13/2 – Testing & Live Trading Update

First of all, welcome to the people located in Estonia and Slovakia, who have started reading my blog this week – that’s something that surprised me!

The last three weeks I have been putting on live trades risking £50-£100 per trade.  I did this because I felt confident enough that my strategy (in its current phase) is profitable and therefore eligible for live trading.  The plan was to continue, in parallel, with significant amounts of testing in the simulation software.  Unfortunately, I have done very small amounts of testing during the last three weeks – a laughable 20 trades on the DAX using 2013 historical data – that’s all.  In fact I have found that my productivity as a whole has really taken a dive over the last three weeks, with the exception being a solid amount of work in the area of trading psychology.

What did the live testing produce?  Firstly a lot of material to be used in the daily psychology reviews – very helpful.  Secondly, it’s also helped me to immerse myself in the markets – fair go, primarily as far as the DAX, Oil and Cable are concerned, but still – immersion has been happening.

Now, how about the results of the live trades?  Hmmm, not anywhere near what I produced in the 15 real-time demo trades on the same instruments, using the same strategy, on the same timeframe during the period from 9th Dec to 26th Jan.  With that load of trades (Group A) I made 10R profit.  In the 35 live trades I took in the last 3 weeks I made a loss (!) of 1.8R.

result summary

results feb2015

And here’s how it looks on a chart:

graph 1

Out of interest, I am also going to show a graph for the DAX testing results (the DAX testing is based on historical data from January to August of 2013) – on it I have marked out the data that relates to the testing that was done from the date on which I began trading live (3 weeks ago) – I would think that the results in the testing software should not be impacted by the fact that i started trading live in the real markets, other than the testing became less focused because it was done in bits and bobs, rather than in concentrated sessions.  But it just scares me how similar the graphs look!!

graph 2

A couple of thoughts on this data (it was great to explore this discussion with a non-trading friend!):

  • Why is there such a stark difference between the Group A trades and the Group B trades?
    • Is it purely a coincidence? Is it simply a matter of the winning trades clustering together at the beginning?  Meaning that all the setups and position management was equal in terms of quality throughout the entire exercise.
    • Is there a difference in the quality of my trading in live conditions as compared to the real-time paper trading?
    • Is there a psychological dimension that kicks in when I trade with real money (see discussion on this a few lines below)
  • Why is my productivity so much lower when I do live trading?
    • This begs the question – why do I spend so much time looking at price moving up and down, when I am not actually going to make very many adjustments as a result in any case – stop is in place, target is in place, and I plan to only shift the stop occasionally.
    • In defense, I also spend a lot of time watching an instrument, waiting for a setup.  (this makes me realise something – with the Group A trades, I didn’t spend a lot of time looking at the charts – it was more a case that I would occasionally look and suddenly spot a valid setup!)
    • Why do I feel a lot more pressure when the live trades are on?  Surely it’s not the money, because I am only risking £50-£100 a trade.
    • Is the pressure on because I feel that every winning trade pushes me towards my dream of being a successful trader, and every losing trade pushes me towards being a failing trader who will need to look for something else to pursue for the rest of his life?  And I need to look at the price because I need to know the answer!
  • Live Trades from Subscription Service: As from Monday (9th Feb), I have been trading on the specific recommendations of a successful City trader, Alpesh Patel – who emails his specific trade recommendations on Cable, EURUSD, the FTSE index and Gold around 7.45am each morning.  Those trades, there have been six this week, I am also trading with £75 risk.  Those are live trades – but I have not really paid any attention to them at all – they have not been stressing me out, they have not been capturing my thoughts – they are just something I am watching on the side – I don’t really care whether the trades win or lose, I just try and follow the instructions as carefully as possible – I don’t care about the results (well, only in the long run) because there is no pressure on me getting it right!

I don’t really have clear answers for the above questions.  Here’s what I am going to do (basically the plan for the 2nd half of February, the next 2-3 weeks):

  • I am just going to carry on and collect more data – I am going to continue testing and I am going to continue doing more live trades (at the same level risk level of £50-£100).
  • I will continue doing the psychological reviews at the end of each trading session
  • I will do a whole lot more testing on all three instruments – this will be the primary objective – the live trades I will just do if the setups stare at me from the screen!
  • Each day I will look over the charts of Dax, Oil and Cable and identify all valid setups.
  • With the testing and live trading I will continue refining and documenting my trading strategy – thus either realising that the strategy doesn’t work, or that it does work and coming up with vital statistics such as typical win rate and typical reward-risk (RR) ratio. And it will help me to fine-tune setups and position management approaches.  And this will help me acquire a sense of confidence with the strategy.  (If the strategy doesn’t work then I will develop one of my other trading strategy ideas)
  • I will continue with the Crash Course in Applied Trading Psychology – this will be for 1/2 day each week

All right, that’s all that I wanted to say/write.

Other blog posts that are quite relevant to this post (read at your own leisure!):

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