BREASTSTROKE Trading Journal

Trading Discussion Trade Journals
1

[B]LINKS:
PERFORMANCE: MYFXBOOK, TRADE EXPOLORER.[/B]

[B]ABOUT:[/B]

I entered forex trading about 10 years ago. US brokers used to be a good bunch back then, FXCM used to offer MAM accounts run by their internal team (it lost money, was closed and all records were later removed from their site), MBTRADING use to offer forex trading and their platform used to be world-class, Alpari was a huge UK based giant, MIGBank was still a separate entity and was advertising in car races, MQL use to run EA based trading competitions and myfxbook didnt exist. I left it as I was not successful enough. Plus life happened moved from city to city and country to country. I even made an unsuccessful forex website (long defunct) which most of you would never had come across. Now that I have aged, travelled around, read and re-read tens of thousands of pages, spent what feels like an eternity on charts, and finally found my own personal holy grail, I am back.

[B]PURPOSE:[/B]

Purpose of this thread is to show the world my trading results, and more importantly to find myself whether I can trade successfully with public eyes on. Signal or MAM is not available at the moment.

[B]TRADING STRATEGY:[/B]

I call my method BREASTSTROKE. Just like the popular swimming technique. Breaststroke happens to be one of the oldest and arguably the most stable swimming technique. It is not the fastest but using it swimmers head remain above the water most of the time while he moves forward steadily. If market is like water, then trader is like a swimmer and the strategy I use to participate in the market is breaststroke.

[B]ENTRY:[/B]

As far as entry is concerned, I am pure Chartist. Actually I just trade a single setup which I know very very well. Perhaps I understand that setup better than anyone in the world or at least I would like to think that thats the case. I purposefully neglect all risk events for entry except those I identify to be unprecedented events [1] for lack of better term. Most entries are done using pending orders. Pending orders if not triggered are cancelled after 8-12 hours unless original setup has not been invalidated as per my understanding. A single trade can have multiple positions, but that is done to utilize server-based TP as MT4 does not allow server-based partial closes.

[B]STOPLOSS:[/B]

Stop losses are always static. They are not loosened once trade has been setup. Every trade risks less than or up to 1% [2]. I don’t mind a single bit if a trade ends -1%. That’s ok in my books.
In fact, contrary to popular trading methods, (ideally) I let the winner runs and hope that price never comes back to entry point, rather than letting the losers run and hoping for price to come back to entry point.
This stacks odds in my favor in long run. When enough time has passed, I would have a single or a few trades which would have resulted in outsized, gigantic, huge, mind-boggling profit instead of a single or basket of trades which would wipe out months or potentially years of profits if I were to let them (losers) run.

[B]EXIT and TRADE MANAGEMENT:[/B]

Trade management is done based on technical analysis, risk events calendar, news and fundamentals. Any idiot can enter the market, it takes a good trader to decide when to exit.

[B]BREAKEVEN:[/B]

In practice, for many trades stop-loss is never moved to BE; so trade is either a win or loss. And for those trades where SL is moved to BE, it is moved once price has reached another price zone. This can differ slightly for different pairs. It can be roughly 40 pips away or at 1:1 risk reward point.
Because of setting break even on some trades, myfxbook and the likes might show a lower average win but higher win %. Their math is not incorrect. It is just that BE is set at entry price + a few pips to cover for spread. If BE was set at entry price minus a few pips, average loss will decrease, average win will increase while %loss will be higher and %profit lower. So just be mindful of this once you look at stats.

[B]TARGET RETURNS AND BREAKEVEN:[/B]

As much as everyone would like good and bad opportunities are not stacked uniformly. In all systems, except may be automated HFT systems, one can reasonably expect that there would be extended period of time where a system any system would experience consecutive winners or losers. I dont plan to keep a target for return, but personally I trade to keep drawdown in single digits or in teens. I do believe the longer you trade a system, higher the possibility is to experience higher drawdown [3]. Thats just how odds are stacked in trading. Doesn’t mean that I wont do everything in my power to avoid drawdowns. In principle, all drawdowns must be avoided.

[B]INSTRUMENTS:[/B]

I am trading all pairs of 8 major currencies (28 pairs; 8 C 2 for those who like maths).

[B]BROKERS:[/B]

I personally prefer brokers which charge commissions instead of widening spread. I believe after hundreds of trades has been executed, there are bound to be handful of profitable trades which would have ended at SL just because spreads were artificially wide to cater for no commissions. Currently I am using Pepperstone, but really any regulated, trustable, commission based broker should work. I am going to create a brand new account with portion of my trading capital for purpose of public record and trade on that.

I have said enough. Generally it is uncharacteristic for me to say so much. Now let the trading begun.

Don’t sweat if I am not super quick to reply on this thread. Participating is new to me. Otherwise I have always been a silent lurker. I’ll do my best to come back to the thread once or twice a week.

[B]- BREASTSTROKE.[/B]

[1] Biggest example of what I call unprecedented news in recent times is interest rate hike by Feds after 8 years in late 2015. Now many people would not remember it and that is because all went according to the plan. But that doesn’t means that this was supercritical and the single most important risk event of last 1 year.
[2] SL is something I am currently considering to increase. And I might be increasing it to 1.5 - 2% per trade in near future.
[3] Reading Market Wizards, one realizes that even living legends and billionaire investors like Paul Tudor Jones once faced drawdowns that wiped out their capital. They learnt their lessons eventually, learned to size the positions accordingly and to get out of losing trades. But the point is that drawdowns are a reality in trading. An unfortunate, unwanted, disgusting, repulsive reality. All we can do is the plan accordingly and learn to survive today so that we can participate in market tomorrow.

[B]DISCLAIMER:[/B]

Trading foreign exchange on margin carries a HIGH LEVEL OF RISK, and may not be suitable for all investors. Any opinions, news, analyses, or other information posted by me are provided as general market commentary, and does not constitute investment advice. I will not accept liability for any loss which may arise directly or indirectly from use of or reliance on such information. I am not licensed by any regulatory authority including NFA, CFTC, ASIC, FCA, FSA, FINMA, CySEC and FCSM.

2

“The big money is made on the big swing” Livermore.

Thanks for the post.

3

So, what’s the setup?

4

I have made a new account at pepper stone.

Funding it might take 2,3 days because of the Easter holidays and the delays it is causing.

But I have connected this new account to myfxbook and fxstats. For some reason, Forexfactory’s trade explorer is giving me error. I have submitted a support request, hopefully it should be sorted shortly.

Links to myfxbook and fxstats have been added in the first post.

Hello Forexunlimited,

I believe it might be better to show than to tell. This forum and the likes are full of strategy/systems threads. But how many have stats attached? I’ll try to do the opposite. TO SHOW, and to perhaps answer any questions that come up. That’s why this thread is a journal and not a strategy thread. I don’t have a traditional checklist like A> B, then enter. I look at chart and when prices reaches a level where I think it will be heading in another direction, I enter. Let’s see a few trades to learn more. I am afraid I will be disappointment to any one looking for another set of trading rules.

I believe in spirit of transparency, I should mention that I have a similar thread at 2 others forex forums to interact with a wider audience. (whole purpose of all this).

5

I have touched on major points on how I trade in first post. Following is some more information which might interest readers.

[ul]
[li]Chartist to an extend that I look at the price levels later (when I am validating a setup) and charts first. [/li][li]Contrarian in spirit. For last 2 months, all major investment banks are saying to short any aussie rallies. Meanwhile aussie has shot up 700 pips. So being contrarian with money management pays off. [/li][li]I don’t like to trust anyone else’ market reading. But I do consider any views which signal potential major risks. Something like change of leverage on HKD by many major smart brokers recently signals massive risk to me and if I were to trade USDHKD(which I don’t), that would be the point I would stop and go flat on all HKD positions.[/li][/ul]

–

Account has been funded. So I am looking for trades now. Fxstat and Myfxbook live links are given at top of the first post.

6

ARTICLE: How to avoid Armageddon events like SNB removing CHF ceiling in Jan 2015

You can’t. You are most likely too small a fish. Events like this wash out large hedge funds. You are just a boat in an ocean, you can’t fight with ocean waves. You can only adjust your sails and be prepared.

Events like this are only thing which personally scares me from trading. Not losing x% of my account on a single trade. That is cost of doing business. So I have given it a long hard thought on how to avoid complete capital wipe-out in such in instances. As I believe it is matter of time before a next one appears. May be next time it would be meteor or tsunami and not a central bank. But you can bet your ass it is going to come. Following is what I personally do to save my own trading capital:

[B]HAVE PENDING STOP ORDERS. ALWAYS.
[/B]I shouldn’t have to explain this. But there are many people who don’t like stop orders. They think they are always keeping an eye on market and would be quick enough to respond to any event. Let’s agree to this for sake of the argument. Even then have a crazy stop loss 1000 pip away for the time when markets go to haywire. Pending order are executed by the broker’s server in split millisecond once stop loss price is hit. Meanwhile, even if you click ‘close’ on your platform exactly at the same time, latency alone will put you in a very disadvantaged position. It would take hundreds of millisecond for your order to reach the broker’s server and by that time, people like me with pending orders would have consumed all available liquidity.

[B]STOP TRADING PAIRS WHEN BROKERS ARE REDUCING LEVERAGE.
[/B]Brokers like dukascopy and many others are vigilant and they reduce the available leverage on selected pairs if they expect large sudden movement in them. They do it to save their client balances going in to negative. By the same logic, we should avoid those pairs as well. This simple trick would have made many stop trading CHF pairs early 2015.

[B]DON’T FIGHT CENTRAL BANKS.
[/B]Soros might have made a billion betting against Bank of England. But it is unlikely that you have enough ammunition to fight such a war. I am not even saying to not go against central bank, I regularly do that myself. Trick is not go bonkers on position size and to use stop loss. Don’t assume that central bank is too weak to act. Hell! They don’t even need to act. A single phone call from central bankers to interbank dealers will likely wipe out your capital if you over leveraged.

[B]LET ONLY PROFITS RUN.
[/B]Seriously! What is worse? A position already in 400 pips in profit getting wiped out with sudden movement of -500 pips in pair or a position in 400 pips loss and getting hit with another -500 pips of sudden movement? SAVE YOUR CAPITAL, keep your head above water and survive for another day.

[B]USER BROKERS WITH LARGE LIQUIDITY (and fast execution).
[/B]Generally large name brokers have large liquidity pool. Also, it takes a lot of effort on broker’s part to get their hands on multiple liquidity pools, hence no brokers can stop itself from bragging that it has deep liquidity if they have made an effort. So we can pick from the list of brokers which are bragging. Now a days, many brokers even show available liquidity they have per pair, so choosing isn’t that hard.

[B]USE HIGHER LEVERAGE ACCOUNTS.
[/B]My broker allows me to choose leverage. In cases like this, always always choose the highest leverage account. Even if you are not going to use high leverage, this will give yourself some room to avoid unexpected margin call when you are in multiple positions and unexpected happens.

[B]DON’T KEEP ALL OF YOUR TRADING CAPITAL IN TRADING ACCOUNT.
[/B]Not always, but brokers are less likely to chase negative balance even if you were to experience one despite following all the above tricks. So use leverage to trade. For example, you trading capital is $10000. Put $5000 in trading account and use same lot size as you were with $10000 in account. If $5000 gets wiped out. You still have half of your capital available to rebuild another innings.

7

I almost trade naked, other than a couple of moving averages which I use for basic filtering there is nothing else on the charts.

I especially did away with any thing which can not be overlayed and required a separate small window at the bottom of the main chart (oscillators etc) long time ago.

Use of ctrader is mainly for flexibility as its charting is many times better than MT4. Actual Order are executed on MT4 in reality. From time to time, I also use web based tradingview for the charts.

Favourite time period to look at is H8.

charts.jpg700×268 38.9 KB

8

Week 1:

I had 1 break even, 3 losing and 1 profitable open trade last week.

All losing trades were executed as per my understanding, it just didn’t work out. Price moved against before moving in the intended direction. But that’s how it goes in trading. There is nothing which I believe needs improvement.

The profitable trade is still running and will remain open over the weekend. Let’s see how this will play out next week.

The BE trade is one I wanted to talk about. I believe trading will public eye effected me here. Like I have said in the first post, stop losses are sometimes moved to BE. For this trade, I really just hurried to move the SL to BE just because I felt eyes were on me. Price pierced through the BE SL by 6-7 pips before moving over a hundred pip in the intended direction. Hopefully I will grow out of this mentality soon that I need to cater for public eye and just do what I do. Indeed, that was the purpose of this thread.

BE Trade:

BE.jpg700×271 15 KB

9

[QUOTE]

Pick one: Stop Loss or Margin Call.

10

[B]Dealing with currency pair correlation:[/B]

An issue with trading 28 Paris composed of 8 unique major currencies is you are bound to experience effect of pair correlation.

[ul]
[li] Firstly, every pair is correlated to other pair(s) at least to some extend. [1]
[/li][li] Secondly, one pair is correlated to another till it isn’t. [3]
[/li][/ul]

These statements might seem contradictory but they aren’t.

After given it enough thought and testing multiple methods to manage correlation, I have come to conclusion that correlation is best dealt by limiting VAR (Value at risk) rather than messing with position sizing or SL settings.
At any given point of time, I shall not put more than x% of my account at risk through use of SL. Right now this x% for me range between 3 to 5%.

So I will take all signals that are valid as per my understanding, despite the fact that some of them might appear in the same direction on correlated pairs, UNTIL total VAR exceeds x%. When it does, I will either have to neutralize the risk on existing pairs by moving SL to break even effecting elimination any risk or will not take the new signal.

[1] Generally AUD = NZD, EUR = GBP.

[2] Minor crosses like NZDCHF and the likes are practically just ratios of their majors. Well! all crosses are ratios in practice, but some minor crosses have no weight of their own i.e. NZDCHF and the likes.

[3] It is easy to see here. First, correlation is different for each time frame. Pairs correlated in 5M are not correlated in 1D. Also, pairs can be correlated to each other due to market sentiment till their correlation goes away. A good example can be of JPY and CHF, which fundamentally become stronger when market is risk averse. But as soon as the risk averse sentiment goes away, this correlation brakes.

11

Public trading keeps on effecting me. Very happy now that decided to iron out these glitches.

~ -3.5% at the moment because didn’t take a trade which went on to become +4%. Plus closed a trade early due to invisible pressure of public trading.

All in all I believe I should have been somewhere around +1-2% if I would still be trading privately.

Stay tuned!

12

One of the hardest thing in trading at times is … to NOT do anything.

[ul]
[li] NOT entering the trade.
[/li][li] NOT hitting that take profit button.
[/li][li] NOT moving stop loss.
[/li][/ul]
… to name a few

–

At the moment, I am at -2.64% after making 1.7% last week.

Featured trade:

EURGBPH4.jpg700×242 12.4 KB

13

[B]Balls of Steel[/B]

balls.jpg700×438 57.3 KB

There are 2 giant steel balls in the heart of the city I live in. Locals are actually very touchy about it. There have been fights on where they should be placed and whether they should be altogether removed or not.

These are exactly the size of balls a trader need to let winners run and losers die.

14

I love the place breaststroke…

15

Last couple of weeks have been quite interesting.

First, I missed a few good higher time frame trades due to other commitments.
Second, my schedule has changed in a way where now I am able to really sit on my trading desk for a while and enter trades on a smaller time frame.
I believe, I am not a bad scalper at all. But the heart wants what it wants (swing/position/longterm trading) and the way I trade lower time frames currently is that I focus on participating in the market from a low risk point then take some profits off the table and keep a smaller size position of about 1x leverage open after moving SL to BE. This gives me some quick small wins and allows me to potentially position myself for longer term trend.

Monday, which was public holiday in Australia went really well. Up 1%. Tuesday was slightly better 1.1% or so. By then I was out of all the drawdown.

But the featured trade of the last week is the losing USDJPY trade.

6A87C9036A494E389DCFDE567C740594 (1).jpg700×585 22.9 KB

Now, USDJPY moved about 300 pips as many would know on BoJ doing ‘nothing’.
(This is exactly why I preach SL. And I had a 0.4% SL for this one or so I thought)

Turns out that the EA I trust to set SL automatically has a bug. I entered in this trade before the news with a small deleveraged position. News hit the wire and the price started falling before my eyes, which is really ok as this happens and you can be either right or wrong on any of your trade. But when it crossed a hundred pip in the matter of seconds instead of hitting ~ 25 pip SL, I realized that I have to intervene manually. Still I got out for a loss of -1.5% … which wiped out majority of the other gains acquired earlier in the week. I think I have found the bug in trade manager and have reported it to the developer. Hopefully they will sort it out soon.

Meanwhile I have learned to manually verify that trade manager has set SL in every trade. This will make sure that I can keep participating in the market after a losing trade. That is a traders only job, to keep participating the market (from a position of low risk). Everything else is just an explanation. (use SL, letting winners run, avoiding news, trade trend etc etc)

16

I don’t want a small probability of ruin, I want zero.
Because if you have a small probability of ruin, any given day, over time, you will be ruined. It is just matter of time.

Source: Nassim Taleb on the Importance of Probability - Bloomberg

17

[B]Changing my (trading) religion[/B]

Going public with your trading has myriad of drawbacks. One of them, perhaps the biggest of them is that changing your opinion becomes much harder, even when it is for the better. I would say that going public with my stats has pushed my growth about 2 months behind.

Truth is my understanding of markets since I went public has evolved. And, I don’t want to be stubborn about it.

So here are the new things in my trading:
[B]
More fundamentals and even more news: [/B]I have always looked at fundamentals but mostly for the purposes of risk management and profit taking. But I will be using fundamentals and news to understand the current sentiment. My current understanding is that sentiment is single most important thing that effects market in short term. Think risk on vs risk off kind of things, such things cause enough money to move and that … creates tradable opportunities.
[B] Less price action:[/B] the more I learn about market mechanics, the more I understand how a particular candle and hence pattern is formed. In past, I have made a mistake to take it too literally. If I dive in to this right now this post will become a very long essay, so let’s keep this discussion for the future (hopefully not too distant). But in summary, price action has become much less complex for me. It offers me just one piece of information and sometimes one last push to pull the trigger but it is not sole why I will enter in a trade.

Also, pure price action for all its benefits had been mined merciless by larger, more resourceful participants and solely relying on it in my humble opinion is tireless hunt to find another trick because the last one stopped working. That’s why quants call it market anomaly. If you have indeed found something then market will find a way to plug the hole sooner to later.
[B]
Trimming my focus to less number of pairs:[/B] Now that understand the sentiment and market happenings have taken a centre stage, I will need to trim down on the pairs I focus on or a better way to say it is to trim the currencies I focus on at any given time and find a suitable instrument (trading pair) to trade the opportunity later. This is not to say that I will only trade handful of pairs, in fact now I plan to trade exotics as well, but if and only if I understand what is happening.

There is no better guarantee to make a consistent profit in the market then to learn to understand what the heck is actually going on.
18

Persistence over stubbornness:

I have been away.

Life is been happening.

Couldn’t trade.

But didn’t stopped learning.

I think being away from sharing thoughts immediately helped me; it gives thoughts a chance to morph and mature.

I have changed my views on trading a lot. I think it would be fair to say that I am not a pure chartist any more.

Rather I have become much more conventional and my approach is much more old school.
Become aware of what is happening and take a position when odds are ridiculously in my favour.
Worse drawback of this approach is that it is not possible to go on vacation and come back at leisure, take a look at the charts and enter a position. I need to be aware of what is going on around me pretty much all the time. It is not necessary for me to be in a position rather I need to wait for when in my opinion odds are ridiculously in my favour.

I now have pretty much binary view of market.

X is either going up or going down.

I however will enter when I think that odds are ridiculously stacked in one direction. Such conviction is not merely result of a chart, but rather, news, technical, fundamentals and sentiment as well.

Stop loss exits are based on odds decreased, hitting 1-2% loss on a single trade or 5% on a single idea.
Profit taking exists are based on loss of conviction of original idea, medium term EMAs and historical data like how % X moves in a day, week or when similar event happened.

I will never do grids. I really have a huge disliking to grids. Grids feels like cheating to one’s own self. And I will never add to a loser. **** losers. Single most important thing in trading is to have an overall edge and then be able to trade forever so that that edge can play out. Grids are a sure way that odds will destroy you and whatever you have earned during the good times.