Trading journal

[dushimes]

A trade that has been a thorn in my side the last few days was EUR/CHF.

I had a D1 signal twice. And I got stopped out each time.

I contemplated doing it a third time. I wasn’t sure about because fear was stopping me. I was scared to lose money, and I was scared to be wrong again.

But I remember the lesson I learned from my recent EUR/USD trade. I regretted it big time. I ended up opening a EUR/USD trade by the way, but it was late and with less than 25% of the profit. Anyway…

I opened the EUR/USD trade again. For the 3rd time. We’ll see how that goes.

I have a few channel trades going. They’re around the half way mark, and I’m learning that even though I want to move my SL, and add to my position, I can’t. In a channel, anything can happen.

Moving my SL to the halfway point, and I add to my position, if price starts reversing, then I’m stuck. Either I can just get stopped out and let go of the potential profit to be had by allowing price to reach the other end of the channel, or move my SL farther and farther back and expose myself to more and more risk.

Or, I could just leave my SL at BE, and let the trade run its course. If I get in early enough, I’ll add to the position. I haven’t done this perfectly yet, but I’m getting better. I’m seeing trades earlier.

By the way, I started reviewing my (monthly) M1 charts. After reviewing the EUR/CHF on M1, I realized that I probably made a mistake talking that long trade.

But I was already in it, and I also had to leave. I’ll find out tomorrow morning how it went.

For the past few months I’ve been trading very small positions. I’ve caught some very nice trades, but I’m still losing. I’m learning which trades to avoid, and I’m trading less of those, recently—the kinds of trades where there are two possible S/R lines.

[dushimes]

Part of me wants to trade larger lots. But, until I can show that I have a better grip on my losses, trading larger lots will bring in more money but also pull my account balance down faster.

So, I’m gonna keep with my current 0.05% risk for now.

[MattyMoney]

@dushimes

1- where have the bulk of your wins been?

2- What seperates your losing entry/exits vs your profiting entry/exits?

3- how did you figure that out? Journal?

I started answering these a few days ago, but got sidetracked and ran out of time. Then completely forgot.

1 - Since up until recently I mostly focused on reversals, this is where my biggest wins have come from. However, since that’s also where my losses come from then I’ve been working on increasing my win rate.

2 - I’ve been seeing better entries since using SR areas on the weekly & monthly charts. I mark my levels on the monthly chart (blue lines) to determine direction. I use a line chart to see the points more clearly. You can use the wick too if you want, but it doesn’t have to be that precise on the monthly chart because you’re only trying to gauge which direction you think price is going long term:

Then do the same on the weekly chart (black lines). As you can see I think price will continue up:

Now I have my bias, so I’m looking for buy opportunities on the daily or 4H chart, just like this one where price bounced off the bottom of that channel on the 4H:

Obviously, I could be completely wrong an price can turn at any time, but when you enter with the trend and keep your risk low (wide SL, mine is at the low of this week’s candle) you have a better chance of staying in the trade.

3 - A simple journal can tell you all you need to know. I use Google Sheets (Excel) because it’s free:

[dushimes]

The problem with my activity right now is that when I get the trade right and it runs, I can see my profits going up.

However, while my profits are growing, my account is dropping due to taking bad trades.

So, I could lie to myself and only think about the profits, but them I’m not being honest with myself.

Being honest with myself will help me to see my flaws and give me a chance to fix them.

[dushimes]

@darthdimsky

Looking at trades in isolation is, in my humble opinion, will only encourage bad behavior. Gotta condense it to larger volumes over a larger time period.

Sorry, but I’m not sure what you mean here. Could you try explaining it another way?

@darthdimsky

Yes, you would’ve won that one hand and scooped a huge pot but odds are you’ll lose a hell of a lot more if you continue playing the same hand consistently from the same position over many hands/games.

And this analogy as well. Sorry. I want to understand your point, but I’m not understanding your example. I value what you say, so I want to be clear.

[darthdimsky]

My fault. I automatically relate this problem to a similar situation in poker and just word vommitted without thinking.

I believe giving importance to the outcome of that one trade is a mistake. If your strategy called for not getting into the trade at the time then it’s the right decision, even if the trade went the “right” way.

I’ve been sitting for the past half hour struggling to come up with an alternative explanation to the poker example I gave. Will PM when I figure it out.

@dushimes

However, while my profits are growing, my account is dropping due to taking bad trades.

Have you looked into your losing trades yet? Maybe take a month’s worth of losing trades from your journal and categorize them?

[dushimes]

Doing my working this morning.

I see another trade that I should have risked taking.

I say “risked taking” because it’s always a risk.

I’m learning that it’s ok to risk when you have an entry signal. Even if you’re wrong 3 times, that’s ok. It ain’t pleasant, but it’s acceptable.

It’s not acceptable, however, to take risk on trades that you’re forcing yourself to think are entry signals.

That’s what ruins your account. Well, at least in my case.

[dushimes]

Yesterday, I took a trade that I had doubts about. It was a trade I would have taken months ago. I wasn’t sure, so I opened a small position.

Shortly after, bam! Stopped out.

“Yup. I knew it.”

Then another voice said, “Well, if you knew it, then why’d you take that trade?”

I realised that shedding my bad trading habits is a gradual process. For some reason I have to prove myself wrong in order to let go of a bad thing.

I can’t just stop a habit, because I still have a belief that it might work, or a curiosity if it could work. And I need to exhaust it before giving it up.

And it’s a slow, painful process.

[dushimes]

As I review my charts, I see so many regrets.

But that’s mostly the greed talking. What you didn’t do in one scenario, you wish you did in another.

You NEVER know. I guess you just keep learning so you know the best time what certain actions.

Sometimes, it’s best to be patient and keep the position open. Other times, it’s safest to close it.

Only experience and playing the averages will make the difference.

I took just one trade today. The others are still running, and as much as I want to add to them, it’s too risky. Moving the SL in a channel can get you stopped out of a trade that was gonna keep going in your direction.

It can be quite frustrating. The best you can do is move SL to BE and wait for an idea to play itself out. And don’t be upset when you walk away at BE instead of a 10% profit. Just gotta roll with the punches.

Right now, several pairs are consolidating on D1. I’m sitting on the sidelines for the most part. No new trades.

Now’s the time for me to just wait.

[dushimes]

I had a part-time job working Saturdays, but I need the weekend for my forex work: reviewing W1 charts is important.

I have to review my W1 charts, and also review losses for the week.

I can’t do all that in just one Sunday.
Especially because markets reopen in the evening in my timezone. So, if I want to open a position Sunday evening, I need all my work done; I need to filter thru all my set ups and see which ones are worth taking.

So, I decided that I have to stop the Saturday job. It was an easy job, but if I want to improve my forex, I have to take it seriously.

[darthdimsky]

Decided against PM so folks can fact check this or correct if needed:

@darthdimsky

But isn’t it all about probability? Like an x% of incomplete setups will always go in the intended direction but you’ll risk a higher % of failed trades by following that incomplete setup?

The best I can explain it in trading terms is as follows, with an example. Conventional TA and possibly price action (haven’t read enough yet) recommend waiting for a retracement to previous resistance before buying into a breakout. This is a recommended high probability trading setup.

Source - p.87, Naked Forex: High Probability Techniques for Trading without Indicators

Assumed scenario:

You backtest this idea and find that you have a win-rate of 70% over a 200 trade sample. Forward testing also yields similar results which is when you decide to include it in your tool-kit.

A similar situation, in my opinion, to what you’re facing is you’re seeing trades go in the intended direction (upward in screenshot) without that retracement. You remember recent trades and easily pull up 5 recent examples you’ve seen. This compels you to change your strategy because you’re missing out easy pips on the upward moves now.

This would be an incorrect decision (to change strategy because of a recent high volume) without testing that breakout for a similar sample size. Despite it failing only one rule (that it didn’t retrace) doesn’t warrant changing course all of a sudden. The change in that one rule makes it a new setup, which warrants backtesting and quantifying it.

The sideways arrows indicate the false breakouts. Source - p.85, Naked Forex: High Probability Techniques for Trading without Indicators

Although conventional reading recommends strongly against taking such trades, you might find it a very relevant setup against certain pairs during certain market conditions. Only backtesting/forward testing with a relevant sample sizes will determine this for sure.

I don’t believe this is a foreign concept to traders. Thomas Bulkowski’s attempted to determine similar statistics on chart patterns in his book. Here’s an excerpt from Technical Analysis: The Complete Resource for Financial Market Technicians that explains this concept:

Source - P. 308, Technical Analysis: The Complete Resource for Financial Market Technicians, 2nd Ed.

Here’s an except of his findings against descending triangles:

Source - P. 737, Encyclopedia of Chart Patterns, 2nd Ed.

How Poker helps quantify similar situations:

Poker uses probabilities to guide players into making correct decisions based on incomplete information (very similar to trading IMO). They use a concept called Expected Value (EV) to help determine whether the decision to bet, raise or fold in certain situations was correct or not. The video does a good job explaining the simple math and why it’s important for long term poker success:

Going back to the numbers from the breakout scenario on top. If you determine a minimum 3R return on that win-rate in your testing. The numbers are as follows:

EV = [0.70 x 3R] - [0.30 x 1R] = 2.1R - 0.3R = 1.8R

If you’re R = 15 pips then that translates to an EV of 27 pips per trade. What this means is that even if you have 5 consecutive trades go against you (loss of 5R) you grade each of those losses instead with a positive EV score of 1.8R (gain of 9R).

Disclaimer: I haven’t applied this statistical approach to my trading yet honestly speaking. Better to admit it than pretend to be holier than thou. Because I’m new myself my primary focus so far has been expanding my knowledge base as quickly as possible (still very lacking IMO) and routine building/discpline. I’m setting up the groundwork to enable this analytical approach going forward.

[dushimes]

@darthdimsky

This is where I’m trying to buy.

By the second bullish candle, you can already move your SL to BE and add to your position. You’ve doubled your potential profits, but halved your risk.

I haven’t done it perfectly, but I’m getting better.

[dushimes]

This weekend I actually got thru all my work, without rushing at the minute markets open, and without staying up late.

I had to refuse a couple phone calls, which was unpleasant. But I really needed to focus.

I opened just two positions. We’ll see how this week goes.

[dushimes]

There’s a part of me that still wants to trade more and bigger lots.

And it’s ok to feel that way, I think.

As long as I don’t ACT on it.

Wanting to trade more doesn’t mean I should trade more or more wrecklessly.

To me, it means I should continue to pay very close attention for proper set ups, so I don’t miss them.

[dushimes]

I finished all my trading in 2 hours. That’s pretty good time.

I had two lists before, but I merged them into one. It spares me the mental drain of switching back and forth frequently.

So many pairs are consolidating right now. Not many opportunties for me at the moment. I’m ok with that.

Right now, the key for me is to not jump in when I don’t see a good set up.

[dushimes]

I’m halfway thru my trading for the day. First, I review my open positions. That’s phase one. Phase two is reviewing possible setups.

I’m not sure I want to finish. Only because I’m already at a risk exposure of almost 6%.

I don’t think I want to go much higher than that. Finding more trades might be too tempting.

I had a resistance bounce trade that was retracing the past two days. I moved my SL to reduce my risk in case it was reversing unexpectedly.

I left a note to myself to move the SL back to my original SL position. I forgot to do, then when I remembered I thought maybe I should just leave it.

Then this morning I saw that price TOUCHED my new SL then went in my favor! If I had moved it back to my original SL position, I’d be in the green right now, and catching this nice trade.

The funny part is that it was a small position. Not a big deal. So why was I annoyed about it?

Initially, it wasn’t missing out on those profits, it was actually the idea of being wrong.

After that, I realised I would be missing out on the profits. But it’s strange that my first reaction was about being wrong or right.

Maybe it’s because I know what being wrong/right means: loss vs profit.

On another trade I got stopped out, but there was a nice long wick on a doji (i forget what those are called). MFor me, that’s a sign of a reversal. Not a guarentee, but a clue. So, I opened a position with the same pair again.

I also opened a short position on USD/CAD, after I saw a nice doji candle. It took a nice long bullish stretch to meet my resistance, then it reversed hard.

Overall, trading is ok this morning. Just a few new mistakes, but not too many. So, I should be grateful for that.

[Mondeoman]

@dushimes

Then this morning I saw that price TOUCHED my new SL then went in my favor! If I had moved it back to my original SL position, I’d be in the green right now, and catching this nice trade.

Hi,
I find this a lot in my trading too. Despite the fact that it the decision making is almost fully automated and mechanised, there are always situations like this that are discretionary. Damned if you do and damned if you don’t. If I cannot think how I could backtest such scenarios, it helps to do something like this:
On a daily basis, does the set up and the reason I took the trade still apply? If I were not already in that trade, would I still enter that trade at the same price as I did when I entered it? If the answer is yes, don’t move SL to BE until the price is at least 1.5 ATR(14) in your favour. If the answer is no, then exit the trade. That may also solve your other problem of having a total risk of 6%. Are you staying in trades for too many days?
Just ideas, not advice.

[dushimes]

@Mondeoman

If I were not already in that trade, would I still enter that trade at the same price as I did when I entered it? If the answer is yes, don’t move SL to BE until the price is at least 1.5 ATR(14) in your favour. If the answer is no, then exit the trade. That may also solve your other problem of having a total risk of 6%. Are you staying in trades for too many days?
Just ideas, not advice.

Yeah, I think I moved my stop too early. So, when it retraced, I was like “why are you doing this to me?” Haha.

It wasn’t a big deal. I should have just moved my SL to its original place, and I would have been fine.

However, the REAL problem was my late entry. Had my entry been earlier, we wouldn’t even be having this conversation. I entered late, but not too late. A late entry, in my strategy, creates problems like this.

That’s why I’m making more effort now to stay on top of my routine: get up in time, and check every pair on my list for that week. No skipping steps because I don’t feel like it. And another part of my routine is to take the trade if I see a proper signal, instead if feeling scared and not doing anything.

If I get three signals, and I’m stopped out three times, I’m ok with that.

But if I skip it, because I’m scared of being wrong again, I’ll deny myself the chance at a hefty swing profit. I’ve done it enough times…

[dushimes]

@Mondeoman

That may also solve your other problem of having a total risk of 6%. Are you staying in trades for too many days?
Just ideas, not advice.

And normally, I would stop at 5% risk, but I didn’t check until after. So, now I’m at 6%.

And I’m holding some of my positions for a while. I’ve been in one of them for a month because JPY pairs have been consolidating. They’re starting to move again. But I think they’re gonna retrace for a week or so, then continue.

I’m trading SEK/JPY, and I’m holding that. That pair is gonna go up for a week or two I think, then go bearish on the major trend.

I’m short, but I could have gone long on another account. I wasn’t even thinking about that until this morning. Totally forgot.

Live and learn.

[dushimes]

Also, today, I placed a couple straddle sell orders in case the market reverses and I lose my long positions.

I didn’t want to think about, but I had to consider “what if I’m wrong?”