Trading journal

When I started looking for samples of the first strategy, it was quite difficult finding them. I started wondering if it’s worth it to try trading a signal that’s so hard to find.

I also had trouble finding samples of the second strategy. I thought maybe this whole thing was a bad idea. But I noticed that I had trouble finding samples for every strategy. However, if I combine all the signals together, then I have a batch of signals to look for. Each one may not occur a lot, but together they are a sufficient number of signs.

Even better if not strongly correlated, positively or inversely,

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No, not related. But the funny thing is that I’ve had so many losses by all of these signs, my mind thinks each of these signs are all over the place!

Fear has altered my perception!

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Interesting! What do you think is the main cause of this? Is it due to the inaccuracy of the actual signs? or an inconsistent approach in actually taking the trades? or problems in setting the right targets and stoplosses? or something else?

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I was misreading the signs. I was misunderstanding the major trend. And when I did catch a good trade, I jumped out too early.

It was a disaster. Over the past few months, I’ve been losing money much slower. I actually started to see a tiny bit of profit. I’ve been much more patient, lately.

I’m breaking my strategies down, and trying to untangle them. In my mind, the signs and strategies are all mixed up. I’ve really slowed down my trading so I can take a methodical approach to untangling the crossed wires in my brain.

The main problem could be boiled down to misreading setups, and then mixing them all up in my head.

I hope that makes sense…

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Well…yes and no! :joy:
I think the real paradox in trading is that while it is not easy - it is not complex either. :wink:
I also think that we all struggle with the psychological issues that can complicate the reading of signals - as well as handling the trades once we are in them.
I am sending you a DM that I think might be interesting for you…

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I tried moving on to collecting samples of my next strategy, but I checked a prior batch of samples, and I realized that I had already collected the same type of samples.

I realized that some signs can’t necessarily be separated from others. When there are signs, there are also conditions I must consider. That’s why i lumped some samples into the same folder. They might appear different, but the conditions are the same. Now, I know, and I can move on to the next batch of samples.

Well, now I feel like pulling my hair out because I’m stuck on a hamster wheel.

I was trying to understand the difference between shorter swings and longer swings. I was separating these trends, and after comparing two different folders side by side, I realized I had the same type of swings in both folders.

I was getting confused and upset. The sun is out, the weather is a little warm, so I went outside for a walk with my notepad. I talked to myself and simplified my folders (on paper).

So, I go back inside and compare two folders that are completely different strategies. I compared them side by side, and the entries look the same!

WHAT’S GOING ON?!?!?!?!!?

This is the first time I compared these entry signs side by side. But in my mind, the signs were different. Well, not when I compared them together.

I started getting mad, because how am I supposed to know when a trend is ending vs retracing?!

Well, how about instead of asking a rhetorical question, I should figure that out! So, that’s a good start.

I’m really getting upset here. Then I look at a random EUR/CHF chart, and I’m looking at it, wondering how I’m supposed to know when these changes are happening.

I looked, and I can see all the clues in front of me. Then, I thought about what SovoS wrote:

It’s really not complicated when I looked at that chart and saw all the clues. I’m the one who’s complicating it.

I need to figure out what I’m overcomplicating…

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Emotions are very powerful. Perhaps it’s best to confront and manage them, rather than ignore them. Of course, it varies from person to person.

I feel like a fool for doing all this studying and analysis, just to find out that maybe it wasn’t even necessary.

Imagine you ask a helper to organize some papers while you go do something else. You come back three hours later, the paper is only half organized, and the helper is organizing paper clips. You’d feel like yelling.

Well, I feel like that helper who thought he was doing the right thing, and SOMEHOW ended up organizing paper clips.

I feel frustrated because pairs are trending in the market, and I’m messing around with these samples and analyses.

It’s time for me to finish these samples, and get back to practicing trades. It all boils down to bullish signs and bearish signs. I’m gonna finish collecting my samples, and then start preparing practice charts in accord with my samples.

I’m gonna try to keep it simple. Keep it meat and potatoes.

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I think I remember that way back up in your journal you mentioned that you wanted to figure this out for yourself and didn’t want others making suggestions. I deeply respect that and I’m trying not to “interfere” even though your journal is on my regular reading list! :grinning:

But I thought I might add a few catalysts here that might stimulate your thinking?

Given that the only price facts we have are 1) what has happened before, and 2) what is happening right now, how can one ever establish at the start of a new move whether it will end up as a “longer swing” or a “shorter swing”? For example, many quote that an uptrend is identified by higher highs and higher lows - but you don’t know that until a series of highs and lows have actually been achieved!

In other words,at the start of any move, they all look the same. I don’t think you can divide moves into shorter or longer categories except retrospectively.

But is there even any need to try to?

So that leads to the next question: How do you decide that a new move is forming? But before that I think one needs to have a clear definition of what, and how, one is looking to trade. Am I looking for new trends from a consoliation period? reversals from an existing trend? a ranging market? etc.

I think one needs to identify oneself as much as (if not more than!) the market structure one is looking at. What kind of trader am I? what timeframes am I working? what instruments generally reflect my interests and aims?

For example, I trade off the 4-hour chart because that suits my character and the timezone where I live. I trade with a move and not against, Therefore I want a market that moves well, and far when it does! So I trade the SP500 almost exclusively. I look at other markets out of interest but not to trade. I only need one market if I can trade it well and consistently! I take all my signals from the 4-hour chart and only then do I drop to the same chart on a 1-hour time frame to seek confirmation and timing. This 1-hour confirmation applies to both entries and possible premature exits. So I basically look at the charts 5 times per day: morning, midday, mid-afternoon (after US data releases) mid-evening and close. This suits me but may not suit other trading styles at all! Which is why one must be clear what one is trying to achieve and how.

I see this personal trading style analysis as a critical first step in this business. If one does not have a clear and concrete (and simple!) profile of what kind of trading one wants to do, how can one decide what to look for in the charts?

Only then, in my opinion, can one decide what to look for in the charts. What do I need to see that indicates when my kind of move is starting/continuing/ending - which matches the kind of trading I am looking for?

I actually found it useful in earlier times to write it all down. I actually produced a pdf file of my trading style, complete with examples and explanations, as though it was for another audience. It had to be clear and workable!! .I still edit and re-read that file regularly.

I think what I am saying here is pretty much what you mentioned above. That the issues are not so much in the charts as they are in the person. It is we that make it complex, not the price, which, afterall, just goes up and down! :grinning:

Once one knows who one is and what type of trading one wants to do, then one can define what signs, signals, indicators, etc one needs to work three decisions: where to get in, which way, and where to get out.

That sounds easy, but it is not. Oh, how many times I have got the direction right and lost money - and got the direction wrong and still made money!!! :joy:

Personally, I think the greatest effort needs to be made on the choice of exit style and levels. What type of move are we anticipating? what is the right risk exposure? what type of stoploss, fixed or trailing? previous S/R levels? etc, etc.

I am a very simple guy and I know I simply cannot do all that analysis for multiple products, hence why I specialise in one. But each trader needs to define which, and how many, instruments to follow - and follow to the extent that it/they are in your genes!

Sometimes it might feel like its going back to the beginnings, but it is not: Define your trader profile and style, select one instrument, define what you need to see in order to base decisions, and decide which tools are going to provide that. Then work it, refine it, and apply all the experience that you have gained so far - and then, backed by a growing confidence and familiarity, add other products to your portfolio :grinning:

I think many traders fail to realise that unless, and until, they build confidence in the consistency of their trading approach/system, via its documented success, they will never get to trade with sufficiently large position size to make it all worthwhile - a tried and tested system with appropriate risk control, and the patience and discipline to stick to it. Without that, one is just trading a house of cards which eventually doesn’t stand the emotional strain that accompanies the uncertainty and grows along with position size until…

Just some personal thoughts, just to stimulate some questioning - I’ll delete this post if you feel it is getting in the way…just say so! :slightly_smiling_face:

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Well, that’s the rub, ain’t it? I’m realizing that I just have to go with the flow and let the trend tell me how long it’s going to run. That’s the whole point of an exit signal, right?

I agree! What suits me is D1. Deep down, I’m lazy. So, D1 works perfect for me. I only need to check the charts once a day.

This is what I’m working on!! After all, if I can’t write it down, how clear is my strategy? This is on my list of things to do!

You wrote so many good points! Certainly a lot for me to think about and continue to consider as I develop.

Thanks so much for reading and taking the time to respond!

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I am not sure that I would call it a “signal”? Rather, at the same time that I enter a trade, I look for suitable levels that I think price might reach. In addition, I decide the level that, if reached, my trade reasoning is nullified. In other words, a preset TP and SL. This is ok for the shorter term TFs where moves are that much shorter.

However, I also would prefer to trade off the day charts but I have never been able to maintain the patience. And the distances to SL are always too painful to sit through. On the other hand, the entry signals off the daily charts are, in my opinion, much more reliable and rewarding - if one can manage the risk/reward parameters well enough!

I still think that preset TP/SL are worth setting in daily charts but, in addition, these longer moves also provide the opportunity to use a manual trailing stop as the trend unfolds.

Personally, I have never succeeded too well with daily trades. If I set a position trade on a daily TF, anticipating a duration of several days, or a week, I am already checking it a few hours later to see if its “working” yet! :innocent: But the biggest problem for me with longer term trades is that, although the wins are great, the distance from entry to SL are usually so long that they would have formed an opposite direction trade on the 4H-1H setups! I can’t deal with just watching the drop on the daily whilst knowing that I would be winning on the 4H chart!

Maybe a Daily/4H combination could be one solution for trades based on the daily chart, but that requires more intraday checking. And with a PA approach I guess the levels on the daily and 4H charts would be almost the same anyway…

But I think whatever approach one takes about setting targets and stoplosses, it is important to let them run and not watch them all the time and then interfering along the way. Afterall, if the setup is based on a logical analysis, why meddle with it later purely on a hunch or intuitive gut-feel?

I think our daily chart trading expert here is @tommor so it would be interesting to hear his input on the issue of “exiting”. :slightly_smiling_face:

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Referring to me as an expert is kind but I worry I’m setting myself up for a fall by offering opinions here.

But I do have painful experience on the D1 in forex. I’d say I have lost more money in forex from missed profits than I have from losing trades. It’s worth tracking potential after an exit even if it’s been a winner. Lessons are not just learned from losing trades. In fact it’s worth tracking the trades you didn’t take - the signals you didn’t notice, the positions you didn’t have margin to enter, the positions that would have clashed or correlated with existing positions etc.

By now I have some general thoughts -

  • r:r ratios of better than 1:2 don’t deliver consistent profits
  • r:r ratios of 1:1.25 or 1:1.5 are actually good
  • go for 1:1 if you have to - remember the 3-6-3 rule from banking - the wealth of banks is built on r:r of 1:1
  • if price surges in your position’s direction to make a longer candle than the last 7, take the profit
  • if a profitable position has such good TA that you intend to hold it through pull-backs, why aren’t you planning to add to it?
  • if TA says a pull-back is more probable than continuation, why wait? Take the profit now, then look to re-enter.
  • even in an uptrend, only about 55% of forex D1 closes are higher than the previous day’s
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Hi @tommor, thanks for the useful input :slight_smile: Some comments:

I have the same opinion. Most of my trades fit in the 1:1-1.5 range. I don’t actually use the ratio to determine the actual levels. My choice of levels just generally come close to these ratios - anything less and the trade is not worth the risk.

I would add that a lowish R:R also requires a high win rate to generate a decent income. I.e. a 50% win rate with a 1:1 R:R is not going to get anyone very far!! :laughing:

I think this is very close to what @dushimes was talking about when he said above:

Just out of interest, what TA do you use to differentiate between a pullback and a reversal? I still rely on a simple, very basic, EMA strategy that is as old as the hills and thoroughly boring - a million miles from the modern obsession with “naked charts” and “accumulation/distribution” or “order blocks” or “ITC” algorithms or whatever! :innocent: but I get by with it! :slightly_smiling_face:

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Cheers, this is such a useful subject to discuss, not many commentators are much interested in exits, yet that’s where the money comes from.

Far as differentiating pull-backs from reversals I do not have a clue. Hence my happiness to get out early with profits, even before the pull-back starts. Continuations are easier to see, though still not 100 percent, but I am less and less going for pyramiding these days on Forex, only long-side on the US stock indices.

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I totally agree! It is not the entry that makes the money at all, it is where you get out that counts. I remember quoting you last year when you said: “The entry makes the trade but the exit makes the money” That is about as close to a “universal truth” as one will get in trading! :grinning:

It is certainly not an easy job! :slightly_smiling_face: One approach could be with an EMA band like in these sample pics. This is a bit tongue-in-cheek as most traders nowadays would probably trash the idea without even looking at it! :joy:

Here are the SP500 and EU daily charts. The red rings highlight a pullback because the twin ribbons have not changed sides. But the green rings show a reversal. The horizontal green lines on the SP500 show how and where a stoploss could be progressively moved as the trend evolves.

I have actually found this particular chart quite useful but, as I mentioned earlier, the distances to stops and the time to reach a target do not suit my style to actually use them as “standalone” trade charts:

My theory here is that an MA can show the evolving direction and strength of a trend. So if price starts to cross below (above) the MA then it suggests that the trend is exhausting. But the question is how far does price have to move in order to be significant regarding a pullback or reversal. And that is where the EMA band has some value as shown here.

One method that I use is to set the same chart setup on both higher and lower timeframe and watch the lower TF to dictate when and if price returns to the previous trend - or starts a reversal.

Naturally, this is not sufficient as it stands as it only defines a possible pullback v. reversal. It also requires a means for identifying profit targets. It is not intended as a crossover system at all. Horses for courses, as it were!

I should add that I have not found this same setup to be reliable on intraday charts at all, but my trading chart setup is not so very different in concept. Yep, I’m just a very old-fashioned retro-trader… :innocent:

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I kind of got interested in this as I was writing about it :joy: and here is an example of using the Daily/4H TF combination to manage pullbacks/reversals:

On the EU daily chart on the left we can see price recently dropping from 1.09 to 1.07. But if we look at the 4H on the right,we see that on 20.2. price moved the EMA twin band into positive mode. i.e. time to close out the shorts and wait…
…since then the 4H chart has remained positive. I.e. the two charts are in conflict or neutral. So we can now wait to see whether the 4H turns negative again and we continue the down move (i.e. a pullback), or that the daily chart starts to turn up as a reversal.

I would emphasise that this is not science, it is art. I.e. the charts are only giving a visual indication of what appears to be happening. I don’t think we ever get more definite than that. It doesn’t mean that a trend is occuring in either direction, only that “something” is changing.

Actually, one interesting feature of these charts is how they demonstrate how very differently moves evolve as they play out…

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These ideas and charts are quite convincing. Got to think about this.

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If one treats them as just one tool in assessing the overall situation then I think the approach does have add-on value, but certainly not to use it as a mechanical “system” in any way - and certainly not as a crossover trading system.

But I think it certainly can help avoid getting locked into losing positions and improve timing regarding entries. But It really needs a separate method for setting profit targets in some form or other to complement this. Personally, I tend to use previous weekly highs/lows for that together with (dare I admit it) just a gut-feel for when it seems to have over-reached itself. :laughing:

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