Friday, September 15, 2017

Loss Day - Day Trading - NIFTY, CRUDEOIL

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NIFTY


NIFTY M3 Price Action Chart
NIFTY M3 Price Action Chart

The trades moved favorably for sometime, but I could not lock in profits.


 

CRUDEOIL


CRUDEOIL M5 Price Action Chart
CRUDEOIL M5 Price Action Chart


In case of Crude Oil, I don't even have that fig leaf.





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Thursday, September 14, 2017

Regular Day - Day Trading - NIFTY

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Today, I could not trade Crude Oil. The Crude Oil chart today is unidirectional so far, and I think that it would have been an easy trade if I had traded it.

NIFTY


NIFTY M3 Price Action Chart
NIFTY M3 Price Action Chart


The first trade was a long within 20 seconds of the Day Open. The trade was correct as per the chart at that time, but when the bar repainted after the completion of the first minute, the position became invalid as per my rules. Turned out to be a good trade though.

The other trades were regular trades. Some of my exit points turned out to be reversal points. And some of my exit ticks do not even show up in the chart. Same issue had happened during the Crude Oil whipsaw on Tuesday. But have to work with what data we have...

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Wednesday, September 13, 2017

Just my lucky day - Day Trading - NIFTY, CRUDEOIL

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On some days you do everything right, but are undeservingly unlucky. On other days. you do the stuff wrong, but are undeservingly lucky.


NIFTY


NIFTY M3 Price Action Chart
NIFTY M3 Price Action Chart


I got a Short signal in the very first minute and went Short - or so I thought. I had made a typo and gone Long instead of Short. So, when the Stop Loss hit for that "Short" trade, and then a Long trade triggered, I was Long 3 times my normal position size and without a Stop Loss. I took me over 15 minutes to realize what had happened. But then, since difference between the Average Entry Price and the Stop Loss for the Long was just 4 points, I decided to trail as per my Mechanical Trading Rules.

The second trade was another confusion. My rules for dealing with slightly deeper pullbacks and volatility are not well defined. Anyway, I took the trade.

The third trade was a non-existent Long. I went Long by mistake because I interpreted the chart incorrectly.

The fourth trade was a reversal to Short, but I took that entry a few points above the trigger. So, none my entries today were correct as per my pre-defined rules.


CRUDEOIL

 

CRUDEOIL M5 Price Action Chart
CRUDEOIL M5 Price Action Chart


Dull day in Crude Oil. I initiated my position at 5:22 PM, and after that it was a long wait until auto-square-off.... and the move happens after I exit....

I will probably not be able to trade Crude Oil tomorrow due to other engagements.

EDIT: Just realized that the exit of CRUDEOIL was about 4 points higher than what's marked on the chart.



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Tuesday, September 12, 2017

Terrible Whipsaws - Day Trading - NIFTY, CRUDEOIL

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Followed all my rules, but today was a bad day in Crude Oil. I had modified my rules to take any trade setup open at 8 PM, unless it got cancelled. Hence the last entry was well after 8 PM.

NIFTY

Got hit the first couple of times. The third trade worked, but not before a long consolidation that tested my patience.

NIFTY M3 Price Action Chart
NIFTY M3 Price Action Chart


CRUDEOIL


5 consecutive whipsaws....

CRUDEOIL M5 Price Action Chart
CRUDEOIL M5 Price Action Chart



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Monday, September 11, 2017

Good day - Day Trading - NIFTY, CRUDEOIL

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Good day. Today, I stuck to my pre-defined rules.

I deviate from my pre-defined rules when (i) there occurs a scenario that I had not thought about, and so I do not have a pre-defined rule to deal with it OR (ii) the system performs well below my expectation for a sustained duration. Today, neither scenario occurred.

NIFTY

NIFTY M3 Price Action Chart
NIFTY M3 Price Action Chart

After the first debacle, the next trade gave some profit. I had decided on VEDL as the alternative scrip to trade, in case NIFTY stagnated. But today, NIFTY moved better than VEDL, I think.

CRUDEOIL

CRUDEOIL M5 Price Action Chart
CRUDEOIL M5 Price Action Chart
Same show, almost every day... Catch a move and try to stay with it. Rinse and repeat. Show timings: 5 PM to 8 PM IST

Today's show has closed already... Not taking entries after 8 PM.


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Sunday, September 10, 2017

% The Evil Percentage %

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Language shapes our perceptions. It is almost impossible to express and develop ideas that are not expressible in language. To progress beyond limitations of current thinking, it would be necessary to move beyond current notations. Mathematical notations are one example of the how ideas can be developed further beyond the confines of current language.

There are also self-inflicted constraints that we impose on ourselves to restrict our thinking. Our value systems, our education, traditions, our sources of information bias us to think in a certain way.....

The evil percentage
The evil percentage   source:custom-it.fr


For years, I have been using Win % to evaluate the performance of trading systems. That is perhaps the most common way to indicate the Win-Loss Ratio. However, it is also terribly misleading to indicate Win-Loss Ratio with a Win % - at least to me. Nowadays, I always translate the % into a ratio, and that helps me a lot.

Here are a couple of posts that I had earlier posted in the Bakwaas Trading thread of the Traderji forum.


The importance of the win rate


I am treating this thread more like a scratchpad... So, I am putting out another of my half-baked thoughts here.

For the purpose of this post, I am ignoring Risk-Reward Ratio, which everyone knows is a very important factor in determining a trader's happiness.

Let's say that there are 2 systems - the first has a win rate of 49% and the second has a win rate of 51%. A 2% difference in win rate is not much.

But if you think about it, the first system will win 0.961 times for every loss. The second system will win 1.041 times for every loss. The values calculated as win%/loss% = win%/(100%-win%). So, the second system has a (1.041/0.961) = 1.083 better chance of producing a winner than the first system.....

Restating, a system with a 51% win rate is 8.3% better at producing winners that a system with a 49% win rate. Just a 2% difference in win rate gives me a 8.3% better chance at happiness :)

Take a system with a 45% win rate, and another with 50% win rate. The 50% win rate gives me a 22.2% better chance at happiness than the 45% win rate.

Similarly....

50% win rate --> gives 50% more happiness than --> 40% win rate
60% win rate --> gives 50% more happiness than --> 50% win rate
60% win rate --> gives 125% more happiness than --> 40% win rate
50% win rate --> gives 133.3% more happiness than --> 30% win rate
50% win rate --> gives 200% more happiness than --> 25% win rate
50% win rate --> gives 300% more happiness than --> 20% win rate
10% win rate --> gives 111.1% more happiness than --> 5% win rate
99% win rate --> gives 102% more happiness than --> 98% win rate

and finally,

100% win rate --> gives infinite times more happiness than --> 99% win rate

See... we have scientifically proven that trader's nirvana can be achieved by 100% win rate.

With a higher win rate, the chances of prolonged drawdowns reduces, and so does your blood pressure. With a 100% win rate, you could practically be dead.

Perception


Continuing my blabber from my previous post.... a casual look at win rate of 49% or 51% does not indicate that the impact between the 2 win rates could be more than 2%, like it actually is. Instead, would it have been better to state that the wins-to-loss ratio are 0.961 and 1.041 respectively?

Nowadays, for my trading systems - whether live or backtesting, I use the terms "plus" and "minus", instead of "win" and "loss". Even, when I use the terms "win' and "loss", like in the previous posts, internally I am translating them to mean "plus" and "minus". A "minus" does not give me the same feeling as a loss. It's not a defeat, it is just something that is expected in this business of trading, well anticipated after backtests and simulation. Similarly, a "plus" is not a win, a triumph. Unlike a "win", a "plus" is not going to give me a heady rush of adrenaline that wrecks my psychology. "plus/minus" keeps me calmer emotionally than "win/loss".

I am not very satisfied with the terms "plus" and "minus", but for now they will do - until I am able to expand my vocabulary, or ideate better. In George Orwell's book "1984", Big Brother's party invents Newspeak - a version of English with reduced vocabulary, concepts and rigid structure - just to prevent people from thinking anti-party thoughts. If you don't have the vocabulary to think thoughts, how will you think, communicate and take ideas forward?

So, here, I am trying my own Newspeak, just to get my thoughts and ideas in the right direction (though I am never sure about the direction being right). For now, I can think of viewing "win" rates differently, and "plus/minus"...

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Perpetual Dilemmas

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Since my last post, I have been system hopping again. I have evolved the discretionary range compression trading system into a mechanical trading system. That is one reason that I stopped posting. The other reason is that I have started trading Crude Oil after many years, so my free time has reduced by that much.

By now, the trading system is almost the opposite of the narrow range consolidation system that it evolved from. Now, I am looking for a sustained move in one direction that could potentially build into a bigger move in the same direction. The Stop Loss is wider, but not too wide. The system hopes to catch at least 95% (or 19 out of 20 times) of the big moves early on - but whether it will be able to remain in position to catch the bulk of the move is open to question. And it is still evolving, even during runtime.

So, the perpetual dilemmas continue.... discretionary vs. mechanical trading systems, wide stop losses vs. narrow stop losses, fixed stop losses vs. trailing stop losses, limit entries vs. trigger based entries, price action vs. statistical trading, scalping vs. swing trading... the list of alternatives goes on.

Sometime what works doesn't work at other times, on other scrips or on the same scrip.... as in Friday's trades below. System that worked for me for months, just stop working after some time. This has happened to me multiple times with the Opening Range Breakout system. Even the Range Compression trading system worked very well for sometime. The Princess Trading system that I traded for 11 months- that is longest that I have traded a single trading system - did not work during the first half of 2017, though it has started to perform again recently.

Friday's trades:

Nifty was clogged in a range. Not a good day with my current mechanical trading rules....

NIFTY M3 Price Action Chart
NIFTY M3 Price Action Chart



Crude Oil has been a revelation. The plan is to catch the momentum moves. I have decided to watch Crude Oil only after 5 PM, because it is usually boring and misleading until then - but sometimes moves to start right at the day beginning like on September 5th.

The plan was also to close the chart at 8 PM, unless I had an open trade, but Friday's move will make me keep the charts open longer, I guess.

CRUDEOIL M3 Price Action Chart
CRUDEOIL M3 Price Action Chart





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Saturday, September 2, 2017

What worked yesterday did not work today - Day Trading - NIFTY

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On Friday, I tried doing the exactly same thing that I tried on Thursday (expiry day). But the day was different and I was seared.


NIFTY M3 Price Action Chart
NIFTY M3 Price Action Chart


At the end of the day, it is very clear what I should have done or not done. It is just that this clarity isn't there just before the end of day. Today, I tried to take close entries with tight Stop Losses. The recency effect of the previous day was quite strong.

Though I was trying to be discretionary, my mechanical trading predisposition forces me to stick to pre-decided rules even when some them are not working. Squeezing the Stop Loss tighter and tighter for every small move - even without a pivot formation, turned out to be a bad decision today.

The aim of this discretion is to be able to generate entries will small Stop Losses, so that any one loss does not have a big impact. It was true that none of the losses had a big impact. On the average, each trade had a loss of less than 3 points + costs. But since there were multiple losses, the impact became significant.
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