Risk Management: A Trading Journal

Background:

I started in equity markets in 2001 with the purchase of 10 Apple stocks, at that time they were trading around $21.00 per share.

Fast forward 13 years and I sill invest a large portion of my savings in stocks, bonds, and GIC’s. It wasn’t until early 2013, after I lost my job that I looked seriously at the forex market.
Being cautious, I deposited a small amount into an account and set out on the journey to financial freedom.
It was cut short when I lost all the money I had deposited in less than 3 months. This seems to happen to every trader at least once at the beginning of their journey.
I went back through my trades and looked for patterns, and what I found was my risk management was completely off.
I took a few notes and opened a demo account and traded for 6 months and I was able to generate capital gains of 2-3% per month, which for me is a great start.
If I could get that per month with my stock portfolio i’d be sitting in a excellent position.
On October 8th I logged into my real account deposited another small amount started following my rules.
Hopefully by following my rules and having patience with Mr. Market I can grow my capital well into the future.

Rules:

1. Trade only on the Daily chart
 
2. Trades must be less than or equal to 2% of deposits, not equity

3. No more than six trades a day, this keeps my margin level above 1000%

4. Employ a stop loss of 40.0 pips

5. Employ a trailing stop loss of 15.0-25.0 pips depending on currency pair

6. Make small deposits periodically, allowing me to increase my lot size accordingly, based on the 2% rule

7. Join a partner program and deposit any money made into trading account. (This is a separate subject, I have no plans of spamming you. If you’re interested we can discuss offline.)

Progress:

Check my FX|one stats.

I have set a custom analysis time frame starting the beginning of October, since that when I started tracking my new rules.

I’m excited to hear from anyone that has input and knowledge with forex trading.

Best Regards,

Kurtis J. Martyn
 

Congrats on your 2-3% capital gains on your demo account I do hope you remain consistent on your real account.

Keeping your risk low is key I believe. Worry more about your losses than your gains.

My trading experience has been somewhat different. I have been trading for the past 5 years on and off (part time) and i have blown out several real accounts. Thank God I am still here and not in the poor house I have only recently started to pay close attention to trading demo accounts and develop a true trading philosophy and practice good trading habits while trying to root out the bad ones.

I treat my demo accounts as if they were real, I feel myself becoming more and more in control of my emotions while I trade before I would try to run down every trade I see. Now I have specific trading days based on fundamental announcements and look for high probability set ups and manage my risk based on my trade being a high probability one or a low probability one. I trade mainly the 15 minute time frames and would look for a direction on the currency pair based on the larger time frames.

Emotional intelligence is key! Knowing when not to trade is key! Risk Management is key!

Congrats again!

Emotional intelligence combined with risk management and a healthy interest goes a LONG way.

Hi Kurtis, I see you have an average 70 pip loss on your trades - how does that happen if you have a 40 pip stop loss?

danmcqualter posted:
Hi Kurtis, I see you have an average 70 pip loss on your trades - how does that happen if you have a 40 pip stop loss?

To be honest I don't know. I'm not sure if Fxbook goes back since I opened the account or not. If it does than that would explain it, if not than I'm not sure. I'm hoping it will adjust after 200 trades.

This week has started to test my patience. This is where emotional/behavioural finance comes into play. I so badly want to close a losing position, but I'll stick to my plan and let my stop losses do their job.

Post_Tropical posted:
This week has started to test my patience. This is where emotional/behavioural finance comes into play. I so badly want to close a losing position, but I'll stick to my plan and let my stop losses do their job.

 I would say stick to your guns (in the case to letting your sl getting hit), yet look at what you have in front of you. A floating red position which can get even reder thus putting your free margin further into risk. The more money you have tied up into a loser, or to make matters worse ( trying to avg out the loser) then you will miss even better positions which can be taken in other pairs, or even if the same pair.

 One of the crazy things about forex is that results will vary, and we tend to make decisions right now based on what has happened the last time. So if last time you THOUGHT about closing a position before you sl was hit, and that position ended up going green, then you will more then likely hold it the next time you see the same setup. The danger of that form of trading is that you aren´t factoring in variations of the same formation which you have profited from in the past by luck.

Cholipop posted:

Post_Tropical posted:
This week has started to test my patience. This is where emotional/behavioural finance comes into play. I so badly want to close a losing position, but I'll stick to my plan and let my stop losses do their job.

 I would say stick to your guns (in the case to letting your sl getting hit), yet look at what you have in front of you. A floating red position which can get even reder thus putting your free margin further into risk. The more money you have tied up into a loser, or to make matters worse ( trying to avg out the loser) then you will miss even better positions which can be taken in other pairs, or even if the same pair.

 One of the crazy things about forex is that results will vary, and we tend to make decisions right now based on what has happened the last time. So if last time you THOUGHT about closing a position before you sl was hit, and that position ended up going green, then you will more then likely hold it the next time you see the same setup. The danger of that form of trading is that you aren´t factoring in variations of the same formation which you have profited from in the past by luck.

Couldn't agree more @Cholipop I kept the position open and its recovering nicely. I trust my system so I let it do its job.

Made a deposit today that almost doubled my balance, so I have reduced my trade size to 1.5%.
I believe this will reduce my risk, thus making it easier to trade as my balance starts to grow.
When my balance doubles again I will reduce it 1%, and I think that will be as low as I go.

Hi Kurtis, I always like it when traders start a trading journal so we see what goes thru their minds. Some comments on your rules. I agree winning is more about not losing big, and the account somehow will go up. I am surprised to see in your rules such a tight dynamic stop. Everybody has different trading styles of course, but I would think with such tight stops you would get closed out all the time just when some official sneezes. It's tough to provide genuine feedback on your trades, since your history is private. I would suggest if you want a real discussion on your trades you should show them. Anyway, keep up the journal and good trading!

growthera posted:
Hi Kurtis, I always like it when traders start a trading journal so we see what goes thru their minds. Some comments on your rules. I agree winning is more about not losing big, and the account somehow will go up. I am surprised to see in your rules such a tight dynamic stop. Everybody has different trading styles of course, but I would think with such tight stops you would get closed out all the time just when some official sneezes. It's tough to provide genuine feedback on your trades, since your history is private. I would suggest if you want a real discussion on your trades you should show them. Anyway, keep up the journal and good trading!

@growthera I believe you are on to something, but I wouldn't know because I don't look at the chart after I enter a trade and after the exit. Maybe I should. HAHA.

I'm still learning and I'm thinking about using the ATR indicator for setting my stop loss. What do you think?

I unlocked my trade history for those that are interested. 😁

yes, I believe ATR is relevant. Lower ATR, lower stops, as long as you have some way of also looking at potential short term peaks. Why would you not look at your chart after exit? I know its game over for the trade, but every trade is a learning experience for the next trade. Why would you want to not take that chance? I guess you are trading a fixed system, so short term does not matter. I would still do this as in future you might want to have your system evolve. Not second guessing your system at every trade, but just a process of system improvement over a long series of trades...
I also trade a fixed system, and so 5 losing trades in a row is not going to make me change my trades. I do continuously look at upgrading my system (but I use 500 trades for that). I still look at the charts, there is just no way to understand your own system too well. The better I understand my system, the more confident I am in drawdowns.

Here is my trading environment including indicators, I recently added ATR.

growthera posted:
yes, I believe ATR is relevant. Lower ATR, lower stops, as long as you have some way of also looking at potential short term peaks. Why would you not look at your chart after exit? I know its game over for the trade, but every trade is a learning experience for the next trade. Why would you want to not take that chance? I guess you are trading a fixed system, so short term does not matter. I would still do this as in future you might want to have your system evolve. Not second guessing your system at every trade, but just a process of system improvement over a long series of trades...
I also trade a fixed system, and so 5 losing trades in a row is not going to make me change my trades. I do continuously look at upgrading my system (but I use 500 trades for that). I still look at the charts, there is just no way to understand your own system too well. The better I understand my system, the more confident I am in drawdowns.

I don't look at my charts after exit because I let my system execute my exits for me. It makes it easier for me not to interfere with the system if I don't look at it every minute.
I do however look at the stats on the trade on fxbook. This will gradually change as I become more comfortable with my system. Thanks again for the input @growthera

A stat that I think myfxbook SHOULD HAVE front and center is Avg Pip - Drawdown. A stat which you can find the avg of as long as the inputted % data is higher. So example you could have a avg Pip - drawdown of 5 pips, but with lots larger then 2.00 your avg is 38 pips. :) Instead of only focusing on Pip drawdown... Why not focus on the AVG of pips you give to the market. I trade using a dead chart. No need for any indicator, as no indicator can tell me if the next candle will be green or red, much less engulf the last candle. :) The simplest and most accurate form of trading is using engulf entries. When you exit on engulf you are ensuring yourself that you won't be on the wrong side of the trade.

Refined my system a bit more. I now only trade 7 crosses.

EUR/USD
USD/JPY
GBP/USD
USD/CHF
AUD/USD
USD/CAD
NZD/USD

@growthera you will be glad to know that Ive started writing down my trades in a journal. Haha. Makes it easier for me to analyze my trades when i'm at work.

How many trades does a system have to make until a trader can be satisfied that it works?

Over 200 trades and I believe my system works and I don't focus on fancy indicators, complicated math or economic news, my system is 90% risk management and 10% technical trend following.

I would love to hear your thoughts.