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Hello fellow traders,
in this post I would like to share my progress in trading towards profitability. Every week, I'm going to post my results from trading the DAX (GER30).
Just a few words about myself: Currently, I'm studying chemistry at a university in Germany and I've been trading for almost exactly three years. I started with stocks, continued with CFD's and then futures and options. I was never profitable and in fact I lost a lot of my equity over the three years. A week ago, I signed up for the Brook's trading course. Of course 399$ might seem like a lot of money (and it is), I arrived at the conclusion that I'd rather spend it on some proper training from the ground up than loosing an equal sum in trading.
Even though I'm not proud of my losses, I know that they have been / are part of the path (at least for me). I had to make the mistakes myself and try out a lot of things. Now I'm finally in a state of mind where I actually listen to people instead of trying to outsmart the market. If I would have singed up for this course three years ago, I believe that it wouldn't have helped my a lot, since I wouldn't have listened.
So anyways, I've been through the losses - so if you want just feel free to openly comment onto my weekly results - I can handle it.
Why do I even trade? Well, firstly, I'm young so I don't really care if it takes me another three to five years to reach profitabilty. That still leaves enought time to archieve my financials goals (and if I happen to die young than I'll never have to worry about money ever again). -> I can only win by learning to trade.
I also like the mental challenge in trading and would like to be able to eventually be an independenten reseacher(funding myself). Chemistry and Astronomy really fascinate me.
My plan:
- In the first phase, I'll try to cut away my biggest losses and the obviously stupid trades. I hope that that will bring me closer to breakeven on a weekly or monthly basis. My verifyable goal is to have the 20d SMA of my P/L at or very close to 0. I'm estimating around six months for this phase.
- In the second phase, I'll try to reach into the region of profitability. My verifyable goal is to have the 20d SMA of my P/L turn positive. I'm estimating around twelve months for this phase
- In the third phase, I'll try to keep my 20d SMA of P/L in the positive as consistently as possible.
I'm so mad right now. My SL was triggered by one tick, so that I missed a 300 point decline in the DAX.
"there where only few buyers". Well, they are probably talking about me. 😇
Here are the broker's statements for yesterday:
Week 4: Wed: All trades with chart
Daily P/L: +125.9 DAX points
Detailed analysis: What a day! I have learned sooo much from this trading day. Yes, I was angry in the morning but I still managed to make reasonable trades. Also, this is my biggest daily profit ever and today was my most profitable trade ever. Also, my most profitable trade is now bigger than my biggest loosing trade. I consider this a success, since I'm struggeling so much with letting trades run. Of course, I want to avoid a negatively skewed return curve under all circumstances.
- Trade: Short early in the morning, got stopped out unfortunately. P/L: -38.5 DAX points
- Trade: Shorted again at the daily low (at the time). Held until the afternoon. P/L: +131.6 DAX points
- Trade: Short after bounce up (2nd entry short): P/L: +22.1 DAX points
- Trade: Short after breakout from triangle. P/L: +10.7 DAX points.
Do you notice the pattern? The trend was down and I simply sold, even at the worst possible point (Trade 2) and managed to have a good trading day without even doing much apart from occasionally checking in on the chart. Thank you Al, especially for teaching me the right level for the SL. I finally start trusting the probability and accepting the "far away" SL. I hope experiences like these will for once and for all cure me from my bottom and top picking mania.
Also, I'm just about scratching breakeven regarding the total P/L from the start. So I'm very exited since I managed to trade myself out of a 320 point deep drawdown. Actually, there are only 6.5 points missing to total breakeven. Very exciting!
Had a terrible trading-day yesterday and today is not looking good either. Will post the usual details in the evening (Berlin-Time).
Week 4: Thu: All trades with chart
Daily P/L: -252.1 DAX points
Will do a detailed failure analyis for both Thursday and Friday.
- Trade: Short for second leg down. P/L: +1.8 DAX points
- Trade: Short at topping formation: P/L: +72.8 DAX points
- Trade: Short at false breakout downwards: P/L: -215.2 DAX points
- Trade: Reversed position as 3.Trade got stopped out. P/L: -82.0 DAX points
- Trade: Short. P/L: -29.5 DAX points.
Week 4: Fri: All trades with chart
Daily P/L: (-237.0 DAX points)
Will do a detailed failure analyis for both Thursday and Friday.
- Trade: Short at strong bear-leg. Thought that my SL has triggered, but didn't double check so I'm stuck with a short position over the weekend. Now it's pure gambling how it's going to turn out. Accounting-wise, I'm simply going to book the current P/L as is for the analysis. On monday, I will then post the actual P/L once the position is closed.
Befor I'll post my own failure analysis, I would invite you to take an unbiased look at the trades from Thursday and Friday and post, what I have done wrong in your opinion. Feel free to write openly. Of course I know what I think I have been doing wrong, but I'd appreciate another point of view.
Don't worry, I have prepared for this exact situation, so I have been trading really small. The P/L in points and % is dramatic, but the actual loss in cash is nowhere near to beeing dangerous.
I can recognize that you are basically on the same path I was 8 months ago, when I was just starting out with Al's course.
You say that you are not very good waiting for the market, well, then that is exactly where you should start. Wait for the market to show you exactly what it is you are comfortable trading. If High/Low 2's is your thing, just do that, if MTR's are your thing, just do that.
Taking lots of trades equals lots of losses, rather than taking 1 or 2 profitable trades and believing in the setup. WHEN, and I do me when I rush my trades I loose every single time, but when I just sit there (sometimes watching a movie on a second screen) and wait for a setup that feels good. I often make winning trades.
The real challenge is building up the confidence and patience to --> JUST SIT THERE and stare at the screen.
I went away from trading over the summer, taking a good long break. When I came back everything looked different. I spent time getting my setup exactly right. I started drawing in everything and deleting what did not become fact. I waited and waited and waited for trades and what I realised quickly was; that taking a single trade in a session was often far more profitable than trying to get in the market 4 times.
You only need a few points with the right risk to make a lot of profit.
I like that Al keeps saying that, where he is today, he only takes the fun trades. Well, there really is no need to take anything else. And you can find fun trades in trending markets as well as trading ranges.
My best advice to you is to take up a meditation practice and meditate before each session. That way you enter the session with a calm mind. If you during your meditation feel uneasy, probably you should not trade that day.
Short list of advice:
- Calm you mind before a session
2. Focus on trading, when trading, it is not a secondary thing you do
3. Wait for the market
4. Do not rush trades
@riembaus Thank you very much for your advice! I really appreciate it, that you took the time to write it down. This is the first time I'm able to exchange with other, more experienced traders.
Your advice sounds very good. I think I'll start with calming down before the session and limiting the number of trades. Do you think it makes sense to have a rule, so that I'm only allowed to take two trades a day?
Again, thanks for your advice!
You have to figure out your own process. If you KNOW that you are inpatient, you HAVE to train patience...
Here's something you could try. Miss trades, it is much easier to recover from a missed trade than it is to recoup lost capital. And it helps you get rid of FoMo and revenge trading. You get near perfect setups every day, so ask yourself just before you enter a trade, if you would take the opposite side of the trade you are about to enter. If you would, maybe just wait for a trade, where there is no way in hell, you would enter in the opposite direction.
Have you thought about choosing one particular set up and trading only that until you are consistently profitable?
Thanks for the reply! Yes, I have thought about that, but was hoping for a steeper learning curve by "trading what I see". I'm also not very good at sitting and watching the market, only looking for one setup. I must admit that I'm already very liking Al's "you can enter on almost any bar" approach. Currently, I'm only at my first pass in the trading course (at 14E right now). So I'll hope that thing's will get better once I have an overview of the course.
I'm thinking about focusing on scalping, since it seems like I'm doing better that way.
Failure analysis: W4, Thursday and Friday
Above, you can see the chart with all my trades from thursday and friday (refer to my previous posts for details!).
Here, I'm going to analyze my trades to prevent these mistakes from happening again:
Contributing factors:
- At work, so very little screen time and lack of focus
- Trading from phone, so little overview and oversight
- Rushing, since little time to trade
- Not beeing able to monitor trades and to manage them correctly
Main factors:
- Failing to recognize trading range (BLSHS!!)
- Failing to acknowledge 80% rule -> Betting on reversals and breakouts -> low probability
- Betting on breakouts, but using swing stops -> low probability + bad risk/reward
Lessons:
- If not enough time, don't trade or switch to higher timeframe (1h,2h etc.)
- Use computer screen to have overview
- Realize market is in TR -> BLSHS
As a positive side: If I'm able to loose 200 points with one trade, there should be no reason to not beeing able to make 200 points with one trade. But: Let profits run!
Please note: Monthly summary with P/L graph, gaussian distribution etc. will follow on monday, since last trade is still open.
Week 4: Mo, October 26 - Fri, October 30
Gross P/L: -503.8 DAX points
Average daily P/L: -100.76 DAX points
Total P/L since start: -540.4 DAX points
Since the week has already been discussed in detail, there will be no further analyis in this post.
Month 1 Summary
Please note: All graphs are based on EOD data (intraday swings are not shown).
Graph 1: P/L Distribution Month 1: As you can see, the distribution of returns is heavily negatively skewed. This means, that when I make a profit, it is usally small compared to the losses. You can see that the graph has a large negative tail. So the probability is there for a very big loss. What you would want to see is of course the average beeing positive and a positive skewness. That would mean that you can effectively limit your losses, but you have that occasional big win that you trail up to 4,5,6,7 times your initial risk.
So this graph clearly shows, that I fail to let my profits run and fail to cut my losses. This is very bad, since one trade gone wrong will wipe out several positive trades (see W4: One bad trade was enough to wipe out an entire week's worth of profit!) Of course, this is also bad from a psychological standpoint.
Graph 2: P/L [DAX points]: Here, you can see my day to day returns.
Graph 3: Cumulative P/L [DAX points]: This graph shows the cumulative development of my returns. Also, note that we see a strong rejection from breakeven. While certainly only a contributing factor, it is plausible that some psychological effect was at play as I approached profitability. What I can say is that I was very excited as I reached profitability intraday. Then, I messed up.
Average daily P/L: -27.02 DAX points
Gross P/L: -540.4 DAX points
Note for traders just starting out: Please realize, that knowing a little bit about math and statistics does not make me money (obviously). So you do not have to know all this to be profitable. The reason that I'm posting this is, that I want to be able to pinpoint developments and back up all of that with actual data. So instead of relying on my feelings, I want to be able to say for ex.: "This month was way better, as I reduced my negative skewness etc...). Just the return curve alone is not the entire story.
Excel worksheets available upon request.
