As i’ve been trading a lot more intraday price action lately, and observing all the way down to minute timeframes, i’ve began to notice a very common theme.
As much as this sounds obvious, I think it may be useful for a lot of other people to hear.
I like to describe myself as a position trader, that may be the wrong description, however in my opinion that is a great way to describe my trading preferences.
My rules are fairly simple, get in, get out, and realise your floating profit.
As i’ve said in other blogs, I find it difficult to “predict the future” with trading, and often found myself in the past giving back a lot of floating profits because i was greedy. I never trailed stops, and often moved my stop loss to breakeven to simulate a “free trade” which doesnt exist because you’ve still gotta pay your broker at the end of the day. A free trade in my books is now a fucking ridiculous idea, if you’re up 2% and arent thinking about trailing your stops your fucked.
Imagine when you actually wanted to trade for a living, and having £1000.00 in floating profit only to see it evaporate in front of you and return back to break even. Take your fucking money and admit you were wrong on your fortune telling capabilities.
So, as I said, i get in, and get out, and i trail my stops when available.
Ultimately we’re all in this game to make money, so my personal view on things now is to take my pound of flesh and get out.
So as stated in my previous blogs, i no longer try to predict the future and i just trade what is currently happening for me, not what i hope is going to happen.
This brings me on to my topic for this blog, it’ll be fairly short and sweet.
Areas of interest for me are areas where other traders will also be noticing.
These include;
Swing highs and swing lows
Daily pivot levels
Main moving averages (50, 20, 5, etc)
Fibonacci zones
Support and Resistance levels
Round numbers
Indicator extremes, i.e. RSI extreme readings over 70 / under 30.
Trendlines
When i say these are areas of interest, what im implying is that they are ares where a lot of smarter traders will be looking to exit trades / catch the less experienced off guard.
My most recent observation is on the 1min timeframe, around the daily pivot.
Looking at the below chart, it’s hard to say that the daily pivot level is nothing but a magnet for attention. When i look at this its hard not to see that business is being done at this level, trades being entered, exited, price consolidating as trades are exited and entered, all sorts of behaviour.
So my point that i believe will be most helpful for other traders is to avoid trading around these areas, sounds pretty good right?
If i was short and price was heading towards the daily pivot, i’d look to atleast trail my stop to avoid a complete reversal from this, as well as things like the daily 50 ma, if i was day trading it i’d look to exit atleast half my position at the daily 50 as its likely to be similar to the above pivot level and prove to be an area of consolidation and indecision.
If youre day trading, like i said above, get in, and get out and realise some of your floating potential. Day trading by definition is you get in and out within the same day. I used to find myself looking at trades that are over in hindsight going “ah shit if only i’d held it open i’d have made 1000% on that trade”. The reality is, i banked 2% and got flat, it’s too easy to be a hindsight trader.
If you’re looking to swing trade for a further distance, look to try and keep as many of these indecision areas before your stop loss to avoid a loss.
I look at it like stacking timber on a road, if you put one bit on the road it wont stop a moving truck, but a lot of them will definitely slow it down, reducing the likelihood of it causing an accident (hitting your stop loss).
In other news, as of Monday 23rd im beginning to actively day trade as i’m currently out of work. My current live testing results are shown below, safe to say it seems to work pretty nicely! Only problem is i’ve only live tested for 10 days, but my backtesting covers over 100 trades, so in my opinion this is a sufficient sample size for backtesting, and 10 days worth of live testing is a decent barometer of my capabilities.
I need to stop watching the news and using erroneous statistics to gauge my sentiment.
Ultimately, the news are great harbinger’s of fear, and love to use out of context statistics and headlines to impose a response. Most notably is references to the 1987 Black Monday crash, 19/10/1987 where the Dow slid 22.6%. This is officially the worst single day sell off in the history of the Dow, a barometer of the American economy. Today the WSJ has put out a notification saying today is the second worst sell off in the total existence of the Dow Jones, which is pretty ominous, yet without context hardly gives a lot of helpful insight.
Now, listening to the news is definitely a terrible idea to try gauge an honest and unbiased description of what is really going on.
The sell off over the last few months has been mega, and we are roughly down 30% from all time highs. This sounds awful, yet nobody seems to mention the positives? Positives such as in the entirety of the Dow Jones existence, EVERY bear market has been followed by a bull market which erases all losses seen.
Additionally, when though about rationally, even the 1987 sell off, the WORST in history, was followed by a bull market, so there’s always that.
I don’t know who decided the rules for definining bear markets, but according to wikipedia they are as follows;
A bear market is a general decline in the stock market over a period of time.It includes a transition from high investor optimism to widespread investor fear and pessimism. One generally accepted measure of a bear market is a price decline of 20% or more over at least a two-month period.
A smaller decline of 10 to 20% is considered a correction. Once a market enters correction or bear market territory, it is not considered to have exited that territory until a new high is reached.
From 1926 to 2014, the average bear market lasted 13 months with an average cumulative loss of 30%, while annualized declines for bear markets ranged from −19.7% to −47%
So, seeing as the Dow is already 32% down, i think we’re atleast at the average. The real question is, how low can ya go?
Well, that’s the million dollar question isn’t it.
My short answer is, I don’t know, and nobody knows. Ray Dalio likes to compare the 1920s end of the longer term debt cycle with now, as they have some similar characteristics. Widening wealth gaps, rising of populism, central bank rates hitting zero, etc etc. Personally, I like to think some things may have changed now, in the almost 100 years since. I could be wrong, but the fact that people have a lot of different morals, values and perspectives on topics means we live in a new world, and therefore economics and politics will have changed.
The fear currently ripping through the market can only be compared to a panic in my opinion, much like 2008, and 1987, 1929, all followed by a bull market. Below is a screenshot of what I believe to be meaningful, high impact events that affected the economy, with the equivalent amount of fear and panic as we are currently experiencing with the virus.
As you can see, the selling eventually came to an end, and the economy eventually recovered.
History does tend to repeat itself especially in given markets, and I believe with the virus currently threatening the world, we will be okay due to the fact that it has such a low death rate. The real threat to the world like i said in my last blog is the threat to the economy, like a train once you put the brakes fully on and bring it to a stop, it takes a lot of energy to get it moving again.
I have a few quotes rattling through my head at the moment, 1 from Martin Schwartz, and another from good old Buffet.
This is an excerpt from one of my favourite books (Pit Bull by Martin Schwartz).
After the market closed down 508 points, I called Zoellner. “So, Bob, whaddya think?” “I don’t know, Marty, but you what i always say, ‘When it gets so bad that you want to puke, you shoud probably double your position.”
And secondly, a classic from Buffet
Be fearful when others are greedy, and greedy when others are fearful.
Personally, i’m shitting myself, but conversely, i’ve been watching the news far too much and it’s been clouding my logical judgement. So, from today I am limiting myself as much as possible.
In a final bit of perspective, what a fucking experience to put in your diary eh? Total world lockdown, this hasn’t been since since World War 2. Something to tell your kids and grandkids isn’t it? Imagine telling your kids that at one point, the general public hoarded toilet roll like it was a precious commodity? Mental!
I think that if the countries are put on lockdown for a few weeks, and people are told to stay at home, it may actually do the world some good. Teach your kids new life skills they’ll never get taught at school, why not start that hobby you’ve always wanted too? Exercise, do something you’ve never done before. But for fuck sake don’t get off the merry go round, life goes on and we are all here for a reason.
Stay safe people, the world will soon return to normal.
So it’s been an interesting few weeks, and the following few weeks / months will be even more interesting to observe.
What originated as a small localised outbreak in Wuhan appears to be spreading, with materialising effects on the economy.
A slowdown in the economy has been threatened a lot over the last few years, with a lot of recession indicators firing off last year stacking the probabilities (when studied against conventional economics) of a recession more so in its favour each time.
An example of the standard indicators for recessions are the US 2/10 year yield curve inversion, central banks reducing the main interest rate closer to 0%, and the sheer fact that bull runs usually last between 5 & 10 years (we’re over that now). Below is an example of said yield curve inversion, and overlaid is a highlight showing when recessions have occurred.
A topic for discussion another day down the line, is do these same signifiers work in newer economic times, i.e. negative interest rates of central banks, or negative yield bonds issued (Greece recently, absolutely stellar example of a doomed economy). We’ll find out over the next few months as too whether this is the case or not.
I could talk about conventional recession indicators a lot, but the fact that remains is, in my opinion, a recession does not materialise without a “Black Swan” event.
Examples of past events include;
Fall of the USSR
September 11 2001
2008 Housing Bubble
2011 European Bailouts
Brexit
A black swan event is something which is unpredicatable, with wide spread ramifications, and is typically followed by hindsight bias saying it was actually, indeed, predictable and preventable…
Now, in my opinion the outbreak and subsequent impact of the coronavirus is almost a perfect storm, a perfect black swan event.
It’s unpredictable impact on the economy is genuinely almost impossible to calculate, until it is over and we can review in our infinite hindsight wisdom. But the fact remains, that until the virus is either completely cured by vaccine, or case numbers / death counts begin decreasing significantly, we cannot calculate the impact this will have. This I believe is the difficulty faced by many policy makers, politicians, banks and business owners.
I am in no way saying I believe this virus deserves the exaggerated response it is recieveing, we are all still dangerously at risk of dying from other wildly more probable and dangerous threats, such as road traffic collisions, heart disease or diabetes. I personally believe these are the things that should be focussed on as they have reasonably easy remedies, do some exercise, look after yourself and be safe in the car…
Realistically if you wanted to talk about national emergencies, maybe the fact that a large percentage of the population suffers from heart disease, and are obese…
Heart disease alone contributes to 1/4 of the deaths in the UK, and the fact remains that an overwhelming amount of evidence suggests eating more vegetables and just exercising can reduce that figure drastically, but personally i believe it is not in the governments best interest to fix this because the industries that contribute to these deaths (fast food, alchohol, tobaco etc) pay an obscene amount in taxes… I’ll leave that as food for thought and move on. Imagine the media pointing out statistics like 1 person dies every 3 minutes in the UK from heart disease and making an absolute campaign against it…
The more pressing national emergency is the danger to life this causes, not from the virus but the impact on the economy. This impact on the economy is what i’d rather discuss right now.
The main cause of crises, or a main contributor anyway, is a reduction in consumerism.
Think about it, A LOT of countries rely heavily on external input, be it tourism, goods from abroad, medicine supply chains etc. If borders are closed, holidays cancelled, shipments delayed etc it stops people from being able to actually spend their cash, which is needed for a healthy economy to continue. Now, this stunting of the supply chain, coupled with FEAR of actually going outside to spend the money creates, like i said, the perfect storm for a recession. Additionally, banks are less likely to extend credit in times of uncertainty, atleast without government assurances anyway, so this again freezes the ability for business owners to spend.
The reason this cash flow slowdown causes said recessions is it puts the economy at risk (obviously). Airlines go out of business because nobody is travelling, restaurant chains face difficulties as nobody wants to go out and be around other people who could be ill etc etc.
Companies going out of business then means unemployment increases, further compounding the effects of a lack of consumerism, and furthermore making those who still have jobs, less likely to spend, and more likely to save because they fear also losing their jobs and need to prepare themselves and their families.
My personal advise is pretty blunt and straight up, but we’re all likely to get it, much like the flu, and those under certain ages and are healthy or reasonably so will be fine most likely. I personally believe people should all go about their daily lives, BUT avoid going to hospitals where they are then putting those actually in there at risk.
When I was 8, i had to have a substantial amount of chemotherapy for lieukemia, and the way chemo works is it essentially removes any immune system you have, so if somebody had brought an illness onto the ward i was being treated on, i would not be alive.
So don’t be selfish, avoid putting the infirm at risk, stop stocking up on toilet roll because in the apocalypse you are preparing for the last thing you’ll be worried about is having a civilised poo, and go about your daily lives. Please follow the below specified advice for hygiene.
As of today (15.02.20) China has closed its last purpose built hospital for treating the virus, and their total case numbers are levelling off, whether you believe this or not is another thing since China are a stickler for a bit of propaganda / false information… Below is a chart of the total cases according to the following website. https://www.worldometers.info/coronavirus/country/china/
As you can see, once the threat was contained using appropriate measures, total case numbers levelled off. However other countries are yet to see such a levelling off, I believe the lockdowns imposed by Italy, Spain etc should work nicely, and realistically shouldn’t last more than a month or two.
As far as markets go, it’s been a shock to the system as a lot of selling off has occured over the last few weeks, predominantly the main borometer of the world economy (The S&P 500) has seen a pretty hefty 30% sell off. Historically this has been a great buy at such sold off levels as every bear market has been followed up by a bull market. Personally, i will be waiting to see case numbers in countries like Italy and Iran to begin stabilising before being interested in buying.
I’ve been thinking to myself over the last few months about myself and my strengths, weaknesses and key interests when it comes to trading.
I believe it’s key, understanding these parts of yourself, in order to shape and mould a game plan which is specifically tailored to yourself. That way you stand the best chances of succeeding over the long run.
The reason I think this is key is because when all is said and done, every person is different, no matter how much you want to emulate another person, your basic habits and opinions will always get the better of you because it’s all you’ve known since birth. My favourite quote for habits is “Good or Bad, Habits always deliver results.”
Now, coming to a conclusion based on that statement can go two ways, positive or negative, i’m not particularly philosophical, so let’s not get too deep, but results are what you make of them. I agree bad habits should be reduced and removed as much as possible, but in my opinion you should try make positives of existing habits as much as possible, as they offer the path of least resistance. Much like swimming with the current rather than against it.
It all also comes down to aspirations, if you join the trading game and want to make money consistently within 6 months you’re delusional. However 5 years is a fair timescale to put on it.
My reason for saying this is it seems to be plastered all over social media, every dickhead and his entrepeneur page posting about how you need a mentor, but giving you no real helpful context. The basic premise of this is a good idea, obviously you want to be successful, so modelling yourself off a mentor / person who IS successfully doing what you want to do makes perfect sense. This is definitely a topic I agree with, however I feel that a caveat should be added, which is you should learn from them as much as you can, but you need to take what you’ve learned and make it your own. Below is an example of the cliche shit online.
Mike Bellafiore of SMB capital attests to this, as well as Richard at Able trading. Rich made a great point to me when we started talking about trading and he began to mentor me, he said that he could show me how to trade, but it doesn’t necessarily mean I will make a success of it.
Mike Bellafiore says something along the lines of make trading your own, take a strategy and make it your own.
These statements are very accurate because when you think about it, everybody is different, and has different approaches to doing things. An example of this is in my line of work in construction, we engineer solutions to problems, and often I can be working alongside another colleague doing very similar work, yet we both can come up with vastly different solutions, both that work but in their own way.
Richard has taught me a great deal about how he approaches the markets, and his way of viewing them, and its with this knowledge i’ve began to develop my own framework, taking bits and pieces and forming my own version of an approach, based off what he has taught me.
For example, I find it difficult to incorporate macro economics into my trading, as in all honesty I do not have time to keep track of it all, given the fact i still work full time, and ultimately in my opinion it’s just a theory anyway much like a technical set up is just a theory of what could play out in the market.
I often find myself with conflicted opinions on macro fundamentals, and I think to myself that this is causing me to miss setups and sometimes take setups when I shouldn’t, because my macro theory was incorrect. Macro theories can have multiple outcomes and scenarios, leading to almost an infinte string of variable outcomes, which seem vague and non linear. Whereas technicals show either a black and white outcome of X or Y, macro can offer multiple variations of X, Y, Z or X1, X2 etc.
So, lets get stuck in. Below i have listed what I can think of, as my core strengths and drawbacks.
Strengths:
I am able to criticise myself to the point most would feel uncomfortable, this stems from my early days at school where people would attempt to bully me, to which I would just agree with them and go along with the shit they were spouting, which by the way is a great strategy as it leaves them with fuck all ammo as they’ve gained no rise from their statements. Being able to criticise when you’ve been a cunt and when you haven’t is absolutely paramount, and being able to objectively say you’ve been a dick is SO important in trading.
I also believe, given the right set up, I can execute a strategy systematically over and over again without shooting myself in the foot. I can happily take 5 consecutive losses, and still show up the next day and execute my strategy.
I have realistic expectations of trading, and do not dream of making outlandish profits (just yet). I understand how the markets can evolve, adapt, and times can change, heralding a new era of market activity which REQUIRES you to adapt. Simply blindly buying off oversold RSI is no longer a sufficient method of going long. It requires a more finessed approach atleast.
I know what technical analysis works for me now, and i have combined the indicators which I’ve both been taught to use, as well as some that I believe make sense to me to use. I believe a mixture of moving averages, channels, RSI, MACD and fibonacci levels, are the most effective indicators in my repetouir and I am happy to proceed with using them and honing my abilities with them.
I am a wildly confident person, in my abilities to both make money, as well as execute my strategy without error. I know that given a sufficient timescale, I can perform impressively, and offer a niche that very few can match, consistency, and the ability to limit losses.
Taking 1% losses almost doesn’t phase me now, as i said above, I know that over a longer time horizon I can make money consistently, and that draw down is expected and inevitable.
Weaknesses:
I am impatient, and always have been. This is something I believe i shouldnt fight, but should infact embrace and make into a positive. I hate not being in the market for prolonged periods of time, often struggling to sit on my hands for weeks. Again, like i’ve just said, I believe this can be moulded into a strength.
I am forgetful, often times only remembering key information when its too late. Therefore an overly complex strategy requiring multiple inputs, and macro co-ordination is a difficult thing for me to implement. A strategy which is simplistic to myself, requiring less subjectivity is key. This is why I wrote my previous blog about trading setups, that I believe is going to be my fortay, looking for setups and scanning multiple markets quickly without spending hours analysing an asset and building a theory.
I am not as knowledgeable as others within this industry, with very little financial education under my belt, which given certain circumstances could put me at a disadvantage. I believe with adequate knowledge of certain correlations, basic fundamental theory and a sufficient method of applying it, this can be an advantage.
I struggle with trend based trading, and often find myself gravitating towards more breakout strategies or reversion to mean strategies. Again, this I believe can be honed into a strength.
I also struggle when i’ve made say 3% profit in one month, I struggle with taking further trades within the month as i’m both A) fearful of erasing that 3% return, as well as B) greedy sometimes and want to make more.
Scalping
I have began experimenting with scalping. This is a taboo subject with a lot of people I know, however give me a chance and I will explain my logic.
Scalping involves skimping 4 or 5 pips out of the market quickly and succinctly. Almost like dipping your toes in and out of a pool. Now, this is pretty difficult on the majority of markets, as spreads / costs of trading often eat into A LOT of the gain to be made on 4 or 5 pips. And realistically, if your profit target is 1:1, having 30% deducted because of the spread, means over time you need a pretty high strike rate just to break even…
Scalping also is almost completely removed from institutional traders who wish to make large cash off small price changes, because of the sizes of trades they wish to trade. Don’t get me wrong, it is surely riddled with algorithmic traders who trade large size, however i’m fairly certain pension funds and mutual funds aren’t actively trading EURUSD on the 1MIN trading 1000 lots to make 5 pips of profit. This removes the possiblity of macro theories and fundamentals influencing the micro trends. Some newer traders are more deluded than others, and believe that trading can be infinitely scaled. Once you reach certain thresholds for trading, opportunities dry up as liquidity inhibits your ability to place trades of adequate size, as well as your insurances provided by a lot of conventional brokers often is far to risky to be placing £1,000,000 in your FXCM account…
Now this narrows the playing field, as nobody cares what is happening under the skin of say the 15MIN timeframe.
Let me introduce you to the idea / theory of fractals. We all understand how what happens on the micro affects the macro. You look at a big bullish engulfing 1HR or 4HR candle, you know inside of that theres more than likely some bullish price action, maybe a long term trend has been underway, alternatively, a large news spike has pushed price up and it has stayed there.
Fractals are structures that comprise of essentially infinite micro structures, which make up the macro structure. Like a snowflake, the small nodes on the ends of snowflakes are what make the overall snowflake LOOK like a snowflake.
Much like a micro bullish trend over the course of an hour, is what MAKES a 1HR bullish engulfing candle look like bullish price action.
I’ve also read up last year about high frequency traders, and how A LOT can happen over the course of a few seconds, so the theory that a lot can happen over the space of 15 minutes is fairly justified.
Below is a link to an example of how fractals work, you can zoom in on what seems like an innocuous part of the structure, and it is actually comprised of multiple micro structures, which make up the larger picture.
The point i’m trying to make is that it almost seems like an insignificant 1HR bullish candle, but there is a huge amount of opportunity available over the course of an hour each day, so why not take advantage of this?
Now, I think i know what most people’s reservations would be, so let me try and list them below, and then offer my opinion on each one.
It’s just noise, and tiny fluctuations.
Now, this is true, during certain periods of time, price is often just erratic and illogical. I propose only trading clearly flowing, and orderly assets / markets. My chosen market is EURUSD as it is far less volatile than JPY pairs, and has the highest amount of liquidity of all currencies. From my observations, this issue of erratic and illogical price occurs during the periods of time before and after the London & New York sessions have ended. See below an example. You can see at the bottom this is between 2am and 4am GMT. This would typical coincide with the Sydney & Tokyo sessions, which comprise of a lot less volume when compared with the second screenshot. The first screenshot shows volume present on the euro futures, we can see the highest amount of volume was 430 contracts.
The second screenshot is of the London session, we can see multiple examples of much higher volume, and a more clearer trend forming with this increase in activity. Price flows much nicer, with less spikes and wicky candles.
So, I would argue that trading within the London / New York sessions isn’t just noise, it actually is orderly, and as stated above, a fractal.
2. It’s stressful being at the screen all day, and doesn’t suit the #laptoplifestyle i want.
I would agree, that the idea of watching the 1MIN timeframe for a whole working day, would be painful, and would for some be difficult to keep up. I do however have a counter arguement to that. Trading has been taken on by so many aspirational people because it gives them the potential to make money, so that is the main goal I don’t care what you say, and quote garyvee as much as you want, making money is the only fucking reason to do this. So if there are more opportunities to take a cut of the cheddar, why not do it for an hour each morning? Or on your lunch break?
3. The risk of blowing an account is much higher.
I would agree also with this statement, however surely if you have the ability to blow an account on the 1MIN timeframe, then you have the ability to blow it on the higher timeframes, it’s just going to take you more time on the higher timeframes as the poor way you are trading takes longer to play out.
I believe you absolutely need to already have an existing base performance and consistent strategy you have been using for atleast 1 year before even thinking of going down this route. The mental and emotional strain will be far less painful to yourself if you already know how to manage yourself, and like i’m doing, know your strengths, weaknesses and limitations.
Additionally, my proposal for a means to mange this is to set limits on losses or gains for the week / month, so as you cannot trade for the rest of the agreed upon period of time because either your loss limit or profit limit has been met. For myself, i am still trying to find a happy medium, however I feel 5% profit or loss per month is reasonable to deal with. I will still trade my swing trading strategies on the daily / 4HR to work parrallel to this.
4. Volatility will ruin you
Again, this analagous statement makes sense in principle, however I feel that it hasn’t been given enough thought. A pretty basic understanding of trading would suggest you dont try and trade the 1MIN timeframe when medium to high impact news for either the Eurozone or Untied States is scheduled. I have set myself a minimum 15 minute window either side of such news announcements before thinking about trading again.
Hope you guys enjoyed this blog, please let me know your thoughts!
Thought i’d do a quick-o blog post regarding my thoughts on my journey so far.
I really used to struggle to do top down analysis on markets, to identify a preferred directional bias for the market.
I’d spend HOURS each sunday analysing each currency pair, all the way from the weekly down to the 4hr, noting down as much information as possible to try determine im conforming to the old cliche of ‘the trend is your friend’.
Fuck that idea off
I’d often find that i’d do ALL this prep and then never really use it / profit from it, i’d sometimes be lucky but most of the time i’d fuck it right up…
Over my last few blogs i’ve re-emphasised how i’ve changed over to able trading, and using the able method which as so far provided me a solid 20% steady consistent gain since August 2019.
Honest to god this switch to systematic almost mechanical trading has made such an improvement on my trading.
I used to feel like myself, and trading were pieces of two different puzzles and i could never get them to fit together nicely.
This switch to systematic trading has been a god send for me. I’ve almost memorised now exactly what a quality set up looks like that i could most likely draw it from memory.
This allows me to scan through markets quickly, with a simple question, has price done X recently? If so, onto the next asset to check for a set up.
My evening routine for checking for trades lasts about 15 minutes, on trading view I have all my major and minor currencies listed in different lists. Same with commodities, major stocks, indicies etc.
I’ll start from the top, check AUDUSD, has it done X lately? Yes, cool, next on to EURGBP, has it done X lately? No? okay cool flag that with a red flag as its a daily set up, and i will return to these to scrutinise all flagged items at the end of my checking process.
This simple method has removed my need to over analyse markets to try predict the future when it isn’t even necessary. All i care about is this, have i got a valid set up? No, onto the next. OR, Yes, okay check a few refining factors, plot my entry and then set it and move on.
This simplistic idea is the correct piece of the puzzle that for me personally I needed.
Removing subjectivity and discretion from my trading has been the most beneficial thing I could’ve done, and for that i’m truly grateful.
I don’t need to know what the pound is going to do next month, I just work with the law of large numbers.
I know over a large enough sample size I will remain profitable, and that’s all the complex thinking I need to do. One incorrect trade is just another addition to the sample size. Same as one correct trade.
Rinse repeat.
I don’t care if after i’ve taken my profit that the trade ‘could’ve’ gone further. That’s not part of the strategy.
In, out, no questions asked.
Next play.
Because i work full time and have a life outside of work, being able to avoid over analysing markets has actually helped me a lot, I get more time to spend with my family, friends and other projects I want to focus my time on.
Again, for this I am truly grateful.
Stop trying to predict the future and just focus on what is happening right now.
I will leave you with my favourite scene from the wolf of wall street, particularly 0:30.
Your job is to put money in your pocket, not predict the future, so stop trying to predict the future and start putting money in your pocket, because i bet its the other way round currently.
Evening all, it’s been a while since my last blog post.
I apologise for this, i try to use this blog as a way of documenting my progress as it’s set in stone and dates cannot be changed (so it acts as a way of measuring my development over time), anyway long story short I don’t like hammering out bullshit / dribble for no reason, I try to keep it strictly to content that both reflects my progression, as well as content that may benefit others.
Earlier this month I began with the idea of starting a podcast, as it was potentially an easier way of put my thoughts out there, however i’ve struggled really to talk about topics especially ones that i’d be comfortable putting out there. All i’ve ended up doing so far is ranting about things that frustrate me, but really it’s just made me sound like a miserable bitch…
Anyway, i’ve got that idea ticking over in the back of my mind, still unsure on the whole thing however i’m still keen on the idea.
I might even just fuck the whole idea of keeping it trading orientated and just go full Joe Rogan on it and talk about any old shit, which to be honest i’m kind of more inclined towards.
Myself and my friend tend to have good chats about market related things sometimes, so I may try do podcasts with him instead.
Anyway pressing on, before Christmas I had began to backtest and produce my own daytrading strategy involving the bare bones components of what I had learned with Richard at able trading.
Mainly being bollinger bands & moving averages, i seem to gravitate towards these. They’re a great way of gauging market behaviour.
My favourite quote from a lot of market wizards is to focus on what makes the most sense to YOU and double down on it.
So that’s what i’ve done, taken what makes the most sense to me and began to develop my own intraday strategy focusing on a few particular markets, and scalping essentially small profits each day / other day from the market.
My issue with this is for some reason I can’t seem to figure out where i’m going wrong.
i’ve backtested the strategy and it’s provided a seriously high positive expectancy.
However, big caveat is that i’ve just ran the same data through an excel tester and i’ve got a very dissimilar result (much lower than my expectancy).
So back to the drawing board I go, there’s something there to use, i’ve just gotta figure it out.
I’ve also had a pretty odd thing fall in my lap lately that I hadn’t thought about for YEARS.
Originally, i studied graphic design in sixth form, which I absolutely loved doing, and upon leaving sixth form I wanted to produce my own mini kids book on space because I fucking love space and shit.
But along came being an adult and I had to make a choice between going to University (which wasn’t a possibility as I had shite grades) or going out and getting a job, so this dream got pushed aside and I ended up getting an apprenticeship in engineering.
Fast forward 8 years and i’ve found myself almost full circle, with the opportunity to do this again as i’ve downloaded adobe creative cloud for a reasonable fee each month.
I’ve followed a channel on youtube for years called Kurzgesagt – In a Nutshell, and they do great videos on space in a style very similar to what I had in mind in 2012.
So that’s additionally my side project on the go, which I thoroughly enjoy producing, as i’m such a perfectionist and have an eye for graphical content.
Lastly, i’ve decided to throw myself to the wolves and learn how to count cards in Blackjack… Wish me luck!
Anyway, meandoring rant over, I hope you all have a great 2020, and make sure your trading actually turns a profit!
I think backtesting is a double edged sword, much like a lot of things in life.
There is a lot of varying opinions out there regarding the topic, and ranges from being a complete waste of time, to essential to your trading.
We have all heard the old adage of past performance is not indicative of future results, but personally I think that is a phrase that was coined to A) cover poorly performing individuals, and B) give some self reinforcement to fundamental traders…
If that saying was true then there would be no professional traders anywhere, and prices would be literally random 24 / 7 / 365.
My first experience with the topic of backtesting was when learning through infinite prosperity. They advised that the strategies should not be backtested because what had happened in the past had no bearing on the future… which made fuck all sense seeing as what they were teaching was purely technical trading?
When I was mentored by abletrading, Richard advised that my first steps after learning the strategy should be to backtest the method to A) build confidence in pulling the trigger, and B) prove to myself that I could be net positive over a long period of time.
So that’s exactly what I did, I think I spent over 1 and a half months testing 3 pairs on various timeframes and asset classes, mainly commodities and currencies as they are all i can trade currently with my account size.
The resulting information showed that with the information i’d been provided I could make a net positive return over a large enough sample size, and this was only 3 pairs!
Now this is where I believe a caveat must be thrown in.
Just because you have a proven strategy, doesn’t mean you will be a profitable trader.
You really need to get a firm grasp and understanding of how your mind plays games with you.
Here’s my latest example.
I’ve had a few trades recently on the daily timeframe, and this is where you need to be careful with how you’ve taken in information when backtesting. What you do not realise when backtesting daily / hourly / 15 minute timeframes is how much TIME itself affects your decision making abilities. My example is on AUDJPY 1D TF 27.08.19.
EXAMPLE:
Order set for a retracement on this large bullish candle.
Day 1: Fuck. Not been triggered. do i wait? do i remove my order?
Day 2: Okay cool, now im in.
Day 3: Get in. I’m up 40 pips!
Day 4: Shit, another down day. Is there a trendline holding it down? I’ll hold it over the weekend, i’m happy with the trade analysis and entry.
Day 5: Fuck sake, gapped down monday and hasn’t moved… Is this a sign? Shall i bring my stop up and reduce my risk? No that’s a cuntish move.
Day 6: Get in im up 40 pips again.
Day 7: Buzzing! but wait, it’s not closed above these highs, shit… shall i take profit? im up 0.8%. No, don’t be a cunt, trust your trade analysis.
Day 8: Fuck sake, profit target was missed by 6 pips… Shall i bring my stop up? No don’t be a cunt your profit target is just there its inches away..
Day 9: Fuckiiiin beauty! I’m a trading god.
Now, i’ve embellished these quite a lot, but the point i’m trying to make is that a lot of thoughts go through your head when managing a trade on anything from the lower timeframes to the higher timeframes. No practise can prepare you for the real battle of being live on a trade in the middle of the action.
News coming in left right and centre about a billion different things that can affect global economics.
Watching a bar form throughout an entire day and being able to hold on for days, trusting your judgement and not succumbing to your emotional thoughts is fucking hard work. And i know for a fact this is even harder when you’re trading intradays.
Only live trading of your own money will give you that experience.
Mark Douglas teaches that you should test a strategy to ensure its edge plays out, and to build confidence, nothing more.
Too much of something isnt always a good thing, as I frequently see people touting backtested strategies on social media, yet they’ve failed to mention anywhere whether they’ve actually practised what the preach…
In my case, as a person who felt lost in an ocean of shit and lies, it came as such a fucking breath of fresh air to know that I had found a strategy / approach that appealed to my personality.
All i can say is this, build trust in an educator and simultaneously build trust in yourself.
Although I still have moments of lapsing habits, I now look at each trade as just an opportunity to allow my strategies edge to play out. Nothing more. No hoping for some economical miracle, just rinse and repeat. Almost robotic. I’m here to make a consistent return, not to feed some part of my ego that requires me to feel like im a god.
