I have off from work tomorrow through Sunday, so my goal is to get 15 hours of backtesting in. The initial idea I am going to test is going to revolve around getting in on pullbacks. Pullbacks stick out for me like a sore thumb, so that is as good as any of a place to start with.
My idea is that if I can figure out the best time to enter the pullback then I can ride that move up to profit targets. I definitely want to set stops and targets because I can’t watch my trades all day long. So my question is how to determine when a move against the trend is really a pullback and not a reversal?
My testing is going to test a lot of different things at once. For entry signals, I plan to test double bottoms/tops, RSI, Stochastic, CCI, Fibonacci retracement levels, previous support/resistance levels and single candlestick patterns. Each thing I look at is going to have the goal of helping me fine tune the entry. I even plan to include whether or not the direction of the trade corresponds to a higher fractal trend. For targets, I plan to test ATR based targets, Fibonacci extensions, harmonic moves (where second leg is equal in length to first leg), previous support/resistance levels, and round numbers (such as 1.2600 or 1.1700). For stops, I plan to test ATR based stops, Fibonacci inversions, and previous structure levels.
Once I get a good amount of data I should be able to see which combination of factors gives me the best risk/reward ratio or highest win rate (it would be really nice to get a 5:1 ratio with 85% win rate ). From there I can develop and refine my trade rules to test in my demo account before trading live again.
The good thing about all of this backtesting is that it should carry me through the screwy holiday markets and back to a more normal market behavior after New Year’s Also, I hope it will make me a lot more competent at executing trades than I am now so that I can focus on risk control and money management at that point.
It could be worse. I watched the GBPJPY get 90% of the way to my profit target, only to turn around and head the other way. I’d moved my stop to break-even, so it wasn’t a loss, but I was kicking myself for not getting out as soon as the reversal started.
No matter how many times I tell myself ‘when in doubt, get out; hope is not a strategy’, it never seems to sink in as well as I would like it to!
Right now I am trying to formulate a strategy for trading pullbacks using CCI and Stochastic indicators with Fibonacci levels and support/resistance lines. I pop both those on my chart and I am looking at my first trade setup. I spot it, and now I am trying to capture the data in a spreadsheet to analyze.
That’s where I am getting stuck at - what data do I capture, and what can I ignore? Right now my spreadsheet as almost 20 columns of data and I have no idea if I am even getting the right stuff.
And now my brain is telling me to go grab a free system from the forums here and try that instead… grr…
After shaking off the flu over the weekend, I decided that it’s time for me to take a break from trading real money. My strategies are untested and my execution needs more practice. At this point, I am trying to run before learning to walk. My plan at this point is to sit down and spend some time finding a few different strategies that really work for me.
By that, I mean strategies that I feel good about, that I can readily identify in the market, and that have a track record of being successful as measured by back testing and demo trading. Since the market has only three states - bullish trend, bearish trend, consolidation - it stands to reason that I have one or two different range strategies and a strategy for trading the trend.
My goal is to have all this done by 3/31/18 and resume live trading at that point. This week, the goal is to re-read all of the school section here and look for techniques that I want to investigate. Next week, the goal will be to backtest a trend strategy and the week after that the goal will be to backtest a range strategy. Once I backtest those strategies then I will spend a few months demo trading those strategies, providing that backtesting shows a positive expectancy.
Sorry to hear about the flu. A couple of suggestions, though.
First, don’t set arbitrary time-lines for yourself. I know that I’m being hypocritical here, because I fall into that trap myself all the time, but your strategy will be ready when it’s ready. Feeling like you have missed your self-imposed deadline is just a way of beating yourself up.
Second, I don’t think it’s necessary to have a strategy to for all market conditions. Better to take your winner and look for markets that fit your criteria (or simply sit out a market that does not suit your edge) than to use second-rate strategies simply because you want to be ‘in’ your chosen markets.
That last one was really tough for me to wrap my head around, but every day I sit out is a day I don’t lose money.
Hey Bud, the Flu is not good, glad you are on the mend. A suggestion, since we are in a range market, especially the EURO, maybe you might want to look at that first since it is happening right now. But, however you work best, is the most logical way of approaching this.
The thing is I don’t know how I work best. The early Forex YouTubers I watch always advocate for hours and hours of backtesting, followed by demo testing, followed by live trading, but that just might be for liability purposes. I suppose live trading small positions and controlling risk would give me the same practice and potentially make me some pennies.
I really dislike backtesting because its tedious, but if it is worth it, then I probably should do it. I am just not sold on backtesting being worth the time.
Wow, it’s been a few days since I updated this thread. I spent last night watching the market to see how a new pattern I learned works. Very informative, and very helpful.
I am also thinking of making another YouTube video where I just ramble on into the mic about how I am looking at the market. I might do a live stream as my skills progress and I feel comfortable teaching other people how to trade (for free - I want to make my money trading, not selling failed systems).
I also talked with a friend that I met here about prop firms and got confirmation on something I longed believed - prop firms are brutal places to learn to trade. However, I see the benefit of talking with other traders IN REAL TIME while trading and by doing so we can all learn from each other. To that end, I will gladly setup a Discord voice chat server if anyone wants to hang out with me while I trade.
My standard trading hours are 1800 to 2100 (UTC -6) on Mondays, Tuesdays, Wednesdays, and Thursdays. Of course, these are not set in stone and will vary - without warning I might add. If you think you would be interested in a trader hangout type of room (and you alone are responsible for losses if you follow anyone’s trade) PM me.
That’s midnight to 3 am GMT ? - That’s Asia Hours ! - Are you looking to trade that interval, or discuss pending entries and exits on larger time frames ?
I’d quite like to play - but am on GMT and by midnight - I’ll either be Pssst or asleep !
Yep, that’s the only hours I can trade given my work schedule. I might do the odd Friday or Sunday afternoon (1600 to 1900 UTC - 6) once in a while, but not reliably. Of course, if enough people want a Discord server to hang out on it doesn’t matter if I am there or not.
Productive night tonight. So far, banked 10.9 pips on the AUDUSD pair, and looking at one more potential trade setting up right now. Fingers crossed that I don’t give those 10 pips back
I haven’t figured out yet how to export chart images from fxTrade platform yet. I might yet be forced into MT 4. And I got in on a double top play for the last trade of the night. The goal of this trade is 10 pips with a 5 pip stop loss.
The first trade was a short entry at 0.7587 (19:33 UTC -5) for 1,000 units. Closed 500 units at 0.7575 and closed other 500 units at 0.7578. First 500 units net 12 pips, and second 500 units net 9 pips. Overall profit 10.5 pips (assuming averaging the two positions together is proper). Overall profit in USD is $0.78 cents.
The second trade was a long entry at 0.7581 at 20:14. Closed entire position at 0.7584. Net profit of 3 pips. So far up 13.5 pips for the night. Net USD profit on this trade was $0.31 for a total of $1.09 overall.
Double top trade entered short at 0.7586 (20:30). This trade was a test of nerves as price came up to a hair away from my stop loss, stopped, and then started moving back towards break even. Now with 8 minutes left in my trading session, this trade is at -$0.37. Right now I will be happy with break even within the next 8 minutes. This trade hasn’t been in the green since I put the position on and in 7 minutes that will be two whole bars of the trade moving against me. On these short trades, I like to see at least a move into profit within the first three bars.
And the trade is stopped out 2:01 minutes before the buzzer for a loss of 6 pips, or -$0.63. Net profit for the night is actually a profit! Net profit of $0.46.
So yes, it turns out I can make money in the markets. I got a long way to go yet, but this is definitely a positive step in the right direction.
I snuck in a trade today at work. I wanted to experiment with higher time frame charts to see if that would allow me to take advantage of some of the market volatility from the New York and London sessions without actually being present during those sessions because of corporate slavery and all.
I found a range trade on USD/CAD 4 hour chart. I entered short at 1.29002 (top of range, and psychological number) at 12:32 PM (UTC -6). My stop is at 1.29280 and my profit target is at 1.27000 (200 pip move if I catch it all) but I have alerts set at each structure level on the way down to check for loss of momentum in the move. This trade is currently 6.7 pips in profit.
I shorted this trade around 12:30 PM (UTC -6) yesterday. At that time, price action was at the top of a range from 1.2900 to 1.2700. 1.2900 had been tested twice, as well as 1.2700 so it was a solid range. In addition, CCI was over 200 and Stochastic was over 80 on the 4-hour chart. Fill price was 1.2900 for 1,000 units.
When I went to bed, the trade was around 15-20 pips in profit. My phone woke me up this morning as I had an alert from trading view that this trade was a lot farther in the money. By the time I logged in price had fallen to 1.27951. CCI was approaching the zero line, and Stochastics was between 50 and 20. I thought that momentum might be slowing down (not to mention that was also the mean level of the range), so I closed out 500 units and moved my stop loss to about 10 pips below break even (so if I got stopped out, my second position would still be +10 pips.
A few hours later as my dad, brother, and I were making venison summer sausage and bratwurst my phone goes off. A quick glance shows me that my take profit was hit at around 1.2700. At this point I am flat with price hovering near the bottom of the range. If I could get logged into Oanda I would be looking for either a range breakout trade or a long opportunity depending on what the momentum looks like.
Summary of trade:
1st 500 units - 100 pips profit
2nd 500 units - 200 pips profit
I could have made more money had I not closed half my position the 100 pip mark, but had the market turned around and stopped me out I would have lost on all 1,000 units. Closing out half my position allowed me to bank some profit and eliminate the risk in allowing the second half of my position to run. Better yet, my trade account is now in the green after 2 straight negative weeks.
Last week was a hell of a week for me. My account is in the green by a few dollars, and the first two weeks of losing trades has been erased, at least financially. This means that I am not going to be in any rush to give that money back, so I am not taking trades this week. Instead, I have a few other goals related to trading that I am going to work on:
Create a trade review worksheet where I can mark down the specifics of each trade, save a picture of the chart, and keep notes while the trade is active.
Fill out my trade review worksheet for all past trades
Work on my range trades in demo. This trade setup seems to work well for me, based on the limited data I have. I need more data to evaluate, but I don’t want to spend money to get that data
Video record my market analysis sessions this week and post to my YouTube channel. Doing it publicly this way makes me more accountable to actually doing the analysis even though I am not taking trades. I am basically using this as a way to get free reps in answering the questions “What has happened?”, “What is happening?”, and “What do I think is going to happen next?”
). From there I can develop and refine my trade rules to test in my demo account before trading live again.
