26/10 – Practical improvement tips for daytraders

As usual in recent weeks, I did a weekly wrap-up post last Friday.  Click here if you want to read it. Somewhat unexpected, a lot of comments and constructive suggestions came in as a result here othanksn the blog, on my facebook and via WhatsApp!  It was really encouraging to get all these helpful suggestions from members of the trading community – thanks a bunch guys (and girls)!

I wanted to list these here, because these helpful suggestions could be useful to lots of traders at varying points in their trading career.  So without further ado, here is a list of all the suggestions (I think I got them all!), not in any particular order:

  • Reduce trading frequency – focus on fewer trades but make these trades count, in other words pursue a trading strategy with higher edge, and increase lot size on those trades
  • Review my stop management approach – consider a trailing stop, focus on reducing the size of the losing trades, and try to let the winners run more
  • Focus on fewer instruments so that I can understand these instruments well
  • Use myfxbook to analyse my trades  and to understand the probability & statistics associated with my strategy (my add: Chasing Returns is also great for that!)
  • Switch from trading forex to trading options, because it is extremely hard to make money daytrading forex
  • Appreciate the cumulative impact of slippage and other transaction costs [my add: Blog posts on roulette illustration of transaction costs and transaction costs in trading]
  • Spend less hours working in the office, take a break, and focus on things I can control (health, sleep, nutrition) [my add: Paul Wallace is a trading coach who covers these types of trader issues really well]
  • Turn off the squawk that streams important market information throughout the session
  • Understand the likelihood of drawdown and losing streaks, given various strategy expectancies

Most of these points are really good – and again I really appreciate several of you really trying to help out – very appreciated!!   And these could be helpful to a lot of aspiring traders, rather than just me.

My comments on the suggestions (less important!)

I was not planning on replying in detail to each suggestion (I think that would make an extremely long blog post!!) – but hope it’s all right to quickly say the following:

  • I have (and still am) doing a lot of testing and development with this 1hour-timeframe-based trend-following strategy.  Market conditions in September and October have been terrible for this kind of strategy.  It sounds crazy to propose to use a strategy that works “sometimes”.  However I am also working on developing metrics for assessing the markets generally to give me an idea of whether the strategy is likely to work or not at the present time.
  • Thus, I will continue to trade this strategy live, though with minimal position size.  I am happy to “pay” the market for the information of whether the strategy is working or not.   Trading the strategy live will help me stay focused on the market and be more alert – this happens with me regardless of position size.  And it will help me to quickly identify when the market conditions are in fact turning suitable.
  • As far as understanding risk, edge, probability, drawdowns, transaction costs etc – this is an area that really fascinates me so I am always eager to discuss any aspects of it – I’d like to think that I actually understand this area fairly well – that’s what traders more experienced continue telling me and one City-based hedge fund has used me on several occasions to talk about this topic to their traders  – so I will take their word for it.  My knowledge in this area primarily stems from playing various casinos games for several years.  By the way for blog posts on risk & money management you can search by the category.
  • Whilst the market conditions are clearly SHIT for trend-following right now, I will now look at developing a reversal strategy, which should be more suitable to the current low volatility environment across most of the asset classes.  You will be able to read some more about that in the blog in coming days/weeks.


Anyways, thanks again for all the constructive comments everyone! And thanks for reading this blog – it encourages me to keep writing!


This entry was posted in Psychology, Risk & Money Management, Trend-Following Strategy. Bookmark the permalink.

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