Another issue about hindsight chart analysis that can cause discipline problems when traversing into trading live with real money in streaming data... Market conditions change often. Thus, that trade signal you got on Monday within the market context of that Monday...the exact same trade signal on Tuesday will be within a different market context. Simply, same trade signal but different market context. For example, Monday's price action controlled by a surprise FED rate announcement and Tuesday's price action controlled by negative geopolitical event out of Europe. This is one of the flaws with backtesting and flaws with simulation trading because its rare to know a trader that has also documented the market context of any trading day in the past that correlates with the day of the trade signals. Simply, in real trading in live conditions...the market context will be different and it will then produce a price action you're not use to seeing when your trade signals appear. Therefore, you will trade differently or possibly have a higher chance of discipline problems even though the trade signal itself is exactly the same. This is when that mindset comes into play...the ability to see through the fog and execute your trading plan exactly the way it was designed. Just as important, you need to have the ability to adapt (make positive changes on the go) when an unusual market environment shows up so that you can exploit it...something that occurs a few times per month. In fact, its normal to hear profitable traders say that those few days per month are usually their most profitable trading days of the month because they were prepare to see their trade signals in very unusual market condition. In contrast, just the opposite for losing traders because they study exclusively hindsight charts and/or didn't study recordings/replays of their trade signals backtested price action. Solution - Hindsight charts + Recordings/Replays...the latter more important to be properly prepared when traversing from backtesting to real trading as a discretionary trader (no automation).
I've never taken a strict mechanical system approach to trading or really backtested anything. Just forward tested with small size and then adapted. You brought up a good point when you highlighted the market context in terms of fundamentals. I also look at it in terms of the traders who were in the market at that point. You described the 'fog' and adapting a few times a month brilliantly, you've certainly clarified a few points in my head. My best days have been where I've seen a slight anomaly in the price action 'fog' and adapted my strategy to a temporary edge in the markets. There's a big difference in the way I adapt my strategy now then when I first started. When I first started I would 'adapt' due to emotional factors or just randomly gamble based on my p/l. Now when I adapt it's because I've been looking at a set of variables consistently and trading my edge for thousands of hours that when something 'anomalous' comes in I can see it objectively and act on it. Vulcher - before you start tweaking things in the moment. Walk the path first, get used to the rhythm of the markets you trade (with your strategy) and the paths your trades take before changing your rules. I have to extensively look at new strategies over a course of months before I start making significant changes in the moment to my initial mechanical ideas. I looked over the trade log you posted, generally 2 lot positions but then an 8 lot loser? Come on, cut that shit out, make some money consistently before you start flinging around quadruple clips. Simple small steps, consistent size, get a significant sample that confirms your edge, become familiar with your strategy, clip up, adapt. Find new strategies. Rinse, repeat. Enjoy the process of really becoming comfortable with your strategy and being able to execute flawlessly with comfortable size rather than rushing to 'make money ' as fast as possible. The ability to execute is far more valuable in the long run.
I agree with you the 8,6 and 4 contract trades. they are part of my issue. I get frustrated and things get out of control very quickly. the 2 contact is more what I based my strategy. When I developed a plan and try to test it by sticking to the rules with the objective of collecting a good statistical set I realize I have discipline issues. I first thought it an easy thing to fix but come to realize it's a struggle for me. I just couldn't stop my bad habits from taking over. Which started this thread. I appreciate all your comments and suggestions especially wrbtrader.
Oh wow, what a long presentation to watch. But it's useful and correct, to control our bad trading psychology (fear, anxiety, greed, haste, etc) we need to take our time to explore our mind and build discipline inside ourselves...