Naked November tradelog (scalping)

Trading Systems
164

Wednesday 4/20/11
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
3.1773% account change
Max in-trade drawdown: -6.46%
As of new rules, # emergency stops I can hit and still be net positive for the month: 2

The flow of the market seemed obviously strained today (lower liquidity) but nonetheless the trading seemed relatively normal to me. Spreads only moderately higher on Oanda, to be expected. For whatever reason, there was an unusually strong upward bias today. Part of my rules include a morning-prep decision of whether or not I should trade uni-directionally. I did review this, but decided that the upward move was “normal enough” that I didn’t need to restrict myself.

HAPPY EASTER everyone! Christ was brutally murdered on (Good) Friday, but he did it to take our place as sinners – he paid the price for our salvation, so that we could one day be with our Father in heaven. On the third day (Easter) Sunday, he rose from the dead. Christ lived a perfect life on earth and taught us how to love one another. Through his grace we can be with the Father in eternal paradise (heaven) if we would only believe in him.

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165

Awesome to see you’re still at it Dusk. Seeing as how you’re so single-minded in your pursuit of making this method work for you I really feel that you’ll do it.

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Testing framework for breakeven teasers
Is there a simple way to adjust weighting on subsequent trade leg(s) so that the incidence of “breakeven teaser” would instead become the trade’s takeprofit zone? This finding could reduce drawdown risk and provide increased trade opportunities by exiting trades in profit sooner.

Definitions:
[ul][li]“breakeven teaser” is a situation that occurs when price action moves toward the takeprofit area but only reaches breakeven or a nominal profit, then retreats significantly. I believe this is a psychological phenomenon that indicates the crowd is following the same target levels I am, and that they may be “jumping ship” rather than allowing their profits to run.[/ul]
[/li]
Goals:
[ul][li]objective way to determine when/if a trade would qualify for extra weighting to be applied
[/li][ol][li]testing will be applied to historical trades that have 3 or more legs[/ul]
[/li]
[li]objective way to identify which leg is most optimal to contain the extra weight: 3rd? 4th? 5th?
[/li][list=1][li]this test assumes the extra weight is applied only once, so the optimal weighted leg is the one that results in takeprofit before an additional trade leg would be required[/ol]
[/li]
[li]objective way to identify the optimal amount of extra weight to apply: double%? 150%? triple%
[/li][ol][li]each variety will be compared to identify which weighting provides the quickest takeprofit with smallest drawdown risk[/ol]
[/li]
[li]objective way to measure chart, to know if the adjusted weight would have helped
[/li][ol][li]a recalculated average position line will be used to identify where the hypothetical takeprofit zone would be:
[/li][li][ (leg1 entry * leg1 weight) + (leg2 entry * leg2 weight) + (leg3 entry * leg3 weight) ] / # of total weights[/ol]
[/li]
[li]objective way to identify success
[/li][ol][li]condition 1: takeprofit reached and “breakeven teaser” averted
[/li] [list=a][li]trade hits takeprofit zone on a swing and avoids what would have been a “breakeven teaser”[/ol]
[/li][li]condition 2: takeprofit reached but no “breakeven teaser” occurred
[/li] [list=a][li]trade hits takeprofit zone on a swing but a “breakeven teaser” situation never occurred
[/li] [li]for the purposes of this test, this condition will not be considered “success” as the extra weighting did not generally reduce risk[/list][/list]
[/li]
[li]objective way to identify failure
[/li][ol][li]record the adjusted swing intensity (ie max drawdown %) trade would reach after extra weighting applied
[/li][li]swing intensities that exceed the allowable max (6% per current Rules) will be considered failure[/ol]
[/li]
[li]spreadsheet to track hypothetical weightings
[/li][/list]

EDITS:
Sometimes after I begin a study like this, I run into situations that I couldn’t envision while creating the testing procedures. I’ve added the following bits to this framework and wanted to keep it all in this post:

[ul][li]assume all legs originally taken at weight 1 (eliminate discretion);
[/li][*]assume no more legs taken after the extra-weighted leg; therefore for the purpose of testing, price may never reasonably recover (label as just “failure”)[/ul]

167

Thanks! I hope someone else can be inspired or learn something new from all my stumbling too.

168

Tuesday 4/26/11
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
-6.0723% account change
Max in-trade drawdown: -6.07%
As of new rules, # emergency stops I can hit and still be net positive for the month: 1

You know, it’s extremely hard for me to admit when I’m wrong. That’s one reason I like to wait awhile before completing my analysis of failed trades. Because usually right after the trading session, I’m in shock about the loss, and upset, but I don’t always know if it was my fault or not. If the reason for the loss was just a crazy market but I’ve followed all my rules, then I just have to accept it and know that it’s part of the range of possibilities. Of course I can strive to always improve, but I believe there will always be a margin of performance that cannot be fully controlled. In that case, the best I can hope for is perfect-form execution.

However, after doing my analysis on today’s trade, I’ve come to the conclusion that this was an execution error on my part. I was probably rushing, and did not spend enough quality time reviewing the market before I jumped in. I am up at 4:30 and beginning the run-through on my trading Rules by about 4:35 each morning. I try to whip through them quickly, and as you can see it usually takes until about 5:20 to actually be “ready” for trading. Generally speaking I run through every Rule every day, and the longest setup is the careful trendline updates needed specifically for the 5min and 30sec timeframes (on those timeframes, I wipe the slate clean every day and start fresh).

Now that I’ve analyzed this situation fully, I feel much better. I actually completed this Tuesday afternoon, in time to be ready for trading on Wednesday. Once I know why it happened, I can put my emotions about it aside, and focus on continued perfect-form trading for the day-at-hand.

Runaway trade analysis:

What went wrong with this trade?
I entered a long trade on support and kept scaling. Price continued moving down until my stop was hit.

Was this trade taken in good form per my rules?
Yes, the trading legs themselves appear to be in good form, and most new legs were taken from significant support levels. However, I failed to observe a key trading Rule "check larger timeframes for strong trends in force – consider trading uni-directionally”.

Did any clues exist that there could be trouble?
Aside from the clues that were obvious on the Hourly chart, there did not seem to be any reason not to take this long trade on the 30sec chart.

Was there anything noticed in retrospect that could have been helpful?
It seems that a major breakeven teaser that occurred after the 5th leg could have resulted in reaching the takeprofit level if I had weighted one of the legs heavier (currently processing the breakeven teaser study, so I’ll know the definitive answer on this soon).

What specific steps should I take in the future to try to prevent this from happening again?
Begin looking for obvious support or resistance patterns on the larger timeframes before beginning trading. The Rule says to look for “strong trends in force” but previously I had not specifically looked for this type of pattern, which seems obvious in retrospect. The correct response is to trade uni-directionally on the day, which is more conservative. It is less likely that I would get caught on the wrong side of a major trend move if I was restricted to uni-directional trading only for that day.

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Here is the hourly view. I did look at this prior to trading, but failed to recognize the obvious pattern that can be seen in retrospect.

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169

Wednesday 4/27/11
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
2.6505% account change
Max in-trade drawdown: -2.97%
As of new rules, # emergency stops I can hit and still be net positive for the month: 1

Something is going on in the markets today, maybe that ‘All Day’ news event I have listed. Either way, I like it. Spreads were mostly normal (1.0) but price action was peppy. I’d rather take this than a slow boring morning. The peppy spurts allow for more trades… I just have to make sure I’m on the right side of the fence LOL.

Anyone know if it’s “safe” to trade tomorrow with the JPY on bank holiday? I’m thinking I will check it out and see how it feels. I’m not planning to trade Friday due to the GBP bank holiday. Hoping to wrap up the month with a gain.

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170

Thursday 4/28/11
Quick stats:
5 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
-6.5587% account change
Max in-trade drawdown: -7.30%
As of new rules, # emergency stops I can hit and still be net positive for the month: 0
Monthly account change (April): 3.6753%

Welp, last trading day of the month. This was the first month that I went all-in with my trading stake. After taking a step back, I’d say I’m pretty pleased with the way this is developing. I’m in this for the long-haul, and I feel like I’m learning a ton right now. This journey of “scalping” has been tremendous fun for me. I certainly cannot make a case that “it just doesn’t work,” which is the standard I would normally hold myself to when trying new things. I believe I’m on the right track with this method, and I’m committed to continued research. Also increasing my account balance starting next month.

Ok, so what does all this tell me after a solid month of honest efforts and full psychology at play? Well a total monthly gain of only 3.6753% is really about breakeven in my book. It’s not good enough, considering all the effort and risk. I expect a reasonable monthly return in the ballpark of 50-100%, based on what I believe is possible trading the 30sec chart. I should be able to average 2% or better on a daily basis, and this equates to roughly 50% compounded gain.

On a positive note, the fact that the entire month’s net is breakeven gives me motivation to fully complete any studies on the table, especially if I think they have good merit. One way to look at it is: I could spend the entire month working on something else, then rack-up this gain in the last day alone (heehee). If I’m basically spinning my wheels as it is now, then I should focus on improving the method at its core, which can only be accomplished by innovation – by brainstorming new ideas to try, and then fully testing them. I am making good progress and gathering lots of information about the breakeven teasers. I hope this will show that a simple change to my entry-weighting can dramatically improve the profit factor. But I won’t draw that conclusion until I have all of the data in front of me to analyze (data being gathered from 2/14 to present, which is the “current” Rule set).

So it’s all good… I’m happy with my progress and routines. It is definitely not what I would call “easy” but I’m more focused than ever to reach my goals.

Here is the runaway trade analysis from this day:

What went wrong with this trade?
I began scaling into a long trade, but the bias changed and EURUSD moved down enough to hit my stop (and then further)

Was this trade taken in good form per my rules?
Yes.

Did any clues exist that there could be trouble?
In looking at the 30sec, 15min and 1hour charts, I do not see any obvious reasons to be concerned.

Was there anything noticed in retrospect that could have been helpful?
A breakeven teaser occurred after leg3 and also leg4. If leg3 had a double-weight applied, it would have easily reached its profit target.

What specific steps should I take in the future to try to prevent this from happening again?
As these trades were taken in good form, there were no execution errors.

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171

Dusktrader,

You still trading? Only advice I can give is from personal experience, your biggest loser should never be greater then your biggest winner. Its hard taking all those little trades and have one trade wipe out 3 or 4 days worth and its almost impossible to say it will only happen X amount of times because it could happen three nights in a row (lol again personal experience) and lose almost 3 weeks of profits. But I am guessing you have realized this on your own but just wanted to drop by and say I’ve been there and I know how discouraging it feels. Hope alls well.

172

If …

A) you are taking a well deserved vacation from the markets, then enjoy.

B) you got hired at a super-secret hedge fund and are doing miraculous things, then…

... please hire me! I'll pick up your dry-cleaning, wash your car, and get you coffee.

Either way, good luck! :57:
173

I hate to let this thread die… dusktrader seemed to be making progress. I never could get this style of trading to feel right but always enjoyed watching his progress.

174

hi dusktrader, are you still trading pip siphon’s steroid scalping strategy? i do too ,been hitting 1% profit daily for some time now tho i do trade in rather small amount .i would like to thank you for making the video about how you draw your trend line ,i been using it rather well,those trendline works like a charm . i started with the bollinger band that pip siphon taught.but found the bollinger bands unhelpful and with the added trendline,everything became a jumble .so i took those bollinger band off and now trade solely off trendline and 1 minute chart. i have to agree that the biggest draw back to this method is the scaling in …there been numerous time i scaled into a losing position .now instead of scaling into every trade that goes south of me ,i scale on discretion .there are times where i would rather take a hit then scale further…for example after the second scale or the 3rd scale i would sometimes close position with a minimal loss or breakeven rather than waiting for it to hit profit as sometimes those price retracement will then go back the general direction it first went after your first trade.for me taking a 0.2 or 0.5% hit is easier,tho i do have to admit sometimes they would reverse and go the way i wanted after i took the hit which sucks big time, however after taking the loss i’m now ready for a new trade