Tuesday, 13 June 2017

EURGBP daytrade prep

Quick reminder of I why I hate day trading: do your prep, wait all day, have a couple of furious wanks, nothing triggers...

Sunday, 11 June 2017

Learning to Trade pt3

In part 2 I tried to speak about the importance of trading in your own vision. In this final part, I wanted to talk about ways we can refine our vision and edge.

(Links to part 1 and part 2 if your interested)

play like an amateur; enjoy the game

Image result for nate diaz

Ultimately this is a zero-sum game, so you must enjoy the competition! To do this you need to go beyond the one dimension of your own game. Your opponent is always going to have a completely opposing view to yours. They are going to try and run your stops and make you doubt your strategy everywhere they can. They will do this wittingly, purposefully trying to throw you off your game and unwittingly, by simply being true to their beliefs. So you need to...
  1. learn your style's strengths and weaknesses
  2. understand how and where others will try to implement their style and exploit yours by getting into the habit of seeing every trade from both a bull and a bear's perspective 

Once you start to develop this broader view, you will begin to compete intelligently rather than emotionally. Win or lose, you will build self-respect and confidence, because you're playing the game for what it is. If you lose, you gave them nothing easy, if you win, you took part in making the trade a success. Amateurs understand and enjoy these battles and accept that losing them from time to time is the price of competing. In fact, more than that, they say "well done, I see what you did there"or "tut" at themselves for failing to do something they know they should have. It does not throw them off their game, it only makes them enjoy it more. Because this is the game.

Personally, I believe I am just about at this stage.

the pro: never stops learning 

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Now the following is purely conjecture as I am certainly not at this stage but as I understand it; where the Pro differs from the amateur is in their acceptance that they will always be a student of the market.

One thing I would say with a little more certainty is, again, that as I understand it, this where the serious back-testing should commence if you're so inclined. I say this because this is what my coach has always alluded to in his instructions which to paraphrase were: Find a system that you understand, forward test it to see if it suits you and to learn some KPI's, as it's starting to fall into place come and see me again so we can review it  and you can spend some time backtesting to further refine your edge/KPIs.

We can continue our education by.
  1. Continuously recording our data and learning our KPIs
  2. Continued studying of the world and market events
  3. Journalling our trades and thoughts and exploring them
  4. Getting independent input and coaching in regards to our strengths and weaknesses
  5. Start comprehensive backtesting to further extend our KPI knowledge and insights into our method. My buddy has written a great post on backtesting on his blog
  6. Work with other traders to help, test, push and encourage good habits, better practices and fresh ideas. Something I was thinking about in a previous post on building a Trade Team

Monday, 29 May 2017

Learning to Trade pt2

This is part two of my three posts on Learning to Trade. I felt inspired to write them after a couple of conversations with fellow retail traders.

In the first part, I tried to explain how I have found viewing trading as a game a more useful mindset than approaching it as work. I will try and expand on this here...

(Link to part 3 if you wish to continue reading)

l-plates: knowing how to play a game is very different from knowing you can playing the game

Knowing the rules and the processes is the first part of learning anything, and technically, you will be able to "play" but you aren't going to be able to compete. To compete effectively in anything you need to build a healthy self-respect and confidence that you can only gain from truly understanding the game.

To me, after having learnt the processes, most traders, including myself, enter into one of two failure states. The problem as you will see, is that these two states are not based on your beliefs or in reality.

state 1: blind-trading

Image result for poking self in the eye

Blind-traders bastardise a setup up from a book, video or coach that they like and assume because they like it, that they believe in it. They work hard at adapting the setup into a strategy and because they don't want the work to have been in vain the "belief-lie" becomes bigger. They end up with a setup that is good but a system they have no faith in. Because of this lack of faith, they then start a campaign of constant "setup-tweaking". However, this means they are never able to learn their KPIs because the unit of measurement is always changing and so, the blind remain blind.

state 2: the testers

Image result for backtesting

Testers hide behind backtesting, looking for the perfect way to exploit their "edge". But the problem is this trader hasn't spent any significant time trading it in real-time and are in a "reality-lie"; they have no idea if it suits their personality, or whether they can even see their setups when under the pressure of the market. So, when the rubber eventually hits the tarmac, the months of work have been for nothing, they have a "successful" strategy that they are unable to execute.

Personally, I spent about 7 years fucking around between these to states.

your way

In my opinion, it doesn't really matter what style you choose as long as you believe in it. Muhammed Ali believed boxing was a war of attrition, while Mike Tyson saw it as a pistol draw. Neither style was infallible but they worked because they believed completely in their way. And to me this is the first step to truly playing any game; you have to play the game your way.

  1. Decide how you believe the market works. Not how a book or your coach says (nb a good coach should make you decide yourself), why do you think markets move? what are you absolutely certain about? This is where you need to build everything from. From your beliefs/faith, not science, backtesting etc.
  2. Now you need to find or develop a style that allows you to trade the market in that vision.
  3. After finding your style and like my coach says, you then need to forward test it to 1. see if it suits you 2. see if it is practical to execute and 3. learn some early KPIs to make some basic adjustments to better your edge. 

When I did the above roughly 18 months ago my trading transformed, my results went to break-even and slowly eked into profit and most importantly I lost the execution anxiety that had plagued me for years. I was able to enter trades when I saw them, I now have less issues holding through retracements and can manage and close them with far less emotional involvement. It was completely liberating. The irony is I was just doing what my coach had been telling me to do for two years.

I can't emphasise enough how important it is to trade the market in your vision.

Personally, I believe the market moves because of supply and demand (orders), central bank policy (because central banks control the supply of cash and interest payments) and sentiment ("uncertainty" and "stabilised uncertainty" create fear of losing it (FOLI) = supply, or greed, fear of missing out,(FOMO) = demand).

Sunday, 21 May 2017

Learning to Trade pt1

Recently I have had a couple of conversations that got me thinking about how we, as retail traders, go about learning to trade and the pitfalls the majority seem to suffer.

Included are few exercises that I have found helpful in developing my trading but really, this more a map of the "retail journey".

The post was getting quite long so I divided it into three posts, this is part one.

(Links to part 2 and part 3)

understand: it's just a game

Image result for billions

The TV show Billions is ridiculous, but to me, the mindset its characters encapsulate is correct: trading is just a big game of trying to fuck each other over. If you understand this and still decide to play I believe you are on the road to eventually gaining your opponents respect. While if you don't, your capital will reflect that.

Why is this important? Trading is a zero-sum game; I can only speak for myself but I have found that when I "work" at anything my mind is slow, heavy, often filled with unneeded facts and figure and not very aware of its surroundings. However, when I choose to "play" at something, my mind naturally adopts a clearer, more fluid, happy/playful state. And as such has a far easier time processing what is going on all around.

To clarify, I am not saying you should play at trading, we all know it's serious business. What I'm saying is: when in the act of making and executing trade decisions, I need the most fluid mind possible.

Personally, I find that when I tell my brain that "it's a game", almost a sport, I am far more effective in preempting my opponents actions and making my own more competitive.

I will cover more of this in part 2.

Friday, 21 April 2017

Trade Team

Last week I wrote a comment on a friend's blog. Luckily he found it of use and kindly put it up as a blog post of its own, you can read it here if you're interested. On this occasion, I haven't reblogged his post as it felt silly to have three versions of exactly the same thing rattling around the internet. However, the exercise got me thinking about the continuing struggles we all go through when learning to trade and things I'd like to do to combat them.

trader / athlete

Image result for athletes team training

I often think of traders as aspiring professional athletes; hours and hours per day training, extremely strict routines, diet, mindset, psychology, studying etc. But the difference between the two professions is the distinct lack of support even professional traders have. Athletes have coaches for technique, coaches for strategy, coaches for routine, dieticians, physios, psychotherapists, training partners and teammates at their disposal every day! Even hedge funds and investment banks don't provide this kind of support to their traders.

I rarely mention it here but I was an amateur boxer for many years and I am now (after quite some time off) training at an MMA gym with an idea to compete at some point in the future. At my gym, I have unlimited lessons, 3 Brazilian Jiu Jitsu coaches, an MMA coach, a Muay Thai coach, a Boxing coach, a Wrestling coach, a Judo coach and a Strength and Conditioning coach. I get one-to-one coaching for an hour a week and I have 200+ training partners and 50+ teammates (those who are looking to pursue fighting). For all this, I pay £230 per month (the private sessions are what drive the cost up). But even so, this is extremely cheap when you think of all the support that is available to me.

Having said all this, what I would say is that in terms of progress, every part is equally important. You, of course, need your coaches to instruct you but you have to have your training partners to drill with and teammates to encourage you. Without them, you wouldn't last long. It's a hard sport that is designed to make you quit, a bit like trading really.

trade team

Image result for team

As traders, I doubt we will ever be able to get the same amount of support that is available to sportsmen and women but like my trading coach has always said, we could be far more effective in the way we utilise each other. I think much of what is lost in trading is the comradeship of a team, too often we fall into a slightly competitive mindset with each other, most likely due to the nature of the game we play. 

When I wrote my comment on my friend's blog I wanted to be his teammate. I wanted him to feel like someone had his back and would go to war with him. This is the feeling you get when you're in a fight team, you train with each other, you sweat together, struggle together and win together. We're honest when someone's doing something wrong, encouraging when they're doing something right and playfully competitive when you're able to be.

Going forward I would like to pursue this idea of building a "trade-team". A band of traders who go to war together. It's great to share victories and commiserate losses, however, I feel often when you need the support is when you're in the trade. In the midst, is often when you most need an objective friend, to either encourage you to continue with the game plan or tell you it is no longer working and to change tactics.

If anyone is interested in this trade team mentality drop me a comment below.

Friday, 14 April 2017

Fear Beats Greed (catalyst)

there's a catalyst(s) in here somewhere

So Wednesday evening we had quite a few events; US monthly budget statement, which came out worse than expected, then, of course, the 3 hour US press conference.

Rex was banging on about Syria...
then Russia...

and finally, Trump came along talked about the USD...

the catalysts

The above events had the effect of killing the USD (it has since recovered much of its loss) but there was quite a lot going on here and felt I needed to revisit them and identify the individual effects and causes.

NB: When trying to identify catalysts what I am looking for is events that that will trigger either weaken (fear) or strengthen (greed) the status quo.

  1. US monthly budget statement: worse than expected is "technically" bearish for the USD but this is not a highly watched or volatile event, the numbers weren't drastically off so really was very low impact. Not a catalyst.
  2.  Assad/Syria: War uncertainty,  to me this means Gold, Bonds, JPY and USD should appreciate and stocks should suffer. This is definitely a "negative" catalyst, war triggers uncertainty and fear and weakens the status quo.
  3. Russia Relations: Uncertainty, even, fear of war. Again to me this means Gold, Bonds, JPY and USD should appreciate and stocks should suffer. This is another "negative" catalyst, uncertainty/fear over the status quo.
  4. Trump wanting a weaker USD: This a funny one as there is clearly a winner and loser. This is dovish for the USD and positive for stocks. Ultimately this is best seen as a "positive" catalyst for stocks, as it creates some sort of stability (strengthens the status quo) and hence greed.

fear beats greed

As the title and subtitle state, the rule I use to help digest events is; "fear beats greed".Ultimately most investors in Wall Street and Main Street alike are here to make long-term gains for their pensions, retirements etc. They have worked hard and saved that hard earned money diligently. They (clients and fund managers) will always be scared of losing their initial capital, so when an event hits the market that causes "fear"/ threatens the status quo, they will almost always switch to a capital preservation approach where capital will be less exposed to risk. As such my feeling from the events above is that Gold, Bonds, JPY and USD should appreciate and stocks will probably suffer. 

Wednesday, 12 April 2017

Weekly System (for 2 Year Plan)

Image result for system


In my last post, I talked about my 2-year goal and outlined a very broad system: plan my trade, trade my plan, manage my trade, record my trade, build my numbers up and learn my KPIs.

This a nice sound bite but actually, it provides very little in the way nourishment or sustenance for the tired trader/investor at the end of each day. What follows is a breakdown of what actually needs to be done. To clarify this information is in my TTP and SBP but is not as clear or concise as it is here, I will print this off.

weekend system

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The weekend marks the start of my trading week and is when I do the majority of my work. There are 4  major jobs which consist of 9 tasks, I find I need to take a short break between each job.

Week to week my energy levels differ, so it is hard to specify an exact time to as when this work should be completed. What I can say though is that in order of preference they would be 1, Saturday Morning, 2 Saturday Afternoon, 3. Sunday Morning, 4 Sunday Afternoon, 5 Sunday Evening,

job 1: markets

1. Monitor the MOTR (Momentum and Trend) of each market (approx 40) (MOTR)
2. Find potential W1 and MN trades (MN, W1 candle setups with momentum)
3. Define where the MOTR Matrix is heading to across the markets.

job 2: trades

4. Update profiles,  add those with matching MOTR, remove those without (D1 long/short watchlist)
5. Review profiles for setups (D1 long/short watchlist)
6. Review potential trades, do they pass all your requirements (ie pin bar tail at least 60% of candle)

job 3: review

7. Review trade sheet and journals if appropriate. This needn't take ages. Just a weekly check-in to take stock and remind yourself of your KPIs.

job 4: broader themes

8. Research economic data due for the upcoming week.
9. Be aware of the current themes (FTWeekend and MoneyWeek).

daily system

Image result for monday to friday

Each evening I have 3 jobs consisting of 5 tasks.

job 1: themes

1. Stay abreast of news developments (twitter and FX street app)

job 2: trades

2. manage open positions (end-of-day).
3. Check for new D1 trades in Long and Short Profiles (end-of-day).
4. Review potential trades, ensure they match trade criteria.

job 3: record

5. Record closed trades (Journal and Trade Sheet)