(Photo taken in Okinawa)
I went live for the first time day trading on Monday, Jan 23rd 2017. As I have mentioned earlier, I have been trading the EUR/USD spot forex on the 1 minute chart. I use MT4 for charting and entries/exits.
Just a quick summary of how I got to this point. Back in about July of 2016 I had started really reading and researching a lot on trading as a full time endeavor. Up until that point I had invested in a few stocks for long term holds with good success. I bought a few large caps back in late 2009 when the market started bouncing back and they only went up from there. Most doubled or tripled in 2016 and I sold them as they were pretty stagnant for the past year.
So, with my earnings, I wanted to get into more active swing trading. I was on Youtube and came across a really cool channel called “Chat with Traders.”
Basically the host interviews a bunch of “successful” traders and asks them about their stories of how they came to be traders, their methodologies, advice to newer traders and so on. I don’t really listen to the channel as much as I used to as I feel he uploads too many these days. Whereas it used to be (I think) weekly or even longer and I’d look forward to the next, it seems now he has gone down the path of gaining as much revenue from ads and sponsors as he can, so the more frequent uploads, the more revenue.
Anywho, a lot of them were really cool to listen to and they are pretty motivating for you to really put the time and effort into trading as a business. So I went online afterwards, bought a few books, went on a few forums, watched some videos and decided I was ready to throw down some real capital after about a month. Basically I made entries on every type of entry you could fathom, testing them out but with real money. The simulator is for pussies (I thought). Triangles, pullbacks, double tops, etc. you name it, I tried it. I did keep risk to 1% of capital and seeing where the trade would take me. I was met with mixed success being about break even after a month or two, but thank the heavens, I was strict with my stop losses. I realized I don’t really know what I’m doing and I am just sitting at my computer everyday just hoping my stocks do what I want them to. So I gave it a rest for a few weeks, closed out all positions as I retreated and hit the books once again.
Reading more and more, I came across a few articles on forex and futures which mentioned the pros over trading equities (especially for day trading). And I have always been interested in day trading as well but never considered it as I was well short of the $25,000 (and more like $30-$35,000 to trade effectively) needed to get around the PDT rule. So I looked into day trading futures and forex. Basically, for forex you could start off with $500 (I’d recommend at least $1000) and futures probably around $4000 or so. So why not give it a shot?
After perusing through the forums over at futures.io, I came across a trading style that many on their seemed to gush over. It is a price action system based on a trader that goes by the name “Mack.” (http://priceactiontradingsystem.com/pats-price-action-trading-manual/). So with so many people praising it, I decided I would give it a shot. (And I will do a separate post on his trading methods on another day, along with my opinions it and takeaways). But basically, it wasn’t for me. I spent some time then following a trader by the name “Vince Virgil,” who is a trader that based his own style off of Mack. He seemed to have really great success judging by the charts he posted daily. And I found the way he traded to be a bit more suited for my tastes. So this time, I put in a few months on the simulator using Ninjatrader trading the ES future. I didn’t want to get into the deep end going straight to live yet and thankfully so. It was a good experience and put me in the right direction for where I ended up today. Needless to say, I gave up trying to mimic their styles and took what I could from their strategies and moved on. What next?
Fast forward a few months, and a few other systems, and I came across this video. I have been following Cory (the guy who made this video) now for about 6 months. He is probably the most genuine guy I have met in the trading sphere. Most guys I e-mail after purchasing their books or systems, usually revert me to a link or give me a short grumpy old man type of response like “well you gotta keep at it on the simulator and be disciplined…bahhh bah.” But Cory always gave detailed and insightful answers to my questions. And he has the patience of a Buddhist monk because I have probably e-mailed the poor guy over 100 times in the past year with questions he definitely gets on a regular basis. Very chill guy.
I had given his eBook a read as well as purchased his swing trading course. Recommend both to traders out there as he also offers your money back should you feel it was a waste of your time. Of course neither is the be all end all, but the materials he provides is well worth the time and money.
So I watched and re-watched this video he made probably a half dozen times. He has a few others on trading the forex on the 1 minute chart that I had also watched in the past but nothing that really made me think, ok, I got it. After piecing together his other videos and a few bits and pieces from other traders, it kind of hit me like, whoa. This makes total sense and no reason why trading like this wouldn’t work. No fluff, no fancy indicators, no vague conditional answers that can go either way (*cough Al Brooks, cough*) and best of all honest truths like “ok, this was a good entry, but you would’ve gotten stopped out, and that is OK.” Realizing and understanding it’s ok to have losing trades and going with what you have after you entered the trade is the best we can do. It’s all based on feel and experience and making the most of what is in front of you and being patient. Entering a trade because strategy A from super-trader Bob says it works and then sitting and hoping for a unicorn +80 pip run up is bush league stuff. You have to take control of your own trading.
I think this video pretty much sums up the way I have been trading successfully on the simulator now for the past few weeks. I used to find trading on the 1 minute chart filled with a lot of noise and wonky movements. But then I found that I wasn’t getting enough trades on a 5 minute chart. I didn’t want to compromise. So once I learned to filter through those noisy moves and really see the main price waves, my whole trading outlook shifted on the 1 minute time frame.
Now of course I’m not saying I win every single trade, more like 50-70% (a lot are washes or +1 or 2 pip trades which boost that number a bit). but I feel like I have control over each trade. If I enter a trade, I know where, when and why I will exit. That has really been the game changer for me from a few months ago. I am able to enter a trade, know beforehand that if it stalls right below my target or the previous high/low, will I give it another chance to push before closing the trade? Or am I squeezing the last bit of the last price move and exit at the first sign of hesitation? Knowing all of these things plus a lot more has really transformed my trading. Here is an example thought process I will play through before or right when I enter a trade:
- Price has made a strong wave/move up for 16 pips and is starting to retrace.
- Previous price action has shown a tendency for price to retrace around 30-50% of the move up as we are in a strong uptrend.
- Previous price action has also shown that 10 pips for a target should be hit on almost every wave. About half of this for the stop loss or 6 pips to account for the spread. So my daily target is set at 10 pips with a stop loss of 6. (I will usually tighten the stop once price goes in my direction).
- Looking for a pullback and then for downward momentum to stall. I don’t want to enter on strong momentum downwards right at 50% just because other price moves have gone about that distance. I need evidence that the selling momentum is hesitating and buyers will step back in or that sellers are collecting profits.
- If price begins to consolidate and I feel selling momentum is done, I will place a stop limit buy order just above the recent consolidation and only triggered in on momentum going back in the direction of the buyers. Since price has been moving so strongly upwards, I will let the price make 2 attempts toward my target before closing it. If after two moves up, it pulls back, I’ll take whatever profits I have at that point. If price stalls at the previous high, it may be a double top forming and I will exit there as well.
- If the price continues to retrace down past 50% of the recent move, we may be losing buying pressure/momentum and I may be entering into the first phase of a downtrend so I need to manage this trade more actively. If after entering, price moves in my favor but I get hesitation somewhere below my target, I will exit immediately as it may be the first lower high in the next move down.
- Price does indeed pull back about 30% of the move up. Price has been consolidating now for 3 minutes. I place a buy stop limit order above the consolidation. Price jumps up through my orders and I’m in.
- It’s up about 3 pips and hesitating. I told myself I would give it 2 chances to hit my target before exiting. It makes another sharp move up to about 5 pips. About halfway to my target with good momentum. I will move my stop to break-even now.
- It is slowly creeping up towards my 10 pip target. It is hesitating now about 1 pip from my target and starting to pullback.
- I can either move my stop to the most recent attempt to go back down or, I can just let it play out if I feel buying momentum is still strong.
- Price is still just below my target and floating around not making any moves. I move the stop loss to just below this sideways movement which is at about +7 pips.
- At this point price will either go back down and stop me out with a 7 pip profit or it will continue to head higher, giving me my original 10 pip profit target.
So this is an example of my thought process that I go through with every trade that I take. Because it is so focus intensive, I find that trading about 2 to 3 hours is best to get the most out of your day. Any more than this and you can’t really manage the trades as well due to lack of mental focus. Just think of taking a 4 hour exam. During the first hour or so you are fresh and ready to tackle that thing. Towards the end of the exam, when you find challenging questions you tend to just give up or say whatever or fill in any blank just hoping to end it. Same thing goes for trading.
Here is my first live day of trading. You can see my comments there and also get a feel for how I actively managed each trade. I am a pretty risk averse guy, so any time price goes in my favor a few pips, I’d much rather get out with a pip or two than to take the full loss. Sometimes of course it gives me my 1 pip and surges back towards my target, but that is the type of risk I am willing to take – another important aspect to your trading is figuring out what type of person you are. Some would rather take the risk of gaining 7 extra pips but losing 5 than to just take 1 or 2 with no chance of losing. So you have to make that assessment for yourself.
Hope to upload a few more trading days in the near future. Happy trading.