Mondeoman Fast Track Trading Journal

Hi,

MONDEOMAN FAST TRACK TRADING JOURNAL - not what you may think.

Some of you may recall that I have been hanging around here for the last few months, but was also a member nearly a decade ago. After loss making efforts in FTSE100 share trading and Forex trading in 2010 and 2011, followed after a gap by another foray into Sports Betting, I decided to approach Forex again in the latter half of last year prompted by three events in my life.

The first in 2018 was the passing away of my father, who was one of those Dad’s to die for. I never grieved his passing. I just thought of all the beautiful times we had spent together despite a long time being physically separated since I left school. In his last couple of years he retired to a single flat about 1/2 mile from our home. I would proudly walk him to the bookies, and the bookmaker would say “Oh hell, here comes Bill. He’s brought his bodyguard with him”. I drive a Merc but still think Mondeos are the best car ever manufactured - you know - fit for purpose without breaking the bank, and fine for an inverted snob from “Up North”). “If it’s more than a grand you’ve won I don’t have that much cash”. You see, my Dad lived and breathed horses, but did not suffer fools gladly. So he took his Racing Post form secrets to the grave.

I may share anecdotes if encouraged to do so, but I am mindful you are here to learn, so I will not force them upon you.

Anther event in 2019 was that I had occasion at work (contract management IT consultant) to initiate a programme of robotic process automation of business processes using a proprietary tool from one of the large global consultancies, after a transition of services to their East European offshore location. My mind swiftly returned to 2011 when I had convinced myself that I had “an incompatible psychology with that of a successful trader”, and vowed to cease interest in the subject unless I could find a methodology that excluded my interference once I had “pushed the button” on the trade entry. Preferably, I would have a robot do that for me but I was already knowledgeable about the good and bad practices and results from HFT (high frequency trading) and was amazed as a telecoms consultant that this was all about latency, and getting a few nanoseconds closer to the Exchanges in which the financial transactions occur meant the difference between an edge and no edge. By the way, I do not condone HFT since it is exactly the "big business raising the barriers to entry that I so despise in global business. I plan to automate, but the jury is still out whether I will maintain a watchful human eye over any other than binary decisions (in our out of market) and leave all that other stuff to a machine time frame.

The third event was that I read the book Super-forecasting, which reminded me so much in its content of that work done by Tharp in helping professional traders with their Psychology, but also with a deeper understanding of what is involved in the mindset and consequent actions of a budding successful trader.

So that was my decision to re-enter Forex as a passion, but also as a potential future stream of income. And recently, it was the final placement of my father’s headstone on his wife’s family grave (don’t ask why it took two years to get this done) that made me realize that my pride in the life of my father could only be bettered by saying a silent thank you to him for being such a wonderful influence on my life, and something I could discuss with him when you have those inevitable conversations with yourself - whether it is your alter-ego or your actual father, it doesn’t matter.

Two weeks ago, I was writing my Terms of Reference (an unfortunate habit formed by being a Project Manager for a living), for Forex Trading as an adjunct to a recently and similarly written document that spelled out a 2020 to 2025 long term investment plan in Crypto-currencies. Part of the reason to revisit Forex was a fascination in the short side of Crypto, but in my mind shorting an underlying asset is alien to “investment” but sure could be handy for the new Crypto, and also for the not-so-new precious metal long term and very boring holding (kidding really).

So as part of a lessons learned review from 2011/2012 and from 2014/2015 for Sports Betting, I looked into the decisions taken at the time and realized that those decisions did not make sense in the cold light of day. Though in both instances we were not achieving our goals (we had less money, not more money), we had nowhere near broken the bank, and with the benefit of hindsight, I realized that I really should have persevered and sought a slowing down of expectations and a continuous improvement cycle to identify WHY we could not demonstrate an “edge”. For sure, the results were negative, but for the last 150 out of around 400 trades, the system expectancy had become pretty close to zero. At the time I saw this as a failure, but now I see it as an opportunity. So realizing that it was now going to take me at least 3 to 6 months to get into serious back testing of algorithm ideas (I am following the NoNonesenseForex method), after completing (this time) all the School of Pipsology including quizzes and all the 130 or so remaining NNFX videos, I took a decision (it’s called Agile framework) to run a Sports Betting back test on some historical data I have, and a forward demo account (Excel simulation) of around 100 historical cases on what is remarkably similar to the “Algorithm” that VP talks about in his NNFX approach. It is a baseline, two confirmatory indicators, an entry that satisfies rules, a management and an exit plan, mostly preset depending on written rules.

It is this system that I am going to provide a “Journal Journey” for. I will post my first 40 trades (in 10 days) next

I AM TOO IMPATIENT

Still learning to try to slow myself down, I spent three nights on a row up till after 6am completing and refining a back testing spreadsheet that outputs results I already know. Why did I do that? It was to know that I knew what I was doing with the raw data from 1,500 sets of horse racing data that I had in my old system. I never throw anything digital away. When I have a major new subject to concentrate on, I give it a sequential job number. In the UK, which includes all my contract jobs for the past twenty years, this just happens to be job 292 (from 2014). So I just create a new folder within that data repository and pick up from where I left off. Sometimes very useful. Rule 101 - Never dispose of your data - you never know when you may reuse it. Anyway, it only took me 3 days to compete 1,500 data sets, and sharpened my absent skills on Excel data manipulation. I started some live data and just before I wrote this journal, I looked back over a list of “50 habits of successful traders”, one of which I found to be about periodic review - on the topic of identification and reduction of “mistakes”. A mistake is defined as an event that resulted in an outcome that the documented Strategy and Plan did not plan as an outcome. Mistakes can be positive (you are lucky for the wrong reasons) and can be negative (you suffer financial loss from them.

So I have entered 40 trades in 10 days since 11Jul2020, and below is the initial few days of equity that many of you will recognize as being applicable to Forex trades. The graph should speak for itself, but just in case it doesn’t please do ask questions I will be glad to answer on method, process and procedure.

In this Agile iteration of ONE strategy, where the object is win or loss on horse racing results to a documented Algorithm, not win or loss on Forex pairs to a documented Algorithm, I am satisfied that one represents the other, and that I will be able to replicate the historical 1,500 data set into another automated spreadsheet kindly donated on a forum by others with which I can prove its intended output functions by ensuring all the outputs are the same as those for my spread bet Excel sheet.

The bank is described as £2,000. Of this amount, £250 has been transferred into two bookmaker accounts and £1,750 is sitting in a bullion investment account in GBP where it is earmarked for this Forex-related trading strategy, and can be moved to use within 3 working days. This is a super-cautious approach of 1/2% of bank per trade whereas I need to have sufficient “real data” before moving to a theoretical 2% of bank per trade if my future back-testing of enough results shows me a three sigma (99.8% probability) that it will not ruin a bank. Meantime, and notably:

I have made SYSTEM MISTAKES three times in 40 trades, for which I am declaring my “system efficiency” as 37/40 or 92.5% efficient.
The first mistake was hilarious. I will number the trades from 1 to 40. The first was #14, resulting from me backing a horse TWICE - once with each of two bookmakers, for an unintended additional £100 profit. They say that luck is a fine lady.
The second mistake was to be expected. This was #16. My algorithm told me to take odds as early as possible where the bookies match or exceed those odds, but to wait till just before the race starts to enter the trade at the starting price if I have not been successful to obtain at least the system odds. The horse won, but I had no bet on. Arrrgggghhhhhh. This is greed, and trying to push what should already be a system with an edge to one with a bigger edge. Or trying to walk before I can run. That cost me 3.1% of bank, or £62 for a £10 stake.
The third mistake was for the same reason for the second. This was # 37, and by not ensuring the bet was on before the start of the race, it cost me 3.4% of bank, or £68 for a £11 stake.
Three mistakes added up to +5.0% - 3.1% - 3.4% = -1.5% or £30 and profit to date is £74.24 or 3.7% and a £100 Bet365 new customer offer for the £100 I already lost using their service (winners to date on the Betfair account)

What I have been able to do with real world data and confidence in the high starting efficiency of this Strategy I thought would take me weeks. But my previous familiarity with both bookies sites, which haven’t changed in years, has helped me a lot in coping with not so many new aspects all at the same time.

More importantly, I feel so comfortable with following the plan that is so far incomplete, my mindset is in a completely different psychological space.

Don’t get me wrong. I still fear creating the Algorithm, setting up a real and meaningful back test that will start manually but that may be swiftly automated as I gain confidence in a subject matter I used to do by hand in the late 1970s as a engineering trainee, and can now do quite well in Excel whilst learning what statistics means in reality. It is an enjoyable journey for only a few days and I look forward to reporting when the next two weeks of data arrive.

By the way I have no way to mathematically prove this - it is an extract from the book “How To Find a Black Cat in a Coal Cellar” but the number of trades I need to simulate to have a (rho) value of 0.01 (a 1% statistical significance) are 683, and for a 0.1% 1,205. At the rate of discovery of events that satisfy the current algorithm it is about 100 events per month which will take around six months to know whether this is luck or edge, to within 1% and just over a year to know within 0.1%. I would be grateful for any comments about the usefulness of this rho calculation and what I can do with the historical data and with the new live data to predict, whether at 0.5% of bank or at 2% of bank, what the likelihood is that the bank can be drawn down to a -50% and a -75% level. I am still just a script kiddie on this journey.

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Update after two weeks. Two more mistakes identified, one cancelling the other out in terms of profit and loss.
Now 90 trades completed.

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