Trading journal

[darthdimsky]

@SovoS

But we need to design and mould a personalised bespoke strategy around our character and personal quirks!

I think this rings so true, especially in correlation to this statement:

@dushimes

If you’re accustomed to having 5 trades running, and now you have just 1, you start thinking about how everybody else out in the market is making money.

I sincerely believe the above mentioned mindset is very damaging in the long run. At the risk of sounding offensive this sounds like a keeping up with the Jones’ type of mentality. If your plan calls for staying out of the markets then that’s that. You’ll have developed that plan after numerous hours back/forward testing and have the absolute confidence (which is what the testing is supposed to enforce) that your plan is works best for you at that point in time. Doesn’t matter if someone else is making 2x/3x the pips you’re making.

Obviously you’ll want to incorporate changes to your plan and test it accordingly over the long run but it shouldn’t hinge on what anyone says or does, including us. In the longer run your own voice should ring the loudest and truest.

[Mondeoman]

@SovoS

But it would not have been a good entry set-up at that point

It often seems that these events are more common than those for which you would have entered causing a loss. But since the price action no longer conformed to the rules of your plan, this was a good choice. I sometimes (but not often enough) put in a “side journal” the trades that I decide NOT to place, go back to them at the end of the week or next week, and log the outcome. I convince myself this is not a futile exercise because it may lead to a more productive plan. Problem is trying to describe in few words what the alternative plan would be, given that it does not align with the actual documented plan. Some are easy, others are difficult if you can’t exactly document the reasons you wished to monitor the “none-trade” in the first place.

[dushimes]

I’ve been thinking about what more experienced traders have been telling me about risk management.

We all have financial goals here. And for me, if I don’t make the necessary changes, I’ll never reach them. Simple. Do I want to be right or do I want to succeed? I can’t have both. Not possible.

So, I decided to re-think my risk managment practices. My first step was to utilize the search button. What a simple yet powerful tool! Most beginner questions have already been asked on babypips.

I found this thread.

This article repeats what several of traders have already told me: be careful with overall risk exposure and correlated pairs.

I trade a very very low risk %. 0.75 at the most. But recently, max 0.5% per trade.

However, I don’t keep track of TOTAL risk exposure.

My strategy is based on momentum, and bounces. Two seperate strategies.

But I’ve been trading them very loosely. Varied risk, and not being selective enough.

The bottom line is that I’m thinking all this stuff through at the moment. And I’m also putting it on paper to solidify the idea.

I’m considering making my MAX TOTAL risk exposure at any one time just 3.0%

That includes long-term and short-term trades. I’ll have to be more patient and more selective.

I feel like I’m trading a lot of “well, this looks good, let’s see what happens” kind of trades.

The type of trades I SHOULD take, probably occur maybe just a few times per month, which is scary.

To be honest, it’s only scary because I feel like everyone’s making money except me, and I’m missing out. FEAR OF MISSING OUT. FOMO.

There’s nothing beneficial about that emotion. It’s not a strategy. It’s hard to tell when you’re being rational, or just rationalizing the irrational.

That’s what mechanical systems are for.

So, I’m considering reducing tje frequency of my swing trades, and reducing the risk of my S/R bounce trade risk.

If I want to trade more pairs, then I’ll have to reduce the lot size for each one.

I’ll have to consider a limit # of correlated pairs as well.

But sometimes, I feel like the whole forex market is correlated to an extent.

Anyway, these are things for me to think about.

Also, I’m getting eaten alive on channel breakouts. Price breaks out, then bounces maybe, or it could break out and keep going.

Several things can happen, and I keep taking losses.

If I’m gonna profit consistently in forex, I can’t keep trading those. Either get in earlier, or just let it go.

If I’m gonna keep trying and trying to enter a pair that is breaking out, then my risk has to able to withstand those losses until that pair starts trending.

Holy cow. I just realized how long this posts is…

[dushimes]

Another thing that has been bothering me is the time. My trading seems to go on forever. Trading for 5 hours seems excessive to me.

That’s turning into a job. I scan almost every pair that my broker offers. That’s a lot of charts. But looking at each chart takes just 10-15 seconds. But when I find something, and in the end I’m drawing trend lines on 15 charts, that’s a lot. So, I don’t mind spending 3 hours on my charts.

But, there are books I want to read and I have other things to do. I should think about how much time I’m spending trading and if I’m using that time effectively. The key word is effective.

If I’m spending 4 hours trading every morning, and I’m losing money, something’s wrong and I have to fix it.

For a moment, when I was thinking about taking fewer trades, I actually wondered what I would do with myself with more free time.

I can’t believe that was a concern. Haha

That’s how I know I’m working for the sake of working. And in trading, that’s counter productive. I’m thinking time=money. And that’s not how trading works.

That’s how jobs work. Working out. Studying. All those things, time=reward. But not necessarily with investing.

I have to keep in mind what habits I’m falling into. Both good and bad. Habits develop slowly, and if I don’t pay attention, it will cost me dearly—in time and money.

[dushimes]

@darthdimsky

Doesn’t matter if someone else is making 2x/3x the pips you’re making.

To me, it kinda does. Because it lets me know that it’s possible to do better. If I’m not profiting at all, I may start to think that forex is a scam.

But if others are profiting, then I can too.

I understand your point, I think. Trying to keep up with others can pull you out of your own strategy/plan/discipline and make you wreckless.

Is that right?

[SovoS]

I hope you don’t mind me responding yet again. I think that maybe I am getting in your way rather than helping in any way! But I thought to add just a few points here, you know, how I look at things (which doesn’t mean they’re right! )…

@dushimes

This article repeats what several of traders have already told me: be careful with overall risk exposure and correlated pairs. I trade a very very low risk %. 0.75 at the most. But recently, max 0.5% per trade.

You are certainly right to define this aspect of your trading, especially at this stage, and in particular your overall exposure when you are trading various strategies. Correlated risk is also very important…BUT:

Ask yourself WHY is this important…and the raw truth is that new traders are extremely vulnerable to serial losses and then their entire account is at risk if their risk exposure is too high. It is a survival lifeline, like a mountaineer uses to break his falls.

But a climber’s lifeline does not teach him/her to climb better, it only protects them in the event of a fall. In the same way your risk capping does NOT teach you to trade any better. If your trading is faulty then your risk capping just means you will eventually die the death of a thousand cuts instead of a quick fatal wound.

So, although your risk exposure is an important element in your trading strategy, it is not the MAIN element. The prime concern must be to develop and adhere to a successful trading method that consistently produces a net gain. Once you have achieved that then your risk exposure is only to protect you against unforeseen major events.

I think you will find that many, if not most, veteran traders have traded so long that they have a personal comfort zone in terms of the number of lots (or dollars per pip) that they use in various circumstances and rarely deviate very far from that. I doubt many of them actually calculate their risk in percentage terms every time they trade.

So, I believe, the key task is the strategy first (which is why demo accounts are so useful in the early stages) and your risk exposure is just a tool to avoid costly errors while your trading method is evolving.

@dushimes

I feel like I’m trading a lot of “well, this looks good, let’s see what happens” kind of trades. The type of trades I SHOULD take, probably occur maybe just a few times per month, which is scary. To be honest, it’s only scary because I feel like everyone’s making money except me, and I’m missing out. FEAR OF MISSING OUT. FOMO.

If you wish to trade more frequently then why not develop a strategy that will provide greater opportunities? There are many strategies that can be applied to 4-hour or 1-hour charts. For example, we have had about 17 trading days so far this month and I have taken 25 trades so far, nearly all with the same instrument, and using 1H-4H charts.

Surely it is better to use a method specifically designed for shorter term trading than try to force more trades out of a longer term trading method?

Also, I wouldn’t think too much about other peoples’ “successes”. We never really know what other people really achieve and the broker warnings still report that around 70-80% of retail traders lose. Just look after yourself!

@dushimes

We all have financial goals here. And for me, if I don’t make the necessary changes, I’ll never reach them.

This is an extremely important aspect and it is excellent that you are thinking about this. We do need to have a clear, specific, defined, objective, measurable and above all, realistic and achievable set of goals that we can focus on and keep in mind. It is too easy to just concentrate on our trades and forget what we are trying to achieve in the long run. In other words, one’s equity growth is a higher priority than risk exposure issues, which, again, are only a tool in the process of protecting your equity growth.

So many times we read newcomers talking of making millions, financial freedom, being their own boss, etc. But these are not concrete goals, they are just dreams. They have no definition or measurable progress. For example, a reasonable goal for a newbie would be to earn enough trading profits to be able to withdraw their initial deposits and then continue building on purely trading earnings. A next target might be to achieve consistent profits on a monthly basis (regardless of the actual percentage - in fact, to even ignore the percentage because it can cause rash moves and overtrading and is irrelevant anyway!).

I am sorry if I am ruining your journal with lengthy waffle, but I think you are one of the most industrious and ultimately promising traders we have here on BP currently. And I really do wish you every success with your journey. You are looking at all the right things and I am sure you will grow into all the right answers as you go!

[darthdimsky]

First, I want to apologise for the last post. I took some time, recalled some of your previous posts and I believe it’s has less to do with “keeping up with the Jones’” and more to do with uncertainty and confidence. To put it into context it’s not the just the post I quoted earlier but stuff like the potential missed trades in CAD/NOK and GBP/USD.

You may disagree with me when I say this but when I read parts of your journal I am reminded of this page.

That’s from chapter 15 of Naked Forex: High-Probability Techniques for Trading Without Indicators, Alex Nekritin & Walter Peters. If you can make the time just read that chapter. The rest of the chapters on psychology is worth reading if you have extra time.

@dushimes

But if others are profiting, then I can too.

I can’t tell you how much I disagree with this statement. I keep editing this part of the post and re-writing it to try and make it concise. It’d be so much easier if I could talk it over a beer or something.

Your circumstances aren’t the same as those traders.

• Do a majority of those traders have more experience than you (and me)? Highly probable.
• Do they have access to more data points to make those same trades? Highly probable
• Do they have the same psych profile and time constraints that you have? Highly improbable
• Do their strategies and setups differ from the ones you have for yourself? Highly probable

When you draft your trading plan you are looking at high probability setups that fit your profile and circumstances. You establish confidence in that system by taking 100-300 backtested trades and x months forward testing it. In the process of testing it you build confidence in your system because it works the best for you despite:

1. Seeing a significant number of trades go against your setups
2. Seeing a number of missed opportunities (100 - 500 pip moves).

Over time, and with more experience, obviously you try and try and incorporate those missed opportunities maybe with one or two new rules but you go through the same process of back/forward testing to see if those new rules adversely impact the success of the existing system.

Either way you must have absolute confidence in your system even when things don’t necessarily go your way. In my humble opinion, you can only establish that by putting the work on your system.

@dushimes

I understand your point, I think. Trying to keep up with others can pull you out of your own strategy/plan/discipline and make you wreckless.

It can make you reckless if you haven’t tested your system enough. But more than that it’s a waste of mental capital. The “what ifs” and “what could have beens” are an unbelievable drain on your mental state and adversely affect how you function. It erodes your self confidence and instills a lot of doubt.

And you can’t afford to have that because your high probability trading setups aren’t supposed to happen as frequently. When it does you cannot afford to be fillled with doubt and loss of confidence. You have to be quick and decisive to seize the opportunity when it presents itself.

Atleast that’s what I believe.

[MattyMoney]

@dushimes

But sometimes, I feel like the whole forex market is correlated to an extent.

I’m glad you wrote this. I have stated this on more than one occasion.

This is the reason I limit the number of trades I open at any given time, and pay close attention that I don’t open multiple pairs of the same currency. When a strong move happens, it usually reverberates across the entire market, and if you’re on the wrong side of the that move then it can hurt.

Great thread @dushimes with some excellent contributions by other BP members.

[dushimes]

@darthdimsky

First, I want to apologise for the last post . I took some time, recalled some of your previous posts and I believe it’s has less to do with “keeping up with the Jones’” and more to do with uncertainty and confidence.

No worries!! Haha Speak your mind!!

Thanks for all of your help! I appreciate it. I also appreciate it when you challenge what I say. It helps me critique my own thoughts.

And as far as keeping up with others, I didn’t mean it in a cash money amount. It’s just motivation for me not to quit, basically.

@darthdimsky

Either way you must have absolute confidence in your system even when things don’t necessarily go your way.

Yes. I’m confident in my system. But I need to improve the execution. I have to be more honest with myself and just be willing to walk away from more trades.

I’m improving, though. This morning, my total risk exposure was 3.84%

I felt a little ridiculous for such a small amount. Originally, my max was 3.0% but decided that 5% total risk was acceptable. I ran out of time this morning and didn’t have time to place more trades.

[dushimes]

@SovoS thanks for writing so much. I appreciate you taking the time to give your opinion. This is how we grow, right?

@SovoS

If you wish to trade more frequently then why not develop a strategy that will provide greater opportunities?

There are lots of opportunities, I just have to be more selective.

A lot of where I lose comes from triangle break outs. So many things can happen—especially if you hold on too long.

@SovoS

the key task is the strategy first (which is why demo accounts are so useful in the early stages) and your risk exposure is just a tool to avoid costly errors while your trading method is evolving.

My strategy is only as good as my awareness. If there’s a trade I want to take, I might rationalize why I SHOULD take that trade.

In my mind, I’m following my strategy, but in reality I’m taking bad trades.

This is where I have to be more concrete in which trades I’m taking. I can lie to myself all day long, but if I have a set criteria, then I have a rule guide. This is simple stuff, but the mind can/will play tricks on you.

[dushimes]

Thanks to everyone for reading and posting here!!

It’s incredibly helpful!!!

[dushimes]

@MattyMoney

This is the reason I limit the number of trades I open at any given time

It makes sense. But…if you’re on the right side….boom!!!

And if you’re wrong? Sad violins…

Lately I was trading several crosses of the same pair. But today, I limited it to just two. Two! Oh man.

I wanted to keep placing orders, but I had to keep thinking “what if I’m wrong?”

It really did help me. Thanks!!

[dushimes]

@SovoS

I think you are one of the most industrious and ultimately promising traders we have here on BP currently. And I really do wish you every success with your journey. You are looking at all the right things and I am sure you will grow into all the right answers as you go!

Thanks! I wish you the best as well! And your contributions on this entire forum are valuable. You may not realise it, but you’re a big help to all of us!

[darthdimsky]

@dushimes

Yes. I’m confident in my system. But I need to improve the execution. I have to be more honest with myself and just be willing to walk away from more trades.

To be frank being confident in my system and not being able to walk away is a bit contradictory.and I can’t wrap my head around this. Maybe my point of view is highly subjective and perhaps I’m projecting my opinion too strongly.

Isn’t it easy to walk away from trades that don’t meet the rules that define the criteria for your setups? For e.g. your setup has 3-4 rules and one rule is unmet. Would you still have a difficulty walking away from it?

For context and reference look at this guy share and discuss his trading plan on the Ichimoku Kinko Hyo.

If you watch his live trading videos you’ll see how strict he is adhering to those rules. If one rule is invalid he walks away from it.

Disclaimer - I don’t trade the Ichimoku nor am I advocating it. I just wanted to see a trading plan discussed in detail and it being implemented by the same guy.

Edit:: - If certain Ichimoku terms are difficult to follow he also has a 5 part guide on it among his videos, which I found easy to follow and understand.

[SovoS]

@darthdimsky

To be frank being confident in my system and not being able to walk away is a bit contradictory.and I can’t wrap my head around this.

I think this is the core difference between a totally mechanical, systematic, trading method and a discretionary trading method. The key point being that a discretionary method has the ultimate factor of “discretion” layered over the mechanical bits.

Personally, I think the relevant issue here is the role of this “discretion” in the decision-making process. I believe that the correct order is that a) the mechanical rules make the initial signal and b) the discretionary element considers other current factors and either accepts or rejects the signal and then sets the appropriate risk parameters.

However, it is also possible to reverse that into what I would suggest is an incorrect approach, where the discretionary element decides what could/would be a good trade and then moulds the signals to fit.

I think the latter is especially prevalent in PA methods where the drawing of trendlines and S/R lines, and the interpretation of patterns and candle formations is often imprecise and subjective - especially when multiple timeframes are involved. E.g. does the hourly signal override a daily or vice versa, if so under what conditions, etc.

There are always grey areas in discretionary trading methods and it is in those grey zones that one can easily take bad trades in spite of a weak signal (or even pre-empting a signal) whenever we are faced with a “mind over matter” situation where the mind just aches to be in some kind of trade and then lowers the exposure risk to a level that “doesn’t matter even if it goes wrong”.

In my opinion, the discretionary element should (almost) always be the prosecutor in judging the signal and not the defense attorney…

[dushimes]

Just thinking and drafting some rules for my strategy.

I’ve been keeping them in my head as they evolved, and this has created grey areas—room for rationalizing.

It’s cliche, but the first step to fixing a problem is simply acknowledging that you have a problem.

If you can identify it, then you know what solutions to start looking for. It doesn’t mean you’ll find the solution right away, or even at all, but it means you’re hot on the trail. You’re chasing down the answer.

So, I’m taking people’s advice and creating a list of conditions for taking trades. No more grey areas and worrying “but what if I’m right and I miss a big move?”

That’s a very strong emotion to let go of, but I’m trusting the more experienced traders that such random uncertainty is detrimental and costly.

[dushimes]

@darthdimsky

Isn’t it easy to walk away from trades that don’t meet the rules that define the criteria for your setups?

It’s easy once you learn how to do it. Until it’s a habit, it’s a struggle. But worth it, I think.

[dushimes]

That feeling kind of sucks

The “well, what if that’s a big trade?” feeling…

And you walked away from it.

The idea, I guess, isn’t to catch every single move. It’s to catch the moves that fit your strategy, and then you let probability work itself out. If you have a profitable strategy, the money will take care of itself.

When you’re desperate or in a rush, that’s when the process falls apart. And instead of working your way towards regular profits, instead you suffer losses continuously.

[darthdimsky]

Gave it a bit of thought after @SovoS’ previous post and you may have very valid reasons to override certain rules based on specific situations.

Having said that I still believe there should be a way to quantify it. One way I can think of is by assigning a weight (level of importance) to each of the rules based on your priority and apply it to your journal entries. With this approach you arrive at a grading system you can use to test how:

• effective your system is, and
• disciplined you are in your approach

With this you’re not influenced by any recency/confirmation bias and are able to quantify your decisions.

For e.g Let’s say these are the rules I use to determine an uptrend (simplified). I’d say my ADX value the most important, which is why it carries the most weight.

Add another layer to this perhaps and say that these rules applied to a HTF carry even more weight (e.g. 2-4x more weight). So if all the rules are met in the HTF, then omitting the bollinger band deviation on the LTF is completely valid in that instance given it’s lower significance.

At the end of a week or month when you take stock of your journal entries you are then able to grade both your systems and your discipline, which gives you a very objective outlook to how you’re trading by your own definition of good rules/system.

This is a line of thought I picked up from an Alexander Elder book, The New Trading for a Living.

@dushimes

The idea, I guess, isn’t to catch every single move. It’s to catch the moves that fit your strategy, and then you let probability work itself out. If you have a profitable strategy, the money will take care of itself.

Yep, this echoes my thought process. It’s to make the most of the high probability setup I see in front of me, which is why I said I was very disappointed when I wasn’t scaling into my good trades.

As for the missed opportunities, I literally tell myself: “Dumb@$$, if you can’t make the most of the easy setups you can identify why are you pining about something you couldn’t spot at the time”. My attempt at trying to clean up all the low hanging fruit first.

[Mondeoman]

@dushimes

I’ve been keeping them in my head as they evolved, and this has created grey areas—room for rationalizing.

Hi,
This has turned out to be one of those threads that has value at different levels for members at different stages of their individual journeys. Well done for continuing the discussion. About the grey areas you refer to, it may be useful (and organized) if you take any particular grey area and start a new thread - something like “Dushimes Trading journal - rationalise grey area of SL as a function of ATR(x)” as an example.
That way, members can contribute to particular threads without this one getting to a 1,000 post readathon.