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Losing streaks. Another thing I struggled with was controlling my losing streaks. S-I-X-T-E-E-N consecutive losses. Highest on the win side was 4. This compelled me to see what the odds of seeing a 16-loss streak in 45 trades was (assuming 50/50). It lead me to something I never knew about: hexadeccanacci series. Sparing you the details, the odds are 1 in 4,900. So probably safe to assume I was titling the odds against me.
One thing I was curious about the losing streak was if it was a result of breaking any rules, such as no more than 5 trades per day or no more than $80 of loss per day (two full stops). On 6 or 15% of my trading days I did exceed my max number of trades (highlighted in yellow), but only 1 of those was a losing day (1 kind of breakeven day). I did exceed my max daily loss limit, but this was driven by slippage rather than me not honoring stops.
Can you help answer these questions from other members on NexusFi?
Trade set ups. I collected more data this time around. Among that data was set up information. Here are the long/shorts for trades that were pullbacks, complex pullbacks, failed breakouts, tests, breakouts, first pullback after breakout, pressers, flips (closing and opening a position at the same time) , and “gut” trades. Pressers were trades that I tried to add to a trade that appeared to be working out. Gut trades are just as they sound – no real set up, just “looks” like it will work.
Pullbacks worked, both long and short. The win rates are better, the W/L ratio is better.
Complex pullbacks I struggled with, and oddly didn’t see on the short side. Not a lot of numbers here, so tough to draw too many conclusions.
Failed breakouts were tough too, but also sparse.
Tests I got killed on the long side, probably trying to fish the bottom. On the short side I fared a little better, but probably flat given sparse data.
Breakouts were pretty flat, nothing exciting.
First pullback after breakout were terrible on the long side and pretty good on the short. Sparse data here too.
Pressers were disappointing. I would have hoped for better results when a trade appeared to be going my way.
FLIPS were not surprising. They seem like the only logical thing to do at the time, but rarely feel right in retrospect.
GUT trades always “feel” right. Not much edge in the numbers.
Crossed 10,000 views today on the journal. Thanks for looking. 91% of the journals don't make it this far - over half of those are inactive (as was I for a while). How do you tell the difference between determined and stubborn?
Type of mistake. Another piece of data that I kept track of was mistakes made during trades. I classified those mistakes into 5 buckets
1. Directional (35%), thought the market was going up/down but instead it went down/up.
2. Entry error (11%), something was off on the entry: I got in too late which pulled my stop higher, or I chased the entry too much, or I hesitated too much, but if my entry had been better, the trade would have eventually gone my way or presented a better opportunity.
3. Stop Error (8%), stop too tight, or not wide enough to incorporate the latest swing low (can be tough to distinguish #2 from #3), or moved the stop too soon.
4. Execution error (28%), didn’t let a winner run, or didn’t break even when the market gave me a chance. Somewhat of a catch-all category where something could have gone better.
5. Trade error (9%) bought when I meant to sell and vice versa. Or bought too many shares. Or bought the wrong instrument. Or put in a limit order when I needed a stop loss.
That leaves 9% of my trades that I was totally happy with given the circumstances.
Here are the P&L impact of each of those groups. Over time I hope to see the directional errors decline.
Always frustrating to see the impact of those trading errors - $26 an error. They seem so avoidable.
I also kept track of my assessment of the market when I placed my trade, whether it was trending or in a trading range (and whether my trade was in the direction of the trend or counter). Not too many surprises: with trend was my “best“ collection of trades, really got chopped up in the trading range, and counter trend has “room for improvement”.
Should I set profit targets? One question I was interested in was to see how I would have fared with a price target – rather than holding onto my winners for an undetermined amount of time and profit. The Chart below shows what my P&L would have been had I exited all my winners at a predetermined profit target – including the ones where price went my way, but I let retrace a bit too much.
Fitting a curve line to those scenarios, I get an equation. The first derivative (solved for zero or just eyeball it) shows the local maximum of the curve to be about $120. But practically a $105 and $145 yield better “results”.
In both cases, my winning percentage increases a percentage point or four and my average win declines $3 to $9, contributing to a higher overall result. If I were to split my targets into 1 at $100 and the other discretionary, that might be interesting.
When I lower my hypothetical price target to 1R or $40, I get a win rate of 49%, but I lose my big winners.
One other thing that this analysis does is group all trade entries together. It might make more sense to have larger targets for with-trend trades and smaller targets for counter-trend and trading-range trades.
I haven't been idle from a trading perspective over the last month. I have been "post-it" trading - keeping a screen in the corner of my eye and jotting down entries, targets, fills, and exits on a post-it. I will put together an analysis of those 83 trades over 19 trading days. Maybe tonight. Hopefully this week.