Less progress achieved last week. I was struck by cold & flu, taking me out of trading action for two and a half days. Had it been caused by the five hours of hiking on the North Downs Day last Sunday? Who knows – but the hiking sure was fun!
Strategy Testing continues
Got another 80 trades under my belt, despite only working half the week. Half a dozen on the live markets, and the rest using ForexTester2.
For now, the trading results are implying a return of risk of 15-17% return on risk – it would be fantastic if I can actually achieve that over a long time horizon whilst executing at least 50-100 trades per month. These figures are based on 165 trades – which have shown a return of 27.6R. Great – at this point the revised and simplified strategy is showing promise!
In the testing environment, I have traded through the 1H charts of March’2015 to February’2016 for Cable, EURUSD, Oil, AUDUSD, EURGBP and USDJPY (total of 145 trades, or around 25 per instrument). This implies that each instrument will on average have just two setups per month – which doesn’t seem a lot if using the 1-Hour timeframe – resulting in 60 trades a month if monitoring 30 instruments. Conversely it could be argued that this demonstrates being more selective with setups.
On the live side, I have done 19 trades over 6 trading sessions, monitoring those 30 instruments. Interestingly, executing 3 trades a day (19 divided by 6, give or take!) – also gets to around 65 per month. But the live trades thus far are a tiny set of data. The live returns thus far have been a gain of 6R in the first week, and a loss of 1.2R in the second week.
I used a risk of £50/trade for the live trades for the last week.
“Okay, so how is it all going?”
As I said on a recent blog post, the aim is to continue testing and to take the strategy live in May if it continues to show profit potential. At this point, the strategy definitely looks good in terms of results and trading frequency. But I still have some doubts when I take setups in either the testing or live environments. I want to get more test trades under my belt however I don’t see any harm in simultaneously continuing to take live trades.
Unlike with my testing & analysis on the 5M timeframes, the unexpected (and positive!) surprise in working on the 1H timeframe is that I am able to run the live and testing trades in parallel without seeing a decrease in productivity in either. I can actually do live trading and testing/analysis at the same time!!
I also made progress in terms of documenting the startegy.
My goal was to complete 200 test trades by the end of April – actually it was 200 for trend-following and 200 for range-trading. Very early on in April I realized the potential advantages of switching from the 5-Minute to the 1-Hour timeframe (see the details for that here) and this has created some real momentum, simplification, productivity and promise of good results. I will certainly get to 200 trend-following trades in the next three days (before escaping to Scotland for the outdoors!!) but will have to forget about the goal of 200 for range-trading.
I guess unless things go drastically wrong with the testing this week then I will continue doing the same stuff for May – testing and trading live, increasing the financial amount risked per trade. Thus, being on track on with my plans and targets, whilst at the same time building my confidence further with more testing. It seems I am able to do both. Could to get through all of the 30 instruments by the end of May? That would put my total test trades up to around 750 – a decent amount – substantial enough to judge whether my revised strategy is good or not. If it’s still good after 750 trades, then I definitely have the basis of a trading business – if it’s not then it’s back to the drawing board for needing further trading strategy development. What should be my threshhold for saying that the strategy has passed testing? 10% return on risk, 12.5%, 15%, 5%? Is “return on risk” the appropriate measurement?
- Attendance at the Traders Forum in central London was excellent. A good range of speakers, a good venue and some great conversations with other retail traders.
- Having some dialogues with more experienced traders/coaches – interesting stuff, let’s see where it leads.
- Still battling my own demons a lot. How the hell am I meant to progress if I keep beating myself up on a regular basis!!