Fade false breakouts

Dr Elder mentioned in his book that professionals love to fade false breakouts. In fact, he also provided a strategy for fading false breakout. Subtly, Tom Yuen also showed some trading examples fading false breakouts. This was brought to my attention because I asked him why was he not following the trend (though he preached never to go against the trend)

Try more than once to find the right entry

This was also from Dr Elder and Tom. This is really intriguing to me. I am still trying to figure out how to determine the “right” entry.

Keep good records

I believe almost all successful traders advocate this. Dr Elder said he can tell if a trader is good or not by looking at his records. Ray Barros cannot emphasize this more enough. I was overwhelmed by the amount of information that he maintains for his record.

Adds on to winning position

I got this from Tom during his course. But he can’t really answer me on what makes him decide that he is going it. I guess it has to do with experince…

The trend is your friend, until it bends

This is also all trend-following traders’ advocate, be it using indicators or from the price itself.

Do note that when people talk about “professionals”, you may want to find out more. Professional traders can be pit traders, institutional traders, bank traders, full-time retail traders etc

Have you come across things that professional traders do to share?

in post image by sndrspk

If you came across any, don’t hesitate to share it with us! Just drop me a email!

In future, I will be posting when the “Free Education” page is updated, so that my RSS and email subscribers can instantly be informed of new free trading education. So if you wish to be informed, subscribe to my blog via RSS or email today!

Hey Friends!

I have updated the “Trading Courses Comparison Table” with the latest trading courses that I have attended:

• Applied Technical Analysis by Tom Yuen (YCK)
• Habit of Success Webinar by Ray Barros

Also added 2 news courses to the “List of Trading Courses in Singapore”:

• Mastermind Trader by Colin Seow
• The Alchemy Workshop Series by John Lok

Seems like the number of trading courses in Singapore has reached equilibrium

Sign up at the top right hand corner of my blog to get the latest list!

I chanced upon the audio book and after listening to it, decided to get the book.

It is an easy read (if you less the formulae presented in the book). I’d like the way Curtis highlighted what was really important to the turtles that brought them trading success. In a nutshell, what really brought them success had to do a lot with their mentality - to follow the trading system consistently, to not focus on the immediate trading results but look at the long haul etc. Curtis also highlighted the importance of the money management rules - position sizing based on the violatility of the instrument, position size limitation based on market correlation etc. The above 2 aspects were more impactful to the Turtles’ trading success than the trading system itself. That’s why the rules of the trading system are revealed in entirety in the book.

“…The funny thing is that most of the principles that Richard Dennis taught us were not new. Some were basic principles that had been espoused by other famous traders since before Richard was born. Yet the very simplicity of the principles we were taught in some respects was a hindrance for those of us who tried to follow them in those initial months. People have a tendency to believe that complicated ideas are better than simple ones. Many find it hard to comprehend that Richard Dennis could have made several hundred million dollars by using a handful of simple rules…”

However, Curtis did highlight that the Turtles started off not having to worry about the trading system mainly because it came from the legendary futures traders . The Turtles trusted that their mentors had done the necessary system testing and had passed them a profitable trading system. So the Turtles just had to focus on their psychology and follow the money management rules strictly, which could explain why they became so successful in such a short time.

“…If I had to pick the single X factor most responsible for our success
as Turtles, it would be the fact that we were taught by a legendary
trader. This knowledge gave us a faith in the methods that
Richard taught us, making it much easier for us to follow his rules
consistently and persistently…”

Because of Curtis’ background in trading system testing, he also shared metrics for measuring the performance of a trading system (even how to identify if a trading system has an edge), how to do proper backtesting and pointers on how to make a trading system robust. Along with the interesting Turtle trading stories, I definitely find this book a good read!

inpost image by turtlemom4beacon

I am backtesting a trading system with daily charts - manually.  I have to do it for over 5 instruments. I confirm that it is tough to do manual backtesting Tough not in the menial way but mentally. As I am working my way through the charts, I keep thinking of the following:

I can only carry out limited testing

I am only backtesting the trading system itself - the entry signal, the entry, stop loss and profit target. What I did not include is money management and my psychology.

Well, it is still possible to simulate money management. Just that it will take even longer for the backtesting. As I am trading more than 1 instrument, my money management has to take into account for which instrument the entry signal appear first. You can imagine I switching between 5 charts and determining if the entry signal has appeared. Hence the longer time for backtesting.

It is not possible to stimulate the psychology part though. For example, I may choose to skip a trade because I have quarreled with my wife… for instance only

What can I tell from the backtest results then?

Since I am not able to simulate money management and psychology, what can I get out of my backtesting? We all know that most trading systems have success rate of around 50%. Am I to just prove that my trading system is near average?

How much history data to use for backtesting?

Ray Barros suggests that he would backtest 5 years worth of downtrend data, uptrend data and range data. I found that amazing. Firstly, I have to determine uptrend, downtrend and range data accurately. Then it is the painful process of working through the data! Tough job!

Which instrument to backtest?

Do I want to trade with instruments that are uncorrelated? How can I be sure that the instruments that I have chosen are uncorrelated.

Will backtesting using different charts reap the same results?

For instance, the daily candle on InterbankFX chart closes at 8 am SGT while the daily candle on Oanda closes at 10 am SGT (if I remember correctly, anyway, they definitely close at different times). Will I get the same backtesting results with the 2 different charts?

Then again, would I want to do my homework now or do I prefer to pay the market to learn? Meanwhile, the backtesting continues…

刘谦 (Lu Chen) - a magician from Taiwan gained popularity among the Chinese community rapidly after he performed a magic trick that involved “putting” a ring into an egg on China National TV early this year. After watching his interview (another section of the interview here) on how he got started in magic, it sets me thinking: How different is learning trading from learning magic?

Lu Chen started to learn magic as young as 7 and become successful at the age of 30. Some aspiring traders can be at it for decades without any success. Seems like he has a much higher chance of success as compared to if he had learn trading instead

This set me thinking. So did I?

Well, yes and no

From attending Freely, I learned about options basics and researching US stock fundamentals. After that I knew that fundamentals and options are not for me.

From attending FX1, I learned that 5 min charts are not optimal for me and that the market is dynamic and changes over time and template strategies don’t work. It forced me to learn EA programming too

From attending Farseers, I double-confirmed that 5 min charts are out for me and learned about profit trailing, correlation and futures (ES and ER).

From FX Clinic, I learned that hourly charts are not optimal for me too and that the markets do have some structure in terms of price (sometimes). FX Clinic also taught me to look at money management creatively.

From Tom Yuen’s course, I re-learned my technical analysis and enjoyed the many pit stories.

After the Habit of Success, I have given my trading plan a makeover and will be incorporating the trading journaling, position sizing and trade management methods on the daily charts.

So do you think it is a yes or no?

For me,

Yes

I have learnt what do not work for me. As you may observe every course presented me with a new perspective or taught me something new. Basic technical analysis knowledge was reinforced almost in every course. So I am applying what I have learnt in that manner.

No

After attending the Habits of Success, since it provided me with strategies and system to trade the timeframe that I am comfortable with, it is definitely easier for me to adopt the strategies and system wholesale first. Subsequently, make changes to the strategies and system to better suit my personality with knowledge from the previous courses and books.

in post image by Capture Queen TM

I have not tried it out myself yet but let me summarized what is new from the article:

• Supports object-oriented programming (OOP) - Expert advisor (EA) programmers that are familiar with object-oriented concepts can design their program in that manner and achieve better software maintainability and reusability
• No Low[0] or iLow ( Symbol(), PERIOD_D1, 0 ) - Existing EAs that use these will have to change
• New MQL functions: OnTimer(), OnTrade(), OnChartEvent() - Suppose to ease development efforts and to improve interactivity
• Timeframe flexibility - More denominations of minute timeframes
• Data stored as a minute timeframe - The hourly charts, daily charts and all are derived from minute chart data
• Able to clear the logs

From the presentations and his book, I sense that Ray is a what I call a engineer trader. He is a discretionary trader but his material is very objective. For instance, he teaches how to grade our trades to tell if we are following our trading plan. He advocates the expectancy formula as the holy grail of trading. He uses a lot of statistics (you can always hear him saying “standard deviation” in his presentations). Having a engineering background myself, I feel that I can connect with his teaching, looking at numbers and statistics and formulae. Hence, I signed up for this course. He meant to come down to Singapore to conduct the course initially (he does that once every year), but due to personal reasons, the course was changed to a webinar instead.

More about the course:

• Website: http://www.tradingsuccess.com/hos.html (This is the website for the webinar, not sure if he will be coming down to Singapore to conduct the course in the future, you may want to email him)
  
• Duration: 4 days (7.30pm to 11.30pm on Saturdays and Sundays)
• Cost: S$800 (the webinar cost US$750 but I paid the live seminar price)
• Held at the comforts of my home using Omnovia, no software installation needed
• Ray went through some practical tips, particular using Neuro Linguistic Programming (NLP), to psyche us on learning trading and highlight common psychology barriers during trading and how to get around them.
• Ray brought us through on how we should keep our equity and psyche journals. He even provided a equity journal template to help us along (a fairly complex one too).
  
• Finally Ray taught a trading system based on RSI (nope, it is not the normal way that most people use it). The main objective is to trade and cultivate the good trading habits as taught as well as practise position sizing and trade management. The trading system can by applied to any timeframe and any instrument. The statistics of the system are in the HOS website.
• I get to download and keep the recorded webinar video and review them unlimited times
• I get samples of trading journals, Ray’s equity journal spreadsheet and other reading materials.
• There is 1 week of personal email support by Ray after we have reviewed the recorded webinar video
• Thereafter, we can join his past students in a forum or something (I haven’t reach that stage yet) and continue discussion and seek assistance
• Ray also introduced a new mentoring webinar following this webinar to hand hold students in putting what we have learnt in the HOS webinar to practice.
• Ray also has another advance course.
  

jmot’s Takeaway

The webinar answered many of my doubts, including how much capital should we start with? What instrument can we trade with such a capital size? Ray has mathematical formulae as answers for my questions. I find the webinar very good value, considering there is such in-depth discussion on trading psychology and trade journaling. Come to think of it, no educator I come across so far go to such lengths in explaining trading psychology and traded journaling (with such a complex spreadsheet), and at such a low price. I get to keep the recordings and can review them again and again.

Downside is, learning through webinars takes some getting use to. Webinars are more one way. In this case, Ray Barros is the only one talking. We ask questions by typing them out in a chat box. The content is jam-packed and with only Ray speaking, things can get dry at times, especially when it is 11pm at night. Also with webinars, one may be distracted easily. Well, at least I was distracted by my kid at times…Then again, there is the recorded video to help us along.

Smaller margin requirements and tick size

So now with US$5000 trading capital, we can trade the S&P500 index! See the table below. Fine, perhaps we cannot trade futures because we need US$5,625 minimum in our trading capital to trade a futures contract. Now we have the option of CFDs.

* - Values I gathered with a demo trading account. I could not find the specs from CMC Markets website.

There is CFD for everything! (almost)

Seriously, I don’t know what we cannot trade with CFDs. There is CFDs on forex, futures, stocks from various countries etc.

BUT…

The prices for CFDs, like forex (non-ECN), are quoted by the brokers. So there are talks of manipulations, brokers trading against us etc, giving rise to long candle tails.

So is CFD for you?