Comment by Indy on March 15, 2013 at 11:11pm

just realised the last of the  posts i pasted over here didn't include the chart so here it is again, just for the full sequence

Comment by Indy 10 hours agoDelete Comment

the first trade already hit t/p, pending triggered on break at b/e, time to sit back and have a coffee

Comment by Indy on March 15, 2013 at 11:54pm

OK before i discuss the trade i am doing my first digression. At the end of peters blog there was some talk about factually correct representaion of trading so I am going to talk about that first. The whole reason I entered Peters blog today was because i thought I might want to do a blog and I wanted a log of my realtime trading . I did this because i believe in using very real examples of trading when discussing trading. it is easy to cherrypick a perfect example of a trade to illustrate a point in hindsight, however trading is rarely perfect so imperfect examples can be even more useful, by calling these trades live i wanted to do 2 things,establish a chain of action, this is important to the discussion and if anyone was following that blog live they may have been able to see what I was doing. I also wanted to show that I could actually use this strategy in realtime and not just hindsight and still make money. 

When Jasmine posted her first GBP/USD short blog, lots of people chipped in with opinions, some constructive, some negative, she rightly pointed out that many people showed 'after the fact' perfect charts or just random 'short EU' comments, but very few had the balls to to call live trades with s/l and t/p when they were still open. When you  just show perfect after the fact trades they can be useful to make points, but who knows how many losses you had first. If you just say 'short EU' its pointless without a t/p and s/l mentioned it is too easy to just come back later and if the trades positive you can say 'yeah that was a good trade' and if it has gone negative say 'came out at b/e'. I am not accusing anyone of anything, there are lots of good people here, however there are some who are less good and it is just hard to know who is telling the truth and who isn't, and therefore who to listen to and who to ignore,. If you tell the s/l everyone knows if its good or not. you should also say when it is closed and what the result was.

With that in mind, I would like to state for the people who weren't following live that my tradecalls today were 100% live. I didn't explain much at the time because I just wanted a log but when I placed a trade I posted a chart showing s/l and t/p, I did this as soon after the trade was opened as possible and while the trade was still open, in the first 2 they turned against me and I closed without them hitting either s/l or t/p, in that case I posted as soon as possible when I had closed the trade, with the result. If the trade had suddenly turned and gone in my direction I could not have claimed I had held it for a win without showing a new entry. The fourth pending trade may seem to have been an after the fact call but if you check the first trade chart its clearly visible right from the start. To me that is trading transparency and I to me that is the best way to establish some measure of credibility when you operate in an anonymous world.

Lastly I would like to say that this is not directed at anyone in particular just a general thought. I don't mean to offend anyone and if you are offended anyway its like whatever man.

Enough of that

Indy

Comment by Indy on March 16, 2013 at 1:09am

I'm still not going to talk about the trade yet, first I want to talk about breakeven trades, this is relevant to the trade sequence I have posted but it is worth a post all on its own.

I have previously commented on breakeven trades and how no-one talks about them in their trade stats, it all just win:loss but where are the breakeven? This is another thing Jasmine was talking about today,(I said before that it was good to have some new blood in here to shake up the conversation so well done Jasmine, nice to have you here). The 3 trades shown above feature 2 breakevens and 1 win so it should be no surprise that I like breakeven trades. In fact it is part of my strategy. However it is worth talking about how you use them.

First question is why are you moving to breakeven?

Is it part of your strat or is it just because you are scared and don't want to lose?

Then look at the times you have taken a breakeven. Were they losses that were saved or were they wins that you cut?

If breakeven is part of your strat is your breakeven strat suitable for your overall trade strat.

For example; if you trade a break of resistance as your entry there will be an average size of the first move, if its not a news related break. Depending on what pair you are trading this may be 15 or 30 pips or whatever. This is why you need to know the chacteristics of the pair you are trading, an usd/cad break move will not be the same as a gbp/jpy move.

So assuming a typical resistance break move of 25 pips as an example, what is your overall strat target? If you are just targetting 20 pips on the initial break it may be ok to move to b/e at + 8 because if it retraces before you hit 20 its probably a false break.

However if your final target is 100+ on a swing you are going to have to ride out a few retraces, and one trading cliché that is pretty true is 'support becomes resistance etc' so if you want to ride to 100 you should be aware that after the initial 25 pip move it may well come back and tag the old s/r line before moving off, so if you have entered at 3 pips over the s/r line and you move to entry +1 when you reach +10 you should be aware that after +25 theres a good chance it will come back, stop you out at b/e and then move off. Very annoying. But the fact is that if you were playing that trade you should have been aware of the move sizes and allowed it to retrace 1 time, only moving to b/e when you hit 35 on the second move.

Your breakeven strat should be in balance with the overall strat.

I like breakevens because I use them to save losses. (more on that when I explain the trades). If you use b/e as part of your strat you should analyse the difference in results when you use b/e or just set and forget. The easiest way to do this without boring backanalysis of trades is to use a demo account and duplicate your trades in the demo, if you are using breakeven live run the same in demo without b/e option just running to win or loss and then see which account has the higher balance at the end of the month.

An example of why I like b/e trades, using generic numbers, and why its important to know if your b/e's are wins cuts short or losses saved;

Using a very standard expectancy of 60% win rate 1:1 R:R example, that means a 40% loss rate. If you risk 2% of your account per trade after 10 trades you have 2R or 4% in profits,

this next part depends on your own strat so I can only make suppositions based on how I trade but I will remain conservative, if you switch to a b/e strat you may end up with 40% breakeven trades, if these are evenly split between potential win and potential losses that are now cut short you end up with a 40:40:20 result. Thats 40% wins to20% losses. As b/e trades are zero sum on overall result you can consider this a 66% win/loss rate which means you should end up with an average of 3.3R or 6.6% per 10 trades. Better than 4%. if you can skew it more towards the saved losses than cut winners your win loss ratio increases very quickly.

Indy

Comment by Indy on March 16, 2013 at 1:10am

A bit more on breakeven trades. ( I did warn you I might Ramble a bit)

I can understand why Jasmine doesn't like breakevens. You have to remember that just because you didn't lose, doesn't make it a win. If its small its a breakeven. If you take 4 'wins of 5pips then lose 25 you have still lost.

On my second trade above I commented when I closed it 'no not lucky this time either, back out at b/e again. luckily took a partial on the first drop.  '

and when I answered Jasmine later I said 'Hello jasmine,

I know you don't like breakeven trades, personaly I do like them, I posted 3 trades, 2 were breakeven, 1 was 3:1 that is to do with my strategy

in both of those comments I refered to my second trade as a breakeven, I did take a partial profit but I didn't say 'it was a winner that came back on the remainder'. It was a breakeven. I actually got 0.65R on that trade, thats 1.3% on my account but I still called it a breakeven. I have a border around 0.8-0.9R that I consider a winner, (it has to be nearly 1R to be considered a winner)

Psychologically its important to keep things in the right categories otherwise you can become complacent counting small wins until you take the big loss

Cheers

Indy

Comment by Indy on March 16, 2013 at 1:28am

I forgot to mention that I don't intend this as an instructional blogpost, its more discussional. A trader should keep an open mind and never stop learning so I welcome others opinions and questions.

if something I say helps anyone I am happy, If you disagree, tell me, if I learn something from anyone elses comments I will be even more happy so please feel free to comment even if you totally disagree with me 

Cheers

Indy

Comment by Jasmine C on March 16, 2013 at 8:05am

A great post for discussion Indy - thank you.

I've got quite a bit to say on this ( as you may have guessed :-) ) and I'm afraid I'm going to drip feed it as I'm a busy girl today...

So, firstly @Leon - 8 pip stop loss, 60 pips up?? What are you thinking? A 1% or even 0.5% risk, you've increased your account by 5% with one trade... What were you hoping for?? This is one of my issues - completely unrealistic expectations :-)

Ok @Indy - why do I not like break evens? Well, lets say you like a bet on the horses. So you study form, do lots of analysis, look at the ground conditions on the day, look for the best odds ( basically you do a lot of work! ) then you place your bet.
Your horse is doing great, everything seems to be going to plan, but then she drops back into the pack at which point the bookie says - tell you what Indy, ill give you your money back. You grab at the opportunity.

This is called fear.

You don't really know if that horse is going to fall right off the pace, or pick up again. All you know is that you did this vast amount of analysis before placing that bet but were prepared to discard all that at the first sign of weakness.

The next time, your horse may not be so quick out of the gate, half way round she pulls back into the middle of the pack. The bookie says, tell you what Indy ill give you your money back. At which point you say "no way".

This is called greed.

The simple fact is, we don't really know where price is going. The best we can do is study the form, look at the conditions, place a realistic bet and see how it goes. There are many advocates of the bet-in-play strategy and if you can calculate odds at any given time, then it can work in your favour. I'm not that good. What I can do is state that "more often than not" when I trade here, price will reach A before B. Now, my "more often than not" is hovering around the 75% figure and A and B are equidistant.

I have just altered this slightly such that A is 1.618 further away than B so I expect my 75% to drop obviously. But hopefully not too much.

One question. Have you ever done any analysis on those b/e trades to see which would have gone on to lose and which would have won? There's nothing more infuriating than being stopped out and then watching price head off to your TP.

All for now... :-)

Comment by Dimitar Kinov on March 16, 2013 at 9:11am

Interesting topics Indy. I must say that first of all, the trader needs create for himself a comfortable environment to work - it should be to it familiar and relative safety. For each trader individually. Such definitions as "like or do not like," do not have anything to do with money, or the ways of earning. Rhetoric experts suggest, before the dispute, to determine its meaning. In this case, I think the question is where to place SL.

Such a question asked by а famous trader and he replied, "SL should stand where it should be." Once the position is open and the primary SL is set, the trader must move the SL (of course after the price fell short of expectationsand has gone in the right direction). And the immediate question - when and how much?

The general recommendation here is that - should focus on the level of the wave, which was formed or formed a reversal pattern. If the pattern is implicit (fuzzy), investigate the lower levels of the wave. Based on this - decide to SL (for no loss, in particular). Approach should always be pragmatic.

Thanks again for you raised an important topic.

Comment by Jasmine C on March 16, 2013 at 9:27am

Hi,

Me again  :-)  So, let me touch on that "60% win rate 1:1 R:R example" you stated.

If you have a fixed R:R, whatever it may be... and a standard entry criteria, then after you 100 trades (or 10, or 50 or whatever) you can state that the entry criteria you have, with that R:R paid off say 60% of the time.

If you introduce the concept of b/e you introduce more variables into the trade dynamic.  for example, when do you move to b/e? or when do you take partial profit? the more decisions you introduce into your trading, not necessarily the more error you are likely to introduce, but just it becomes much harder to qualify that strategy.

lets say your strategy was that once price moved 50% toward your target you moved to b/e.  this is total acceptable.  providing on EVERY occasion you make this same decision.  which means it becomes part of your strategy and at the end of 100 trades you can say - when i make this entry, with this s/l and this t/p then if i move my stop after 50% i have X% winners.

if sometimes you move to b/e, sometimes you don't then you are introducing variables.  and emotion.

i'm trying to cut all that out and the simplest way to do that is to take the time to do some analysis, and place my trade with the confidence of knowing that if I do nothing else that trade has an X% chance of success.

... comments welcome!!  :-)

p.s. 

i dont like pip-based strategies seeking e.g. 25 pips or 5 pip s/l etc.  i prefer to talk in percentage terms a lot of the time - the percentage i'm referring to when talking about my tp or sl is usually the depth of the pullback since making the resistance or support level :-)  which means it can be applied on M15, H1, H4, D1, ... 

 

Comment by JohniFx on March 16, 2013 at 10:20am

@Indy: what is that blue line backshifted on your chart?

@Leon: I use a script which after a predefined pip moves/places the stop to b/e. since i usually have 10+ positions open i cant really manage them alone. but loosing 60 pip profit is more a psychological issue which could hurt far more than that 8 pip loss.

@Jamine: that sentence " we dont really know where price is going".... price similarly to that defined in quantum theory both has characteristics of a wave and also as a particle... the probable path of the price... or almost anything can be described with a sufficiently high probability. time and space even with your fibo logic remains in synch and on longer term even in balance.

@Dimitar: exactly. in most cases the possible location of the stop determines the entry.

Comment by Indy on March 16, 2013 at 11:22am

Hello everyone,

nice to see some good responses, I will try to get around to talking about the actual trades today although I can't promise it won't be a bit of a long preamble as this post is more about an approach to trading not about actual entries/ exits. 

First to answer a few comments:

@johnifx, the blue line is simply a price line backshifted. to do this I just use a 1ma close, and the shift feature, if my price had been a line chart not candles you would have seen it was identical

Dimitar you say 'Such definitions as "like or do not like," do not have anything to do with money, or the ways of earning.'  you are correct that one is a subjective opinion and one is an objective endeavor so like and do not like should have no real bearing on earning, therefore maybe one should strive to elliminate the subjective as an influence on your trading.

however I believe' like and do not like' have a place in trading that people should be aware of. absolutely you should not take trades just because you 'like' them. but when it comes to developing strategies i believe you should play to your strengths not just focus on addressing weaknesses.  Maybe You can make more money scalping than swinging but if you are not comfortable doing it or do not like it you are unlikely to excell at and therefore will probably not do well at it, if you 'like' swinging you will be more likely go on to gain a good level of expertise as a swinger and therefore to earn money by swinging. there is no point trying to force yourself to adopt a style just because you think it will be more profitable.

Leon, scalping into swings is exactly where this post is going so will be addressed in full later

Jasmine,  " we dont really know where price is going" is also key to where I'm going so I'll be back to that I will answer some of your b/e points in a minute, it will take a little time so I will make a cup of tea first

Regards 

Indy

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