Trading journal

[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?”

[Mondeoman]

@dushimes

the REAL problem was my late entry

Do you always enter your trades live? If so, have you considered placing limit orders so that you enter at the right time (price), or did you not have a pre-planned entry price that you could have placed a limit order on?

The reason I ask is that I quite often place limit orders to buy my sh__coins (crypto trading) and am often surprised that some orders even get filled. Volatility being what it is with Alts, the limit order is often 25% below price at the time of placing the order, and since I am trading with zero margin, stop loss is not required. I may live to regret it but I am actually holding two losses long term, and have on at least 3 occasions sold out at 50% gain or 100% gain within days. I know I cannot do this with Forex pairs for the same relative reward/risk, but I have borrowed the operational practice from my Forex trading strategies and they seem to work for me a whole lot better with crypto Alts than they ever did with Forex pairs.

[dushimes]

Yesterday, I wanted to close my GBP/USD long trade, but I had trouble closing it in one of my accounts. I wanted to move my SL to BE because price was turning a bit bearish.

I remembered I had the app on my phone. I made the adjustment and placed a limit order on my app.

I’m glad I didn’t delete the apps. So, my money was protected, and I this morning, I saw I got in on a long position at a good price.

[dushimes]

There was a trade I was looking at, and the entry signals were there. But the R:R was discouraging. It was a rather short-term swing. It was soooo tempting, but I decided to not take it.

Sure, I could have been right, but there were too many factors that were in play despite the entry signals.

It was quite a difficult decision. But I have to be willing to walk away from trades that are tempting but less than ideal.

The reason that’s so hard because desperation will make you focus on how the trade could lead to profits, and not how it could lead to loss.

Some set-ups have ideal conditions, while others have poor circumstances. Telling them apart is key.

For me, trades often roll in cycles. There will be 6 or 7 set ups. You take them, and while those trades are trending, the best thing to do is just sit back and exercise even more discretion.

If you missed the swing, let it go. That’s what I tell myself. Trying to board a moving train is dangerous business.

That’s why I do my best to stay away from breakouts. They can get incredibly choppy. I’ve lost 3 or 4
times on the same pair, trying to jump in, and still be completely unsure about where price could go or when.

When price hits support in a channel, and the candle wick touched it then pulled back slightly, it’s a good bet that price will turn bullish. It might stay bearish, but at least it’s a pivotal point.

You have an idea of what could happen. And if something completely unexpected happens, they you know the situation may not be what you thought it was.

But those are the kinds of set ups I’m trying to wait for. Sure, price just bounced the MA20, but is it in the middle of a channel? Is it consolidating? Is it near a trend line? What’s the W1 looking like? So many factors to look at.

I’m really rambling now. But this is what’s bouncing around in my head.

[Mondeoman]

Hi,
Does your trading plan allow you to trade just in the last hour before the holiday break? That is like trading the news.

[dushimes]

If the chart tells me so, then yes.

Several pairs are consolidating, but GBP/USD is starting to trend now.

So is EUR/USD.

I follow what the chart says. Regardless of the month. I usually don’t even pay attention to the first candle of the week. i sleep in. But then, I recently missed several nice entries.

So, now I take every candle as significant.

How about you @Mondeoman? Do you prefer to stay on the sidelines at the end of the year?

[Mondeoman]

@dushimes

How about you @Mondeoman? Do you prefer to stay on the sidelines at the end of the year?

no, not at all

I need to find a few K to buy some more NFTs for my “crypto income plan”. Just working out which cryptos to sell so I have funds for the NFTs.

[dushimes]

Just finished trading for the day.

Not much going on. A couple losses, but worth jumping back in.

I saw one trade that I was tempted by but didn’t take. And I saw today that I was right not to take it.

It was kinda nice to know that I was right for staying out. It almost feels as good as profiting…

Which, now, I can see is a problem. If I’m attached to being right, then my fear of being wrong would prevent me from taking proper trades…

That’s something I’ve been working on. Taking the trade when I get the signal.

Also, right now for me, it’s the time to not jump at trades. Some pairs are moving but not many entry signals for me.

The best thing for me is not to force trades. If I take too many bad trades while my profiting pairs are trending, then my profits will just bring me to zero, or my original account balance—instead of being in the green.

So, no more trading for me today.

[dushimes]

I got a late start this morning, but it worked out ok.

One of my long trades was pulling back near the stoploss. It was a great time to add to my position.

However, I have to consider “what if I’m wrong?”

No matter how confident I am in a trade, I have to respect my risk management. So, I added a super small position.

It would have been great to add half my normal position, but I wasn’t willing to lose that much. I can’t assume I’m going to be right and throw caution to the wind. I’ve done that before and it was terrible.

The reason for risk management is to control losses. And this is because we never know when we could be wrong. And any trade could go wrong.

[dushimes]

I had a few losses today. I jumped back in on two of them. But the rest, I’m staying out for now.

One of the trades was a long resistance bounce trade. But it was a trend line within a big channel in W1.

I got my bounce confirmation then price slightly broke thru resistance.

Sometimes I guess it’s a roll of the dice. Or…perhaps I need to just pay more attention to the W1 before closing. That sounds more logical.

I had several losses the past month. I think I need to do another assessment of not why I lost, but what kind of trade it was. I’ve had a lot of trouble with S/R bounce trades. But these minor S/R lines, I guess I could call them. These small lines that I can’t even really see on W1, but I can see on D1 only.

You know what? I’m here trying to figure out why I had these losses.

It’s ok to analyze losses, but sometimes losses are just part of the game.

The problem I have to solve is “where these losses justified in the end?”

If I see a reversal coming, and I take two losses, then om the third entry signal the pair reverses, then it’s justified.

But even if I take a trade that looks like a good entey but price consolidates and just continues in the same direction, then that loss is justified as well, because it was a genuine entry signal.

But entries on trades that I shouldn’t be taking because I told myself I’d stop, that’s a problem.

So, I’m gonna take some time to do some analysis of the trades I got wrong, and also got right.

[dushimes]

Today, my whole rhythm was off.

Normally, I wake up, do my trading then I get started with my other work.

But, I was soooo sleepy this morning. I checked on my open position, then collapsed on my bed for three hours.

When I woke up, I felt so lost. I did some errands and some calls, but I didn’t feel so productive.

Not everyday is gonna be a winner.

Tomorrow’s a new day. This is why I look forward to waking up. It’s a chance to do better.