Results

While I don’t think it’s a good idea to post the individual trade to any forum, as one single trade is not important, daily or monthly results are very important. They don’t lie and you better don’t ignore your own statistic, as it’s the only measurement you can apply to your trading.

These number tell you whether you improved in your trading or not.

This is not only measured in your account being up or down on the month, but it’s in the statistics. Did you manage to reduce the average $-Loss / trade, did you increase the $-Profits / trade. What are your %-Winners and %-Losers numbers, what’s the actual Risk : Reward and how many ticks did you make on average / day.

So I have decided to continue posting my results. It will not help anyone seeing them, as you can’t copy them for your own trading, but maybe it gives you at least an idea, a number of what is possible to achieve.

October turned out to be a good month for me. 

Here are the daily results

And here the statistic

As you can see, the month was a good one, the account is up 37% from last month. But it’s even better, that I managed to have just 2 red days and was able to bring down my average $-Loss significantly from 282$ to 178$ / trade.

My trading method worked fine and I achieved approximately the same results as in September.

My average $-Win was down a bit, but that might be, because I was quicker to pull the plug on a trade reversing on me, avoiding big loss trades. Sure I missed some big home-runs as well, but for now, bringing the average loss down was more important.

The market is an ocean full of opportunities

It’s only up to you to swim in this ocean and explore what it has to offer. You can take as much as you like, there will be always enough.

I wrote this mini “Trading is no war” article series and today a reader provided me with a link to Ruth Barrons Roosevelt’s website.

I don’t know her, I just found her website worth exploring.
She wrote an article about trading metaphors and the good and bad they can do to you, which I really urge you to read.

Maybe you will change the way you think about trading. I can only tell you, that I found this way on my own and that it was a very stony road I took, as you all can see, if you read some of the older articles. This article now gave me the answer, why this approach to trading really works.

Rules

There are rules and there are Rules.

You know what I mean. Adding to trades at a loss, moving your stop against you because you still believe in the trade, we all have done it. (If not I truely admire your discipline)

But as a daytrader there is one rule you should never ever violate:

If you leave your screen you are flat with no open orders

Yes you miss opportunities and it will mean a trade you close at a loss would have shown you a profit. But it also means that there is nothing to worry about. You will have a sound and refreshing sleep and a clean slate the next morning.

I now apply it also intraday. If I have to go for 1 or more hours I’m flat. You just don’t know, what will happen and if you have no chance to interact with the market, you better stay flat. There are so many opportunities when you are at the screen, why take the risk to have a trade go against you, when you can’t intervene. Sure you have bracket orders, but these can fail, the exchange can go down, your computer can crash…

Just don’t do it, your first and foremost interest is in protecting your account. You take enough risks, when you are at the screen. No need to add to that by letting your computer trade automatically when you have no ATS

For me trading is no longer war

Again I urge you to read christophe’s comment. And yes Christophe, I know, that trading is not comparable to real war. Still you chose to make that analogy. I just took it to the extreme, as your previous comment was one I thought about a very long time. Actually I finished the article only the next morning, as it took me some time to understand, why I couldn’t support your statements about what is needed in the markets to make it 100%.

Your observations are correct:

You need market knowledge, which most of us gain through very long and very tedious screen hours. The charts tell you all and if you have no one telling you when the big players enter, over time you will notice them in the charts, in the tape, as size leaves footprints and if you know where to look, you see them.

You need financial backing, so you can continue trading after a loss. And you need resources to finance your learning to trade the markets.

I disagree, that you need size to learn trading. Yes sure you need to trade size, if you want a good return. But once you know how to trade you can make 30 to 50 ticks a day with one contract, which gives you 300 USD to 500 USD per day or 75.000 USD to 125.000 USD per year. This will allow you to live and continue trading. Actually it will allow you to increase your trading account, even when you need to take out monthly amounts to live. It’s nothing big, but it’s not so bad either. Size and over-leveraging are the most common factors, which lead to the downfall of a trader. So size matters, but for a private trader, Risk– and Money-management are a lot more crucial. And they will tell the private trader, that it’s better to add another month trading “just” one contract to build up a bit of extra safety margin.

And you need mental preparation. I fully agree, that chat-rooms can be a lot more distractive than helpful. But once you have a trade on, haven’t you made the observation, that leaving the trade alone instead of micro-managing the trade by being totally focused on it cost you more than it was worth? It all depends on your trading style. When I’m trading the HSI or Gold, I would never ever take a look at a chat-room, but when trading say the German Bund, the ESTX50 or the FTSE and everything is going as it should, the market is working to reach my target, bounces show lower lows and lower highs or higher highs and higher lows, why shouldn’t I take a look at a chat-room or stand up and let my program manage the trade. Micro managing has cost me a lot in missed profits as suddenly the fear to lose profits comes into play.

But for a new trader, for learning, most chat-rooms are a distraction, which will cost you a lot of money eventually.

So it seems I agree with all the points you made, actually I also believe that trading naked might eventually be the way my charts look. For now, my mind is still drawing clues from additional information I have on my charts, even if I trade price only. But I will take a look at a bare Line on Close chart and see, if it makes it even clearer to see than now.

Still I felt uncomfortable, something was not right for me. And that was the analogy that trading is a war. Yes it is competitive and more so in a trading room full of different traders and personalities, less when sitting alone at your computer at home. Yes for years I saw trading as a war I was waging against the market against other traders to take their money. A war i was about to lose.

But somewhere along the road I changed. I realized that I was trading only against myself. It was my mind which interfered with my trading success. It was my mind playing games, using emotions to play havoc with my trading plan.

I was at war, but not against the market, not against other traders, I was at war with myself. And you can’t win this fight. It’s impossible.

So I changed, I decided to stop trading against myself. I was no longer at war against myself. I tried to analyse what it was, what bothered my subconscious mind. I wrote about it and long time readers will know about all the struggles I went through, ideas and trading approaches come and gone, once correct now discarded.

And then my subconscious mind started working together with me towards a common goal. It started giving me new ideas, which I tested, which I traded and integrated in my trading plan, if they looked solid. All the while I kept my promise to listen, to recognise the feelings, when my subconscious mind tried to warn me, tried to tell me, that it felt uncomfortable with a trade, a decision made by me. Or when it saw other pressing matters at hand to be done, before I would be able to continue trading free of any worries.

This all might sound strange and maybe a real world example will show you what I mean. I’ve a mountain rescue dog named Sully.

When I trained him, I couldn’t let him go and do what he had to do: Finding people in need for help. Tests were average at best, but suddenly that changed. I had come to the conclusion, that I couldn’t do the job I had trained my dog to do. I couldn’t run for hours, search 100 to 300 meters left and right of me in the forest, when we searched for a missing person and I had to cover a distance of 3 to 10 kilometres. I had to trust my dog that behind me would be no one, that we hadn’t been in the vicinity, might had even found that person still alive, but my dog hadn’t found him. I think it was, when I was looking for hours for a missing girl in a forest, that I decided finally to trust my dog, that he would do his job 110%. That if he did not tell me that there was someone, then there really was no one. The missing girl was found weeks or months later in a totally different part of that forest, a part no dog had been assigned to search in. But since that time we are a team, I trust my dog and he trusts me.

I still know the feeling, when I decided to let go, to give up that control I thought was necessary. And I did the same with my subconscious mind. We had been at war for so long, because I was neglecting it’s, my other needs. because I had a lot of unfinished but important business to do, before I was free to trade.

My subconscious mind and my conscious mind now trust each other, they work together to do the best for me. 5 years after I started trading futures, 10 years after I started trading, I finally trust myself to do what’s best for me.

Of course you don’t need to go through all that struggle to trade, but it might be worth to start listening to your subconscious mind. It has a lot to tell you and it will provide you with analysis and insight you would never be able to come up with in time for a trade, when you consciously thought about it.

Trading is war - isn't it

I hope you don’t miss Christophe’s comment. I’ve known him for some time, saw him struggle and now he seems to have found his way. I don’t know, whether he still trades his own account or – as it seems to be- whether he is now employed by a trading firm learning to be a trader.

His comments speaks of knowledge, of being sure of himself, of finally knowing which way to go. And I could leave it as such, because he has written a true statement how he now sees the markets, what he believes is necessary to be successful.

“Trading is a war, we try to beat each other up and take each other money. If you don't agree let me ask you what you feel when you are taking up a beating and having a red day ??? are you totally zen or do you feel the pain? well guess what, someone else whilst you are feeling the pain is having a good time enjoying the good feeling of making money. The people who don't feel the pain are the people who can afford to loose.

Whenever the price goes up or down, someone is smiling and counting the money whilst another is praying and suffering. This is trading in few words.

Most traders start trading as if it was a nice social activity without realising that they throw them self in an arena full of sharks and lions. “

Ask an US soldier coming back from a tour in Iraq, if trading is war?

If you take a loss, do you lose a limb, do you lose an eye, do you face abduction, torture or death every single moment you are in a trade.

No Christophe, trading is not war and don’t think so one second.

Yes some elements are the same, but one element is not: In trading, if you lose, you can stand up and trade yourself back to where you were and do better next time. You have another life as long as you push yourself up and start again.

In war, if you're dead you sure stay dead for eternity.

As far as I know more than 1 Trillion US-Dollars are traded every 24h seven days a week. And I’m carrying contracts worth between 50.000 USD and 1.000.000 USD. Does this amount really matter, does it change anything at all, does the grande scheme of things care whether my trade is executed or not. Is there any chance at all, that I will learn who is the counter-party of the trade, which blew up in my face? I’m not Amaranth, the hedge-fund who blew up 5 Billion USD in the Natural Gas markets. They know their counter-parties, they know who profited from their losses. These losses can be personalised. But still it’s not war.

Taking profits and losses in a Zen like state of mind, being detached from it isn’t the way for me. In trading I feel emotions, I allow myself emotions as it helps me to prepare for the next trade, to find back my calmness necessary to objectively analyse the markets.

I’m happy about a great profit, about a plan succeeding.

I’m angry about a loss and I vent it, because it helps me to take the loss.

But in both cases I analyse the trade, I think about it, so I might redo the profitable setup and I might avoid the losing setup the next time I encounter similar circumstances in the markets.

When taking a profit, does my counter-party have to take a loss? Most futures trader would answer: Yes!

But let’s look at it, because it’s not as simple.

My best trade on Friday was a short in GOIL Z6 (that’s the December Gas Oil contract traded on IPE in 0.25 increments with a tick value of 25USD)

GOIL was trading around 548.00 at 09:58:00 and I placed a Short at 556.75. At 09:59:30 this order was filled in a spike, going up to 561.00. I exited the trade at 10:00:25 at 550.25 for a 25 tick profit or 620USD including commission.

Had my trading program placed an automatic stop I would have been stopped out of the trade, because I never ever would have let GOIL trade above 560.

But I had learned this lesson a few years back, when such an event actually happened and instead of a 500USD profit when the Russell broke 8 points I was sitting at a 200 USD loss due to a stop triggered in this spike, as the Russell continued another 3 points before reversing all the spike range upward again. 

As it were at one point, right after my entry this GOIL trade showed a loss of 500 USD, so the trader going long against my short had the chance to exit his trade at a 500 USD profit. And he was not alone because there were a few trades happening above my entry. Profits and losses made by automatic programs. 

But nothing happened for me, I just held my short during that 1 minute spike, actually oblivious about what was happening, because I was getting myself a cup of coffee at that time. Back at the screen GOIL was trading right above 550 after dipping below 550 and I decided to exit the trade happy about the profit I made. I thought about the trader going long at 561, but I actually will never know, if he rode it down all the 11 points or if he took a stop at 560.25 or if he actually was happy about his loss, because it was a loss executed according to his plan.

Trading and losses are inseparable. You can’t trade without losses. It’s how you handle your losses, how you take a defeat, which decides whether you will succeed or perish in the markets.

But it’s not a war. 1 Trillion USD is like an ocean of money with waves of opportunity and the only thing I’m doing is turning small drip-lets into my account and trying to make sure it’s getting filled faster than money is running out of the natural hole every account-bucket has.

 

Recommended Reading

Life is wonderful

A sunny, warm autum afternoon. I was playing frisbee with my daughter in the garden and suddenly she smiled over all of her face and told me: Papa!

Life is so wonderful

She did not think about a bruised arm. She did not worry about tomorrow. She just enjoyed herself in the present.

When I came back today after I brought her in the kindergarten, this statement still vibrated in my mind.

Think about your trading. Do you worry about your last trade gone against you, do you fear taking the next trade, because suddenly your setup isn’t so sure any longer, do you hesiate and because you hesitate you lose the next trade as well?

Life is truely wonderful. Trading gives you the opportunity to make all your dreams come true. But you need to stay in the present, you have to focus on what is happening NOW. Don’t dwell on the past, you can’t change it. Don’t think about the future, you can’t influence the market with your trade. But you can influence the present.

Marc Douglas calls it being In the Zone. What it really is, is being in the present and doing what has to be done without hesitation. You have a plan, you know what you will do regardless of the situation you find yourself in, you trust yourself to do whatever is best for you.

Worth trading

This morning I was thinking “Are the contracts I’m trading really worth trading”. So I thought about a way to rank the contracts I look at.

I looked at 9 Minute, 60 Minute and Daily charts, as these are the charts I look at and here are the results

First I’ve looked at the Average Range in Ticks made in 9 Minutes, 60 Minutes and during the Day and then I’ve calculated the US-Dollar Value for this period. The contracts have been sorted to show you, which contract gives you the highest Return on average on a daily basis. The higher the return for the 60 minute period compared to the daily return is, the more the contract is ranging, the lower the return for the 60min period, the more the contract is trending.

Why so many futures trader fail

Most of the futures traders I know have started trading stocks and somewhere along the road decided to try their hand at futures. And most trade something between 2 to 5 contracts using the margin given to them by their broker to the fullest. For example, for trading 5 Russel contracts intraday an account of 10.000 USD would be sufficient. You know I don’t recommend that, actually I consider that reckless trading and a sure way to disaster and bancruptcy, but it is possible and it is done.

Have you ever stopped to consider how many shares these 5 Russel contracts equal to?

I don’t look at the contract value. I use a very simple approach to determine this. I just say a tick is a tick. It doesn’t matter if this tick represents 0.1 (eg. the Russel) or 1 (eg. the Dow futures) or 0.0001 (eg. most currency futures) or 0.000001 (eg: the USD/YEN currency futures) points.

A single tick usually pays 10 USD to 12.50 USD. (I know the Dow pays less and the Bonds pay more, but let’s concentrate on the most common tick value)

To earn 10 USD per tick with a stock, you need to trade 1.000 shares, as stocks are now priced in pennies and the tick value is 0.01. Of course there are a lot of stocks, which move in bigger increments, which never ever have a trade at every 0.01 increment. But there are also futures which move a lot faster and jump easily 10 tick levels. If you ever tried trading the ZG Gold futures you know what I mean.

On the other hand there are a lot of stocks (examples coming to mind are MSFT, CSCO and a lot of other high volume stocks) which trade at every 0.01 tick level quite heavily and for our comparison to work we will look at these.

So if you trade 5 contracts ER2 with your 10.000 USD account, could you trade 5.000 shares MSFT as well?

To trade 5.000 shares MSFT fully margined (4 : 1) you need an account of at least 36.000 USD and that’s the absolute minimum. Considering the volatility of most of these high volume stocks a 2 : 1 margin rate would be more appropriate for most traders, meaning with a 36.000 USD account you would reasonably trade something between 2.000 to 3.000 shares MSFT.

Still, I’m sure, most futures traders would think nothing of trading even swing trading 3 Russel contracts with a 10.000 USD account, not to say 5 to 10 contracts with a 36.000 USD account.

This has nothing to do with inappropriate risks. This has to do with perception.

Most consider trading 1 contract not worth the effort. But trading 1.000 shares, well that’s something different. Most start trading 1 lot or 100 shares and work their way up to 1.000 shares or 10 lot sizes. But with futures, if you compare them with stocks, most start with a 20 lot.

Do you now really wonder why a lot of traders fail trading futures?

Woodie's CCI

BBC wrote this comment:

I read on your blog that you used Woodie's CCI and learned trading futures, I listened to their chat room and it was helpful using their software....would this be a good route for me? I am new to trading although I have managed our portfolio to good advantage. However I distrust any system software reliance due to chaning market conditions. Thank you.

BBC I’m taking your comment and answer it in its own article as it touches so many aspects of an aspiring traders mentality.

There is the obvious, the clear question whether to trust or distrust Woodies CCI due to changing market environements.

But there is also the statement, that you are already managing a portfolio to good advantage, even if you are new to trading.

And you distrust any software based system because it might not work tomorrow, even if it did so the last year, the last week, yesterday.

The first and maybe the most important point popping up in my mind is, WHY?

Why do you want to change something which is already working according to your own statement. You are already managing a portfolio to good advantage. In trading to be better than yesterday, to have bigger profits today than the day before, you increase size. You don’t change your trading system, you don’t change the kind of instruments you have traded successfully yesterday, you just trade bigger size. And you do exactly the same you did yesterday. This makes sure that statistically over the long run, you will have bigger profits, IF you were profitable in the past.

If you want to change something, if, as it seems to be the case, you have decided to play a more active role in the market and start day or swing trading futures, something you haven’t done before, be prepared to go back to school, be prepared to learn and be prepared to do what is necessary to learn (day)-trading futures.

Learning to daytrade successfully encompasses a lot of things. Some you will learn in Woodies CCI Club. I was there for 3 years and what I learned there still helps me today in my trading. But I was not profitable in Woodies CCI Club. I learned to recognise patterns, something which now helps me extremly in my trading. The money I payed for learning was well invested, as I’m now in a position to earn this money back and more. You might tell me, that Woodies room is free and that is correct (if you don’t count the Trade-a-Longs), but as you can’t learn trading by Demo-trading year in and out, you will see, that being in Woodies CCI Club will cost you money.

CCI Patterns work, when they work. They are never 100% and I would be surprised if they are 65%-70%, if you look at them in realtime. There is a way to increase this ratio of winning to losing patterns, but this can’t be accomplished by introducing more and more filters you need to be aware of, before you take a trade.

Nothing in trading works for eternity. There is no Holy Grail, no 100% system. You will have losing trades. It’s up to you how much you pay the market for your losing trades as it’s only you who decides where you put your Stop.

But I tell you something obvious: Something will not change in the markets: Markets will always oscillate between Trending and Consolidating Conditions. The problem is, you don’t know in advance what type of market we will have today. Technical analysis can help you here, but it also only works when it works. It will fail and maybe as often as it is right.

You need Money Management and Trade Management tools to cope with that. And you need to trust your system 100% that it will in the long run provide you with profits.

I have the CCI on my charts. And I have had this CCI on my charts for 5 or more years, with a brief interregnum when I left Woodies CCI Club and tried some other oscillators on my charts (Stochastic, RSI, Ergodic A/D and some oscillators I developed for my own). It made no difference at all. They all show the same, so I came back to the CCI, which I can read with more accuracy than any other oscillator, just because I was in Woodies CCI Club for so long.

I will not discourage you going to Woodies room, but I will not tell you to go there either. I can’t. You need to find the way, which is right for you. Try it, if it feels right, maybe it is (for now). Because what is right now, what helps you today, may hinder you tomorrow. Adapt to yourself as you change and evolve as a trader.

I’m now usually logged in on IRC #Tradingspace on Othernet, because I can chat with fellow traders there. There is noone teaching, but we are sure willing to answer questions if time permits.

Being profitable

Are you profitable?

Let me quote you a lesson

A martial arts student went to his teacher and said earnestly, "I am devoted to studying your system. How long will it take me to master it." The teacher's reply was casual,,,,,,,,,, "Ten years."

 

Impatiently, the student answered, "But I want to master it faster than that. I will work very hard. I will practice everyday, ten or more hours a day if I have to. How long will it take then?"

 

The teacher thought for a moment, "20 years."

 

Make the following commitment

 

I will learn for as long as it takes

I will stand up everytime I find myself at the bottom

And somewhere along the road I will decide to win

 

It is possible to trade successfully, but you need

• an edge
• a commitment
• discipline
• a will to win
• the ability to look at your failures and learn from them

Does it help to see results? I know, I was looking for proof for quite a long time. So it might be the same for you reading this blog. I became profitable in June this year after 5 years of struggling and trying to keep myself somehow afloat so I could continue on my way. Looking back now, I know, I had a string of luck in June and July and was able to resist the temptation to increase the leverage used.

10k$ per contract traded. I will goto 2 contracts with an account balance of >20k$.

May I lose it again? Maybe. Everything is possible in trading and I can’t rule out a string of 15 losing days in a row or one freak trade, which wipes the account. It’s the risk we all take, the risk we have to accept in this profession. Limiting leverage is one, is the only way to deal with it. And to tell the truth I feel a lot more comfortable now, than in June, when I had to trade with the 5k$ / contract margin.

I’m sure there are traders out there saying “what is this jerk showing us here, I’m making 2k$ / day” or “I have 50k$ in my account and that’s the bare minimum I would consider for a trading account”

Never forget:

If you can’t trade 1 contract profitable, do you really think you can trade 5 contracts profitable?