since 23 July for example.

> But thank you for sharing your thoughts! I will have answered concerns for others and is the kind of feedback I appreciate. Good luck with your new strategy!

18

No probs mate, wish you the best of luck eh, sounds like you’ve got the bases covered. One “key” metric that I track, is system error v user error. Sadly with trading I think most of them are user errors! :slight_smile:

Kind of … “you can teach a man to fish, but it’s his fault if he doesn’t get out of bed”…

From your back-testing, is there a period of time during the day that sticks out as triggering most of the entries? Just thinking about trading off a 4hr chart but optimizing your time for trade entries/management throughout the day.

19

You’ll stop posting when your account drops below 10,000.

I don’t expect that to take longer than 2 months.

21

What is the point in posting that, lad?

I find it a bit strange that you find the time to part with negativity. Have you truly nothing better to do with your time?

I have confidence in the system, but if it does fail and I stay within the parameters of the system - unlike this week - then so be it, Forex is a con for a small time trader. If, on the other hand it works… then happy days. Either way, I’ll let you know. Cheers.

But no, my account will not drop to 10K, I have a conceptual understanding of money management and will have already been made aware that the system is failing, well before then. The most I will lose is £5’000 before I throw in the towel, at which point, I won’t just go quiet but make people aware as to why forex is a nonsense.

[B]The whole point of this thread is to ascertain whether Forex is BS or a potential revenue stream for amateurs like us whilst giving people an insight into the emotional ups and downs of trading for a newbie.[/B]

Cheers for your negs though.

22

The whole notion of whether or not “FOREX is BS” still baffles me.
It comes up a few times every month when a new user joins the forum.

May you please elaborate on what you mean?

23

Hey mate,

Just letting you know its not a con. By the things you have posted it sounds like you are failing not your system. This is probably because you went straight from paper trading to trading 15000 at 3% risk…After paper trading systems you should live test them with a small amount of your total capital (for you maybe 1000) until you get used to trading without getting effected by your emotions. Then you can slowly build up the amount you are trading with to your full amount.

Also,you are trading low time frames, these take ABSOLUTE balls of steel to trade and realistically you have to be doing it as a full professional rather than an alternate income stream.

That being said the expectancy of your system is 0.24. This means that for every unit risked you can expect a 0.24 gain from every trade on average. This is pretty low…I would guess that allowing for (some) minor emotional errors you would only be hovering around breakeven and if you have a lot of these errors or a few major errors you will be losing quite a bit of money.

My advice would be to scrap your system. Make a new one which uses daily bars (not as hard to trade in terms of emotions), with higher R:R ratios(you don’t need the probability of each trade to be high) and only trade at 1% risk (maybe even 0.5 if your system has quite a high frequency).

Once you do this you just have to be prepared and I mean properly prepared to lose money to make money. Expect every trade to be a looser before you even take the trade and you have to be totally comfortable with wiping out about 25% of your account.

Best of luck.

24

Course.

If one is trading in a purely mechanical context and therefore circumventing the necessity for discretion to enter one’s consciousness when entering the market, Live results should mimic those of the demo and that of back tested data (up to 20 years in all conditions). Course, there is a chance that on the basis of past returns not mimicking those of the future, it would stretching the limits of credulity for the system to fail at the very time one begins to go live. (Hypothesis testing suggests there is a 0.5% probability of a negative return over an extended period of time).

My point is that I may well fail if I struggle to control my emotions. As you can see from previous posts, I am honest about it and this week I have struggled, thereby encountering losses. But if - as it has over the past 2 days - put faith in the system and control thsoe emotions [B]There is no reason for the system fail. If it does, I am suspicious as to why that may be. It is statistically improbable for this system to fail on the condition that emotions are controlled and trading is undertaken within the parameters of the system.[/B]

25

Spot on. I have been honest! Absolutely, I f***** up big time these last 2 weeks! Going in at 3% was absurd, I have dropped the RRr and feel more comfortable. My system has not been tested fairly in live conditions yet, because I was letting emotions get in the way of the system!

Why is the expectancy, 0.24? Where do you get this figure from? Even when taking into account the random nature of returns, it would seem unlikely (though not imposible) for A 70% success rate with a near 0.8 RRr to not seem as pretty good odds to me.

I expect to be breaking even for around 8 months or so before the randomly distributed nature of returns consolidate gains by the end of any 12 month period as per backtested data results.

Why would you - in your experience -suggest that what I have said is not sensible? Cheers for your help.

[B]I actually think your advice was great apart from the ‘scrap the system’ bit. This is a system, that shows - time and time again - large compounded returns over an extended period after a fairly gradual initial trajectory (as you pointed out), but patience is the key.[/B]