Analysis During Paralysis

Beginner Questions
1

Let’s discuss learning from mistakes.

I’m 120 days in, and the trading year is all but over. The exchanges aren’t dead yet, but nothing is moving.

I became a trader August 23rd while on vacation, and did very well for about 3 days. I had traded demo for a couple of months but real money made me focus.

I very quickly learned that more indicators is not more success, and discovered Price Action.

Frankly I haven’t done that well, but in my day job I’m a systems analyst and I am going to analyze my performance and create a trading plan for January based on the things that worked.

The main thing I have learned is that it is extremely hard to stick to a system, because a system usually stops you from trading (and usually, rightly so!).

For the month of January then, I will stick entirely to 1 system and log my results. I will take into account the stats of my successes to date, develop a plan, and stick to it.

Successful trade features:

Wednesday and Thursday have been my best days

Highest % of wins was between 5-7 AM and 9-10 AM closing after an average of 7.5 hours

Longs on Tuesday & Wednesday were the only trades I averaged a profit

I won over 50% of trades in UJ, EA, NU, GCH, AU, EJ, AJ, EU, GU, AN, GCA, ECH, UCA, ACH, EG

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I made a profit on AN, UJ, CACH, NU, ECA, GCA, and UCA only.

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Only USDJPY, NZDUSD, GBPCAD and USDCAD fall into both categories.

The other thing to think about is the signals. I don’t really have accurate records.

Plan

I will record the basis / signal name & location for every trade

I will look for signals discussed by dnbforexpriceaction

I will trade in line with the 200 SMA on whichever chart I enter, unless it is neutral

I will trade in line with the 10 & 20 EMAs on whichever chart I enter

I will set my risk to 5% of my balance or $10, whichever is more, using $/SLD

I will set SL at the last swing + the spread

I will set a trailing stop equal to the distance between entry and stop loss

I will flag weekly swing levels and only enter if entry-to-swing > SLD x 4

I will only trade Tuesday night, Wednesday early morning, noon, after work and late at night, Thursday early morning, noon, after work and late at night.

I will trade D1, H4, H1 and M15, and record which chart I used for every trade

I will only trade USDJPY, NZDUSD, GBPCAD and USDCAD

I will log the characteristics of my pairs every Wednesday and Thursday before I take any trades

It’s hard to discipline myself but I believe this will give me a better shot at success; does anyone else do anything like this?

What do you think?

2

You’re right about more signals necessarily meaning success. You’re wrong when you think price action is better. Most indicators are based on price action. I think a lot of traders have trouble because they confuse trading method with trading plan. What you tried first from what I can see is a trading method. Example I will trade when my indicator gives me a whatever signal or just as bad, (actually worse in my opinion) when price hits here or there.

What you have above is a trading method with strict defined rules, which is a trading plan. In my opinion the rules by which you trade by are more important than the method you use; as long as your method is based on sound principles of course. I use a combination of indicators to help me to enter, manage and exit any trades I take. But if I’m trading short term for example, I only consider executing a trade if the trade meets the short term rules I trade by. Same type of rules you have stated. Rules that not only govern what I trade, but also when and how I trade.

No matter how many indicators you use, or don’t, rules you use or don’t, the only thing for sure is that you will win some trades and lose some trades. But if you use a trading method along with strict trading rules, I believe you have a better chance of putting the balance of probabilities on your side long term.

Anyway Good Luck with Your Trading Plan.
Gp

3

GP, thanks for posting. Very interesting, I don’t think I had considered it that way.

I’d like to know if others have reviewed their year like this and taken decisions as a result.

In the interest of holding myself to my plan, I’mm committing to posting the parameters and bases of my January trades here for peer review, if it can be had. These trades will be based on price action, not indicators, rightly or wrongly. I’m still learning and I suppose as the market changes, I’ll have to also; but for January, I’ll be listening to price-action-based arguments most of all.

Losing is all part of this game; my goal is to understand myself and the patterns I recognize better, in order to tip the odds a bit.

I look forward to others’ comments.

4

I forgot to add be consistent. Set a time frame for automatic review of both trading method and trading rules. I found in the beginning I needed a shorter time frame, to review and make changes. The more time you get trading the method and living by the rules the less times you spend making changes in most cases.

5

I will only trade Tuesday night, Wednesday early morning, noon, after work and late at night, Thursday early morning, noon, after work and late at night.

This will screw you over given enough time. There is a fine line between realizing what gives a profitable edge and what is just pure non-coincidental luck such as picking out days of the week. Days of the week have an absolute minimal impact on a trading strategy, and should not either. This is just pure cold ‘curve fitting’. If any day is considered perhaps more different it’s late into a Friday when the markets are winding down for the week.

6

OK, that’s very interesting Jezz - I guess I’m using this type of thing often at work to sniff out causality, which is why I chose it. I thought maybe it could be related to either my familiarity with a particular day’s characteristics, or the increased volume of those days giving improved validity to signals.

But I’d like you to say more, because I’m new to this particular application of stats.

BTW my times noted are NY time.

7

OK, that’s very interesting Jezz - I guess I’m using this type of thing often at work to sniff out causality, which is why I chose it. I thought maybe it could be related to either my familiarity with a particular day’s characteristics, or the increased volume of those days giving improved validity to signals.

But I’d like you to say more, because I’m new to this particular application of stats.

BTW my times noted are NY time.

8

Personally, should you be able to combine an actual trading aspect with a particular day of the week then this is far more reliable. As you just replied you are looking to combine volume with a relation to days of the week - which is more appropriate. Volume in isolation is an element of trading, Days in isolation are not an element of trading (this is just the difference I wanted to point out).

So sure, as long as you can correlate a raw trading related element into your analysis then it would be fair to say that this variable is directly related to the other variable being tested (such as volume against days of the week). Correlation can be found in almost any two variables, even unrelated ones, so staying on the topic in hand will always work in your favor!

Give enough monkeys a typewriter and at some point a single monkey will type out a novel… obviously this is true statistically, but does not prove monkeys can type! So keep it relevant :slight_smile:

Note: What I would consider doing is looking at your trading plan of rules etc, and for each and every point ask yourself “why is this so, and can I statistically prove the benefit of each of these rules while keeping in the realms of trading variables”?

9

Got it, thanks for your help. I think this helps me get my thinking clear.

Anybody else able to weigh in? I need help on these things, and if anyone has experience analysing their past and redefining their plan I’d like to hear about it.

10

Got it, thanks for your help. I think this helps me get my thinking clear.

Anybody else able to weigh in? I need help on these things, and if anyone has experience analysing their past and redefining their plan I’d like to hear about it.

11

That’s not always the case. There are many exploitable patterns during specific times of the day and/or week. You’re telling me those are all just coincidental?

12

Correlation can be found in anything these days, what you decide to use in a profitable trading plan comes down to personal opinion. Days of the week though is not one I would waste my time worrying about.

As for specific times of the day, yes, I totally agree, we all know volatility typically increases with LO and NYO combined, just for example. You also used the phrase “exploitable patterms”, im sure these do exist, however my point was that it’s unlikley the OP has found these with only limited testing; as im sure you would agree Clark.

13

Fair ball, to be sure; but if there isn’t correlation is this just a coincidence? Or are you saying the correlation has to have more to do with my life than the market?

Which could be the case; I suppose I really would need to properly design an experiment to draw any real conclusions. On the other hand, whether the effect were to be traced to the market or my life is immaterial.

I guess the takeaway for me here is, I have a working hypothesis; but I shouldn’t assume it to be true. I need to work out how much of an improvement it would take to validate it.

Either way your original point was about discipline, as was mine; so I’ll go with it for January and re-assess.

Thanks for provoking me to thought!

14

Yes, you have just nailed it. I have no doubt that what you are doing does indeed work, and fitting trading around your own personal life style is totally acceptable, it’s the starting point for many traders who want to take it seriously as they appreciate the hours in which they will be free to trade.

Best of luck for the new year!