Soul Trader Quits Day Trading

I've been following Soul Trader's blog for some time now.  He is a forex trader from England and announced on his blog today that he is quitting the day trading game.  One of the big reasons for him quitting is that he just cannot take the frustration and pain of discretionary trading.  He states that he will continue to trade his mechanical system but will give up on being an "active" day trader.  His post today is actually a good read as he gives the following advice for all of us:

The only way to make it in Forex is to trade with a completely mechanical system

That's it.  It seems like 5 years of day trading has taken its toll on Soul Trader and I cannot speak from experience or even disagree that a totally mechanical system is the only way to go.  I've only been doing this for a little less than a year now and I still don't know what the best way to trade is.  I know that is is totally possible to do this for a living but the chances are pretty damn slim.  It been a educational ride so far and as the months carry on, an expensive one.  

Read Soul Trader's Post

Popularity: 2% [?]

Not Following the Rules Can Hurt!

I am attaching a PDF file that includes all of my trades this week with date/time, P/L, max drawdown, max run-up, and important commentary about the trade including whether I followed the rules.

While I was putting this together, I realized that I failed to follow the rules 50% of the time.  Do you know how many pips I lost because I didn't FOLLOW THE RULES?

113 

How many pips did it cost me for following the rules?

43

This doesn't count the fact that I failed to follow the rules today in my GBP/USD trade that cost me 30 pips or more!  

If I would have followed the rules 100% of the time, I would be about even. 

I take full responsibility for my trades and blame only myself.  I should also note that though this trading system has rules, it is discretionary.

Here is the file:

 Forex Trade Report 28/04/2006,00:08 11.74 Kb
  

Popularity: 8% [?]

Magdalena Speaks About Her Forex Experience

I like to post some of your comments sometimes because I find them so beneficial to my learning process and know that they can do the same for you.  This is an email I received from Magdalena yesterday.  I can totally relate to her comments because we are at similar stages.  Maybe you are to.

I started learning about Forex last October and was totally amazed for two reasons: The whole concept of trading FX seemed so perfect and natural that I felt like I discovered the best way to make a living there is. My master thesis was on hedging foreign currency transactions in international trade yet it has not occurred to me until then you can actually make money yourself trading forex. I blame it on the fact that I got my master's in Poland and my home town university's curriculum missed a lot of practical and useful information, since I refuse to admit that it's probably me being a dummy and it never dawned on me before.   After an initial immersion into the market I opened my first demo and doubled it within a month without much effort and occasionally missing trading days. I didn't have any strategy whatsoever, I went with my gut feeling and basically after a while, my way to trade would be to open (I only traded EUR/USD) 2 positions on the same currency just in different directions waiting for each position to make a 10 pip profit. I didn't use any stops based on an assumption that what goes up must come down and vice versa – pretty naive thinking for someone who has degree in finance. It worked beautifully for a while though. Then came December and a couple of big loses that I had to take which pretty much ate all my profits from previous month. This is when I decided to actually learn something and went on a crazy search for a Holy Grail. I guess we all do that at some point Hundreds of websites, offers and promises. The only reason why I didn't buy any system or program is because  simply couldn't afford it. But I kept on looking and got every book from the local library that something to do with trading. And after a while I got to a point where I didn't know anymore what works what doesn't and worst of all I stopped trusting my own judgment. I was dazed and confused.   Then I bought Raghee's book and all of the sudden realized that there is no perfect system. That you can chose basically any strategy and if you have the discipline (the hardest part of it all !!!) to stick with it, you will become successful. So this is where I am at now… Trying to train my eye to see set ups as described in the book and get my personal feel for the market. So far I have found that I get some pretty good trading ideas, however my execution sometimes is not up to par.   I could ramble on about my trading experiences for hours since no on around me shares the interest…Right now I trade a small mini account just to get the feeling of the real account and hope that within next few month I will have enough to open standard account and will be consistently making profit.       Talk to you soon,     Magdalena

Popularity: 3% [?]

I Signed Up For Forex 1 on 1 Training

I have felt totally lost over the last couple of months.  I have books, charting software, a blog where I receive numerous helpful comments from all of you and yet I don't really have a trading strategy.  I've dedicated a lot of my time to this and though I'm in the early stages, I feel like I need to head off any of the "giving up" feeling that may be entering my mind.  I know that going forward if I don't do something to stimulate my learning process, my blog will be yet another sitting around with stale content because I'm off working for the man again with no thoughts of being free.

So what did I do?  I signed up for 1 on 1 training with Rob Booker.  The training will officially last 5 weeks.  I trust Rob Booker and have been exposed to his recommendations and articles in the past. Here is a quick course overview.  I will keep everyone updated on the training.

Anyone interested in reading more about it can visit: https://www.robbooker.com/training.html 

Course Overview: 

1 on 1 training is exactly what
it sounds like: it's where you and I work every day, by
instant message, phone, videoconference, and email, and
we turn you into the kind of trader that your mother (or
spouse) would be proud of. We work together officially
for 5 weeks — following the course outline below — but
I will work with you for as long as it takes for you to
be a consistently profitable trader. I
guarantee it.

This is not some ridiculous
course that you buy and read and then find impossible
to profit from. It makes me sick to my stomach when
I hear that someone has spent $2,000 or $3,000 for a book-based
system. You don't need a book. You need a mentor.

During the training, I become your
mentor and your coach with one mission: to dramatically
improve your trading results.

Training officially lasts 5 weeks.
But we will not stop working until you are successful,
or we're both dead. Note: no one has ever died. Every
one I've trained has been successful.

You will have my phone number.
This is about getting personal advice from someone who
has been in the market. I can help you correct your mistakes
and speed up your path to trading success.

You will receive course materials,
30-40 assignments, and at least 80 hours of total instruction.

I worked with 41 traders in 2003.
All of them are still going strong.

You will always be able to contact
me, even after the training is complete. You will be part
of a growing network of people I've trained, all across
the world.

I have training references. You
can request them from me if you are thinking of signing
up.

Popularity: 3% [?]

3 For the Day

{mosimage}
Big Losses are hard to take.  Rob Booker Helps You Recover

US Trade Gap Narrows More than Expected due to decrease in Chinese Imports

Check out Amateur Trade System Results at Collective 2

 

 

Popularity: 1% [?]

Mechanical versus Discretionary Systems

After finally importing 2 more years of intraday data, my Dooku trading system has failed to backtest well using 4 years of intraday data.  Where does this leave me?  In a word, LOST.

I need to investigate furthur the recommended methods to backtest a trading system.  Of course I realize that past results don’t guarantee future results but I need to understand it more.  1 question I need to ask myself is:  Will my system will be totally mechanical or a discretionary system?

Here are some good pros and cons of both:

Mechanical systems

Advantages 1. This kind of system can be automated and backtested efficiently. 2. It has very rigid rules. Either, there is a trade or there isn’t. 3. Mechanical traders are less susceptible to emotions than discretionary traders. Disadvantages 1. Most traders backtest Forex trading systems incorrectly. In order to produce accurate results you need tick data. 2. The Forex market is always changing. The Forex market (and all markets) has a random component. The market conditions may look similar, but they are never the same. 3. A system that worked successfully the past year doesn’t necessary mean it will work this year.

Discretionary systems

Advantages 1. Discretionary systems are easily adaptable to new market conditions. 2. Trading decisions are based on experience. Traders learn to see which trading signals have higher probability of success. Disadvantages 1. They cannot be backtested or automated, since there is always a thought decision to be made. 2. It takes time to develop the experience required to trade successfully and track trades in a discretionary way. At early stages this can be dangerous.

Popularity: 2% [?]

Dooku Reversal

Sticking with my trading system to start the week off has paid off.  Dooku generated some realized profits this morning when I closed out 2 positions +$1000.  I have since reversed 1 position that Dooku generated after the exit. 

Trading with a plan is so much easier than trading without a plan.  Where the emotion was so evident before, now it just isn’t as much of a factor.  I still don’t know if this trading system is the answer to making a consistent profit but I like the feeling that having a plan gives me. 

Popularity: 2% [?]

Trading System signals

I still have two short GBP/USD and EUR/USD positions from last week that were opened due to signals that my Dooku trading system generated.  The market hasn’t been doing much since then yet I’m sitting on an unrealized profit of $500. 

Yesterday I stated that my trading system had a profit target of 225 pips and a stop loss of 75 pips.  Though these are the stops and limits I place on each trade, my trading system can generate reversal signals that prevent my profit target from ever being hit.   The most I can lose on any given trade is 75 pips.  Generally if the trade moves at least 50 pips in my direction, I’m usually guaranteed that I will profit from at least these 50 pips.  It’s when it moves above this when I have a chance of realizing the 225 pip profit target as long as my trading system doesn’t generate a reversal signal.  In backtesting, my maximum profit target was not hit as often as my maximum stop loss but forward testing should give me more insight on how this trading system will perform in the long run.

I’ve been busy trying to import 5 years worth of intraday data into Amibroker for backtesting.  I know I was talking up Amibroker like it was the greatest thing since sliced bread but 1 drawdown is the fact that they use flat files for historical data as opposed to an optimized database.  What this means is that as more and more data is added, the slower and slower it is to import.  I figured the import of 5 years of 1 minute data for 10 currency pairs will take about 2 days for a single cpu pc at 100% utilization.  Unfortunately I don’t have a dual-cpu or dual core system right now though I’m very tempted to buy one. 

Popularity: 2% [?]

Dooku Forex Trading System

I started to work on multiple trading systems over the last week or so and realized that I was falling into the same trap of trying to do too many things at once.  I decided this weekend to work on my first trading system more.  The first thing I did was give it a cheesy name so that I can distinguish it from all the others.  I have named it Dooku.  You can figure out on your own where I got this one from. 

This system was previously being tested on hourly charts with a risk reward of 1:1.  It tested well with a 50 pip stop loss and a 50 pip profit target.  The first thing I wanted to do was to get the risk reward to 3:1.  I successfully accomplished this and Dooku tests very well on the hourly charts with a stop loss of 75 pips and a profit target of 225 pips.  

I will forward test this system this week and going forward to see how it performs.  From my backtesting, it has never had a losing month.  I will forward test this with real money and 1 lot each trade.  I will use a 75 pip stop and a 225 pip profit target.  I will trade only the GBP and EUR.  From my calculations, this system will generate an average of 20 signals a month for each currency pair.

Popularity: 3% [?]

Week 15 performance

This week was my 4th straight losing week.  I lost $1220 this week which drops my overall profit over 15 weeks to $1243.  Even though my P/L isn’t looking good as of late, I really am not discouraged.  I have the confidence and determination to continue onward and I have the belief that I will be successful.  I am just going through the stages of learning and if it costs me money to learn, so be it. 

This week I used my first self designed trading system and followed through on every signal it gave me.  Unfortunately it is a range trading system and the EURO had some pretty nice gains against the dollar this week.  Therefore, my trading system did not perform well.  I will continue to use it.  I will stick by my hours upon hours of work. 

Popularity: 2% [?]

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