Trading in the real world

This thread title is taken from the YouTube video series produced by Babypips member, @Lang15, otherwise known as TheScruffyTrader.

The reason why I am starting this thread is because, having listened to a number of his videos, I have noticed that they contain a lot of basic down-to-earth practical information, thoughts and concepts that are very relevant to newcomers to trading in general.

However, YouTubes tend to be unidirectional and offer limited scope to discuss and explore the contents in deeper detail.

So my idea here is simply to express my own take-away from these various videos and, if anyone is interested, to dig deeper into the various issues.

Langers has many years of experience both in running a large business with international interests and as a retail trader trading forex full-time for a living. And this experience reflects in his videos. I find his approach to be authentic, open, feet-on-the-ground, and realistic.

As with most things in trading there are many ways to approach various subjects and most things necessarily need to be bespoke tailored to the individual. So this thread is based on my own views of the issues raised and everyone else is invited to freely join in.

I have discussed this with Langers and he is ok with the idea and “promised” to comment if and when possible.

After all, if we have a forum member who is willing to openly talk about his trading, even down to his own positions and results and coffee addiction ( :smile:), then why not squeeze what we can out of it! :slight_smile:

My first topic is with journalling and planning position sizing…in the next post tomorrow!

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Oh wow , better put the kettle on. The idea of the channel was to inspire rather than teach as I am not an educator and have no desire to be. The channel will also show that with a little thought and discipline trading is possible no matter your style if you understand the win rate and don’t look for the magic pill. Anyway I am very flattered Manxx and will chip in when I can " Do what you love & the money will follow"

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Very interesting, looking forward to see how this develops.

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This sounds exciting! :blush: I’ve watched a few of @Lang15’s videos and I agree that his content is very helpful and authentic. :smiley: Will definitely follow future posts. :blush:

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Fine idea for a thread. Its always great to learn from a trader who actually trades (not just a clever software coder whose EA made some Monopoly money).

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This is my first choice for “critical dissection” as the surgeon might say! :crazy_face:

My first take-away from this is if Langers has been a successful full-time trader for a good number of years and still uses these kinds of analytical spreadsheets then they are definitely worth taking a serious look at!

I would place a good-sized bet that Langers did not have these current spreadsheets at the start of his full-time trading and that they have grown and expanded over time as requirements developed. Therefore they really do play an essential role in consistent trading.

My second take-away is that doing this kind of research and analysis of one’s trading emphasises that trading is a business just like any other type of business. This depth of analysis and preparation, in addition to the basic trading method used, defines the difference between running a successful professional business and trading like a casino gambler…and actually requires more time and devotion that the actual triggering of trades.

Although Langers presents a very detailed set of spreadsheets here, that does not mean everyone needs to copy the same style and content. Trading is a very personal business and comes in many shapes and sizes. But there are some common underlying principles and issues that I think are worth highlighting:

Whatever style of trading one undertakes, it should be treated like any other type of business. i.e. there should at least be:

  • a clear and practical business plan stating the overall objectives, methods, risks, and management processes that will define how business (trading) will be executed. Langers shows an example of this in his own spreadsheets by defining and separating his day trading (monthly/annual income targets) and his swing trading (long term savings, pension, etc). A beginner probably does not need such complexity in the early stages.

  • a detailed execution plan describing how and when individual trades will be entered and exited, the rules concerning risk exposure, and what information needs to be collected from the trades. For example, Langers states his pip value, max% exposure, win rate, rules followed, mood, etc. In my own execution plan, for example, I collect data on how many trades hit target, hit stops, closed manually, reverse signals, the max distance each move traded actually reaches, etc. It all depends on what is useful.

  • a periodic profit/loss statement detailing all trades and any information relevant to each. This can be weekly/monthly, for example, and allows comparison of achieved results with the business plan objectives (under/over performance), reasons for good/bad results. There is no point in just listing trades if it does not tell you anything. There has to be some add-on value. This creates the opportunity to periodically review and revise methods, instruments, risks, targets and so on.

Having said that, I don’t think that such a business plan should form a tight straightjacket, tying you into a set of parameters that stifles creativity and limits taking advantage of opportunity.

In a way one can think of these trading plans and reviews as a form of Project Management. All projects have a defined end result and a detailed plan of how it will be achieved. But projects often deviate from the original plan and the skill of the Project Manager is observing the reasons and reacting to them in order to keep the project on course. In our case, this may mean regularly evaluating the instruments we select, our timeframes, our targets and our exit strategies, etc.

This is a big topic and really deserves its own thread, but the aim here (as Langers says) is just to inspire and encourage others to think about these matters and decide what is necessary and sufficient to control their own trading.

One last point. It is also worth remembering that your trading account balance is not your bank account. It is only your business “warehouse”. It is the “goods” that enable you to do business .and this means two things:

  • It will inevitably go up and down with wins and losses – and that is not a problem when the losses are according to the business plan and when the overall level of “stock” in the “warehouse” is stable or increasing. Losses are not failures, they are overheads. And all businesses need to manage and control their overheads. Losses are only a failure if they result from bad management.
  • The more you grow your trading account (the more"goods" in your “warehouse”), the more trading opportunities you can take. Obvious really. Your trading account balance is a business asset not a salary. Trading profits are only salary once they are drawn out and transferred to your bank account.

Retail traders are usually sole traders, which means you are simultaneously, Managing Director, Finance Director, Production Manager, Systems Manager and shop floor worker. Perhaps the only task that one can actually delegate – if one is lucky – is the coffee making!

Anyone else any thoughts on this? Feel free to comment!

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@Manxx

As a beginner if I’d have seen this spreadsheet I’d have probably quit on the spot!

But really there is little more satisfying than see your spreadsheet, the trades and and equity curves grow over time

I think you really do need to be a bit of a stato to be in this business

Also I can see from the few videos I’ve watch I suspect @Lang15 is a very methodical thorough person - a totally under rated trading skill and one I had to come to come grips with before I too found consistency.

One final point - I personally found it difficult keeping up to date records after losses - I just didn’t want to come face to face with my failures.

Inputting away into your excel sheet can feel like self flagellation when your on a losing streak - but its a necessary part of the game.

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Yes, I agree with that! Langers also mentions that people who had his spreadsheet were not sure how to actually use it. I think the key point here is that one should know what one is aiming at long term (e,g, savings v. income, monthly salary, etc) and how one intends to achieve it - and then build the spreadsheets around these. After that it will develop as and when/if further needs appear.

I also think one other advantage of such “documenting” for newcomers is that it helps to create what Langers calls realistic expectations. It might seem depressing and time-wasting to a Newbie to be satisfied with 10 pips and $5 on the day. But if one’s equity is $1000 and one earns $5 per day for 20 trading days in a month then that is a $100 monthly return on capital - kind of looks different in that sense!

And by teaching oneself to be satisfied with such realistic expectation must surely help to build a safe, progressive development towards eventually becoming a consistent and significant trader.

I know! It can really be tough! :face_with_raised_eyebrow: For me, even now, my worst nightmare is when I enter a position and the price just instantly drop away, as though it had just been waiting for me! But that is trading and, as you say, all part of the business! :slight_smile:

But I think it really does help to try and view one’s trading account equity as simply the warehouse stock. It doesn’t really matter how this inventory fluctuates daily or weekly provided it is stable or growing over time - and the actual trades are according to the rules!

This helps to avoid revenge trading and spontaneous entries based on nothing more than a whim.

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Over the last week @Lang15 has made a series of 5 videos on scalping the DAX. I think there are some very eye-opening lessons in these for Newbies when deciding what kind of trading they are going to do. Out of these 5 videos I have chosen number 4, this one:

I am not going into the actual trading mechanics here, rather, I want to point the spotlights on scalping as a trading method.

I can’t say for sure, but I get the feeling most newcomers start off with trading intraday on very short timeframes in the belief that it is easier and safer to have lots of small trades and to monitor the screen at all times.

I think this video is a gem in showing the reality of why such belief is totally misplaced. Many other experienced traders here also constantly warn that intraday scalping for beginners is not a good idea (for example, @tommor and @Johnscott31).

I am not going to say much more about this (I always say too much) except to say watch the video, see how the original analysis quickly goes out the window, how stress and uncertainty shows in Langer’s intense microscopic scrutiny of tiny, erratic movements - and how he ends up switching on his “damage control” trading strategy to save the situation, and ends up descibing the day as “horrible”.

OK, he ended up with a profit on the day - but the big question here is if a professional, experienced and successfully consistent trader like @Lang15 finds this an uncomfortable and demanding challenge, requiring every inch of his trading skills, what chance has a raw beginner of making consistent money day in day out, using this short term method?

Some purists might say this kind of trading is not actually scalping, rather it is just quick sniping from the hip in short TFs, but the end result is the same, in my opinion, unless you are talking about automated scalping systems. The intensity and uncertainty is both mentally wearing, and usually leads to erratic outcomes and overall loss.

Day trading is something different, it is not a mass of small positions taken intraday for a few pips up and down. But that is another topic.

I think Newcomers to trading should take a good look at this video and watch and listen to Langers’ comments and reactions - it might help a lot in deciding what style of trading to start with

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@Manxx

Have not yet watched the vid but you have sold it to me on the idea of @Lang15 getting all stressed out.

I will watch with keen interest!!!

Great idea! Thanks for doing this, Manxx and Lang15! I’m definitely following this topic.

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Yes, but very controlled stressed out! :joy: No revenge trading here!

@Lang15 is emphasising the point why he also does not like this style of trading…and I think that is the message here when we are talking about “trading in the real world”.

Yea, the same with me. Found it difficult to do anything with a loss other than “go for a winner.” It’s a mind game to continue in the process when you lose a trade. But it’s just as important to document the loses as it is the winners. Maybe more since with winners, everything happened as you had planned. With a loss, something didn’t go as planned.

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Very perceptive! :slight_smile:

I guess there are two basic ways how something didn’t go as planned:

  • Either the market behaved in a manner different to expectations, which we can do nothing about and is built into our risk/money management controls.

  • or it was something either within ourselves or our method, which can and should always be evaluated and adjusted if necessary.

Good point! @forexforexforex! Thanks! :slight_smile:

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Great idea for a thread @Manxx Manxx. I have been watching @Lang15 channel and finding it quickly becoming a favourite go to, as are some of the threads and other people here. All the peeps that have ‘been around’ and still helping outs the newbies like myself (you know who you are) - I am sure I don’t just speak for myself when I say it is truly appreciated.

I will contribute what I can but I am at ground zero in my learning curve. I have an economics degree and some certifications around financial planning etc from over 20 years in financial circles but all being ‘checked at the door’. I am assuming I know nothing and building slowly from there.

Finalising Babypips couse, reading Japanese Candlestick Charting Techniques by Nison and trying to soak up some book smarts. Work on my risk management etc.

Then plan is to demo until comfortable. Once ‘live’ will be micro lots and low leverage until comfortable. I expect that will take maybe a year or two. Marathon not a sprint.

Anyway my takeaway is this…

I will not touch scalping or short timeframes with a 10 foot barge pole.

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Definitely a reasonable approach in the short term. But don’t completely discount it. You never know, it might turn out to be something that works for your style and personality.

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Haha. Never say never I guess but at my age I know myself well enough. Would put myself down as a swing trader. Don’t have the time currently to sit in front of screens all day.

Never can tell but even if I am lucky enough to be able to trade “full time” I still don’t see myself doing it. I respect it as a viable option for many and nothing wrong with it. Horses for courses i guess.

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That is one of the unique joys of trading financial markets. There are endless ways to do it and a huge number of instruments to choose from as well as three major global timezones in which to do it. And with modern platforms and connections, trades can last from seconds to weeks or more.

But I think there is a big difference between an experienced trader scalping on odd occasions when they feel like it and a complete novice trading like that because they think it is the best way to learn and that it is safer if you can watch your trade on the screen.

It is the latter case which I think is a false assumption. I could imagine there are few traders who have not experienced the deflating emotion of having enjoyed a run of small gains only to end up giving it all back in one or two disaster trades!

But whatever approach to learning one takes, the key aim is to develop confidence: Confidence in one’s method and confidence in oneself.

One of my favourite sayings is: "Ships are safe in harbour - but that is not what ships are for" In our case, our ship is our equity and its purpose is to sail the financial seas for reward. But there is only one captain of that ship and we need to know the nature of the seas, the limitations of our ship and our skills in handling our ship.

If scalping is akin to sailing close to the rocky shorelines in stormy, unpredictable weather then it is no surprise that the shoreline is littered with shipwrecks… :slight_smile:

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Feel free to raise here any issues you want. The purpose of this thread is to talk about trading from a grass roots, feet on the ground, level. As Langers would say, there are no green Lamborghinis here!

I started watching Langers’ videos a few weeks back and I immediately noticed that although we have followed different career routes, we have been around markets for about the same length of time and I was really surprised to find that we have both independently come to the same conclusions about many things in trading - and it was that realisation that prompted the thought to start this thread. There is very little opportunity to really discuss video contents directly on YouTube, so I thought this would be a good way to extend the info contained in them.

But my hope is that Newbies will raise issues that occur to them rather than just reading my endless waffle! :smiley:

Cheers - will do. Once I have digested a couple of weeks worth of content I am sure I will be peppering the forum with questions, thoughts and take-aways as I see them (up for discussion).

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