Btw, I don’t think I’ve ever posted my trading rules sheet. Here it is in its entirety. Feel free to ask any questions and I’ll be glad to tell you how I use them:
TRADE RULES for Naked November:
[ul][li]pray for family and trading
[/li][li](check kid computer – no internet lag)
[/li][li]check news release calendar for ORANGE or RED or WHITE events in any currency
[/li][li]check CurrencyNews and Reuters for unusual news (earthquake, etc.)
[/li][li]update trendlines: Daily(red), 3hour(brown), Hourly(pink), 15min(yellow), 5min(white), 30sec(purple)
[/li][li]setup trend indicator on 5min chart: PSAR (0.03, 0.3)
[/li][li]draw horizontal trendlines for any nearby psychological levels .xx00 .xx20 .xx50 and .xx80 (red dashed)
[/li][li]check larger timeframes for strong trends in force – consider trading uni-directionally today, or limiting scaling against the trend bias
[/li][li]determine max trade units = 95% of Oanda max
[/li][li]write down trade buckets and circle the stepping unit:
[/li][list][li]AGAINST 5min trend: 10 steps
[/li][li]WITH 5min trend: 5 steps
[/li][li]STRONG confluence: 2 steps[/ul][/list]
[/li]
Typical trendline spacing I’m looking for:
[ul][li]5min(white): about 15 pips apart
[/li][li]30sec(purple): about 6-8 pips apart (not more than 10)[/ul]
[/li]
News event special rules:
[ul][li]No new trades will be entered for 10 minutes after a news release, to try to determine whether or not there will be any meaningful impact
[/li][li]If in a trade already, no new legs will be taken and loss should be taken as soon as it can be ascertained that a new trend has taken place (ie ranging SR levels breached)
[/li][*]For 20 minutes after news release, restrict trading only to the 5min trend direction[/ul]
I just stumbled over your thread here and find it very interesting!
I have not scalped yet but I think I would want to try it on a demo account. On your first post you link to a scalping thread of PIP-SIPHON but your charts look different. Are they the same trading strats?
Friday 3/11/11
Quick stats:
9 trades
Trend bias taken from the 5min PSAR (0.03, 0.3)
AGAINST trend weight: 1/10 acct max per leg
WITH trend weight: 2/10 acct max per leg
STRONG confluence weight: 5/10 acct max per leg
2.2941% account change
As of new rules, # emergency stops I can hit and still be net positive for the month: 0
Today seemed like a pretty typical Friday, slow and maybe a little jerky. Spreads were normal and even minimal for the most part. I did note the major earthquake news before I started / it did not seem to have any impact on my trading.
PIP-SIPHON’s thread was an inspiration for this method. If you read through his thread, he recommends that newbies strip a chart of all indicators and make sure they are able to still trade profitably on price-action alone. Well, that’s what I’ve attempted to do. This method called Naked November is a work-in-progress. It has evolved into something completely different than PIP-SIPHON’s method, although there may still be similarities. Have fun!
Monday 3/14/11
Quick stats:
4 trades
Trend bias taken from the 5min PSAR (0.03, 0.3)
AGAINST trend weight: 1/10 acct max per leg
WITH trend weight: 2/10 acct max per leg
STRONG confluence weight: 5/10 acct max per leg
2.2144% account change
As of new rules, # emergency stops I can hit and still be net positive for the month: 0
Tuesday 3/15/11
Quick stats:
18 trades
Trend bias taken from the 5min PSAR (0.03, 0.3)
AGAINST trend weight: 1/10 acct max per leg
WITH trend weight: 2/10 acct max per leg
STRONG confluence weight: 5/10 acct max per leg
4.9796% account change
As of new rules, # emergency stops I can hit and still be net positive for the month: 0
The market had a nervous bustle to it this morning; seems like traders are uneasy in general. Spreads were mostly normal around 1 pip (woohoo Oanda!)
This Thursday is a EUR bank holiday, so I won’t be trading. Instead, I’ve been thinking about how best to spend my precious time. Generally speaking, my wife won’t let me spend more time than this on trading studies, but I’d say we have a pretty darn good balance between the hot sex and screen time (so I can’t really complain). But nonetheless, I feel it is my duty to always work diligently, and plan to use the time available in the most productive way that I can.
The other day it occurred to me… I have made some good progress optimizing the profit targets for this method (via the bucket weighting discretion added to my rules). I’ve managed to roughly double the take without making any changes to the emergency stop level. Of course I do not plan to hit that stop level, but I recognize that it will take a lot of practice to become intuitive enough to take a discretionary stop; in the meantime, the emergency stop protects me from the “trader failure”.
So I was thinking – if I can just find another breakthrough with the stop management, I could catapult this method further by an order of magnitude. For example, what if I could determine that 11% emergency stop is not really necessary… that 6% is plenty enough? I think I could possibly reach that conclusion if I could show that, historically, trades that went awry beyond 6% were no more probable at reaching their targets than those which hit the 11% level. I will work on this theory more Thursday morning…
Wednesday 3/16/11
Quick stats:
10 trades
Trend bias taken from the 5min PSAR (0.03, 0.3)
AGAINST trend weight: 1/10 acct max per leg
WITH trend weight: 2/10 acct max per leg
STRONG confluence weight: 5/10 acct max per leg
4.5170% account change
As of new rules, # emergency stops I can hit and still be net positive for the month: 0
Trading felt more fluid today than yesterday. Probably because the realities of the Japan crisis are setting in, and there is less shock value at this stage.
Tomorrow is a EUR bank holiday so I will not be trading. Instead, I will focus on research to optimize the emergency stop. My strong desire is to find some justification to allow me to tighten it to 6% or better (currently at 11%). The emergency stop is a level that should never be used, with the exception of a system failure (or trader execution failure). In practice, I do utilize the emergency stop level, typically because I have left the platform on autopilot for extended trades.
Here are some specific goals for tomorrow morning:
[ul][li]locate/organize chart views for missing charts around March 1st timeframe
[/li][li]on historical chartshots, use Oanda’s Pip-Profit calculator to determine roughly the extent of equity loss before a (runaway) trade reverses to profitability
[/li][li]determine if there is a more optimal loss level at which point the trade cannot be saved and does not reverse (ie, a trade reaching this level is no more likely to become profitable than that which hits an 11% emergency stop level)[/ul]
[/li]
FYI I just filled in the gaps with missing charts I had on file. They start from this post. It was a bit of a pain-in-d-butt due to Babypips 4-image restriction, but I think I managed to get them all in there now.
Having all the charts in chronological order is really helpful to me for historical research like I am doing now…
I’m still working on my objectives from this morning. I’ve realized that in order to do this study properly, I need a framework to define more specifically how the data should be gathered. The data I’m gathering is critical to this method’s overall profitability, so I don’t want to blaze through it sloppily. Also, I want to make sure I painstakingly gather all the information at once, so I can avoid having to repeat this exercise if possible. Between the historical chart shots and my spreadsheet, I should have everything I need.
Here is what I’ve come up with so far (some of it could be wrong, especially the math parts – in that case hopefully I’ll be able to correct it while I’m gathering the data):
Testing framework for measuring in-trade swing intensity
Goals:
[ul][li]non-subjective way to determine which swings should be measured
[/li]all swings that involve 4+ trade legs should be measured
[li]method/formula for finding average position
[/li] = average price of all entry prices with weighting applied
= [ (leg1 entry * leg1 weight) + (leg2 entry * leg2 weight) + (leg3 entry * leg3 weight) ] / # of total weights
[li]method for standardizing the units for testing percentages
[/li]according to the PIP/Profit Calculator,
$1000 account at 50:1 leverage = 35619 units
95% max = 33838, so each leg = 3384 units
[li]spreadsheet to track swings daily moving forward (data for future testing)
[/li]
[li]procedure to measure a swing
[/li]a) swing distance to be measured from initial trade entry to max swing level
b) using PIP/Profit calculator:
$loss = move between (average position level) and max swing level
c) % equity loss for trade = $loss / $1000
d) record max % equity loss on spreadsheet
[/ul]
Well Friday I had another runaway trade… this time, against my better judgment, I let it run to a 15% loss level. I was sure it would hold but, of course, it didn’t. I should’ve known better – usually when you’re in “hope” mode then something is wrong LOL.
Anyway, I used this experience for motivation to stop trading and finish my study (no trading on today Monday). I’m very happy to report that this seems to be a breakthrough! I’m posting my spreadsheet below, which contains all of the 4+ leg trades since this new ruleset took place on 2/14. Since then I have taken 148 trade ideas total.
According to this, my theory of 6% seems right: when a trade idea reaches this level, there is no hope! So it is really pointless to carry it any further. This is a HUGE benefit to my trading style, because it means that I now have a mechanical way to significantly cut risk. It also means the recovery time from a runaway trade is significantly shorter than before.
Btw, the reason I chose 6% was the same reason I originally chose 11%. I figure that a lot of other traders are trading at the same levels as I am (actually I know this to be true). So rather than pick nice round numbers like 5% and 10%, I prefer to go just outside that comfort boundary and use slightly nonstandard levels.
I am so confident about these new findings that I have already added a big cash infusion to my account that I will begin using tomorrow. I will plan to close losing (runaway) trades at 6% equity loss mechanically. I may tighten that up with some more research, but for now 6% is a lot more attractive than 11% (or worse). The incidence of the so-called “runaway trade” seems to be somewhat rare (only 4 times in 148 trade ideas). However, I do not think I have enough data to determine this with any confidence, so I’m basing my estimations on it occurring once a week. It seems that it happens “every few days.” I do also believe that as my discretion improves, so will my ability to cut trades before they enter this red-zone area anyway.
Friday 3/18/11
Quick stats:
1 trade
Trend bias taken from the 5min PSAR (0.03, 0.3)
AGAINST trend weight: 1/10 acct max per leg
WITH trend weight: 2/10 acct max per leg
STRONG confluence weight: 5/10 acct max per leg -15.46367% account change
As of new rules, # emergency stops I can hit and still be net positive for the month: 0
This day I should not have traded, because I was in the middle of a study on stop losses. If I had worked on completing the study like I was supposed to, I could’ve made use of those findings which would have saved me some blood…
Tuesday 3/22/11
Quick stats:
7 trades
Trend bias taken from the 5min PSAR (0.03, 0.3)
AGAINST trend weight: 1/10 acct max per leg
WITH trend weight: 2/10 acct max per leg
STRONG confluence weight: 5/10 acct max per leg
1.6275% account change
Max in-trade drawdown (4+ leg trades): -1.74%
As of new rules, # emergency stops I can hit and still be net positive for the month: 0
A new rule was implemented today based on the swing intensity study I just completed. I will maintain the data for this study moving forward and also be able to report the max drawdown (for 4+ leg trades) on a day-to-day basis.
The trading was a little jerky feeling today, probably all the various news releases.
Wednesday 3/23/11
Quick stats:
8 trades
Trend bias taken from the 5min PSAR (0.03, 0.3)
AGAINST trend weight: 1/10 acct max per leg
WITH trend weight: 2/10 acct max per leg
STRONG confluence weight: 5/10 acct max per leg
2.5731% account change
Max in-trade drawdown (4+ leg trades): -3.21%
As of new rules, # emergency stops I can hit and still be net positive for the month: 0
Today was pretty typical and also spreads reflected this. I think I will start tracking the swing intensity for trades based on the total weighting, not the legs. This makes more logical sense to me. For example today one trade was 3 legs but a heavy weight of 7, so I included it as well (its max drawdown was -2.55%). I’ll go back and check all the history charts and find any heavyweight trades that I may have missed.
Thursday 3/24/11
Quick stats:
6 trades
Trend bias taken from the 5min PSAR (0.03, 0.3)
AGAINST trend weight: 1/10 acct max per leg
WITH trend weight: 2/10 acct max per leg
STRONG confluence weight: 5/10 acct max per leg
2.0984% account change
Max in-trade drawdown: -2.24%
As of new rules, # emergency stops I can hit and still be net positive for the month: 0
Friday 3/25/11
Quick stats:
8 trades
Trend bias taken from the 5min PSAR (0.03, 0.3)
AGAINST trend weight: 1/10 acct max per leg
WITH trend weight: 2/10 acct max per leg
STRONG confluence weight: 5/10 acct max per leg
3.2039% account change
Max in-trade drawdown: -2.98%
As of new rules, # emergency stops I can hit and still be net positive for the month: (unknown at this point due to my lack of math skills I added $$ to the account mid-month – better figures on this beginning in April)
Fridays are usually boring and slow, but today had some good movement. Maybe because of the Summit going on. It doesn’t matter, I don’t really care the reason. I like being a technical trader because I don’t have to try to interpret fundamental news. Just knowing that there IS news is enough. On my trading rules I do this in two different ways: 1) before trading, I make myself aware of critical events that have occurred in the past 12 hours or so; and 2) before trading, I make myself aware of Orange, Red or White events occurring in ANY currency on the economic calendar.
I’m currently in the process of combing back through the trading history back to 2/14, which is when the bucket-weighting rules took effect. I am updating my swing intensity spreadsheet for any trades that had a WEIGHT of 4 or higher. These figures are essentially the max in-trade drawdown. A lot can be deduced from this study. Once I’ve completed gathering these stats, I will go back and do some probability studies on drawdown. I want to see what the tradeoffs are to tighten my 6% stop even further. At some point it may become unrealistic to keep tightening for the simple fact that it takes me a few moments to actually calculate the % levels (based on current average position). When the EURUSD is moving really fast, I may not be able to calculate the level and make a decision to stop quickly enough if too tight. As far as I know, I can’t use the Oanda default stop setting because it would only affect individual trade legs and I need an all-inclusive stop based on the average position.
Hope everyone has a great weekend! I’ll be backpacking in the Great Smoky Mountains with my hottie
Since it’s Friday, and things are a little slow for me, I decided to take a stroll down memory lane. I’ve reviewed this entire journal and wanted to make note about some critical milestone discoveries that I’ve had on this journey so far.
If you’ve been following this with me, you know that this method was inspired from PIP-SIPHON’s Steroid Scalping thread. I wanted to create something that I could call my own, but following the wisdom of another trader who I believed was successful. Over the past few months I’ve had the pleasure of watching this evolve into what it is today. My excitement grows with each new discovery and still trading is not “boring” to me like the pros say it should be. I’m not sure it will ever be boring because I just enjoy the chase too much.
My live trading account has recently been at the largest equity level ever for this method and I will also double that beginning this coming Monday. I believe that continued scaling upward in this fashion is forcing me to become comfortable with trading as a lifestyle.
MILESTONES that have been critical to my success:
[ul][li]11/5/2010 – started research based on inspiration from PIP-SIPHON’s Steroid Scalping thread
[/li][li]11/30/2010 – determined my method for multi-timeframe trendlines was working well; in a single chart window, it provides a total picture of SR levels and projections
[/li][li]11/30/2010 – defined “scalping” target to be 1-5 pips only
[/li][li]12/1/2010 – implemented new rule to limit scaling to a max of 3 legs
[/li][li]12/10/2010 – started a method to promote good psychology when scaling-up account equity by doing it in doubling steps
[/li][li]12/17/2010 – after getting hit with a platform outage, began instituting a default emergency stop on every trade
[/li][li]1/3/2011 – established the 5min PSAR for dynamic trend bias
[/li][li]1/12/2011 – determined the ideal trendline spacing target on 30sec chart to be 5-10 pips
[/li][li]1/25/2011 – determined scaling was critical to this method, that I needed to find a way to constrain it to something that works
[/li][li]2/14/2011 – established the bucket-weighting system to allow discretion to “strike with force” when good opportunities present themselves, while trading more conservatively at other times. The bucket system also optimizes the use of my account equity for maximum impact with each trade idea
[/li][li]2/14/2011 – now tracking red and orange and white economic events
[/li][li]2/14/2011 – began taking both long and short trades in the same session based on the current 5min PSAR trend bias
[/li][li]3/1/2011 – added xx20 and xx80 psych levels in addition to the xx00 and xx50 already in use (psych levels now appear as horizontal red dashed lines)
[/li][li]3/22/2011 – swing intensity study shows that runaway scaled trades never succeed if they reach the 6% loss level; tightening emergency stop to 6%
[/li][/ul]
Stay tuned. I feel like I’m just getting started here.
Fascinating method of trading. I’m excited to see how it does in the months to come. Quick question though, Are the charts you post the only window you watch while trading? It seemed that PIP-SIPHON’s method used several different windows and some kind of tick chart as well… for me it was a little to much to keep track of… One really sweet thing about this style is you can trade during the Asian when price action is a little slower. Seems like most people prefer the the London and its at the wrong time for me to trade.
great post
I added $$ to the account mid-month – better figures on this beginning in April)
