Jul 292011

This month was a really interesting month.  I learned a lot about myself and my trading.  And I realize I have a lot of work to do.

Last week I wrote my plan for this week, which was:

  • 3 pt max stop, and ideally get out with losses of 2 pts or less
  • Trade more with the direction of the value areas
  • Be more thorough with my homework so that less decisions need to be made while trading
  • Start up the journal again (yes I slacked off)

How did I do?

3 pt stop

I kept a very detailed (painfully detailed) log for the past week.  I took 42 trades.  in 9 of those I moved my stop wider than 12 ticks and left it in the rest.  Here are some stats in ticks:

Avg MAE when stop not moved: 3.27

Avg MAE when stop moved: 14.33

Avg P/L when stop not moved: 5.88

Avg P/L when stop moved: -11

Did moving the stop increase or decrease performance?  -11 ticks was what I got.  If I didn’t move it, I would have had -12.  So it appears not to have affected it.  In that case, better to leave the stop and avoid taking a big loss (which I did a few times this month).  So that’s another goal going forward.  My total average MAE was only 5.64 ticks and so I’m even considering a 8 tick stop.  I was surprised at this stat:  1/2 of my trades had an MAE of 4 ticks or less!  I find that amazing.  I am studying this further.

Trade with value area direction

Average P/L trading against VA direction: -1.79, with VA direction: 5.56

If I use the day’s trend, defined by the market making new highs (up) or new lows (down):

Average P/L trading against intraday direction: 1.67, with intraday direction: 3.00

If trading with VA trend and intraday trend: 8.83, and against both: -2.63

This makes a good case for trading with both the VA trend and the intraday trend.  Requires a lot of patience as there would be days without any trades (when VA trend & intraday trend are opposite directions for example).

I’m going to collect more data and continue analyzing this.

Be more thorough with my homework

I need to do more work on this as we’ll see below.

Start up the journal again

I kept a detailed trade log but I think a word doc to summarize each day would be very useful as well.

In the detailed trade log I gave myself a grade based upon how well I executed my plan.  At first it was very subjective but this week I graded each trade.  The results were surprising in that I had an average grade of C.  I think this is a result of my plan not being clear.  I need more details in both my trading plan (general) and my homework (specific).  I also think I am looking at too many things which make decision making difficult.  I missed a lot of trades.  So I want to simplify as well.  I will be removing some charts from my desktop.

So how did I do?  I compared my July results with June a few days ago, not much changed in the past few days (small wins).  This month was slightly less than last month due to 4 days vacation.  On a per day basis it was 18 euros less.  That’s ok because I feel like I’m improving and controlling risk better.  For example if I fade less then I may make less but with less risk (meaning I can trade bigger size and make more).  For this past week, I did almost exactly my weekly average over the past 3 months.

So another profitable week and my 3rd consecutive profitable month.  Now I need to work on my plan, do more homework, and focus on my execution.  I realize that success in trading is there for anyone who puts in the hard work and time.  I imagine a lot of traders don’t do any preparation and make decisions on the fly, which could be responsible for their performance.  And those traders who do put in the time & effort are rewarded.  It’s really hard to do an hour or more of homework every day but it’s absolutely necessary.

Hope you had a good week and I wish you a great weekend.



Jul 272011

I quit tracking all the metrics on each trade simply because a couple of scratches or big losses completely distorted the metrics.  I think these metrics are good if the data is stable.  If you’re a consistent trader for a long time then your performance may be stable.  Mine isn’t.

Instead, I’ve been doing some stats on my daily P/L.  This is far more interesting as the effects of scratched trades have no impact.

Here are the stats for June:

For simplicity, these figures do not include commissions.  For June my commissions were 15% so you can lower the amounts by 15%, 18% for July.

The daily average was good, although less than May.  The volatility due to Greece tripped me up a bit.  The win rate was very high.  My avg loss was quite high due to a big losing day.  That made for a bad avg win / avg loss ratio.

I’m quite pleased to say that I’ve improved for June, although at the expense of my daily profit.  That’s ok because I’m not focusing on profit right now.  I’m focusing on risk.

The win % dropped as I took a few more losing days this month.  However the losses were smaller, 212 euros this month versus 749 last month!  That’s quite a difference.  And the win/loss ratio is 1.51 which is acceptable.

If I had to pick between June & July, I feel much better with July’s stats.  However, I think if I can cut my losses a little quicker, I can improve the win/loss ratio and possibly have fewer losing days which would improve the win rate again.  If I could get something in between 65-86% with an avg win/avg loss of 2.0 would be ideal.  So that’s what I’m shooting for next month.


Jul 262011

I quite reading trading books a while ago, but recently a couple have come to my attention.  The first I found while browsing on Amazon:  Diary of a Professional Commodity Trader: Lessons from 21 Weeks of Real Trading.  I like trading books that are conceptual and/or about stories of trader experiences and development, rather than books about a “system” or “setup”.  This one seems interesting and I figure if I can benefit from his 21 weeks of trading by spending a few ES ticks then it’s a good deal.

The second book is one I already have: Reading Price Charts Bar by Bar: The Technical Analysis of Price Action for the Serious Trader.  I found this one very difficult to read but FlowTraderES has been tweeting some interesting ideas he got from this book such as the 5 tick reversal and today a large breakout bar on 5min chart (9:50 NY time).  He got long on that and was using the midpoint of the bar for his stop.  It turned out to be a great long trade.  I missed that.  So I intend to attempt to read the book again and see if I can understand it better.  The last time I read it was over a year ago and I still hadn’t been weened off indicators at the time.

For fun, I will be reading Harrington on Online Cash Games; 6-Max No-Limit Hold ’em.  I’m intrigued by the similarities in trading & poker and I think learning more about poker will help my trading.  I need to fold more often in trading – ie. give up my position when it’s not likely to win.

If you know of another good book, particularly if it’s available in an audiobook, please let me know.