I have one month of paper trading results. Over the month I have kept to my process which was developed in order to achieve my goals as a trader. Those goals still are…
have average losses that are significanly smaller than average wins
lose no more than 50% of the time.
Over the month my loosely formed trading process has evolved and become more specific. I expect it will continue to do so as I gain more experience. Here is my process…
before my session (which is a 2 hour session falling between 2:30am and 5:00am), I do my “homework”. This consist of me using various volume profile composites and larger time frame structure in order to come up with some hypotheses of where I see price being attracted to or rejected from. I do this for each of my 3 products (crude, gold, yen). I also take a look at what is on the schedule for data releases so I can be prepared for possible turbulence.
Once the session starts I have certain “price action set ups” that I look for. These set ups are essential becasue they are designed for me to be able to put my stop very close. This is the part of the process that makes goal # 1 a reality. Not only do I look for my set ups, but I use the hypotheses from my homework to determine if there is any motivation for this trade to run me a decent profit. That make the second part of goal #1 a reality.
I journal throughout my session, review my trades, and constantly assimilate my process.
RESULTS
total trades: 44 total wins: 19 total losses: 20 break even: 5 average win: $82 average loss: $47 net P/L (including would be commissions) $420
(note: I am paper trading under the same conditions I expect to be when I start with real money: with a $10,000 account and trading “1 lots”)
Here is my equity curve
I’m please I was able to more or less mimic my objectives on my first month. Going forward, I am hoping I will be able to be even more selective on what set ups are the most quality ones. I think experience will endow that skill on me. This has been my first experience actually staring a the screen for 2 hours at a time and absorbing all that happens. I do expect in the months to come for that to have a strong effect on my familiarity on market behavior. I have also already gained insight on how my products each behave and the quirks of my unusually trading session. I tend to like the behavior of the Yen (6J) the best.
I am optimistic going forward. Not only will the experience continue to build up, but I am getting the following upgrades. I am getting a new monitor set up. I am currently trying to track 3 products (each requiring about 4 charts of data + the DOM) on a 23 inch monitor! I am getting two 27 inch monitors next week. I am in the process of switching to Stage 5 brokerage. With them I will have access to the Investor RT platform which specializes in volume profiling. I won’t bore you with the details of why it will be incredibly powerful in the way I trade, but it will be!
I am probably going to continue ot sharpen my eye and my process through December. Depending on my consistency, I will start with real money in January.
Many will warn that the emotional component of trading real money makes that experience very different from paper trade. For myself, I have not found that to be true. Before I realized what a ticking time bomb algorithmic trading can be, I was trading on one of my systems live for a while. I found the emotional experience is the same for me when real money is on the line. Being a dancer, money has always been easy come, easy go. I have developed a sort of emotional detachment from it. The stress in trading for me is the want to prove to myself that it is something I can do successfully. In that way, my paper trades get me just as nervous as real ones.
I don’t know anything about daytrading (that’s an impressive chart), but I too don’t really experience much of an emotional reaction. Personally I just like the strategy of it all, paper, $100K, $10M, don’t feel any real difference…it’s all the same fun of trying to beat the game.
Detachment is important, greed/fear is what we want to exploit, not experience ourselves.
Trading is a lot like doing endurance sports to me. It is something difficult that takes hard work and energy, but when you get good at it, it is very rewarding because few can do what you do. The process of becoming a successful trader is the goal and what I enjoy… making money is the side effect of that goal. I just like markets. They’re neat. I’m having fun!
I have my month #2 results. There is much I could discuss, but I will keep it as simple as possible. I welcome questions about anything I am doing.
First off, I had a few changes this month. I now have 3 monitors instead of one. I have switched from TD Ameritrade to a boutique brokerage called Stage5. I now use the Investor RT platform which is specialized in volume profiling capabilities. Stage5 has a private chat room for it’s members. This was appealing to me since Stage5 specifically attracts a lot of traders who trade with similar methods and philosophies to myself. There is a specific chat room for Eurex traders. This is where I have met about 10 other traders from around the world that trade the same silly hours as me. It is also why I now trade the German Bund (along with oil, Yen, gold). The chat is great because some of them have been doing this for much longer and are more established. A few actually do it for a living. It is reassuring to see others be successful.
Here is the breakdown of my results.
Total trades 70 // total wins 19// total losses 26 // scratches 25 // avg win $85 // avg loss $37 // net P/L (after would be commissions) $202
Here is the equity curve
First off, the month started rough for me. If you include scratched trades as “failed”, I had a 70% failed trade rate for the first two weeks! When that happens it can be hard to troubleshoot what is going on. Even when your technique is great and you are trading optimally, you will expect for some of those trades to not work out. The market is noisy. So, when you have a bad streak, it can be hard to hash out which trades were due to poor technique and which were due to normal expected loses. Well, I did review what I was doing and came up with some ways to tweak it going forward. I’m going to say those tweaks improved my technique because my trading results did get better after that. Silver lining on the first two weeks… because my process is based in favorable risk/ reward, I can trade that poorly and still manage to only be down $100 (after commissions, so basically break even). That is the foundation of my positive expectancy! I would also like to note, even though my net P/L is lower, I actually have better results than last month. My max draw down was smaller and my max draw up was larger. That is probably even more important than net P/L. It implies stability.
Going forward I really need to work on being a better trade picker. My new technique has me getting more scratches and smaller losses, but my win rate has not gone up. My commission deduction killed me this month. One avenue to achieve this is getting to know my product’s “personalities”. The each have their own flavor of noise and set ups that seem to work best. My trades in oil were overwhelmingly my best results. I know what I am looking for with CL. The Bund has been unsuccessful for me so far even though it is the quietest of the bunch. I am still learning it’s personality.
