'Bit of a landmark for me this week as my first customer subscribed to my GBPJPY Based trend-trading system, Yen Burst.
In fairness to myself, Yen Burst has generated a shade under 50% capital growth since going live in the beginning of March and is climbing nicely up Collective 2's performance tables, so it was clearly going to start attracting attention, but it is still thrilling to think that someone is willing to start paying for my trading advice.
Otherwise, last week's other development has been finalization of a capital recovery strategy for my single position, Swiss Franc based Counter-Trend trading strategy; I'm particularly pleased with the results which allow a trader to risk 5% of their account in an initial position, with a very high degree of confidence that they will emerge from the trade with profit, however price moves subsequently.
My intention is to market this strategy through Collective 2, also, and will let you know how it performs in live trading.
Finally, my Euro based, proprietary, day -trading strategy is taking shape nicely. The idea here is to create something 'trainable' that allows a trader to harvest a consistent, low-risk return, from about 3 hours focused market participation daily.
Basically, it's all-go for Joe !
Saturday, April 10, 2010
Sunday, April 4, 2010
March Review
Well, March is over and I'm satisfied, generally, with how the Project is proceeding.
On the up-side, the account has grown by 50% (of it's starting balance) this month, which is great ( ... you will see I have posted this month's trading statement for completeness).
However, the system I trade had far greater potential, still, that I might have harvested. On reflection, the reason for this failure is timidity - argued on my personal, and clearly sub-optimal - reading of the market. Basically, there are occasions when, despite my rigorous testing, I have stayed out of the market when my system indicated a trade trigger, only to watch it mature profitably - just as my testing had indicated it would.
This, as you will appreciate, is self-defeating behavior which will kill me long term, if I let it.
So, how do I rectify it ? Well, there is only one way so far as I can see, and that is increased trading discipline.
... But how do I go about acquiring it ?
Well, at the moment, and based on backtesting, I risk 10% of the total account on each trade, in the hope of harvesting 5% profit for each winner.
This, admittedly audacious, risk profile is based on a very well tested probability ratio of 4 wins in every 5 trades. With compounding - which I have yet to implement - it is extremely profitable. Indeed, if you want to see just how profitable this proprietary system can be, just follow the link to view my first month's recorded stats.
However, as the cash sums grow, it is likely that my own psychological alter-ego is stepping in to spoil the party.
Hmm... Solutions ?
Well, the most obvious way ahead would be to reduce my trade size - perhaps half it - In order to wrestle my destructive sub-conscious back into its box.
- and I may well do this, but it would be a pity as the whole psychology of the thing is a lot of what Project One Million is about, so I'm going to give myself another month to straighten this discipline issue out, before I step in to clip my own wings.
Wish me luck...
On the up-side, the account has grown by 50% (of it's starting balance) this month, which is great ( ... you will see I have posted this month's trading statement for completeness).
However, the system I trade had far greater potential, still, that I might have harvested. On reflection, the reason for this failure is timidity - argued on my personal, and clearly sub-optimal - reading of the market. Basically, there are occasions when, despite my rigorous testing, I have stayed out of the market when my system indicated a trade trigger, only to watch it mature profitably - just as my testing had indicated it would.
This, as you will appreciate, is self-defeating behavior which will kill me long term, if I let it.
So, how do I rectify it ? Well, there is only one way so far as I can see, and that is increased trading discipline.
... But how do I go about acquiring it ?
Well, at the moment, and based on backtesting, I risk 10% of the total account on each trade, in the hope of harvesting 5% profit for each winner.
This, admittedly audacious, risk profile is based on a very well tested probability ratio of 4 wins in every 5 trades. With compounding - which I have yet to implement - it is extremely profitable. Indeed, if you want to see just how profitable this proprietary system can be, just follow the link to view my first month's recorded stats.
However, as the cash sums grow, it is likely that my own psychological alter-ego is stepping in to spoil the party.
Hmm... Solutions ?
Well, the most obvious way ahead would be to reduce my trade size - perhaps half it - In order to wrestle my destructive sub-conscious back into its box.
- and I may well do this, but it would be a pity as the whole psychology of the thing is a lot of what Project One Million is about, so I'm going to give myself another month to straighten this discipline issue out, before I step in to clip my own wings.
Wish me luck...
Thursday, March 11, 2010
Carl Von Clausewitz ... On Trading.
Those of you who have met me, know that as a serving military officer I am a student of warfare.
I recently set about the study of Clauswitz's seminal work ... On War, expecting to find little of relevance to my other passion, that is the object of this blog. But I couldn't have been more wrong.
Indeed, such was the relevance that I am compelled to articulate some specific insights that will be of use to you in your trading.
By way of setting the scene I need first to argue the case for this relevance...
... I mean, what is trading if not war ? Whilst an Analyst studies the Market from distance, passing his observations on for action or otherwise, it is the Trader who - as a General - converts those observations to execution. And in doing so he or she takes on that most fearsome of foes, the Market, in an engagement that that will end in either victory or defeat.
The General, as the Trader, will only prevail if he possesses the coup d'oeil to see the chance, the boldness to take it and the conviction to see it through.
As Traders, it is our backtesting that gives us the insight to see this chance and our boldness to execute the trade, but how many of us close an ultimately successful trade before our goal is attained - or worse - we close at a loss ?
Clausewitz explains this frailty eloquently in his observations on the 'Fog of War'. As a General's meticulously laid plans are exposed and challenged at the onset of the engagement, so are ours at the instance a trade is executed.
From this moment the General's presumptions are challenged by the ebb and flow of the engagement or - in our case - Price, toward or away from our profit target. And this is where conviction plays so heavily.
As the best Generals possess the conviction necessary to weather 'the noise' of the engagement, confident that their plans will - in the final analysis - secure the victory sought, so we must embody the same quality to endure the noise of the Market.
Generals with this rare combination of coup d'oeil, boldness and conviction are bestowed the accolade of genius; genius being a highly developed mental aptitude for a particular occupation.
Is this not the degree of mastery that we seek - that we must seek - as Traders ?
... How else are we to prevail with consistency against the Market ?
So now to the juice as for me this is all about that last, vital, quality of conviction.
The only way that we - as Traders - can achieve the degree of conviction required, is to complete our backtesting and bolt down our money management. Any weakness here will play on our conviction and unseat us in the fog of our engagements with the Market.
I say all of this with a recent trading experience at the forefront of my mind. I entered a trade to a high probability price point accurately identified, only to close it at break even when it didn't achieve profit in the time-scale I had anticipated.
Now you may say that, at least, I survived in-tact to fight another day; but this is to ignore the lesson of Clauswitz. My system probability, profitability, money management and all, is based on taking every opportunity that the Market presents.
When price eventually - this morning actually - reached the profit target I had originally identified it represented defeat, not survival, because tactical stalemate has taken me one step closer to, an inevitable, tactical defeat without recording the success that I was due.
So to conclude; we as Traders need to attain the status of genius to succeed, consistently, against the Market. If we attend to our backtesting and money management, we arm ourselves with coup d'oeil to see the chance, the boldness to take it and the conviction to withstand the 'fog' of the trade.
If we fail to do this, then we will ultimately fail. It is that simple.
I clearly need to do better, but I know that I am not alone.
I recently set about the study of Clauswitz's seminal work ... On War, expecting to find little of relevance to my other passion, that is the object of this blog. But I couldn't have been more wrong.
Indeed, such was the relevance that I am compelled to articulate some specific insights that will be of use to you in your trading.
By way of setting the scene I need first to argue the case for this relevance...
... I mean, what is trading if not war ? Whilst an Analyst studies the Market from distance, passing his observations on for action or otherwise, it is the Trader who - as a General - converts those observations to execution. And in doing so he or she takes on that most fearsome of foes, the Market, in an engagement that that will end in either victory or defeat.
The General, as the Trader, will only prevail if he possesses the coup d'oeil to see the chance, the boldness to take it and the conviction to see it through.
As Traders, it is our backtesting that gives us the insight to see this chance and our boldness to execute the trade, but how many of us close an ultimately successful trade before our goal is attained - or worse - we close at a loss ?
Clausewitz explains this frailty eloquently in his observations on the 'Fog of War'. As a General's meticulously laid plans are exposed and challenged at the onset of the engagement, so are ours at the instance a trade is executed.
From this moment the General's presumptions are challenged by the ebb and flow of the engagement or - in our case - Price, toward or away from our profit target. And this is where conviction plays so heavily.
As the best Generals possess the conviction necessary to weather 'the noise' of the engagement, confident that their plans will - in the final analysis - secure the victory sought, so we must embody the same quality to endure the noise of the Market.
Generals with this rare combination of coup d'oeil, boldness and conviction are bestowed the accolade of genius; genius being a highly developed mental aptitude for a particular occupation.
Is this not the degree of mastery that we seek - that we must seek - as Traders ?
... How else are we to prevail with consistency against the Market ?
So now to the juice as for me this is all about that last, vital, quality of conviction.
The only way that we - as Traders - can achieve the degree of conviction required, is to complete our backtesting and bolt down our money management. Any weakness here will play on our conviction and unseat us in the fog of our engagements with the Market.
I say all of this with a recent trading experience at the forefront of my mind. I entered a trade to a high probability price point accurately identified, only to close it at break even when it didn't achieve profit in the time-scale I had anticipated.
Now you may say that, at least, I survived in-tact to fight another day; but this is to ignore the lesson of Clauswitz. My system probability, profitability, money management and all, is based on taking every opportunity that the Market presents.
When price eventually - this morning actually - reached the profit target I had originally identified it represented defeat, not survival, because tactical stalemate has taken me one step closer to, an inevitable, tactical defeat without recording the success that I was due.
So to conclude; we as Traders need to attain the status of genius to succeed, consistently, against the Market. If we attend to our backtesting and money management, we arm ourselves with coup d'oeil to see the chance, the boldness to take it and the conviction to withstand the 'fog' of the trade.
If we fail to do this, then we will ultimately fail. It is that simple.
I clearly need to do better, but I know that I am not alone.
Tuesday, March 9, 2010
Analyzing Results...
A friend asked, last week, how I go about analyzing backtest results.
After mulling the question over for a bit I think my brief answer would be that' it depends', but allow me to try and be a little more insightful...
If the system I am testing is 'fire and forget' in nature I am less interested in time of trade entry but very keen to know how many come in, what the draw-down on successful trades is, how long each will expose my capital for and what the underlying technicals (aside my trigger) were, on trade entry.
This all goes into a bespoke spreadsheet which I design to make post test analysis as easy as possible.
In that analysis I have 3 specific aims. I want to...
1. Spot and eliminate any outliers that stand apart from the norm in whatever respect.
2. Optimize stop placement.
3. Identify how I might best leverage the trading system to maximize profitability.
Basically, I want to cut out as many bad trade setups as possible and then optimize the risk / return equation for those that are left.
It may be, for example, that cutting out the high draw-down trades allows me to trade the fewer profitable ones at a higher lot size.
In all this, I keep in mind my own trading psychology, appetite for risk and need for affirmation.
I know from experience that any system returning below 70% probability, will have me doubting the integrity of what I have designed as the bad trades start to roll in.
Further, whilst I know this is sacrilege for some, this is why I have moved away from stacked trading; I am not good at managing such a high powered trading mechanism, objectively, in the vinegar strokes, and I simply cannot cope with the reality that one losing trade munches the profits of 4 winners...
... But I do salute those of you who can.
Testing and analysis of real-time, conventional, day-trading systems differs in that here I am acutely interested to know when each of these trades fire because I need to understand how many of them I'd have been able to take - and how this affects percentage profitability.
I'm also, for the psychological reasons stated above, prepared to tolerate far lower 'in-trade' drawdowns as I don't want to be tempting myself to take potential winners off the table just because I fire up my trade station at the wrong moment and get spooked by what I see.
To understand how such a system will feel like to trade the only option is to advance the testing software bar by bar and hone one's ability to spot set ups, enter at the correct trigger and manage the trade objectively once it is in-play.
In all of this I am guided by the philosophy of only attempting to pick up the very easiest pips and minimizing exposure of my capital to the market for the absolute minimum time necessary to achieve that aim.
In such a volatile market-place this is, perhaps, my most important guiding principle.
After mulling the question over for a bit I think my brief answer would be that' it depends', but allow me to try and be a little more insightful...
If the system I am testing is 'fire and forget' in nature I am less interested in time of trade entry but very keen to know how many come in, what the draw-down on successful trades is, how long each will expose my capital for and what the underlying technicals (aside my trigger) were, on trade entry.
This all goes into a bespoke spreadsheet which I design to make post test analysis as easy as possible.
In that analysis I have 3 specific aims. I want to...
1. Spot and eliminate any outliers that stand apart from the norm in whatever respect.
2. Optimize stop placement.
3. Identify how I might best leverage the trading system to maximize profitability.
Basically, I want to cut out as many bad trade setups as possible and then optimize the risk / return equation for those that are left.
It may be, for example, that cutting out the high draw-down trades allows me to trade the fewer profitable ones at a higher lot size.
In all this, I keep in mind my own trading psychology, appetite for risk and need for affirmation.
I know from experience that any system returning below 70% probability, will have me doubting the integrity of what I have designed as the bad trades start to roll in.
Further, whilst I know this is sacrilege for some, this is why I have moved away from stacked trading; I am not good at managing such a high powered trading mechanism, objectively, in the vinegar strokes, and I simply cannot cope with the reality that one losing trade munches the profits of 4 winners...
... But I do salute those of you who can.
Testing and analysis of real-time, conventional, day-trading systems differs in that here I am acutely interested to know when each of these trades fire because I need to understand how many of them I'd have been able to take - and how this affects percentage profitability.
I'm also, for the psychological reasons stated above, prepared to tolerate far lower 'in-trade' drawdowns as I don't want to be tempting myself to take potential winners off the table just because I fire up my trade station at the wrong moment and get spooked by what I see.
To understand how such a system will feel like to trade the only option is to advance the testing software bar by bar and hone one's ability to spot set ups, enter at the correct trigger and manage the trade objectively once it is in-play.
In all of this I am guided by the philosophy of only attempting to pick up the very easiest pips and minimizing exposure of my capital to the market for the absolute minimum time necessary to achieve that aim.
In such a volatile market-place this is, perhaps, my most important guiding principle.
Where Next ?
Yen Burst took out another break of support this morning for a further 5% gain on account. Hurrah...
However, its lack of follow-through, so far today leads me to wonder if support at 134 as withstood the assalt for the time being. Here is the chart...
If this is the case, and it can manage to break through near term descending resistance, there is a fairly big magnet at 136.30 going into tomorrow, concurrent with longer term descending resistance.
On the other hand, if support at 134 gets taken out, 132.50 is looking like an entirely reasonable short target.
Just thinking out loud...
However, its lack of follow-through, so far today leads me to wonder if support at 134 as withstood the assalt for the time being. Here is the chart...
If this is the case, and it can manage to break through near term descending resistance, there is a fairly big magnet at 136.30 going into tomorrow, concurrent with longer term descending resistance.
On the other hand, if support at 134 gets taken out, 132.50 is looking like an entirely reasonable short target.
Just thinking out loud...
Monday, March 8, 2010
Saturday, March 6, 2010
Trading the Plan
I had grave reservations about whether to switch my trading system off or not in advance of the NFP figure hitting the market yesterday.
As I have said, I trade technically and don't, therefore, enjoy the out-sized impact that this key piece of fundamental news can have on prevailing market sentiment - especially when I'm trading it !
Specifically, price was getting close to a trade trigger point on my favorite (but volatile) pair and my fear that was that if it did open, my normal trade size wouldn't leave sufficient room for the violent price swings that this announcement often generates.
In the event - and thanks largely to the pointed advice of a trading friend - I stayed with it and I'm glad the I did, as my trade opened and raced to its target within 3 minutes for a shade under 8% gain on account.
Initially - and perhaps surprisingly - I had mixed feelings with respect to this result. On the one hand I had stuck to my original plan, but on the other, I was assisted by a very favorable NFP figure. Bad news would likely have cost me at least as as much as I made - and in a similarly short time-frame.
The reduction of a hard earned 12 % weekly gain to small change in the space of a few minutes would have been... err disappointing.
In the end, though, it was Rob Booker who laid to rest my post-trade concerns with this simple observation;
"You didn't give a f**k about NFP in your backtesting so why should it affect your trading decisions now ?"
... and you can't really argue with that !
So, the first week in March has been another 20 percent'er and the Project One Million equity curve is starting to look handsome...
In the meantime I've re-learned 2 priceless lessons:
1. Plan the trade & trade the plan.
2. Rob Booker is still 'the man'.
As I have said, I trade technically and don't, therefore, enjoy the out-sized impact that this key piece of fundamental news can have on prevailing market sentiment - especially when I'm trading it !
Specifically, price was getting close to a trade trigger point on my favorite (but volatile) pair and my fear that was that if it did open, my normal trade size wouldn't leave sufficient room for the violent price swings that this announcement often generates.
In the event - and thanks largely to the pointed advice of a trading friend - I stayed with it and I'm glad the I did, as my trade opened and raced to its target within 3 minutes for a shade under 8% gain on account.
Initially - and perhaps surprisingly - I had mixed feelings with respect to this result. On the one hand I had stuck to my original plan, but on the other, I was assisted by a very favorable NFP figure. Bad news would likely have cost me at least as as much as I made - and in a similarly short time-frame.
The reduction of a hard earned 12 % weekly gain to small change in the space of a few minutes would have been... err disappointing.
In the end, though, it was Rob Booker who laid to rest my post-trade concerns with this simple observation;
"You didn't give a f**k about NFP in your backtesting so why should it affect your trading decisions now ?"
... and you can't really argue with that !
So, the first week in March has been another 20 percent'er and the Project One Million equity curve is starting to look handsome...
In the meantime I've re-learned 2 priceless lessons:
1. Plan the trade & trade the plan.
2. Rob Booker is still 'the man'.
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Equity Curve 2010
