tag:blogger.com,1999:blog-65791468082621447092024-03-14T05:22:29.812-04:00Grove TradesTrials and tribulations of a traderGrove Underhttp://www.blogger.com/profile/11996363914551744557noreply@blogger.comBlogger222125tag:blogger.com,1999:blog-6579146808262144709.post-11887428699138921632015-05-02T09:59:00.000-04:002015-05-02T09:59:21.871-04:00Things I Wish I Believed When I Started Trading<div style="color: #222222; font-family: arial, sans-serif; font-size: small;">
Although I've been involved with trading (i.e. survived) on and off for over 20 years, it has been 4 years since I've started actively trading again. I'd be the first to admit -- although there are good moments, life of trading isn't always easy, especially when you're first starting.</div>
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For whatever reasons, I wanted to write some "things" I wish I believed when I first started trading. Every time I see a new trader trader start to learn how to trade, I wonder if they really know what they're up against. What most people don't tell you is that trading can be very difficult, especially mentally.</div>
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Don't get me wrong -- I love to read about peoples dreams and expectations, because it helps to remind me why I first decided to trade. You MUST have those dreams, and they MUST burn a fire of passion deep within, or else it'll be too easy for for you to quit when the inevitable dark times come. If you've been through the trading school of hard knocks, you know trading can get really brutal.</div>
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<a href="http://4.bp.blogspot.com/-YblGj3bnndU/VUQzJid6uGI/AAAAAAAAA2k/yitn91dbZH0/s1600/wpid-monkey-wahala.jpg" imageanchor="1" style="clear: right; float: right; margin-bottom: 1em; margin-left: 1em;"><img border="0" src="http://4.bp.blogspot.com/-YblGj3bnndU/VUQzJid6uGI/AAAAAAAAA2k/yitn91dbZH0/s1600/wpid-monkey-wahala.jpg" height="211" width="320" /></a>When I first started trading, I wish someone told had told me what to expect, and perhaps my journey would have been a little smoother, or totally different. </div>
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Well, I take that back. </div>
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Honestly, I probably wouldn't have listened or taken this type of message to heart.<br />
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Many of the "things" I list below are well known and no secret. I would have said, "This doesn't apply to me." <br />
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We all need to learn the path ourselves, similar to how we need to discover what method and style of trading works best for us.<br />
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We're all different, so this list may not even apply to you. But this is what I've experienced, and have also observed from many other traders on their (often failed) journey. As they say, hindsight is 20/20.</div>
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<b><span style="color: red; font-size: large;">You need to be a bit of a psychopath to do well as a trader</span></b></div>
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First of all, having certain psychopathic tendencies isn't necessarily a negative thing. But on the other hand, if you are to become wildly successful from trading, you are not a normal person. </div>
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The learning curve to trade successfully is brutal and takes a lot of time and energy. Sure, when you're on a winning streak and on top of the world, trading seems so easy. Get too confident, and the market will certainly punish you financially and mentally.</div>
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But to be able to keep pushing forward, when the chips are down, and you can't seem to do anything right when you book a loss after loss after loss. It requires extraordinary effort, like psychopathic tendencies, to continue moving forward.<br />
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You can read an interesting article on psychopaths <a href="http://www.bakadesuyo.com/2015/04/psychopaths/">HERE</a>.</div>
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<b><span style="color: red; font-size: large;">Once you learn the basics, successful trading is mostly about behavioral modification / trading psychology</span></b></div>
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How many people do you know who have tried to diet or exercise or lose weight or quit smoking, or whatever, but couldn't succeed? </div>
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Of those who are successful, how long have they been able to change their behavior?</div>
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Google up "Success rate for [smoking/losing weight/etc.]" Is it coincidence that the % that fail are similar to those who fail as traders?</div>
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Chances are, you know many people who have tried to change their behavior, like a diet, achieve some level of success, then revert back to their old ways.</div>
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But I'm sure we all have seen success stories, long term success in some cases, people who truly changed their ways. </div>
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What were the successful people able to do? They were able to modify their behaviors and habits. It's very similar with trading, since natural human emotions are wired counter to successful trading habits.</div>
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Learn from other fields of study that require behavior modification or how to change your habits in order to succeed.<br />
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So in hindsight, what should I have done?<br />
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Learn as many trading setups and test them out, preferably live to work off the emotional charge of trading, but trade very small size. Find ones that produce an edge for YOU over at least 50-100 trades, or more. <br />
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Pick your top 3 performing setups (or just ONE, per Trader-X below) and commit to them. Get married to them, for better or for worse. Continue trading super conservative risk management (RISK SMALL, risk well under 1/2-1/4% of your total account) and track how well you do with a more focused setups.<br />
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In the meantime, focus your energy on the behavioral and psychological side of trading, to see if you can simply remain consistent with your plan and execute properly. If successful over time, this will build up consistency and confidence.<br />
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So, how do you work on your brain and make it stronger?<br />
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Self-hypnosis, NLP, meditation, mental exercises, sessions with a trading psychology coach, biofeedback, etc. Like trading setups, there is no right or wrong way to work on this, only what works best for you.<br />
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Ultimately, finding what works best to strengthen and maintain your mental game will determine whether you succeed or fail as a trader. It's not the setup or the strategy. It's all in your mind.<br />
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<b><span style="color: red; font-size: large;">If you're an adrenaline junkie looking for excitement, don't trade. Find something else for excitement and keep trading "boring"</span></b></div>
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For a rush and excitement, perform in a musical band, compete in something whether it's chess or triathlon or to get on a game show like Jeopardy or a cooking show, go rock climbing, give public presentations, etc. </div>
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Find a passion that will give you goals and excitement outside of trading. But seeking excitement from trading will only make you lose money. Because that's gambling. And over time, you will certainly lose money if you gamble.</div>
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<b><span style="color: red; font-size: large;">If your main goal is "I want to spend more time with family", don't daytrade. Maybe consider swing trading. Or better yet, don't trade at all.</span></b></div>
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Active daytrading is more of a young person's endeavor. When I was fresh out of college, I spent a considerable time learning to trade and I would easily spend 14-18 hours a day. </div>
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There was no impact to family, since I was single. I could blow up trading accounts, and oh well, no worries, since I have my whole life ahead of me. </div>
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However, this not something as advisable if you have a family and are just learning to trade. And are you over 30? [my hand is raised] Then the odds are even more against you.<br />
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See an interesting article on about why there aren't many top traders over 30 years of age <a href="http://news.efinancialcareers.com/uk-en/150960/footballer-syndrome-do-top-traders-need-to-quit-after-they-hit-30/">HERE</a>.</div>
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Venture into the field of trading because you love it, not necessarily because you want to have more time for other things. Learning how to trade successfully is all all encompassing and will take over your life. <br />
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And if you treat trading as a hobby, then sure, that's fine, but it will likely be an expensive hobby.</div>
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<b><span style="color: red; font-size: large;">Focus on mastering one setup</span></b></div>
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I should have listened to Trader-X, one of the original old school bloggers. Read the articles <a href="http://traderx.blogspot.com/2006/09/chasing-success_16.html" style="color: #1155cc;">HERE</a> and <a href="http://traderx.blogspot.com/2006/11/chasing-success-again.html" style="color: #1155cc;">HERE</a> about "Chasing Success." Read the comments, there's a lot of gold in there.</div>
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In the old school sushi restaurants in Japan, an aspiring sushi chef will spend <i>years</i> working in a restaurant and mastering various tasks, like simply making steamed rice for 2 years, before even being able prepare the fish. </div>
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Seems a bit excessive, doesn't it? But what a way to build discipline. So what did I do? </div>
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I went into stocks, then forex, then futures, then options, then stocks again, then options, then back to...</div>
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And within each of those asset classes, I tried discretionary trading, charts patterns, volume profile, Fibonacci levels, mechanical systems, quantitative/statistical outcomes, special situations, etc. </div>
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<a href="http://2.bp.blogspot.com/-WYkKwLZ95G4/VUQ1Gcy2kJI/AAAAAAAAA2w/TM9IwBE---s/s1600/jack-of-all-trades1.jpg" imageanchor="1" style="clear: right; float: right; margin-bottom: 1em; margin-left: 1em;"><img border="0" src="http://2.bp.blogspot.com/-WYkKwLZ95G4/VUQ1Gcy2kJI/AAAAAAAAA2w/TM9IwBE---s/s1600/jack-of-all-trades1.jpg" height="152" width="200" /></a>A jack of all trades.</div>
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I have a personality that loves to research and to constantly learn. So it's hard for me to just focus on one setup and only execute that for an extended period of time. </div>
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Because it can be so...boring. To just sit around waiting for one setup seems like such a drag, you know? It's like a...<i>job</i>. </div>
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BINGO!</div>
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When I've felt and treated like trading was a job -- you know, somewhat of a drag, somewhat boring (which trading can be much of the time), like something you didn't necessarily want to do (sitting around endlessly looking at a computer screen), but you know you have to do it and do it well -- those have been the times when I've executed my trades the best. </div>
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<b><span style="color: red; font-size: large;">Assuming you've successfully worked in the corporate world, don't immediately try and replace your salary</span></b></div>
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Before the latest return to trading several years ago, I was fortunate to be in the tech/financial space where 6 figure annual salaries are not a big deal.</div>
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So when I returned to short term trading, I wanted to replace that salary (AND MORE!) without really spending the time to develop a sound process and strategy that was in sync with my personality.</div>
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Why would I want to limit my losses to $20 and possibly gain only $80 on a great trade? That's peanuts! Wuss! C'mon, I don't play the $5 tables in the casinos, so why should I do the same in the stock market? Now add a few zeros to that and then we're talking!</div>
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Bad mistake. Ego was talking.</div>
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Get a solid strategy and process in place first. RISK SMALL (less than 1/2-1/4% of your portfolio per trade). Achieve consistency. Work on getting through any emotional and mental issues trading live. Then scale up, slowly. Otherwise, you are likely just gambling. Which means you'll lose.</div>
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Trading small -- easier said than done. </div>
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Most people will initially have the discipline of risking small, but will eventually get tired of the grind. When the realization that someone working at McDonald's is making more than you, going for the big win out of boredom and/or frustration of a bruised ego is easy to do.</div>
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Sure, you might get lucky betting and winning big, but eventually, if you don't follow a sound strategy and process with an edge, it's only time before you lose it all. I've seen it happen to many people. On twitter, keep track of those traders who go quiet and/or permanently disappear.</div>
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For the first year or two (or more), it shouldn't be about the money, but about finding the strategy that works best for you, and creating a process that you can repeat over and over. Make it through that learning experience with minimal tuition (i.e. losses).</div>
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If you're coming into trading from a successful career making respectable $'s, it will be especially hard to bet only peanuts while you learn. Whether you admit it or not, you have a big ego, although you might call it confidence.</div>
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The temptation to size up will be big. And you'll be lucky at times, or for weeks or months, but if you don't practice prudent risk management, the market will take it all back. It's only a matter of time.</div>
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Learn to walk before you run. Don't think about the money, just whether you executed your plan properly. And RISK SMALL, especially while you're learning.</div>
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<b><span style="color: red; font-size: large;">Trading is all about money, but successful trading has nothing to do with money</span></b></div>
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Yes, the basis of trading revolves around money. So it becomes easy to focus on profits and losses for every trade. </div>
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But this is one of the best ways to get sidetracked and to go down that dangerous road of emotional trading. Focusing on money (especially if you're losing) can quickly lead to FOMO (fear of missing out) trades, along with impulse and revenge trades. Once you're in that frame of mind, it's pretty much game over, and there's a high probability you will kiss your $'s goodbye.</div>
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Those who are successful traders will usually have a different perspective of trading -- the outcome of any single trade doesn't really matter, as long as the proper execution and position sizing has taken place. </div>
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In addition, the routines of the processes/routines necessary to be properly prepared for the next trading day are repeated consistently over and over and over. In many ways, it's just one big constant grind to be a consistently successful trader.<br />
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It's a lot of work, which has nothing to do with money. So you better love everything about trading, especially all hours of research and homework you'll need to do when the markets are closed. Otherwise, find something else that captures your passion.</div>
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<b><span style="color: red; font-size: large;">If you're starting with a small account expecting to make a decent living, then yes, you're gambling</span></b></div>
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Study trading long enough, and you'll hear endless stories and mantras about "Don't risk more than 1% (or 2% or whatever) of your portfolio per trade. Risking small works for people with a big account in order to make a reasonable living.</div>
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It's one thing to have a $1 million dollar account to try and achieve a 10% return in order to make $100k a year</div>
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But it's another to start with $5,000 and think you can make $100,000/year, consistently, especially if you've only been trading for less than a few years.</div>
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And let's say you are one of the few that does it. Still, you can not quickly build an account without either risking a big % of your account on a several "high conviction" trades, and/or have a unusually <i>lucky</i> series of consecutive wins. </div>
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<a href="http://4.bp.blogspot.com/-0ETWbAc7YQE/VUQ3ms9Qw9I/AAAAAAAAA28/A9O-2X-NkgQ/s1600/gambling-picture.jpg" imageanchor="1" style="clear: right; float: right; margin-bottom: 1em; margin-left: 1em;"><img border="0" src="http://4.bp.blogspot.com/-0ETWbAc7YQE/VUQ3ms9Qw9I/AAAAAAAAA28/A9O-2X-NkgQ/s1600/gambling-picture.jpg" height="182" width="320" /></a>For those of us who start with a small account and build their account to a sizable amount, there was significant LUCK involved. Making big $'s from a small account -- it can happen, I've seen it happen, and I truly hope it happens to you! I've seen people win the MegaMillion lottery, too.</div>
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But it's not a good idea to base your business plan and trading career on luck. If you do start with a small account, consider it additional tuition expenses, not your ticket to the big time. Because you will likely blow it up either via losses or commission/fees.</div>
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And in the meantime, work hard and hustle to save up enough to open a respectable sized trading account. Then you can risk a minimal % of your account so that you can statistically reduce your risk of ruin, but still generate reasonable account growth.</div>
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After you have a lot of successful experience, then maybe you can decide if you want to trade like George Soros, where you put all your eggs (and more) in one trade based on your level of conviction. </div>
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But for the rest of us, that method is not a good idea. </div>
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<b><span style="color: red; font-size: large;">Expect AT LEAST 3 to 5 years to become consistently profitable, assuming you don't quit or blow up first</span></b></div>
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Huh, WTF? That's a really long time, c'mon, that's BS, man.</div>
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What about "Joe Super Star Twitter Trader" who started making $10k/week after 6 months? Or all those other people banking big bucks and killin' it week after week within a year after taking a trading class?!?</div>
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Sure, it's absolutely true that you will start killin' it in under a year -- very possible, but very rare. Most of the time, it's just a lot of it is BS from people trying to sell you something. </div>
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If you've been around long enough, you'll understand the saying <i>"Trading is the hardest way to make an easy living."</i></div>
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For every Lebron James that skips college and immediately becomes a elite superstar in the NBA, there are millions of others that don't make it. And even though he's at the top, Lebron continues to work harder in than nearly everyone else.</div>
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Same with trading. If you happen to be "the one" that makes it big, I'd seriously be the first one to cheer you on and congratulate you. I love to see people succeed. </div>
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<a href="http://4.bp.blogspot.com/-nUFF8ishOk4/VUTE-ukBugI/AAAAAAAAA3g/ThBT56-OCvA/s1600/ChiMarathon.jpg" imageanchor="1" style="clear: left; float: left; margin-bottom: 1em; margin-right: 1em;"><img border="0" src="http://4.bp.blogspot.com/-nUFF8ishOk4/VUTE-ukBugI/AAAAAAAAA3g/ThBT56-OCvA/s1600/ChiMarathon.jpg" height="275" width="320" /></a>I'm not trying to be a buzz kill, but there's a 90+% probability you won't succeed and be around in 3-5 years, that's just the cold hard facts about trading. It's a tough grind for the majority, you have to be a little crazy to stick around.</div>
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Want to increase the chances to beat the odds? </div>
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When you first start trading live, keep losses really really really small for a long long time. <br />
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This will be very hard to maintain when you go on a losing streak and feel that you need to chase your losses. Or when you think you need to cover certain financial expenses every day/month (like your daily fees or housing rent/mortgage). That's when the downward spiral often begins.</div>
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So be prepared to give your blood, sweat, and tears, and but plan to GIVE IT YOUR BEST for at least A FEW YEARS. It's a marathon, not sprint, so pace yourself! </div>
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<b style="color: #222222; font-family: arial, sans-serif;"><span style="color: red; font-size: large;">Find accountability partner(s)</span></b><br />
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When you're in a slump, trading can take you into some very dark corners of your mind, places where you may never have experienced.</div>
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Gurus are easy to find, but finding someone who will both be totally honest with you, have your best interests at heart, and have the TIME to spend with you, especially during the really tough times, are very difficult to find. </div>
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But having such a partnership could make the difference between making it as a trader, or not.</div>
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When things just aren't going well, most of us become quiet. We don't journal anymore. We don't blog anymore. We don't socialize anymore. We clam up.</div>
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This is exactly the time when we really need to have a voice of reason, to make sure we stick with our process. That we continue to grind away, journal and continue to study and review our trades.</div>
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We all need someone who can provide the intervention necessary to hold us accountable and remain true to ourselves. Someone who will help keep us from being our own worst enemy.</div>
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Do you best to find a solid accountability partner.</div>
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<b><span style="color: red; font-size: large;">Mental Game > Risk Management > Exits > Entries</span></b></div>
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When I first started trading (and even now at times), I was obsessed with finding the Holy Grail of trading, which meant finding a new way to enter trades. <br />
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So this is how I thought as a beginner:<br />
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Entries > Exits > Risk Management > Mental Game</div>
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But what I failed to realize was how important exits are (just as much as entries). And how about position sizing and risk management? Most don't realize the huge impact of position sizing to your longer term success. </div>
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Assume you have the same exact system trading in 2 different accounts. But you use a different position sizing method for each of the portfolios. Let's say on one system, you risk 1% of the account. And on the other, you risk 3%.</div>
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<a href="http://1.bp.blogspot.com/--ZnGb-tmdpQ/VUTCLmVK3eI/AAAAAAAAA3U/44ihavvfHdM/s1600/mental-muscle1.jpg" imageanchor="1" style="clear: right; float: right; margin-bottom: 1em; margin-left: 1em;"><img border="0" src="http://1.bp.blogspot.com/--ZnGb-tmdpQ/VUTCLmVK3eI/AAAAAAAAA3U/44ihavvfHdM/s1600/mental-muscle1.jpg" height="270" width="320" /></a>You will see a HUGE difference in performance between the 2 account simply based on the position sizing.</div>
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Ultimately, your mental game is critical to making sure you're able to take your trading plan, and execute properly. That's the area most traders focus very little on.<br />
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I believe successfully working with your emotions is the holy grail of trading.</div>
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So whereas beginners and losing traders focus primarily on entries, successful traders will focus much more on improving their risk management and psychology of trading. </div>
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Do what the successful traders do. Focus on your mental game.</div>
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<b><span style="color: red; font-size: large;">Develop other sources of income</span></b></div>
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Investigate any long time successful trader -- nearly all have other sources of income. Whether it's from a trading chatroom, real estate, business, corporate job, etc. </div>
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This very helpful to reduce the amount of pressure you have to make enough from trading in order to pay your bills. In general, income from trading can be a very cyclical, where you never know if you're going to have a good week/month/year, or not.</div>
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But with additional sources of income, you don't need to worry whether you'll have a good or a poor month from trading. And don't forget the pressure from whether or not you'll have food on the table and a roof over your head. </div>
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You'll be able to focus on trading from the perspective of having the valid setups. And if they don't show up, fine, you'll have other non-trading areas to focus on and to help generate constant income, and thus reduce your overall stress.<br />
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As a result, this makes you a better trader.</div>
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<b><span style="color: red; font-size: large;">The Grind NEVER Ends</span></b></div>
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I thought that once I figured out THE method with an edge, life will be easy, the money will flow endlessly, the sun will always be shining, the birds always singing...</div>
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Wrong.</div>
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Life happens. As soon as you think you finally have it figured out, the market will let you know otherwise (i.e. will punish you mentally and financially).</div>
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<a href="http://3.bp.blogspot.com/-T-0hreW0Ov4/VUQxhNkOO7I/AAAAAAAAA2I/fwr3y4gGku4/s1600/Bigger%2Bthe%2Bdream.jpg" imageanchor="1" style="clear: left; float: left; margin-bottom: 1em; margin-right: 1em;"><img border="0" src="http://3.bp.blogspot.com/-T-0hreW0Ov4/VUQxhNkOO7I/AAAAAAAAA2I/fwr3y4gGku4/s1600/Bigger%2Bthe%2Bdream.jpg" /></a>Just when you think everything is going well, there will always be something happening that will ying and yang with our emotions and mental well being, thus messing with your ability to execute and to trade consistently.</div>
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Your holy grail/bread and butter/go-to strategy will one day, gulp, stop working. Or your internet or PC will glitch on you right as the market is starting to go against you. </div>
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That's why I've found that the amount of success is often equivalent to the amount of work you put into grinding away -- doing your journaling, doing your homework, doing your practice, doing new research for new strategies, and so on, especially when the market is closed.</div>
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This could amount to many hours a day, beyond just executing your plan during regular market hours.</div>
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But wait, this isn't what I signed up for, is it? Didn't I want a life sitting on the beach, only working a few hours a day?</div>
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Sure, this could be achieved, but most of those people (assuming they're not BSing), have spent thousand upon thousands of hours grinding away, until eventually getting to that point where they're at peace with how they trade.</div>
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And even then, they're so used to the grind, that it becomes "normal" and they become lost in their routine.</div>
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If you truly love trading, the passion will keep you going, regardless of the good times or bad, till death do you part. <br />
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<b><span style="color: red; font-size: large;">HEALTH is most important</span></b></div>
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When Paul Tudor Jones (legendary hedge fund manager featured in the first Market Wizards book) was in a slump, he signed up with Tony Robbins (for $1 million a year) to be his business coach. </div>
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And Tony's first advice to Paul was to become his best, he had to get into his best physical shape. See the article <a href="http://fortune.com/2014/10/30/tony-robbins-best-advice-executive-coach/">HERE</a>.</div>
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Unless you're physically fit, your mind will not be operating at its peak, and all of the above won't matter. And remember, you can't do much trading buried 6 feet under.</div>
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* * * * *<br />
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If you've read this far, thanks for reading. As if you didn't notice already, the keys to consistent trading success is having a STRONG MENTAL GAME, along with RISKING SMALL / conservative risk management. <br />
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And surprise -- these are the topics least interesting by most developing traders. Coincidence?<br />
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Best of luck on your journey!<br />
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Grove Underhttp://www.blogger.com/profile/11996363914551744557noreply@blogger.com12tag:blogger.com,1999:blog-6579146808262144709.post-66765618977270467782015-04-05T15:31:00.000-04:002015-04-05T15:31:34.307-04:00ThinkorSwim / TOS Custom Quote Columns with Conditional Colors<div style="color: #222222; font-family: arial, sans-serif; font-size: small;">
There are several key levels and/or conditions that I have considered important over the years. And within the past year, <a href="http://stocktwits.com/financialtrader">@FinancialTrader</a> has further inspired and validated the use of those levels based on the methodical way he trades opening range breakout (ORB) setups. <br />
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A few examples of the levels include where the stock currently trades (or has traded) in relationship to the prior high of day (pHOD) as well as the prior low of day (pLOD), and the 30 minute opening range.</div>
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So with my daily watchlist, I wanted to quickly see those conditions within a quote window with simple green and red boxes, so that I wouldn't have to even view and/or flip through multiple charts.</div>
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<a href="http://1.bp.blogspot.com/-pep44RHLCpc/VSFmvECyZ1I/AAAAAAAAA1c/lbOGMaD0T04/s1600/TOS%2Bcustom%2Bquote0.png" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img border="0" src="http://1.bp.blogspot.com/-pep44RHLCpc/VSFmvECyZ1I/AAAAAAAAA1c/lbOGMaD0T04/s1600/TOS%2Bcustom%2Bquote0.png" height="320" width="225" /></a></div>
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I've been a TradeStation user for many years and had already programmed the conditions within a customizable quote window they call <a href="https://www.tradestation.com/trading-technology/tradestation-platform/find-opportunities/radarscreen" style="color: #1155cc;" target="_blank">RadarScreen</a>. But unless you meet certain trading volumes every month, they will charge you $60/month just for the RadarScreen add-on (in addition to the base platform fee of $99/month AND exchange data fees which never get waived). </div>
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Doesn't seem like a good deal, especially since I'm winding down my trading volume and will likely miss my volume thresholds in the future. So I wanted alternatives to TradeStation...as much as I love the platform.</div>
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This is where thinkorswim / TOS comes into play. Hard to believe I've had an account with them for nearly 20 years, ever since they were Datek and they had just created their revolutionary Island ECN...oh those were the days. </div>
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I've NEVER paid any data or platform fees to TOS, even though the account has been mostly dormant for nearly 10 years! Since FREE > $60/month, I started a crash course last month to learn more about TOS and programming with thinkScript. </div>
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I credit a lot of my recent thinkScript learning to:</div>
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<a href="https://readtheprospectus.wordpress.com/" style="color: #1155cc;" target="_blank">https://readtheprospectus.<wbr></wbr>wordpress.com</a></div>
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<a href="http://www.thinkscripter.com/" style="color: #1155cc;" target="_blank">http://www.thinkscripter.com/</a></div>
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For the ORB code, it was great to see in the header comments for the original code that Prospectus created the script based on inspiration from the old school <a href="http://traderx.blogspot.com/">Trader-X blog</a>. That blog inspired me to return back to trading several years ago, and it feels like I've come full circle. And although the blog is no longer active, it sure was good to see Trader-X post a new update back in February.</div>
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Explained below are few examples of how and what you can do to create red/green (or whatever color you choose) conditional boxes / columns in quote windows. The code is based on very small modifications I've made to popular scripts that have in use for a while. Since I'm still a novice, any good shortcuts or suggestions for improvements is much appreciated.<br />
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<b><span style="color: red; font-size: large;">HOW TO ADD CUSTOM QUOTE INDICATOR COLUMNS WITH CONDITIONAL COLOR HIGHLIGHTING</span></b></div>
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1) Within a quote window, RIGHT click the small gray circle in the upper right part of the box next to Symbol. Then click "Customize"</div>
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<a href="http://2.bp.blogspot.com/-THZSo6N_Dl8/VSFlUgb6J9I/AAAAAAAAA08/rRSZWDnKeGc/s1600/TOS%2Bcustom%2Bquote1.png" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img border="0" src="http://2.bp.blogspot.com/-THZSo6N_Dl8/VSFlUgb6J9I/AAAAAAAAA08/rRSZWDnKeGc/s1600/TOS%2Bcustom%2Bquote1.png" /></a></div>
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2) Within the Customize Quotes or Watchlist window, scroll down to an unused "Custom..." item, and double-click it</div>
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<a href="http://1.bp.blogspot.com/-N2GakRM5o8c/VSFlYiFTMlI/AAAAAAAAA1E/7ji_Ak2YlgU/s1600/TOS%2Bcustom%2Bquote2.png" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img border="0" src="http://1.bp.blogspot.com/-N2GakRM5o8c/VSFlYiFTMlI/AAAAAAAAA1E/7ji_Ak2YlgU/s1600/TOS%2Bcustom%2Bquote2.png" height="208" width="320" /></a></div>
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3) Go into the "Column name" and change it to the name of your new study (see below)</div>
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<a href="http://2.bp.blogspot.com/-WQLr2RE5bQU/VSFldqKBAsI/AAAAAAAAA1M/VRrdR6XyBBc/s1600/TOS%2Bcustom%2Bquote3.png" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img border="0" src="http://2.bp.blogspot.com/-WQLr2RE5bQU/VSFldqKBAsI/AAAAAAAAA1M/VRrdR6XyBBc/s1600/TOS%2Bcustom%2Bquote3.png" height="157" width="320" /></a></div>
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4) Just to the right of "Column name" change the "Aggregation" to 5 min.</div>
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5) Select the "thinkScript Editor" tab</div>
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6) Remove any content within the editor</div>
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<div style="color: #222222; font-family: arial, sans-serif; font-size: small;">
7) Copy/paste your new code (see below) into the editor and press OK</div>
<div style="color: #222222; font-family: arial, sans-serif; font-size: small;">
<br /></div>
<div style="color: #222222; font-family: arial, sans-serif; font-size: small;">
8) Highlight your newly created Custom Quote column in the left column, and move it to the right under "Current Set" </div>
<div style="color: #222222; font-family: arial, sans-serif; font-size: small;">
<div class="separator" style="clear: both; text-align: center;">
<a href="http://1.bp.blogspot.com/-feeaVtTL_MI/VSFlkL1--II/AAAAAAAAA1U/OxBhukD0RGs/s1600/TOS%2Bcustom%2Bquote4.png" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img border="0" src="http://1.bp.blogspot.com/-feeaVtTL_MI/VSFlkL1--II/AAAAAAAAA1U/OxBhukD0RGs/s1600/TOS%2Bcustom%2Bquote4.png" height="207" width="320" /></a></div>
<br /></div>
<div style="color: #222222; font-family: arial, sans-serif; font-size: small;">
9) Press OK, and you should see the column in your quote window</div>
<div style="color: #222222; font-family: arial, sans-serif;">
<div style="font-size: small;">
<br /></div>
<span style="font-size: large;"><br /></span></div>
<div style="font-family: arial, sans-serif;">
<b><span style="color: red; font-size: large;">CUSTOM COLUMN CODE BELOW</span></b></div>
<div style="font-family: arial, sans-serif;">
<b><span style="color: red; font-size: small;"><br /></span></b></div>
<div style="color: #222222; font-family: arial, sans-serif; font-size: small;">
<div>
<b>Custom column name:</b> ORB</div>
<div>
<b>Definition:</b> If last traded price is either above or below the 30 minute opening range, then display green box with + or red box with -</div>
<div>
<b>thinkScript code:</b></div>
<div>
<br /></div>
</div>
<div style="color: #222222; font-size: small;">
<div>
<span style="font-family: Courier New, Courier, monospace;"># Original code by Prospectus & Thinkscripter</span></div>
<div>
</div>
<div>
<span style="font-family: Courier New, Courier, monospace;"># Prospectus:</span></div>
<div>
<span style="font-family: Courier New, Courier, monospace;"># Automatic Opening Range and Fibonacci Levels</span></div>
<div>
<span style="font-family: Courier New, Courier, monospace;"># By Prospectus @ <a href="http://readtheprospectus.wordpress.com/" style="color: #1155cc;" target="_blank">http://readtheprospectus.<wbr></wbr>wordpress.com</a></span></div>
<div>
<span style="font-family: Courier New, Courier, monospace;"># Inspired by Trader-X @ <a href="http://traderx.blogspot.com/" style="color: #1155cc;" target="_blank">http://traderx.blogspot.com</a></span></div>
<div>
</div>
<div>
<span style="font-family: Courier New, Courier, monospace;"># Thinkscripter:</span></div>
<div>
<span style="font-family: Courier New, Courier, monospace;"># TS_OpeningRangeCloud</span></div>
<div>
<span style="font-family: Courier New, Courier, monospace;"># <a href="http://www.thinkscripter.com/" style="color: #1155cc;" target="_blank">http://www.thinkscripter.com</a></span></div>
<div>
<span style="font-family: Courier New, Courier, monospace;"># <a href="mailto:thinkscripter@gmail.com" style="color: #1155cc;" target="_blank">thinkscripter@gmail.com</a></span></div>
<div>
<span style="font-family: Courier New, Courier, monospace;"><br />
</span></div>
<div>
<span style="font-family: Courier New, Courier, monospace;"># Modified by @grove_under to display as custom column quotes</span></div>
<div>
<span style="font-family: Courier New, Courier, monospace;"># with green/red background boxes</span></div>
<div>
</div>
<div>
<span style="font-family: Courier New, Courier, monospace;"><br /></span>
<span style="font-family: Courier New, Courier, monospace;"># Opening Range custom quote</span></div>
<div>
</div>
<div>
<span style="font-family: Courier New, Courier, monospace;"><br /></span>
<span style="font-family: Courier New, Courier, monospace;">input showOnlyToday = YES;</span></div>
<div>
<span style="font-family: Courier New, Courier, monospace;">input InitialBalanceMinutes = 30;</span></div>
<div>
<span style="font-family: Courier New, Courier, monospace;">input Market_Open_Time = 0930;</span></div>
<div>
<span style="font-family: Courier New, Courier, monospace;">input Market_Close_Time = 1600;</span></div>
<div>
<span style="font-family: Courier New, Courier, monospace;"><br />
</span></div>
<div>
<span style="font-family: Courier New, Courier, monospace;">def day = GetDay();</span></div>
<div>
<span style="font-family: Courier New, Courier, monospace;">def lastDay = GetLastDay();</span></div>
<div>
<span style="font-family: Courier New, Courier, monospace;">def isToday = If(day == lastDay, 1, 0);</span></div>
<div>
<span style="font-family: Courier New, Courier, monospace;">def shouldPlot = If(showOnlyToday and isToday, 1, If(!showOnlyToday, 1, 0));</span></div>
<div>
<span style="font-family: Courier New, Courier, monospace;">def pastOpen = If((SecondsTillTime(Market_<wbr></wbr>Open_Time) > 0), 0, 1);</span></div>
<div>
<span style="font-family: Courier New, Courier, monospace;">def pastClose = If((SecondsTillTime(Market_<wbr></wbr>Close_Time) > 0), 0, 1);</span></div>
<div>
<span style="font-family: Courier New, Courier, monospace;">def marketOpen = If(pastOpen and !pastClose, 1, 0);</span></div>
<div>
<span style="font-family: Courier New, Courier, monospace;">def firstBar = If (day[1] != day, day - 1, 0);</span></div>
<div>
<span style="font-family: Courier New, Courier, monospace;">def secondsUntilOpen = SecondsTillTime(Market_Open_<wbr></wbr>Time);</span></div>
<div>
<span style="font-family: Courier New, Courier, monospace;">def regularHours = SecondsTillTime(Market_Close_<wbr></wbr>Time);</span></div>
<div>
<span style="font-family: Courier New, Courier, monospace;">def secondsFromOpen = SecondsFromTime(Market_Open_<wbr></wbr>Time);</span></div>
<div>
<span style="font-family: Courier New, Courier, monospace;">def pastOpeningRange = If(secondsFromOpen >= (InitialBalanceMinutes * 60), 1, 0);</span></div>
<div>
<span style="font-family: Courier New, Courier, monospace;"><br />
</span></div>
<div>
<span style="font-family: Courier New, Courier, monospace;">rec displayedHigh = If(high > displayedHigh[1] and marketOpen, high, If(marketOpen and !firstBar, </span></div>
<div>
<span style="font-family: Courier New, Courier, monospace;">displayedHigh[1], high));</span></div>
<div>
<span style="font-family: Courier New, Courier, monospace;">rec displayedLow = If(low < displayedLow[1] and marketOpen, low, If(marketOpen and !firstBar, </span></div>
<div>
<span style="font-family: Courier New, Courier, monospace;">displayedLow[1], low));</span></div>
<div>
<span style="font-family: Courier New, Courier, monospace;"><br />
</span></div>
<div>
<span style="font-family: Courier New, Courier, monospace;">rec IBHigh = If(pastOpeningRange, IBHigh[1], displayedHigh);</span></div>
<div>
<span style="font-family: Courier New, Courier, monospace;">rec IBLow = If(pastOpeningRange, IBLow[1], displayedLow);</span></div>
<div>
<span style="font-family: Courier New, Courier, monospace;"><br />
</span></div>
<div>
<span style="font-family: Courier New, Courier, monospace;">plot IBH = If(pastOpeningRange and marketOpen and shouldPlot, IBHigh, Double.NaN);</span></div>
<div>
<span style="font-family: Courier New, Courier, monospace;">plot IBL = If(pastOpeningRange and marketOpen and shouldPlot, IBLow , Double.NaN);</span></div>
<div>
<span style="font-family: Courier New, Courier, monospace;">assignBackgroundColor(if close > IBH then color.green else if close < IBL then color.red else </span></div>
<div>
<span style="font-family: Courier New, Courier, monospace;">color.current);</span></div>
<div>
<span style="font-family: Courier New, Courier, monospace;"><br />
</span></div>
<div>
<span style="font-family: Courier New, Courier, monospace;">AddLabel(yes,if close > IBH then "+" else if close < IBL then "-" else " ", Color.DARK_ORANGE);</span></div>
<div style="font-family: arial, sans-serif;">
<br /></div>
</div>
<div style="color: #222222; font-family: arial, sans-serif; font-size: small;">
<br /></div>
<div style="color: #222222; font-family: arial, sans-serif; font-size: small;">
* * * * * * * * * *</div>
<div style="color: #222222; font-family: arial, sans-serif; font-size: small;">
<b>Custom column name:</b> pHOD/pLOD</div>
<div style="color: #222222; font-size: small;">
<div style="font-family: arial, sans-serif;">
<div>
<b>Definition:</b> If last traded price is either above or below the pHOD or pLOD, then display green box with > or red box with <</div>
<div>
<b>thinkScript code:</b></div>
</div>
<div>
<div style="font-family: arial, sans-serif;">
<br /></div>
<div>
<span style="font-family: Courier New, Courier, monospace;"># pHOD/pLOD +/- quote indicator</span></div>
<div>
<span style="font-family: Courier New, Courier, monospace;"><br />
</span></div>
<div>
<div>
<span style="font-family: Courier New, Courier, monospace;"># Modified by @grove_under to display as custom column quotes</span></div>
<div>
<span style="font-family: Courier New, Courier, monospace;"># with green/red background boxes if last price above pHOD or below pLOD</span></div>
</div>
<div>
<span style="font-family: Courier New, Courier, monospace;"><br />
</span></div>
<div>
<span style="font-family: Courier New, Courier, monospace;">input aggregationPeriod = AggregationPeriod.DAY;</span></div>
<div>
<span style="font-family: Courier New, Courier, monospace;">input length = 1;</span></div>
<div>
<span style="font-family: Courier New, Courier, monospace;">input displace = -1;</span></div>
<div>
<span style="font-family: Courier New, Courier, monospace;"><br />
</span></div>
<div>
<span style="font-family: Courier New, Courier, monospace;">plot PrevDayHigh = Highest(high(period =</span></div>
<div>
<span style="font-family: Courier New, Courier, monospace;">aggregationPeriod)[-displace], length);</span></div>
<div>
<span style="font-family: Courier New, Courier, monospace;">PrevDayHigh.SetDefaultColor(<wbr></wbr>GetColor(3));</span></div>
<div>
<span style="font-family: Courier New, Courier, monospace;">PrevDayHigh.<wbr></wbr>SetPaintingStrategy(<wbr></wbr>PaintingStrategy.HORIZONTAL);</span></div>
<div>
<span style="font-family: Courier New, Courier, monospace;"><br />
</span></div>
<div>
<span style="font-family: Courier New, Courier, monospace;"><br />
</span></div>
<div>
<span style="font-family: Courier New, Courier, monospace;">plot PrevDayLow = Lowest(low(period =</span></div>
<div>
<span style="font-family: Courier New, Courier, monospace;">aggregationPeriod)[-displace], length);</span></div>
<div>
<span style="font-family: Courier New, Courier, monospace;">PrevDayLow.SetDefaultColor(<wbr></wbr>GetColor(3));</span></div>
<div>
<span style="font-family: Courier New, Courier, monospace;">PrevDayLow.<wbr></wbr>SetPaintingStrategy(<wbr></wbr>PaintingStrategy.HORIZONTAL);</span></div>
<div>
<span style="font-family: Courier New, Courier, monospace;"><br />
</span></div>
<div>
<span style="font-family: Courier New, Courier, monospace;">AddLabel(yes, if Close > PrevDayHigh then ">" else if Close < PrevDayLow then "<" else " ", Color.DARK_ORANGE);</span></div>
</div>
<div style="font-family: arial, sans-serif;">
<br /></div>
<div style="font-family: arial, sans-serif;">
<br /></div>
</div>
<div style="color: #222222; font-family: arial, sans-serif; font-size: small;">
* * * * * * * * * *</div>
<div style="color: #222222; font-size: small;">
<div style="font-family: arial, sans-serif;">
<b>Custom column name:</b> pLOD</div>
<div>
<div style="font-family: arial, sans-serif;">
<b>Definition:</b> If today's low of day is below prior low of day, then red box</div>
<div style="font-family: arial, sans-serif;">
<b>thinkScript code:</b></div>
<div style="font-family: arial, sans-serif;">
<br /></div>
<div>
<div>
<span style="font-family: Courier New, Courier, monospace;"># pLOD broken</span></div>
<div>
<div>
<div>
<span style="font-family: Courier New, Courier, monospace;"># Modified by @grove_under to display as custom column quotes</span></div>
<div>
<span style="font-family: Courier New, Courier, monospace;"># with red background box if today's LOD < pLOD</span></div>
</div>
<div>
<span style="font-family: Courier New, Courier, monospace;"><br />
</span></div>
</div>
<div>
<span style="font-family: Courier New, Courier, monospace;">input aggregationPeriod = AggregationPeriod.DAY;</span></div>
<div>
<span style="font-family: Courier New, Courier, monospace;">input length = 1;</span></div>
<div>
<span style="font-family: Courier New, Courier, monospace;">input displace = -1;</span></div>
<div>
<span style="font-family: Courier New, Courier, monospace;"><br />
</span></div>
<div>
<span style="font-family: Courier New, Courier, monospace;">plot TodayHigh = Highest(high(period =</span></div>
<div>
<span style="font-family: Courier New, Courier, monospace;">aggregationPeriod), length);</span></div>
<div>
<span style="font-family: Courier New, Courier, monospace;"><br />
</span></div>
<div>
<span style="font-family: Courier New, Courier, monospace;">plot TodayLow = Lowest(low(period =</span></div>
<div>
<span style="font-family: Courier New, Courier, monospace;">aggregationPeriod), length);</span></div>
<div>
</div>
<div>
<span style="font-family: Courier New, Courier, monospace;">plot PrevDayHigh = Highest(high(period =</span></div>
<div>
<span style="font-family: Courier New, Courier, monospace;">aggregationPeriod)[-displace], length);</span></div>
<div>
<span style="font-family: Courier New, Courier, monospace;"><br />
</span></div>
<div>
<span style="font-family: Courier New, Courier, monospace;">plot PrevDayLow = Lowest(low(period =</span></div>
<div>
<span style="font-family: Courier New, Courier, monospace;">aggregationPeriod)[-displace], length);</span></div>
<div>
<span style="font-family: Courier New, Courier, monospace;"><br />
</span></div>
<div>
<span style="font-family: Courier New, Courier, monospace;"># Assign color to quote background</span></div>
<div>
<span style="font-family: Courier New, Courier, monospace;">assignBackgroundColor(if TodayLow < PrevDayLow then color.dark_red else color.current);</span></div>
<div>
<span style="font-family: Courier New, Courier, monospace;"><br />
</span></div>
<div>
<span style="font-family: Courier New, Courier, monospace;">AddLabel(yes, if TodayLow < PrevDayLow then "pLOD" else " ", Color.DARK_ORANGE);</span></div>
<div style="font-family: arial, sans-serif;">
<br /></div>
</div>
<div style="font-family: arial, sans-serif;">
<br /></div>
</div>
</div>
<div style="color: #222222; font-family: arial, sans-serif; font-size: small;">
* * * * * * * * * *</div>
<div style="color: #222222; font-family: arial, sans-serif; font-size: small;">
<b>Custom column name:</b> pHOD</div>
<div style="color: #222222; font-family: arial, sans-serif; font-size: small;">
<b>Definition:</b> If today's high of day is above prior high of day, then display green box with pHOD</div>
<div style="color: #222222; font-family: arial, sans-serif; font-size: small;">
<b>thinkScript code:</b></div>
<div style="color: #222222; font-family: arial, sans-serif; font-size: small;">
<br /></div>
<div style="color: #222222; font-size: small;">
<div>
<span style="font-family: Courier New, Courier, monospace;"># pHOD broken</span></div>
<div>
<div>
<div>
<span style="font-family: Courier New, Courier, monospace;"># Modified by @grove_under to display as custom column quotes</span></div>
<div>
<span style="font-family: Courier New, Courier, monospace;"># with red background box if today's HOD > pHOD</span></div>
</div>
<div>
<span style="font-family: Courier New, Courier, monospace;"><br />
</span></div>
</div>
<div>
<span style="font-family: Courier New, Courier, monospace;">input aggregationPeriod = AggregationPeriod.DAY;</span></div>
<div>
<span style="font-family: Courier New, Courier, monospace;">input length = 1;</span></div>
<div>
<span style="font-family: Courier New, Courier, monospace;">input displace = -1;</span></div>
<div>
<span style="font-family: Courier New, Courier, monospace;"><br />
</span></div>
<div>
<span style="font-family: Courier New, Courier, monospace;">plot TodayHigh = Highest(high(period =</span></div>
<div>
<span style="font-family: Courier New, Courier, monospace;">aggregationPeriod), length);</span></div>
<div>
<span style="font-family: Courier New, Courier, monospace;"><br />
</span></div>
<div>
<span style="font-family: Courier New, Courier, monospace;">plot TodayLow = Lowest(low(period =</span></div>
<div>
<span style="font-family: Courier New, Courier, monospace;">aggregationPeriod), length);</span></div>
<div>
<span style="font-family: Courier New, Courier, monospace;"><br />
</span></div>
<div>
<span style="font-family: Courier New, Courier, monospace;">plot PrevDayHigh = Highest(high(period =</span></div>
<div>
<span style="font-family: Courier New, Courier, monospace;">aggregationPeriod)[-displace], length);</span></div>
<div>
<span style="font-family: Courier New, Courier, monospace;"><br />
</span></div>
<div>
<span style="font-family: Courier New, Courier, monospace;">plot PrevDayLow = Lowest(low(period =</span></div>
<div>
<span style="font-family: Courier New, Courier, monospace;">aggregationPeriod)[-displace], length);</span></div>
<div>
<span style="font-family: Courier New, Courier, monospace;"><br />
</span></div>
<div>
<span style="font-family: Courier New, Courier, monospace;"># Assign color to quote background</span></div>
<div>
<span style="font-family: Courier New, Courier, monospace;">assignBackgroundColor(if TodayHigh > PrevDayHigh then color.dark_green else color.current);</span></div>
<div>
<span style="font-family: Courier New, Courier, monospace;"><br />
</span></div>
<div>
<span style="font-family: Courier New, Courier, monospace;">AddLabel(yes, if TodayHigh > PrevDayHigh then "pHOD" else " ", Color.DARK_ORANGE);</span></div>
<div style="font-family: arial, sans-serif;">
<br /></div>
</div>
Grove Underhttp://www.blogger.com/profile/11996363914551744557noreply@blogger.com9tag:blogger.com,1999:blog-6579146808262144709.post-33698324851451759332014-09-14T15:15:00.000-04:002014-09-14T15:15:42.660-04:00How I Use Tradervue with BOWS Bootcamp<div>
<div>
Last month, I enrolled into the Bulls on Wall Street (BOWS) 60-day Bootcamp training program for daytrading stocks, and it has surprisingly exceeded my expectations. After years of studying trading and joining various chatrooms, I initially thought, what else could I really learn or gain? </div>
<div>
<br /></div>
<div>
Before joining, I asked several prior students and they all said the same -- the Bootcamp was well worth the time and cost. And yes, I was still a bit skeptical, I thought I was different.</div>
<div>
<br /></div>
<div>
I was wrong. </div>
<div>
<br /></div>
<div>
I've realized that you never stop learning something new, even if you think you already know a lot. A surprise value-add has been the highly focused / low noise content within the private Bootcamp Google+ community from all the current and prior students, where I continue to learn and also try to help pay it forward.</div>
<div>
<br /></div>
<div>
I'll write more about the Bootcamp and why I joined in a future post. </div>
<div>
<br /></div>
<div>
One interesting and reassuring topic within the Bootcamp has been the use of Tradervue for journaling trades. I've written much about Tradervue in the <a href="http://grovetrades.blogspot.com/search?q=tradervue">past here</a> and it has been great to dust off some of my old Tradervue tags from back when I traded stocks more actively. </div>
<div>
<br /></div>
</div>
<div>
<div>
Posted below is a slightly modified crosspost I made to the private BOWS community regarding how I'm using Tradervue now to create and refine my trading plan.</div>
<div>
<br /></div>
<div>
* * * * *</div>
<div>
<div>
<br /></div>
<div>
<b><span style="color: red;">OVERVIEW</span></b></div>
<div>
<i>"Better decisions through data"</i> was the motto for a company I used to work for many years ago. It's something that I still strongly believe. And analyzing data has been a big part of helping me to make better trading decisions.</div>
<div>
<br /></div>
<div>
In this post, I'll explain the Tradervue analysis of my SIM (simulated) trades to determine whether the setups I outlined in my initial trading goals are still applicable. </div>
<div>
<br /></div>
<div>
Based on the performance of the setups, I will then create and refine my trading plan. This is working somewhat "backwards", but given my trading background, this process works for me.</div>
<div>
<br /></div>
<div>
<br /></div>
<div>
<b><span style="color: red;">PERFORMANCE MEASURED IN R-MULTIPLES, NOT $'s</span></b></div>
<div>
<div>
Trading in the Clique Fund (BOWS hedge fund) is my goal, so the trading conditions (trading share size, daily loss limits, etc.) I used are similar to initial conditions when I go live. </div>
<div>
<br /></div>
<div>
However, I still chose to measure my performance on the R-multiple scale within Tradervue, which is simply a ratio of how much you made/lost compared to what you initially risked. </div>
<div>
<br /></div>
<div>
Examples: </div>
<div>
a) Risk $10 and make $20, you made +2.0R</div>
<div>
b) Risk $10 and lose $5, you made -0.5R</div>
<div>
<br /></div>
<div>
That way, I focus on reward/risk for every trade, NOT absolute $'s. It's easy to brainwash yourself and become overconfident with big fat $ returns under SIM, only to get smacked hard with reality when you go live. </div>
</div>
<div>
<br /></div>
<div>
It's also harder to "fool yourself" with the R-multiple returns. For example, you can make up a big losing day with one last huge unrealistic 50,000 share winning trade, whereas the R-multiple returns will still likely show you with a losing day. </div>
<div>
<br /></div>
<div>
I've fooled myself too many times in the past, so I've learned some lessons. Use Tradervue or any other journaling tool/spreadsheet to look at the cold hard facts. </div>
<div>
<br /></div>
<div>
<br /></div>
<div>
<b><span style="color: red;">TRADERVUE TAGS</span></b></div>
<div>
It was a decision filled with pros/cons, but I decided to reuse many of the tags from my prior experiences in stocks. Therefore, some of the tags you see in this analysis may not be a part of the BOWS vernacular.</div>
<div>
<br /></div>
<div>
Once the tags are entered for each trade, it's very simple to filter the results to only view or report the performance for a specific subset of accounts.</div>
<div>
<br /></div>
<div>
Example: </div>
<div>
To only show or report on trades that were long bullflags that were in a ascending triangle, I would type in the tag field:</div>
<div>
<br /></div>
<div>
<span style="font-family: Courier New, Courier, monospace;">long AND bullflag AND asctri</span></div>
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<b><span style="color: red;">OVERALL SIM RESULTS</span></b></div>
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<a href="http://4.bp.blogspot.com/-cyAFcvlWMqw/VBXe-pG34gI/AAAAAAAAAu8/Rtqyoln6ChE/s1600/BOWS%2Bstats%2B9-13-2014.png" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img border="0" src="http://4.bp.blogspot.com/-cyAFcvlWMqw/VBXe-pG34gI/AAAAAAAAAu8/Rtqyoln6ChE/s1600/BOWS%2Bstats%2B9-13-2014.png" height="184" width="320" /></a></div>
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<a href="http://2.bp.blogspot.com/-ONm1BaaDOkA/VBXfGMsILyI/AAAAAAAAAvE/Y2K_uNQWM6s/s1600/BOWS%2Boverview%2Bcharts%2B9-13-2014.png" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img border="0" src="http://2.bp.blogspot.com/-ONm1BaaDOkA/VBXfGMsILyI/AAAAAAAAAvE/Y2K_uNQWM6s/s1600/BOWS%2Boverview%2Bcharts%2B9-13-2014.png" height="228" width="320" /></a></div>
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<div>
* Results are based on SIM trades (beware of the *fantasy fills*!), gross (no commissions), 25-100 shares per trade (with few rare 200 share trades), $150/gross daily max loss. My goal is to get used to initial Clique fund conditions.</div>
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* R-multiple return was +59, based on 400 trades from 8/19/2014 to 9/12/2014. "Probability of random chance" = 4%, so results are statistically valid.</div>
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<div>
* If a consistent 1% of portfolio was risked per trade (R=1%), that's an almost 60% return. And if 2% was risked per trade, it's almost 120% return. But this is NOT a realistic assumption -- it's hard to daytrade with a consistent R value. Reality for me will likely be more like 0.5%.</div>
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<br /></div>
<div>
* I overtraded, surprise! And only trading 100 shares on lower priced stocks, even if in super-juiced-momo-mode, is very challenging to make decent <i>net</i> dollar returns consistently. Commissions and errors also start to compound dramatically with overtrading.</div>
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<br /></div>
<div>
* Winning accuracy was about 50%, which is not great given the lower profit factor value. I was not as selective as I could have been. In the back of my mind, I was thinking, "I'm collecting data, so I'll just do this to see what happens." Not a good habit to make.</div>
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<b><span style="color: red;">KEY FINDINGS</span></b></div>
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<div class="separator" style="clear: both; text-align: center;">
<a href="http://1.bp.blogspot.com/-oGAMgTlQJfc/VBXfVdhAYzI/AAAAAAAAAvM/6qByT8HvzCQ/s1600/BOWS%2Binitial%2Bperformance%2B9-13-2014.png" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img border="0" src="http://1.bp.blogspot.com/-oGAMgTlQJfc/VBXfVdhAYzI/AAAAAAAAAvM/6qByT8HvzCQ/s1600/BOWS%2Binitial%2Bperformance%2B9-13-2014.png" height="320" width="211" /></a></div>
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<div>
Under my initial goals, I thought focusing on flags, ORB, and 123 tops/bottoms would generate the best results. </div>
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<br /></div>
<div>
WRONG! Well, kinda... Here are some key findings.</div>
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<br /></div>
<div>
* The long side performance dominated over the short side. Perhaps that's just the current condition of the markets, as well as bias of stocks. Or maybe the chatroom's bias.</div>
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<br /></div>
<div>
* Therefore, the bull flag and 123bottom setups also significantly outperformed the short side of those respective setups.</div>
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<br /></div>
<div>
* I always thought the bearish "h setup" was a good setup for me, but based on the past month, that's WRONG. Although that setup might do better if overall markets go into correction mode.</div>
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<br /></div>
<div>
* The ORB setups were profitable overall, but didn't generate a decent average R per trade. In addition, some of those ORB setups should have gotten runners that run the entire day. Likely I'm doing it wrong.</div>
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<br /></div>
<div>
* The triple tap breakouts as well as the sideways consolidation type flags were surprise solid performers. However, need bigger sample for the triple tap breakouts.</div>
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<br /></div>
<div>
* I thought I'd be a pretty good trader of 1min charts by now, but the data clearly says STAY AWAY. I need to focus primary on the higher timeframes, and rarely use 1min except when absolutely necessary.</div>
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<br /></div>
<div>
* Revenge and rogue type trades were a small percentage (< 4%) of overall trades. But still, total R-multiple profits could have been about 20% higher without them, <b>these trades are a huge negative impact</b>!</div>
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<b><span style="color: red;"><br /></span></b></div>
<div>
<b><span style="color: red;">OTHER COMMENTS AND REPORTS</span></b></div>
<div>
* There is an opportunity to do an even deeper dive to optimize what combination of tags do best, as well as time of day type analysis, and more. This will be something to explore in the near future. </div>
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<br /></div>
<div>
* I will need to focus on creating tags to help determine how best to optimize exits. <i>Exits are arguably more difficult than entries.</i> </div>
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<div>
* Additional reports from the upgraded version of Tradervue have been attached. These are just a very small number of interesting reports that could be used to further refine your trading, I've only scratched the surface. Most of the reports should be self explanatory, but please feel free to leave questions in the comments.</div>
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<table align="center" cellpadding="0" cellspacing="0" class="tr-caption-container" style="margin-left: auto; margin-right: auto; text-align: center;"><tbody>
<tr><td style="text-align: center;"><a href="http://1.bp.blogspot.com/-Vq_13gnWptY/VBXfiGWa95I/AAAAAAAAAvg/d2rZWk_q8Lk/s1600/BOWS%2Bavg%2BPL%2Btrend%2B9-13-2014.png" imageanchor="1" style="margin-left: auto; margin-right: auto;"><img border="0" src="http://1.bp.blogspot.com/-Vq_13gnWptY/VBXfiGWa95I/AAAAAAAAAvg/d2rZWk_q8Lk/s1600/BOWS%2Bavg%2BPL%2Btrend%2B9-13-2014.png" height="193" width="320" /></a></td></tr>
<tr><td class="tr-caption" style="text-align: center;">A trend report of average P&L</td></tr>
</tbody></table>
<table align="center" cellpadding="0" cellspacing="0" class="tr-caption-container" style="margin-left: auto; margin-right: auto; text-align: center;"><tbody>
<tr><td style="text-align: center;"><a href="http://4.bp.blogspot.com/-qCrDczexPdk/VBXfhm3m3oI/AAAAAAAAAvU/StEvlEQ7vWA/s1600/BOWS%2BMAE%2Bstop%2Bchart%2B9-13-2014.png" imageanchor="1" style="margin-left: auto; margin-right: auto;"><img border="0" src="http://4.bp.blogspot.com/-qCrDczexPdk/VBXfhm3m3oI/AAAAAAAAAvU/StEvlEQ7vWA/s1600/BOWS%2BMAE%2Bstop%2Bchart%2B9-13-2014.png" height="202" width="320" /></a></td></tr>
<tr><td class="tr-caption" style="text-align: center;">Determine optimal stop amount</td></tr>
</tbody></table>
<table align="center" cellpadding="0" cellspacing="0" class="tr-caption-container" style="margin-left: auto; margin-right: auto; text-align: center;"><tbody>
<tr><td style="text-align: center;"><a href="http://4.bp.blogspot.com/-cWXp6q1KuRo/VBXfhpSA2fI/AAAAAAAAAvc/Qu92aJyLWwY/s1600/BOWS%2BMAE%2Btrend%2B9-13-2014.png" imageanchor="1" style="margin-left: auto; margin-right: auto;"><img border="0" src="http://4.bp.blogspot.com/-cWXp6q1KuRo/VBXfhpSA2fI/AAAAAAAAAvc/Qu92aJyLWwY/s1600/BOWS%2BMAE%2Btrend%2B9-13-2014.png" height="204" width="320" /></a></td></tr>
<tr><td class="tr-caption" style="text-align: center;">Trend of average heat taken on trade (MAE)</td></tr>
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<table align="center" cellpadding="0" cellspacing="0" class="tr-caption-container" style="margin-left: auto; margin-right: auto; text-align: center;"><tbody>
<tr><td style="text-align: center;"><a href="http://1.bp.blogspot.com/-45EhBU6A1WA/VBXfhuGmdzI/AAAAAAAAAvY/tFNxqsolgew/s1600/BOWS%2BMFE%2Bchart%2B9-13-2014.png" imageanchor="1" style="margin-left: auto; margin-right: auto;"><img border="0" src="http://1.bp.blogspot.com/-45EhBU6A1WA/VBXfhuGmdzI/AAAAAAAAAvY/tFNxqsolgew/s1600/BOWS%2BMFE%2Bchart%2B9-13-2014.png" height="202" width="320" /></a></td></tr>
<tr><td class="tr-caption" style="text-align: center;">Evidence of trade mis-management -- letting winners turn to losers</td></tr>
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<table align="center" cellpadding="0" cellspacing="0" class="tr-caption-container" style="margin-left: auto; margin-right: auto; text-align: center;"><tbody>
<tr><td style="text-align: center;"><a href="http://4.bp.blogspot.com/-xz3lw8vMpsw/VBXfiDtc4bI/AAAAAAAAAvk/nM8r3ed7hUs/s1600/BOWS%2Btags%2B9-13-2014.png" imageanchor="1" style="margin-left: auto; margin-right: auto;"><img border="0" src="http://4.bp.blogspot.com/-xz3lw8vMpsw/VBXfiDtc4bI/AAAAAAAAAvk/nM8r3ed7hUs/s1600/BOWS%2Btags%2B9-13-2014.png" height="248" width="320" /></a></td></tr>
<tr><td class="tr-caption" style="text-align: center;">Report based on tags</td></tr>
</tbody></table>
<br /></div>
<div>
<b><span style="color: red;">NEXT STEPS</span></b></div>
<div>
Now that I have a clearer idea of what works and what doesn't, the findings from above will be used to modify and tighten up my initial trading plan. </div>
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<br /></div>
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<b>Focus on your strengths</b> is a common mantra. Therefore: </div>
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<blockquote style="border: none; margin: 0px 0px 0px 40px; padding: 0px;">
<i>I will most likely focus my trading plan on the setups with the magenta values under the PF (profit factor) column of the INITIAL PERFORMANCE BREAKDOWN report. </i></blockquote>
<div class="separator" style="clear: both; text-align: center;">
<a href="http://4.bp.blogspot.com/-u4bT0ksz8Vw/VBXnz8Q5A1I/AAAAAAAAAwI/77Na_n3t_O0/s1600/BOWS%2Bsetups%2Bin%2Bfocus%2B9-14-2014.png" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img border="0" src="http://4.bp.blogspot.com/-u4bT0ksz8Vw/VBXnz8Q5A1I/AAAAAAAAAwI/77Na_n3t_O0/s1600/BOWS%2Bsetups%2Bin%2Bfocus%2B9-14-2014.png" height="303" width="320" /></a></div>
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Why should I use a lot of energy to try and become a profitable 1 minute chart trader when I'm already doing pretty well with other setups? </div>
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Markets ebb and flow -- what works now may not work in the future and vice versa. So all these setups will continue to be monitored, and as the market changes, adjustments will most likely be made in the future.</div>
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Grove Underhttp://www.blogger.com/profile/11996363914551744557noreply@blogger.com7tag:blogger.com,1999:blog-6579146808262144709.post-9561011091426141492014-09-05T22:08:00.000-04:002014-09-05T22:08:15.180-04:00Response from Spread The Trend<div class="tr_bq">
As was clear in my <a href="http://grovetrades.blogspot.com/2014/08/after-3-years-im-still-here.html">last post</a>, as well as some of the comments under the <a href="http://grovetrades.blogspot.com/2013/10/review-of-spreadthetrendcom.html">Spread The Trend review</a> (originally posted in October 2013), there have been some rough patches recently. This happens to all traders, funds, investors, etc. Participate in the markets long enough, and no one is immune to experiencing challenging times at some time or another.</div>
<br />
Spread The Trend replied under the comments of the original review. I thought it would be good to promote it to a blog post, since there are some clarifications, explanations, and admissions that will be of value to some readers. <br />
<br />
Here is the comment in its entirety:<br />
<blockquote>
<i><span style="background-color: white; color: #444444; font-family: Arial, Tahoma, Helvetica, FreeSans, sans-serif; font-size: 13px; line-height: 18.2000007629395px;">We are responding to the comments made by Marco Starr whose name is unfamiliar to us. When a trade is rolled, you close one position and then simultaneously open another position. The losses being referred to are paper losses. A true realized loss is not incurred unless someone chose to simply close all positions and not roll their trades. We are currently down for the year with implied volatility being anemic but our final tally is far from solidified. We have also been trading in and out of several positions to help reduce the cost of our rolls and being as conscientious as possible to our subscribers. </span> </i></blockquote>
<blockquote>
<i><span style="background-color: white; color: #444444; font-family: Arial, Tahoma, Helvetica, FreeSans, sans-serif; font-size: 13px; line-height: 18.2000007629395px;">In regards to “wiping out several years of gains” this seems to be an over reaching statement. You only need to view our track record page to see that we are well ahead of the game if you consider the longer and even medium term. Now had someone only been with our service for less than a year, then yes it is possible that their account could've temporarily dropped below the value they started with. <a href="http://spreadthetrend.com/yellow-condor-history">http://spreadthetrend.com/yellow-condor-history</a> </span> </i></blockquote>
<blockquote>
<span style="background-color: white; color: #444444; font-family: Arial, Tahoma, Helvetica, FreeSans, sans-serif; font-size: 13px; line-height: 18.2000007629395px;"><i>All along it was explained to subscribers what our plan of action was and why our decisions combined with market forces lead to these outcomes. In all fairness, perfection in trading is difficult and we stand by our longer-term track record. Of course, we do our best to try and avoid getting into stressful situations altogether. We also believe we could have done a better job as well and have taken “key learning’s” to heart from this experience.</i></span></blockquote>
<blockquote>
<i><span style="background-color: white; color: #444444; font-family: Arial, Tahoma, Helvetica, FreeSans, sans-serif; font-size: 13px; line-height: 18.2000007629395px;">The majority of auto trade subscribers, or over ¾, did fill on the roll in question. As for those folks trading their own accounts the results seemed mixed as some did fill and some did not. It’s most common for everyone to fill or not fill as a whole but on rare occasions sometimes not everyone will get filled all in the same day. This can possibly be due to the timing of the order being sent or how quickly the broker is able to submit the order, or it could even have something to do with the liquidity in the market at the time the order is processed.</span> </i></blockquote>
<blockquote>
<i><span style="background-color: white; color: #444444; font-family: Arial, Tahoma, Helvetica, FreeSans, sans-serif; font-size: 13px; line-height: 18.2000007629395px;">When we see that the mass majority is filling that tells us that our order is priced fairly and correctly. If a broker did not fill, then we ask the question why? There are tools available where one can go back and see the amount of volume traded on these strikes, which shows there were many fills. Could Spread The Trend have sent the order earlier? In hindsight, probably yes. However, the process that has been successful for many years dictated that waiting was appropriate. We desired a different outcome as well and these trades impact our own personal accounts. </span> </i></blockquote>
<blockquote>
<i><span style="background-color: white; color: #444444; font-family: Arial, Tahoma, Helvetica, FreeSans, sans-serif; font-size: 13px; line-height: 18.2000007629395px;">All trades are posted on our website in the Member's section under current open positions with all of the details in their entirety. We do not post the trades to our closed positions page until the entire trade has been closed out and as of Mr. Starr’s posting and this posting; the entire trade has not yet been closed out.</span> </i></blockquote>
<blockquote>
<span style="background-color: white; color: #444444; font-family: Arial, Tahoma, Helvetica, FreeSans, sans-serif; font-size: 13px; line-height: 18.2000007629395px;"><i>We offer a one month $1 trial so folks can get comfortable with the strategy and always ask that individuals add capital gradually. One may review both open and closed trades and decide if the newsletter is a good choice for them. Spread The Trend realizes that this period was stressful but we also have many winning weeks, months, and years on record. However, that concept that we were a “deer in headlights”, “virtually sunk”, or “listing” is disingenuous to our long term subscribers who are somewhat disappointed but are still extremely profitable and content with our strategy.</i></span></blockquote>
Grove Underhttp://www.blogger.com/profile/11996363914551744557noreply@blogger.com2tag:blogger.com,1999:blog-6579146808262144709.post-71885174198789544262014-08-23T19:49:00.001-04:002014-08-23T19:49:14.145-04:00After 3 years, I'm still here<div style="color: #222222; font-family: arial; font-size: small;">
<i><span style="color: blue;">[NOTE: This was originally written about 3-4 months ago, </span></i><i><span style="color: blue;">but not posted until now...I've been admittedly a lazy blogger)</span></i><i><span style="color: blue;">. Material changes have taken place since then and noted with</span> <span style="color: red;">red text</span><span style="color: blue;">.]</span></i></div>
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<a href="http://1.bp.blogspot.com/-lrEpQHEnr8U/U_knqgX-i6I/AAAAAAAAAtc/sefwxGha0YM/s1600/3rd-birthday-cake2.jpg" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img border="0" src="http://1.bp.blogspot.com/-lrEpQHEnr8U/U_knqgX-i6I/AAAAAAAAAtc/sefwxGha0YM/s1600/3rd-birthday-cake2.jpg" /></a></div>
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Yes, I haven't been blogging much, but I'm still here. </div>
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<div style="color: #222222; font-family: arial; font-size: small;">
It has been 3 years since I've gotten back into trading from a long time off, and it sure has been an interesting journey. Late last year, I hit a bump in the road of life where my health condition lead me down a path with potentially very negative implications. </div>
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There were many times when I wondered about my worst case scenario: how my passing away would burden my wife and 2 young children immensely; how devastated my children would be; how I would never be able to see them graduate school, attend their wedding, see their children, and so on. </div>
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Oh those were depressing times. Although I was still involved with the markets, it obviously didn't mean as much, and my performance reflected it. During those times, trading became somewhat of a distraction from reality. In hindsight, I should have shut it down completely.</div>
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After many tests, my heath issues luckily turned out to be nothing major, and I have pretty much worked myself back to "normal." But it sure was a big wake up call and reminder not to take health for granted.</div>
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Seize the day. This moment, right now, you own it.</div>
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* * * * *</div>
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Back to the world of trading, my <a href="http://grovetrades.blogspot.com/2013/06/making-turn-2013-trading-resolutions.html" style="color: #1155cc;" target="_blank">goals and plans from last year</a> are still in progress. And I have continued to approach trading within 3 key areas:</div>
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<b>1) Discretionary trading:</b> </div>
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- Continue to be consistently profitable, but sizing up slowly and organically</div>
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- Focusing primarily on weekly options, with some swing trading via stocks </div>
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- Creates a source of ideas for analysis and system development</div>
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<span style="color: red;"><br /></span></div>
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<span style="color: red;">UPDATE 8/2014: </span></div>
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<span style="color: red;">- Recently had too much volatility with weekly options, so I'm putting it on hold with a loss after being up as much as a much as couple hundred percent net with a small account. The losses were all due to commissions, and I was gross profitable overall, but that doesn't count</span></div>
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<span style="color: red;">- Given the high level of difficult trading weekly options, I consider this experience and outcome successful with many lessons learned</span></div>
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<span style="color: red;">- With swing trading, YTD performance has been stuck, with all time equity highs acting as strong resistance</span></div>
</div>
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<span style="color: red;">- Moving back to focusing on short term stock trading, which is how I initially started. Going full circle. </span></div>
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<span style="color: red;">- This month, I've joined a trading Boot Camp program just to shake things up, and after starting with low expectation, I've been very positively surprised -- the program has greatly exceeded my expectations. More about this in the future</span></div>
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<b>2) Autotrade programs:</b> </div>
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- Expanded and diversified this year beyond credit spread options to include futures</div>
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- Added to size up capital </div>
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- Overall, has been profitable year to date</div>
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- Tracking/analyzing the signals from various systems have created a source of ideas</div>
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<span style="color: red;">UPDATE 8/2014: </span></div>
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<span style="color: red;">- As noted in the comments section of the Spread The Trend post, this service has recently experience significant losses. Letting the dust settle, and looking to write an update soon</span></div>
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<span style="color: red;">- My options credit spread account is currently down over -40% YTD. Will monitor over next few months to determine next actions</span></div>
<div style="color: #222222; font-family: arial; font-size: small;">
<span style="color: red;">- The futures autotrading programs are up about breakeven YTD since starting this year </span><span style="color: red;">(they were up +35% as recently as last month)</span><span style="color: red;">, although it was up as much as +60% earlier this year (it's very volatile)</span></div>
<div style="color: #222222; font-family: arial; font-size: small;">
<br /></div>
<div style="color: #222222; font-family: arial; font-size: small;">
<br /></div>
<div style="color: #222222; font-family: arial; font-size: small;">
<b>3) System development / quantitative analysis:</b></div>
<div style="color: #222222; font-family: arial; font-size: small;">
- Programmed a few algo type systems, some with surprisingly solid results</div>
<div style="color: #222222; font-family: arial; font-size: small;">
- But not quite ready for prime time</div>
<div style="color: #222222; font-family: arial; font-size: small;">
- Positive benefit, program backtesting of ideas and concepts useful for discretionary trading</div>
<div style="color: #222222; font-family: arial; font-size: small;">
- Great area of focus when I'm in a slump with discretionary trading</div>
<div style="color: #222222; font-family: arial; font-size: small;">
<br /></div>
<div style="color: #222222; font-family: arial; font-size: small;">
<span style="color: red;">UPDATE 8/2014:</span></div>
<div style="color: #222222; font-family: arial; font-size: small;">
<span style="color: red;">- Scaled back significantly recently. Will need to reevaluate longer term goals</span></div>
<div style="color: #222222; font-family: arial; font-size: small;">
<span style="color: red;">- Here's my mental road block -- after all these years, I've come to believe that solid discretionary trading can provide returns about 4x vs. a solid mechanical system</span></div>
<div style="color: #222222; font-family: arial; font-size: small;">
<span style="color: red;">- But discretionary trading can have significantly more wear and tear on the psychological and emotional capital. There are definitely tradeoffs</span></div>
<div style="color: #222222; font-family: arial; font-size: small;">
<br /></div>
<div style="color: #222222; font-family: arial; font-size: small;">
<br />
How quickly things can change over a few month period. But that can be pretty much "business as usual" in the world of trading.</div>
Grove Underhttp://www.blogger.com/profile/11996363914551744557noreply@blogger.com4tag:blogger.com,1999:blog-6579146808262144709.post-84105905214086207812013-10-22T14:26:00.003-04:002013-11-27T14:49:26.909-05:00Review of SpreadTheTrend.comIn my prior post about <a href="http://grovetrades.blogspot.com/2013/10/adventures-in-autotrading-services.html">Adventures in Autotrading Services</a>, I discussed my overall experience to date with a handful of autotrading newsletter services. And in conclusion, mentioned how one program has actually delivered solid results so far. That service is <a href="http://spreadthetrend.com/">SpreadTheTrend.com</a>.<br />
<br />
<div>
<span style="color: red;"><b>OVERVIEW</b></span> </div>
<div>
SpreadTheTrend is a iron condor/credit spread newsletter services run by Derek that trades the SPX index options. Derek posts on Twitter under @spreadthetrend, doesn't have a chatroom, and communicates primarily by email, although he does publish a phone number which I've never tried. <br />
<br />
<span style="color: red;"><b>THE WEBSITE</b></span><br />
The website is in the process of being revamped, so the information below could become somewhat dated soon.<br />
<ul>
<li>The non-member/public portion of the website has some helpful information including a very helpful FAQ's, how to get getting started, performance page, etc.<br />
</li>
<li>The members section contains a couple dozen or so tutorials diving into more details regarding trading credit spread options strategies. There's a lot of useful information in there and it's not overly technical, so it's relatively easy for a beginner with some basic options knowledge to understand. But since I'm autotrading, I admit I haven't studied these posts as much as I should. Maybe it's time for me to revisit them.</li>
<li>The <a href="http://www.spreadthetrend.com/TrackRecord.aspx" target="_blank">performance</a> page format has changed starting this year. However, you can still see the prior years in the older (and less detailed but easier to read) format. I started with this program in Q1/2013, so I don't have actual performance results prior to that time. But from what I have heard from others, the posted performance on the website going back a few years matches their actual account performance very closely.</li>
</ul>
<span style="color: red;"><b>COMMUNICATIONS</b></span><br />
As mentioned earlier, the primary source of communications is via email. Since I subscribe to his autotrading program for hands free execution of his signals, my interaction with Derek has been very minimal, only via email. His response time has been timely, usually within several hours or less during the weekday.<br />
<br />
For those who manually execute his alerts, there are examples of how his alerts are emailed <a href="http://www.spreadthetrend.com/TrackRecord.aspx" target="_blank">on his website</a>. Pretty straightforward.<br />
<br />
<span style="color: red;"><b>MARKET COMMENTARY</b></span><br />
He also sends out market commentary on a weekly basis, or more frequently as conditions change. I admit, I was initially ignoring his market commentary emails since I was in autotrader mode and didn't really want to know what's behind his signals -- I just wanted results.<br />
<br />
However, I now look forward to reading his market commentary. His emails are far from dry and technical -- they often have a entertaining and sometimes quirky or snarky tone (I mean this in a positive way), ranging from rants regarding the "cabal" propping the markets, some subscribers getting too nervous about current positions (or complaining about being in cash too long), or whatever is the topic de jour. But in the end, his commentaries consistently contain very valid insights and perspectives.<br />
<br />
He often says he has no idea what the market is going to do, which
might lead you to initially wonder whether he's the right guy to lead
the ship across the ocean. But read carefully and you'll see that his
commentary is peppered with wise trading wisdom that can only come from
years of trading experience. <br />
<br />
<span style="color: red;"><b>DOESN'T SEEM TO ADVERTISE MUCH</b> </span><br />
For whatever reasons, Derek is yet another newsletter service proprietor who doesn't advertise or market himself very much in his communications. You won't see "BOOM" or "nailed it!" type comments from him. It's hard to tell from his Twitter posts that he even offers a successful alert service. Maybe it's because he's content with his subscriber base, or maybe he'd rather grow based on referrals and focus on trading. I'm finding that a lot of the good services are very low key, and they probably like it that way.<br />
<br />
<span style="color: red;"><b>THE BOTTOM LINE</b></span><br />
Ultimately, just look at his <a href="http://www.spreadthetrend.com/TrackRecord.aspx">past performance</a> and results speak
for itself. I often sense an interesting dichotomy between his market
commentary vs. his timely trade executions, and believe it comes down
to his unique and intuitive feel for the markets, which can change quickly due to market conditions. His trading seems to
be far from mechanical, and that's what I have come to appreciate
about his trading style.<br />
<br />
Here's a breakdown of my P&L based on the autotrading service: <br />
<ul>
<li>$5,959.45 in profits net of commissions since starting in February 2013</li>
<li>About 24% net return year to date since late February, based on a $25k allocation</li>
<li>The net return does not factor in subscription and autotrading fees</li>
<li>I started with a decent drawdown, at one point unrealized losses were around 15-20%. So right off the bat, I was able to see how Derek managed difficult conditions, and in hindsight, he handled the situation very well. Many other similar services panicked and booked big losses.<table align="center" cellpadding="0" cellspacing="0" class="tr-caption-container" style="margin-left: auto; margin-right: auto; text-align: center;"><tbody>
<tr><td style="text-align: center;"><a href="http://1.bp.blogspot.com/-jcZoRmNHvLo/UpZLmAFaKYI/AAAAAAAAApg/msc7ZY4WhwI/s1600/Spreadthetrend+10-15-2013.png" imageanchor="1" style="margin-left: auto; margin-right: auto;"><img border="0" height="283" src="http://1.bp.blogspot.com/-jcZoRmNHvLo/UpZLmAFaKYI/AAAAAAAAApg/msc7ZY4WhwI/s400/Spreadthetrend+10-15-2013.png" width="400" /></a></td></tr>
<tr><td class="tr-caption" style="text-align: center;">P&L curve generated by TraderVue.com</td></tr>
</tbody></table>
</li>
</ul>
<ul>
<li>The report below indicates a 81% winning percentage</li>
<li>However, this is based on how I grouped the various legs of the trades together in Tradervue (which were grouped by expiration month)<br />
</li>
<li>But if you track the trades based on how they rolled (if applicable), the accuracy would be higher</li>
<li>The profit factor is a very respectable 2.50</li>
<li>And the probability of random chance is < 10%, meaning these results are not likely due to luck<div style="text-align: left;">
</div>
</li>
</ul>
<table align="center" cellpadding="0" cellspacing="0" class="tr-caption-container" style="margin-left: auto; margin-right: auto; text-align: center;"><tbody>
<tr><td style="text-align: center;"><a href="http://4.bp.blogspot.com/-6dazmL3gPSs/UpZLmOTlo_I/AAAAAAAAApk/3zEO3BcXkdo/s1600/SpreadTheTrend+stats+10-15-2013.png" imageanchor="1" style="margin-left: auto; margin-right: auto;"><img border="0" height="185" src="http://4.bp.blogspot.com/-6dazmL3gPSs/UpZLmOTlo_I/AAAAAAAAApk/3zEO3BcXkdo/s400/SpreadTheTrend+stats+10-15-2013.png" width="400" /></a></td></tr>
<tr><td class="tr-caption" style="text-align: center;">Statistics report generated by TraderVue.com</td></tr>
</tbody></table>
<span style="color: red;"><b>MOVING FORWARD</b></span><br />
SpreadTheTrend is a keeper, assuming the results remain within acceptable historical ranges, which I believe they most likely will. Although my primary goal is to diversify with other autotrading programs, I will likely scale up my investment in this program next year. So if you're looking for a solid program to begin autotrading credit spreads and iron condors, SpreadTheTrend would be a very good program to consider. <br />
<br /></div>
<div>
<div>
</div>
</div>
Grove Underhttp://www.blogger.com/profile/11996363914551744557noreply@blogger.com63tag:blogger.com,1999:blog-6579146808262144709.post-40460500129131399372013-10-22T14:26:00.001-04:002013-10-22T14:28:22.320-04:00Adventures in Autotrading Services<div>
Currently, I have 3 ongoing trading initiatives:<br />
<ol>
<li><b>Discretionary</b>: Discretionary trading strategies -- primary swing trading stocks and stock options. </li>
<li><b>Algo systems</b>: Develop and manage mechanical trading systems</li>
<li><b>Autotrading</b>: Research and invest in autotrading newsletter services</li>
</ol>
<div dir="ltr">
One of my goals for this year was to explore "autotrading" services/newsletters. Since "it" (auto trade, autotrading, automated trading, signal providers, trade copy, etc.) can mean different things to everyone, I'll define it as an alert newsletter service you subscribe to, which then executes their trade recommendations in your brokerage account automatically.</div>
<div dir="ltr">
<br /></div>
<div dir="ltr">
It's an interesting space -- somewhat between alert service and chatrooms on one end, vs. managed futures accounts and perhaps some types of hedge funds on the other end. </div>
<div dir="ltr">
<br /></div>
<div dir="ltr">
<b>NOTE</b>: One key point -- like most chatrooms, autotrading services are usually not operated by registered investment advisors, so be aware of your risks (very high) and recourse options (very low).</div>
<div dir="ltr">
<br /></div>
<div dir="ltr">
One of the main reasons for investigating autotrading services is to try and diversify my trading "business" and to hopefully recapture more time for my family as well as non-trading goals. We'll see if that's possible in such an all encompassing field such as trading, but I going to give it my best.</div>
<div dir="ltr">
<br /></div>
<div dir="ltr">
This year, I've participated in a handful of autotrading services in various asset classes, including index options, stock options, stocks, and futures. This "experiment" was all conducted with actual live accounts, since ultimately, there's only one way to find out how a program performs.</div>
<div dir="ltr">
<br /></div>
<div dir="ltr">
The autotrading world is a much bigger business than I expected, and I've only scratched the surface. But if you haven't yet explored it, here are a few ways to find out more.</div>
<div dir="ltr">
<br /></div>
<div dir="ltr">
<span style="color: red;"><b>HOW TO RESEARCH</b></span><br />
I've found that the services are generally clustered around a particular asset class (such as stocks, options spreads, forex, etc.). Here are some sources I've found useful for further research:</div>
<ul>
<li><b>Google</b> search "auto trade stocks" or "auto trade options" or "auto trade credit spread" or "iron condor newsletters" or whatever other keywords you can think of. There will be tons of sites that come up. </li>
<li><b>Global-Autotrading.com</b> - this company acts as the agent or middle man between the alert services/newsletters and your broker -- they take what the newsletter recommends, and executes the trade on your behalf at your broker. You can see a list of all the newsletters they cover <a href="http://global-autotrading.com/autotraded-newsletters.html">here</a>. For my autotrading program, I use this intermediary service linked with my brokerage account at Interactive Brokers (IB).</li>
<li><b>Dittotrade.com</b> - this stock and stock options brokerage also acts as a autotrading agent. See a list of newsletters and lead traders that you can follow on <a href="https://www.dittotrade.com/index.php?option=com_content&view=article&id=246&Itemid=294">this webpage</a>. I have an account with Ditto, and have used the account with both a Ditto autotrade service, as well as a standalone brokerage account.</li>
<li> <b>Pro-trading-profits.com</b> - I'm not a member of this site, but they will take actual results from subscribers of newsletters, aggregate it, and provide that information to their subscribers. You can see a list of what they track <a href="http://pro-trading-profits.com/services/who_we_track_results.asp?front=1">here</a>.</li>
<li> <b>Collective2.com</b> - I have not used this site, although I know someone who has subscribed to some services they offer. They are somewhat similar to global-autotrading.com, in which they act as the middleman between those who generate trading signals and your broker. The autotrade section of <a href="http://automate.collective2.com/">the website</a> is nicely designed, with the ability to quickly search for various systems and evaluate their performance.</li>
<li> <b>Currensee.com</b> - Another site which I have visited, but never utilized. This site focuses on forex traders, and you can see the leaderboard <a href="http://www.currensee.com/invest/leaderboard">here</a>.</li>
<li><b>MyFxBook.com</b> - Last but not least, this is another site focused on forex systems that appears to have recently offered a new <a href="http://www.myfxbook.com/autotrade">autotrade service</a>. You can also see their most popular systems <a href="http://www.myfxbook.com/most-popular-forex-systems">here</a>.</li>
<li> <a href="http://investimonials.com/"><b>Investimonials.com</b></a> / <a href="http://forexpeacearmy.com/"><b>forexpeacearmy.com</b></a> - Many of the newsletter services you find above can be researched via these review sites. I've actually contacted some people who posted comments on these sites and have gotten some great feedback.</li>
</ul>
<span style="color: red;"><b>HOW I GOT STARTED</b></span><br />
Like many things, it was a somewhat of a fluke. I accidentally received information about a iron condor credit spread newsletter late last year, and that made me recall learning about those strategies over a decade ago.<br />
<br />
They say something like 90% of options expire worthless, so why not be the one that sells/writes the options and keeps the premium with a 90% win rate? But here's the catch -- if you write options, the only thing to be worried about is the 10% of the time when the trade goes against you, and your losses are theoretically limitless.<br />
<br />
I didn't like the thought of unlimited losses. But I liked the idea of having a steady "income" via writing options spreads such as iron condors, which at least limits the downside risk. I wanted to move forward with this trading strategy, but didn't want to deal with having to execute and adjust/roll all those iron condor legs, which seemed like one big complicated hassle.<br />
<br />
After deciding to move forward with autotrading, here are the steps I took:<br />
<ol>
<li> Subscribed to a credit spread/iron condor newsletter service</li>
<li> Opened an account with Global-Autotrading.com</li>
<li> Opened a brokerage account with Interactive Brokers </li>
<li>Requested Global to link the newsletter service and brokerage</li>
<li>Set the allocation per trade (i.e. % of portfolio or $ amount) for each trade</li>
</ol>
<span style="color: red;"><b>WATCH THE COSTS</b></span><br />
A big point of consideration are the overall costs.<b> </b>Depending on your portfolio size, costs can be high as a % of assets and/or profits. Here's a general ballpark cost structure for stock and options trading.<br />
<ul>
<li> Newsletters range from $30-$150+/month</li>
<li> Global-Autotrading charges based on number of newsletters subscribed: </li>
<ul>
<li> 1st newsletter = $70/month</li>
<li> 2nd newsletter = $30/month</li>
<li> 3+ newsletter = $10/month for each additional</li>
</ul>
<li> Interactive Brokers doesn't charge any fees for autotrading. But what's interesting is that because all the accounts managed by Global are aggregated under one adviser umbrella, you benefit from reduced commissions as volume tiers are exceeded within the calendar month. </li>
<li> Dittotrade doesn't have a monthly fee, but each of their newsletters/alert services have varying monthly fees. And their commissions are middle/high end of the road, about $6/trade (and additional $.75/contract for options).</li>
<li> There are some options brokers which work directly with some credit spread newsletters and either don't charge any autotrade fees (<a href="http://tradingblock.com/" target="_blank">tradingblock.com</a>), or minimal $2/trade (<a href="http://eoptions.com/" target="_blank">eoptions.com</a>). <br />
</li>
<ul>
<li>In those cases, you can avoid the global-autotrading service and monthly charges. Their commissions can also be as low as $0.75/trade, with no ticket charges. However, your fills may or may not be as reliable as using the Global-autotrading and IB combo, although it's hearsay and I have no firsthand evidence.</li>
</ul>
</ul>
So depending on your portfolio size and/or returns, costs as a % profits can vary widely on a net return basis. For example:<br />
<ul>
<li>Using the higher range ballpark cost figures above on a $5k portfolio, <i>you would need to make a 40+% net profit in a year, just to break even on your autotrading related costs!</i> <br />
</li>
<li>Compare that to a $50k account, which would require a 4% net profit annually to break even. Big difference.</li>
</ul>
</div>
<span style="color: red;"><b>SO, HOW'S IT WORKING OUT?</b></span><br />
Surprise! Most autotrade programs I've tried just haven't delivered. Maybe it was bad luck with the selection process, or maybe that's just the way it is with most autotrading services Keep in mind my sample size of autotrading services is very small. But the bottom line is I've lost several thousand $'s on "autotrading research." <br />
<br />
<span style="color: red;"><b>DID ANY AUTOTRADING SERVICE WORK? </b></span><br />
<div>
<div>
Yes, there has been one autotrading newsletter that ended up meeting/beating expectations, so I am considering scaling up my investment in that program. I've posted a review of the performance to date on a separate <a href="http://grovetrades.blogspot.com/2013/10/review-of-spreadthetrendcom.html">blog post here</a>. <b> </b><br />
<br />
<span style="color: red;"><b>NEXT STEPS</b></span><br />
It has only been less than a year since I began this journey into autotrading services, so I'm still tracking the newsletters I'm subscribed to as well as continually evaluating other potential ones. <br />
<br />
I'm finding that this is not a process that can be accelerated very quickly, except perhaps from others who subscribed to other newsletters and are willing to share their real time results or experiences. <br />
<br />
So if you're someone who is interesting in sharing autotrading newsletter results, it would be great hearing from you. Like any other endeavor, there are some good opportunities out there, but only after working hard (or luck) at uncovering those few autotrading gems.<br />
<br />
Moving forward, I will continue to research potential autotrading candidates, invest a small amount in promising candidates as a test, and if results are within an acceptable range, scale up. Ultimately, I would like to diversify into 3 to 5 autotrading services across various assets classes and trading methodologies.</div>
<div>
<div dir="ltr">
<br />
Stay tuned as this interesting journey continues.<br />
<br /></div>
</div>
</div>
Grove Underhttp://www.blogger.com/profile/11996363914551744557noreply@blogger.com4tag:blogger.com,1999:blog-6579146808262144709.post-91838006265585825242013-10-18T14:54:00.001-04:002013-10-18T14:57:20.228-04:00Review of TheTradingWife.net<div>
<div>
Now that enough time has passed and hindsight analysis becomes 20/20, it's clear that joining Danielle's <a href="http://thetradingwife.net/">TheTradingWife.net</a> chatroom had a big impact on my overall swing trading performance, as discussed in my prior two blog posts <a href="http://grovetrades.blogspot.com/2013/06/making-turn-2013-trading-resolutions.html">here</a> and <a href="http://grovetrades.blogspot.com/2013/10/the-quest-for-consistency-q32013-results.html">here</a>. <br />
<br />
This is my unsolicited review of her service.</div>
<div>
<br />
<span style="color: red;"><b>BACKGROUND</b></span></div>
I had been a follower of Danielle via @thetradingwife on Twitter for a while and knew she also had a credit spread options service. So when I started exploring various credit spread services around the end of 2012 and contacted her for more details, I found out she was no longer at that website. <br />
<br />
She said she was planning on starting her own service, so I got on her trial when it opened up. In hindsight, it was a good serendipitous series of events.</div>
<br />
Since launching her service earlier this year, Danielle has been positively mentioned by @the_real_fly on his <a href="http://ibankcoin.com/flyblog/2013/02/21/the-official-2013-review-of-select-blogs-from-around-the-web-o-sphere/" target="_blank">ibankcoin.com</a> website back in February, as well as profiled in this month's (October) Active Trader magazine.<br />
<div>
<br /></div>
<div>
<b><span style="color: red;">IT CLICKED FOR ME, BUT...</span></b></div>
<div>
My belief is that there are no secrets with successful trading. Everything you need to know is already out there in the public domain. I believe one of the biggest challenges of successful trading is to "simply" discover what methodology works for you, as well as having the proper mental attitude. <br />
<br />
One way to find out is to just keep trying various techniques and/or chatrooms in a methodological fashion until you find something that works -- but before you run out of financial and/or psychological capital.</div>
<div>
I had studied many swing trading methods thru the years, so I am very much aware of the many different variations of trading. However, I had yet to package up a method that I felt comfortable with, which also aligned with my personality and style and produced consistent results. <br />
<br />
After joining TheTradingWife.net and learning her overall process and methodology, I was surprised to learn how well her methodology resonated with me and with my own particular preferences I've picked up along the way. And after nearly a year, my performance trading her method speaks for itself. Note that my results are not based on her alerts -- I wanted to learn <i>how</i> to fish, not simply be given it. As mentioned earlier, my actual results are <a href="http://grovetrades.blogspot.com/2013/06/making-turn-2013-trading-resolutions.html">here</a> and <a href="http://grovetrades.blogspot.com/2013/10/the-quest-for-consistency-q32013-results.html">here</a>.<br />
<br />
Will it work for you? I have no idea. And no one, except for yourself, will know for certain until you give this or any other trading methodology a fair shot. If the overview below seems interesting to you, then it might be worth investigating.</div>
<div>
<br />
<span style="color: red;"><b>MORE DETAILS ABOUT THE METHODOLOGY</b></span></div>
<div>
You can see many blog posts and charts on TheTradingWife's website to give you an example of her swing trading method. In a very simple nutshell, the swing setups are based on a combination of these criteria:</div>
<div>
<ul>
<li>Going with the daily 8 ema trend.</li>
<li>Candlestick patterns such as left-right, belt hold.</li>
<li>Chart formations such as rounded bottoms, J-hooks, and frying pan bottoms.</li>
<li> Riding that trend until an appropriate signal appears to exit the trade.</li>
<li>"Trade small and often"</li>
<li>Position sizing no more than 10% of portfolio (sometimes half size), and generally, risk per trade much less than 1% of portfolio.</li>
<li>Importance of staying out of the market during unfavorable conditions.</li>
<li>Understanding emotional and psychological control when trading.</li>
<li>For example, she will pass on a trade if she feels "emotions" about a particular stock. The way she explains this as it happens really hits home with me.</li>
</ul>
</div>
<div>
<span style="color: red;"><b>THE CHATROOM</b></span></div>
<div>
This is not your typical chatroom full of emotional chest pumping daytraders shouting out boom at every opportunity. So if you're looking for that kind of excitement where everyone is hi-fivein' and hootin' and hollerin' after "nailing" a few penny scalp, this is not the place for you.<br />
<br />
TheTradingWife's chatroom is a much more relaxed and congenial place for those looking to learn how to trade for bigger % gains on a swing trading timeframe. There's a good mix of content in the conversations -- heavy on trading obviously, but also open to current affairs, music, humor, etc. during slower periods. It's like a friendly neighborhood pub.</div>
<div>
<br />
<span style="color: red;"><b>BENEFITS FROM THE CHATROOM</b></span> </div>
<ul>
<li>First of all, access to Danielle in the chatroom throughout the trading day (and often into the night) regarding any question you may have.</li>
<li>In addition to live interaction via the chatroom, receiving realtime email alerts on stock entries and exits are great for those not glued to their computers.</li>
<li>On occasion, she'll launch a video chat so that you can view her charts and comments.</li>
<li>Great contributions from other members, but especially from the prolific and very knowledgeable "G.G.", who posts relevant and timely comments/charts throughout the day -- from very early morning to often late into the night. </li>
</ul>
<div>
These days, I'm not around as much to monitor the chatroom in real time, but having a transcript to review is very valuable, especially since Danielle does a great job commenting the reasons why she took (or didn't take) a particular entry or exit. If you take the time to study this the transcripts, there are usually some solid lessons.</div>
<div>
<br /></div>
<div>
<span style="color: red;"><b>THE BOTTOM LINE</b></span></div>
<div>
Check out her closed P&L performance on her blog <a href="http://thetradingwife.net/?page_id=311">here</a>. And her open positions are listed on the top of her <a href="http://thetradingwife.net/">homepage</a>. I've watched enough of her trades in real time over many months to know these results are realistic. She prides herself on transparency.<br />
<br />
I'm not sure if many are even aware of the service she offers, since she doesn't really market or hard sell her chatroom -- it's just not her style to boast with tweet after tweet after booking a +30% trade, to join her room. But maybe she should do just a little more self-promoting so that others could learn and benefit.<br />
<br />
So if you're truly interested in working hard to learn how to swing trade based on her successful methods, she is a willing and capable mentor who will take the time to teach you in a congenial and supportive environment. I'm just one of many who have had the privilege of benefiting from her mentorship.</div>
<div>
<br /></div>
Grove Underhttp://www.blogger.com/profile/11996363914551744557noreply@blogger.com1tag:blogger.com,1999:blog-6579146808262144709.post-69746627959227720692013-10-14T14:39:00.001-04:002013-10-14T14:39:31.956-04:00The quest for consistency - Q3/2013 resultsIn my <a href="http://grovetrades.blogspot.com/2013/06/making-turn-2013-trading-resolutions.html">prior blog post</a> almost 4 months ago, I commented at that time that I was profitable 6 out of the prior 7 months in my swing trading account. Since that time, performance results have continued to remain consistent. <br />
<div>
<div>
<br />
Around that same time, I also made some changes to my swing trading. I had a nearly forgotten IRA account at ETrade, and the account had been primarily in a money market fund making paltry < 1%/year.<br />
<br />
But I was notified that the money market fund was shut down, thus leaving the account in all cash. Well, at current money market yields where they are, being in all cash isn't much of a difference, but at least I was now "free" to trade in that account.</div>
<div>
<br />
So I began actively swing trading my IRA account around the end of June. Here are some specifics of that account:</div>
<ol>
<li>Due to IRA status, it is a long only and cash based (no margin) account</li>
<li>A steep $10/trade commissions. So that's $20/round trip, and even more when scaling out of a position.</li>
<li>The starting balance was a little over $30k, so it larger than my prior swing trading account.</li>
</ol>
So how did I do swing trading that account, with a much less favorable commissions cost structure? Given the conditions, respectable. Here are my actual results:</div>
<br />
<table align="center" cellpadding="0" cellspacing="0" class="tr-caption-container" style="margin-left: auto; margin-right: auto; text-align: center;"><tbody>
<tr><td style="text-align: center;"><a href="http://4.bp.blogspot.com/-Na_gcQKUQjg/Ulvse2MB-_I/AAAAAAAAAoU/mkpl7ZiZdNE/s1600/IRA+performance+10-12-2013.png" imageanchor="1" style="margin-left: auto; margin-right: auto;"><img border="0" height="224" src="http://4.bp.blogspot.com/-Na_gcQKUQjg/Ulvse2MB-_I/AAAAAAAAAoU/mkpl7ZiZdNE/s320/IRA+performance+10-12-2013.png" width="320" /></a></td></tr>
<tr><td class="tr-caption" style="text-align: center;">Performance by month from Tradervue.com</td></tr>
</tbody></table>
<br />
<table align="center" cellpadding="0" cellspacing="0" class="tr-caption-container" style="margin-left: auto; margin-right: auto; text-align: center;"><tbody>
<tr><td style="text-align: center;"><a href="http://4.bp.blogspot.com/-ltLOeGI114c/UlvsejSeipI/AAAAAAAAAok/66wBP3VZSzs/s1600/IRA+stats+10-12-2013.png" imageanchor="1" style="margin-left: auto; margin-right: auto;"><img border="0" height="141" src="http://4.bp.blogspot.com/-ltLOeGI114c/UlvsejSeipI/AAAAAAAAAok/66wBP3VZSzs/s320/IRA+stats+10-12-2013.png" width="320" /></a></td></tr>
<tr><td class="tr-caption" style="text-align: center;">June - October 2013 statistics from Tradervue.com</td></tr>
</tbody></table>
<br />
<table align="center" cellpadding="0" cellspacing="0" class="tr-caption-container" style="margin-left: auto; margin-right: auto; text-align: center;"><tbody>
<tr><td style="text-align: center;"><a href="http://3.bp.blogspot.com/-Fp2XG16Nb8Q/Ulvse_6sfFI/AAAAAAAAAoY/gLELIaP4z74/s1600/IRA+trade+dist+10-12-2013.png" imageanchor="1" style="margin-left: auto; margin-right: auto;"><img border="0" height="320" src="http://3.bp.blogspot.com/-Fp2XG16Nb8Q/Ulvse_6sfFI/AAAAAAAAAoY/gLELIaP4z74/s320/IRA+trade+dist+10-12-2013.png" width="207" /></a></td></tr>
<tr><td class="tr-caption" style="text-align: center;">Trade distribution from Tradervue.com</td></tr>
</tbody></table>
<span style="color: red;"><b>TRADE AND ACCOUNT RISK MANAGEMENT</b></span><br />
<div>
From the trade and account risk management perspective, my risk management was even more conservative than with the prior account:</div>
<ol>
<li>Except for a few dividend yield plays, my risk per trade was generally around 0.2% to 0.5% of my total account, often on the lower end of the range</li>
<li>Position sizing per trade was generally < 5% of the total portfolio</li>
<li>Total position leverage was on average < 50% but maxed out at around 85% for a short period</li>
</ol>
<div>
<b><span style="color: red;">MY THOUGHTS</span></b></div>
<ul>
<li>This swing trading method has worked for me over the past 10+ months, and appears to be process with which I can remain consistent.</li>
<li>However, a one year performance is nothing in the world of trading. And I'm always wondering if the markets will change enough to negatively impact my future performance.</li>
<li>How would I do in a overall downtrending market, since I'm in a long only account?</li>
<li>Had I used a less conservative position sizing and/or more aggressive risk per trade, my returns could have conceivably been 2x higher.</li>
<li>How much can I really size up my trading before I run into growth limitations?</li>
<li>Commissions accounted nearly 25% of my gross profits (!!!), especially since my positions were usually small, only just a few hundred shares. Had I used IB or TradeStation, my net returns would have been significantly higher.</li>
<li> Even with swing trading, I still fight revenge/rogue trading at times, but it's very infrequent compared to daytrading. I realize that this challenge will likely never go away.</li>
<li>Trading with small risk per trade has been key. I simply trade the solid setups, and follow the rules with little emotions.</li>
<li><i>My greatest challenge now is to stay motivated and to remain consistent with following my overall swing trading process. </i> </li>
</ul>
<div>
</div>
<div>
<b><span style="color: red;">LOOKING FORWARD</span></b></div>
<div>
As my discretionary trading continues to improve, my trading time continues to get squeezed due to increasing family commitments. <br />
<br />
My main goal now is to work hard now to diversify my trading business so that by doing so, I gain more time for non-trading activities in the future. I'm continuing to explore autotrading services, as well as ways to trade other methodologies and products. I've also reignited the development of mechanical trading systems with some promising results.<br />
</div>
<div>
It's a very interesting and exciting time for the retail trader, with tools and services currently available that most (especially me) could not have possibly imagined even 10 year ago. </div>
<div>
<br /></div>
Grove Underhttp://www.blogger.com/profile/11996363914551744557noreply@blogger.com4tag:blogger.com,1999:blog-6579146808262144709.post-39038358306335770842013-06-21T23:05:00.001-04:002013-06-21T23:08:33.675-04:00Making The Turn / 2013 Trading Resolutions RevisitedI've winded down my trading for the month of June, since I'll be on vacation for most of next week. And since we're at the halfway point of the year, it was a good time to do some reflecting and analyzing of my trading to date.<br />
<br />
As of today (Friday, June 21st), <u>I am up 15% for the month of June</u>. And based on the open positions I still have, it should not go down by more than a couple % points even if they are stopped.<br />
<br />
On a longer timeframe, <u>I have been profitable the past 6 out of 7 months</u>. Here is a chart of % returns based on closed trades (net of commissions) on my swing trading account for 2013.<br />
<div class="separator" style="clear: both; text-align: center;">
<a href="http://3.bp.blogspot.com/-8OxGNarmtJM/UcUNgOB-1uI/AAAAAAAAAm4/4fW8JBfdZHw/s1600/2013+performance+6-21-2013.png" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img border="0" height="245" src="http://3.bp.blogspot.com/-8OxGNarmtJM/UcUNgOB-1uI/AAAAAAAAAm4/4fW8JBfdZHw/s320/2013+performance+6-21-2013.png" width="320" /></a></div>
My average number of trades have also consistently averaged around 22 trades a month. No signs of overtrading. <br />
<div class="separator" style="clear: both; text-align: center;">
<a href="http://3.bp.blogspot.com/-2919eHhEdBA/UcUN75DSKKI/AAAAAAAAAnA/jo-Idy8VrQs/s1600/2013+tradedistribution+6-21-2013.png" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img border="0" height="320" src="http://3.bp.blogspot.com/-2919eHhEdBA/UcUN75DSKKI/AAAAAAAAAnA/jo-Idy8VrQs/s320/2013+tradedistribution+6-21-2013.png" width="228" /></a></div>
<br />
<b><span style="color: red;">TRADING RESOLUTIONS FOR 2013 - REVISITED</span></b><br />
<div>
I wrote the following resolutions back in March 2013. More details <a href="http://grovetrades.blogspot.com/2013/03/my-2013-new-years-trading-resolutions_5.html">here</a>.</div>
<div>
<ol>
<li>Stop overtrading/revenge trading/daytrading</li>
<li>Lower expectations of returns and trade small to help build solid trading habits</li>
<li>Explore and implement other trading methods, products, and time horizons</li>
<li>Start thinking of returns based on % risk (R), not $'s</li>
</ol>
</div>
<div>
<b>1) Stop overtrading/revenge trading/daytrading:</b> <span style="color: blue;"><b>ON TRACK</b></span><br />
Based on the chart above, there is no sign of overtrading. I've only had a handful of daytrades, and it's usually because I get stopped out quickly, or had such a good winner I needed to take some off the table.</div>
<div>
<br />
There have been a few rogue trades, but it's a small % of total trades. And revenge trading is nearly non-existant, since I'm no longer in the daytrading mindset. <i>Every trade I take is with the expectations of holding overnight and for several days or more.</i></div>
<div>
<br /></div>
<div>
I have also deliberately kept my account below $25k, so that I am subject to pattern daytrading rules (PDT). This has been one of my best decisions. TradeStation prevents me from entering the final trade that would trigger my account to get flagged under PDT. This helps to prevent me from overtrading, and to get into the habit of thinking carefully about each trade I enter.</div>
<div>
<br />
<b>2) Lower expectations of returns and trade small to help build solid trading habits:</b> <span style="color: blue;"><b>ON TRACK</b></span><br />
Trade small and often, is something preached and practiced by <a href="http://twitter.com/thetradingwife">@TheTradingWife</a>. I've also watched @<a href="http://twitter.com/thelincolnlist">TheLincolnList</a> daytrading live and consistently profitable for over a year with generally a few hundred share sized trades. And those crumbs add up to very impressive daily/weekly/monthly returns. </div>
<div>
<br />
Following their examples, I've established small position sizes as a % of my portfolio for each trade, and that easily allows me to sleep at night. This helps me to follow my rules and let each trade properly play out without interference or sabotage. </div>
<div>
<br />
Letting each trade properly play out means I'm building good habits. That's huge.</div>
<div>
<br /></div>
<div>
In the past, I used to want to make 25-50%/month or whatever crazy expectations of returns. But a funny thing happened when I stopped caring as much about P&L returns and started to really care about simply following my trading plan -- it resulted in being consistently profitable.</div>
<div>
<br />
As those who play golf are well aware, when you really try and swing the club hard, the worse off the shot usually goes.</div>
<div>
<br />
<b>3) Explore and implement other trading methods, products, and time horizons: <span style="color: blue;">ON TRACK</span></b></div>
<div>
This probably requires a separate post, but the autotrading experiment has been very interesting. The goal was to diversify my trading via other traders/trading services. Similar to how you can diversify long term investments between various types/styles of mutual funds.</div>
<div>
<br />
My timing to start was unfortunate based on market conditions, so I'm currently down about -10% year to date in my autotrading account. But I've learned a lot and still see great potential. In fact, in addition to my <a href="http://www.globalautotrading.com/">Global Autotrading</a> account, I'm also in the process of opening up an autotrading account with <a href="http://www.dittotrade.com/">Ditto Trade</a>.</div>
<div>
<br />
Compared to even 5-10 years ago, the opportunities today to diversify your trading opportunities are amazing. In essence, you can now outsource your trading and manage it like a business. Simply hire and fire traders/services based on whatever criteria and business plan you setup.</div>
<div>
<br />
Here's an analogy. There are an amazing number of talented people out there, such as musicians, that in the past would never have been discovered. But YouTube has created a distribution channel where you don't need to be "discovered and chosen" by the old school record industry establishment in order to reach a mass audience.</div>
<div>
<br />
On a similar note, we're entering a new era for talented and dedicated traders who don't have the right connections or pedigree in order to gain employment at hedge funds or premier investment banks. Platforms such as Ditto Trader are a game changer for those skilled traders who want greater exposure and opportunity. This is just the beginning.</div>
<div>
<br />
<b>4) Start thinking of returns based on % risk (R), not $'s</b>: <span style="color: blue;"><b>ON TRACK</b></span></div>
<div>
There was a recent upgrade to <a href="http://www.tradervue.com/">TraderVue</a> that has made it much easier to track performance based on R-Multiples. I'm still in the lengthy process of updating my trade data to support the new reporting features based on R. But once completed, this method of reviewing performance will provide a risk based return, rather than return alone.<br />
<br />
I'm guilty of this, but it's so easy to say "I made a 2000% return on my options trade" without understanding the proper risk context. Was your risk or position size of that trade 1% of your portfolio or was it 50%? Because there's a BIG difference in the impact and risk of that 2000% return trade.<br />
<br />
And as I've said many times before, thinking in % terms also helps make it easier to scale up. Because over time, as I meet my goals, I plan on scaling up significantly.</div>
<br />
<span style="color: red;"><b>HAVE I MADE THE TURN?</b></span><br />
<div>
It sure hasn't feel like a switch suddenly turned on, at least not yet. However, I am feeling a much greater sense of clarity and confidence with regards to what works for me, and my results indicate likewise. <br />
<br />
But the efficiency of my trades are far from optimal. I still make sloppy mistakes, and my execution still has a lot of work necessary. However, my upside feels limitless.<br />
<br />
It has only been about a half year of consistent profitability, so in the big scheme of things, that's not much. But so far, this track record is a huge accomplishment for me and I feel proud. I set a goal, I'm accomplishing it, and I will continue to meet my goals and raise the bar.</div>
<br />
It has been almost 2 years since I wrote the post about <a href="http://grovetrades.blogspot.com/2011/08/moment-you-own-it-you-better-never-let.html">The Moment</a>. My moment is still here. And I remind myself, "<a href="http://www.youtube.com/watch?v=lsSC2vx7zFQ">How Bad Do You Want It?</a>"<br />
<br />Grove Underhttp://www.blogger.com/profile/11996363914551744557noreply@blogger.com0tag:blogger.com,1999:blog-6579146808262144709.post-66111335029597104302013-05-19T21:58:00.000-04:002013-05-19T21:58:24.103-04:00Anti-market-topping analogsOn Friday, I <a href="https://twitter.com/grove_under/status/335481648231612416">tweeted</a> <a href="https://twitter.com/grove_under/status/335481522045988865">a</a> <a href="https://twitter.com/grove_under/status/335481309369610240">few</a> <a href="https://twitter.com/grove_under/status/335481019589349377">chart</a> based analogs.<br />
<br />
Since this recent 24% or so move on the SPX over the past 6 months has been relatively unusual, I was able to find a few examples that seemed to fit relatively well. I then used the historical outcome to overlay how the current market would appear if it followed the same path (on a % move basis).<br />
<br />
I've reposted the charts below to make it easier to see in one place. But as is the case with any type of technical analysis, there are always caveats to any type of analysis and <a href="http://www.thereformedbroker.com/2013/05/16/in-which-downtown-josh-brown-destroys-the-1999-comparison/">The Reformed Broker</a> makes a few for chart based analogs.<br />
<br />
<b>Why did I do this?</b><br />
One of the motivations for this was based partially on the "<a href="http://grovetrades.blogspot.com/2013/05/are-tops-really-process-analyzing-25.html">are tops a process?</a>" post earlier, as well as my net short bear call spread positions in my autotrading account (which is taking a lot of heat). I personally "feel" as though we are very overextended, but my logical side tells me that the trend is still strongly up.<br />
<br />
So based on this current "overextended" move higher, I was surprised to see how much similar moves in the past continued to go higher. Even the move that lead to the 1987 crash eventually recovered and finished higher after a 3-4 years.<br />
<br />
As for where this exercise could lead me, @justcharts <a href="https://twitter.com/justcharts/status/335486572755562497">tweeted</a> to me a few other comparison timeframes as well as other data that could be considered, such as ISEE sentiment and other put/call related data. Her helpful tweet opened up some new interesting directions based on some limited research I've done so far.<br />
<br />
<b>My bottom line takeaway?</b><br />
If we're truly topping here, there's usually some good signs and a <a href="http://grovetrades.blogspot.com/2013/05/are-tops-really-process-analyzing-25.html">few weeks to exit</a>. Or, as the charts below indicate, we could just be getting started on a move higher to levels we currently find difficult to even imagine. Always keep an open mind, the market is always right.<br />
<br />
<b><span style="color: red;">2011-2013 vs. 1993-1995</span></b><br />
<b><span style="color: red;">WEEKLY SPX </span> </b><br />
<div class="separator" style="clear: both; text-align: center;">
</div>
<div class="separator" style="clear: both; text-align: center;">
<a href="http://3.bp.blogspot.com/-TqBGYkLaX5o/UZl9f6maptI/AAAAAAAAAmc/FrVglUCIE_o/s1600/SPX+2013+v+1995+analog+5-16-2013.png" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img border="0" height="400" src="http://3.bp.blogspot.com/-TqBGYkLaX5o/UZl9f6maptI/AAAAAAAAAmc/FrVglUCIE_o/s400/SPX+2013+v+1995+analog+5-16-2013.png" width="368" /></a></div>
<br />
<div class="separator" style="clear: both; text-align: center;">
</div>
<span style="color: red;"><b>FORECAST OVERLAY BASED ON 1993-1998 </b></span><br />
<span style="color: red;"><b>WEEKLY SPX</b></span><br />
<div class="separator" style="clear: both; text-align: center;">
<a href="http://2.bp.blogspot.com/-YpObMTw5PAA/UZl9iItuFVI/AAAAAAAAAmk/kxaEzpwQcNs/s1600/SPX+forecast+analog+5-16-2013.png" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img border="0" height="400" src="http://2.bp.blogspot.com/-YpObMTw5PAA/UZl9iItuFVI/AAAAAAAAAmk/kxaEzpwQcNs/s400/SPX+forecast+analog+5-16-2013.png" width="368" /></a></div>
<br />
<b><span style="color: red;">2011-2013 vs. 1983-1986</span></b><br />
<b><span style="color: red;">WEEKLY SPX </span> </b><br />
<div class="separator" style="clear: both; text-align: center;">
<a href="http://4.bp.blogspot.com/-xtcRDNmGTOo/UZl9bnby7iI/AAAAAAAAAmM/AgXs__hYXIo/s1600/SPX+2013+v+1986+analog+5-16-2013.png" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img border="0" height="400" src="http://4.bp.blogspot.com/-xtcRDNmGTOo/UZl9bnby7iI/AAAAAAAAAmM/AgXs__hYXIo/s400/SPX+2013+v+1986+analog+5-16-2013.png" width="367" /></a></div>
<br />
<span style="color: red;"><b>FORECAST OVERLAY BASED ON 1983-1990 </b></span><br />
<span style="color: red;"><b>WEEKLY SPX</b></span><div class="separator" style="clear: both; text-align: center;">
<a href="http://2.bp.blogspot.com/-Uqxg0UGFdfA/UZl9dmfvRzI/AAAAAAAAAmU/tyM3PzNHlkQ/s1600/SPX+2013+v+1986+forecast+5-16-2013.png" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img border="0" height="400" src="http://2.bp.blogspot.com/-Uqxg0UGFdfA/UZl9dmfvRzI/AAAAAAAAAmU/tyM3PzNHlkQ/s400/SPX+2013+v+1986+forecast+5-16-2013.png" width="368" /></a></div>
<br />Grove Underhttp://www.blogger.com/profile/11996363914551744557noreply@blogger.com0tag:blogger.com,1999:blog-6579146808262144709.post-74267175589406017432013-05-13T22:16:00.000-04:002013-05-13T22:16:38.541-04:00Are tops really a process? Analyzing 25 years of $SPX topping patterns<div>
<div>
<div>
<div>
<div>
Anytime we approach new significant highs in the stock market, the Twitterverse lights up with "This is THE top" calls. Well, I'm somewhat guilty of this, too. I'm sure it has much more to do with ego -- trying to prove how right you are. However, I've learned the hard way that being right is far from being positively correlated with profitability.</div>
<div>
<br />
So let's look at the data. There's a saying that "tops are a process and bottoms are an event", so I've done a little hindsight-based-K.I.S.S.-back-<wbr></wbr>of-napkin type analysis to take a closer look at stock market top formations.<br />
<br />
There's a zillion different potential approaches that could have been taken to performance this analysis, and I just did something I felt comfortable with. This is not a statistically significant analysis nor an actionable trading system, but for me, this homework helps me to get a "feel" for the data from my perspective and also generates some interesting takeaways.</div>
<div>
<br />
<span style="color: red;"><b>MY QUESTION</b></span></div>
<div>
Since "tops are a process" is often repeated as an trading axiom, does there really need to be a big rush to exit a long position (or to enter a short)? And how much time do I realistically have to act on a topping pattern?</div>
<div>
<br /></div>
<div>
<span style="color: red;"><b>METHODOLOGY</b></span></div>
<ol>
<li>Started with a 25 year monthly chart of the $SPX to identify key highs during an uptrend</li>
<li>On the monthly chart, down arrows were placed at pivot swing highs based on a high that had 1) two preceding highs that were lower and 2) two succeeding highs that were lower</li>
<li>The highs from the monthly chart were then identified and marked on the weekly chart with a down arrow</li>
<li>On the weekly chart, starting from the pivot swing high arrow, the next pivot swing low was identified, and the retracement was measured</li>
<li>If the retracement to retest the pivot high was greater than 50%, then that point was identified on the chart with a smaller down arrow</li>
<li>The number of weeks between the "Potential Top" and the 50%+ retracement was identified</li>
<li> And finally, the shape of the 3 legs of the swings, starting from the high, was also drawn on the chart</li>
</ol>
</div>
</div>
</div>
</div>
<div>
<span style="color: red;"><b>THE CHARTS</b></span><br />
Here's the high level SPX monthly chart going back 25 years (January 1998 to May 2013), with each significant high marked with an arrow:</div>
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<a href="http://2.bp.blogspot.com/-h6HEyWB6dz8/UZGWpAW6g1I/AAAAAAAAAlM/wexD46pp9zc/s1600/SPX+monthly+5-11-2013.png" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img border="0" height="236" src="http://2.bp.blogspot.com/-h6HEyWB6dz8/UZGWpAW6g1I/AAAAAAAAAlM/wexD46pp9zc/s400/SPX+monthly+5-11-2013.png" width="400" /></a></div>
The following charts drill down to the WEEKLY charts, with each arrow corresponding to the arrow on the monthly chart above.<br />
<br />
July 1998 - March 2001 <br />
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</div>
<div class="separator" style="clear: both; text-align: center;">
<a href="http://2.bp.blogspot.com/-gorbsbcxx7Q/UZGXMO7XE0I/AAAAAAAAAlU/QDjJ1PtttuE/s1600/SPX+1998-2001+5-10-2013.png" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img border="0" height="236" src="http://2.bp.blogspot.com/-gorbsbcxx7Q/UZGXMO7XE0I/AAAAAAAAAlU/QDjJ1PtttuE/s400/SPX+1998-2001+5-10-2013.png" width="400" /></a></div>
<br />
<span style="font-weight: normal;"> January 2004 - September 2006</span><br />
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October 2006 - August 2009<br />
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February 2011 - December 2012<br />
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July 2010 - Current (May 2013)<br />
<span style="color: blue;"><i>[Note: significant overlap with chart above]</i></span><br />
Doesn't look like a topping process is forming yet.<br />
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<span style="color: red;"><b>FINDINGS</b></span><br />
<ul>
<li>After a "Potential Top" was established, ALL examples had a bounce from the succeeding pivot swing lows of at least 50% that retested the highs (based on weekly chart) <br />
</li>
<li>After "THE Top" (2000 and 2007) was been established, there was adequate time to exit on a retest bounce to highs (a 50+% retracement) within a 2 week period. </li>
<li>After a "Potential Top" was established (13 incidents), there was adequate time to exit on a retest bounce to the highs (a 50%+ retracement) within an average of 4.5 weeks</li>
<li>During the last 2 run ups to new all time highs (2000 and 2007), there were 6 significant swing highs (false tops) before the "THE Top" was established</li>
<li>For both the 2000 and 2007 tops, once the pivot swing low that preceded the high was broken, it potentially indicated "THE Top"</li>
<li>The 2000 pivot swing low was broken after about 8 months, and 7 months after "THE Top"</li>
<li>The 2007 pivot swing low was broken after about 5 months, and 3 months after "THE Top"</li>
</ul>
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<br />
<span style="color: red;"><b>THE TAKEAWAYS</b></span></div>
<div>
<b><u>Long term investor:</u></b><br />
Over the very long term perspective (i.e. years/decades) which is the timeframe for the long term investor, the stock market has an overall bias to go higher. <br />
<br />
So unless you have a highly accurate method of picking tops, just wait for some confirmation that the trend has changed before exiting. Otherwise, you're likely to get many false signals until you get it right.<br />
<br />
Something as simple as waiting for the pivot swing low that preceded the high to be broken (blue lines on the monthly chart), in conjunction with other signals seems to makes the most sense. You get several months to make your decision.</div>
<div>
<br />
So yes, don't need to rush to the exits. Based on a longer term horizon based on monthly charts using the break of the pivot swing low criteria described above, <span style="color: blue;"><i>the topping process lasts 3 to 7 months based on 2 incidents, over the past 25 years</i>. <span style="color: black;"> This is loosely identified as "Topping Formation" on the weekly charts.</span></span></div>
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<br />
<b><u>Longer term trader:</u></b></div>
<div>
If you're looking for a trade lasting up to a few weeks and don't really care about picking "THE Top", then every potential top had a bounce that exceeded 50%. <br />
<br />
That could be a good area to potentially exit long positions or even go short, with a reentry or max stop on short above the "Potential Top." But all the losses from getting stopped out could likely negate the profits you gain from eventually catching "THE Top."</div>
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<br />
You can also keep an eye on the monthly/weekly charts to see whether a potential top is lining up so that it can give some bias to the daily chart timeframe.</div>
<div>
<br />
In the case of the shorter term timeframe, <span style="color: blue;"><i>the topping process, where a bounce up retests the 50+% mark to the highs on a weekly chart, lasts on average almost 4 weeks</i>.</span></div>
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<br /></div>
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<b><u>Day trader/Swing trader:</u></b></div>
Don't even bother reading this, except for entertainment and cocktail party purposes. (And yes, I essentially fit into this category).Grove Underhttp://www.blogger.com/profile/11996363914551744557noreply@blogger.com2tag:blogger.com,1999:blog-6579146808262144709.post-24125169222623050492013-05-06T22:00:00.000-04:002013-05-06T22:00:13.360-04:002 Years of Trading - Lessons Learned (Part 3 of 3) - The Mental GameThis is a continuation of the prior posts in this series: <br />
<a href="http://grovetrades.blogspot.com/2013/04/2-years-of-trading-lessons-learned-part.html">LESSONS LEARNED (Part 1 of 3): TRADING FUNDAMENTALS</a><br />
<a href="http://grovetrades.blogspot.com/2013/04/2-years-of-trading-lessons-learned-part_29.html">LESSONS LEARNED (Part 2 of 3): THE LEARNING PROCESS</a><br />
<br />
<br />
<b>LESSONS LEARNED (Part 3 of 3): THE MENTAL GAME</b> <br />
<br />
<span style="color: red;"><b>Once you're fortunate to find a style that works for you, it's all mental</b></span><br />
Perhaps it's human nature to want to deviate from something you know works. Let's say you have a trading system that's right 95% of the time and generates 5:1 reward/risk. You've found the holy grail! <br />
<br />
Doesn't matter, our mind plays tricks on us. It's easy to think we can do even better and get 100% accurate and/or generate a 10:1 reward/risk. Or maybe the holy grail is a counter trend system but you like going with the trend and catching the big moves, so it doesn't quite fit your personality. You tweak the system to the point where it's no longer the system that originally had an edge.<br />
<br />
When we deviate from our system just that one time, the next rule break becomes just a little easier to do, and so on... Your mental discipline starts to crack. And if you don't watch out, it eventually snowballs into something very ugly. Yes, this has happened to me many times.<br />
<br />
Even if you know you have a system that works and fits your personality, staying disciplined to consistently execute your trades, through the good times and bad, requires considerable psychological efforts. This is especially true when you're not at your mental best due to lack of sleep, personal issues, illness, etc. Awareness of the state of your mind and being able to act appropriately, is key criteria for success.<br />
<br />
<div>
So once you've achieved a certain level of trading ability, managing your trading psychology becomes one of the biggest factors to successful trading. A great instructor of the mental aspects of trading is <a href="http://www.futurestrader71.com/" target="_blank">FuturesTrader71</a> (FT71) who is a part of <a href="http://www.stage5trading.com/" target="_blank">Stage 5 Trading</a>. His <a href="http://www.futurestrader71.com/?page_id=14" target="_blank">webinar #3</a>, available via a donation to charity, is something I consider a trading classic. Recommended to all types of traders who have a solid understanding of trading fundamentals and want to get to the next level.<br />
<br />
There are also a lot of great books about trading psychology available written by Brett Steenbarger, Mark Douglas, Ari Kiev, Ruth Barrons Roosevelt, Denise Shull, Steve Ward, to name a few. But look in any other performance based field, such as golf, <a href="http://amzn.com/1570280215">baseball</a>, or even <a href="http://grovetrades.blogspot.com/2012/06/back-on-gridback-in-audusdand-archery.html">archery</a> which I wrote about last year, and there are some real gems.<br />
<br />
I have found the mental challenge of trading similar to dieting or exercise. Once you find a type of diet or exercise program that works for you, it's a matter of "simply" sticking with the program, with slight tweaks along the way, day after day, week after week, and so on. Much easier said than done! I've accepted the fact that I will need to constantly work on my mental game in order help ensure my long term success.</div>
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<br />
<span style="color: red;"><b>"Successful" behavior in the corporate world, could lead to failure in trading</b></span></div>
<div>
Those who cross over from the professional fields or corporate environments seem to have extra challenges with retail trading. Those who have been successful in their respected fields are used to getting their ways by managing others to help accomplish your goals, always taking the initiative and action to make things happen, and knowing how to successfully politic (BS) and influence the origination. When things go wrong, their ability to act and quickly do "something" gives the perception and aura of confidence and competency.</div>
<div>
<br />
But utilize those behaviors within certain aspects of trading and it's good recipe for failure. The market is always in charge, it's the ultimate boss, and it's never wrong. You can't tell it what to do, you can only react and be submissive to it (price). The market doesn't care how confident you appear to be, it just doesn't care about you, period.<br />
<br />
If you constantly take the initiative to be in a trade so that it appears you're doing something (looking like you're working hard) instead of being patient waiting for your setup, it could mean you're overtrading or rogue trading. And if you're "wrong" and lose money on a trade, then trying to take immediate action to fix the situation (without a plan) most likely means you're revenge trading. We've seen this many times by politicians and corporate types as a "knee jerk" reaction to an event. But do this to the markets, and it will most certainly punish you, if not this time, then later. </div>
<div>
<br />
I come "brainwashed" from years in the corporate world, so I can now clearly see how many aspects of good corporate behavior can be so counter-intuitive to good trading behavior. So the longer you've been successful in the corporate world, the longer it may take for you to truly change your behavior when you begin trading. However, constantly being <i>aware</i> of your behavior is one step that could help shorten the learning curve.<br />
<br /></div>
<span style="color: red;"><b>Finding true mental breaks is important</b></span><br />
<div>
Like most who are passionate (addicted?) about the markets, I find it tough to switch gears and focus on non-trading activities. Without checks and balances, I could probably spend 16+ hours day, just about 7 days a week studying the markets (again, addicted?). But I'm finding that having the ability to take a true mental break has been critical to create balance and prevent burnout (and prove to myself, I can stop anytime, unlike an addict, ha!).<br />
<br />
Most have an activity they do regularly that will switch the focus of the mind from trading to something else. If you're a daytrader, some traders find it helpful to have a diversion to help deal with the boredom of trading, or as a way to cool off after a bad losing streak. Even a swing trader needs to help balance their days in order to stay sharp and ready for a setup. Unlike a daytrader, swing setups happen much less often, so missing one could impact your overall performance with greater impact.<br />
<br />
So what is a true mental break? Examples I've heard include: meditation, listening to music, playing a musical instrument, triathlons, mountain bike racing, yoga, reading (non-trading) books, learning new languages, writing a blog, cleaning the house, yard work, etc. The important part is that your mind gets completely engaged in some other activity completely devoid of anything trading related. In my case, also having a couple young kids most certainly helps to creates a break, whether I like it or not. <br />
<br />
I've personally found that group exercise classes can be very motivating. When you're in a kickboxing class with a few 60-70 year old grandma types demonstrating clearly that you don't want to get into a fight with them, it's quite the motivation to keep up and not look like a wimpy girly-man. Consequently, unless you maintain maximum focus and get totally absorbed in the class, you will likely embarrass yourself. So not only is it a great mental break, it's also great for your health.<br />
<br />
A hobby I've had is to roast my own coffee, primarily for espresso shots. Ever since moving away from the SF Bay Area where there were many amazing artisanal coffee roasters and cafes, I got spoiled and couldn't find the same level of quality and freshness in my current neighborhood. Yes, I became a coffee snob.<br />
<br />
So I started to roast coffee on my own and quickly realized that what seems so simple, is full of never ending complexity and nuances. But most importantly, working on this hobby requires absolute concentration and focus, which for me, results in a complete mental break from trading. Plus, having a great shot of espresso to get the day started is a huge positive benefit.<br />
<br />
In the end, it's important that I take these true mental breaks so that I can maintain some semblance of a balanced life. When that happens, my trading becomes more centered, clearer, and generally improves. This also spills over throughout all aspects of my life in a very positive way.</div>
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</div>
<br />
<span style="color: red;"><b>Plan your breaks from trading...and DO IT</b></span><br />
As mentioned above, I've learned that taking a true mental break throughout the day is important. I seem to do better when I go exercise mid-morning, shortly after the market opens. Since I'm primarily swing trading, this is not an issue, since I basically adjust my orders/positions shortly after the open. However, even for daytraders, I believe it's very helpful to take a significant break during the lunch hour.<br />
<br />
And more often than not, it's those days I do NOT feel like taking a break (because I'm feeling emotions about something market related), are the days when I truly need to force myself to get away. Otherwise, I've become aware that I become too fixated about something, and lose sight of the bigger picture.<br />
<br />
On a longer timeframe, such as every 2-3 months (or whatever works best for you), taking a week completely away from trading seems essential for good mental health. Otherwise, you'll be subject to burn out since trading (especially daytrading) can be so intense. I find it's very hard to get completely away, but remind myself, the market will always be there. <br />
<br />
<span style="color: red;"><b>Explore, learn, push your boundaries...</b><b>but know when to stop trying so hard.</b></span><br />
<div>
It's no secret how some of the best players in the NBA (or any other sports) such as <a href="http://www.reddit.com/r/nba/comments/19o38z/hi_rnba_my_name_is_robert_and_im_an_athletic/">Kobe Bryant</a> and Lebron James, have incredible work ethics. At their elite levels, there's not much of a difference in physical abilities, so a lot of of their edge comes from honing their mental game through rigorous hard work and focused practice.<br />
<br />
Growing up, I used to think that once someone became a superstar, they are simply so good that they can just kick back and continue to perform at peak levels. Well, how wrong I was. Being a superstar requires tremendous passion and dedication to never stop learning and pushing your boundaries, since everyone else is doing the same. You have to keep pushing hard simply to maintain and/or improve, but it's so easy to let it all go.<br />
<br />
Trading is similar. When you first start learning, you need to constantly explore and learn everything you can so that you can eventually figure out what works for you (your strengths) and what doesn't. It's OK to make mistakes, but for the sake of progress, you have to continue to focus hard on areas for improvement based on discovering your strengths and weaknesses gained through painful experience. <br />
<br />
I've gotten to a point where there's a certain style, timeframe, and setups that seem to work best for me. However, I'm still lured at times to "chase success", although thank goodness it's no where near what it used to be. In the past when I read about a successful trader, I wanted to quickly put aside what I was doing, and learn how to trade just them.<br />
<br />
But now that I'm finally figuring out what works for me after trying (and failing) so many different trading styles and methodologies, my focus has become more on maintaining the proper focus as well as refining a process so that I can replicate it every day. Now when I read about a successful trader, I understand what type of trader they are, and accept the fact that I can/can't trade like them because I've already explored it in the past.<br />
<br />
Now that I don't need to work as hard to figure out what works for me, I realize it's becoming more important to know when and what specific areas to back off from (or stop chasing). Like stop trying so hard to be like or be influenced by someone else, or stop trying to force a trade in market conditions that isn't suited for my style, or stop trading simply out of boredom. I consider this a sign that I need to continue to work hard on my mental discipline, and most likely, this work work will never end.<br />
<br />
Golf is a good analogy. Getting good at the fundamentals of golf takes years. But after a while, you will realize what type of player you are, and whether you are the type that can drive the ball 300+ yards. You may really want to be a long drive golfer, but may never get there -- it's just not your strength. At some point, you will realize that to improve, you need to focus on different aspect of your game. And along the way when you stop trying to swing so hard, you realize that the ball actually goes farther with greater consistency and accuracy!<br />
<br />
In trading, I've learned that I need to always push hard in many areas, but then also realize that I need to back off in other areas. Knowing which area to focus on and to back away from requires a lot of awareness. <br />
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<b><span style="color: red;">I'm still as passionate as ever about trading, but feeling more detached about every trade</span></b><br />
Maybe it's the 1,000+ revenge and rogue trades I've taken over the past couple years that have finally gotten much of the overtrading out of my system. After seeing time and time again how taking trades based on negative emotions results in a negative P&L, common sense might finally be making it through my thick skull. <br />
<br />
It's common to hear some say that you should not feel any emotions when you're trading. I don't completely agree with that, since we're all different, and since we all react to situations in our own personal ways. Have you ever <a href="http://www.businessinsider.com/paul-tudor-jones-trader-documentary-2013-1">watched</a> how Paul Tudor Jones traded back in the '80s? He's far from emotionless when he's trading, that's for certain!<br />
<br />
Although I've always known, I have finally started to <i>believe</i> and <i>accept </i>that the outcome of each individual trade is essentially random. We don't truly know how a particular trade will turn out, however, we have total control over whether we enter the trade, at what point the trade is wrong so that we exit with a loss, as well as where we exit if the trade is profitable.<br />
<br />
Assuming we have a plan, there's simply not much else we can do after we're in a trade, other than to follow the trade plan. When you first start trading, this is the most exciting part, being in the trade. But these days, it's relatively boring, and that's good because being emotionally detached helps me to better ensure that I follow my plan. And over time, it seems like I'm becoming both more detached as well as intuitive, which then helps me to follow my process and trade plan..<br />
<br />
Here's another quirky way I've come to understand and accept this particular type of detachment. After decades of making hundreds of boxes of mac & cheese in my life, I'm still as passionate as ever about it. But unlike the first few exciting times I made it all by myself, carefully following the directions, I'm detached and unemotional when I'm preparing it now. I don't even need to read the directions on the box anymore, the process is pretty much intuitive and on autopilot. It just took a lot of time and experience to reach this stage.<br />
<br />
<span style="color: red;"><b>Develop your sense of awareness, and more importantly, be able to act on it</b></span></div>
<div>
Knowing when NOT to trade because you're not in the right frame of mind, AND most importantly, being able to take action to stop trading, is one of the most important risk management tools. This was inspired by a video of Denise Shull, and I wrote a <a href="http://grovetrades.blogspot.com/2012/03/whats-more-important-than-risk.html" target="_blank">blog post</a> about this last year. <br />
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Recently, <a href="http://thetradingwife.net/">@thetradingwife</a> said she passed up a good trade setup, simply because she felt emotions about that particular stock. She recognized that due to a bad experience with the stock, she felt a level of emotion beyond her normal threshold, recognized it, and acted on it by making the decision not to take the trade. It was simple and decisive. For whatever reason, this was one of those defining moments that I'll always remember.</div>
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<br />
There have been so many times when I know I shouldn't trade, whether it's because I started the day with 2 losses in a row (a big daytrading revenge trigger for me), or because I'm sick, or my kids are causing trouble, or lack of sleep, or whatever.<br />
<br />
Most of the time, I'm completely aware of my negative condition(s). I tell myself exactly why I should not be trading. However, in my mind, my mental chatter says, "I know I shouldn't take this trade, but screw it, I'm going to do it, I really don't care. I'm going to make up my 3 previous losses with a huge winner. So I'm going to do it. [Click]" That attitude is extremely toxic to trading. Especially when your "screw it" attitude results in a winning trade, which further reinforces bad behavior.</div>
<div>
<br />
Once those emotions are bubbling under the surface, that's a sign of danger to your P&L. Having the awareness is one thing, but taking action so that you back off and actually stop trading is huge accomplishment. To be able to stop trading means that means you have the ultimate risk management control over yourself.<br />
<br />
Those with a <i>I'M NOT A QUITTER</i> attitude have an especially tough time, since taking this action of walking away feels like quitting. I fall into that category and have had my fair share of P&L damaging revenge trades. Roughly 25% of my 4,000+ trades in the past 2 years were revenge and/or rogue trades. My statistics show that these were very poor trades. Imagine if I had simply walked away from taking these trades. </div>
<div>
<br /></div>
<div>
When under mental conditions of emotional distress where you've lost nearly all sense of self control (it's akin to driving drunk), backing away from trading is not quitting, it's protecting yourself (your capital) from harm's way. And protecting your capital is one of the most important goals of trading. </div>
<br />
I have found that building awareness is key to gaining control of the mental game. Awareness of: revenge triggers, strengths, trading style, best timeframe, any heightened emotions, when not to trade, and so on. The ability to differentiate between impulse and revenge trades vs. intiutive trades is also a big milestone. Initially, I thought there was a fine line between them. In many ways, they are very similar, but factor in awareness, and there is a huge gap between them.<br />
<br />
I've found that as I continue to become more aware of my own emotional triggers, and consequently more aware of the respective outcomes, a greater ability to take action based on my awareness is gained. And because of that increased level of control over myself, I've become a lot more emotionally detached and accepting to many other aspects of trading.<br />
<br />
The end result? I've experienced improvement to my overall trading P&L and consistency. But I still have a long journey ahead of me. I'm looking forward the 3rd year. <br />
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<div style="text-align: center;">
* * * * *</div>
<br />
I'm looking forward to rereading these posts in 2 years and telling myself, "If I only knew back then what I know now."Grove Underhttp://www.blogger.com/profile/11996363914551744557noreply@blogger.com4tag:blogger.com,1999:blog-6579146808262144709.post-83478945529302680032013-04-29T16:50:00.002-04:002013-05-06T22:01:58.060-04:002 Years of Trading - Lessons Learned (Part 2 of 3) - The Learning Process[This is a continuation of the first blog post in the series: <a href="http://grovetrades.blogspot.com/2013/04/2-years-of-trading-lessons-learned-part.html">LESSONS LEARNED (Part 1 of 3): TRADING FUNDAMENTALS]</a><br />
<br />
<br />
<b>LESSONS LEARNED (Part 2 of 3): THE LEARNING PROCESS</b><br />
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<div>
<span style="color: red;"><b>I wish I had done a consistently better job at keeping a trading journal</b></span></div>
<div>
Who knows where I'd be now if I had a journaling system such as <a href="http://www.tradervue.com/" target="_blank">Tradervue</a> many years ago. As I've written about many times before, Tradervue is a powerful online trade journal system that has made it a lot easier to journal and to <a href="http://grovetrades.blogspot.com/search/label/tradervue" target="_blank">analyze the statistics of my trading</a>. <br />
<br />
Or what if years ago before the Internet, I consistently journaled in a simple paper notebook and more importantly, had the discipline to review and take corrective action on a regular basis? Would I have been able identify my strengths and find my style more quickly? Could I have discovered how to achieve mental control more effectively?</div>
<div>
<br />
Keeping a journal is something most say you should do, but writing about and having to relive a really bad day can be difficult. In many ways, this blog has been somewhat of a trading journal at times, but it has been far from consistent. A true journal is one of those tough nitty gritty tasks that most people don't take seriously, and so I keep in mind that most people are not consistently successful traders.<br />
<br />
There are no right or wrong ways of keeping a journal, although there are some good guidelines and templates out there. But in the end, you should be able to understand why you are not (or are) following your trading plan, focus on areas of improvement, understand what your strengths are, improve awareness to know when you should and should not trade, etc.<br />
<br />
Especially during the early formative period when the learning curve is steep, I believe keeping a journal is not an option, it's a must do. As time passes and experience is gained, the nature of the trading journal also begins to evolve.<br />
<br />
<span style="color: red;"><b>Paper trading is good, but I believe betting very small is better</b></span><br />
There is much debate on whether paper trading is useful or not. Once again, everyone is different. For me, I believe learning with real money, even if very it's a small risk, is better than paper trading via a SIM account. There's nothing like having real money on the line.<br />
<br />
There have been times when I absolutely got killed on a % of account basis trading the ES E-mini. Due to the tick size and average movement (rotations) in the ES, it's easy to go on tilt and lose over $1k trading only one contract. Yes, been there a few times. On another note, I always wonder why I never went on tilt and made over $1k trading one contract.<br />
<br />
Other "trade small" solutions is to trade the spot forex, where you can trade in a "micro" size where each pip = about $1. With some of the volatility recently in certain forex pairs, such as EUR/JPY, the movements are equivalent to the E-mini ES daily range of 30 to 50 points or more! <br />
<br />
Since I try to think in % terms, I've had sleepless nights swing trading spot forex, where my absolute dollar risk was only $30, but it was considered a big % risk based on my trading plan. Conversely, in my longer term accounts, I could be risking many dozens of times more $'s and not lose a wink of sleep since it was a small % of risk relative to portfolio size. Having those sleepless nights was when I knew that even betting small was much more realistic than trading on SIM.<br />
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<div>
Another option is to trade the <a href="http://www.cmegroup.com/trading/fx/e-micros/e-micro-euro_contract_specifications.html" target="_blank">E-micro EUR/USD (M6E)</a> futures that trade on the CME. Each tick is only $1.25, but the prices track the same as the <a href="http://www.cmegroup.com/trading/fx/g10/euro-fx_contract_specifications.html" target="_blank">big contract (6E)</a>. For charting, you can still use the big 6E where the data isn't spotty like the M6E. But by trading the micro contract, you'll still be able to trade with a small account, not worry about pattern day trading (PDT) as with stocks, and still have the ability to scale out of your positions by trading multiple contracts.</div>
<div>
<br />
<span style="color: red;"><b>I wish a brokerage like Stage 5 Trading existed when I first started trading</b></span></div>
<div>
I believe one of the best opportunities now, especially if you trade futures, is to open your account and start trading at <a href="http://www.stage5trading.com/">Stage 5 Trading</a>. The core team at Stage 5 was previously with Vankar Trading, but have now started their own brokerage firm. Full disclosure -- I'm not currently daytrading nor am I trading futures at this time, but I feel very strongly about the people at Stage 5 based on my experience with them. They have earned my loyalty for when I one day return back to futures. <br />
<br />
At Stage 5, you get access to <a href="http://www.futurestrader71.com/">FuturesTrader71</a> who is a master ES E-mini trader and is also a tireless and passionate educator. One of the primary reasons why he became a broker was so that he can work more closely with his students and to be able to monitor their actual trades.<br />
<br />
I've always wondered why FT71 gave so much, with what doesn't seem like much in return. Wondered when the bait and switch would finally happen where he would monetize his followers? What's the catch? But the more I listened to him, it finally started to make sense that he has some deeply set values and beliefs about helping others, locked in the core of his being. I've found this type of dedication rare, especially within the trading industry.<br />
<br />
And right now, you'll be able to watch him as he is re-learning how to trade the E-Micro EUR/USD (M6E) futures through his active chatroom as well as weekly webinars. He's relearning the Euro after many years, so this is a great opportunity to watch and understand how a master trader approaches a new product to trade.<br />
<br />
He realizes that for those just learning to trade, the M6E is a great step up from SIM trading. This is primarily due to the small $ per tick size and margin requirements. Although his trading method is primarily volume profile based, his education transcends the trading methodology used, and a great deal of his focus (and his strength) is on the psychological side of trading.<br />
<br />
Except for you to open your account and trade through <a href="http://www.stage5trading.com/">Stage 5</a>, there are no addition costs for the chatroom and webinars. This is probably one of the best educational deals out there to learn from a highly respected trader and educator, while also getting some of the best service in the futures brokerage industry lead by <span class="" id=":ye" title="Anthony Giacomin">Anthony Giacomin</span>. It's a no brainer. </div>
</div>
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<div>
<span style="color: red;"><b>If I had to start now, I would do my best to learn on a physical trading floor surrounded by successful traders</b></span></div>
<div>
Who wouldn't want that kind of opportunity? I know this is much easier said than done. But I'm confident that learning how to trade surrounded by successful prop traders who are great and willing mentors would accelerate and increase the odds of longer term success.<br />
<br />
I'm not familiar with anyone who has joined the <a href="http://www.smbtraining.com/overview/smb-trader-development" target="_blank">SMB training program</a> and whether it's good or not, but something similar to that would have been very interesting for me when I was first starting. Even if it didn't end up being a good fit, understanding what a trading environment is like and seeing successful traders in action would have been a valuable experience.<br />
<br />
Back in the days before I had a family, if I had spent those 6-18 hour work days being surrounded and learning from the best in the business, where would I be now? I'll never know and it's not my nature to dwell much on the past.</div>
<div>
<br />
But looking forward, we now live in a world with zillions of chat rooms, newsletters, advisory services, blogs, and Twitter where you can learn independently or with others in a virtual setting. Although you may have to look and research hard, there are a few great traders who are also great teachers (as mentioned earlier about FuturesTrader71).<br />
<br />
So participating in a chatroom or joining forces with other traders in the virtual world is the next best thing to being on a physical trading floor.</div>
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<span style="color: red;"><b>Trade and learn with others</b></span><br />
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Being an independent retail trader from home can be quite the lonely business. Back during my early attempts to be a trader, telephone calls were the only way to communicate with other traders. And this was back in the days when long distance calls were $0.20+/minute on a land line. When I started getting rates of $0.10/minute, I thought that was a steal. Oh how times have changed.</div>
<div>
<br />
Compared to even 10 years ago, our options to work, learn, and trade with others is amazing. Webinar and screen sharing services, chatrooms, Skype, instant messaging, etc. We may be physically isolated, but we have never been more close to others in the virtual world.</div>
<div>
<br />
Through this blog, Twitter, and the various services and chatrooms that I have participated in over the past couple years, I have been very fortunate to have met some amazing people from all over the world. Many have become great friends that I communicate with on a regular basis, constantly learning and sharing ideas about the markets. <br />
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For me, surrounded by like minded traders have made the good times even better and the bad times not quite as bad. And as physically isolated as I may be, being a part of a community has never made me feel as if I were alone. Trading is a tough endeavor, even tougher when going through the unavoidable slumps, so having that support network to trade, learn and just be there for others is vital for growth and survival.<br />
<br /></div>
<span style="color: red;"><b>Twitter is a "double edged sword"</b></span><br />
As of this post, Twitter is "only" about 7 years old, but the impact it has had on trading and investing is enormous. When I first learned about trading, I had to go to the library at the university to checkout books and read back issues of Commodities (now Futures) Magazine on microfiche. I still recall the old books by Stanley Kroll wrote as some of my favorites.<br />
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Today, who needs the library (hurts me to say that) since the Internet has changed this all. Recently, Twitter has become an amazing source of real time trading information that has truly changed the landscape of trading. But a potential downside to Twitter is that it's like drinking from a fire hose. It can become so overwhelming and conflicting that it becomes noise and impedes our ability to learn.<br />
<br />
Here are some random tidbits I've learned through Twitter over the past couple years:<br />
<ol>
<li>Big # of followers ≠ a great follow. Some of the best follows are up and coming with surprisingly few followers</li>
<li>When someone usually active stops tweeting, they're likely losing</li>
<li>Observed trend: Get a big Twitter following, start a subscription service, then cash in. Get 100 (or more) subs at $100 (or more) a month and that's some decent money -- easier than trading!</li>
<li>There are some that just can't use Twitter and trade effectively due to excessive noise </li>
<li>Twitter wars (arguments) prove that some of us never quite grow up. </li>
</ol>
For those moving ahead with leveraging Twitter, if used methodically with the proper filters and context, it can be an incredible way to learn about trading. Managing your following list often is essential to provide focus based on what you're trying to learn or monitor without going overboard. And you should also monitor to what level of effort you are able to write tweets, without impacting your primary job as a trader. <br />
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<span style="color: red;"><b><b>Great talking head </b></b><b><b><b><b>≠</b> </b>G</b>reat trader </b><b>≠ Great teacher </b></span><b><br />
</b><br />
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Staying along the topic of Twitter, someone who produces great tweets breaking down and analyzing the markets does not necessarily mean they are a great trader or a great teacher. There are many who call the markets accurately, but when it comes to executing their plans, their trading leaves much to be desired. </div>
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<br />
I have a strong suspicion that most of the elite traders don't tweet much, if at all. And those on Twitter may not be very active or tweet only non-trading related topics, or simply don't want to be known. Many might even be a someone who is a terrible teacher or poor communicator. Even if you find a great trader who actively communicates and makes great returns a year, they might not even trade similar to your style.<br />
<br />
And except for entertainment purposes (which Twitter is great for) I'm not quite sure how actionable following a great talking head (such as those that appear on CNBC regularly) are for a trader. Many of those who sound great with an impressive pedigree and/or ivory tower vibes followed by 10's of thousands on Twitter don't ever seem to be wrong, just like economists!<br />
<br />
Looking back on their calls, most don't seem to be that much more accurate beyond random chance. But the bravado and confidence at which they make their predictions makes for good entertainment. There's a lot of ego out there in Twitter-land. So those who regularly admit to trades that ended up as losses are to be respected.<br />
<br />
Therefore, I believe it's most important to try and find people that you can learn from -- on or off Twitter. What matters is that they possess some knowledge that is valuable to you, and whether they are a good teacher by communicating in a way that resonates with you.</div>
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<span style="color: red;"><b>Learning is a process that should never stop</b></span><br />
In order to remain successful, I believe it's important to establish some process that helps us to learn most effectively and then always strive to learn more. If we ever reach the point where we truly <i>believe</i> we think know all we can about something (like trading), then that's when we have essentially quit -- the game is over and we will begin to fail. By making the process of learning a regular and continuous part of our lives (not just trading), we will help put success on our side.<br />
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<br />
The next post in this series is: <a href="http://grovetrades.blogspot.com/2013/05/2-years-of-trading-lessons-learned-part.html">LESSONS LEARNED (Part 3 of 3): THE MENTAL GAME </a></div>
Grove Underhttp://www.blogger.com/profile/11996363914551744557noreply@blogger.com0tag:blogger.com,1999:blog-6579146808262144709.post-52154084934956724852013-04-26T14:13:00.003-04:002013-04-29T16:52:13.397-04:002 Years of Trading - Lessons Learned (Part 1 of 3)<div>
It has been about 2 years and well over 4,000 trades since I started trading full time in Q2 2011. Over the past 20+ years, I've been involved with the markets on and off in one way or another. But when I decided to return full time, I tried my best to be as humble and open with myself to start with a blank slate, just like a rookie or a freshman. <br />
<br />
Even though I wanted to restart as if I didn't know anything, when I first started learning about trading long ago, I could have told you nearly each of the lessons learned in these posts very confidently. <br />
<br />
I was like a teenager who "knows it all" only to realize decades later that the older you get, you really didn't know. Experience has a way of doing that. It's one thing to know, but it's another thing to truly <i>understand</i> and <i>believe</i> the words<i>.</i><br />
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You will find nothing groundbreaking here in these mostly well known trading aphorisms, just views from yet another developing trader who has come to the realization that there are no secrets to trading -- except for passion, desire, hard work, and some luck. </div>
<div>
<br />
For readability, this post has been broken into 3 parts.</div>
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<br />
<b>LESSONS LEARNED (Part 1 OF 3): TRADING FUNDAMENTALS</b><br />
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<span style="color: red;"><b>The concept of trading is simple</b></span></div>
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Trading is simple, just like golf. Hit the ball with a golf club into the hole with the least number of strokes. Conceptually easy, but as we all know who have tried, there's a lot of complexity involved with the details and execution.</div>
<br />
Trading is similar. However, there are many people trying to sell you a system or algo or model or "holy grail" with many bells and whistles, full of "proprietary" indicators, based on impressive statistical and mathematical formulas that can only be interpreted by ivory tower PhD's. <br />
<br />
But to goal for trading is to simply this: Buy low and sell high. Sell high and buy low. Easy! Right?<br />
<br />
The entry method for most retail traders is based on 1) choosing a timeframe, 2) go with trend or counter trend, and 3) enter on a breakout or on a pullback. Once you're on board, your trading plan should give you an idea of where you decide to take profit, or when to get out when you're wrong according to your risk and trade management parameters. <br />
<br />
For the most part, all systems are essentially a variation of the criteria above. Learning the basics of trading is relatively easy. There is no "holy grail" trading system, although I'm confident through my own analysis that there are certain trading setups that have enough edge for retail traders to make a very good living. And when finding setups with edge, the point K.I.S.S. (keep it simple stupid) is also applicable. This K.I.S.S. point is also something that makes more and more sense as time goes on.<br />
<br />
However, I've realized that once you do achieve a basic nuts and bolts level of trading, the deciding factor between success and failure shifts drastically to your biggest trading obstacle -- your mind.<br />
<br />
<span style="color: red;"><b>There is no right or best way of trading</b></span><br />
When you follow or read many of the "trading gurus", many express the notion that their way is the best and only way. That is completely, unequivocally false. There are trading strategies and timeframes that work best for <i>you</i>. We're all different. I believe Dr. Brett Steenbarger's books explained it best.</div>
<div>
<br />
Whether you're a macro / Fibonacci / chartist / volume profile / Market profile / volatility breakout / Elliot wave / DeMark / trend follower / channel trader / scalper / swing trader / or whatever type of model / system / indicator / methodology you prefer, successful traders have a certain setup that resonates for them (i.e. aligns with their strengths). </div>
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I've found that the successful traders tend to have a way to "tell a story" about the market based on the construct that works best for them. And more importantly, they have the discipline to execute their methodology consistently over the long term.</div>
<div>
<br />
<span style="color: red;"><b>Finding your "style" is key, it's only a matter of time and/or luck</b></span><br />
As rare as it is, some are fortunate to meet and marry their high school sweetheart and live happily together for the rest of their lives. Some will be unfortunate to never find their better half. Many think they found their soulmate, only to eventually get divorced. I found this analogy similar to trading success stories. The Market Wizards book series gives great examples of how successful traders all took different paths and approaches to become successful traders.<br />
<br />
There are a very lucky few who find a trading method that suits them from nearly the beginning of their careers, and end up as successful traders for the rest of their lives. Most do not (or can not) continue to put in the enormous effort hitting brick wall after brick wall, trying to find that trading strategy which ultimately suits their personality. They end up as part of the 90+%, quitting before they find what works for them, with enormous psychological and/or financial deficits.</div>
<div>
<br />
I've been there, <a href="http://grovetrades.blogspot.com/2012/09/still-chasing-success-but.html" target="_blank">chasing success</a> by looking for one trading method after another, seeking a shortcut to a hot streak of winning trades that will finally help me get out of the psychological and financial hole, to vindicate me as not just another loser, but that as a fleeting winner. This gambling mentality is not the best approach to long term success. <br />
<br />
However, this experience of chasing methods has exposed me to many trading systems and methodologies. And this has helped me to learn what works for me and what doesn't, as well as gaining more knowledge about trading. On a good note, it has considerably reduced my "upgrade-itis" desires to look for that brand new and shiny trading system. Every time I look into something "new", it's like I've been there, done that. I've become somewhat jaded of systems, which is good.<br />
<br />
I've always known that the "holy grail" system of trading doesn't exist. But after overturning so many rocks, I finally <i>believe</i> that it doesn't exist in the form we all seek. There's a big difference between knowing and believing.</div>
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So the ability to pace yourself, so that you don't lose all your money or your psychological capital before finding your style, is critical to success. However, how quickly you find "<i>your</i> system" that fits "<i>your </i>style" and personality can involve some luck.<br />
<br />
<span style="color: red;"><b>Managing and exiting a trade is arguably more important than entry setups</b></span><br />
Most new (and experienced) traders find it much more exciting to hear about a great system / model / indicator / methodology / holy grail that gets you long at the lows and short at the highs. So how exciting is it to learn about where to put your stop losses, or how to scale out? When you're starting off, you don't really think of how much you can lose, only how much you can win. And scaling out? Doesn't that mean you don't make as much money when you are right? <br />
<div>
<br />
Well, <a href="http://futurestrader71.com/" target="_blank">FuturesTrader71</a> promotes a coin toss SIM exercise where you enter long or short trade based on a coin toss, and then manage your trade according to predefined stop loss and profit scale outs. He makes the point that the focus on entry setups are overrated.<br />
<br />
As you adjust the stop and profit targets over various iterations of your experiment, you will become enlightened to the powers of what trade management can do to your bottom line results vs. an all-in all-out type management, even if the entries are based on a random coin toss. <br />
<br />
If you're not yet a consistently profitable trader, don't be surprised if you find that the coin toss experiment generates better results vs. your current trading. Sad but true (don't as me how I learned, haha). <br />
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You'll also see that trade management of your stops and profit targets are just as important (or more so) vs. your entry signals.<br />
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<span style="color: red;"><b>Risk management is key</b></span><br />
For the beginning trader, discussing risk management is a BUZZ KILL. The last thing you want to do when you're starting to trade is to limit your risk, because that will get in the way your huge profits! But as time goes on, we all learn that this is mindset is the wrong approach for long term success.<br />
<br />
If you don't have an edge, like gambling at a casino, they the best strategy is to bet all you have for just one play. Then quit, because the more you play, the odds will eventually work against you.<br />
<br />
But if you have a trading strategy with an edge, risk smaller per trade so that you can stick around around for the long haul. Because even high probability strategies can have several losses in a row. Therefore, if your per trade risk as % of portfolio is too high, you could eventually suffer a business ending drawdown, even with a solid high accuracy trading system.<br />
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<br /></div>
<div>
The next post in this series is: <a href="http://grovetrades.blogspot.com/2013/04/2-years-of-trading-lessons-learned-part_29.html">LESSONS LEARNED (Part 2 of 3): THE LEARNING PROCESS</a> </div>
Grove Underhttp://www.blogger.com/profile/11996363914551744557noreply@blogger.com3tag:blogger.com,1999:blog-6579146808262144709.post-67868627956281984392013-04-17T20:05:00.000-04:002013-04-28T19:58:16.055-04:00Does your trading have an edge? Here's how to find out.How do you know if your trading system has an edge or whether it's just random luck?<br />
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One way I learned was from Adam Grimes' book, "<a href="http://www.amazon.com/Art-Science-Technical-Analysis-Strategies/dp/1118115120/">The Art and Science of Technical Analysis</a>." As I mentioned in the <a href="http://grovetrades.blogspot.com/2013/04/using-tradervue-for-analysis-of.html">prior post</a>, I consider his book a must have for traders.<br />
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In Chapter 12, there's a section called "Statistical Analysis of Trading Results" which discusses "deriving the <i>p </i>value, which is a significant test (one-tailed <i>t</i>-test) for the mean P&L being > 0." The table on page 389 Adam used as an example looked similar to this (but without the <i>t</i>-value column):<br />
<div class="separator" style="clear: both; text-align: center;">
<a href="http://3.bp.blogspot.com/-0qCXmz_sv7Y/UW7cSrvVVpI/AAAAAAAAAko/FvZGQ66-V-w/s1600/t-test+results+4-14-2013.png" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img border="0" height="155" src="http://3.bp.blogspot.com/-0qCXmz_sv7Y/UW7cSrvVVpI/AAAAAAAAAko/FvZGQ66-V-w/s400/t-test+results+4-14-2013.png" width="400" /></a></div>
The chapter didn't go into the calculation details, but with some helpful guidance that Adam emailed me, I was able to dust off the cobwebs and think back to my college statistics class. You can find out more about <i>p</i> value from <a href="http://www.cliffsnotes.com/study_guide/One-Sample-t-test.topicArticleId-267532,articleId-267511.html">here</a> and <a href="http://en.wikipedia.org/wiki/P-value">here</a>.<br />
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<b>HOW DO YOU CALCULATE IT?</b><br />
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The steps are simple from within Excel. Take each individual trade P&L and figure out: 1) the average P&L per trade, 2) the number of trades, and 3) the standard deviation. If you use <a href="http://tradervue.com/">Tradervue</a>, Greg will be rolling out the <i>p </i>value soon (if not already) within the reports section.<br />
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Then plug in the #'s above into a Excel spreadsheet with the formulas below. This then calculates the <i>t</i>-value so that the <i>p </i>value can be derived. It can all be in one formula, but I broke it apart to make it easier to read.<br />
<div class="separator" style="clear: both; text-align: center;">
<a href="http://3.bp.blogspot.com/-Pw9DB_Z9O5Q/UW7cPcbKo1I/AAAAAAAAAkg/4NeWcg3Sog8/s1600/t-test+formula+4-14-2013.png" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img border="0" height="155" src="http://3.bp.blogspot.com/-Pw9DB_Z9O5Q/UW7cPcbKo1I/AAAAAAAAAkg/4NeWcg3Sog8/s400/t-test+formula+4-14-2013.png" width="400" /></a></div>
<b>WHAT DOES IT MEAN?</b><br />
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A lower <i>p</i> value is better. The lower the <i>p</i> value simply means that based on the series of trades analyzed, the results are less likely due to random chance or luck. In general usage, a <i>p </i>value of < 0.05 is often considered to be statistically significant.<br />
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If you have a higher <i>p </i>value, that means your trading results, even if very profitable, could be likely due to random chance or luck vs. having some sort of edge.<br />
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For example, if your <i>p</i> value is 0.01, that means based on the data set analyzed, there's a 1% chance of seeing the analyzed results due to random chance or luck. If your <i>p</i> value is 0.50, then there's a 50% chance your results are based on luck (i.e. not much of an edge).<br />
<br />
<b>CAVEATS</b><br />
<br />
Like any calculation used to measure trading or investment performance, whether it's a straightforward % gain on portfolio, win/loss %, profit factor, average profit per trade, or more sophisticated calculations such as Sharpe, Sortino or Sterling ratios, there are pros and cons for each type of measure.<br />
<br />
And if your risk based on account size varies per trade, analyzing the trading results based on an R-Multiple or %R should also be highly considered. Adam Grimes discusses on page 392 that "standardizing for risk removes the position sizing effect" so that it could reveal that a system or trader via the <i>p </i>value could be "trading with a clear statistical edge, even though it was completely obscured by his position sizing decisions."<br />
<br />
The <i>p</i> value has its fair share of criticisms, so it's just a reminder that one measure shouldn't be the ultimate judge. It's best to look at trading results from multiple perspectives and take a holistic approach. And of course, always use some common sense.Grove Underhttp://www.blogger.com/profile/11996363914551744557noreply@blogger.com1tag:blogger.com,1999:blog-6579146808262144709.post-7702651054878802752013-04-16T22:25:00.000-04:002013-04-16T22:25:57.214-04:00Using Tradervue for analysis of autotrading The Lincoln Million<div>
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Although it has been a while since my last in-depth <a href="http://grovetrades.blogspot.com/search?q=tradervue&max-results=20&by-date=false" target="_blank">reviews about Tradervue</a>, Greg Reinacker has continued to build it into one of the premier trading journals. It is elegantly designed and for all that it's capable of doing, it remains surprisingly user friendly. <br />
<br />
Here are a few highlights of the improvements I've personally found valuable over the past year:</div>
<ul>
<li>Import trade data from more brokerages</li>
<li>Calculate your performance statistics based on <a href="http://blog.tradervue.com/2013/03/22/risk-tracking-and-reporting/" target="_blank">R-multiple</a> and net of commissions</li>
<li> Improved statistics (e.g. <a href="http://blog.tradervue.com/2013/04/02/new-statistics-available/" target="_blank">standard deviation</a>, <a href="http://blog.tradervue.com/2012/11/29/mfe-and-mae-calculations/" target="_blank">MFE and MAE calculations</a>)</li>
<li> Support for <a href="http://blog.tradervue.com/2013/02/28/forex-now-supported/" target="_blank">forex</a> and <a href="http://blog.tradervue.com/2012/07/09/options-now-supported/" target="_blank">options</a></li>
<li>Ability to handle <a href="http://blog.tradervue.com/2012/11/12/using-multiple-trading-accounts/" target="_blank">multiple accounts</a></li>
<li> Even better <a href="http://blog.tradervue.com/2012/10/10/new-tag-combination-report/" target="_blank">tag based analysis and reporting</a></li>
<li>Improved editing/admin tools...and lots more</li>
</ul>
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For anyone who is serious in improving their trading performance, maintaining a trading journal is not an option, it's a must have. And I believe Tradervue is one of the best out there.</div>
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<br /></div>
<div>
<b>USING TRADERVUE TO ANALYZE AUTOTRADING BY THE LINCOLN MILLION</b></div>
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<br />
Over the past several months, I've started to focus primarily on swing trading, which means collecting a meaningful population of trade data for analysis takes a lot longer (vs. daytrading). And as I wrote in the <a href="http://grovetrades.blogspot.com/2013/03/my-2013-new-years-trading-resolutions_5.html">prior post</a>, I'm also focusing more on autotrading a large portion of my account.</div>
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</div>
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<br />
Recently, I've gained enough data from autotrading <a href="http://thelincolnlist.com/lincoln-million/" target="_blank">The Lincoln Million</a> (TLM) to perform an analysis. TLM is a swing trading service where Doug has gained an impressive return on his own account, and one of a few services being <a href="http://thelincolnlist.com/auto-trading-2/" target="_blank">autotraded</a> in my account.<br />
<br />
I've taken the The Lincoln List's Champ Camp trading course (worth it, recommended), and have seen Doug in action live within The Lincoln List and The Lincoln Million trading rooms (both daytrading and swing trading). He has been very consistently profitable, but how would the autotrading results compare?</div>
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<b>REPORTS AND CHARTS FROM TRADERVUE</b></div>
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Here are the actual results of The Lincoln Million's autotrades from January 1, 2013 through April 11, 2013 generated from Tradervue. Although I've been autotrading the service since November, my $'s allocation per trade were not quite consistent and locked in until the beginning of this year, so I excluded that group of trades.<br />
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<a href="http://2.bp.blogspot.com/-aHM05bGhaFs/UWxMd6oOiWI/AAAAAAAAAj4/lp6EY1pJi6s/s1600/TLM+review+1+4-12-2013.png" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img border="0" height="225" src="http://2.bp.blogspot.com/-aHM05bGhaFs/UWxMd6oOiWI/AAAAAAAAAj4/lp6EY1pJi6s/s400/TLM+review+1+4-12-2013.png" width="400" /></a></div>
<b>Positives: </b><br />
<div>
High winning % (82%)<br />
Solid profit factor (2.10)</div>
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<br /></div>
<div>
<b>Potential concerns:</b></div>
<div>
Average winning trade smaller vs. losing trade ($89 vs. -$414)</div>
<div>
Average hold time of losers much greater than winning trades (26 days vs. 5 days)</div>
</div>
<div>
<br />
The report below displays a graphic summary of the Win/Loss ratio as well as the P&L and drawdown curve:</div>
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<a href="http://1.bp.blogspot.com/-CKK95Fn38VE/UWxMjDf_VVI/AAAAAAAAAkA/MsO0o4CPXmE/s1600/TLM+review+2+4-12-2013.png" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img border="0" height="400" src="http://1.bp.blogspot.com/-CKK95Fn38VE/UWxMjDf_VVI/AAAAAAAAAkA/MsO0o4CPXmE/s400/TLM+review+2+4-12-2013.png" width="361" /></a></div>
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The report below represents another view of the how long winning trades are held vs. losing trades:<br />
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<a href="http://3.bp.blogspot.com/-L-61HXUFEWc/UWxMwK8OoNI/AAAAAAAAAkI/Pp2lQJAOAtg/s1600/TLM+review+3+4-12-2013.png" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img border="0" height="280" src="http://3.bp.blogspot.com/-L-61HXUFEWc/UWxMwK8OoNI/AAAAAAAAAkI/Pp2lQJAOAtg/s400/TLM+review+3+4-12-2013.png" width="400" /></a></div>
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One interesting analysis method within Tradervue is the ability to <a href="http://blog.tradervue.com/2012/12/07/simple-stop-analysis/" target="_blank">analyze your stop</a> locations. I didn't expect the chart below to so clearly delineate a potentially more advantageous stop location:</div>
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<b><a href="http://3.bp.blogspot.com/-h9K-gLi3BlA/UWxMzi-sKLI/AAAAAAAAAkQ/iE2V0eR-eYc/s1600/TLM+review+4+4-12-2013.png" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img border="0" height="280" src="http://3.bp.blogspot.com/-h9K-gLi3BlA/UWxMzi-sKLI/AAAAAAAAAkQ/iE2V0eR-eYc/s400/TLM+review+4+4-12-2013.png" width="400" /></a></b></div>
<b>INITIAL THOUGHTS ABOUT AUTOTRADING THE LINCOLN MILLION</b></div>
<div>
<br /></div>
<div>
The past 5 months represent my first experience into autotrading, so I really didn't know what to expect other than mostly hands off approach, like a mutual fund. There are some other services I'm also autotrading which are based on writing options credit spreads and each service has their own pros/cons. I'll likely write about those in the future once I have more data.<br />
<br />
With regards to autotrading via The Lincoln Million, here are a few thoughts:</div>
<ul>
<li>There have been a decent number of trades that The Lincoln Million alerted and got filled on his own account, but were not filled via autotrading. As expected, nearly all the missed trades were winners</li>
<li>Primary reasons for no fills: short shares no longer available, signal to execution time lag (generally takes 3-10 minutes for autotrade order to arrive at my broker via <a href="http://www.global-autotrading.com/">Global Autotrading</a>), and impact of orders on thinly traded micro and small cap stocks resulting in slippage</li>
<li>Unlike trading the very liquid ZB or ES (T-bonds or S&P e-mini futures) products where you can put on large size per trade ($1 million/trade is nothing), trading microcap stocks often have a much greater issues with liquidity.</li>
<li>Therefore, actual results from autotrading is likely <= 50% of posted results</li>
<li>However, if you are following the chat room alerts in real time and manually trading, I believe it's possible to achieve performance 75+% of posted results</li>
<li> Better yet, once you learn the setups, you can probably do very well trading your own stocks, which is what Doug ultimately wants you to accomplish</li>
</ul>
<div>
</div>
<div>
I admit, I've experienced frustrations watching unfilled trades become winners, getting bad slippage on fills, experiencing underwater trades that are held multiple times longer than winning trades, and simply seeing average winners be smaller than average losers. My initial expectations on what the returns from autotrading TLM should be were extremely high, and they were not being met.<br />
<br />
But when I started to review the trading results via Tradervue and started looking at the results from various perspectives (not simply total % gains), there was definitely a high level of consistency that needed to be respected, even when the autotrading execution was less than ideal.<br />
<br />
<b>STATISTICAL SIGNIFICANCE</b></div>
<div>
<br />
The final sense of a-ha was when I ran the trading results through a <a href="http://www.cliffsnotes.com/study_guide/One-Sample-t-test.topicArticleId-267532,articleId-267511.html">significance test</a> (one-tailed <i>t</i>-test where mean P&L > 0). I learned the method of determining whether you have an edge from Adam Grimes' book "<a href="http://www.amazon.com/Art-Science-Technical-Analysis-Strategies/dp/1118115120/">The Art and Science of Technical Analysis</a>" within chapter 12 (highly recommended, it's a keeper).<br />
<br />
Even with all the slippage and missed trades, the <b><i>p</i>-value was 0.07</b> for The Lincoln Million autotrades, which means there's a 7% chance the results are random. Lower <i>p</i>-value indicate the results are more statistically significant (better) and <i>p</i>=0.05 is a commonly used guideline for a significance level. <br />
<br />
<i>This is an indication that even with all the challenges from autotrading</i><i>, </i><i>this system still has a solid edge </i><i><i><i>based on the current data</i></i> set. </i></div>
<div>
<br /></div>
<div>
Assuming future improvement of missed trades and/or reduced slippage, or perhaps greater success from manually executing the trades, the statistical significance can potentially drop well below the <i>p</i>=0.05 significance level, further reinforcing the notion that this method has an edge.<br />
<br />
And what if I take his <a href="http://profit.ly/user/LincolnMillion">published results</a> over the same period and perform the <i>t</i>-test? The resulting <i>p</i>-value is less than 0.01, which means there's less than a 1% chance his results are random or due to luck based on the particular set of data analyzed. Doug's trading method definitely has an edge.<br />
<br />
<b>ADVANTAGES FROM AUTOTRADING</b><br />
<br />
Perhaps the The Lincoln Million autotrading doesn't align perfectly with my personality (but then again, would any system you did not create yourself?), which is why having it autotraded without my biases or intervention has worked relatively well to date.<br />
<br />
That's one reason why I'm approaching autotrading as a way to diversify my overall trading portfolio by 1) utilizing historically profitable trading services that 2) I couldn't execute consistently on a long term basis. In essence, it's like I'm selecting and hiring traders with various trading methodologies and styles, and having them each trade a portion of my account. And if I don't like how they're performing or how their performance blends with the other traders (services), I can easily "fire" them.<br />
<br />
So far, here's one of the biggest benefits from autotrading The Lincoln Million -- I have continued to track and follow the trade alerts with a much greater level of focus and involvement since I have "skin in the game." I believe that has enabled me to learn this method much faster vs. a passive approach, and to discover certain Lincoln Million setups that resonate very well with my personality.</div>
<div>
<br />
<b>NEXT STEPS</b></div>
<div>
</div>
<div>
<ul>
<li>Since I only have around 30 trades for observation, which is barely the minimum data set required for a statistically significant test, I will continue tracking the system to see how well it continues to perform</li>
<li>Continue to monitor the number of missed trades/slippage to determine how much of an impact it has on overall results</li>
<li>At a certain point, I might consider manually executing the trading signals instead of autotrading to see whether I can obtain better execution, but having the time to trade is currently a constraint</li>
<li>Keep track of what happens if a trade is closed out when it's at a loss > $400 (based on current trade allocation level) vs. letting it ride hoping for a recovery. This will be easy to track within Tradervue using the tag feature and the MAE metric</li>
<li>And finally, this exercise has reminded me of how I need to step up my trade journaling. I know the more I leverage the power of Tradervue, the faster my trading will improve</li>
</ul>
</div>
</div>
</div>
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Grove Underhttp://www.blogger.com/profile/11996363914551744557noreply@blogger.com4tag:blogger.com,1999:blog-6579146808262144709.post-50630461157263806582013-03-05T21:51:00.000-05:002013-03-05T21:51:12.341-05:00My 2013 New Year's Trading ResolutionsWow, time flies, has it really been that long since I last posted? Well, now that it's March, most people have long forgotten about their New Year's Resolutions. So it's time for me to zig while most zag -- better late than never. <br />
<br />
<br />
<b>TRADING RESOLUTIONS FOR 2013</b><br />
<ol>
<li>Stop overtrading/revenge trading/daytrading</li>
<li>Lower expectations of returns and trade small to help build solid trading habits</li>
<li>Explore and implement other trading methods, products, and time horizons</li>
<li>Start thinking of returns based on % risk (R), not $'s</li>
</ol>
<br />
<b>GOALS</b><br />
<ul><ul></ul>
<li>Overtrading/revenge trading to account for < 5% of total trades</li>
<ul>
<li>Too much intraday trading can emotionally charge my trading in a very negative way </li>
</ul>
<ul>
<li>Even reducing my historical revenge/rouge trades (30% during my worst periods) by half would have a huge positive impact on my P&L</li>
</ul>
<li>Target consistent 2-8% returns a month</li>
<ul>
<li>Focus on limiting risk (not maximize returns) while building up good trading habits</li>
</ul>
<li>Initiate equity swing program, options writing, and further explore forex strategies</li>
<ul>
<li>Swing trading via newsletters/chat rooms/autotrading (target 50%+/year)</li>
<li>Options writing via newsletters/autotrading (target 25%+/year)</li>
<li>Forex strategies via alternative trading methods (target 100%+/year)</li>
</ul>
<li>Evaluate performance based on R multiples. Reports and analysis are based primarily on %'s</li>
</ul>
<br />
<b>TACTICS</b><br />
<ul>
<li>Stop daytrading</li>
<ul>
<li>Suspended my futures accounts</li>
<li>Reduced equity/options accounts to significantly below < $25k to put PDT into play</li>
<li>However, allow forex account for "penny slots" daytrading -- minimal absolute dollar risk</li>
</ul>
<li>Reduce % risk of portfolio per trade</li>
<ul>
<li>Average risk per trade <= 1% of portfolio</li>
<li>Lotto plays <= .5% (weekly options plays)</li>
<li>Stronger conviction (rare) <= 2%</li>
</ul>
<li>Capture stop size as a metric to calculate returns based on R. Reports and analysis should focus on %, not $'s</li>
<li>Implement autotrading initiative to explore other trading opportunities</li>
<ul>
<li>Research and initiate autotrading of equity swing trading newsletter(s)</li>
<li>Research and initiate autotrading of credit spread options newsletters(s)</li>
<li>Analyze and explore other forex trading strategies in increase # of trades and returns</li>
</ul>
</ul>
<br />
<b>RESULTS TO DATE</b><br />
<br />
More details later, but based on implementing a large portion of the tactics above, I have been NET PROFITABLE both in my equities and forex accounts the past 3 months. <br />
<br />
One of the biggest factors has been to SLOW DOWN. Daytrading was fine when I started with profitable trades, but a few losing trades in a row often had the tendency to quickly snowball into revenge trading. I'll eventually daytrade again, but not now.<br />
<br />
Based on the past several months, I'm cautiously optimistic and looking to focus on even greater consistency with my overall trading process as I complete 2 years of full time trading. <br />
<br />Grove Underhttp://www.blogger.com/profile/11996363914551744557noreply@blogger.com2tag:blogger.com,1999:blog-6579146808262144709.post-43820974700091771322012-12-20T22:12:00.000-05:002012-12-20T22:12:19.526-05:00A break from radio silenceHas it really been about 2 months since my last post? A lot sure has
happened since then. Hurricane Sandy certainly disrupted life for a
while, and when I returned to trading sometime in November, it's pretty
clear I wasn't ready. I was back from my hurricane hiatus, swinging for
the fences, looking to make it big. Probably as a way of lashing out
at life's challenges. <br />
<br />I was having upwards of 20-30 point daily P&L swings (both
profit and losses) trading ES with only 1 contract. I even had some
overnight sessions with the flighty and volatile soybeans, trading late
into the night resulting in 20 or more point P&L swings on a single
contract. <br />
<br />The only problem is that for every 20+ point day, there were more
days where I lost 20+ points on 10 point range day. Big recipe for
disaster.<br /><br /><b>Yeah, I wasn't watching my risk...at all. And I paid the price...big time.</b><br />
<br />Although my forex account has quietly gained well over 150% for the
year, I ended down in my futures accounts over 70%. Luckily, in
absolute dollars, I had started with a minimal sized account just to
trade, so there's hardly any impact to my overall financial condition. <br />
<br /><b>But from the psychological capital perspective, I was hit hard. </b><br /><br />I
usually think primarily in percentages of portfolio, and when I took
the hit in November, I wasn't even thinking in terms of percentage of
portfolio risked (only thought how much $'s I could/should make). In
hindsight, this is simply not acceptable. This is not what a
professional trader does. This was pure gambling. In order to prevent
myself from truly blowing up all my accounts, I took
preemptive action and transferred money out. Time out.<br /><br />I've
learned through experience that it's so easy to destroy your money with
reckless trading, but so much more difficult to accumulate profits. All
it takes is one bad day of senseless trading to wipe out
days/weeks/months of hard work. It's a similar concept trusting someone
-- what takes years to build trust with someone, can be forever broken
in just moments. I need to respect this concept.<br />
<br /><b>During the darkest hours, I admit, I had thoughts of quitting. </b><br /><br />This
doesn't happen often, but I needed to think of an alternative life to
trading, and strangely enough, this usually brings me back to trading.
Trading is something I've been planning on doing full time for the past
couple decades, and I've realized after careful consideration that
there's no better time than now to continue charging ahead.<br />
<br />By the 2nd quarter of 2013, I will have been trading full time for 2
years. It sure does seem like I've been at it a lot longer. I
remember hearing many others say it takes on average 3-5 years in order
to become a consistently profitable trader (for those who even make it
that far), and I always thought I could accomplish it in a year...or
less. Sure hasn't been the case.<br />
<br /><b>Where has this trading journey taken me so far? </b><br /><br />I
started it all in early 2011 with stocks, and after about half a year, I
lost about half my account, literally all the losses were commissions.
I was breakeven on a gross basis, even with all my
revenge/rogue/impulse trades. I discovered that there were certain
defined setups that worked very well for me, but just couldn't be
patient enough to avoid the revenge and rogue trades.<br />
<br />As an escape, I decided to switch to futures which had more leverage
and no pattern daytrading rules to worry about, and ended up losing
over 70% in about a year. A little less than half of my losses were due
to commissions. Unlike stocks, I definitely had a gross loss trading
the ES and nearly all of my losses came on a handful of weeks where I
went on tilt and got sucked down a death spiral of revenge trading. <br /><br />In
hindsight, the leverage/tick size/contract size of the ES emini in
relation to my account size really put me at a disadvantage. I couldn't
size down below 1 contract and reduce risk/scale out of positions as I
easily could with stocks. My thought was that if I couldn't be
consistently profitable with 1 contract, why even bother sizing up? I
was stubborn to try and make it with an all-in all-out trading style
using 1 contract. <br />
<br /><b>What and how I'm doing now</b><br /><br />And due in part to this
last experience of pain, I've recently escaped again. However, instead
of focusing more on forex (which has continued to work relatively well
since I started trading full time) I've decided to explore stocks once
again and for whatever reason, utilizing options heavily. <br />
<br />I'm currently trading with a very small equities account and don't
want to get triggered as a pattern day trader, so I only swing trade.
This restriction has reigned in the revenge and rogue trading
significantly, since I can only execute a few trades a day and thus have
the time to think them out.<br />
<br />During December to date, I've only had about 18 trades, of which
over 70% are winners with a profit factor greater than 3.00. In
comparison, a bad revenge filled day from the past would produce more
than 20 trades with an accuracy of < 30%, so this is significant
change. <br /><br />I am hopeful and optimistic that maybe, just maybe, I'm starting to make the turn. But then again, I've had this feeling
before...which then lead to me to overconfidence, which then led me to falling off the discipline wagon in
spectacular fashion. <br />
<br />
So I am determined more than ever to stay the
course of maintaining a consistent and disciplined trading process, rather than focusing on P&L. I also have to credit
the stock trading room I've recently joined, which has making a big
difference in the way I think and trade. More about that in the future.<br />
<br /><b>2013, here we come!</b><br /><br />Since I'll be traveling over the
holidays next week, this year is essentially over for me and I'll be
shutting down. So this will likely be my last post of the year. <br />
<br />I'm really looking forward to seeing my old friends and family back
in San Francisco. Hard to believe it has been about 2 1/2 years since we
moved from the beautiful Bay Area, so there will be a lot of wonderful catching up to
do.<br />
<br />I look forward to 2013 with renewed optimism and confidence.<br />
<br />
Happy Holidays to all, and best wishes for a great 2013!<br /><br />
Grove Underhttp://www.blogger.com/profile/11996363914551744557noreply@blogger.com2tag:blogger.com,1999:blog-6579146808262144709.post-43350631178228328352012-10-20T22:02:00.000-04:002012-10-20T22:02:33.549-04:00Recap: Week ending 10/19 - Tough week but good finishThe week ending 10/19 was another tough week as I continued my long
journey to find my way. It ended on a good note, but it was full of
difficult moments.<br />
<div class="separator" style="clear: both; text-align: center;">
<a href="http://1.bp.blogspot.com/-VD8dY7S3OZE/UINVTMYvZGI/AAAAAAAAAiI/Xvxot42LupY/s1600/Weekly+recap+10-19-2012.png" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img border="0" height="132" src="http://1.bp.blogspot.com/-VD8dY7S3OZE/UINVTMYvZGI/AAAAAAAAAiI/Xvxot42LupY/s400/Weekly+recap+10-19-2012.png" width="400" /></a></div>
STARTED THE WEEK OFF WRONG<br />
I started the
week focused on maximizing P&L -- not on my goals to limit the
number of daily trades to 3 and to limit my profit targets to +2.00 ES
points. I wanted to CRUSH the markets. That should have been a big
warning sign. Sure, it felt OK that I ended up making a decent profit
to start the week, but in the back of my mind, I knew I fell off the
program. I know was cheating myself.<br />
<br />
CRACKS FORMED ON TUESDAY<br />
Whether it was from guilt or who knows
what, the cracks started to form on Tuesday. Just prior to lunch, I
called it a day barely exceeding my # of trades goal and although it
shouldn't matter, I had a slight profit. Nice job, I'm getting back on
track. But...in the final hour, I went on tilt. I took what I thought
was solid setup to end the day on a really good note, only to realize I
totally read it wrong. Yes, got greedy, got stopped out, revenge
traded, and ended down a few points. Ugh.<br />
<br />
MONKEYS RAN AMOK<br />
So when Wednesday came around, the monkeys ran
amok. Shortly after the NY open, I already had 3 losses in a row and it
was all downhill from there. My initial thought was, "We just opened!
How could I stop trading so early in the day?" My will was weakened, I
took one more trade, realized I did something I shouldn't have, which
then snowballed into "what the heck, I blew it", and my behavior for the
rest of the day ended up being yet another big ding to my psychological
capital.<br />
<br />
RADICAL SHIFT / DO SOMETHING DIFFERENT / DO WHAT WORKS<br />
Just
around that time, I realized that the S&P was in overbought
conditions based on the interpretation of the daily charts that I have
used for many years, primarily on the forex charts. The high
probability setups only happen once or so a month, and I just don't have
the patience to simply wait only for those signals. <br />
<table cellpadding="0" cellspacing="0" class="tr-caption-container" style="float: left; margin-right: 1em; text-align: left;"><tbody>
<tr><td style="text-align: center;"><a href="http://2.bp.blogspot.com/-nnC_dxjc70Y/UINVSscLHII/AAAAAAAAAiA/hX9l0hFSsFQ/s1600/ES+daily+10-18-2012.png" imageanchor="1" style="clear: left; margin-bottom: 1em; margin-left: auto; margin-right: auto;"><img border="0" height="320" src="http://2.bp.blogspot.com/-nnC_dxjc70Y/UINVSscLHII/AAAAAAAAAiA/hX9l0hFSsFQ/s320/ES+daily+10-18-2012.png" width="317" /></a></td></tr>
<tr><td class="tr-caption" style="text-align: center;">$ES_F - daily chart - 10/19/2012</td></tr>
</tbody></table>
<br />
But I
needed to do something different to change my ways and make new habits
after a rough start to the week. Swing trading has worked well for me
in forex products, so why not try something similar to that in the ES?
And when I am swing trading, the setups are very infrequent, so it's
much more difficult to get into the rhythm of impulse trading -- another
plus.<br />
<br />
THE PLAN<br />
So Wednesday night, a plan was made to establish a swing
short in the ES, very similar to what I do with the forex trades. A
couple indicators I use on the daily timeframe showed a nice clean
overbought condition, so it was time to find a good short entry. My
target was 1425-35 area. I entered the short Wednesday evening and by
Thursday morning, I was up over +5 at one point. But then came the big
Thursday morning grind up where I got stopped out just 1 point before
the erroneous Google earnings release that spooked the market around
lunchtime. It was tough to get stopped out so close to the highs, but I
followed my trading plan and felt good about that.<br />
<br />
I ended up taking a few solid day trade setups to end the day with a
slight profit. And after the market close, the daily charts looked
just as bearish, or even more so than ever. So Thursday night, I
reentered the short, utilizing some good resistance areas from earlier
in the day. That short ended up being 1 tick below the high of the
night and following day.<br />
<br />
PATIENCE IS TOUGH BUT WORTH IT<br />
At the Friday NY open, something strange
happened. The market gap opened below yesterdays close and ended up
having an "opening drive" lower. That means it sold off strongly after
the open with very little rotation/swings higher. This was very
unexpected based on pre-market action as well as other factors. <br />
<br />
A
very key point to remember is that when there is an opening drive,
there's about a 50% chance for a trend day. Since trend days generally
happen < 20% of the time, those are pretty compelling stats. As the
ES tanked and continued to fall with minimal rotations higher, I knew
there was a good chance it's going to be a trend day, and that trend
days generally end at the extremes of the day -- in this case, the lows
of the day. <br />
<table cellpadding="0" cellspacing="0" class="tr-caption-container" style="float: right; margin-left: 1em; text-align: right;"><tbody>
<tr><td style="text-align: center;"><a href="http://2.bp.blogspot.com/-1KUD7V75dPM/UINVSEEjMII/AAAAAAAAAh4/dCV0sSDprFQ/s1600/ES+30m+10-18-2012.png" imageanchor="1" style="clear: right; margin-bottom: 1em; margin-left: auto; margin-right: auto;"><img border="0" height="320" src="http://2.bp.blogspot.com/-1KUD7V75dPM/UINVSEEjMII/AAAAAAAAAh4/dCV0sSDprFQ/s320/ES+30m+10-18-2012.png" width="317" /></a></td></tr>
<tr><td class="tr-caption" style="text-align: center;">$ES_F 30m 10/19/2012</td></tr>
</tbody></table>
<br />
I couldn't be near the charts for very long, since
the temptation to exit would become stronger, so I took frequent
breaks. Having patience to just sit on your hands on trend day is
tough. <br />
<br />
But I ended up exiting once the market started to consolidate a
couple hours before the close, weary of a reversal bottom that would rip
higher into the close. And most importantly, it was right in the middle of the 1425-35 range that I had targeted for profits. I followed
my plan, although it happened 1-2 days quicker than I expected.<br />
<br />
As it happens more often than not for trend days, the market did end
up closing at the lows. I left about +6 ES points on the table, but
I'll consider myself fortunate that I was able to book almost +24
points.<br />
<br />
RANDOM QUESTIONS AND THOUGHTS<br />
The week ended on a good
note, but I still have many questions and issues floating in my mind
that I will need to evaluate and address. This last trade hardly
resolves my many challenges. So although both my financial and
psychological capital have been somewhat replenished, there are still a
lot more obstacles to overcome.<br />
<ul>
<li>Over the past couple years,
I've been successful at simply swing trading, so why do I keep trying to
trade more like a scalper that goes for big wins?</li>
<li>Oh, but what would I do during most days
just waiting for a swing setup? One part of me likes the "action" of
daytrading! [** Flashing lights and "Danger Will Robinson!" alerts going
off **] Trading should not be something you do to help pass time.</li>
<li>Ending
the week on a strong note is nice. But this only means I need to be
extra careful not to be overconfident on Monday. And how will I feel if
the market tanks another 20 ES points...without me on board?</li>
<li>Am I getting closer to the point where I will stop chasing success? The pieces of this trading puzzle seem like they're starting to come together, but I've said/thought that many times before.</li>
<li>Cough medicine and the recent correlation to trading performance, so strange. But correlation is not causation!<span class="st"><i> </i> Or maybe not? If so, what does this really mean?</span></li>
<li>Why
is limiting myself to 3 trades a day so tough? Sounds so easy, doesn't
it? What if I had originally set the daily trade goal to 6, would that
have made any difference?</li>
<li>Although I have my fair share of
really tough days that have hit my psychological capital hard, I still
believe from my core that my dreams of trading success will
become true. It's only a matter of time. </li>
</ul>
<ul>
</ul>
Grove Underhttp://www.blogger.com/profile/11996363914551744557noreply@blogger.com2tag:blogger.com,1999:blog-6579146808262144709.post-3307379210041637942012-10-14T22:13:00.002-04:002012-10-14T22:13:20.015-04:00Back to the drawing boardWell, that didn't last long. My plan was to focus strictly on only two
simple metrics: 1) A max of 3 trades per day and 2) limit profit
targets to +2.00 ES points. P&L wasn't supposed to matter. I didn't even last 2 weeks before I had a big blow up of my goals. I had a couple
days last week with around 30 trades. What a
disappointment.<br />
<table align="center" cellpadding="0" cellspacing="0" class="tr-caption-container" style="margin-left: auto; margin-right: auto; text-align: center;"><tbody>
<tr><td style="text-align: center;"><a href="http://2.bp.blogspot.com/-sP3qodckh10/UHtnR1OC75I/AAAAAAAAAhI/nEfPldqx3J8/s1600/Weekly+review+10-12-2012.png" imageanchor="1" style="margin-left: auto; margin-right: auto;"><img border="0" height="128" src="http://2.bp.blogspot.com/-sP3qodckh10/UHtnR1OC75I/AAAAAAAAAhI/nEfPldqx3J8/s400/Weekly+review+10-12-2012.png" width="400" /></a></td></tr>
<tr><td class="tr-caption" style="text-align: center;">Week ending Oct 12 / From Tradervue.com journal</td></tr>
</tbody></table>
It was like asking someone who loves and eats a chocolate bar every
day to suddenly being allowed to eat only 1 tiny square after getting a
job at a chocolate factory surrounded by thousands of bars. Or someone
who drinks 3 cups of coffee a day, to cut back to 1/4 cup. And whatever other example you can come up with. Not impossible, but very difficult. And very much subject to the binge effect.<br />
<br />Then there are those days, like Friday, when I felt I was in
such tune with
the markets under unusual conditions. I had barely 4 1/2 hours of sleep and felt
emotionally "hollow". I was also on cough medicine, both huge warning signs. However, the lack of sleep and cough medication was a strange
combination -- one which required me to only interpret and act based on what I saw on
the charts, with very little emotion or mental chatter. <br /><br />Instead of looking only for setups, I also kept talking
about the markets
from a "story line" and "contextual" perspective, from both the bull and bear viewpoints. That was different. For example, when the better than expected Prelim U of M
news came out at 9:55 ET on Friday morning, the
market moved strongly higher with initiative buying. <br />
<a href="http://4.bp.blogspot.com/-lhJtxPkQQqM/UHtrPg6TZpI/AAAAAAAAAhg/Ejji1VHb8HU/s1600/ES+short+10-12-2012.png" imageanchor="1" style="clear: right; float: right; margin-bottom: 1em; margin-left: 1em;"><img border="0" height="206" src="http://4.bp.blogspot.com/-lhJtxPkQQqM/UHtrPg6TZpI/AAAAAAAAAhg/Ejji1VHb8HU/s320/ES+short+10-12-2012.png" width="320" /></a><br />
But something happened. The market could not continue higher and began to stall.
Price action didn't jive with the better than expected news. So when
one of my favorite bearish chart pattern appeared, it screamed
SHORT! <br />
<br />There were many of these types of moments on Friday, and maybe that's one of
the reasons why I keep trading with hope. <br />
<br />
Trading only a single
contract, my MFE
(Maximum Favorable Excursion) for all my trades on Friday was almost 28 ES points, double the RTH daily range. Yes,
it's not
very likely to close out anywhere near 100% of your MAE. But I ended up
with about 1/3 of it which is so-so, but came oh so close to booking
about 1/2 of it of my total MAE.
<br /><br />Something was definitely different about Friday and I really
hope it
wasn't due to the effects from my cough medicine, because I'd rather not
become some sort of cough medication addict to improve my trading! So was it just a
lucky day? Was it just some false hope, like a slot machine
that pays off just enough to keep you sitting around longer to
ultimately lose everything? Or was it an glimpse of more progress to
come?<br /><br />This weekend, I went back to review my blog entries from a
year ago. At first, it was disappointing to see that I've been
essentially working on the same key issues back then as I am now. Same story over and over and over again. I
feel like I've been spinning my wheels for an entire year. <br />
<br />
But the
successful method I've been using for my forex swing trades have
essentially remained unchanged. And on another positive note, I do
believe I'm wiser and better educated now from regarding trading methodologies vs. a year ago. However, being smarter means nothing when a weak mental game prevents proper execution of trading methodology.<br /><br />All of
this raises even more questions. I'll take some more
time reviewing my journal entries from a year ago, to help understand what I
did or did not do over the past year to address and take better control
of my issues. It's back to the drawing board. <br />
<br />
In the past year, I also realize that my psychological
capital has been hit much harder than my financial capital, but my will
to succeed continues to burn strong. <br />
<br />Grove Underhttp://www.blogger.com/profile/11996363914551744557noreply@blogger.com2tag:blogger.com,1999:blog-6579146808262144709.post-51281082083036426312012-10-05T21:50:00.003-04:002012-10-05T21:50:22.352-04:00Review: Week ending October 5 - mixed results<div class="separator" style="clear: both; text-align: center;">
<a href="http://3.bp.blogspot.com/-0LXjlC_Iph0/UG-Lc5Aq_AI/AAAAAAAAAgw/3X2iSFsuHZI/s1600/Weekly+review+10-5-2012.png" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img border="0" height="132" src="http://3.bp.blogspot.com/-0LXjlC_Iph0/UG-Lc5Aq_AI/AAAAAAAAAgw/3X2iSFsuHZI/s400/Weekly+review+10-5-2012.png" width="400" /></a></div>
<br />
<b>MONDAY</b> <br />
The week started off on a success. I had the patience to wait for the solid setups, executed well, limited my profit targets to +2 ES points, and I stopped trading once I made 3 trades. PASS<br />
<br />
<b>TUESDAY</b><br />
Only 1 trade. And nothing else I saw was good enough to take. It didn't bother me a bit. I'm on a roll. PASS<br />
<br />
<b>WEDNESDAY</b><br />
I started with 3 losses in a row. Uh oh, I'm no longer on a roll. I was ready to quit and made the decision to move to SIM. However, another setup came up, I took it, realized it was a live trade, but didn't immediately close it out. <br />
<br />
It ended up going +2.25, which means a +2 target would have filled. But the problem was, I had moved my profit target way out. I broke my +2 profit target rule. And the traded ended up b/e. <br />
<br />
Monkey alert! <br />
<br />
I knew this had the potential to get bad, was quite aware of it, and even told others about it. For the most part, I thought I had successfully quit at 4 trades. But the damage was deep, because in the last 30 minutes of trading, I executed *6* more trades. <br />
<br />
Looking back, I had very few breaks during the day, I was fatigued, and my willpower was weak. All I thought about was making up my losses for the day. It was comeback time! And it completely backfired. FAIL<br />
<br />
<b>THURSDAY </b><br />
No repeat of the prior day. I limited myself to 3 trades and never changed the profit target. PASS<br />
<br />
<b>FRIDAY</b><br />
After starting with a scratch, the next 2 trades were a losses. And it was only 9:50 AM. What would I do for the rest of the day? Less than 2 minutes later, I took my 4th trade, I broke the plan. Another loss. About another minute later, another trade entered, another loss. And so on...<br />
<br />
I ended up with 5 consecutive losses. By this time, the damage was once again done, and my mind was all about getting my money back. Total focus on P&L. I was quite aware of it, but by that point, I had thought:<br />
<br />
"I've already broken all my rules, so F the plan. I'm going into comeback mode and getting my money back!"<br />
<br />
Sure, it ended up OK from the P&L perspective. But P&L wasn't in the goals of what I'm trying to accomplish this month. My goals were to simply:<br />
<br />
1) Limit my trades to 3 a day<br />
2) Limit my profit targets to +2.00 ES points<br />
<br />
So Friday was a complete FAIL based on both goals.<br />
<br />
<b>WHAT HAPPENED?</b><br />
What was the trigger for those FAIL days? Nothing new. It was basically when I either start off with a loss for the day, or have more 2 or more consecutive losses in a row, revenge trading mindset becomes comes into play. <br />
<br />
On a good note, there were many instances this week when I was quite aware of my plan as well as my emotions for that particular moment. And I successfully kept myself out of trades. Many of those passed trades ended up being profitable, but it didn't bother me too much. That was great to know. It was also good to see I was reading the markets relatively well.<br />
<br />
<b>NEXT WEEK</b><br />
I will continue with the plan. <br />
<br />
I will wait for only the best setups every day and limit my day to 3 trades.<br />
<br />
I will limit my profit target on every trade to +2.00 ES points.<br />
<br />
Upon internal reflection, I'm making good incremental progress. But I have far to go and it's time to step it up. <br />
<br />
One week down, 3 1/2 more to go.<br />
<br />Grove Underhttp://www.blogger.com/profile/11996363914551744557noreply@blogger.com2tag:blogger.com,1999:blog-6579146808262144709.post-30815611310570018962012-09-30T21:48:00.000-04:002012-09-30T21:48:00.184-04:00September update and new October goalsOne of my primary goals for September was simple -- gain control of my overtrading by minimizing the number of trades per day. The successful control I had through most of September surprised me (to average about 3 trades/day). But as we approached the final couple days of the month, I let my overconfidence get the best of me and ended on a bad note. <br />
<div class="separator" style="clear: both; text-align: center;">
<a href="http://4.bp.blogspot.com/-67DOlUzr2h8/UGjxNpfI9iI/AAAAAAAAAgY/9bJigYv3ngE/s1600/Sept2012+trade+overview.png" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img border="0" height="190" src="http://4.bp.blogspot.com/-67DOlUzr2h8/UGjxNpfI9iI/AAAAAAAAAgY/9bJigYv3ngE/s400/Sept2012+trade+overview.png" width="400" /></a></div>
I was in "single parent
mode" during the final days of September, which usually results in sub-par performance. Add to that lack
of sleep and being under the weather. These were all major willpower weakeners. I should have known better.<br />
<br />
More significantly, I believe the minimal number of impulsive trades I had for nearly a month made me think I finally overcame my biggest challenge, I became overconfident and started to think the forbidden -- I now deserve to crush it and end this
month with big profits. Yeah, I started thinking about the P&L. <br />
<br />
The only thing that got crushed was my psychological capital. <br />
<br />
<b>October goals </b><br />
<br />
In September, I had minimal regards for P&L since the goal was all about minimizing the number of trades per day. So with the limited number of "bullets" per day, when I finally got into a trade, I found myself swinging for the fences more often than not, getting stopped out at breakeven many times even after being up 2 or 3 points and more. It was a bit hypocritical, saying P&L was not important and yet still holding on for big moves.<br />
<br />
So for October, I'm going to add on another simple goal -- every trade will have a +2.00 ES profit target, no more. I may exit earlier if conditions warrant, but I will NOT be holding for the big winners. That will happen in the future once I start scaling out of entries with multiple contracts, and then letting a runner run.<br />
<br />
Therefore, I'm going to continue to keep my goals simple and easy to track for compliance: <br />
1) Average about 3 trades a day (focus on solid setups)<br />
2) Profit targets at +2.00 or less (lock in higher probability profit targets)<br />
<br />
In the big scheme of things, I feel pretty good that I was able to maintain control for a decent (at least for me) stretch of time. So now, it's time to just step it up and execute. Let's do it.<br />
<br />Grove Underhttp://www.blogger.com/profile/11996363914551744557noreply@blogger.com0tag:blogger.com,1999:blog-6579146808262144709.post-79904387174352287602012-09-20T21:45:00.001-04:002012-09-20T21:45:43.518-04:00ZERO = progressThe month of September has been groundbreaking in that my propensity to
overtrade seems to have slowed considerably, almost overnight.
It reminds me of the time when my son was almost 3 years old. He
constantly sucked his thumb and no matter what we tried, we couldn't
stop him. So we eventually gave up. <br />
<br />
But then not too long after we backed off, we realized that he had stopped, cold turkey,
kaput. I had fears of a relapse, a fakeout phase, but no, he never
sucked his thumb ever again. <br />
<br />
I can only hope that I have the
same experience with my history of rogue/revenge/over-trading, but I'm
pretty sure it'll be something that I'll need to work on for as long as I
trade. But as of now, here is how I'm doing from the perspective of
number of trades per day:<br />
<br />
<span style="font-size: x-small;"><span style="font-family: courier new,monospace;"><span style="font-size: small;"><b>DATE # TRADES</b><br />==== ========<br />5/5 5 <br />5/6 1 <br />5/7 7 <- 4 rogue trades, narrow range day<br />5/10 1<br />5/11 3<br />5/12 3<br />5/13 ZERO <- Big trend day, but no trades <br />5/14 9 <- Went overboard after ZERO day </span></span></span><br />
<span style="font-size: x-small;"><span style="font-family: courier new,monospace;"><span style="font-size: small;">5/17 ZERO <br />5/18 ZERO <br />5/19 ZERO <br />5/20 3 <br /><br />AVG/DAY = 2.7 trades <- Big success, last month was <b>7.3!</b><br />GROSS P&L = +7.75 <- Big underperformance, but this metric </span></span></span><br />
<span style="font-size: x-small;"><span style="font-family: courier new,monospace;"><span style="font-size: small;"> is currently irrelevant </span></span></span><br />
<br />
I
started the month of September back from vacation with some of my
old habits in place. But on a good
note, the trend in the number of trades per day has continued to decline
steadily. I'm quite surprised how many ZERO trade days I've had.<br />
<br />
After sitting out of the big trend day on May 13th, I probably felt like
I missed out and ended up going a bit overboard the following day on May 14th. Shame on me.
But then I stepped up, and there were 3 ZERO days in a row -- I don' t think that's ever
happened before. Patience is working.<br />
<br />
Interestingly, I haven't experienced withdrawal
symptoms from reducing the number of trades. I'm sure the chatroom I've
joined as of this month has been a big factor. I'll write more about
it at another time, but the key has been the similar outlook and style
that the moderators and many of the members have with my own.<br />
<br />
I've
also tried my best to increase the level of awareness regarding how I
am feeling, and more importantly, removing myself from trading when I get
those feelings of revenge or from bored twitchy fingers. Constantly
being aware of my overall psychological and physical state is something
I've been working on for the past few months. But it seems as though I am
now better able to take action. That's a big step.<br />
<br />
One internal dialog I've started is to ask myself "<i>How will I feel if I get stopped out of this trade?</i>"
before entering a trade. If I know I'll be completely at peace with the outcome if I get stopped out, then I know it's a decent setup. Otherwise, I'll pass up
on the trade. And if I impulsively entered a trade, I will exit it immediately.
I haven't counted the number of times I've avoided an entry this month,
but it's significant. That's good sign of progress.<br />
<br />
All in all, this focus on considerably
reducing the number of trades and becoming much more selective with my
trade selection feels good. As least to me, those days of ZERO trades
indicate big progress. I'm know I haven't been behaving this way long
enough to turn it into a habit, so I'll continue to focus on: 1)
minimizing number of trades, 2) maximizing trade selection quality, and
3) minimizing attention to P&L.<br />
<br />
So ZERO = progress. My behavior is changing for the better. But I still have a lot more work to do...<br />
<br />Grove Underhttp://www.blogger.com/profile/11996363914551744557noreply@blogger.com0tag:blogger.com,1999:blog-6579146808262144709.post-9136398172978028502012-09-10T21:36:00.000-04:002012-09-10T21:36:09.696-04:00Still chasing success, but...Summer is over. And I admit, even with my limited time for trading over
the past couple months, I not only did some SIM trading as expected,
but also had some real live trades on and off through July and August.
Yes, I shouldn't have, especially since I was experimenting with various
trading methods, and ended up trading live a whole lot more than I
should have.<br />
<br />
Recently did a review, and I see I ended up down around 40 ES points at one time, recovered
around 40 points, back down around 40 points, and back up a bit, for
now, on mostly one contract trading. Quite a roller coaster ride that
I'm not proud of. Ugh.<br />
<br />
Why did this happen? I admit, I'm still <a href="http://traderx.blogspot.com/2006/09/chasing-success_16.html" target="_blank">chasing success</a>. <br />
<br />
Taking
the last week of August off for our family vacation helped to slow and
settle my mind to reflect back and understand what (and why) I'm doing
what I'm doing, which can often feel like I'm banging my head against a
brick wall. I'm still looking for something that works for my style
over the long term.<br />
<br />
Although I usually feel that I'm getting closer to
that elusive consistent profitability, I often step back and realize how
long I have been thinking that way. I'm going through <a href="http://traderhabits.com/trading-curve/" target="_blank">various stages</a>
of development such as the lingering "Trough of Sorrow", then there's the "Crash of
Ineptitude" which happens too frequently, all the while getting faked out by the
"Wiggles of False Hope." <br />
<br />
I know there are more disciplined and effective ways of learning and
improving. But for me, based on my past paths to success in other
endeavors, the not-the-most-efficient-<wbr></wbr>shotgun-and-grind-it-out method seems to be how my journey will continue. <br />
<br />
Turning over stones<br />
<br />
I will need to turn over as many rocks as I can, until I get to the
stage where I feel I've done all that I can. It reminds me back to my
much much younger days of visiting the local 7-11 convenience store after school. I would
see so many different kinds of candy for sale and would spend an
inordinate amount of time looking at each one, trying to figure out
which one to buy.<br />
<br />
Now days, if I even want to eat some candy, it only
takes a few seconds to select it, and I'm done. Unlike my trading, I've already turned
over many stones over the years, and I'm done searching. <br />
<br />
I also used to spend hours in the record store every week, endlessly
looking at both current and old albums from all various genres, learning
about the various artists, figuring out how to best spend the money I
made from my paper route.<br />
<br />
Now days, my desire for music is much more
muted, although my taste in music is better focused. So with sites like
Pandora, it no longer takes me a very long time to select something to
play and just move on. Although there will always be some new stones to
turn in the world of music, gone are those days when I would obsessively spend
many hours a day/week focused on turning over those musical stones.<br />
<br />
And my biggest "chasing success, success story" is that it took <i>many many years</i>
of turning over many stones before I met my wife. But that journey is
thankfully over and has resulted in a family with 2 great young children (as
long as they are behaving!), for which I am very lucky and thankful.<br />
<br />
Now days, the amount of work and effort to maintain my relationship with my
family is greater than ever before, and continues to grow at a
breathtaking rate. So although I'm done searching, the real though work
has only just started, and seeing the positive return from my efforts, watching my children grow, is something beyond measurement.<br />
<br />
So back to trading -- I often see many people who are very
successful in other fields say trading has been one of their most
difficult challenges to master. Taking my current path of
experimenting/chasing success/turning over as many rocks as I can to
become successful with trading is an expensive way to learn, both from a
financial and psychological capital perspective. But I'm not sure if there's any other way, based on how I
operate. <br />
<br />
On a good note, I do think the rate of "turning over stones" is
starting to decrease. So maybe I'm starting to settle down. Maybe I'll
stop searching so hard and settle down with a specific trading method.
And maybe I'll finally start putting in much more effort to maintaining
a successful trading process. This will be a key "tell" that I'm moving in the right direction.<br />
<br />
The importance of environment<br />
<br />
But here's one missing piece
I've recently overlooked. I have discovered that my
trading environment is a big factor in my ability to remain disciplined
in successful. When I was doing some random trading over the past
couple months, I was pretty much on my own, operating with minimal
structure, exhibiting a lack of self discipline. Recipe for disaster. <br />
<br />
I now realize that I've done
better in the past when I'm a part of a group all trading a
similar methodology. So for now, I need to be a part of a
team again. The best environment for me would to be physically on a trading
floor with other like minded traders. But since that's not realistic at
this time, the next best thing is to be a part of a chatroom.<br />
<br />
So here's my new plan based over the next few months:<br />
<ul>
<li>To
continue daytrading the ES, I've joined a chatroom which has a live
streaming audio and video feed of the charts. Most importantly, there
is a full time moderator using a methodology that I've recently evolved
towards and have been exposed to quite a bit since earlier this year.
Based on attending for only about a week, this seems to have instilled a
new sense of confidence and discipline.<br />
</li>
<li>I've also joined a swing trading service for stocks, just to
see if this timeframe might be better suited for my personality. I've opened up a new
equity account just for this purpose and will slowly ease back into
stocks after taking a break from equities for nearly a year.</li>
<li>I will also continue to monitor the forex markets for swing trade opportunities. </li>
</ul>
Will this direction be yet more random turning over of stones
and a continuation of chasing success? Or will this lead me to more
focus, more self discovery, and ultimately, bring me closer to becoming a
consistently profitable trader?<br />
<br />
We shall see. I still believe. The journey resumes.<br />
<br />Grove Underhttp://www.blogger.com/profile/11996363914551744557noreply@blogger.com8