Mincer #06 1. This week I leaked the remainder of the deposit on MNQ. Why? The commission on the MNQ is 2.5 ticks. And this leads to two consequences multiplying each other: a) The “headwind of the commission” requires a multiple increase in professional efficiency. The table below shows that the commission on NQ is 41% of the deposit, and for MNQ 122%. This is a very, very big difference. In order to make the same net profit of 50% of the deposit, I need to make 91% gross profit on NQ, and 172% on MNQ. I have to be twice as effective. And here a second aspect arises. b) With a commission of 2.5 ticks, I can’t go near zero when it seems that “something is going wrong.” The commission will just gobble up me. And this aspect greatly affects the quality of decisions and their consequences. This is the main disadvantage for scalping on MNQ. 2. To test my skills, I switched to NQ demo trading (gray in the table). And here everything, as usual, is normal - the standard $ 200 for two hours. The conclusion is simple - only NQ needs to be scalped.
Forwardtest #09 - #10 My system with a tough algorithm does not tolerate abrupt market changes when the microstructure breaks. The microstructure is changing due to the fact that the balance of active and passive liquidity is changing. On such days, passive liquidity, as we see, fell 10 times, while the volume of contracts in the minute candle increased. Thus, the active / passive liquidity balance ratio increased 10-20 times. fundamentally changing the ratio and pattern of the main and correctional movements. Hence, systems built on rigid geometry and clear conditions will often receive stops due to the low liquidity in limit orders. And here the systems need to expand their take-ups to use volatility and compensate for% of winning trades. The backtest of the last two weeks shows that the take-profit increase should be four times. But this is a different system, under a different market condition. And this state of the market will not be long - such a market is not effective. Therefore, the most reasonable is the disconnection of such systems from trade in such conditions. But at the same time, we continue the forwardtest to assess the stability of the system as a whole - how much it will merge from the earned.
Mincer #11 The first unsuccessful start with $1050 and a plan to increase capital with NQ scalping to $2100, which would then switch to Vintage system trading ended February 6 from $44. Two things killed me: 1. The disproportionality of the NQ volatility and the size of my account; 2. High commission on MNQ when trying to control risks. February 12, I replenished the account: While I tormented the demo account and wondered how to start the market, it changed dramatically. The original plan to trade Vintage was postponed indefinitely. Also, at the end of February, I changed the time zone - now the NYSE session does not end at 04 a.m. in my time, but only at 23 p.m. Which is much more beneficial for the body and the state of the brain. I began to sleep at normal hours and got enough sleep. Having twisted a couple of days of demo in a volatile market, I began to manually trade 1-3 MES contracts. And now I ran into an internal psychological problem associated with some fears. Therefore, in order to understand, I am writing this post - restoring the chronology of events and looking at the nuances I will pull the problem out of myself and be able to move on. The expansion of volatility always tears the usual balance of risk-reward. Moreover, such an extension is more than 4 times. according to my feelings, I do not remember such a swing even in 2008. Extension of the foot is a necessary fact. The extension of the take is required to compensate for the loss and the natural desire for profit when there is 2-5% movement in front of you. Consciousness and psyche become excited and begin to take their breath away - like a transition from a children's swing to adults. Such volatility can forgive you a lot of mistakes at first, but then it can severely punish you. Unprofitable averaging will be especially tough and quick to punish. In such a market, entry accuracy is reduced and the criterion of "why are you trading?" Is tested for viability. When you trade on the system, everything is simple: there is a signal - there is a deal, there is no signal - there is no deal. You do not determine how much and how you need to trade, but your system. As soon as you start to trade discretely, i.e. creatively, the criteria are blurry. You can’t trade a little or a lot - the quality of transactions will decrease and you will get a torpedo below the waterline. You need to trade as much as you want. I don’t feel like trading now, that's why I am writing these lines. Now the market is giving out money - take as much as you can, so you need to trade as much as possible. But some kind of fuse has blown inside me or I have erroneous criteria, now I’ll figure it out and repair myself. With discrete trading, the main thing is to choose the right target in order to try to fully absorb the energy of the market. But for this you need two things - trading skills and psychological potential in order to remain in the mind when this energy fluctuates. Often the condition of a small deposit imposes a significant limitation and pressure on the consciousness - "you can not lose and fly into." The risk of significant loss in discrete trading is much higher than in system trading. Therefore, instinctively, with an increase in volatility, we reduce saises more than mathematically needed. It’s just scary for us and we are moving away from possible pain. But at the same time we miss the profit potential. Why are we doing this? We are not confident in our trading decisions and in the stability of our ability to make these decisions. We are a very fragile system at a long distance, even the presence or absence of the sun outside the window can influence our decisions. So what is the criterion to take as the red line for the most effective long-distance trading? - %% deposit changes per day/week? - $$ arrived on 1 contract per day/week? But these are artificial sides on the bowling alley. When the market is bad, in an attempt to reach and scrape the rate, you will trade the “gray” setups. The driving force in you will be the awareness of "necessary." It turns out that you will show excellent trading activity in a bad market. And if the market is magnificent, then you will leave earlier and significantly shorten possible profits. This and that is bad. There should be a balance of your trading activity and market quality. And if you will trade less than the norm in a bad market and significantly exceed the norm when the market allows, then why do you need this %% / $$ norm? It ceases to be a key and decisive parameter. Our brains need such a norm in order to connect their current efforts and mental stress with the model of the interpolated future. We are going to the mirage, because the future will be different. “Everything will be wrong and not even the other way around” (c). But when we move within the planned corridor, we gain inner peace, the psyche relaxes, allowing the preferential cortex to play its intellectual games more productively. This is a good psychological crutch as long as it works. Obviously, with non-systemic trading, past successes only give more confidence in the future, but do not guarantee it. Even in the near future. In the event of a failure, we will be forced to respond by stopping or changing our trading and reducing the risk. Often growing up from small deposits and fighting for profitable trading, our psyche gets used to think / act in the face of problems, in the face of a negative emotional state. And when we get a positive result, the psyche gets dopamine and relaxes and starts to work differently - not so hard and mobilized. Which in the conditions of discrete trade leads to the fact that the assessment of the situation begins to occur only by the preferential cortex, which leads to simplification of decision-making and, consequently, to a decrease in the quality of transactions. There is a swing. It turns out that with the wrong choice of the basic criterion, we can lay mines for the future ourselves. So which criterion is correct? Obviously, the most important thing is the harmony of your decisions with the actions of the market. If you trade discretely, then your actions should adapt to the current market. For long-term trading, you must be very flexible. You should not have rigid parameters and principles. It is incredibly complicated and requires a lot of money given to the market for training. We are slaves to our limitations. Another problem is that the market is volatile even within one day, and our brain is not so flexible. On the one hand, doing many trades per day (>10) with a small stop, we significantly improve the risk curve and improve the quality of equity. On the other hand, when a person makes 1-3 transactions a day, his brain can better adapt to the current state of the market. Everything rests on the power and quality of the trader’s neural network. And this network is affected by food, sleep, oxygen, the chemical balance of harmonics, etc. .... A very fragile system. Let's move on to practice. I had, as usual, a brilliant plan: start with one MES contract to disperse the risk, then increase the size +1 contract for every $300 profit, while the planned rate of return is $150/1 contract/week. Why $150? I do not know. On the one hand, it seems not enough for such a market, but on the other hand, such a rate of return already gives 10% per day. It seems that the plan is balanced by market conditions and risks, but something is not right. Another mathematical table of a brighter future. The main problem is that now the market can be so sharp that in an instant it will knock out 6 points and goodbye to the daily rate of return. The liquidity is thin, the stop will work at the end of the squeeze. Increase profit margin? Therefore, expand the amplitude of the take? And it turns out to leave the probabilistic approach in the amplitude? But if we dance from risks, then we need to predict not where the market will go, but where it will not go. In general, thin limit liquidity makes its own adjustments ... What happens in fact? This is equity for the first one and a half weeks (I) and for the last three days (II). My MES equity with maximum commission. After the quality of the solutions (MFE/MAE) I did not like (I) (1-3 MES contracts) I switched to scalping (2 MES contracts). Of course, it is much better to trade ES, but for some reason I decided for myself that this is a lot of risks. Recent deals were on Tuesday. Tuesday was in some kind of strong psychological stress, there was a feeling that you were walking on a rope over a red-hot abyss. Most likely this is due to the fact that in this style there is a significant imbalance between the amplitude of the stop / take and the current market volatility, coupled with its ability to change per unit time. Most likely his POSSIBLE rate of change unnerved me. Also, at these speeds it is uncomfortable to use MES's DOM. In order to understand what is happening to me, yesterday, Wednesday, I decided to bargain all day for a demo. Starting from $3,000 with one ES contract. Then I increased the number to 5 and also traded FDAX. In the end, I ended the day with $19,000 in net profit. Here it is the potential of the current market - 600% per day with adequate risks per transaction (MFE/MAE~1) ... What turns out: - I still see the market; - In real life, the MFE/MAE coefficient is worse than in the demo; - The point is in psychology. What bothers me? An imbalance in the amplitude of orders and market volatility? Thin liquidity and instant market movement? Reluctance to lose this deposit in force majeure? Distrust of one’s hands and sobriety of thoughts? “The point is some fear.” I feel it from the sensations in the stomach, limbs. But fear of what? Lose $300? It’s ridiculous. To be wrong in a deal? Funny amid hundreds of deals. Maybe the fear and panic of investors is transmitted to me? I understand well what their losses are now and I feel their sadness. But this is not the first disaster that I see and in which I participate. - Probably the main nervousness is delivered by the terminal, which can freeze on fast powerful movements. But on the other hand, the channels of the data feed and orders are divided and the orders at that time pass well, the stop is placed on the exchange. - It is unpleasant, of course, that the base has already shifted to 2600. When everything normalizes, it will be harder for the market to “breathe” and the intraday range will be lower. But when it still will be - before this we still have to live. As a result, nothing else comes to my mind - I feel dizzy from the wide open unusual opportunities)) Roller coaster - both literally and figuratively. Everything is as usual - to pull yourself together and just do it. Upd: In fact, I want to trade ES and FDAX, but the current volatility does not allow me to do this comfortably. From there the discomfort is in me.
Poetic but rigorous, It’s really pleasant to read you. I wish you to find your way to heaven. There is a lot to think about in many ways. Not doing is a form of prudence, You can only be proud for not having messed up. Enjoy !
Mincer #15 A month has passed unnoticed. What news? Firstly, immediately on March 13 and 18 I received a cataclysm on my account. Approximately -25% of the deposit. This happened as follows: 1 - increased the size to 6 MES; 2 - received a significant loss; 3 - tried famously (with a forecast increased amplitude) to compensate => received an additional loss; 4 - transition to 1 ES; 5 - increased volatility of the account, losses began to put pressure on the psyche, profits did not quench thirst => lack of an equilibrium psychological state; 6 - somewhere at the next loss, he increased the size to 3 ES and received a good loss (-$900); It was the bottom; 7 - said to himself “enough” and switched to trading 5 MES, got a smooth growth; again switched to 1 ES - he gained a small plus, but realized that the position volatility was unpleasant, switched to 1 MES. Points 6 and 7 for one day on March 18. 8 - March 19 and 20 positively traded either 1 ES, then 1 MES to understand what was happening. As a result, I came to the following conclusions: 1. At the stage of overclocking the account, setting goals and evaluating activities that sound like "%% deposit changes per day/week" and "$$ arrived on 1 contract per day/week" is fundamentally wrong. My task is to make high-quality transactions realizing opportunities offered by the market. Only the current transaction matters, there is no past and future transaction. I don’t know how much the market will bring opportunities today, so the "daily rate" is a strange goal. Hence the result of the day/week does not make sense. It doesn’t matter what your deposit dynamics is. In general, the size of the deposit in absolute figures is not important. What is important? The only important thing is how much risk you can put in a deal. If you will be profitable on a series of transactions, then from the pillow of profit you can increase the risk. There is no time, no account values, only earned profit. A system of "steps" arises. To increase the size of one ES contract (MES), I need to earn 60 points, $3000 ($300). As a result, I got another diamond plate of stages for accelerating the deposit: we earn 60 points - increase the size by 1 contract, lose 30 points - reduce the size by 1 contract. My staircase is 387 steps. 2. Now I look at the size of my deposit once a month. So my brain is free from this unnecessary information. 3. I do not summarize the day. I just look at the weekly transaction report in order to fill out my “table of steps” and find out if I need to change the size of the trading volume. 4. Now the only thing my brain is busy with is assessing the risk/reward balance in a specific market situation. 5. Now the market has unique opportunities for earning and just NEEDS to increase size. But! Build on profits. Now it is important to be able to suppress in oneself irrational fears and be adequate to reality. Profits can appear very quickly and a lot, unusual for the psyche. This means that things are going well and it is MANDATORY to reinvest profits in risk. At the same time, it is MANDATORY that the rate of decrease in size should be higher than the rate of increase in size. 6. Fear is a natural reaction of the body to a step into the unknown. It is necessary to understand its causes and to divide into irrational fear and justified fear. Irrational fear must be cut off, since it is impossible to work with it, it will rust like you from the inside. As a result, you will either not enter the transaction, or enter earlier / later. Reasonable fear is a good marker for finding the flaws of your strategy. This is a useful fear, fear is a friend. It is necessary not to follow the lead of the first and use the second for their own purposes. 7. I introduced FDXM into my trading. 8. I started with 2 MES contracts three weeks ago. So far, so good. There are fewer silly goals in my head, my preferential cortex thinks more about the nature of risk and a particular deal. As a whole, I managed to reduce psychological stress, managed to cut off the chewing of the past and the empty anxieties of the future. Gradually, trading becomes a routine. I have one and simple task - to make good deals. In conclusion, I will give my equity chart. I specifically do not look at data for April. I will let you know the data for April after May 10th. I repeat - for me it doesn’t matter how much the exact size of the deposit is there right now. For me it is only important to overcome the next "step". I know that if I go up the stairs, then everything will be fine with my deposit. And if it’s down, then it’s bad) my task is only to regulate the direction and change the size according to primitive mathematics.
Mincer #16 The balance between active and passive liquidity is changing in favor of the latter. Volatility is decreasing. The market is getting harder than a week ago. This week I had to scalp 5 MES contracts. But MES has a commission of almost one tick, and the presence of a second glass (MES) is noisy. So I started trading one ES contract in order to: - work only with the primary market (ES DOM), but not with a “mirror”; - do not incur increased commission costs; - Do not reach for an additional tick in a transaction and it is psychologically easy to leave a non-liked transaction; - increase size while the market is favorable for its volatility; - increased size allowed to go 5-6-7 steps for 16 points instead of 26 (I will show the table of steps below). This allowed us to reduce the number of entrances and, consequently, the risks by half to achieve the goal. On the risk of a drawdown, I decided for myself that if I make a loss of $250, then I am going to trade 4 MES. My approach to scaling up a size is simple - if I earn 60 points on the current size, then I add one contract, if I lose 30, I lower it by one contract. Therefore, I earn points, not dollars. My brain is forced to think only about choosing a piece of the trajectory. He does not have the task of making XXX money today. He does not have the ability to "trick" - to extend the day with increased size or, for fear of reducing size. This is a psychologically very environmentally friendly approach - the emotional load is greatly reduced. I admire Steve and root for him, but he goes the other way “2% per day” in and now he has fallen into psychological scissors: over the past ten days he has an average profit of $79.5 (~ 1.3%), on the one hand , the quality of the market (profit on one contract) has deteriorated, and therefore it is necessary to switch to 2-3 contracts, but on the other hand, how to increase size if risks increase, if trading has become worse than 2-3 weeks ago (there is a big chance to get losses on increased size ) Plus, the load on the trader’s intellect is significantly increased - now instead of $ 40 he needs to earn $ 120 with the same 1-2 contracts, this can lead to over-trading and unnecessary losses. This is a difficult dilemma. If he increased the size in a favorable period, now there would be a margin where to reduce it. In this situation, I would refuse to compete with the exponential curve of "2% per day", increase the number of contracts and reduce the number of transactions. I would determine the amount of loss when I reduce the size of one contract and, accordingly, would set for myself x2 the size of the profit when I increase the size of one contract. Depending on the selected digits, this or that curve "%% per day" will turn out. For example, I give my table on which I live: Once a week I look in the terminal how much I have earned dollars and translate into points, filling out this table. I don’t know the exact current size of my deposit. I don’t look at profit / loss every day. I do not rock the psyche. I know that the way to Eldorado lies through collecting centimeters of the schedule. This is not a tricky approach. And quite simple. I try not to spend all my psychic energy on worrying about the past or building fantasies about the future. I direct it to the schedule - here and now choose a piece that you want to bite. Of course, a five-fold increase in size (from 2 MES to 1 ES) is a bit worrying. But: - I have an accumulated pillow for profit; - I know at what level of losses I will radically reduce my size; - I don’t need to "earn exactly today" XXX dollars or XX points - I have first a week ahead, and then behind. I have no situation when I "need" to trade. Therefore, I often interact with the market in an adequate equilibrium state; - I don’t have to earn much, I have to lose very little. Now my average rate is 5.1 points per day, which is 170% per month. I want to save 4 points over a long distance. Although 3 is also very good. - in fact, it does not matter 3 or 5 points per day, it is important that they are. A compound percentage and building up the size will do the trick. "3 points per day" - is it a lot is not enough? If I set a goal in my head “I must earn 3 points today”, then for me this is a lot. If you do not think about it, then a little. The largest in the last month I did scalping 31 points a day. It is easy to trade when the risks in the transaction are not significant for the depot. It’s hard to make money when you can’t lose. Maybe later I will increase the capital by one contract from 60 points to 100 points, but so far I want to get to working size in 5-6 months. Therefore, the current horizon of tasks is to "cut centimeters of the graph" to go through the 8-9-10 stages. So I want to say - "carefully pass." But by myself I know that when you start to act "carefully", you begin to play it safe and be late. You cannot work "risky" with risk. With risk, you need to work "adequately and symmetrically." Or not work at all.
Mincer #16a For some reason, I had to work out brokerage reports and see the current size of the deposit. The mystery to the brain is revealed. Therefore, I made all the statistics and summed up the internal accounting. Here is the equity. In the second section, the share of commission from gross profit is 16%. Now the main task is not to catch up and move away from the knowledge of the current account size. The brain should only think about the current deal, no past and no future.