My journey to long term consistency

[DrSafari]

Demo account

Short Discovery Communications
580 Shares
Reason of closure: trailing SL got hit

Opening rate: 25.21
Opening time: 7/27/2016 6:32 PM

Close rate: 25.35
Close time: 7/27/2016 8:28 PM

Amount risked: ~ € 120 (did not log cause was on other pc)
Initial SL: /

Spread: 7 pips


Net P/L: €‪-73.77‬


Chart
Green arrow is where I opened position and red arrow is where it got closed. Chart is a 15 min chart.




Context
S&P500 and most stocks were down

Personal notes
Non working trade... #2 of the day. Hmmm the setup is not that good though. The candles arent high enough, of course I did not specify in my system so maybe I should. The three green candles you see later in the chart is a much better example of the setup. Another strange thing is... The stop should have been triggered at 25.23 but instead it closed at 25.35. Did I make a mistake entering the trailing SL?? If it would have closed at 25.23 I would have a small profit instead of a medium loss.

 

[DrSafari]

Demo account

Short Finisar
1000 Shares
Reason of closure: trailing SL got hit

Opening rate: 18.93
Opening time: 7/27/2016 6:37 PM

Close rate: 19.09
Close time: 7/27/2016 9:05 PM

Amount risked: ~ € 135 (did not log cause was on other pc)
Initial SL: /

Spread: 5 pips


Net P/L: €‪-144.84‬


Chart
Green arrow is where I opened position and red arrow is where it got closed. Chart is a 15 min chart.




Context
S&P500 and most stocks were down

Personal notes
Non working trade... #3 of the day. Close price seems to add up, 3 pips more than it should be but okay could be that I made the stop 3 pips wider. Those 3 pips is probably the difference between losing 144 instead of the risked 135 (if I remember well). Yeah not much more to say... will backtest again this time taking screenshots, taking note of the spread etc etc.... more work but apparently its needed.

 

[DrSafari]

Okaaay this explains a lot, you cannot just backtest more or less on plain sight and hoping things will average out. It's very clear to me now why my demo results differ so much from my expected results with my first back test.

So I started backtesting again but really looking where each candle opened/closed taking into account the high/lows and the spread and where I would have placed my stop loss and the amount of pips I would win or lose. I stopped after 10 setups because the results now much more resemble my demo account results as my first backtesting did. 8 out of 10 trades are losers, 1 wins a bit but is virtually break-even and the other is a small win (barely more than the spread). These are terrible results so I did not bother to continue.

I have an idea for a new setup though so I will define clear parameters and backtest this in the same manner I did now. I was frustrated a little bit when seeing my demo trade results but now I am kind of excited to go through this whole process. This really forces me to be exact and understand EXACTLY what is happening. I have already learned a lot and I am sure I will learn a ton by really taking this serious

I probably wont trade anymore this week. By the time I come up with a new plan and backtest it, it will probably be next week.

 

[DrSafari]

Analysing my data from the backtesting I have come up with the following strategy. It seems like this could be a winning strategy, the only difficult part will be to define the point where I have to take the position. Right now I need 3 5min bars in the right direction but I dont know this for sure since that is data I didn't collect with backtesting. I do think I have enough info to make a plan and start implementing it. I can still tweak those parameters if it proves necessary.

The gist is that I look for gaps and then take advantage of the move that happens if they get filled.

Plan Demo Account:


1) Find potential trades

• Look at 15 min charts. 15 mins after the opening of the market (so from 15:45 till 16:00 local time) look for stocks that have a gap of at least 1% and put them in my favourites
• After 16:00 switch to a 5 min chart and watch the stocks in your favourites.
• If there are at least three 5min bars going into the opposite direction of the gap, open a position.
• If more than half the gap has already been filled in those 3 times 5 min than don't do anything.
• Ignore stocks with a price lower than 15.

2) Taking positions

• I will put the SL above/below the previous high/low +/- the spread.
• I will not take a position anymore two hours after market opens.
• I am not going to risk more than 2 % on each trade.
• I am not going to risk more than 6 % in total positions.

3) Once in a position

• Make it a trailing stop loss
• Once the trade reaches 75% profit of amount risked move the SL to break even.
• Once the trade reaches 100% profit of amount risked move the SL to 50% profit (of what was the SL)
• Exit when stop loss hits OR if a high expected volatility economic event is going to occur
• Do not hold over the night.
• Document every trade carefully in journal (with charts) saying what you did and what I should have done

Let's go!!!

 

[DrSafari]

REAL ACCOUNT

Short Ant
1300 Shares
Reason of closure: stop loss got hit

Opening rate: 491.4
Opening time: 8/2/2016 10:35 AM

Close rate: 497.75
Close time: 8/2/2016 12:06 PM

Amount risked: around € 97


Net P/L: €‪-97.55‬


Chart
Green arrow is where I opened position and red arrow is where it got closed. Chart is a 15 min chart.




Context
Most of the market was red.

Current Equity: € 5 069.61


Personal notes
Sigh. This is exactly why I want a mechanical system. Position started going against me as soon as I opened at 10:30am. I noticed there were the European Producer Price Index figures coming out at 11:00am though. Normally risk averse as I am lately I atleast wait until after to enter a position. This time I didn't and I paid for it. Why didn't I? Last couple trades were break even or very small losses due to limiting risk and I think this played a factor in my decision to take the trade anyway. The figures were bullish so this did not help my position. I hoped the rise would be temporary (due to the figures) so I held on to the position but it went through my stop loss. Quite a few losing trades now on my real account but a drawback like this was bound to happen as there were also winning streaks in my equity curve. I will post an example of my real account equity curve over time next.

 

[DrSafari]

As promised, the equity curve:

 

[DrSafari]

Small adaptations to the plan just to make it a bit more clear

Plan Demo Account:


1) Find potential trades

• Look at 15 min charts. Between 5 to 15 mins after the opening of the market look for stocks that have a gap of at least 1% and put them in my favourites
• After 15:45 switch to a 5 min chart and watch the stocks in your favourites.
• If there are at least three consecutive 5min bars with a higher high going into the opposite direction of the gap, open a position.
  [*] If there is one or two 5 min bar that fills more than 20% of the gap, open a position
• If more than half the gap has already been filled than don't do anything.
• Ignore stocks with a price lower than 15.

2) Taking positions

• I will put the SL above/below the previous high/low +/- the spread.
• I will not take a position anymore two hours after market opens.
• I am not going to risk more than 2 % on each trade.
• I am not going to risk more than 6 % in total positions.

3) Once in a position

• Make it a trailing stop loss
• Once the trade reaches 75% profit of amount risked move the SL to break even.
• Once the trade reaches 100% profit of amount risked move the SL to 50% profit (of what was the SL)
• Exit when stop loss hits OR if a high expected volatility economic event is going to occur
• Do not hold over the night.
• Document every trade carefully in journal (with charts) saying what you did and what I should have done

 

[DrSafari]

Demo account

Long Coconut Phillips
400 Shares
Reason of closure: trailing SL got hit

Opening rate: 40.16
Opening time: 8/1/2016 4:12 PM

Close rate: 39.66
Close time: 8/1/2016 5:35 PM

Amount risked: € 107
Initial SL: 30 pips (I made a mistake and had to widen the SL afterwards to more than 30 pips which resulted in a bigger loss than the 107 risked so I am going to count 110 as amount lost while in reality it was more)

Spread: 14 pips


Net P/L: €‪-107


Chart
Green arrow is where I opened position and red arrow is where it got closed. Chart is a 5 min chart.




Context
S&P500 and most stocks were down

Personal notes
The three times 5 min bars were there, although the last one had a higher high, the close was lower again so it's not what I would call a clean example. I am in the process of reading several books about trading and one of the things that always comes back is being selective on which trades to take. I notice the same thing for my real account. Lately I have been less selective and my results are getting worse. After one of my losing streaks I was very selective and only took a trade if everything looked perfect... my results were great for some time. I believe this is one of the most important things in trading. I need to adopt the mentality to rather err on the side of being too selective than to err on the side of being not selective enough.

 

[DrSafari]

Demo account

Long CONSOL Energy
350 Shares
Reason of closure: adjusted trailing SL got hit

Opening rate: 19.11
Opening time: 8/1/2016 4:08 PM

Close rate: 19.11
Close time: 8/1/2016 6:08 PM

Amount risked: € 90.88
Initial SL: 29 pips
Spread: 5 pips


Net P/L: € ‪0


Chart
Green arrow is where I opened position and red arrow is where it got closed. Chart is a 5 min chart.




Context
S&P500 and most stocks were down

Personal notes
Again an example of a trade I probably shouldn't have taken. About half the gap was filled but in accordance with the principle of to err on the side of being too selective I should not have taken it when in doubt. Trade worked for me in the beginning so I tightened the SL and then it got me stopped out at break even.

 

[DrSafari]

Demo account

Short Golar
500 Shares
Reason of closure: adjusted trailing SL got hit

Opening rate: 16.88
Opening time: 8/2/2016 4:10 PM

Close rate: 16.46
Close time: 8/2/2016 5:21 PM

Amount risked: around € 110
Initial SL: not logged
Spread: 7 pips


Net P/L: +€‪187.07‬


Chart
Green arrow is where I opened position and red arrow is where it got closed. Chart is a 5 min chart.




Context
bearish

Personal notes
Should have taken it at 16:00 or 16:05, 16:10 was a bit too late cause it was around half way the gap already. Timing will be the tricky part obviously with this strategy.

 

[DrSafari]

Demo account

Short HollyFrontier
300 Shares
Reason of closure: trailing SL got hit

Opening rate: 25.32
Opening time: 8/2/2016 3:55 PM

Close rate: 25.57
Close time: 8/2/2016 5:28 PM

Amount risked: around € 110 nothing logged
Initial SL: not logged
Spread: 14 pips


Net P/L: €‪-66.81‬


Chart
Green arrow is where I opened position and red arrow is where it got closed. Chart is a 5 min chart.




Context
bearish


Personal notes
Went in the good direction but not long enough. Got stopped out at a loss

 

[DrSafari]

Demo account

Long Michael Kors
150 Shares
Reason of closure: adjusted trailing SL got hit

Opening rate: 48.33
Opening time: 8/3/2016 3:44 PM

Close rate: 48.28
Close time: 8/3/2016 4:13 PM

Amount risked: € 100.62 nothing logged
Initial SL: 75 pips
Spread: 15 pips


Net P/L: €‪-6.72‬


Chart
Green arrow is where I opened position and red arrow is where it got closed. Chart is a 5 min chart.



Context
S&P500 rose throughout the day.


Personal notes
The difficulty in this strategy is where to put the stop loss (isn't it always?). Anyway this trade is break even because I adjusted the SL because it did not seem to move much anyway anymore and thus the trade became more a gamble than using the strategy. This is not really defined in my strategy but I still need to find a strategy where I can best put my SL. Below the low of the gap is too wide. I think a better level would be the low of the first 5m bars that are my indicator to get into the position. Now they are way too wide and like this it's difficult to make more profit than 1R. Which means you need to be right A LOT of the times

 

[DrSafari]

Demo account

Long Splunk
200 Shares
Reason of closure: adjusted trailing SL got hit (but something went wrong)

Opening rate: 59.28
Opening time: 8/3/2016 3:46 PM

Close rate: 58.86
Close time: 8/3/2016 4:16 PM

Amount risked: € 107.31
Initial SL: 60 pips
Spread: 10 pips


Net P/L: €‪-75.21‬


Chart
Green arrow is where I opened position and red arrow is where it got closed. Chart is a 5 min chart.



Context
S&P500 rose throughout the day.


Personal notes
Got stopped out at a loss of 75 but somewhere something went wrong because I expected it to get stopped out at 45 or something because I narrowed the SL just like I did with the Micheal Kors trade.

Anyway much more interesting is that the gap slowly got filled after all throughout the day. If you do place the stop loss below the low of the gap (at the orange line), you have to keep it that wide and let the trade run. I would have had 1.5 R profit in that case (atlthought it went slightly below the low of the gap so there was a chance of even getting stopped out after all). The strategy I talked about in previous post would mean I got stopped out earlier here, but in many cases I could make 3-4-5-x R in case the gap gets filled. Still I think the latter is favourable, I dont think this particular instance will happen that much.

 

[DrSafari]

Demo account

Long Urban Outfitters
200 Shares
Reason of closure: adjusted trailing SL got hit (but something went wrong)

Opening rate: 28.3
Opening time: 8/3/2016 3:42 PM

Close rate: 28.77
Close time: 8/3/2016 4:19 PM

Amount risked: € 84.08
Initial SL: 47 pips
Spread: 8 pips


Net P/L: +€‪‪84.18‬


Chart
Green arrow is where I opened position and red arrow is where it got closed. Chart is a 5 min chart.




Context
S&P500 rose throughout the day.


Personal notes
I drew the second arrow on the chart because I got in near the bottom of that bar. I got in because of the rule that more than 20% of the gap had already been filled. After I reached 1R profit I tightened the stop loss and I got stopped out. I probably tightened it a bit too much, although there came a drawdown later which would have stopped me out in case of a wider SL too. All in all, good trade, could have been more if narrower SL as discussed two posts ago.

 

[DrSafari]

Demo account

Okay my new adaptation seems worthless. I made three bad trades yesterday using it, not something to draw conclusions from but I am going to do it anyway. Now that I thought about it with a clear mind it makes sense, near opening there is a lot of volatility, if you use tight stops you are almost always gonna get stopped out prematurely. Two out of three of the trades would have been profitable with the "old" system, and one of them very profitable. I will only post the charts of these trades since they do not count towards the system last posted here.

5m charts, orange line is SL

Obviously too narrow a SL... to be fair I did intend for it to be higher and I was surprised I was stopped out at this level, something went wrong in the execution somewhere.



This is cringeworthy. In my last batch of trades I made about 2R profit. I thought that was an anomaly and that at best I can expect 1R profit, this again proves otherwise. This would have come close to 3R profit ... provided I did not put my SL too tight as is obviously the case here. WTF was I thinking with this? Oh well, thats why we test.



This is the only trade that was an actual loser. Lets say this one and the first one cancle eachother out. Would have a profit of 3R instead of a loss of 3R like I have now. Big difference !

 

[DrSafari]

I have not given up I was on a holiday again but I am back! A lot has happened meanwhile, in my mind that is.

#1
Since I started manual backtesting the idea crossed my mind to automate this. Manual backtesting still has the disadvantage of not being 100% objective. Even if you try your very best it is not guaranteed that you are indeed 100% objective due to your subconscious steering you a certain way. And since I am a programmer it seems the logical thing to do (and it's less work once you have it programmed).

My main concern was to get a hold of intraday data. I knew you could get daily data for free but obviously for my shorter term trading plans I need intraday data. But I have found a service that provides this. It's a paid service but there is a free 15 day trial which also already has to option to export the data I need (I may end up paying for it anyway because there are more options and it looks like it is a very decent tool).

So I am going to make work of programming my own back testing tool. There are probably tools out there but I prefer to make my own so I know exactly what it does and it doesn't cost me any money. I like to program so that's not the issue. The difficulty will lie in programming it in such a way that it is really generic and that I can re use it entering different parameters for different systems.


#2
I remember when I first started demo trading I made a tremendous profit. I doubled my account in 2 months. Of course I was taking too much risk because it got blown up later but I thought to myself what if I do that same thing I was doing with better risk management? Could that be a valid strategy? I looked back at those logs but I can only conclude that it was luck. I was going long all the time and when I look at the weekly S&P500 chart of around that time it was indeed going up steadily. I had more than 10 consecutive winning trades, of which some were really big. I remember thinking this was easy . So my timing to go long was very good and the reason all my trades were winners was that I held them long enough to eventually make a profit (general trend was going up anyway). I was able to do this by putting wide SL's risking around 1/4th of my account on each trade.

Of course this streak ended when the general market stopped going up and I lost most of my demo account. I had forgot to put a SL so got a margin call so I was still under the impression I got that **** down. Interesting thing is that my recollection of what happened at that time does not match the actual trades I can see in the log at all. I thought there was some sort of a system I was using that I could now re-use with my increased knowledge. However, I made the most profits by just entering positions which "felt" good. It was nothign but luck.

After thinking I got this **** down I started trading with real money. I deposited 9000 € in my trading account and made 1000 € the first 10 minutes on my first trade. I remember the emotional rush quite well. But soon the losses starting to stack up more and more and at some point my account was down to around 3500. By some other high risk trades that turned out good I was able to win 1000 back and around that time I joined this forum starting with around 4500. Since then almost a year ago I have turned it into 5069 (was 5250 but july and august were bad months)

Erm, I seriously digressed here, the main point was that my tremendous gains were luck and I can't use it to devise a new system

I did two more trades with my current gap system which turned out slightly in the negative (will post details later). I will continue to manually test it in real time until my back testing tool is ready and then I can objectively see if it could be a valid strategy or not.

That's all, market is about to open now

 

[DrSafari]

My broker just notified me that they are not offering leveraged CFD's anymore for Belgian customers due to some law change. I can still trade but all instruments are without leverage now. Meaning I have to take a position with my entire deposited funds. Even then if I place my stop loss at same technical levels it means I only can risk 1/3 of my usual risk. So can't do multiple trades at the same time anymore and can't make enough profit with only 1 trade.

Even with the leverage I could not make enough on my real account with my current real account system. That being said, it is probably for the best. I was trading stocks at 1/20 leverage and although I avoided holding overnight it did happen. And sooner or later you will lose everything if you are into a position that takes a dramatic hit. This is worst case scenario but if you are continuously trading it is bound to happen at some point. Of course a solution would be not to hold it overnight anymore (In case I find another leveraged CFD broker) but I am not sure how succesful my system would be without holding overnight. I do not have enough data yet to be fairly sure of this, although I probably can get a fair idea. I will put that on my to do list.

I also was playing with the idea of doing a few "safe" longer term investments because my cash is just sitting in my bank account doing nothing anyway. But that would mean a large amount of my cash would not be available to me to trade on shorter term which would rule out option nr 4 of the options listed below.

Bottom line these are my options:

1 Either find a good daygame strategy and find a leveraged CFD broker
2 Continue real account strategy on current broeker without leverage (have to put a lot more cash into the account then, which I am not willing to do with my current broker)
3 Find a leveraged broker and use real account system (IF proven profitable by not holding overnight)
4 Find a non leveraged trustworthy CFD broker to put more cash in and continue to use real account system


I think it comes down to this:
1) I can either use all my cash to safely invest longer term and continue to develop a good daygame strategy on demo accounts and backtesting etc.

-Disadvantage:
-My cash may be stuck for a long time and that may suck if I find a profitable day trading strategy
-No experience in longer term investments (but this should not be rocket science.)
-No practise trading real money anymore
-Not one of my goals, I need to eventually be trading for a living

-Advantage:
-Possibly a more sure source of income (albeit probably not that much)


2) Or I can use all my cash into a trustworthy non leveraged CFD broker and continue real account strategy (I estimate a bit less profit) and continiue to develop a daytrading strategy on my demo account

-Disadvantage:
-Possibly I'll make less profits than option nr 1 if I continue to make profit at all.
-No cash left anymore to invest longer term.

-Advantage:
-I keep practising to trade with real money.



3) On the condition if real account strategy is profitable when not holding overnight --> use leveraged CFD broker with current real account strategy not holding overnight. And continue to deveop daytrading strategy of course.


I prefer nr 3 but if not possible I think I am more for approach nr 2 as it is more aligned with my goals. Meanwhile I still have to continue my day job of course. In order to increase my income I will become a freelance developer after this project is done. I did a rough calculation and my net income minus all taxes and costs will be more than double of my current. Of course you have more risk but that's an alley I am all too well familiar with meanwhile

Ill have to let this sink in a bit.




TODO
* Find out if real account strategy is profitable when not holding overnight.
* Make a decision

 

[DrSafari]

Demo account

Long Splunk
200 Shares
Reason of closure: stop loss got hit

Opening rate: 64.28
Opening time: 8/16/2016 3:47 PM

Close rate: 63.74
Close time: 8/16/2016 4:53 PM

Amount risked: around € 95
Initial SL: /
Spread: 10 pips


Net P/L: €‪-95.87‬


Chart
Green arrow is where I opened position and red arrow is where it got closed. Chart is a 5 min chart.



Context
/


Personal notes
Would have made a small profit end of day but of course you have to place your SL somewhere and price went quite a bit under the max gap value. This is a losing trade.

 

[DrSafari]

Demo account

Long Wall Mart
200 Shares
Reason of closure: closed position due to end of day

Opening rate: 72.75
Opening time: 8/16/2016 3:49 PM

Close rate: 72.94
Close time: 8/16/2016 9:44 PM

Amount risked: € 111
Initial SL: at 72.14
Spread: 15 pips


Net P/L: +€‪33.69‬


Chart
Green arrow is where I opened position and red arrow is where it got closed. Chart is a 5 min chart.




Context
/


Personal notes
Too small a profit to make up for the losses, but sometimes a stock gloses the gap and goes way beyond but haven't been able to catch one of those yet. I'm in the minus right now but not massively so not writing off this strategy yet. Continue testing.

 

[DrSafari]

Demo account

Long Barrick Gold
225 Shares
Reason of closure: stop loss got hit

Opening rate: 21.05
Opening time: 8/17/2016 3:55 PM

Close rate: 20.76
Close time: 8/17/2016 4:18 PM

Amount risked: € 57 (did not have enough margin for risking 100 because I was holding two other trades)
Initial SL: /
Spread: 3 pips


Net P/L: €‪-57.92‬


Chart
Green arrow is where I opened position and red arrow is where it got closed. Chart is a 5 min chart.




Context
/


Personal notes
Non working trade, another strategy is the reverse of my current one. It crossed my mind many times and it might be more valuable. This is to take a position along with the gap in case price moves a certain percentage beyond the gap. So that would mean in this case to go short at the position where I got now stopped out and using a tigher SL.