My journey to long term consistency

[DrSafari]

Real account
Did another trade. First the technicals and then my comments I made sure to make a screenshot when the position was still open as to not lose information. I'm getting better and better at the process of keeping a journal

Short Ved
Amount: 200 shares
Reason of closure: stop loss reached
Opening rate: 493,29
Opening time:21/10/2015 3:01:13 PM

Initial stop loss: 510.12
Amount risked: €45,78

Close rate: 505,76
Close time: 23/10/2015 9:06:30 AM
Net P/L: € -34,26

Current equity: € 4.640,32

I have mixed feelings with this trade. The chart looked nice enough and as soon as I got in it was going in my direction indeed. At some point I was €+25 positive. Not a big amount but also not THAT small if you're risking €45. However, you have to let a winning trade run so that's why I kept it. Raising the stop loss above zero to always make profits would take me out in no time due to market noise so that's not good either so I just raised it to around €-20 instead of €-45, keeping the same distance in points as originally.

However today right after the market opened it gapped up and the position got closed leaving me with a loss of €34,26. A difference of around €60 if I had taken the profits. You can always close the position and re-enter later if things are still going that way but in this case due to spread I would lose €7-8 each time. Not a small amount if your profit level is only €25.

In the end I did decide to keep it open because lately I had the feeling I was closing my positions too soon instead of letting them run (even though in retrospect they have been good decisions). I think I just need more experience in order to "know" or have a good feel for when to close a position and when to keep it running. Maybe I will find out that sometimes you have huge rallies (up or down) and can make up for a lot of small losses and more by holding on to a position. On the other hand, always make sure you keep in mind the economic events and any possible major news events which might influence it.

You win some and you lose some of course, this can't be avoided. But it doesn't feel good to let profits turn into loss.

 

[options-george]

Howdy!
I just skim-read a couple of your posts. Great work on keeping up your journal!

A couple of questions:
-How come your transaction costs (your spreads) are so high?
- Have you thought about how much that could eat into your bottom line (you can assess this by developing an expectancy model for your strategy, and then varying the transaction costs)?
- How much backtesting have you done on your strategy thus far? You might be able to progress a lot faster in terms of figuring out the viability of your strategy by engaging in more backtesting, rather than by taking one trade at a time in a live setting. By backtesting I mean either in Excel or in a simulated environment such as ForexTester.

Just recently the reality of the importance of testing has smacked me in the face once again, so I thought I share that "insight" with you.

Good luck & have a nice weekend!

 

[DrSafari]

A couple of questions:
-How come your transaction costs (your spreads) are so high?

Bad broker I guess. I'm using plus500 and while at first when I was new to trading it seemed a good one cause they have no transaction costs but of course I had no idea the spread was so high.. didn't even know spread existed. I am in the process of switching though.

- Have you thought about how much that could eat into your bottom line (you can assess this by developing an expectancy model for your strategy, and then varying the transaction costs)?

I have thought about it but never put anything on paper. Anyway the costs are too high so the plan to switch broker is definite.

- How much backtesting have you done on your strategy thus far? You might be able to progress a lot faster in terms of figuring out the viability of your strategy by engaging in more backtesting, rather than by taking one trade at a time in a live setting. By backtesting I mean either in Excel or in a simulated environment such as ForexTester.

I have been using it since january.. but adapted it as I was going along since I gained more and more knowledge (basics are still the same though). I am already fairly sure it's a good strategy but before I commit more money to it I want to be 100% sure. I have not yet made an analysis of my results but I have the feeling I am making money with it. The times I lost money was when I deviated from my system. I will also look into the ForexTester thingy thanks!

 

[DrSafari]

Demo account
Finally got around to starting testing a tweaked version of the previous system. I threw away all 15 stocks on my watchlist and replaced them by 15 new ones. System in itself is the same the only thing I added on to it is to look for cleaner charts like I do in my real account system. The interesting thing I noticed was that when I saw a clean chart the indicators in the system usually (90% of cases) would allow me to put that stock in the watchlist too. So unconciously I have been using part of this system with my real trades too.. because apparently what I call a clean chart is more or less saying the same as looking at the indicators... but this statement is not true the other way around. So this system is stricter than the previous one. We'll see how it works out.

Real account
I'm not in any trades at the moment. I'll analyse the European Economic Sentiment Indicators tonight so i'll have a watchlist ready for November

 

[DrSafari]

Real account
Analysed the European Economic Sentiment Indicators generating 22 trading ideas (some long some short). Next I look at the charts of those and if they look good I take up a position. Two suitable charts out of those yesterday so I went long two times, both were losers unfortunately. One trade (Ca) was not that good of a trade, the entry point wasn't that good. I'm not sure what my "logic" was for ignoring that. I think it's because in my demo account it's exactly that what I'm trying to do, get a good entry point, but that tactic has only worked once out of 7-8 trades that's why I dismissed the bad entry point remark (all in my head of course). But of course it's a different system so I'm comparing apples and oranges so I should NOT ignore obvious bad entry points ever.

Second trade (Kon) was nothing wrong with but just went south as soon as I took a long position. I'll write that one off as an inevitable loser.

Long Kon
Amount: 50 shares
Reason of closure: stop loss reached
Opening rate: 26.87
Opening time: 11/9/2015 11:29:49 AM

Amount risked: around €55

Close rate: 25.65
Close time: 11/10/2015 9:06:34 AM
Net P/L: € -61.38

Chart is a 30 min chart. Green is Open. Red is close. Orange line is stop loss.


I will document the bad entry point Ca trade as well in a next post.

 

[timsk]

. . . Second trade (Kon) was nothing wrong with but just went south as soon as I took a long position. I'll write that one off as an inevitable loser.

. . . Chart is a 30 min chart. Green is Open. Red is close. Orange line is stop loss.
View attachment 205386

Hi DrSafari,
If you've tested your entries and your records indicate the trade has a positive expectancy - then that's all that matters. However, looking at your chart, your entry is pretty unconventional (which may well be a good thing rather than a bad thing of course) . . .

1. Your entry is noticeably above your MA line which many traders would interpret as being an indication of poor value and, if anything, look for an opportunity to short rather than to buy. Or at least to wait for price to pull back to a more advantageous level.
2. Your entry is right into an area of resistance where many traders would look for an opportunity to short rather than to buy.

Had you bought when price was at or below the MA and below the upcoming resistance area, you'd have given yourself a little more room for manoeuvre to see if it burst through resistance or bounced off of it. If the latter, (as turned out to be the case), then you'd have an opportunity to close out for a smaller loss or, even, near break even.

All of the above is easy to say with the benefit of hindsight. As I say, if you were aware of these things at the time and it's part of a deliberate strategy to think differently to other traders - and your testing backs up your theories - then completely ignore these comments!
Tim.

 

[DrSafari]

Hi DrSafari,
If you've tested your entries and your records indicate the trade has a positive expectancy - then that's all that matters. However, looking at your chart, your entry is pretty unconventional (which may well be a good thing rather than a bad thing of course) . . .

1. Your entry is noticeably above your MA line which many traders would interpret as being an indication of poor value and, if anything, look for an opportunity to short rather than to buy. Or at least to wait for price to pull back to a more advantageous level.
2. Your entry is right into an area of resistance where many traders would look for an opportunity to short rather than to buy.

Had you bought when price was at or below the MA and below the upcoming resistance area, you'd have given yourself a little more room for manoeuvre to see if it burst through resistance or bounced off of it. If the latter, (as turned out to be the case), then you'd have an opportunity to close out for a smaller loss or, even, near break even.

All of the above is easy to say with the benefit of hindsight. As I say, if you were aware of these things at the time and it's part of a deliberate strategy to think differently to other traders - and your testing backs up your theories - then completely ignore these comments!
Tim.

I see what you mean. I think I'm going to wait for a better level in the future indeed. I think the reason I am neglecting this is because that's exactly what I've been doing in my demo account (choosing good entry points that is) and it's not working out so well atm. Of course this probably has other reasons and it's more of a subconscious decision so it makes no sense to think this way. But that's why I have this journal so I can detect these things and correct accordingly. After I finish this post I am immediately going to write down step by step my system (not in my journal though) including choosing good entry points. It's in my head and not that complicated but I think it will help me to have it written out because I keep adding more and more things.

I will soon post the other trade where I chose an even worse entry point

 

[timsk]

. . . but I think it will help me to have it written out because I keep adding more and more things. . . .

Hi DrSafari,
Having it written out is really useful - essential some would say - as you've then got a checklist to tick off each required condition prior to your entry. By the same token, when conducting a trade post mortem, you can look to see how well (or not) each entry conformed to your checklist.

Regarding adding more things, I'd advise against this. The more complex you make it, the harder it will be to execute. The likelihood is that you'll either overlook one of your conditions or say "to hell with it, I've got 80% of 'em - that's good enough". The problem with the latter is that over a large sample of trades, most of the conditions will both be present and absent, so you won't know which ones are 'working' and which ones are 'failing'.
Tim.

 

[DrSafari]

Regarding adding more things, I'd advise against this. The more complex you make it, the harder it will be to execute. The likelihood is that you'll either overlook one of your conditions or say "to hell with it, I've got 80% of 'em - that's good enough". The problem with the latter is that over a large sample of trades, most of the conditions will both be present and absent, so you won't know which ones are 'working' and which ones are 'failing'.
Tim.

I've read this before but how can one learn if you cannot integrate the things you learn? I get that you shouldn't add a ton of indicators or shouldn't think that some new indicator will finally 180 degrees flip your results. It's not that I have THAT many things added on, and most of them are pretty basic for traders. I'll explain a bit my evolution to make it more clear.

At first (Februari this year) I just analysed the European Economic Sentiment indicators (EESI) and the stocks that came out of that I usually picked to take positions in. I didn't really care too much about the chart although I looked at it I never had any rules as when I could take a position or not, I'd just decide it on a whim. I put stop losses but I never heard of proper risk management and the likes.

Then I started looking at the charts more closely and only chose those with a trend that agreed with the EESI. Still no sign of proper risk management though.

Then I learned that a good risk/reward ratio was 1:3 and that you should let winning trades run but cut off losing trades so I started taking that into account.

Then I learned to adapt my position size according to the amount of money that is at risk (stop loss) and to maximum only risk 2% of my equity per trade (stuff I learned on this forum)

And finally the thing I want to add now is look for a better entry point. It's not that I'm trying to look at 20 different indicators to align in order to execute a trade. Just trying to optimize the current system and so far I have seen a positive evolution of the system by doing that.

Do you still advise against this? I'm a bit confused about all of the information I am getting.

 

[timsk]

. . . Do you still advise against this? I'm a bit confused about all of the information I am getting.

Hi DrSafari,
For sure, this can be a very confusing business. One way to make it less so is to compartmentalize all the various elements. In your post above, you've either alluded to - or made direct reference to - pretty well the whole trading process . . .

1. Filtering suitable stocks.
2. Defining a setup.
3. Entry and exit criteria.
4. Risk and money management.

My comments in the previous two posts relate specifically to #3 - your entry (and exit) criteria - nothing else. For the reasons already stated, I suggest you keep this as simple as possible, but also because you'll have to test each individual component to satisfy yourself that, more often than not, each one delivers the desired result. Each component being a price pattern, indicator or a reaction to a trend line or support / resistance etc.

I hope that adds a little clarity! I don't mean to confuse and, if this is the end result, please ignore my comments. Most importantly, don't assume because I've been at this a tad longer than you that I'm better at it than you. It doesn't work that way. Follow your own nose and don't be distracted by posts from the likes of me - unless you want to be that is.


Tim.

 

[DrSafari]

Hi DrSafari,
For sure, this can be a very confusing business. One way to make it less so is to compartmentalize all the various elements. In your post above, you've either alluded to - or made direct reference to - pretty well the whole trading process . . .

1. Filtering suitable stocks.
2. Defining a setup.
3. Entry and exit criteria.
4. Risk and money management.

...

Okay I got it, I will keep it simple. But right now I didn't really take the entry point into account too much (apart from massive peaks and the likes). I have noticed in the past my timing on my entries could be better so I think it would be useful to take this more into account.

Thanks for the help!

 

[DrSafari]

Real account
As promised here is the second trade. I know it's a bad one. If I keep making these mistakes there's no way I can become consistent. But that's why I'm still using "small" money and practising. It's just a super bad entry point, nothing more to add to that. But to keep this journal honest I must also post these embarrasing mistakes.

Long Ca
100 Shares
Reason of closure: stop loss reached
Opening rate: 34.69
Opening time:11/9/2015 11:46:39 AM

Amount risked: around € 91

Close rate: 33.72
Close time:11/9/2015 4:22:33 PM
Net P/L: € -97.00

Chart is a 30 min chart. Green is entry, Red is exit, orange is stop loss.


Current equity: € 4,481.94

 

[DrSafari]

Real account

Short Tes
1000 Shares
Reason of closure: Safeguarding profits/not wanting to hold over weekend
Opening rate: 172.38
Opening time: 11/12/2015 2:52:03 PM

Close rate: 168.12
Close time: 11/13/2015 4:22:28 PM

Amount risked: around € 90

Net P/L: € 60.30

Will re-enter the position on monday if trend seems to continue. By re-entering instead of holding the position I will lose around €5 because of spread but that's worth not having the risk for me.

Current equity: € 4,542.48


Demo account
Another loser and currently there are 6 orders open. If I have the time I will post the technicals.

 

[DrSafari]

It's been a while since I updated. I haven't been sitting still though. Not much action on my real account. Only one trade which I closed with minimal loss. I closed it before my stop loss because I saw it was going south. It went down further so maybe good that I did.

Long Kon
100 Shares
Reason of closure: saw it going south and didn't want to await my stop loss
Opening rate: 25.97
Opening time:11/20/2015 1:28:14 PM

Close rate: 25.86
Close time: 11/24/2015 1:09:13 PM

Amount risked: around € 45
Net P/L: €-13.96

Current equity: €4,528.52

Oh yeah, forgot to mention. Everything is done for my account with a new broker and I deposited €100 just to try it out. I'm also looking for a good demo account to test Mr. Charts rising/fallings candles day trading method. Can't do it with plus500 due to the spread. And on the other broker there is no demo option and transaction costs are too big to be trading with only €100. Need something with a direct market access demo. I found one but it seems really slow and seems like I can only place limit orders instead of market orders which is annoying.


Demo Account
Two losing trades with the new method. Currently holding 5 positions of which 4 are making profits. This altered version seems to be doing better than the previous one.. but that's no surprise really. Could become a valid strategy. Only need to get a good feel for when to exit these trades and of course keep testing if it will be consistent. Keeping records for this on a separate sheet. I'm looking for a way to keep some basic records. I will probably just post the profit and losses and some comments with them for the demo account.

 

[DrSafari]

Real Account
I have 23 stocks on my watchlist for December. Only one suitable trade came out with my system so far.

Short TD
500 Shares
Reason of closure: reeling in profits, major economic events about to happen so don't want to take that risk
Opening rate: 33.55
Opening time:12/9/2015 9:54:55 AM

Close rate: 32.32
Close time: 12/16/2015 9:58:27 AM

Amount risked: around € 58.97
Net P/L: €83.98

Chart
Green line is where I opened the position. Red line is where my adjusted stop loss was and purple line (at the bottom) was position at time of closure at the end of the chart. Right after I closed it went up by a lot, excellent timing


Current equity: €4,612.50

 

[DrSafari]

Real Account
Another trade around 10 days ago. It was a small loss.

Long Conw
200 Shares
Reason of closure: adjusted stop loss got hit. I raised the stop loss because it was making some profit at some time
Opening rate: 13.71
Opening time:12/18/2015 10:11:42 AM


Close rate: 13.55
Close time: 12/21/2015 5:00:01 PM
Amount risked: initially €46 at 13.48
Net P/L: €-34.34

 

[DrSafari]

Real Account
Another trade I opened two days ago. I hit my profit marge I aimed at which is pretty good obviously.

Long Eli
200 Shares
Reason of closure: I had set a target and it suddenly gapped up which made me sell it. Didn't reallly mean for that to happen but can't complain either. After that it went down again but it probably will go up a bit over the course of the next few days but we'll see.
Opening rate: 34.61
Opening time:12/28/2015 12:37:13 PM


Close rate: 35.34
Close time: 12/30/2015 9:07:46 AM
Amount risked: I seem to recall it was €66
Net P/L: €142.05

Charts
Opened where the screenshot starts and closed at the end of the screenshot


This is the longer term hourly chart. Open position at the green line. Closed at the end of the chart.




Current equity: €4,720.21

 

[DrSafari]

Real Account
Took a while to get started again cause I have a new job and I didnt have a personal workstation yet etc etc. Anyway I did my ESI analysis and around 26 stocks came out if it that I will monitor. Two charts passed my technical parameters and I placed orders for them yesterday. They got filled today. One is around break even, the other one I already sold with profit, details below.

Short Rex
250 Shares
Reason of closure: Made a nice profit and didnt want to hold over the weekend. Opening rate: 10,46
Opening time:1/15/2016 9:21:45 AM

Close rate: 10,16
Close time: 1/15/2016 4:07:12 PM
Amount risked: € 95
Net P/L: €75


Demo Account
Consistently losing there so I am going to abort this system and look for something new. Time to take my trading to the next level but because of trading taxes in belgium I have to use CFD's. On the other hand I want to move away from plus500 if I want to go day trading american stocks. Perhaps I will use my current sytem (;ostly the technical side then) on american stocks too... I will have to brainstorm about this. That's on my TODO list.

 

[DrSafari]

Real Account
Did another trade parrallel with the first one. Did hold it over the weekend because it was losing a bit. Seems a bad call. Stop loss seemed a little too tight cause afterwards it went down again but that is the name of the game, will post charts when I have time.

Short PP
20 Shares
Reason of closure: Stop loss reached
Opening rate: 139.85
Opening time:1/15/2016 11:42:30 AM

Close rate: 143.07
Close time:1/18/2016 9:05:20 AM
Amount risked: ~€ 64
Net P/L: €64.40


Current equity: €4.731,65

 

[DrSafari]

Demo account
Using the technical side of my current real money system on US stocks as of today 21st of January, this just as a reference. Will now also post the results of my demo account here.