3rd Combine PASSED!

This one is significantly different as it was completed with my partner. To get the lowdown on why I've decided to go the route of working in a trading partnership, check out this video.

To get all the details of this successful Combine, watch this video.

So we are now in a position where we have two FTPs open simultaneously, both of them positive, with one nearing the finish line. The short-term plan is to take one of the funded accounts to a place where we are trading 3-5 contracts at a time and keep the other one at just the 1 contract for income.

Exciting times ahead!

Is Profitable Scalping Possible..?

They say that it's impossible for a human to compete with the HFT algos...

Forex Futures trades for the last 30 days.

...looks like "they" may be wrong. 

I'll be back when I've hit the next milestone...

Combine PASSED! (again...)

Just in case you don't follow me on YouTube ....

I'm particularly happy with the risk control on a daily basis (Only one negative day greater than ~-$100 out of the 17 that were taken!).

I go in to much more detail in the video so I invite you to SUBSCRIBE if you want to follow along and see how I make it back to, and stay in, the funded account at TST.

Here's the latest FTP update.

See you on the other side!

Back On The Horse - Journey Back To Funded.

Still here and diligently working my way back to TopstepTrader's funded department.

They have FINALLY done away with the 10-Day rule that was such a challenge for me, due to the historical expectancy of my approach to the markets and the fact that being positive with the method (in a way sufficient to weather any bad luck in the form of a DD...) after 10 days in an account isn't a given.

As mentioned in my last post, I'm very active on You Tube now because "blogging is so 90's" (lol @ L&W) and I'm enjoying giving back to the medium that has given me so much inspiration and so many ideas.

If you haven't done so already, smash that "SUBSCRIBE" button and watch me hit those goals over the next few months!

Process - Oriented (January Game Plan).

After ruminating over the info in my last post, the main things that have changed are:-

a) Desire to "win" in the short-term. I've gradually slipped into the habit of taking trades off before 3R for no reason other than fear of giving back.

b) Lower trade frequency. This is most probably an attempt to "manage" risk when it's really just an avoidance of risk.

c) Not putting on two (or more) trades simultaneously. See "b)".

So here are the renewed rules of conduct. I'm writing them in this post to keep me accountable!

1) Never take a trade off for less than 3R unless:

* There is news, in which case take it off 5 mins beforehand and get back in according to the plan.
* Daily target has been met in open profits.
* It's 21:00 or later (see "3)").

2) Make a conscious effort to have at least two positions on as often as possible to diversify risk/smooth out the equity curve.

3) No trades entered after 20:00. Flatten all trades between 21:00 and 22:10 (all times in Central European Time).

That's it! If I do that for every trade in January, I'll be a happy trader, regardless of the result. Back to the process we go...

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%).

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.

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...

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.

Combine Update- Same Method, Same R:R, Different Instrument.

 

 

Some time ago, I noticed that a lot of TST traders that went on to be funded had two things in common. 1) The used a $30K and 2) They did it with CL.

 

Their daily WR was consistently higher than traders using other instruments, with many of them achieving 100% winning days. Those who achieved, say, 80-90% did so with larger winning days as compared to their losing ones.

 

I had a positive shift in my PnL when moving over to the $30K, I thought it only prudent to check out CL, even if I kept telling myself that I should be able to trade any liquid market in the same way.

 

Preliminary testing suggests I may be wrong.

 

In SIM I managed a 60% WR with 1.5/1 RR. You can see from the above that my result with the Combine so far is slightly inferior at 50% WR with 1.38/1 RR.

 

CL moves differently. It allows me to go with a "set and forget" attitude- no trailing, no management. It hits the target or it hits the stop. When you are on the right side of the market in CL, it rewards you quickly so their is little to no temptation to step in and intervene before stop/target is filled. This leaves me with all my energies devoted to finding the right entries. One of my stronger points...

 

I under-traded these first 5 days. Fear of committing to/trusting the method enough to keep pulling the trigger is an issue. I needed to be taking 5 trades a day to make it likely that I would hit the profit goal. I'm going to do that this week and see where it takes me.

 

P.S E is also saved in terms of costs. CL's tick value is twice that of NQ per contract with the same cost per roundtrip. Using a 2:1 GROSS RR and a 50% WR to demonstrate:

 

NQ- 10 tick wins. 5 tick losses. (10*$5)/-(5*$5)=$50/-$25=$2/-$1. 2:1 RR (gross)

        But commissions=$3.68 so... ((10*$5)-$3.68)/-((5*$5)+$3.68)=$46.32/-$28.68=$1.62/-$1. 1.62:1 RR (Net).

 

E=(0.5*1.62)-(0.5*1)=0.31.

 

CL- 10 tick wins. 5 tick losses. (10*$10)/-(5*$10)=$100/-$50=$2/-$1. 2:1 RR (gross)

        But commissions=$3.68 so... ((10*$10)-$3.68)/-((5*$10)+$3.68)=$96.32/-$53.68=$1.79/-$1.

1.79:1 RR (Net).

 

E=(0.5*1.79)-(0.5*1)= 0.395.

 

You gain 8.5% extra per trade.



Combine Completed!

.....No, I haven't passed yet. But I do have more information/feedback that will guide me towards doing so.

Here are the facts (in no particular order):-

1) The percentage of the target obtained in each of the eight Combines I've taken since last June has increased over time. They are noticeably larger after moving to the $30K Combine.

Here they are in chronological order. The ones in bold are $30K Combines-

3%, 9%, 3%, 37%, 0%, 0%, 49%, 80% (< The one I've just finished...stats in the above screen captures).

2) My plan when moving in to this last Combine was to take advantage of the information gleaned from previous Combines- especially the 5th and the 6th- here is a snapshot of my TST journal which summarises this information...

I basically found that I was able to very consistently net +$200 within 1-3 hours of liquid market action. I needed to allow for a $400 intraday draw for that to happen. The one day out of seven when I wasn't able to achieve this typically resulted in less than a $400 loss.

3) After having a "discussion" with the missus, we decided that I'd no longer talk about the story- the reason why this nearly happened/didn't happen and if I had just done this that or the other...just bare bones results in business-like fashion. Even then, it was to be limited to a weekly conversation if not a fortnightly one.

The period of adhering to this way of operating coincided with the initial run up towards the target.

4) The high coincides with the blog post documenting my results (along with the story of how I got there) along with more frequent conversations with Mrs MM.

What does this all mean to me?

*"1)" Suggests I'm making progress.

*Trading the $30K is the where I need to be.

*Daily structure and an unwillingness to indulge in stories or even results in the short-term is essential.

*I need to use the daily stop and not get drawn in to the idea of taking just one trade per day.

Will establish what I'm going to do in terms of a daily structure then get back on the horse.

Combine Update - Pushing, Pulling & The Present.

The last post documented the second Continuous Combine as well as most of the 10-Day one (the 10-Day marks the switch from the $100K to the $30K). I've since done another 10-Day and Continuous...I'm currently doing another Continuous- my 6th Combine for the year (7th in total)...

 

 

I'm currently two-thirds of the way to the target having traded 5 days. There are a few notable changes I've made to push me in this new direction:-

 

1) One Time frame (less is more)- I've removed the anchor chart. My theory is, take away as much as you can without ruining the integrity of something and you have the most efficient system. Everything I need to know to make profitable decisions can be found in the one chart/TF (15 sec).

 

2) Process Over Outcome- This might seem like an obvious one as we are playing a game of probabilities but it's crucial to ignore what happens (in the short-term- after X number of short-term=long-term then we can look at results) and focus on what needs to be done in the moment according to a given method. We cannot control the outcome, so there is no point in getting upset (or happy) about it. We can, and must, control our actions...i.e. adhere to the process.

 

Therefore, it's very beneficial to get upset (or happy) about not implementing (or implementing) the process.

 

3) Let The Market And Time Do The Heavy Lifting(less is more!)- There have been 14 trading days since the beginning of this Combine. I've sat through 10 and only taken trades in 5 of them. Rushing in to a trade that isn't exactly what you're looking for suggests some kind of fear....fear of a future that lacks opportunity, fear of missing out etc.

 

I once wrote a post about pushing and pulling...this type of back-and-forth, emotional variance leaves us bouncing from trying to reconcile regret (pulling/clinging) to fear of the future (pushing/resistance). All while we ignore what's right there in front of us. The present. The gift of what you need to do, right now, without fear.

 

Here's an excerpt from my TST private journal which shows where my focus now lies...

 

 

Ok! Enough observing of results...time to move on to the next present moment! The next time we look at a result, the Combine will be over (in one way or another) and I'll upload the spreadsheet with all the stats as I did with the last two posts.

UPDATE - End Of Continuous Combine 2 + 10-day $30K.



Improved on the larger-sized winning day metric...still lower highs and lower lows....

Looking back over my journal, I saw many instances of hesitation after booking profitable trades and even more after losing ones...especially if they were the first trade of the day. I also noticed that I had taken only 40 trades in 23 (trading) days compared to my first attempt, where I took 53 trades in 19 days....

All of this lead me to the conclusion that this particular Combine's parameters were a poor fit for my method's expectancy as well as my risk tolerance.

Taken from April 23rd's journal entry:

"The last three days (21st, 22nd and 23rd) have seen me stop out on the first trade only to be offered at least one opportunity to make it to target from there. Today was an especially profitable day for the method and I just sat by and watched after the initial loss. I was in the zone on paper and would have made an absolute killing if I had taken all trades... but I need to remember that it's not like this, not even close to, everyday...
IMPROVE: Take a smaller combine and express myself...."

I mistakenly avoided risk in an attempt to manage it. With a $3000 maximum draw down and $336.8 risk per trade (6 ticks of risk with 10 contracts plus commissions..) I could only afford to lose 8 in-a-row from the outset before being too close to the draw down limit to trade again. 9 and I would have been out of the game. This pushed me to have an overly tight daily stop equivalent to two losses which meant that, when I started out with a loser as I often did, too much emphasis was placed on the fact that I literally couldn't afford to lose if I wanted to be able to continue trading for the day. This made it almost impossible to trade the edge effectively...

One day's data is missing...total is ~+$100 more than the above...



Higher highs and higher lows!



 

So, against my own Ego, I determined that the smaller, $30K Combine would be much easier to trade. The reasons are as follows:

1) Lower profit target (on a per contract basis) - The target is $1500. As the max. no. of contracts is 3, this means $500/contract. The larger, $100K Combine required a $6000 profit target with a max. no. of contracts of 10....$600/contract.

2) Much larger draw down allowed (on a per contract basis) - Max. DD is now $1500 ($500/contract) compared to the $100K's $3000 (only $300/contract). This is the main reason for the switch.

The pay-off is a slightly smaller imposed daily stop ($500) of $167/contract as opposed to the $100K's $200/contract ($2000)...but this doesn't concern me in the slightest as I shouldn't be trading anyway if I find myself at those levels of loss in any one day.

The extra DD allows me to use the full daily stop AND still be in the game after a theoretical 3 daily stop-outs in-a-row...

$33.68/cont./trade=$101.04/trade using max. position size. Therefore daily stop= 4 losses (4*$101.04=$404.16 - less than $500). 3*$404.16=$1212.48...

The equivalent daily stop on the larger Combine would have meant hitting the max.DD after only two daily stop-outs in-a-row.

All of this meant freedom to "express" myself/method without immediate fear of hitting the above parameters.

As there is only one day left of this 10-Day Combine, hitting the profit target is not something I'm going to push to achieve. I'm prepared to do another, possibly continuous, $30K straight after this one...especially as I made some small but significant changes 3 days after the MFE was screaming at me to do so.

For the record, here is what the new, MFE-based, approach looks like on paper. Note that the first day's results were traded on SIM to build some confidence in the newly-acquired info....the rest (7) are as traded in the Combine...

End Of Continuous Combine 1- What I've Learned.

Erroneous last day figure...never breached the daily loss limit but haven't contested it as the end result is the same.

Notice the bounce off of the max. draw down limit...~ -$2500.

 



The solution is clear. Run the winning situation and circumnavigate the fear of short-term loss.

I generally do a good job of cutting the losing days short but need to improve on allowing the winning ones to get big enough to compensate. This is likely caused by a fear of giving back a short-term victory...the cost of which is long-term success...

No matter how good the strategy, everyone who has larger winning trades/days than their losing ones will, to some degree or another, experience that feeling of giving back profits which they could have booked if they weren't looking (and holding out) for larger gains. Trusting an edge which regularly fails you in the short-term is hard for most people to get their heads around.

So, I've reset the combine and this is now my 3rd attempt since June 2014. My goal is to divorce myself from the idea of an individual trade's result (since this is what causes the emotional variance) and train myself to look at aggregate results. The wider the view the better...I'll start with aiming to get through the hour I trade without focusing on each trade and thinking of the session itself as one, big "trade".

Action based on the present, results based on a collection of present moments.

Combine- Day 17.

On the back of a losing streak but finally starting to see a glimmer of what's necessary to move towards the combine target rather than bounce around break even, which is what I've been doing.

The second trade went nicely in favour but I only got partially filled and let my disappointment get the better of me, keeping the order for the remaining 8 contracts on the books when I should have been out for a minuscule profit. I ended up paying out as a result, throwing the day off by some $400. Need to be better prepared to do the right thing even when tested.

If you are going to step off a moving bus, you had better do so with conviction! The next few days in the Combine will demonstrate whether I have that or not as I look to replicate today's kind of engagement with the market consistently. I see two probable outcomes:

1) Quickly moving towards the profit objective- I've been trading alongside the Combine in SIM and, as has been the case for 2 years now, I'm satisfied that my method has edge. The issue will only ever be the ability to execute consistently with a cool head. If I don't do this then the other outcome will be....

2) Quickly failing the Combine- Not embracing this possibility is the surest way to make it happen as we tend to hide from information that threatens us or cling to an outcome we are searching for, quickly removing our ability to be objective.

So my goal isn't to pass the Combine...it's to trade the way I almost did today and let the chips fall where they may. I will gauge success or the lack thereof by the process I engage in NOT by the outcome of that process.

Let's see what happens.