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MANUAL TRADING. The search for the Holy Grail.

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Steven Theobald
852
Steven Theobald 2013.02.23 17:47 

MANUAL TRADING.  The search for the Holy Grail.

I have looked high and low in the forum, but found only fragments of discussions on things that might end up here.  There are lots of present (and future) MQL5 members who have never really touched a line of MT4/MT5 code who love to trade - like me.  And we need a forum spot to discuss some very powerful  ideas.  I have a very unique perspective that I want to share with those who are interested--including my greatest trading epiphany.

Many of the principles discussed in this thread will be directly applicable to programming a great EA, but lets focus on the HUMAN side--since the market is truly the embodiment of human emotion.  Face it--the true value of the pork bellies or the EUR/USD really doesn't change that much in 60 minutes.  Its the humans who are shaking things up.  Just toss in a little fear and greed and stand back and watch in amazement.  Then the action really takes off-- like popcorn in a microwave!

That emotion drives many new traders crazy and close to the brink of destruction.  And some literally lose everything-including damaging relationships with loved ones.  Despair sets in.  They can lose thousands of dollars in mere minutes.  Personally, I lost over $100k in a just 24 months, so I am well qualified to talk about the all-encompassing emotional side of trading.  In a panic, I ran from one signal service to another (over 50), one guru to another, one EA to another, changing from stocks to options to FX to futures and back to FX again. 

Yes, I am embarrassed to share my story, but after talking with many traders, I realize that it is not just my story.  This is the story of 95% men and women who are successful in their professions and intelligent, but naively venture into the markets -- like sheep among the wolves.  And promptly get their heads handed to them on a platter.

So let's find some courage and deal with the realities of manual trading and stop denying the elephant in the room.

-------

What is my unique perspective?  I have learned enough to be successful.  It has taken me 7 years and thousands of hours, but I am happy to report that I have become consistently profitable as a manual trader.  I can finally breathe and have some confidence again.

But where have I really arrived???  Surprisingly, back where I started:  EMOTION!   Now I can control mine, and I can truly understand the emotion of other traders and can turn it into a profit.  The very thing that did me in is now my strength. 

Several large trading services actually employ market psychologists.  I laughed in disbelief when I first heard it.  My arrogance and stupidity made me think that I was better than the average human filled with emotion.  But now I get it.  And I have finally admitted that I am filled with lots  of emotion.  And it's okay.  That is what it means to be human.

And ironically, in all my searching for perfection in an indicator, I have also come full circle:  Believe it or not, I can now trade with NO indicators at all - just price.  I thought it was impossible. 

So my huge epiphany is this:  There is no avoiding emotion in trading.  You have to go through it.  Emotion is to be embraced and then controlled.  And there no magic indicator.  The search may turn up improvements in entries and exits, but when all is said and done -- The Holy Grail is Discipline.

More to come...


Paul Anscombe
3995
Paul Anscombe 2013.02.23 17:52  
TalonTrader:

MANUAL TRADING.  The search for the Holy Grail.

I have looked high and low in the forum, but found only fragments of discussions on things that might end up here.  There are lots of present (and future) MQL5 members who have never really touched a line of MT4/MT5 code who love to trade - like me.  And we need a forum spot to discuss some very powerful  ideas.  I have a very unique perspective that I want to share with those who are interested--including my greatest trading epiphany.

Many of the principles discussed in this thread will be directly applicable to programming a great EA, but lets focus on the HUMAN side--since the market is truly the embodiment of human emotion.  Face it--the true value of the pork bellies or the EUR/USD really doesn't change that much in 60 minutes.  Its the humans who are shaking things up.  Just toss in a little fear and greed and stand back and watch in amazement.  Then the action really takes off-- like popcorn in a microwave!

That emotion drives many new traders crazy and close to the brink of destruction.  And some literally lose everything-including damaging relationships with loved ones.  Despair sets in.  They can lose thousands of dollars in mere minutes.  Personally, I lost over $100k in a just 24 months, so I am well qualified to talk about the all-encompassing emotional side of trading.  In a panic, I ran from one signal service to another (over 50), one guru to another, one EA to another, changing from stocks to options to FX to futures and back to FX again. 

Yes, I am embarrassed to share my story, but after talking with many traders, I realize that it is not just my story.  This is the story of 95% men and women who are successful in their professions and intelligent, but naively venture into the markets -- like sheep among the wolves.  And promptly get their heads handed to them on a platter.

So let's find some courage and deal with the realities of manual trading and stop denying the elephant in the room.

-------

What is my unique perspective?  I have learned enough to be successful.  It has taken me 7 years and thousands of hours, but I am happy to report that I have become consistently profitable as a manual trader.  I can finally breathe and have some confidence again.

But where have I really arrived???  Surprisingly, back where I started:  EMOTION!   Now I can control mine, and I can truly understand the emotion of other traders and can turn it into a profit.  The very thing that did me in is now my strength. 

Several large trading services actually employ market psychologists.  I laughed in disbelief when I first heard it.  My arrogance and stupidity made me think that I was better than the average human filled with emotion.  But now I get it.  And I have finally admitted that I am filled with lots  of emotion.  And it's okay.  That is what it means to be human.

And ironically, in all my searching for perfection in an indicator, I have also come full circle:  Believe it or not, I can now trade with NO indicators at all - just price.  I thought it was impossible. 

So my huge epiphany is this:  There is no avoiding emotion in trading.  You have to go through it.  Emotion is to be embraced and then controlled.  And there no magic indicator.  The search may turn up improvements in entries and exits, but when all is said and done, truly-- The Holy Grail is Discipline

More to come...





This site is all about the programming of mql that is why you will not find what you are looking for.

There are plenty of trading forums sites on the web which cover your topic.

 

Steven Theobald
852
Steven Theobald 2013.02.23 18:58  

Once MQL5 turned on the "Signals" switch, they invited tens of thousands of non-programmers to the site.   Times are changing for sure! 

Think of the new revenue stream for all the existing programmers as they eagerly embrace all the newbies.  Some may decide to become programmers, but most just want to subscribe to great signals.  And they have lots of cash to spend.

And then there are the non-programmers (like me) on this site who are now permitted post signals.  I only trade manually, but am now ranked 3rd out of 600 for MT4 Real systems with over 190 subscribers.  (I just have to hang on them now!)  

The more good systems that are in the signals section (automated and manual)--the more traffic this site will get.  In fact, the growth could be exponential.

So I propose that this site is no longer just about "the programming of mql," but it encompasses much more--to everyone's benefit.  And I also think that all programmers who read this thread will probably find at least one good nugget in their quest to capture the essence of human emotion in their algorithms.


Simon Gniadkowski
Moderator
17998
Simon Gniadkowski 2013.02.23 21:07  
MaxTrader:

This site is all about the programming of mql that is why you will not find what you are looking for.

There are plenty of trading forums sites on the web which cover your topic.

Actually it isn't . . .  the mql4 Forum is "This resource is a site where traders interested in MetaQuotes Language 4 and automated trading systems communicate."  but the same restriction does not apply to this Forum,  check the rules.

 

Simon Gniadkowski
Moderator
17998
Simon Gniadkowski 2013.02.23 21:09  
TalonTrader:

 It has taken me 7 years and thousands of hours, but I am happy to report that I have become consistently profitable as a manual trader. 

Can you please explain what you define as "consistently profitable" ?  day to day,  week to week,  month on month, every week for 12 months ?  what exactly is your definition ?
Steven Theobald
852
Steven Theobald 2013.02.24 02:11  
RaptorUK:
Can you please explain what you define as "consistently profitable" ?  day to day,  week to week,  month on month, every week for 12 months ?  what exactly is your definition ?

Hi Raptor,  

Short version:  On my signal system, my goal is 2% safe growth each day.  Over the last 3 weeks I have averaged about 6% per day - safely, with a nice flat curve.

Long:  Over the past 7 years I traded stocks, options, FX, futures, and then options on futures.  Then I tried FX and futures all over again.  Over the past 5 years, I have started over 100 systems on the big signal-following sites.  I also followed over 50 signals from other traders - but all sucked my accounts dry.  Finally I had no other option than to play around with a $25 micro-lot FX account!  I used to blame all my troubles on those stupid signal providers and of course, Ben Bernanke!  LOL.  But I have gotten smarter now, and I don't blame anyone but myself

16 months ago I started to write in my trading journal, seeing what I was doing right and wrong.  I realized that I kept anticipating the market instead of waiting for the signal.  And I had a very strong directional bias from "gurus" I was following, and it was sabotaging me.  But I was careful to keep my margin under control and really obey my rules.  I then had my first breakthrough; I took my system on the biggest FX signal site from number 9,000+ to number 42 in just 4 weeks!  I was ecstatic.

But my success was short lived.  During the 2011 holidays, I traded on very thin volume.  To make matters worse, I didn't honor my stops.  I just "knew" that the market was about to reverse.  My account died again.  However, there was a silver lining.  Not only did I catch the vision of what was possible but I also got the attention of a fabulous futures trader who had successfully traded up to 100 S&P contracts at a time.  He took me under his wing, spending hours teaching me. 

The bottom line for him was "Simplicity + Discipline = Success."  He convinced me that taking small losses was part of the game.  That it didn't take many good wins to create a positive day IF I didn't blow it with a huge stupid loss.  Following my rules was the key to it all.  He made me unsubscribe from all my "gurus" so I could only trade what I  see.  And he showed me the possibility of trading without any indicators.  I have taken what he showed me and applied it to the FX market and made it my own now.

I really like these quotes from the article in Investopedia called "How to Develop a Trading Brain"

"No other profession creates so many and such intense emotions and reflects so much of our personalities." 

"The fundamental role of trader psychology tends to be underestimated and too much emphasis placed on the technical side. While both are essential, it is arguably the right mindset that differentiates successful from unsuccessful traders. However, learning the technical aspects of trading is more straightforward than acquiring a top-notch trading brain. The latter generally entails working intensely on one's own personality traits and eradicating entrenched behavioral patterns. This process is not easy and requires dedication, time, and often, the aid of a skilled coach. Nevertheless, the results are very likely to reap dividends." 

My goal is 2 to 4% growth on my account each day, depending on the movement of the market.  For the last three weeks I have averaged about 6% daily.   This is the best I have ever done.  I will do my best to keep it up until my broker says "max lots reached!"  And then I will open two accounts and start over again.








Simon Gniadkowski
Moderator
17998
Simon Gniadkowski 2013.02.24 14:18  
TalonTrader:

Hi Raptor,  

Short version:  On my signal system, my goal is 2% safe growth each day.  Over the last 3 weeks I have averaged about 6% per day - safely, with a nice flat curve.

OK,  so your definition of "consistently profitable" is meeting your daily target for 3 weeks.
Sergey Golubev
Moderator
55331
Sergey Golubev 2013.02.24 19:29  

TalonTrader:

... So let's find some courage and deal with the realities of manual trading and stop denying the elephant in the room. ...



Yes, fully agree. I was confused with the title of the thread in the beginning ... but for now - I understand that it is 'the anti-search of ...' :)

Anyway - you made a good post.

Steven Theobald
852
Steven Theobald 2013.02.24 20:02  
RaptorUK:
OK,  so your definition of "consistently profitable" is meeting your daily target for 3 weeks.

You are probably wondering what delusions allow me to think that on any planet in the galaxy three weeks can be considered consistent.  It's really more like 3 years.  But let me explain..

In my work with the biggest signal sharing service over the past 5 years, I had many systems that were profitable most days for as many as 8 weeks--and then I would blow it by over-leveraging or not using the correct stop . . . especially when a politician was about to open his mouth.  As mentioned previously, my best system earned me the number 42 spot out of almost 10,000 systems at the end of 2011.  But then I dropped far.

Here is what my manual trading performance has consistently looked like for much of the past three years before I started my system on MQL5 three weeks ago.  It was this performance that captured the attention of the great futures trader who then became my coach:

  • 3 max open positions
  • 30 pip stop
  • 7 pip average profit per trade
  • 90% win rate
  • average negative excursion of only 24 pips per trade
  • 3 to 10 trades per day
  • average 50 pips per day or 250 pips per week
  • one of the lowest risk profiles on their site.  

But then--each time--there was that one fatal flaw--my Achille's heel-- that destroyed many of my previous hard-earned pips, and trashed my stats.  And when this happened, I would just quit in despair and start a new system.   

So what is different now???  I think I have finally protected the Achille's heel, and I thank MQL5 for being a big part of the turnaround:

1.  I now always honor my stop--no matter what.  I have finally figured out that a few small losses are part of the game.  What subscribers want is consistency.  They are willing to put up with a few losers to get the big prize.  I have been a foolish perfectionist.  But now I am willing to drop my 90% win rate down to 80% or 70% in order to not "blow out" my account again--especially now that I have 195+ subscribers!  It doesn't matter if I think the market is about to reverse in the biggest drop of the century.  I can always reenter if I get stopped out.  Psychologically, I have finally allowed myself to breathe and not be the "perfect" trader--since I know with the unknowable market the perfect trader is a statistical impossibility.  This has lifted a great weight off of me.  And the new epiphany here is that the freed-up mental space is now allowing me to see even better entries. 

2.  I keep my margin under control.  I used to increase the size of my position considerably when I "knew" what the market was going to do next--even if I had promised myself not to do it.  Now I keep those promises.  I still get bit by the big dogs on trades, but now I don't lose my arm.

3.  I am willing to get out "immediately" when a trade goes against me.  I have had several break-even or small-loss trades.  I don't wait for a trade to hit my stop loss if the sentiment has changed and the reason I got in the trade is no longer there.  On that big signal site, the subscribers PAY BY THE TRADE whether profitable or not.  And so to close out any trade at all with a loss "adds insult to injury" to subscribers.  It was very hard on me to see subs lose this extra money, so I tended to wait until my stop got hit, hoping that it would turn around instead and finally become profitable.  So MQL5 with the flat fee per month is a much better way.  This has allowed me to trade properly and not have the psychological baggage of subscribers complaining about "churning for commission."  Of course, a system of payments that completely aligns the interest of the subscriber and the provider by paying "only when profitable" would be the best method of all.  Another one of the big signal sites does allow for this option, and many brokers now offer PAMM accounts too, which I considering-which would eliminate all slippage issues.

4.  Emotional control on losses.  Now when I have a loss I breathe and accept it.  I walk away from the screen.  I never engage in "revenge" trading.  I humbly take my licks and try to learn what the market is trying to tell me.  I KNOW that there will be another setup soon.

5.  My daily target is reasonable.  I don't put the pressure on myself to keep up with the best traders on MQL5.  Many of the demo account EA's are simply amazing!  I am so impressed.  And even though I was recently bumped to #3 by subscriber count on "MT4 Real," I know that low-risk consistency is more important than daily growth.  I am satisfied with 1% to 2% per day.  I know that 1% per trading day will turn each $100 into over $10,000 in 12 months.  I will go for more if I see the setups.

6.  I am finally seeing the emotional side of price action.  I used to try to catch "short" falling knives all the time looking for a bounce.  And I used to always step in front of a "long" speeding locomotive looking for it to fly off the cliff.  Now I know that waiting for the emotion to die down a bit before trying to catch the reversal is the only sane thing to do.  One day I stared in awe at the profit chart of a highly successful system that only went long once the RSI reached 80 or short once it reached 20.  CRAZY! . . . or so I had thought until that moment.  I am much more careful now and generally wait for the move to demonstrate some weakness before being a daredevil and stupidly getting chopped up with short knives or obliterated by long trains.

7.  I don't feel compelled to trade.  I love trading.  It it like a good game of racquetball.  I love hitting the ball so it is impossible for my opponent to return it.  But sometimes the market isn't moving.  One day last week I took ZERO trades--because I saw no decent set ups.  Some subscribers complained; but I just smiled.  This is a great step in the right direction for me.

8. Trading times.  I am doing better about not trading all the time the market is open.  Closing down my platform after the NY morning session allows my mind to rest.  I have been doing more of this.  And I have been trading less of the Asian open too.  I can get other things done and done better because I am not thinking about my open trades all the time.  I used to do a lot of swing trading and I see now how it consumed me.  I have also now committed to not trade Friday afternoons because I have been stuck in draw downs too many times.  I hate it when my fast trade becomes a swing trade, which is not what I want to be doing with this account.  Of course the Sunday opening with possible gaps can be a killer too.

9.  I am trading with fewer  indicators.  I think the clutter was fragmenting my brain.  I am now going for simple.  I can actually trade without any indicators at all now, but I still like my 50 sma and my simple MACD.  I used to have 3x as many things on my charts.  (I also like to check the overall daily ATR to make sure I am not buying at the high or selling at the low of the predicted range.)

10.  I will not give up.  One of the ironies is that I have been searching for perfection in trading, instead of consistent gains.  Many of the most popular signal systems on signal following sites had rocky starts.  While my stats were much better than theirs, they kept going after a series of bad trades.  They are now in the top 100 and I have started over--once again.  The lesson is not lost on me.

Raptor, thanks for asking the question- forcing me to really think about consistency. "Three weeks" is truly laughable when trying to claim success, but it's actually more like 3 years of "mostly" consistent performance for me.  Let's see if I can hang on and really reach my minimum target of 1% per day using the 10 principles listed above in my manual trading.


Steven Theobald
852
Steven Theobald 2013.02.24 20:21  
newdigital:


Yes, fully agree. I was confused with the title of the thread in the beginning ... but for now - I understand that it is 'the anti-search of ...' :)

Anyway - you made a good post.

Thanks NewDigital.
Simon Gniadkowski
Moderator
17998
Simon Gniadkowski 2013.02.25 11:28  
TalonTrader:

You are probably wondering what delusions allow me to think that on any planet in the galaxy three weeks can be considered consistent.  It's really more like 3 years. 

I don't think you are delusional,  from what you have written you haven't had consistency for 3 years.  All I was looking to understand was how you defined "consistently profitable",  by your definition I have EAs that are "consistently profitable"  but I wouldn't dream of using them live.
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