Personal Account + 100% Resistance = Sideways P&L.

Time to reassess and come up with a plan of attack.

The above is the rolling P&L since mid June '16. A few things that leap off the chart...

1) ~340 trades over the first 4+ months. ~70 trades in the following ~2 months. Last two months have a trade frequency of ~40% of the prior months.

2) Last two months- starting from the black arrow- have resulted in an 20+% range. The black arrow also indicates the start of live trading in my personal account.

3) The high of the above range is an 100% return based on $3K/contract over a few instruments with a per trade risk of ~1.6-2.2% (depending on the instrument).

4) Headline stats before last two months of trading: WR=34%, RR=2.319, E= 0.1489.

5) Headline stats for the last two months of trading: WR=36%, RR=1.824, E= 0.0196.

6) 8 target days (+10%) before last two months of trading.

7) 0 target days for the last two months of trading.

8) 46 trades >= 3R before last two months.

9) 7 trades >= 3R for the last two months...


Going to sleep on this post and return with an analysis of what has changed along with a plan of attack to get back on track!

The "Emotional Market Sphere" - Separating Yourself From The Crowd.

I think traders sometime forget that market movement is powered by other traders actions. The collective force of every trader's decision, including your own, moves the market. I call this the Emotional Market Sphere.

It's like a bubble of human consciousness that fails to see the error of it's ways. Everyone finds unique, apparently well-reasoned motives for falling into the trap of cognitive biases...some do it without ever learning that they even exist. The paradox is that, although everyone's way of expressing their cognitive short-comings is as unique as their fingerprint, the result is an entirely predictable constant. Repeatable patterns. The Emotional Market Sphere.

In order to profit from the market, we need to be able to 1) identify the EMS's emotions/actions and then 2) take advantage of them without succumbing to the same emotions (which leads to the same actions).

So the first step is to stop thinking of the market as a bunch of patterns with some rules that we can apply to profit from them, and start thinking about the emotions of the participants. The easiest way to do that is to take note of what you yourself are feeling. Look for the traps that you are about to fall in and position yourself to ride the panic/fear/greed/hope that you would have felt had you fallen for the trap. This requires you to be able to analyse yourself from a 3rd person perspective.

With practice, you'll widen the gap between what you felt like doing and when you took action...eventually, you'll hardly (hardly!) associate with the feelings that would have caused you to have knee-jerk reactions in the past. For the most part, you will have separated yourself from the crowd.

One Hundred Percent!

1) Make the strategy as simple as possible. Okay, now make it even simpler! If it can't fit on a post-it note, it's too complicated.

2) Get comfortable refusing setups. There will be a bunch of "almost a trade" trades. Worse still, a lot of them will work spectacularly! It's like an Aladdin's cave of possibility...and we all know how that ends.

Be disciplined and "touch nothing but the lamp" (i.e. your exact setup).

3) Think super long-term (for results). For various reasons, I broke even in August AND November. But I've still managed 100% in 5.75 months. If I thought about the outcome of those months in the wrong way, it might cause me to lose faith and sway from the plan. Let's not even mention being concerned about a losing day...!!!

4) Think super short-term (for the process). Yes, it DOES matter if you take that extra trade. Or chase that market...or trade at night when you know you shouldn't. Lot's of small, repeated processes add up over time.


PS  No longer with TST. Long story short, they don't really support the profitable trader looking for actual funding. The irony is I would never have become one if not for their program and the dream of getting funded that they promote.

Business As Usual

I only traded 12 of the 21 trading days available this month and still managed to make that achievable ballpark figure that I have in my head. This was accomplished while experiencing three (yes, three!) earthquakes here in Italy. We weren't close enough for it to be any risk to us as we are about 87 Km away but, with the quake measuring a hefty 7.1 on the Richter Scale, it was close enough to move the house from side-to-side, rattle windows and leave objects displaced in the house. Not fun with a family of four. On the plus side, I like that even experiences like this didn't dent my trading composure.

I love not having to rely on WR for results (I "lose" pretty much twice as often as I "win") and I know that if I manage my psychology and follow the plan, the money will eventually follow.

Still waiting on the Funded Account credentials from TST. Should be anytime soon as I've just paid for the data fees and that means the account has been set up on the brokerage side. I'm also adjusting my expectation of take-home profits as commissions are noticeably higher than the Combine (As much as $4.78 compared to $3.68 respectively). Add in the $170 professional data fees and that takes a good chunk out of the monthly figures I've been posting.

The good news is, these costs are fixed. So while commissions will increase as contract load does, the data costs remain the same. Fast forward to 20 contracts per turn and $170 doesn't make up much of cost in terms of percentages at all (1% compared to 1 contract's massive 24%).

FUNDED!

The 7 Deadly Sins & Breaking Resistance

Most people are at least vaguely familiar with the story of Adam and Eve. Legend has it that Adam was placed in the Garden of Eden by God and told he could eat the fruit from all but one tree. Eve, who came into existence from one of Adam's ribs, succumbed to the temptations of the snake. After eating the apple, she offered Adam some and the rest of mankind's problems was history!

Some 18 months ago, I felt compelled to write out each of the Seven Deadly Sins on my whiteboard in the office. I find that poor trading (and living) can always be traced back to one of them so, as long as I'm mindful, I can avoid unnecessary draw-down both in life and in trading.

One that keeps coming up for me is what I call, "reaching for the peach".

We have various fruit trees in our garden and, some time ago, I began to notice something which I'd eventually trace back to a trading problem that plagued me. I would be on the ladder, picking the fruit within a comfortable distance. When the fruit was finished, I'd move the ladder to a spot where I could repeat the process. After a while, I would move the ladder less frequently until I found myself picking (or trying to pick) fruit that was clearly out of my reach.

I knew I needed to move the ladder (think re-positioning yourself in the market..) but I continued to overextend myself, sometimes to the point of falling off of the ladder (lol) or dropping the fruit I had collected. This could be labelled "sloth" and/or perhaps "greed" as I wanted to "finish" the fruit nearby or "get ahead".

This, IMO, is the reason for whole number resistance...the distinct behaviour on lower time-frames when higher time-frames are rolling from one candle to the next. This is why people are sometimes too aggressive on Mondays and too reserved on Fridays. It's the idea that we have "nearly" finished/obtained something or "just" started something. The curse of beginnings, middles and endings. Our behaviour changes as we feel a push or a pull towards something rather than just remaining constant in our execution.

Push When Winning- Part II

Strategically adding to a winner to bag 6.7R, without increasing the original risk!

Don Miller- million dollar trader and educator- often spoke about one of the most misunderstood, and sorely neglected, ways of managing your risk. Push when you're winning and stop when you're not.

There are a few ways to do this:

1) Frequency of Stops.
2) Size.
3) Scaling In (not out!).
4) Daily Target/Daily Loss Ratio.
5) Reward/Risk Ratio.

Check out the short-lived, but very insightful, Trading After Dark series that Don created over 5 years ago for more on the above.

The only problem with all of the above methods is....they all won't work out in your favour some of the time. You need a thick skin, and a rock-solid, probabilistic mindset to allow a 3R win to come back and stop you out...or to stop trading for the day only to see that you could have made it all back if only you'd have continued ( etc. etc.).

4 Months In, MES Capital & Pushing When Winning.

Per contract of initial risk...some trades were scaled into.

It's been a long time since I've been on the back of such a consistent stretch of trading. What's more, the leverage involved has been smaller on average which makes the result even more significant. It's nice to see that the distribution is what was expected as far as the summer months are concerned. The graphs also tell the story of the resistance of the Combine target in August and the fearful trading of the FTP during the latter part of August into most of September. It'll be interesting to see what October will look like as volatility has arrived in full force and I'm free to put the pedal to the metal!

I've been doing a trial with MES Capital over the last week of trading. I'm doing well there so far but may have to sacrifice that for a bigger and better opportunity (which I'm keeping under my hat for now!). My initial experience with trying to learn more about the company was met with a less-than-warm welcome to say the least. This isn't encouraging as how you deal with people personally will often translate into how you deal with them in business, but I'm leaving my options open for now.

I've also thought about a comment that was made in my last post regarding pushing when winning. This is something that a lot of people struggle with in life in general, trading in particular. Our aversion to loss has us fighting the tape when we/the market isn't conducive to profitable trading and running away once we have some gains when the market suggests that there is much more to be had. I think a lot of this comes from our upbringing ("a bird in the hand is worth two in the bush"- Mum) and the way we were taught to think at school and in society in general. Winning is good, losing is bad....being right is honorable, being wrong is shameful...etc.

The Problem With FTP

I gave it a good go, but yesterday saw the unsuccessful end to FTP.

I was so busy trying to pass the Combine that I failed to give the proper attention towards what I would do if I actually passed it.

While I don't want to focus on the negative, when entering FTP, it became clear what TST's marketing strategy is and that it's, at best, a bit cunning ...if not immoral.

The Combine entices you into pitting yourself against the market, with a daily stop and an overall, maximum draw-down. You have to trade at least 10 days which means it's very difficult to pass with luck. If you can pass a Combine, it's very likely that you have the attributes necessary to trade profitably long-term.

Then there's FTP.

You have 10 days with your draw-down before the rug is pulled from underneath your feet and you have to be positive- and stay positive -until you reach the lowered profit target. It's almost as if they don't want to fund you...maybe because the funded traders make up, by far, the smallest part of their profits...especially when the first $5000 withdrawn is given to the trader with no profit split!

The combination of having reduced contracts to trade (I went from being able to trade 3 instruments at once to 2), fewer instruments (you can only trade the ones you were profitable in) and no draw-down after 10 days, proved too much for me and forced me to make a critical choice:

1) Trade normally and accept that a normal, run-of-the-mill draw-down could occur during those crucial 10 days. This would mean failing FTP with a long-term, winning approach or

2) Try to modify my approach to guard against draw-down- take smaller wins, more trades etc.

I chose 2. If I were to do it again, I'd just accept that I may fail due to natural variance and leave it at that. But I'm not sure that I will because, IMO, one shouldn't be subject to luck after clearly proving their skill. Of course, if they were to set the same rules for the Combine, they'd find that their clientele would drop off as the offer would be far less inviting.

Time to come up with a plan B. Any comments and suggestions (or investors!) are welcome. Watch this space!

How Much Does It Cost To Pass A Combine?

Below is a breakdown of the total (fiscal) cost incurred to develop myself to the point of passing a Combine.

Things to note as you read through the data:

* Figures in bold that aren't underlined represent the monthly fee for the Combine- commas separate the months. E.g Two bold, non-underlined figures means the Combine lasted at least two months.

* Figures in bold that ARE underlined represent "account resets"- where rules were broken/limits were surpassed and the account was reset.

* The (mostly negative) figures after the backslash is the amount of profit/loss shown on each Combine account when it was closed/reset.

* Some Combines were paid for with "Ticks"- TST's currency that was paid out to people who participated in the "Community Journal" and in the "Squawk" chat room. (They've stopped offering Combines for ticks now).

* The monthly fee varies as I changed account size.

* Finally, the total cost is shown at the end in bold along with the total P&L of all the accounts...shown after the backslash.

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CREDIT CARD TRANSACTION FEES NOT INCLUDED!

1) 20-DAY Combine. Completed 09/07/14= ??? (~$300) (NO RECORDS) /-$5370

2) Combine. Completed 31/03/15= $279, $279, $100/ -$3280

3) 10-DAY Combine. Completed 18/05/15= $FREE (Ticks)/ +$552

4) Combine. Completed 13/05/15= $325/ -$2801

5) Combine. Completed 15/06/15= $150, $100/ -$1548

6) 10-DAY Combine. Completed 15/06/15= $FREE (Ticks)/ -$1594

7) 10-DAY Combine. Completed 23/07/15= $FREE (Ticks)/ -$288

8) Combine. Completed 24/08/15= $150, $150/ -$272

9) 10-DAY Combine. Completed 11/09/15= $FREE (Ticks)/ -$137

10) Combine. Completed 01/10/15= $150, $100/ -$1513

11) 10-DAY Combine. Completed 30/10/15= $FREE (Ticks)/ +$294

12) Combine. Completed 31/10/15= $150, $100/ -$1184

13) Combine. Completed 20/11/15= $150, $100/ -$1510

14) Combine. Completed 11/03/16= $150, $150, $150/ -$1133

15) (Combine. Completed 30/05/16= $100, $100, $100- Patient Pigeon Account.)/ -$240

16) Combine. PASSED 20/08/16= $150, $150, $150/ +1508


TOTAL COST: $3783/ -18,516


PS

For those who want to follow my Equity Curve journey, that post is in the "featured post" section at the top right of the blog. This will save having to scroll back to find it :)

Combine PASSED!

After 2 years and many attempts, I've finally managed to pass TopstepTrader's $30K Combine!

The entire Combine lasted 57 trading days and 260 trades were taken. The vast majority of these trades were made across 4 instruments: 6A (Aus/Usd futures), 6B (Gbp/Usd), 6C (Cad/Usd) and YM (Dow Jones). 5 trades were taken in the ES (S&Ps) and 1 lone trade in CL (Crude futures).

A tightened up the strategy by making things more statistical and objective using the lessons learned  that I covered in this post. This change occurred 9 days into the Combine and is what I consider the beginning of orderly, rules-based trading within the entire data set.

The results after statistics were applied to the method.

The hardest part of achieving this result was giving up control. I used various techniques to help manage myself along the way, which I'll talk about in a future post.The range of emotions experienced were sometimes very hard to deal with, especially given the numerous stressors that have been present in my life over the last 12-18 months or so (births, deaths, financial difficulties, health and relationship...the list goes on and on).

I also met internal resistance when I reached the $1K mark and, then, when the finish line was in sight.

Next up: A post detailing the cost incurred to get to this point in my TST trading journey. Stay tuned :).

Running P&L In R

Keeping what I said regarding showing vs being firmly in mind, I've decided to share my running P&L with the trading blogosphere!




I've converted the chart from $$$ to risk units - this allows me to share the journey without the potential pressure of sharing the actual dollar gains/losses. Having said that, the usual caveat applies - if it messes with my ability to trade properly, it'll be gone quicker than cake at a Weight Watchers meeting!!

Reasons for doing this:

1)  During the years of following trading blogs, I only know of two that have consistently posted their P&L without conveniently skipping out periods of time (where anything could have happened!). This one  does so in points, while this one does so with $$$ and accompanying charts. I want to add an element of credibility to my posts so that people can verify how well the principles, spoken about in this blog, translate into real-world results.

2)  It's taken me a long time to begin to understand the nature of probability, variance etc. and how we need to fully understand our expectancy, the journey it can take us on, and adjust our expectations to be able to accept the journey without destroying the long-term edge. This curve will serve as a reminder for me when things look grim and as a reference for any future posts.

NOTE!: Friday 23rd September's result is not accurate as much bigger risks were taken to achieve the ~ -3R result in order to try to get above $0 in order to satisfy an FTP rule. I've normalized the result in order to not skew the curve but the result in actual risk taken would have been closer to zero.

10-Year Trading Anniversary: What Has A Decade In The Markets Taught Me?

Today marks 10 years to the day that I set off on my journey into trading the markets by attending Day 1 of a 3-Day seminar.

It's also my birthday! I don't remember whether or not I had intentionally chosen that date to attend the course, but it's a cool bit of trivia that my trading anniversary coincides with my birthday....but I digress...

The course I attended introduced me to the basics (for a hefty price!) and touched on the psychological aspects of trading. The real learning began years later as I found myself trading a $50K account, of money I had borrowed from a bank, whilst trying to regain my composure after my first (8 trade) losing streak...

So, what has a decade of playing this crazy game taught me? 


I've Found The Holy Grail!! 

There is no technical holy grail... every system, approach and method will draw down. Oftentimes more than you'd expect. If ever there was a "holy grail", it'd be the ability to weather the storm until the method eventually picks up again- even after a 17-trade losing streak ;).

Embrace Losers

Let's pretend walking represented a positive trading edge. If the left leg represents losers and the right one represents winners, how far would you expect to get trying to walk on just the one (right) leg?? This is where being truthful with yourself comes in...the goal is to execute a process, with it's inherent losers, not reach for a certain positive outcome/run away from a negative outcome.

A good exercise for checking your resistance toward following a process rather than seeking an outcome is to take note of the thoughts running through your mind when you review some of your trades. If you start blaming yourself for the inevitable times where you are stopped to the tick, or you start looking for a way you could have exited sooner before giving back that 2R paper profit even though the method said that's what you should do...there is still mental progress to be made.

Let Go Of Control

We control nothing but our thoughts and our actions. I've lost count of the amount of times I've sat watching a trade, sometimes for hours, before falling into bed or going out for some much needed air and/or exercise. As if watching it made the difference. The "illusion of control" is one of the more costly cognitive biases as it expends our energy, completely in vain.

Mind The Gap!

I've written about this several times on the blog. Essentially, if we are able to take action at any moment during a trade, then we have no live edge. Every living thing/system relies on gaps to exist. This means we have to let go of control and have faith and trust in our plan over the long-term, almost ignoring what happens in the short-term.


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In a nutshell, I've learnt that we have to be comfortably uncomfortable in order to make progress. Growth hurts, no pain no gain etc.

 I've focused on the trading aspects in this post but, truth be told, learning how to trade has influenced my life- the way I think and live- far more than it has my actual trading. Almost as if trading were a metaphor for life...

Trading Update + Lessons Learned

A lot has changed in the last five months.

In my last post, I mentioned the importance to me of letting go of ownership and the urge to show rather than be. The ramifications of thinking we own anything are huge, both in trading and in life, and I've touched on this subject a few times in this blog, such as here and here.

Remember the Momo? The pattern I've devoted some 8 years of my life to since the inception of this blog??

8 years of charts and notes devoted to the Momo- I have literally gigabytes of video reviews on HD too!

Well, I've let all of that go and completely changed my methodology.

Just because we are victims of the sunk cost effect, doesn't mean we have to continue to be victims! Letting go of the need to be the one in the driving seat (when I helped my partner with her Combine) allowed me to see things from a much more neutral perspective. I've now carried that perspective over to my actions, even when doing things "for me" or with things that "I own".

I'm no longer trying to scalp on a 15 sec chart (for the first time in years). I now use a 5 min. No more fear of trading in harmony with a larger chart. I now trust in the direction of the larger chart, even though I know that the trust will be frequently broken.

No trailing. No break-even trades. No tiny R:R trades.Gone are the days where I only trade 1 market....I now watch 4 markets and trade up to 3 of them at any given time....Not only have I let go of the method I invested so much time, effort and money in, I've pretty much changed every facet of my general approach to trading.



LESSONS LEARNED:

1) Large(r) stops and targets are best- I did a video on why here.

2) Trade with "If/Then" statements- Rather than "we'll see". Base these statements off of something you can quantify (objectively) not qualify (subjectively).

3) Be specific- "I'll buy near that support when I see a reversal candlestick" isn't enough. How do you define "near"? What exactly is a "reversal candlestick"?

End Of Crude Combine- Break-even, Complexity & Showing Vs Being.

I've taken away a HUGE amount of information from my experience in this 3-month-long Combine. I will attempt to reduce the information in this post down to its core principles/points... that way it will be easier for me to cull information from it as needed when the inevitable need for new direction arises.

Here is a screenshot of the TST report:

I have more faith than ever in the method as holding break-even for 3 months/1 financial quarter is not to be sniffed at. Novice traders will look at how much you didn't make, experienced traders will look at how much you didn't lose...

Result up until 19th Feb....3-months to the day.

Random- truly random- entries with a fixed stop/target would result in a loss of costs per trade turned (spread + commissions...slippage negates itself as there is +ve as well as -ve slippage throughout). Therefore: 129 trades with a spread of $10 and a commission of $3.68= -$1764.72. Put another way, you have to have an edge of 1.368 cents per trade to cover costs. Anything above that goes in your pocket.

Simplicity= The initial $800 run-up- key stats:

- 20 trades over 12 traded days out of a possible 19 trading days.

- 50% WR (10 trades. All +10 cents or greater), 30% LR (6 trades. -6 cents), 20% BE (4 trades). 

-No trailing.

-1 pattern, 1 time frame, lots of patience.

Complexity= The second, $770 rally after fall due to "Showing" (more on that later):

-11 trades over 5 traded days out of a possible 5 trading days.

-45% WR (5 trades. 4 >/= +15 cents...1= +11 cents) 19% LR (2 trades. -6 cents), 36% BE (4 trades).

-Some trailing.

-1 pattern, 2 time frames, less patience (but more giving back).

Objectively speaking, the complex approach yields more. $144 per trading day over $42 per trading day using the simple approach. But there are so many moving parts that it becomes even more dangerous to implement should emotion creep in to the process.

The lure was the higher profitability. But you really don't need to do better than $750/800 per contract per calendar month to make big things happen. Leaving $1K as a draw-down per contract, you'd be able to double your contract load every 1.25 months. Meaning a hypothetical 8 contracts after 5 months of compounding and a nice $6-6.4K/month.

Showing-

Green arrows show aforementioned run-ups in equity.

Ownership leads to showing. I had already figured this out back in mid 2012 when I managed this after a prolonged period of not talking specifically about trading results only to end up here. 

In the year that I took off from blogging between mid '13 and mid '14, I managed to put in Combine-passing performances (for the current rules) twice... back then, they were a lot more strict in terms of rules and didn't have the Continuous Combine, hence the reason why I didn't make it back then. 

The above evidence is clear. Sharing my results is bad for my trading health.

Moving Forwards:

1) No more Combines on my own for the foreseeable future. Instead, I'll work on doing one with my partner as we have shown consistently good results together.

2) No more 5 min chart. One target based off of the pattern and it's location within the backdrop as viewed on the one time frame (15 sec). Simplicity with patience.

I'll also be cultivating that distance from telling the story and, so, will make the following changes:

3) Stop writing a trading journal and capturing charts- It hasn't offered me any new information in a long-time and isn't where the issue lies.

4) Use what's working to help the trading plan evolve without having anything written in stone.

5) No more blogging- it just isn't serving me right now.

Crude Combine Update + LIVE trading video!

Decided to flip on Camtasia for the last two sessions last week.

This video shows my post trade commentary as the trades run at 4X normal playback speed. I also go through some stats in addition to areas of improvement.