FX Cowboy Breakout and Retracement Journal

[FX_Cowboy]

A couple of additional thoughts on the contract strategies. C1 can be traded as a standalone scalp entry, or else as a way to get the overall (multiple contract) trade to BE, which was the original intention. I think the C1 strategy makes sense, is fairly straightforward, and with a bit more flexibility in real time, should perform at least as well in forward testing, paper trading and actual trading as in backtesting.

The C2 and C3 strategies need to be more focused and better defined. C2's current job is to run from trade entry to a predefined target, which at the moment is a fairly distant S/R level that I seem to be identifying using different criteria at different times, but which in general is based on previous price movements and where S/R have shown up in the past. And this is where I'm running into some problems in forward testing. In backtesting, it's easy to set targets that will be hit, and to rationalize how one might be setting those same targets in real time. But I've seen that setting targets based on historical levels ONLY leads to a disconnection from what is happening in the market, and is less reliable than I had hoped. That may be due solely to my own personal limitations, but there it is. In addition, I have C2 taking on C3 rules at certain times, which complicates the situation further.

The rules for C3 are based on the idea that C3 is a "runner" -- the contract remains open until there is some reason to close it. That idea in itself sounds fine, but my implementation of the idea, again, has been anchored on predefined S/R levels. On days when price action is range-bound -- or simply doesn't conform to my preconceived S/R levels -- the C3 strategy gets hammered.

These are some problems I'm going to have to deal with. I have some ideas on possible steps to improve the situation, which I'll detail in a later posting.

 

[FX_Cowboy]

I realize that it's been awhile since my last journal entry. What I am and have been doing is observing S/R more closely using "dead" charts, playback, and in real time. I'm seeing things a bit more clearly now in terms of how to nail my entries better, and I'll soon be ready to resume my forward testing.

 

[FX_Cowboy]

Minor "aha":

In one sense, a trend is nothing more than a series of plausible reversals that, for one reason or another, just didn't work out.

 

[firewalker99]

Minor "aha":

In one sense, a trend is nothing more than a series of plausible reversals that, for one reason or another, just didn't work out.

Hi FX, ik weet dat je niet altijd veel tijd vrij hebt, maar je zit toch al behoorlijk ver dacht ik. Ik vroeg me af of je nog eens een vervolg komt posten en was benieuwd naar je vooruitgang...

 

[FX_Cowboy]

Hi FX, ik weet dat je niet altijd veel tijd vrij hebt, maar je zit toch al behoorlijk ver dacht ik. Ik vroeg me af of je nog eens een vervolg komt posten en was benieuwd naar je vooruitgang...

Even een paar zaken doordenken. Ik kom zo terug.

 

[FX_Cowboy]

I just wanted to post an update on where things stand with my trading.

I needed to take some time off from my journal, and from trading, for a while to regroup, and to try to achieve some perspective on my developing system and how it fit with other ideas and concepts I have about trading. I've mentioned most of my concerns in this journal. For some reason I find it more difficult to actually work out issues when I'm in the process of backtesting, than when I'm out of that process, and more in an experimental/observational mode. I've spent a lot of time -- hundreds of hours -- just looking at historical charts, and replaying trading days in order to resolve some of the issues I had come across in backtesting.

After -- and while -- doing that, I went back to trading with real money (not REAL MONEY, just actual money in very small amounts, which by the way is one of the few genuine advantages of trading spot forex -- you can take a position as small as 1/100 of a cent). There are some psychological aspects of trading that I have just not been able to deal with any other way than in actual trading. I'll mention these in more detail below.

A short list of real time trading issues (and demons) I've been working on and thinking about:

-- How do I reconcile a system based on S/R levels with the ebbs and flows of buying and selling waves. What if the levels where I expect something to happen don't match up with what I'm seeing in real time? How do I deal with that?

-- Related to the above, how do I prefer to handle trending behavior in one time frame, when I see conflicts with longer term trend directions?

-- Taking losses. I've discovered a couple of useful things about this recurring problem of mine. First, for me, taking losses is very hard, but it is something that improves with constant exercise. If I am trading on a regular basis, I develop a strong discipline concerning losses, and I just refuse to let losses get big. Secondly, if I am trading with the rules of my system, taking losses becomes MUCH easier, because I understand exactly why I have put my stops where they are.

-- Out of system trades. My main demons here are trying to catch tops/bottoms, trading in the middle of ranges, "casual trading" (trading on a whim, not taking things seriously), and trading against my system because I think I know better. It's been interesting as sort of an outside observer watching myself doing these things, and then realizing how counter-productive they really are.

-- As a result, I'm in a process of focusing more and more on my own system, which is becoming increasingly aligned with my fundamental understanding of markets and trading. As I do this, I see less reason to ever trade anything BUT my own system. I have become a true believer in my system somewhere in this process, although I realize that I have yet to define some important aspects of it. The main thing is that my system now keeps me from making big mistakes, and it allows me to take advantage in a big way when I get things right.

I'm not declaring success yet, and I absolutely intend to get back to my journal to develop further and test my system. I also realize that I have not gone about this in the most efficient way. In fact, I have probably delayed my own progress by making the various choices I have along the way. But I am persistent, and I am making progress. I look forward to resuming this journal in earnest in the near future.

 

[FX_Cowboy]

In the spirit of using this journal to keep track of how my system development is progressing, I want to set down my thoughts concerning the issues (or at least some of them) raised in my last post.

--------------------------------
Issue: How do I reconcile a system based on S/R levels with the ebbs and flows of buying and selling waves? What if the levels where I expect something to happen don't match up with what I'm seeing in real time? How do I deal with that?

My current take: There should never be anything to reconcile, because there can never be a conflict between S/R levels and waves of buying and selling (and what I originally meant by this phrase was the observable sequences of swing highs and swing lows). I think of these now as separate but related parts of a greater mechanism. Essentially, it's a matter of focus. If I'm focusing on the here and now -- what the market is doing in real time -- then I'm aware of where support and resistance are showing up right now. When something gives, I see it happening. On the other hand, if my focus is on lines on a chart representing where I think S/R showed up in the past (and may show up in the future), it's much easier to be wrong-footed. But there's an important distinction to bear in mind. It is absolutely vital for my system to be aware of historical levels of S/R which are significant. So, there are two things I'm trying now to keep constantly in mind: keeping my head in the game and paying attention to what is happening; and being more discriminating in terms of judging what levels of S/R are important. The latter usually keeps me looking at different (longer) time frames.

 

[Mr.Black]

Breakout :!: :!: :!: