My 5000th post: a video on dealing with margin call and blowing up an account

Trading Discussion
21

I don’t think for one second there is any doubt about that, Turbo. But I think the question here is what does one do next? One can’t just stand still. (Although that is probably a good thing to do for a while until one’s sense of direction is reinstated). Eventually, one moves on and the questions here from Frances, I think, are in what form and towards what.

Frances has generously and humbly given valuable insight to all who are receptive as to what the true risks are in this industry.
Interestingly, the only reason this situation arose was a lack of sufficient margin in the account to avoid the positions being closed. The question is would you, Frances, still have kept those positions open now if they were still there or would you have closed them anyway? I.e. what were your long term objectives for these positions? What do [I]you [/I]learn from this situation?

22

I agree fully with the sentiment you are expressing here, but I am not sure I really agree with the statement per se.

I think it is more accurate to say that “Winners are not people who never fail, but people who learn from their failures”. There are people who stubbornly continue to bang their heads against the wall without ever noticing there is a door to open. Frances is not the type to keep on banging his head. That is evident from the video. He is a person who looks, learns and moves on, all the wiser for what he has gained.

23

Hello peeps!

Well, I am honoured to see so many supportive comments from the like of Manxx, Turbo, Yohec, and Lexy - among others - and that my post has generated a little bit of discussion.

After two weeks since my trading debacle I had time to do some thinking, thus I am ready to come back on here and share my thinking with the community:

  1. after making the self-evaluation video and watching it back twice (to make sure I would not forget the lessons I must learn from this event), I decided to sit down and begin writing a draft trading plan;

  2. said plan, at present, contains the germs of a general perspective, with questions such as: edge, goals, risk per month, entry and exit strategy, data source, statistical evidence for system;

  3. I started looking at automation, because one of the problems that discretionary trading continues to have for me is not only bias but the issue of screen-time, which with a new baby in tow and a business to run is limited;

  4. as a result of 3), I have opened my eyes to coding, specifically Python coding, and I have sourced some good information on how to begin coding from scratch;

  5. said information is now split into three branches:

    a) Code Academy’s introduction to Python coding (free resource);
    b) Quantopian’s course in Python-based algorithmic trading;
    c) Coursera’s courses on computational investing;

  6. for 5)c I have enrolled today on an 8-week course (cost: £36) which covers everything from Python programmning to information feed, tech analysis, portfolio optimisation, backtesting, machine learning, etc.

Computational Investing, Part I | Coursera ;

  1. I am also conducting a currency demo trading strategy on FXCM, limiting myself to a small number of trades; after a week of trades, I will start evaluating what I have achieved so far, next week… This is the ‘boring’ work that I want to do because it is the most crucial part of learning from past trades;

  2. I am in conversation with Turbo and others through our own chat facility about trading, and there are some good ideas being exchanged there;

  3. I have scheduled a Skype session with broker support at Darwinex on Monday (next week) to learn how it works; Darwinex offer an investor-backed account based on performance, similarly to Quantopian, except not algo-based; I would like to also thank Lexy for suggesting TopStepTrader in the past, and I have not ruled it out completely but it is certainly something important if I were to try getting capital/backing for my trades in the future;

Most importantly, I am taking my situation as a learning opportunity to rethink my entire approach to trading from
amateur to professional: if what I am looking for is to exploit some kind of market inefficiency, it means doing a lot of work through data, and for that I will need the assistance of machines, as they have the ability of harnessing a greater amount of data in a shorter time than if one were to analyse charts/data manually - although there is merit in both.

Also, given that currencies are a hard nut to crack, I may not need to be so sentimental about being attached to something that I got to know so well, and be open to trading other asset classes, whether it be commodities/CFDs, ETFs, indices, stocks, futures, etc. Certainly, the ability to backtest that algo/coded programmes offer through something like Quantopian can be a great start to learn about data analysis in depth, and how to build a strategy (NB: Quantopian do not offer forex trading at the moment, so that is a further incentive to look beyond foreign exchange).

While I have a breakout/whole-number-level strategy in mind, I want to spend some time learning more about system building than have fanciful notions of ‘systems’ made up in my mind during lunch or in my own dreams: all it takes is finding a set-up that exploits a small section of the market where I can activate an actionable, tested, and data-backed strategy… That in itself will take A LOT OF WORK, but rather than throwing darts at the charts in the hope to ‘make it’, or to think of myself as the next global-macro trend-spotter, or to try scalping manually, I really want to dig deep and remove all emotional attachment to themes, politics, fundamentals from my trading and find what it means to ‘trade what is in front of you’: if price is trying to tell me something, then I need to be taught what data analysis is, how to be efficient at it, what machine tools to learn, etc. For this reason, I am taking a course in Computational Finance, at least to shake me out of my complacency that I can continue as I have, trading manually through spot-forex, for example, which has no edge whatsoever for me.

In the end, you would never open a business without due research on which corner of the market your business should be targeting, so I must first find if there is a higher probability trading strategy, and do enough testing before investing a single penny in a new account.

Thanks very much and please continue to fire your bullets at me, as it is all taken in good spirit - that is the whole point of coming clean about my mistakes in the public context of BabyPips forums.

Happy Trading

Mr. Buddha Buttocks.

24

I am really impressed with your plan, Frances. That is quite a comeback with a vengeance! :smiley:

I sincerely personally wish you every success with your efforts and I am totally convinced you are going to get there. Your enthusiasm, when combined with all your other plentiful assets, will carry you far.

I also wish you great success with your combined work with Turbo and Eddieb. A sure recipe for a great team. I only hope that this site [I]also [/I] continues to benefit in some way from your combined professionalism. It has been a real pleasure to have “met” you all here.

Kaikkea hyvää teille kaikille! :slight_smile:

25

Thank you, Keith! What does your Finnish saying mean?

I could have tried an online translator, but…that is not so special as asking you!

I have a long road ahead but I am seeking help, so that I can have a better chance of making it work.

How is YOUR trading?

How is your new car on Finland’s autumnal roads?

F

26

Actually I am really happy with both right now, thanks.

I can’t remember whether I posted here before that I decided to start trading with EURGBP after Brexit? Previously I have always been a EURUSD purist and never traded anything else, but I have always had a natural personal/business interest in the EURGBP rates. But being an intraday trader, there was no sensible market for me in EURGBP whilst UK was in the EU. But I really believe things have changed now after Brexit and that the EURGBP is going to be as tradable (or untradable :slight_smile: ) as any other pair. Both the EU and UK have specific and different challenges, requiring independent decision-making, as they move forward post-brexit and this is surely going to reflect in their relative currency relationship

Over the last 2 months it has worked out well using my usual guideline charts, I watch the 4H for direction and trade intraday off the 15m/5m. But my trading off those charts is very discretionary, I am not a great beleiver in mechanical trading. I pick my days and my times and, well, so far so good…

The only concern I have is that I have some kind of inbred fear of any pair with GBP in it and tend to anticipate a flash crash every time I open a position!! But I have worked with intraday stops and targets for many years now and I am getting over the stress/reward barriers.

Here’s the 4H chart for the past 2 months and it has been quite well-behaved if one is disciplined (I only put it here as some support for what I said above - it is too easy just to say, yeah, I’m doing great)…:slight_smile:

To be honest, Frances, my original plan was to continue intraday with EURUSD and to try longer term trading with the EURGBP, but I just couldn’t face leaving any GBP positions open overnight even with a stop, so I just carried on with the same approach as before. I guess that is not very adventurous or exciting but, well, if it works…

PS just added the 5m chart from yesterday just to show how that trades within the 4H guielines. That’s my stuff - stupidly simple and almost shamefully boring, but I just like lines that form a whole, tell a story, an look pretty! :slight_smile:

EURGBP 4H.jpg700×314 27.6 KB

EURGBP 21102016.jpg700×376 35.6 KB

27

Thanks Manxx, and, yes, you had talked about your business relationship with this particular pair…

I am glad it is going well for you, and certainly there will be some interesting moves… whether parity will be

reached an when, well, it is another story.

28

Update on my plan.

I contacted Darwinex, a Spanish managed fund who offer traders the opportunity to become invested, a little like the Combine in TopStepTrader.

I just had a one-to-one Skype session with one of the Darwinex staff, who explained how the fund works, and the various stages you have to get through… Your strategy can be invested by anyone, and you are rated on risk and various other parameters…

The fund thus far has 809 traders on their books, but nobody made it to ‘Pro’ level, yet - a few have made it to ‘expert’…

Opening a demo is fine but you can only get assessed/rated and invested with real money: the minimum deposit for a live account is 500 Pounds.

Traded assets: 32 forex pairs, six commodities, and nine indices.

This is something that may be of interest if any of you wanted to look into it… so I thought of sharing it.

I do not want to spend £500 with them, as I am concentrating on learning new skills, so I will leave that for now.

Happy Trading.

29

I guess you are still looking to trade on longer term perspectives? And that you still wish to maintain an element of fundamental analysis in your decision -making? If so, how are you going to plan you entries, targets and stops? Are you going to look for a TA model to help with this?

It seemed to me that your earlier trading style fitted your preferred approach but lacked defined, concrete beacons and lighthouses along the way to a) confirm your decisions, b) time your entries, c) get you (temporarily) out or hedged. Do you have a broad plan how you wish to approach these issues?

I think it is essential for you to determine your position with these broader issues before you start to focus on an actual detailed trading strategy?

30

Hi Keith,

I am no longer tied to fundamentals… I would like to step away from them, not because I want to ‘system hop’ but because I want to look at finding price inefficiencies or other forms of models where I backtest ideas (first, other people’s, then mine), to see how data can be gathered and how to read it…

I want to forget about trendlines, fundamentals, central banks etc. and go into pure price, with data analysis at its core… Then, only after much studying, will I think about a strategy of my own…

:slight_smile:

31

I was wondering how your position was doing. Unfortunately I knew that as I kept adding on to my gbp/nzd position, it meant that yours was suffering. Sorry mate.

Good luck with your coding. It can be quite the daunting task for someone with no experience (I don’t know if you have any in your background) in the field, but Python is often held in high regard as a newbie friendly language to learn. Additionally, even if you fall flat on your face, python experience can take take you to other places in life in the analyst fields, if you have such an interest. That said, R and excel have capabilities that can manipulate data sets quite easily as well and while they have their limitations, they are arguably easier to learn. I’ve always said that learning some form of coding (even if as basic as VB scripting in macros) is the first step in learning true technical analysis. Anyone who creates any form of purely chart based system without running it through code first for back testing purposes is blind as a bat. It’s all frightening, frustrating, and sad that more traders don’t see it this way.

I use to be much more like you. I spent a lot of time on the forums looking for friends to chat with, people to share ideas with, “honing” my “eye” for the market, always looking for the next place to start a conversation about a topic with (although I was almost exclusively focused on trading or systems related material). But once I started actually taking my ideas, putting them into logic, and asking the market “how did I do?”, my activity plummeted faster than the GBP :59: There were too many ideas to explore, from the most basic of basic (if this bar is red, what’s the probability that the next bar is red?) to some of the more complicated, arbitrary (but consistent!) frameworks for transforming the market from a bunch of bars on time frames to structures that can be broken down, analyzed, sequenced, melded, forecasted, and reworked. Every spare hour I had went into either writing the code to manipulate data, creating charts/graphs/tables to analyze results, or pondering my results and thinking of new ones. The rabbit hole begins here and is very, very, [I]very[/I] deep my friend.

The interpretations of the results are much more black and white, yet there are (IIRC) only 1.5 threads on this forum that do any justice to the matter. One is more of an introduction, the other has a mysterious present but an archived past.

I don’t want to ramble on and on about it because I have possible plans for a short thread dedicated to this sort of thing, but it’s a 3, maybe 5 years out from being complete. That aside, it’s always exciting to see someone start their path in code oriented analysis. Maybe that makes me an elitist but so be it - numbers don’t lie. It took me a long time to find something worthwhile in the markets, but believe me when I say it was worth it. The market has a an imbalanced, consistent structure. It is not random. It contains random [I]elements[/I], but the [I]structure[/I] is not. It is robust finding. You can find the balance tilting anywhere from 60% to 80%. For entertainment purposes (because associated risk when the trade fails is catastrophic) you can get the balance as high as 95%. Of course, just because something occurs 60% of the time, does not mean all of a sudden the grail is found and we’re off to perma vacation. Your RR controls what you can and cannot trade, but having core numbers sure makes things easier.

32

Thanks Phaz, great post, it is certainly a long journey ahead

.there are no shortcuts…

:slight_smile:

33

That is one big radical change in approach!!! :smiley: But entirely understandable. How did you end up with choosing that route?

Having said that, I am not sure I fully understand what route we are talking about here! :slight_smile: Evidently, you are looking to go the maths/programming route? That will surely be an interesting expedition but I wonder how far it can go? Is that not the domain of the big funds/bänks etc with huge computing capacity, data access and teams of varied theme specialists? For example, is not the profit objective of studying price inefficiencies derived from arbitrage type trading, which is characterised by huge positions for small movements?

I can understand your interest in these fields, but I am not sure of where the profit opportunities are created for [I]retail [/I]traders…or are you looking at eventual employment in this field?

But I am probably perched totally up the wrong tree here, feel free to put me straight! :slight_smile:

34

Keith, thank you, and you are right: hedge funds rent a rack in the.exchanges for direct access, whereas we have to go through brokers, so even with a robot we (retail traders) cannot compete…

I think this is more of my own need to step away from subjective attachment to trading: designing a model means that once it is tested to the best of my knowledge I will take a ‘hands off’ approach, both literally and emotionally.

The important thing here is learning how to analyse data using Python, Excel, etc. like Phaz was saying… How I will be able to make money out of it is another matter…

35

I just re-read through your earlier posts, PMH, and perhaps only now realising how much of a change you are really making here. I kind of assumed that you were just looking at a different approach to the same thing, but I see it actually runs a whole lot deeper than that.

I have absolutely no knowledge/experience of those things you are pursuing now and will remain silent on it! :wink:

Good luck with your ventures and I hope to read one day how well it has paid off for you and your family (afterall, these decisions and commitments impact on all family members) :slight_smile:

Moikka, mon ami…

36

Moi aussi.

This, too.

Not to mention “xorti t-tajba!” :wink:

1 Like
37

Żgur li kif ukoll :smiley:

38

Good points, Keith…

I think I am trying to look at this route to understand how computers could aid me, and by taking
the small computational finance course and coding course I am learning what is the way that one
can exploit machines to process orders and create models that require less human intervention
in terms of entering/executing trades.

There is no guarantee that I will find something profitable or even trade again, so this is truly my last attempt. With professional firms having computers located at exchanges and with much faster access to pricing at the source, by the time price comes to the retail trader’s computer it has a lag that puts a trader at a disadvantage.

From learning and reading, and starting to practise coding, as well backtesting existing models, I can hope to understand what computer-based trading can do for a retail trader. It is far too early on to load myself with making any decision, or to try answering questions until there has been enough learning time. What I hope to do is to be more discerning about the KIND of learning that I will be doing. I have no expectation of success at this point, and real money has been lost, so any new venture will have to paid in human capital through time spent demo practising, given that the financial capital is unavailable.

There is no point me debating things of which I have no knowledge, so I will just finish here and thank you again for listening to my lonely voice echoing in the distance!

39

Best of luck, mate. Blowing up an account sucks, but it’s not an end to your journey.

40

I don’t think that is the right answer, PMH, you are too valuable here. Contrary to some other comments above, I have valued your input with other trading-related topics. You create interest and a community here. We do not need to always be nose-down and blinkered in our own trades and successes/failures, there is plenty of room for related stuff and some humour, too.

When I came here I was a novice to forums only having previously spent time on one specific thread on one other place. It was a great pleasure to quickly make friends with people like you, Lexys, Turbo and others. I see you as the “heart and soul” of this site, a person always with something fresh to offer that encourages thought, education and even entertainment.

Lets face it, this forum has little to offer in the way serious education about trading. Most of the experienced posters only appear here to admonish or correct and rarely post anything that is of educational value for Newbies (with the exception of Lexys, who is in a class of her own). So you are the great catalyst here that binds many people. That is an important role and I really hope you continue with that.

I am only a reader here now and I really hope that I will be able to follow your offerings in the future - as well as your progess however your plans mature…