(skip to the bold font if you don't want to read my history) First, some background. I was introduced to the markets around August of 2013. A very close friend of mine said that he was going to buy shares in Kodak, about $3000 worth. He explained that if Kodak stock rose in price, he'd have tens of thousands in profit. Of course, being starstruck by the thought of making large sums of money, I found myself increasingly intrigued by stocks and how their properties could be exploited to return large amounts of money. It sounded easy to me, at the time, and so began my quest. Every day that followed, I would check the Kodak chart and scour the internet for more knowledge about this new world. I'd see the "biggest gainers" list on Google Finance and daydream about how I could find myself on the winning side of those 10-20% gains. A few weeks later, Kodak filed for Chapter 11, and my buddy was out 3k. I wasn't fazed. The allure of vast amounts of wealth and freedom had gripped me. I started my "education" with a book- High-Powered Investing for Dummies. I learned about all the financial instruments, their properties and how they could be used to generate income. I started perusing various finance-related forums on Reddit. I came across a Q&A by a professional options trader who would clear 7 figures per annum. Options would be my game, I decided. I bought Options Volatility and Pricing, the "bible" for options traders and diligently absorbed the contents. October came around. My friend, seeing my interest in the markets and my apparent "calling" to pursue trading as a potential career, gifted me with a small amount of capital (1k) to trade. I opened an account with OptionsHouse and within a couple weeks, I was ready to trade. I started a written journal that was to be a carefully crafted record of my ascent to wealth. I opened my first trade in TSLA, one put contract. It turned out to be a winner. I was elated. The next day I did the same. And the next day. I was over the moon! My account was up 50%, and it felt SO easy. But something was missing- I didn't have any meaningful method to speak of; I'd see that TSLA was kinda sorta going down, so I'd buy more puts. I vaguely knew of support and resistance, but had no context for using it properly. My solution was to make a "system" (which, in hindsight, was complete bullshit!) that basically operated on MA crossovers. I bought calls the next day, using this "system," and the trade went against me. "It'll come back," I said. And it went lower. And lower. And lower. The contract was nearing expiration and I closed, losing 95% of the account in one fell swoop. As most noobies do, I thought my problem was a lack of market knowledge. I set out to learn more. I didn't want to lose like that again. I spent more time on Reddit, YouTube, and Google just reading. Through some fluke, I ended up in a chat room with a handful of self-made traders that could take money out of the markets day after day and support themselves. I asked one of these traders to be my mentor. For some odd reason, he accepted. The next month or so I spent every day watching and learning how he would trade. Things started clicking. I felt like I was ready to try again. I threw down another 2k. It was go time. In 2 weeks I was up 72%! It was easy! I was printing money! I even had a few rules written out like a ~real~ trader. Then, predictably, I found myself in a losing position. See, my mentor trades option expiration fridays, among other things. He had a trade setup that was going to good. I bought something like 150 calls in BBRY (12/12/13 on market open), betraying my mentor's advice to wait for confirmation. Price went against me, I was down 80% on paper. In ultimate frustration, I closed the trade; I was mad at myself for breaking rules, mad for not listening to my mentor, just MAD! An hour later, price soared. I later estimated that I would've been sitting on between $15k and $25k in profit. I was absolutely crushed. Blow up #2. I'll spare you the details of blow up #3, but the reader's digest version is that I was trading scared and not following rules at all. I started off poorly, recovered, then blew it. After that, I took a break for a few months- a real break. I didn't even read about the market, I didn't think about it. I didn't talk to my mentor much. I knew deep down that I wanted to make it at trading; it seemed to be the only thing in life that really pulled me in. I enjoy the challenge of it, the technique and logic required to master it. It "fits" me and how I operate. ------------------------------- Flash forward to now. My re-entry into the trading mindset started when someone suggested that I look at getting a desk at a firm. I looked into prop shops around me, went through some introductory seminars and videos. Without going into too much detail, I decided that prop wasn't the route I wanted to go- but in the process of searching, I realized that REAL traders, professionals, treat trading like a business. They have plans, rules, goals and structure for what they do and how they do it. Two months ago, I made a plan and gave myself a path to follow from Point A (here) to Point B (full-time profitable trader). I followed it to the letter. I went through the BabyPips curriculum. I reviewed the method that my mentor trades with in great detail. I made a plan- one that accounts for all my strengths and weaknesses and leaves no portion of my trading career to the imagination. I discovered why I was failing before and set out to make sure I accommodated for those failures. (Mark Douglas' book was particularly helpful here) The next step in my plan is demo trade and build consistency. Follow my rules. Establish that crucial psychological foundation that a career trader needs to grind out profit every day and weather drawdown, year after year. It may take me a while, but it's worth it in my mind. This will be my public journal of my experiences. I share this so that 1) I can receive advice from traders who have experienced the errors I have/will make, 2) I have another layer of personal accountability and 3) I can serve as an example of what to do (if successful) or what not to do (if I fail). I'm not here to get a confidence boost or troll. My trading plan can be found here. Keep in mind it's very much subject to change as I get in the swing of things; I don't have a firm handle on what works, what doesn't, etc. But for now, it'll serve to keep me consistent. The system I'll be using is largely discretionary, based on reading price action and recognizing potential reversal signals. I've use a set of indicators to help make my method more mechanical and add confirmation to each trade to avoid poor decision making. More details about how I'll trade can be found in my trading plan. I welcome your thoughts and comments. I'll post an update once I begin my demo trading routine. -Poke
This is not a "trading plan" per se but rather a combination of journal, business plan, and statement of intentions. The core of it -- at least as far as a trading plan is concerned -- is contained in the following sentences: A proven, successful trading system that employs a combination of simple, effective analysis techniques to predict market movements; A systematized, logical approach to trading that will produce consistent results regardless of market attitude and the commitment to improving and adapting as the market evolves. However, since you end by saying that you "don't have a firm handle on what works", one may conclude that the "proven, successful trading system" does not yet exist, nor does the "systematized, logical approach to trading". Until you have these in hand, and that state of affairs will depend on a considerable amount of research and testing, the rest of it alone will not prevent you from suffering blowup #4.
I thought someone would catch that. My basis for "proven, successful" is entirely on the shoulders of my mentor's performance with it over the past few years and my limited "taste" of doing it right. The "systemized, logical" bit is based purely on my perceived ability to follow a set of simple rules, which is yet to be demonstrated. In brief, my plan is the blueprint to the structure I aim to build through experience. I 100% agree with your comment about "having these in hand;" I will not exit the demo routine until I can walk the talk and back up my plan with (positive) results. Thanks for your comment. -Poke
I suggest you develop your plan through research and testing, which you might be able to complete in a matter of weeks, depending on how much trouble you're in, but no more than a few months. If you try to put something together via simtrading, it could take years, and generally does.
Update: I'll be starting up this Tuesday. Here is myfxbook if you're curious about equity curve/drawdown/etc. Looking forward to getting the ball rolling.
You seem to be taking trading seriously and your plan has lots of good intentions. Perhaps like a list of new years resolutions. You seem pretty new to this so time will tell if you can keep to them and not panic when the shit really hits the fan. I've never done, and don't intend to do FX. However, there is one issue which I also have. That's having real confidence that you have positive expectancy in your system. Its an issue with all discretionary trading and it gets more of an issue as the timescale decreases and you get more noise to signal. You could sim trade for months and its still statistically insignificant. I would try to codify your system and test it in many different environments e.g. pre and post HFT, different pairs, panics etc If you dont do this there is a real risk of a slow death as you gradually give your capital to your broker in trading fees. With FX and your shorter timeframes there is no gradual upwards trend (inflation, GDP etc) or dividends to help you out.
I'm definitely new to this (under 1 year experience), but I've had a few live blowups with enough money to make me really reconsider how I was approaching trading as a serious career opportunity. I'm still a little burned from those experiences, which is both a blessing and a curse. On one hand, the demo feels very real to me- in no way do I feel like I'm playing a game or doing this for fun... on the other hand, my overtly cautious, unconfident attitude could be detrimental to my ability to make objective decisions. But, as you said, time will tell. As for my method- while yes, it is discretionary at the core, I've taken steps to "mechanize" the entry/exit criteria to ensure some semblance of consistency. I also take very fine notes of each trade; my hope is after 20+ trades or so, I can start to identify patterns in both my winners and losers and how they are executed to better assess how I can improve my performance and gauge expectancy. At any rate, my focus at this moment is simply to produce consistent results (winning OR losing) and work on keeping my emotions in check. Psychology and mentality are my critical weakpoints. I appreciate your comment, thank you. ------------------------------- I'll give a full review of my thoughts and performance at the end of this week, likely Friday, and every week thereafter. Consistency is key.
This is the heart of the issue - how many trade do you need to make to make a real statistically significant decision as to whether your system works or not? And not just works now, but worked last year, with different pairs etc. Maybe 20 is enough, maybe if its a small edge you need 1000's. Sorry to say but hope isn't enough here - its tricky maths.
I don't disagree- there's no one around who can honestly tell me that 20 trades will reliably project performance over years of execution (if there is, share with me your secrets ). The one "edge" I have in finding my edge (lol) is having a mentor who's done his work successfully for years now. I certainly won't be able to replicate his discretionary method trade-for-trade, but I have a leg up when it comes to finding out what works and what doesn't. In his words, "I'll get there or die trying."
Week 1 Review Longs: 3 Shorts: 3 Winners: 1 Losers: 5 Net P/L:-183.1 pips Failures: Impatience (not waiting for 100% of my signals) Similar to the above, didn't wait for signals on a higher TF Technical - Partial closing of positions is not possible with FXCM, leaving me unable to scale out in a couple trades Consequence of the above, I put on too much size (3 lots instead of 1 to allow scaling out) Overtrading (rules state no more than 4 per week) Weekly loss limit exceeded, daily loss limit exceeded more than once Found myself distracted by P&L on more than one occasion Successes: Didn't allow anxiety/fear control my decisions Properly logged every trade and what I could do to improve Planned every trade and traded every plan Summary: In a word, I'd describe my first week back as rough. I found it difficult to stay "in the zone" and not allow myself to be distracted by anxiety. Nonetheless, I slogged through and kept putting in trades according to plan... mostly. On more than one occasion, I would be impatient in waiting for trades to set up on the 4hr+ TF, so I'd zoom down to the 1hr to look for signals there. Predictably, the signals I traded on the 1hr were lackluster and didn't result in a desirable outcome. The trade I did win was signaled on the 4hr (USDJPY long). I wanted to allow for the opportunity to scale out of my positions to minimize risk, but in a lapse of judgment I opted for tripling my position size instead of breaking my original size into fragments. This tripled pips gained/lost (duh) and routinely exceeded my risk appetite. There may be a time and place when I can confidently hold positions of that size, but right now is not it! I've already implemented a few changes to my execution for this coming week. Position size will be adjusted to four 25k (0.25 lot) chunks. This will keep my original size intact while allowing the opportunity to scale out. I will only take signals on the 4h+ timeframe. No exceptions. A 50-pip minimum target seems, so far, to be somewhat arbitrary. I'm going to favor a general 1:2 risk:reward ratio over fixed pip targets. Overall it was a productive week. I illuminated some weaknesses in my method and I'll work to address them next week. I'd prefer to learn by winning rather than losing, but I've got to gain a stomach for losses eventually. If you have any comments or tips, feel free to share them. Enjoy your weekend, folks.