Loss Day - Day Trading - NIFTY, CRUDEOIL

 

NIFTY

NIFTY M3 Price Action Chart

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

 

CRUDEOIL

CRUDEOIL M5 Price Action Chart

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

Regular Day - Day Trading - NIFTY

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

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...

Just my lucky day - Day Trading - NIFTY, CRUDEOIL

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

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

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.

Terrible Whipsaws - Day Trading - NIFTY, CRUDEOIL

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

CRUDEOIL

5 consecutive whipsaws....

CRUDEOIL M5 Price Action Chart

Good day - Day Trading - NIFTY, CRUDEOIL

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

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

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.

% The Evil Percentage %

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   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"...

Perpetual Dilemmas

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

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

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

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

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.

Day Trading - NIFTY - 30, 31 August 2017

Since my last post, I had been system hopping, and trying out different trading systems - mainly mechanical trading systems.

NIFTY M3 Price Action Chart

Since yesterday afternoon, I decided to try the Range Compression Trading System once more. This time, though I have rules, I have kept the system discretionary to a larger extent. Also, I do not intend to restrict myself to just the Range Compression Trading System, and will also use other methods. However, for now, the majority of the trades have been based on Range Compression.

Update:
1. Today's second trade - the Stop and Reverse to Long... I think that was really brave of me to go long when there was 9850 just below. Forgot to mention this on the chart.
2. I do not keep watching the chart all the time. This has caused me missed entries, and trails. The first 2 trades entries were almost missed, because I wasn't watching. Also, I was lucky to have avoided a SAR to short of trade 2, again because I wasn't watching.

Discretionary Day Trades - Monday, 28 August 2017, Intraday

Today, I wanted to be more patient than I was on Thursday. In the end, I did get into many trades, but with slightly better entries than on Thursday. The objective remains to take entries with small Stop Losses and trail the ones that work out.

NIFTY M3 Price Action Chart

Did not short the first bar: The pre-open had indicated a higher open. If it opened higher and fell, I wanted to short at 9900. The opportunity was there but I avoided it. Had I taken that entry, I would have exited in the 2nd bar at the entry price, and not made anything.

Ignored BOF of PDH: Was being patient... also, was confused about the direction, though the trend was clearly up. That probably would have been good entry.

Trade 1: Long as Breakout Pullback of Day High. Could have bettered my entries, but I was being patient. If I had followed my original trailing plan, I would have been in the trade until Day High, but would exit with just 5 points, and miss the downmove.

Trades 2 & 3: During the upmove, I decided to look only for shorts, though trend was clearly up and everything told me that it was going up. The first short hit SL immediately, but the second moved. M1 bars of the entries are shown on the chart.

Trade 4 & 5: Was looking for a break of 9900 with high volume to go long. Neither happened, but I still took the Long that I thought was risky. Then, reversed to short.

Discretionary Day Trades - Thursday, 24 August 2017, Intraday

 

NIFTY

Context: At open, I was undecided on the bias.

NIFTY M3 Context Chart

NIFTY M3 Price Action Chart

Held back: I was tempted to go long on the 9:38 and 9:41 bars, as a continuation of yesterday's up move, but held back.

Trade 1: Took short hoping for downward momentum into yesterday's fluid zone. Lost. Then decided to look for shorts only at Day High or below 9850.

Trade 2; Was trying to improve my short entry after breach of Day High. Bad.

Trade 3: Took breakout pullback above Day High. Another loss.

Trade 4: SAR to short on breakout failure. Could have improved my exit.

Trade 5: Another breakout failure entry with small Stop Loss. Lost.

I took one too many trades. Maybe, yesterday's missed trades were playing in the back of my mind. In the afternoon trades, the resistance at Day High held, but the reversal there could at best be scalped, and I was targeting at least 9850.

Not good excuses. Got to learn how to earn with discretionary trades after almost an year of trading the Princess System mechanically. That is, if I do not System Hop before that.

INFY

Context: Nifty was being boring, so I decided to look at Infosys, which showed up as the most traded underlying in NSE at that point of time. I did not bother to look at Bank Nifty.

Infosys has been trying to move up after the crash last week.

INFY M3 Context Chart

INFY M3 Price Action Chart

Trade 1: Opened the chart at around 11:55. Though the bias was up, I immediately liked the Breakout Failure at Day High. The low of the big red bar had already been breached, but I took the short when the price went up in the next bar. I have not been tracking INFY or any other stock for that matter, but what I saw from the previous day charts was that INFY often spikes down with stopping volumes. I was hoping for that, if not a ride to the Day Low.

Discretionary Day Trades - Wednesday, 23 August 2017, Intraday

This month, I paused trading the Princess System. I had traded the Princess System continuously for 11 months. That's the longest that I have traded any single system, longer in duration than any of my multiple attempts with the Opening Range Breakout system. So, back to system hopping.

Yesterday, I tried discretionary trading once again. I am attempting to take trades with small stop losses, and try to trail as best the ones that work out.

Nifty M3 Context Chart

I have removed more clutter from my charts. I thought that the bias was downward, and so was looking on the short side... probably a break of a pivot low.

Nifty M3 Price Action Chart

Price started off by hanging around 9800 Spot, in the middle of previous day's range. So, had nothing much to do. The Spot Prices that I have marked on the chart may not be accurate, because I wasn't thinking of posting a chart. Also, it is tiresome to watch all numbers all the time.

Trade 1: Then there was spike. Took a short when price fell. Could have had a better entry below the 9:56 doji low, but I did try to improve my entry slightly to 9820. The target was 9800. The exit too could have improved, but I had pre-decided my trailing until 9800, and the trials did not happen.

Trade 2: After the exit, the price again started moving down, but I would not enter as there was no room. So, my bais was still down. Took trade 2 as a reversal from range high. Target and trailing plan was the same as in trade 1. Had I been patient, I would have taken the better entry below the higher volume 12:23 pin bar.

Avoided short: I avoided the short below the 12:23 pin bar, and the attractive short below the congestion marked on the chart, because I already had 2 losses on the short side. At this point, I was looking for a breakout pullback entry at day high. That order converted into trade 3 later. On the short side, I decided to wait for action below 9800. In any case, had I entered, I don't think that I would have gained much, because I think I would have exited on the 1:53 spike.

Avoided long: 2:20. Breach on 9800 and reversal, but I had my doubts. Instead, I decided to try a momentum short downwards.

Trade 3: The price zoomed upwards. I had my doubts about price continuing above day high, but I decided to let my long stop at day high stay, and put a small stop loss when hit. Trailed well, but exited by a typo. Turned out to be a good exit.

Trade 4: Tried a loss of momentum short. The stop loss was hit quickly, but I was not aware of that for more than 5 minutes because I was watching the chart only, and the price never touched Stop Loss in the chart.

Princess Trading System Performance till date

Unusually, for a system hopper, I have been trading the Princess Trading System since August 30, 2016. I have been evaluating other trading systems off-and-on in the hope of finding something better. A few evaluations have identified systems that are probably good, but I continue to stick with the Princess.

I am ok with the system performance so far, and I am hopefully ready for the perils of this system when it hits me.... that is unless I shift to another trading system before that.

Here is the chart of the ledger performance, trading only Nifty Futures with the Princess Trading System....

Princess Trading System Performance - Ledger View

The Princess system is an intraday system that doesn't trade every day. But when it trades, it trades with maximum leverage. For this trading system, Kelly Criterion allows me to risk 15-20% of my capital in each trade. Consequently, the ledger balance is volatile. I have psyched myself up, and am hopefully prepared to handle even a 90% drawdown, in the hope that the remaining 10% will recover back to the peak in a short time. (Naive??)

The maximum drawdown so far has been 34.84% of the peak ledger balance. As with any highly leveraged trading system, the system trades more lots as it travels drawdowns from peaks to troughs. Recovering from the drawdowns is a slower process, because only fewer lots can be traded with the lesser cash available at troughs.

As this is a volatile system, I periodically take out some money (my dividend), to buffer the psychological impact of drawdowns. But I also add to the capital, when I see the account dipping, so that.... well, I am as stupid as that.

The chart only shows the EOD value of the ledger balance. If we consider the intraday swings in the ledger balance, the system is actually way more volatile than what the chart shows.