my journal

[Yamato]

NEW OVERSTRETCHED METHOD

ENTRIES:
Set up a month of hourly candles with pivots on EUR FOREX
Enter long/short at 8 AM/PM CET based on these principles:

These requirements MUST be met:
1) overstretched in ticks (>100 ticks top-bottom)
2) overstretched in hours (>24 hours going up or >12 hours going down)

At least 1 of these 2 requirements must be met:
1) pivots (near pivot level)
2) reversal pattern (increasingly shorter legs, do not enter after a tall candle)


EXITS:
Close position after 12 hours, and enter the next trade (unless the requirements are not met).


TRADE #1: SHORT for the next 12 hours

 

[Yamato]

[... reasoning...]

New colleague moved in. She left for lunch....

[...walking and reasoning...]

[...scratching and reasoning...]

Ok. Reached the conclusion. The 12 hours time exit will remain in place - I was thinking of placing a take profit at the next pivot level, but why cut my profits when they're likely to increase for the next 12 hours? On the other hand, there's no reason why I shouldn't cut my potential losses, because if I am wrong I stand to lose 2000 dollars each time I enter and stay in a trade for 12 hours. Therefore I will introduce a change to my, not-so-discretionary, at this point, system:

NEW OVERSTRETCHED METHOD

ENTRIES:
Set up a month of hourly candles with pivots on EUR FOREX
Enter long/short at 8 AM/PM CET based on these principles:

These requirements MUST be met:
1) overstretched in ticks (>100 ticks top-bottom)
2) overstretched in hours (>24 hours going up or >12 hours going down)

At least 1 of these 2 requirements must be met:
1) pivots (near pivot level)
2) reversal pattern (increasingly shorter legs, do not enter after a tall candle)


EXITS:
1) Stoploss at half a pivot level (e.g.: half the distance from P to R1, from P to S1, from S1 to S2) higher/lower (for shorts/longs) than the pivot above/below your entry.
2) Close position after 12 hours, and enter the next trade (unless the requirements are not met).

 

[Yamato]

This system is not a discretionary method any more but has become a manual system, and only because pivots are very very hard to implement and backtest.

I believe that by introducing the stoplosses I have reduced the losses from a potential 200 ticks (coming home and finding I am losing 2500 dollars would be unbearable) to just 40 ticks (500 dollars loss), and have decreased very little the efficiency of the system. After all, if my system is good, I should not have such false signals as to see my stoploss reached and then see the price come back to what would have been a profitable trade. I will miss a few trades because of the stoploss but so few to make it convenient to use it.

My objective is to achieve losses of 40 ticks with those stoplosses going off once every 5 times, and achieving 200 ticks when they don't go off (or less). 80% wins and 5 to 1 ratio, if it were always like this. But of course I won't always make 200 ticks when I guess the market correctly. Sometimes I will only make 40 ticks, but on average I'd predict that I'll win 4 out of 5 times, and have average wins of 100 ticks and average losses of 40 ticks.

That sounds very very good, too good, and even unrealistic for someone who has lost money with discretionary trading for 12 years, but the fact is that this has nothing to do with my discretionary trading which is characterised first of all by impatience. The cadence of this system (operating every 12 hours) deals perfectly with my impatience. The clarity of the rules takes care of the rest of my discretionary problems and in fact as i said this is a manually executed system, with univocal rules, and not a discretionary method, which choices that are up to your discretion.

 

[Yamato]

Speaking of discretionary, and univocal... I just went over my latest ovestretched system's version and noticed there's something which is NOT univocal at all:

reversal pattern (increasingly shorter legs, do not enter after a tall candle)

I will modify my system again, to enforce compulsory pivots (it will make me miss a few trades unfortunately), and get rid of that discretionary part about reversal pattern.

NEW OVERSTRETCHED METHOD

ENTRIES:
Set up a month of hourly candles with pivots on EUR FOREX
Enter long/short at 8 AM/PM CET based on these 3 requirements:

1) overstretched in ticks (>100 ticks top-bottom)
2) overstretched in hours (>24 hours going up or >12 hours going down)
3) pivots (near pivot line)

EXITS:
1) Stoploss at half a pivot level away
2) Close position after 12 hours, and enter the next trade (unless the requirements are not met).

 

[Yamato]

FEEDBACK
Hello, readers. I see your names on the bottom of this page: some of you are reading the journal for hours. Which parts are you liking best?

1. the discretionary compulsive gambling fever posts when I am out of control and swear at the market
2. the research I do about brokers, technical ideas, posting links and tables
3. the music videos and links I post
4. the movie videos and links I post
5. the talking about family issues, and psychology
6. the discussing of automated trading systems (and the posts while I test them on tradestation)
7. the discussion of manual trading systems like the "overstretched method" or the "delusional method", which have nothing to do with my compulsive gambling even though both entail manual execution of trades

Just write the numbers. You don't have to motivate. Write me a post with just, for example, "2, 5 and 7".

 

[Yamato]

FIRST TRADE: -1000 SO FAR

My first trade is looking really bad. I am losing more than 1000 dollars. It's the one I told you about this morning. This loss would have been avoided had I used the stoploss I wrote about.



I went short at R1 and now we're beyond R2.



Everything is looking bad, but I have set good bases for the future. This system is good. This is the way to go. I have to stick to this.

 

[Yamato]

More details on my overstretched system

After all the talking about the requirement of going up for >24 hours and going down for >12 hours, we must absolutely define what we mean by that.

ENTRIES:
Set up a month of hourly candles with pivots on EUR FOREX
Enter long/short at 8 AM/PM CET based on these 3 requirements:
1) overstretched in ticks (>100 ticks top-bottom)
2) overstretched in hours (>24 hours going up or >12 hours going down)
3) pivots (near pivot line)

EXITS:
1) Stoploss at half a pivot level away
2) Close position after 12 hours, and enter the next trade (unless the requirements are not met).

To do so, we first of all need a definition of top and bottom. Hopefully a univocal one. Because otherwise we'll be like when we talk about trendlines, whereby you can adapt them with hindsight.

Also, I am feeling the need for this, because I was wondering whether today I followed the requirements of my ever-changing system.

Did we have >24 hours of going up?

It's simple: we have to count 24 candles from the bottom. But then again what is the bottom? I know the 24 candles are there, because I just counted them, but I need a univocal way of counting them. I need to define what it is that I just did.

WHAT IS THE BOTTOM?
Bottom is, much like easylanguage defines it, the lowest low of x periods, but it is NOT just that, at least in the sense I want to define it. In my case, since I want it to go up for 24 hours, and down for 12 hours at least, then it must be the lowest low of the last 12 hourly periods/candles all right, but that's not enough. Because in the past 12 hours we could be going up 5 hours and then down 7 hours and we'd be at the lowest low of the last 12 periods, but we wouldn't be going down for 12 straight hours, which is exactly what I need to try and define univocally. Both in order to later test it, and in order to not fool myself with hindsight.

So, how do we define 12 hours of straight falling (and therefore bottom), rather than the lowest low of the last 12 hours? We could easily say that requiring all those 12 candles to have lower closes is a guarantee of bottom, and that is correct. But it would be too strict of a requirement, and it would happen too rarely. This is one of the reasons that I could never backtest this system properly. Because I never got down to defining this concept.

Ok, solved. I don't need to worry about how the 12 hours evolved, because I also have the >100 ticks requirement. So this thing comes out to be like this:

NEW OVERSTRETCHED METHOD
Set up a month of hourly candles with pivots on EUR FOREX

LONG ENTRY:
If at 8 AM/PM CET:
1) we're >100 ticks lower than at 8 PM/AM CET, and
2) we're close to a pivot line
Then enter LONG

SHORT ENTRY:
If at 8 AM/PM CET:
1) we're >100 ticks higher than at 8 AM/PM CET, and
2) we're close to a pivot line
Then enter SHORT

EXITS:
1) Stoploss at half a pivot level away
2) Close position after 12 hours

Now, before backtesting this thing I still need to find out very very strict definitions of pivots. Because i've explained how pivots on futures do not work, and yet I only have futures data. So I am screwed to begin with. And even if I had the good forex data, it'd be a real pain in the ass to test with two data sets. Bottom line: I will probably never backtest this thing.

 

[Yamato]

Ok. It's coming down. Hopefully I'll have enough time to at least recover from my huge loss of 2000. Yes, because in the meanwhile I've tripled my contracts. The system was good. Only I didn't follow it. Besides, I've changed and improved it after i made my trade, so i couldn't have followed it. Now it has a stoploss. This morning it did not.



Now it could easily fall back to S2, in less than one hour. Then I'd almost be breaking even, which would be something to celebrate. But time is ripe for a long 12-hour fall. However, once I'll break even, I'll only keep 1 contract open.

 

[Yamato]

I CAN'T TRADE BECAUSE I DO NOT RESPECT MONEY

Well, I am going for my usual bath. So I cannot do damage to my account for about an hour.

Hey. If it doesn't happen and today it doesn't go my way, I'll get below 6k, or something like that. That sucks big time. I can't even remember how I achieved that. It's pretty amazing though. Congratulations to my other self on tricking me so well.

Losing 2500 right now.

I don't know... I am not even worried any more. You see: after all in all these months, I've improved my systems greatly. Yes: I didn't make a buck. I am always stuck at the money I began with. Or a bit less even. But I got all the computers, all the infrastructure... everything is ready.

I just can't seem to take off, because of a mix of impatience and undercapitalization. But thanks to this undercapitalization I am still around. If I had been given what I needed say... even just 6 months ago, I wouldn't have been ready and I would have lost it all. And then I would have had to quit forever, burdened by debts. But i was never given any capital (except a few thousands by my dad a couple of times). And a few thousands by two colleagues who asked me (i never asked them) and I lost everything they gave me in less than a month. But that's not money I owe to anyone, obviously.

So my point is that you have to reach the big capital all by yourself, because having a small capital protects you from disaster. How do you know if you are not ready to trade a big capital? Simple: you never reach it. If you reach it, you are ready. If you don't reach it, you're not ready. So no one should start with anything more than the margin needed to trade 1 future contract.

That's all. Obviously I wasn't ready. It's a real tough endeavour for me and my psychological characteristics. I am not mad, I am not even praying any more for my trades that are losing 1000s. I am ok. I am not ready, that's all. When I'll be ready, if ever, it will happen.

I mean: the systems are ready, but I am not ready to trade them. I am not ready to handle capital basically. Essentially because I do not respect money. And that sums it all up.

 

[Yamato]

Ok, guess what. It wasn't coming down and it hit a new high. Which qualifies it as a... (I didn't define univocally "top" and "bottom" yet but it may as well be the fact that any falls in a rise last less than 6 hours - it's similar to measuring drawdown in systems)... 34-hour long rise.

Another interesting thing to say is that forex (but it won't make a difference) is using EST timezone on InteractiveBrokers' TWS.

In life like in trading, whenever i think i have an intuition, i start lecturing about it and say "this is how things are...", and with life i can get away with it... but with trading I don't. So probably i am wrong in life as well, but the only one where i pay an immediate penalty is trading. I mean: you can't just see that pivots or something worked all last week, and say "they always work" and "things always go like this". It's terrible how my conceit is costing me in the markets, and I never even realized how conceited i was.

And now I can say this so modestly only because i am losing. If this same postion will go my way, in a minute, i'll forget about everything i said, and feel like i am god again.

 

[Yamato]

I started this journal saying how great my systems were and how proud i was. Now i'm writing in every post how much i suck. Not that i'll end my journal here because i have an endless need to write and this place is just perfect, because of the readers and because of the great software and its customization (settings chosen and so, because this software is the same as elitetrader.com but the forum is better, for the settings chosen), which makes it better than any other forum i've ever visited.

So, I was saying. I am not threatening or promising to end the journal. I am just noticing how I evolved from bragging almost to saying I suck. What's next?

I do not think i will blow out my account, even though i am close to it. In the past two years I've blown out a few accounts before, but not as often as i risked it. For example, i've gotten from 10k to 6k at least 3 times in the past 6 months, but i always recovered, sometimes especially thanks to my desperate discretionary trades, which were definitely the ones that got me to 6k in the first place.

So I think I'll recover, and if I won't, I'll just add a few more thousands from my other account. But the problem of course is not getting beyond 15k. That's my real problem.

It almost seems like the more I have, the more i can waste, and therefore always go back to 10k, which feels just right. And partly it might be like that. For example, if tonight i get down to 6k, I won't be placing any stupid trades for a while.

It may also be something in my anti-conformistic nature that makes me go against the trend each time and lose each time. I never went with the crowd, i never followed fashion, and if something or someone is fashionable i'll avoid them.

No more writing for a few minutes.

[...seconds...]

I feel like I should watch more tv. Why do i have to waste my time stressing out about my trades, especially if I just lose from them? I know why. Because, as I said before, a relaxed life is something i am not used to. I am craving the stress. I am craving losing.

Not exactly. I crave the emotional roller-coaster that i feel when i can't take anything for granted, but i certainly would like to make money rather than lose it. But the emotional rollercoaster is definitely the fun part. The thrill.

 

[Yamato]

Wow, what's happening... I am losing 4400 dollars right now. After all, I might have to reconsider the statement that I wouldn't blow out my account. But I do deserve to blow it out: my prediction was so wrong, and my system, in the version used this morning (with no stoploss), was so so bad... hey... no problem. I've blown out my accounts 30 times before.

 

[Yamato]

Wow, made a profit of 900 dollars in a few minutes... went from a loss of 4400 to a loss of 3500. CONGRATULATIONS to myself. Eh eh...!

Anyway, for anyone caring, here's my last version of the system with the changes in red:

OVERSTRETCHED METHOD
Set up a month of hourly candles with pivots on EUR FOREX

If at 8 AM/PM CET:
1) we're >150 ticks lower than at 8 PM/AM CET, and
2) we're close to a pivot line
Then enter LONG

If at 8 AM/PM CET:
1) we're >150 ticks higher than at 8 AM/PM CET, and
2) we're close to a pivot line
Then enter SHORT

EXITS:
1) Stoploss at half a pivot level away
2) Close position after 12 hours

-----

But if anyone wants to really make money.... follow my trades on this journal and do the exact opposite. You'd have made 6000 in less than a week, with a small capital invested.

Seriously, i am consistently unprofitable and with just a few trades. It's easy to be unprofitable by blowing away money on commissions and spread. But I manage to lose everything with just a few trades.

 

[Yamato]

Ok, my trade is lost, and I'm going to be at about 5k for now.

No big deal. I am not going to kill myself.

So, let's go over my system again. It's pretty clear to me by now that I've been fighting the trend forever, so I'll fix it somehow. I've got to fix it, because my systems won't take me back to 10k even if i let them run for a whole year. And I don't want to wire more money.

So I'll devise a system that doesn't fight the trend during the day, when the trend is most likely to continue. It will fight it after 9 PM, when it's likely to reverse. My favorite activity has to wait until 9 PM. 9 AM is a reversal time as well, but it doesn't matter because I won't be there. I'll have to work for a while the way things are going.

Pivots will be used. But i want to simplify it a bit. Here it goes:

[... thinking...]

WITH TREND METHOD (between 4 PM and 9 PM CET)
ENTRIES
GO LONG/SHORT if day's green/red and price goes through pivot levels

EXITS
bracket order of 40 ticks


AGAINST TREND METHOD (between 9 PM and 11 PM CET)
ENTRIES
GO LONG/SHORT if price >150 ticks lower/higher than previous top/bottom and we touch a pivot line

EXITS
1) Stoploss at half a pivot level away
2) Close position at 8 AM

 

[Yamato]

Ok, everyone. I am ready for the challenge. From 5k to 10k with this method. In just a week. Ok, deal.

 

[Yamato]

I am starting tonight. I am definitely short on this mother ****er here. I definitely do not see any pivots lines, so I will not use any stoplosses. This thing can only go down.

I will make 1000 on this trade. I'll close it tomorrow morning before going to work. Then I'll only have 4k to go.

 

[Yamato]

This is going to be such an easy win. This is what I am talking about when i use the word "overstretched"! Check it out:



An easy 1000 dollars is coming my way. I won't even have to slouch at the screen anymore.

 

[Yamato]

Ok. I am going to bed. I've worked enough for today. Or rather - I'll go watch tv. I've worked enough today, documenting my losses live for the entertainment of everyone, and of myself, too, in a few months, when I'll have figured out everything on how to be profitable, and I'll come back to read what a fool I was. All right, goodnight. Goodnight to the 2 invisible members reading me and to the unregistered guest, too.

It's funny, now everyone is turning to invisible mode, because when I see people reading the journal for hours I write them private messages and ask them for feedback.

 

[Yamato]

Despite everything I said, I do feel a bit like Johnny Fontane in this clip:

 

[Yamato]

Ok, look, sorry to come back after i said i was leaving.

I wanted to note this: the position is losing, despite all the rise it had made. However, look at this: it's not rising much more (it lost 100 dollars). This is what happens at night. It's tired from running all day, it rests, and then it reverses. It almost always happens. But guess what: I almost always enter early and manage to lose rather than win money. "Sitting tight", just like Jesse Livermore said, that's what I am missing. I may be tightass but I don't sit tight.