Friday, December 2, 2016

This week's Paper Trades - Nifty Futures

The mechanical day trading system that have been using since August has been giving good results. It is the princess that I found. However, it does not give trading signals every day. My backtests with it indicate that it trades between 5 to 14 days per month. In November, it gave me 7 trading days until 15th November, and then no more trades for the rest of November.

I have been evaluating additional day trading systems. One of the systems that looks good is a filtered version of my Opening Range Breakout, but even that filters out many of the trading days.

To fulfill my itch to trade daily, I decided to test other systems. Currently, I am paper trading on the 5 minutes timeframe with 35 EMA. Many points of the system are inspired by Smart_Trade's Swift Trading System. The lines (Decision Points) on the charts are mostly according to the Decision Points Trading method. Although inspired by the those methods, the way I have been paper trading is markedly different.

Why Paper Trade?

I am not used to paper trading. In fact, this is the first time that I am paper trading. Earlier, whenever I needed to 'live' test a system, I would put in real trades with at least 1 lot. That was when I was kissing princesses, but nowadays I am kissing frogs - so I would need some real confirmation before putting in real money.

I could have just restricted the evaluation to backtesting, but there are many reasons why I am paper trading this system. First of all, it relieves boredom, and gets me feeling involved with the market. Secondly, there is no system. The system rules are still work-in-progress and completely fluid - even discretionary. I could have run multiple backtests, and each time still felt that a different tweak would be better. When I paper trade in real time, at each twist of the market, I decide my trade levels/actions, just like I would do in real trades. Whatever tweaks I may do to the system later, are not going to change the real time paper trading decision that I took.

Thirdly, backtests, even a bar-by-bar replay is cannot show me how the chart appeared in real time, since the time frame is 5 minutes, and I only have 1 minute historical data.

How I Paper Trade 

Fourthly, I am totally involved (to the extent possible) while paper trading. I am totally honest to myself while paper trading. I could have been wishy-washy, and decided on the trade that I would/could/should have taken after the event. I could have been indecisive and confused in real time, and later decided on the action that I would have taken. But no, I am being honest to myself, and my paper trades happen only in real time, and those are what are marked on the charts.

I even got those queasy feeling when the paper trades were not going right. I was very uncomfortable with the paper trades done on Thursday and Friday, when they were not going well, almost as if they were real trades (to the extent possible)

Limitations of the Paper Trades

Paper Trades are after all, not real trades. However, honest and well intentioned I may be, they are still not real trades. In real trades, there's going to be slippage, there's going to be missed trades, missed fills, none of which appear in the paper trades. Also, paper trades can only take into account the ticks that appear in the data feed. Missing ticks that do not appear on the charts, could trigger trades in real time, and completely alter the trading system results. I have the feeling that at many points in my Paper Trades this week, my Stops would have been hit, except for those missing ticks.

Also, however honest I may be to my myself, my feelings will often be different when real money is on the line than while I am paper trading. While paper trading, I do not look at the charts all the time, and mainly observe the bars during bar close or a on significant price movement. My intention is to behave in the same manner if I trade the system with real money, but who knows whether I will be able to restraint myself?

Paper Trades on Monday, 28 Nov 2016

1 trade, +19 points (pre-costs)

This was my first day of paper trading. The EMA indicated a continuation of the uptrend. I went long above the pivot inside the Initial Range, and exited on channel break after multiple attempts to push higher. With my subsequent tweaks to the system, I probably would have delayed the entry until the high of the Initial Range was broken, but the chart shows the decision that I took in real time.

Paper Trades - Nifty Futures - Monday, 28 Nov 2016

Paper Trades on Tuesday, 29 Nov 2016

4 trades, +22 points (pre-costs)

With my subsequent tweaks to the system, the first trade entry would have been iffy and probably delayed, the 2 losing trades would not have been taken, and the last trade would probably have been delayed.

Paper Trades - Nifty Futures - Tuesday, 29 Nov 2016

Paper Trades on Wednesday, 30 Nov 2016

2 trades, +37 points (pre-costs)

Caught a nice move with the second trade, though the entry was perhaps delayed.

Paper Trades - Nifty Futures - Wednesday, 30 Nov 2016

Paper Trades on Thursday, 01 Dec 2016

3 trades, +5 points (pre-costs)

Was not much bothered by the first trade, but the wide Stops for trades 2 and 3 gave me the queasy feeling that I mentioned earlier in this post.

Paper Trades - Nifty Futures - Thursday, 01 Dec 2016

Paper Trades on Friday, 02 Dec 2016

4 trades, +16 points (pre-costs)

Nothing worked. The exit of trade 3 was a nice Breakout Failure entry in the Decision Points Trading method, but the way I have currently tweaked the system rules did not allow me to enter short until much later.

Paper Trades - Nifty Futures - Friday, 02 Dec 2016

Next steps

I am already backtesting this system (with fluid rules) on historical data. I hope to continue that this weekend. If my backtests are satisfactory, I might continue to Paper Trade this system for some more time, or even trade it with 1 lot. If not, I should drop the frog and move on.

Update on Dec 13, 2016:

weil ich habe keine Lust

I have given up on this system, at least for the moment. I was happy with the paper trading results at the end of the first week - trades which are shown in this post. The plan then was to paper trade for one more week and then begin trading the system with a single lot. I also wanted to mechanize the system as much as possible.Sadly, that is not how it worked out.

Click the link below to see all my paper trades with this system:

An additional reason why I am not to keen on continuing with the paper trades is that my current live day trading system has again started giving me frequent trading signals.


  1. Have a look at this video logs (by Sunil). You may get some inputs regarding DP system, trading discipline & trade management (in real time).