The Trading Journey of Lurker

[lurkerlurker]

Trading Summary, 22 May 2007

Placeholder for my trading summary.

Please remember that I must do this, assess my trading today, read and understand all the helpful messages and web links I have been given, and reply to messages posted by other traders. This will take some time. I will get back to you all individually - your feedback is important to me. Once again, I am touched and humbled by the level of respect, patience, and tolerance I have been shown.

I am 62 pips down for today - to add insult to injury the market "came back" to a better position than my worst entry of the day, a short which by accident I closed at the top. I've made two trading errors today, an error being defined as something I didn't actually intend to do. Once was selling instead of buying (which was when I attempted to close my 45 short at 55, and instead doubled my position). By the time I realised what I had done, I covered the second position at a 10 pip loss and then just couldn't cover the remaining position, given that my daily loss limit had been exceeded, my mental stop was 55 and the market was now higher than 65, and I had taken an unexpected £10 loss from a mistaken trade. The second error came about when I had a buy market order ticket open. I hit execute instead of cancel, near the top of the move.

Trades follow:


Instruments: DJIA.
Platform: SpreadBetting (CMC)
Trades Executed:

DJIA //CMC don't give statements until after midnight the same day, so this is manually transcribed from MM. If anyone knows of a better way, please mention it - otherwise pardon my slowness.
Buy 13,552 15:08:39
Sell 13,533 15:19:44
Buy 13,544 15:28:56
Sell 13,537 15:51:48
Sell 13,550 16:31:02
Buy 13,350 16:02:13 //I am enriching my broker. When I refine my plan, there is a new rule going in: "no breakeven exits, except when you have moved your stop to breakeven in accordance with rules, and are stopped out". This manual cover (cause: chicken****), plus one later in the day (cause: chicken****), cost me over 50 potential pips.
Buy 13,535 17:02:13
Sell 13,543 17:32:45 //A profit!!
Sell 13,545 17:43:28 //A silly short to take - the beginning of my serious problems - I was under my loss limit for the day before this trade went wrong - bear with me about my definition of wrong

Sell 13,555 17:54:55 //This was an accident - I tried to cover on a market order, sold instead of bought in my haste. Pet peeve: bookies who set "minimum" stop losses - I couldn't set a SL for this price, the best I could get was 57, so I decided to "set doors to manual"
Buy 13,565 17:55:31 //Yes, I'm not too quick on the uptake. Nor did I have the sense to cover my entire position. I just reversed the mistaken trade. At this point, I was out 20 pips more than expected. Panic set in, and I was unable to act.
Buy 13,580 18:50:40 //Accident. For all of you calling bull**** at this point, go back and read my timestamped non edited posts on the Dow 2007 stage about the resistance around 85. I was actually threatening to average down, remember. This is exactly what I was moving to do. My pre-filled-in order ticket needed cancelling so I could place another sell order. Well, I hit process (not back) instead, and bought a high. Sickening.
Sell 13,575 18:58:53
Buy 13,574 19:33:17 //The one that got away. I've attached todays chart anyway (no indicators though). If anyone can find any reason (and there certainly isn't one in my published plan) to cover a short at this price, I'd be eternally grateful. I'm chalking it up to fear / panic / general lack of confidence in my trades after such a bad day. I'll take responsibility for intentionally covering though, because that was what I did.

Net result: -62 pips.

Each trade, step by step (recollection aided by scribbled notes, and postings on Dow 2007 thread)

Trade One
First off, I missed long signals because of a misguided "no trades before 3pm (London)" rule. It has been suggested that this is silly. Modification to strategy: I will not trade the open, however the rest is discretionary. I am permitted to trade at 2:40 (or a little before) if I see an entry.

First trade of the day, a misguided long from 52 (no clear entry signal). I say it best here, at 15:20.

Stopped out -19.

Resistance wasn't broken. Gamble trade. I wonder am I self destructive?

I then observe

What am I doing. Why did I go long there. Why didn't I take the +4 the market offered me when it was clear resistance wasn't going to be broken. I now need to make almost 20 pips just to break even.

This set a further negative thought pattern of "needing to make X pips". Giving myself an unrealistic target reinforced negative self talk that I would end the day down.

Trade Two
Long from 13,544. The entry was by the book. The exit, however, should have been at 41 (DEMA cross), not later on when I finally realised it wasn't going anywhere. Account down £26 for the day. Feeling pretty gloomy. Strangely enough, I am finding myself worrying about a loss of an insignificant sum. I think this is more to do with what failure at trading represents, rather than the actual loss. I am sure if I had lost 26 pence with FinSpreads I would still feel gloomy. I need to work on that. Since this sum was within my daily loss limit (£30), I was quite prepared to lose it.

Trade Three
Good short entry at 50. Near enough strong resistance, and I waited for confirmation. See that little gravestone doji on the attached 1 minute, four bars later? The top of this is what scared me into covering at a break even. Consider how risk adverse I had become by this point. Refusal to accept the possibility of another loss. There was no other reason to exit that trade. For fun, the bottom of that move was 25, and it was obvious the move was over at 32. Lets call that +18 left on the table due to the above mistake. As an aside, I believe strongly in assessing the consequences of a bad decision, as well as the decision itself. We have a fixed quantity for losing trades. For pips left on the table for reasons such as these, I'll pencil in an "opportunity cost", if you will, in the amount that would have been gained if I had followed the system. Again, the chart is attached, and those of you with charting systems can stick the DEMAs on and see the system exit at 32.

Trade Four
Long from 535. Entry by the book, according to the system. Firewalker has pointed out that there were numerous long signals at this price during the day. This was one I actually took! I talked in my strategy post earlier about defining zones, and I think that should be repeated.

Examine the 5 minute chart to determine support and resistance levels and
confirm trend. Establish a "zone" where you would consider buying (ie around
support). Consider stop loss levels and profit targets.

I should have been fully aware that another buy signal at this price is significant. I should have further realised the market was offering me another change to capitalise on what had been a missed opportunity. I exited this trade at 17:32. See the 1 min candle? It looked a wee bit bearish to me, and I was anxious to lock in my first profit of the day. Note no signal was given to exit (according to my system).

Trade Five
This is where things went badly wrong. Comments above in trade summary say it all. I had intended to stop this at -10, and when that went pear shaped, I intended to hold, shorting again around 80 if a sell signal was given. Usually I dont add to a losing position, but as my stop was missed (see above) and I had an additional expense of an erroneous unintended trade, I thought I would make an exception. Instead I covered instead of cancelling the buy ticket. Two very costly mistakes

Trade SIx
This one had the potential to make everything right. Textbook short, and I think I should get some kudos for calling it correctly, if that sort of thing counts for anything. My previous experiences didn't stop me from jumping on board this low risk, high upside trade. I had calculated risk / reward as 2:1. Target was 45, stop was 90. I was good to go. Then I chickened out on a minor pullback, for +1, because I wanted to call it a day.

Referring to firewalkers admonitions against overtrading ("consider what you would have if you held X position as you were supposed to), I'm pencilling in a missed profit of 35, not including potential pyramiding sometime after 2m, 3m, 5m, 10m, 15m and head and shoulders confirmations.

Okay, so what do I take from this. First, the following rules of my plan were broken

• Maximum daily loss (accidental, but broken, and I continued to trade)
• Maximum loss per trade of 10 pips (broken by first trade, subsequent trades)
• Limit overtrading - if losing, limit to three trades
• Exit rules (I frequently exited for emotional reasons: fear, greed, indecision, lack of confidence, panic)
• Being aware of price "zones"
• Averaging down - I had intended to do this at 80, and only a mistake stopped me*

In short, there are two problems here. Failure to stick to the plan and follow the rules is one. All but one losing trade (if I am counting right) was entered or exited on a rule break. Second, the flat or winning trades would have been much better if I had obeyed the exit rules. The second problem relates to the frequency of trading. I can see three good trades the system made today. The short from 13550 at 16:30 ish. That held until 32 (system exit) would have been good. The second good trade was the second opportunity to go long from 35. The third trade was obviously the short from 75. Those three trades had especially strong entry signals, and did not trigger a genuine exit signal until significant profits (>+15) had accrued. When I covered these trades, I did so prematurely without adequate cause.

This post is rather long, and I believe it is necessary to stop it somewhere. This is the end of my daily review. To follow; replies to those who have commented, followed by a revised strategy which I aim to adhere to without question.

*The massive profits that would have been generated by this move (no loss for the 45 short as the market came back, plus the difference between 80 and 20, plus the difference between 45 and 20, for a total of +85) in no way justify this attempt.

 

[jacinto]

Why the hell change to indicators if you think they are rubbish?!

why use indicators to begin with? that is something I dont understand.

anyway, if you must use indicators, fine, use them. but dont forget to focus on what is the key indicator in your chart: price

j

 

[Priceman]

//CMC don't give statements until after midnight the same day, so this is manually transcribed from MM. If anyone knows of a better way, please mention it - otherwise pardon my slowness.

What about the blotters buttons at the top lurker; you can chose current/pending/all/executed and select the dates you want to see. Or are you using them and then retyping what's on your screen? You can do a screenshot as you would with posting a chart...

Hope this is helpful

 

[lurkerlurker]

What about the blotters buttons at the top lurker; you can chose current/pending/all/executed and select the dates you want to see. Or are you using them and then retyping what's on your screen? You can do a screenshot as you would with posting a chart...

Hope this is helpful

I am using them and retyping what they say. No copy and paste function on the blotters. I can copy and paste the emailed HTML report if I wanted to wait until 1am. I suppose it would be quicker for me to do a screenshot (and redact the sensitive information). I found it quicker to just type them today, but that is something to bear in mind. I note that the "client report" function in MM doesn't let you get the current day statement until 1am.

Bear with me, I'm about 15 mins away from finishing my journal, and then I'll post replies to individuals.

 

[jacinto]

Lurker,

I have tried to think about the best thing to say. I really dont want to write something that tells you what to do, or what not to do, since, at the end of the day, it will really be up to you to decide. Anyway, instead, I will post several questions, and will answer some of them the way I would answer them myself.

1) I have a plan, do I follow it? Edit: how effective is your method is a different matter...see Edit note below
2) My plan has rules, do I break them?
yes, at times.
3) When I break rules, is there any sort of "enforcement of discipline"
yes. depending on the rule broken, enforcement goes from no trading during the day, to no trading during the week.
4) Do I have a set # of losing trades i can take? yes, if i get 2 losing trades in a row, i take a break. if i have a third losing trade, i stop for the day. if i have 2 losing days in a row, i take 1 day break. etc.
5) Do I have a % of capital I am willing to put at risk in one day (this is related to rule4)? yes. going beyond it implies that "rule enforcement" in rule 4 applies immediately and stop trading for the day.

whenever the "no more trades" applies, I go and have a think of what i am doing wrong.

Basically, there is a need to enforce self control.

1) never chase a profit you missed
2) never chase a loss

I dont know what is worse
a) the feeling of a loss
b) to have entered a trade, and let profit go.


anyway, just writing thoughts. I am not trying to write an essay, or recomendations. just some points to think about. I may be extremely wrong about what I am writing, but at the moment think it is a sensible thing to think of.

take care, and do take a break tomorrow.

j

Edit: The fact that your plan incorporates a method is crucial. If the method is good or not, that is a different matter. Only backtesting or forward testing will say. the key thing is self control and discipline. Firewalker has actually made this point. He is spot on.

 

[lurkerlurker]

Replies to some helpful comments

The purpose of this post is to respond to the comments other have made. Following this post, I will post my revised strategy, complete with contingencies. I will ensure that I am comfortable with the new strategy. For each rule, I will consider under which circumstances I would wish to break the rule and why. Then if I decide to keep the rule, I will have no excuses for rationalising to break it during trading.

Comments have been flooding in all day, so the following are addressed in no particular order or preference.

Hook Shot suggests that instead of "having to trade" every time I get a signal, I should consider only taking high probability trades. Retrospectively, my first system posted here omitted this important factor. In fact, having a system generate so many signals has exacerbated my overtrading, despite "reducing overtrading" being stated as an objective in the development of the system. I am most grateful to Hook Shot for pointing this out. A major oversight on my part. A new system will have strict rules to calculate trades with a "high probability of a strong directional move". This will be quantified by risk/reward, stop loss positioning, price level where signal was given (relative to S/R, daily ranges), and the types of entry signal given. When this is finalised, it will go in the strategy.

Covered flat on attempted upside breakout.

...

Watching it fall to 40, I'll admit it was a panic exit.

Lurkerlurker comments that I make panic exits. This will be addressed in the new system.

The problem with days like this is that I lose my trust in my own judgement, which leads to me exiting trades prematurely, at either breakeven or loss. For example, I'm worrying about this long. My reasons were sound enough, and I have confirmation on the 2 and 3 minute charts, my system rules haven't been breached, but here I am thinking of covering my long at +2. Luckily I'm not swayed by the bearish sentiment of others, or I'd be running for the exit right now.

Another pearl of wisdom.

Hate to say this ll, but that there is an engulfing bullish candle just appeared on the 5 min chart. Personally I wouldn't trust shorting this yet, but good luck anyway.
Still in that range too.

Tricks was right. Unfortunately, when I tried to cover at -10, I accidentally sold instead of bought. But that has been mentioned before.

I'm only short from 45. Breakeven is quite near. I'll cover if it takes out the high at 85.

Eeek. Just realised that would be a 40 pip loss. I cocked up the planning of this one good and proper, and then mistakenly sold more (I covered as soon as I realised my mistake, for -10). I'm only short £1pp from 45, but I'm feeling the pressure considering my miserable track record.

More of the same.

lurker,

think any feedback or comments from my end should be in your journal. I can only tell you one thing right now:

now you are in a trade. it is under water. you have a stop. when and if it is hit, go out for a walk. leave it alone. forget about it. dont trade again.

dont trade tomorrow. use the time to think.

all the best.

j

I did exactly what jacinto suggested, or so I thought. Very good advice. I interpreted it as "dont trade again today after this one is covered or stopped out". I'd like to think now that what he meant was "go for a walk now, and if your stop is hit when you get back, don't trade". The stop was never hit, so I think jacinto's advice would have led to me coming back to see a gain of 55 points at Market On Close. (and therefore a net loss of -7 vs -62).

LL, take it easy mate, have a day off, you still seem to be chasing the trade and perhaps overtrading.

I'm taking tomorrow off, good advice.

You'll regret it.

Why not stick to your original plan which I thought was very good.

Re-read it and stick to it tomorrow. Outline your max loss you are prepared to accept and go with it.

I agree with most of the advice here. Set you SL and Limit and go off and cut the grass or something.

To join you if it's any consolation, I still feel this market is going down. 13500 or 13400+ regions at least. If it's not today it's tomorrow. My plan was to trade one way or another at least once with max 25 pip SL. Did that went away and came back and walked away again.

Also, try trading something else. Doing well on gold and fx today. Some markets are different and respond differently too. At the end of the day it's just technics... I'm up on the day despite the loss on the DOW. If one thing isn't working try something a little different.

You are displaying obsessive tendencies. A little like Lord of the Rings if I may suggest . The ring is dominating you and if you don't throw your obsession into the fire you will wither away.

Why not trade the NASDAQ. On CMC you have less margin and less risk?

Good trading all.

Atilla - "re read it and stick to it tomorrow" - I think I will take the day off.

I appreciate your kind words about my plan. The changes to it will be minor and will assist me in following the rules. Don't worry, it will be similar enough.

The obsessive tenancies - that ties in with the overtrading. Both can be controlled in the same way. As far as other markets goes, I was planning the Dax for the morning session before the Dow. I'll consider that if I backtest and my trading plan applies to it as well as the Dow. At the moment, I am struggling to wrap my arms around this market, so would prefer to stay focused at least this week. Perhaps Dax next week.

No worries, you hang in there.
As Atilla pointed out, I see little reason to change your system.
If you haven't followed your rules and didn't trade according to your system, you can't tell whether it's working or not.

I'm not changing my system by that much. I have acknowledged the fact I am not following it, and I know why. The modifications will improve that somewhat.

FW, agree with your statement: the old adage applies, plan the plan, trade the plan.

LL if you can get into that mindset, I have seen you change your plan to many times, state what your going to do, and then do something totally different. With all due respect, you really need to sort this out, otherwise you will consistently struggle and probably lose more than you make, sorry to be blunt.

I hope you sort it out, i'm sure between us all, we can point you in the right direction, and good luck

Kindest regards


Robert

May I take this opportunity to apologise to all who have tried to point me in the right direction so far, when I have just gone against all my rules. The changing of the rules on this occasion will not be substantial. Thank you for your kind words.

Trade tomorrow. Set you rules and stick with it.

I'll consider it. Depends on what my plan says. If I trade, it will most likely be on paper.

Keep going Lurker, what you don't realise is although the learning curve hurts it'll be worth it. It'll start clicking in place soon, keep going even if its in tiny amounts most people would have given up by now.

Although I don't comment much on these boards I do read them alot and you have alot of good input and could one day be a legend.

One day your journal may be in paper back !

I will take those comments to heart. I have £375 remaining in my account which I don't really need. I'll trade for as long as I can keep that. I have so much tied up in wanting to succeed at this, for my own reasons, that I will most likely take extra special care of that £375 and try my best not to lose it - I think throwing more money at this would be foolish if I can't keep that, so losing that effectively bars me from trading for the foreseeable future.

As for finally being published...that gave me a little chuckle (though I think that is unrealistic to say the least!) If I am ever that successful that someone would want to publish my early writings, I'd probably take what one could call the Bruce Kovner attitude. (...'Kovner sent me a charming e-mail titled “There must be a better topic.” The body of the note, which was all in lowercase, contained a hint of flirtation. He had been racking his brains to think of better articles for me. “The 900th piece on The Donald or something about vampy conservative commentators—anyone, pls, but me!”...')

 

[shortorlong]

bad luck Lurker,
you had a bad day,
I am not really qualified to give advice on trading since I tried it myself and had many days just like you had today.

One thing you can do though, is stop looking at the chart and counting the potential points you missed. This a) just makes you feel bad and b) is not a realistic outcome.

The dow was horrible today .. only a couple of modest moves which were long enough to collect points in. It traded sideways until after five pm uk time .. not nice.

btw CMC have a four point spread on the dow .. correct? .. that is awful I would not trade it. ( since I know I can get 1 point spread on the ftse with capitalspreads)
you could get a one point spread on the dow with twowayfutures.com that would make life much easier.
good luck for next time ..

 

[lurkerlurker]

Lurker,

I have tried to think about the best thing to say. I really dont want to write something that tells you what to do, or what not to do, since, at the end of the day, it will really be up to you to decide. Anyway, instead, I will post several questions, and will answer some of them the way I would answer them myself.

Here is something some of you may find amusing. With the exception of about a 40 minute break for dinner (Chinese delivery), I have been spending the time since I stopped trading (around 4 hours) replying to messages posted or PM'ed from various T2W members! I am completely humbled not only by the volume of feedback, but by the consideration given to the very wording of some posts. I am equally impressed by the quality of the advice. Anyway, back to your comments jacinto.

1) I have a plan, do I follow it? Edit: how effective is your method is a different matter...see Edit note below
2) My plan has rules, do I break them?
yes, at times.
3) When I break rules, is there any sort of "enforcement of discipline"
yes. depending on the rule broken, enforcement goes from no trading during the day, to no trading during the week.
4) Do I have a set # of losing trades i can take? yes, if i get 2 losing trades in a row, i take a break. if i have a third losing trade, i stop for the day. if i have 2 losing days in a row, i take 1 day break. etc.
5) Do I have a % of capital I am willing to put at risk in one day (this is related to rule4)? yes. going beyond it implies that "rule enforcement" in rule 4 applies immediately and stop trading for the day.

whenever the "no more trades" applies, I go and have a think of what i am doing wrong.

Basically, there is a need to enforce self control.

1) never chase a profit you missed
2) never chase a loss

Your above points will be addressed in my next post, either in a few hours or tomorrow morning, which is to contain my complete system.

I dont know what is worse
a) the feeling of a loss
b) to have entered a trade, and let profit go.

All the books I have read, and all the self talk, and I still can't seem to have an emotionless loss (whether the reaction be large or small). I have emotionless profits now (probably because they are small). However, I was more flippant about a 30 point loss at £4pp the other week than I am today about a £62 loss. I think participation in these boards creates an expectation of accountablity. I think this means my trading psychology is improving.

anyway, just writing thoughts. I am not trying to write an essay, or recomendations. just some points to think about. I may be extremely wrong about what I am writing, but at the moment think it is a sensible thing to think of.

take care, and do take a break tomorrow.

j

Edit: The fact that your plan incorporates a method is crucial. If the method is good or not, that is a different matter. Only backtesting or forward testing will say. the key thing is self control and discipline. Firewalker has actually made this point. He is spot on.

As for the break - conflicting advice on that one, but as you say I'll need to make my own mind up. I'll see how I feel tomorrow.

As for writing thoughts - this little quote from Trading for a Living by Dr Elder Alexander (pg 259 in my edition) has been running through my head all day.

Institutional traders as a group tend to be more successful than private traders. They owe it to their bosses, who enforce discipline. If a trader loses more than his limit on a single trade, he is fired for insubordination. If he loses his monthly limit, his trading privileges are suspended for the rest of the month and he becomes a gofer, fetching other traders coffee.​

I do not expect traders in an online community to enforce discipline. However, due to the help I have received, I feel accountable to you all, to endeavour to do my best, to follow the rules I have set myself, and to explain my shortcomings and poor discipline when necessary. This expectation of accountability should assist me in sticking to my plan in the future.

 

[jacinto]

lurker,

the system does not allow me to give you kudos at the moment, says i have to spread them around.

however, kudos to you for an honest and open self assessment. that will open the path.

keep it going.

all the best.

j

 

[lurkerlurker]

Welcome, and thanks!

bad luck Lurker,
you had a bad day,
I am not really qualified to give advice on trading since I tried it myself and had many days just like you had today.

There is good advice and bad advice. Even that distinction is subjective. There is no qualification to give advice - your input is appreciated. I can choose to consider your advice or ignore it - there is no need to apologise in advance for trying to be helpful. Your comments are most welcome.

One thing you can do though, is stop looking at the chart and counting the potential points you missed. This a) just makes you feel bad and b) is not a realistic outcome.

The reason I did this is because I was trying to use a mechanical system to determine fixed entries and exits. If you see my system posted earlier in the thread, you will note that there are "exit conditions". Such conditions do not include fear, greed, or simply having a change of heart. They are measured conditions, which would have yielded the results outlined above if they had been adhered to. I do however appreciate your sentiments - I am not intending to make myself feel worse. On the contrary, anybody can read my system, look at the charts, and determine for themselves where an exit was given. If you do this yourself, I am sure you will agree that my exits were premature and not signalled by the system, and in which case it is quite valid for me to acknowledge that.

The dow was horrible today .. only a couple of modest moves which were long enough to collect points in. It traded sideways until after five pm uk time .. not nice.

Yes, it was pretty horrible. Absolutely horrible. Even the traders who profited would agree that there have been better days.

btw CMC have a four point spread on the dow .. correct? .. that is awful I would not trade it.

I have just moved from TradIndex, who had a 5 point spread on the daily Dow contract. The 4 is easier to overcome, however I do agree that it is difficult. I used to trade the FTSE at a 2 point spread, but it is a slow market these days. I am looking into trading the Dax in the mornings before the Dow, also with a 2 point spread. The volatility makes that a viable alternative to the Dow spreadwise.

you could get a one point spread on the dow with twowayfutures.com that would make life much easier.
good luck for next time ..

Another trader mentioned that on the Dow thread yesterday. That is my long term plan. I am between jobs at the moment, living off savings, and determining whether it is realistic to win enough betting (pardon the government terms) to justify doing it habitually. I deposited £500 in a SB account, where it grew to £988 in a week. It is now at £375 - if I lose that I will stop. That is my ultimate enforcement of discipline, and would be analogous to an institutional trader being fired for losing too much. TwoWayFutures requires a minimum balance of £5,000 to be maintained. I won't deposit that with an offshort SB company at this time, as I have nowhere near enough trading experience to stick that in an account. If I can make £5,000 profit over the next year, I would definitely go for it. My spare funds have just been wired into an excellent little commodity based hedge fund, so I can't really stick £5,500 with TWF and tell myself I will only ever use £500 of it. It is a good idea for the long term though. DMA through a SB wrapper; 1 point spread on the YM.

How long have you been trading for, and what instruments do you trade?

Thanks a lot for your feedback on my journal, and welcome to T2W!

 

[lurkerlurker]

lurker,

the system does not allow me to give you kudos at the moment, says i have to spread them around.

however, kudos to you for an honest and open self assessment. that will open the path.

keep it going.

all the best.

j

Thanks! (I've also had the same problem with giving kudos - luckily I see quite a few members who deserve some.)

Regarding the open and honest self assessment: firstly, that was the purpose of this thread, and secondly I hope my ability to be frank about my successes and failures here will restore some faith in my dedication to this habit of mine. (habit yes, definitely not trade, adventure, profession or vocation!)

 

[lurkerlurker]

I believe somebody mentioned it before, but if you are using order types which include STOP and TARGET the second you enter a trade there is really nothing else you should be doing to adjust the trade (apart from moving your stop to breakeven - IF that is part of your plan) and these accidents can't happen anymore.

Good point well made. I was considering saying that I had intended to take those trades to avoid admitting that I made those mistakes. It is so embarrassing. I'm still nervously waiting for cracks along the lines of "they're not going to put the M1 between the buy and sell buttons just for you" and "get off the interwebs duffer". Those accidents accounted for a large part of my losses today.

Some of you may also remember the expensive snafu I had with the TradIndex HTML order system (a cancelled limit not going through properly, being triggered, and putting my long in the market during a major drop).

 

[lurkerlurker]

Your system is only small part of trading (check the pie).
This comes from http://www.trading-plan.com/mindset_general.html
In my opinion system & money money management or responsible for only 30%. Trading is 70% about discipline and psychology.

A useful pie indeed. As I am to refine my trading plan this evening, it is most timely that you post that link. I'll give you my comments on the rest of the site later.

 

[lurkerlurker]

I've just realised...

...I've been on the computer typing replies since almost five hours, and I'm not that slow at typing. I am going to go and relax for awhile, perhaps have a rare midweek beer, and forget about trading for awhile. In all likelihood my new system will not be here until tomorrow.

 

[shortorlong]

How long have you been trading for, and what instruments do you trade?

well I could say I have been trading since 2001 .. but that would be a lie
I was trading the ftse and the dow in 2001 through to 2002 with CMC, but as you can guess I had to quit when I had hit my target loss (and a bit more).

But I am older and .. no wiser .. so I intend to try again starting in the next couple of weeks. I will trade the ftse .. and maybe the dax .. maybe even some large caps.

should be fun

 

[lurkerlurker]

Marginally Revised Dow Method

Following recent poor performance, and failure to stick to the plan, I have revised my method for intra-day Dow trading. I hope this meets with the approval of those who liked the first strategy (and who were opposed to changes). Furthermore, I hope it encourages further discussion and feedback.

Thanks for contributing!

Instrument: Dow Jones Industrial Average, Daily Cash Spreadbet (CMC)
Period: Intra-day, during the cash market (1430 – 2100 London)

Abstract

A system for intra day Dow trading. The system is to give objective entry and exit signals, and additionally provide guidelines within which to operate. Risk control, money management, and discipline enforcement rules are also included. This system has been designed to take account of rationalisations for rule-breaking, and should therefore present additional barriers to the trader making exceptions.

Setup

Pre – Market
Before the open, familiarise yourself with key S/R levels in the last week of trading, and determine the general trend. A four hour chart, and perhaps trendlines, would be helpful here. Write these down on trading pad (always visible during trading). Familiarise yourself with any news announcements which are due, which may affect the market. In the case of economic data likely to have an effect on the market, ensure you are flat 5 minutes before data is due to be released. Ensure no distractions are likely.


During Market Hours
Do not trade the open. Positions may be taken after the market has settled down.

Fullscreen chart on left monitor. Chart to display: price as candles, EMA (100), DEMA (8, 21), MACD (default), RSI (21), CCI (150), and ADX (default). Right monitor to display blotters, client positions, order tickets, news, and prices for other related instruments (S&P, EURUSD, Crude, Dax, etc)

View a five minute chart. Establish key zones of support and resistance, and price areas where trades would have a high probability of favourable price movement. (for example strong resistance, if tested and respected)

Switch back to a one minute chart. Be aware of trend and momentum. Every five minutes, check 5 min chart. Every half hour zoom out to a 15 min chart for a broader view, but keep this timeframe as a supplemental. (keeping the method simple)

Semi-worthwhile tasks are to be positioned around the trading area to assist with boredom. A few books, juggling balls, weights, etc. Laptop to be within reach in order to read other trading literature, T2W, news sites, general leisure browsing. Perhaps some ironing or shoe polishing could be conducted in view of the screens. I have identified boredom to be an issue leading to overtrading, and also idleness give impetus to act and close trades prematurely.

Trade Criteria

Trades are to be executed according to the following guidelines. A limit of £1pp is in place, except for a pyramiding exception covered below. Maximum daily loss limit is £30, and only 12 pips may be risked on any given trade. Stop and limit orders must be set prior to a trade. Stop loss orders may only be moved closer to the market. Limit orders can move freely, but only in accordence with rules and never closer than initial target. Averaging down is not permitted. Two consecutive losses require a 30 minute break away from the trading area. Three consecutive losses require taking the rest of the day off.

Entries

Entries are to be taken as soon as a signal is confirmed. For all entries, target profit must be at least twice risk amount. Stop and limit orders are to be determined before placing the trade, according to their rules. OCO stop and limits are to be placed prior to entering the trade. Limit orders to enter are preferred, although market orders may be used where it may not be possible to be filled with a limit. In order to enter a trade, at least one condition from category A and one condition from category B must be satisfied. Additionally, if any condition from category C is satisfied, the entry signal shall be considered vetoed.

Category A (Signal)

The 8 period DEMA crosses the 21 period DEMA on a 1 minute chart.
Completion of a high probability reversal chart pattern, such as double top/bottom, head and shoulders, etc. Flags, wedges, and triangles are explicitly excluded.​

Category B (Confirmation)

Price has respected a support / resistance level.
Price has respected a strong trend line, defined as three or more contacts on a five minute chart.
Indicator divergence on the 1 minute chart, persisting for at least 15 minutes, supports the signal.​

Category C (Veto)

Prudent placing of the stop loss is further than 12 pips away from the entry price.
Target is less than double the SL distance away from price.
A conflicting signal (whipsaw) has occurred within 5 minutes.
RSI is OB/OS (>70 / <30)
CCI is OB/OS (>200 / <200)
Market appears “choppy”, and on checking ADX is < 15.
The signal is contrary to an existing trend, and price action has not showed any indication of reversal.
News is due within the foreseeable life of the trade.
The trader does not wish to trade this setup.*​

Exits

The trade will be exited on trigger of the hard stop loss order OR the trade will be exited on the trigger of the hard limit order. The stop loss may only be moved closer to the market. The stoploss is to be moved to breakeven at +10 open profit. The stoploss shall be trailed by 50%. The limit order may be moved at the discretion of the trader, but must never be moved closer to the market than the original setting. (ie, a sell limit opened at 13550 may be moved to 13560, then to 13555, but never lower than 550). The limit order shall only be moved further away with cause.

The initial limit order shall be conservative. The trader may move the limit order away from the market, and manually intervene to exit at any price better than the initial limit. Valid reasons for exiting in such a manner are:

EITHER
8/21 period DEMA crossover on 1 minute chart against the entry direction.
OR
Indicator divergence perisiting for 15 minutes on a 1 minute chart.
CONFIRMED BY
Slowing price momentum, as shown by MACD histogram.

Furthermore, an exit may be triggered by price respecting support, resistance, or strong trendline. A confirmed bullish/bearish formation on a 5 minute chart against the position is also a valid indicator to exit. No manual exit may be worse than the intial limit price. Limits should only be changed after breakeven stop is set.

A trade must be exited within 5 minutes of news releases reasonably likely to affect the market.

Pyramiding
A trade showing an open profit may be subject to the following conditions.

A stoploss of at least +12 has been applied to the initial position.
Entry has been confirmed by a DEMA cross on at least the 5 minute chart, preferably the 10.
The new profit target is at least twice total risk away.
The trend appears healthy (subjective veto of pyramid)
A hard stop can be set such that the full position will be closed at breakeven or better.
Further pyramiding may be applied subject to these conditions for each +20 the price moves in favour of the trade.​

Trader Discretion
The trader shall have discretion in the following areas

The determination of stop and target (within reason)
The veto of an entry signal
The veto of a pyramid signal
The moving of limit orders to better prices
Stopping trading early
Holding a trade in the last half hour, although this should be avoided
Taking a break at any time, providing hard stop / limit are in place​

Barriers to trading a system

Gamble entries – strictly prohibited
Premature exits due to fear or greed – prohibited due to initial limit
Overtrading – negative overtrading should be stopped by the consecutive losing trade rules
Lack of confidence in position – initial veto, thorough setup
Impatience – distractions in the trading area, ability to take breaks
Failure to properly record the plan, and failure to trade it – this must be counteracted by noting pertanent information in the trading notebook which is kept in sight.
Changing the rules on an ad-hoc basis. The rules here seem reasonable enough that they should not be changed. Plan can be altered outside of market hours only, with just cause.​

I am trying to keep this simple. However, I think it is more important to remove as much discretion as possible at this stage. The plan permits trader intervention only when flat – the plan must be recorded prior to trading and executed during the trade. Use of stops and limits allow breaks to be taken when reckless interference becomes necessary. Expectation of accountability should re-enforce rules. Rules protect trading capital, and allow profitable entries. The overtrading should be naturally corrected by the system making few trades (due to confirmations).

Does the KISS principle apply to a 1500 word plan? I hope so. Money management and risk is pretty simple. Determine stop / limit, enter on signal with confirmation, exit at limit (or at better price). Trail stops to lock in profit. No “bad trading”. Plan the trade, trade the plan.

I can understand if many of you have limited faith in my ability to execute this to the letter. I hope you can see how I have attempted to minimise the risk of breaking the plan. Please tell me of any glaring errors or omissions – I've been working on these rules for about 8 hours in total today, and it is 04:30 BST.

As ever, feedback is encouraged.

Thanks

~LL


* - I'm still the captain of the ship, despite any plans. If I do not think a trade has sufficient potential to justify the risk, or I do not like then entry signals, I can refuse them. I am open to suggestions why this may not be a good idea, but it makes sense to me. It is better to never enter a trade when unsure, rather than exit at a bad price due to lack of confidence in the setup.

 

[Priceman]

I have just moved from TradIndex, who had a 5 point spread on the daily Dow contract. The 4 is easier to overcome, however I do agree that it is difficult. I used to trade the FTSE at a 2 point spread, but it is a slow market these days. I am looking into trading the Dax in the mornings before the Dow, also with a 2 point spread. The volatility makes that a viable alternative to the Dow spreadwise.

lurker, I'm sure the boys on the FTSE thread could comment on this comment... this month alone it's been up 200pips in 4 trading days, then retraced 140pips down in just over a week, then up again 200 in 8 days, then down again 80pips in the last 2 days... that to me isn't slow.

However I can see your point that there are bigger moves on the DOW. Maybe this isn't necessarily a good thing though while you are finding your feet? Maybe the 'slower' market would give you the time to make calculated decisions, rather than rash ones, based on your system and plan?

Well done for your endeavours, you are making progress as you've acknowledged where you're going wrong. Now the hardest part is to change where you're going wrong.

If you keep doing the things you've always done then you'll always get the results you've always got... don't know where I got that pearl of wisdom but it really is great!!

All the best

 

[zigglewigler]

Well done Lurkerlurker, I wish I had been as organized as you when I started trading.

However, don't underestimate the psychological difficulties you will face as a trader, that is a factor outside of system development.

You will have to go through more pain before you discover that the technical aspects are the least important to a trader.

Keep it up, plug away, reflect, be humble and honest, then who knows you might make a living at this, your approach so far stands you good stead.

 

[Baldwreck]

Lurkerlurker - I think your plan could be very effective - but a question for you - have you any way of back testing it or using (and I hear the groans) a paper or virtual account - I simply mention this because (and I'm one of those rather lowly fixed-odds people) I was able to firstly do extensive back testing on my plan secondly run it on a virtual account thirdly run it on both a virtual and real accounts in tandem before finally going with real cash only.

This gave me the confidence that the plan was right and ensured my money managment system was match- fit ( which has needed adjustment - overtrading, usual crime!).

Just my thoughts but good luck in whatever you do.

 

[lurkerlurker]

Lurkerlurker - I think your plan could be very effective - but a question for you - have you any way of back testing it or using (and I hear the groans) a paper or virtual account - I simply mention this because (and I'm one of those rather lowly fixed-odds people) I was able to firstly do extensive back testing on my plan secondly run it on a virtual account thirdly run it on both a virtual and real accounts in tandem before finally going with real cash only.

This gave me the confidence that the plan was right and ensured my money managment system was match- fit ( which has needed adjustment - overtrading, usual crime!).

Just my thoughts but good luck in whatever you do.

As you can see, the plan is based strongly on indicator signals. They can be backtested. I still have my TradIndex account - I suppose I could go and blow through my virtual £80,000 with this system. Actually, some have suggested I papertrade today. That sounds like a plan when the Dow opens.

Actually, come to think of it, that is rather serendipitous. I have a dual screen setup for my trading. I've just discovered (thanks to Lightening McQueen's thread) that I can have a 1 min and 5 min chart open for the same instrument on marketmaker. I have both screens full with those charts, and brought my laptop over to attempt to login to MM with that. The idea was to execute trades and view news on the laptop, while using the dual screen box to display charts. Unfortunately, MM doesn't allow simultaneous logins. Now, I can use my TradIndex virtual account from the laptop, and use CMC's Dow charts / indicators on the main screens! Thanks!

Will be papertrading the Dow from the open, and will post trades on the Dow thread per usual.

Thanks again for your contribution.