Budget Day, March is already better - Day Trading: Feb 29, Intraday

After the drudgery of the February series, a better day today. It was the Budget Day. For me, it was a  shorts day, with 7 shorts and no longs. That also meant that I could not make anything in the almost 300 point upmove - in fact, I made a loss during that move.

I loved my entries today - each of them had potential, but the exits are what I am unhappy about.

Trade 1: Range Compression entry, even before the budget announcement. Target was the then day low 7025, but I decided to demur even though price reached 7017. Finally, booked a loss. Trade Drawdown -26 points.

Trade 2: Another Range Compression entry, just as the Finance Minister was announcing something about the LPG scheme for the poor. Entry slipped by 4 points. Wanted to trail to 7001, but did not. Trade Drawdown -25 points.

Trade 3: With Trend Pullback entry. Went well. Again, I wanted to trail to 6852, but I don't know what got into me. Trade Drawdown -50 points.

Trade 4: Counter Trend Breakout Failure. Moved immediately, but not much. Trade Drawdown -30 points.

Trade 5: Entry after Breakout Failure. Trailed fast. Good. Trade Drawdown -13 points.

Trade 6: Range Compression Entry. Wanted to trail to 7050, but did not. This was the only time today, that I benefited from not moving the Stop Loss. Trade Drawdown -19 points.

Trade 7: Another Range Compression entry, just 3 minutes before auto square-off. Entry slipped 4 points. Exited in 1 minute for small profit. Trade Drawdown -8 points.

Total trade time of all the trades was just 1 hour and 13 minutes. Happy with the results, though this was a big points day, and I could not make much out of it.

Last week's trades - Day Trading: Feb 22-26, Intraday

Finally, updated the stats and charts of last week's trades. It is a pain to mark these up at the end of the week. Going forward, I shall try to update the trades daily.

Monday's trades:

I tried trading mechanically of the constant volume charts. Didn't do well - the day did not have enough range.

Tuesday's trades:

Shifted to discretionary trading, and continued for the rest of the week. While trying discretionary trading, I am still trying stick to the motto of Range Compression Trading, to the extent possible. Day could have been much better, if I had focused on Decision Points.

Wednesday's trades:

Continued with discretionary trading. I think that my entries were great, but in trades 2 and 4 I lost out because I tightened the SL and got hit by bad luck.

Thursday's trades:

Expiry day. Did not do well. Trade 2 exit was unlucky. In Trade 4, I held off exiting at the peak, and then turned it into a loss.

Series Performance:

The performance in the February Series was very bad. The Trading Stats speak for themselves. Here's a comparison with the January Series.

January

Days Traded: 19
No. of Trades: 50
Win %: 38.0%
Average Win: +36.8 points/trade
Average Loss: -9.6 points/trade
Average Result: +8.0 points/trade

February

Days Traded: 20
No. of Trades: 81
Win %: 27.2%
Average Win: +28.2 points/trade
Average Loss: -10.8 points/trade
Average Result: -0.2 points/trade

Friday's trades:

The first 2 trades were positive (exits could have been better though), and the last two were negative, though all of the trades were based on the same entry logic. In hindsight, could have tightened Stop Losses a bit.

End of a bad week - Day Trading: Feb 19, Intraday

The best thing about this week is that it's over. Was trading quite unplanned, but mechanically....

Trade 1: Short -9 points
Trade 2: Short -3 points
Trade 3: SAR Long -12 points
Trade 4: Long -9 points
Trade 5: SAR Short +9 points
Trade 6: Short -3 points

Acceptable regret? - Day Trading: Feb 18, Intraday

At this point, I am no longer even thinking straight. I have been hit by loss after loss after loss this month, and the account is in a stagnating rut this month. Plus, I wasn't focused on the screen at all today. How do I get the motivation to focus, when the results are like this?

Today, I continued with the modified mechanical Range Compression Trading System. This time I tightened the Stop Loss rules to something similar to the one I had used with the Momentum Lagging Trading System. These Stop Loss rules are really just focused on reducing my regret when I exit a trade - Acceptable Regret.

Did not work. No funcionó. WTF to do tomorrow? Lot's of choices, and I will choose one tomorrow. Forgetting the troubles for today....

Another day wasted - Day Trading: Feb 17, Intraday

Mechanical Trading System, so I get to blame it on the mechanical rules that I created.... I am kinda happy with the change to a more liberal entry rule. That gave me more opportunities today, and most of the entries were good.

The Mechanical Stop Loss... utter failure today. I have kept the Initial Stop Loss wider, but that did not seem to be of much use today. But the Trailing Stop Loss is what gets me - how can I lock in more profit? I do not want to implement a Target Exit, or even a Partial Exit just yet. An alternative is to get back to the tighter Stop Loss rules that I used with the Momentum Lagging Trading System.... though I like the current relaxed Stop Loss rules better.

Today's trades

1. Short, MFE +15 points, Result -14 points, Trade Drawdown -29 points
2. Long, MFE +60 points, Result +34 points, Trade Drawdown -26 points
3. Short, MFE +39 points, Result -15 points, Trade Drawdown -53 points
4. Long, MFE 0 points, Result -5 points, Trade Drawdown -10 points

The drawdown of 53 points has been the biggest intra-trade drawdown this year. The only other 50+ point intra-Trade Drawdown was on January 13, but at least that trade had locked in some profit.

At the end of it all, I am still undecided on the Stop Loss rules to be used tomorrow...

Not a very good day - Day Trading: Feb 16, Intraday

Range Compression Trading System - mechanical version continues. The first 3 trades hit their Initial Stop Losses. The fourth trade redeemed a bit. Number of trades have increased since I am now using a more liberal mechanical entry criteria. Initial Stop Losses are kept wide.... As I always feel with this Trading System, felt stupid giving up large MFE's to make losses (that's really a result of the mechanical Trailing Stop rules, and not the Trading System as such).

Back to the Range Compression Trading System - Day Trading: Feb 15, Intraday

I am back to trading the Range Compression Trading System, with certain modifications. I am now trading it completely mechanical.
 
The main change from the way I traded the Range Compression Trading System in January is in the entry. Now, the entry has been made mechanical, and more liberal in order to get more entries. Also, the Initial Stop Loss may be wider sometimes. Everything is based on mechanical trading rules.

Today, was a totally uptrend day, at least for the relevant part. The first trade was a late long entry into the trend that got me profit. The second trade was a later long entry into the trend that made me a loss.

Falling Knife ⚔ Stalling Knife - Day Trading: Feb 12, Intraday

I am so done with this Momentum Lagging Trading System..... (for now). The intention of this Trading System was to catch the falling knife when it had momentum, and ride it to profit. What I had not bargained for, was the number of times that the falling knife would stall right at my point of entry.

This was probably the wrong time for me to switch from the Range Compression Trading System. If I had traded the Range Compression Trading System on Friday, then I would have had 2 Short winners in the down move and 2 Long winners in the up move.

One of the reasons for the Momentum Lagging Trading System doing so bad is the tighter Stop Loss rules that I have used for this system. However, at this point, I do not want to test that system with a wider Stop Loss. Momentum moves are volatile, and the risk of slippage is huge. And it is difficult to backtest whether a tight Stop Loss would hold, since the entry is during a volatile period, and I wouldn't know if the Stop got hit in the same bar unless I have tick data.

Number of trades was going through the roof. With the Momentum Lagging Trading System, I have 24 trades in 4 days averaging 6/day. In comparison, with the other Trading Systems this year, I had 67 trades in 26 days, averaging 2.6/day. With the Momentum Lagging Trading System, 33% (8 trades) hit the Stop Loss with 5 minutes. In comparison, with the other Trading Systems this year, only 6% (4 out of 67) hit the Stop Loss with 5 minutes. So, though the Momentum Lagging Trading System did not cause me a loss, I have to drop it just for the jitters it caused....

What a miss!! - Day Trading: Feb 11, Intraday

Today is the third day of trading the Momentum Lagging Trading System, and I am already hating it, with enough justification.

It was a downtrend day all the way. I had guessed that the Range Compression Trading System would have entered Short early, and made 200+ points. But checking the charts again, I find that the Range Compression Trading System would have entered a Short trade after 9:45 at 7185, and exited it around 7103. Ohh... Yeah, so not so bad. I will loathe this Momentum Lagging Trading System just a little bit lesser...

Though it was a gap down, and a steady downtrend, there was not much momentum in the morning. The first entry of the Momentum Lagging Trading System was triggered at 1:10 PM, and then things moved fast - maybe, a bit too fast for this Trading System to handle. There were 6 trades overall - 5 shorts (with trend) and 1 long (counter-trend) - all took a total trading time of 52 minutes. This being a 100% Mechanical Trading System, there was not much I could do, except take all the hits.

Differences between the Range Compression and the Momentum Trading Systems

From the Statistical POV, The Range Compression Trading System and the Momentum Lagging Trading System appear to be fundamentally different.... but I guess that the main cause for that is the tightening of the Stop Loss Trailing Rules in the new Trading System. Otherwise, the only difference is in the Entry Rules. While the Range Compression Trading System enters after Price dulls down and compresses into a small range, the Momentum Lagging Trading System enters when the range expands. With the Range Compression Trading System, I was getting too many losing entries during Ranging periods this month. Also, I was missing out on fast directional moves..... and I am still hoping the Momentum Lagging Trading System will star on another day.

Trading the Momentum - Day Trading: Feb 10, Intraday

After all those dark days, comes a glimmer of hope. Today is my first real positive close in February - though not a big one.

I started trading this Momentum Lagging Trading System yesterday - I really need to get into Onomastics now, I called the previous Trading System as the Range Compression Trading System. I would have named my dog Dog, but since that would be too generic, I named it WhiteDogWithBlackPatchOnForeheadBackAndPaws ☹

Well, this is a Momentum Trading System - that much should be clear from the chart. All entries happened when the Price started to move. And when the Price slept after the entry into the first trade, the System idled as well. And when Price started to wriggle, the System got into its act.

As of now, it is a totally Mechanical Trading System. The exits of the first and the third trades were unfortunate - but that is to be expected when I have tightened the Stop Loss rules that were used in the Range Compression Trading System. (I might go back to the previous Trailing Stop rules just yet...)

5 trades on a directionless day - after a gap down it was ranging for most of the day, then got volatile in the last couple of hours. The Price was so wriggly that for the first time in this year, I have Long Loss, Long Profit, Short Loss, and Short Profit - all on the board today.

Check it on the Trading Stats page - I was able to fix the Stats page yesterday.

Finally, system hopped - Day Trading: Feb 9, Intraday

For most of this calendar year, I have been trading a single Trading System - the Range Compression Trading System, off the M15 charts. Finally, today, I decided to System Hop and try some new entry rules. With this new Trading System, I am trying to catch momentum - which is a dangerous business, as you can see in today's chart - buying tops and selling bottoms.

The other change that I have done this week is to shift to a completely mechanical trading system.

I have kept the Initial Stop and Trailing Stop rules very similar to that used with the Range Compression Trading System, though slightly tighter. I am trying to carry over the motto of the Range Compression Trading System into this new system.

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Say NO to small profits, Say NO to big losses.

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Be the Hunted

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The new system did not work well today, but my only consolation (if I may call it that), is that it fared better than how the Range Compression Trading System would have fared today. February has been a bad month for me. The last Short that was closed for +12 points ended a continuous losing streak of 9 trades, in which I lost 103 points before costs. Overall, in February, I have lost 156 points (pre-brokerage) in 21 trades.

Patience did not work today - Day Trading: Feb 8, Intraday

Today was another day when patience did not work. I took a single Long trade today, and booked a loss of 13 points in it - after being that trade for nearly 4 1/2 hours with a Most Favorable Excursion of 36 points. My mechanical Trailing Stop rule did not allow me to move the SL just yet....

This mechanical Trailing Stop rule with wide Stops has been consistently causing me a lot of grief. In January, it did not matter much because I was still earning some points - but in a drawdown, it is a different matter...

Bad run continues - Day Trading: Feb 5, Intraday

This month appears to be a repeat of December. Last week's score has been +8, -59, -31, +1, -40. I have lost 122 points this month.

Friday's trading was without a real plan (discretionary?), but it mostly stuck to the Range Compression Trading System. Entries were discretionary, while for Stops, I continued to use mechanical rules. All the entries were in the chop, and I got chopped. Couple of entries that could have been winners, were ignored. Most Favorable Excursion on the 3rd trade was +15, and +30 on the 4th trade.

Time to Change the System - Day Trading: Feb 4, Intraday

January was a good month for the Range Compression Trading System, but February has been jittery. Except for Jan 29, the first day of the February series, all days have been bad.

The Graphs are not looking great. Since Jan 21, there has been not much progress in Profits....
 

It's time to make more drastic changes to the Trading System, else my reputation as a System Hopper would be at stake. The joke on me is the same - of the 3 Long Trades, 2 were Buys at Pivot Highs. In the one trade that did go in my favor, I exited 21 points lower with mechanical Trailing Stops.

It's not that I believe that System Hopping would improve the results, but...

House Money Effect and Intra-Trade Drawdown

I have been (officially) trading the Range Compression Trading System since January 6.... but I have been trading the system even earlier. In November, I was mechanically trading this very same system, but with somewhat different rules. Even in the first few days of January, when I was not trading the Range Compression Trading System, I was still marking possible entries on the charts.

This system does have a major flaw, if I may call it that... at least psychologically, and even mathematically, I view it as a handicap. With the current mechanical Trailing Stop rules that I use for the Range Compression Trading System, it is given to huge intra-Trade Drawdowns.

I have written about this earlier, and my rough estimate for intra-Trade Drawdown in January was about 15% of the Nifty scrip value. What is the problem and why is it affecting me? If it is a problem, why am I not fixing it? If I am not gonna fix it, then why am I worrying about it?

If I had the answers to these questions, then I would have already fixed it (obviously... probably?). Right now, I can only think of one reason - House Money.

House Money Effect

House Money Effect is the tendency of people to spend/risk income and profits from unexpected or recent sources more easily than other money. Though this term is generally relates to gambling casinos, where gamblers are more inclined to risk gambling gains on bigger or riskier bets, it is also common to see the general public spend a new bonus/windfall money more easily - on treats for friends or gifts, because they still have to get used to the fact that it is their own money, or even because of social expectations.

In terms of trading, this results in the tendency of a trader to take bigger or riskier trades with profits. In my specific case, it even means giving up profits - and additionally booking a loss in its place. How crazy is that?

Click here for the motto/reasoning that drives me to do this

Data and Analysis

The data of all intraday trades that I have done using the Range Compression Trading System in 2016 indicates my proclivity to give away House Money. Here, I am referring to unbooked Profits - that which is not mine, but is mine at the same time. (The term is unbooked Profits, as opposed to notional profits, since I could easily book them at or near the peak.)

The average MFE (Most Favorable Excursion) per trade is about 31 points, and I generally book 9 points out of that. The peak intra-Trade Drawdown is -23 points per trade - which means that in every trade, I watch the trade lose 23 points and do nothing about it. Around 10% of the time, I watch it lose over 40 points, and 27% of the time I watch the trade lose over 30 points and do nothing about it. Again, let me stress that I am day trading, and 30 points is about 0.4% of the scrip value.

Psyching about House Money

When this happens, and I, as a day trader who does not know what tomorrow brings, watch myself giving up a large part of my unbooked Profits.... then there is a lot of psychological pressure to do things differently - to attempt to capture the Profits at or near the peak. However, as a Systematic Trader, I am constrained to do what my System Rules tell me. In case I did not mention it earlier, let me tell that this Trading System has not been backtested.... so the only thing that keeps me at it are the live results. And that becomes really difficult when I hit a bad losing streak like the one which I am in right now.

When on a winning streak, it is easy to justify the House Money Effect, since money comes in anyways. But when you are on a losing streak, giving up the House Money, and then giving up some more, things are different.

So, again, why do I have to stick to a non-backtested system, giving up significant amount of unbooked profits, day after day, and week after week? Because I don't know better. Because the results until the current losing streak were good. When I have tighter Stops, I tend to be shaken out of big moves. Also, waiting for the wide Stops to be hit also keeps in a trade longer, and hence prevents me from overtrading.

Ok, enough psyching about this. I have put forward my justifications to myself to treat intra-Trade Drawdown as House Money. Time to watch how the Trading System psyches me tomorrow....

Nothing goes right - Day Trading: Feb 3, Intraday

It's nothing goes right - part 2 today.

Today, I shifted to 100% mechanical trading. The trading system is the same as earlier - I was trading the Range Compression Trading System that I have been trading since January 6. Until yesterday, my trade entries were discretionary, while the Initial Stops and Trailing Stops were mechanical. The  difference is that today, even the entries were based on mechanical rules.

The Initial Stops for both of today's trades were a bit wide, but I chose to enter anyways since the mechanical rules were pre-decided. The Trailing Stop rules were the same as earlier, and caused me the usual heartache. In the Short Trade, I had an MFE (Most Favorable Excursion) of +25 points, but I booked a loss of -18 points. In the Long Trade, I had an MFE (Most Favorable Excursion) of +16 points, but I booked a loss of -13 points. So, the total intra-Trade Drawdown today comes to 72 points - more than keeping up with the intra-Trade Drawdowns last month.

With a losing streak of 7 consecutive losses now, this is my biggest drawdown this year. I am down 90 points from the peak.

Worst Trading Day of 2016 - Day Trading: Feb 2, Intraday

After the initial sluggishness, and the short volatility after the announcement, this was probably a good day to day trade. However, I have just got my worst trading result of the year.

All the 5 trades that I took hit their initial Stop Losses. The entries were so bad that the MFE's for the trades were +3, +5, +2, +0 and +17. Check the Trading Stats page.

I will obviously be going into the thinking and revising and System Hopping mode now - that is, if I get some free time later in today. Else, will continue with the Range Compression Trading System that had been doing good until today.

Very Small Profit - Day Trading: Feb 1, Intraday

Dull action today. Price mostly stayed within 30 point Initial Range. Took 2 Short trades. The first was a loss. The second short, on the Breakout Failure of 7600 gave a profit - enough to beat the loss by a small margin. After being in that second trade for a long time, got out to a very bad exit.