More than 1 year has passed since I have posted my review on this website and I wanted to let you all know, why I have been absent for such a long time.
This hurts. This realy hurts…
Well, the first month on my new trading account is over. I have tested new instruments that I can trade on, mainly CFDs on the German Bund future (German Bonds), the DAX index future and E-Mini S&P 500. It’s something totaly different trading on a “real” money account instead on a cent account. Last one is real money, too. But you can scale your positions much better.
I have started my account with 350,00 EUR and after some losses, I also made some profits this month. Highest account balance reached has been 380,00 EUR this month, and on 30th of September, my balance was 364,00. So this is a profit of 4% for september. Not much, but it’s still a profit.
But at that time, I have already had a losing position open in BUND, which was a pending order. I have seen that a (spread) tripple top formation will be formed @121.85, so I opened a pending order at that point, where this formation would trigger a signal.
I wanted to risk 3% on this trade and decided to open a position with a size, giving me ~0,25 EUR profit or loss per tick. My stoploss I put 1 box below this formations bottom, which was at 121.50, that’s 36 ticks lower. Now, my stupid mistake was, that I opened 0,25 LOT instead of 0,02!
It was a pending order and my risk was a calulated ~9 EUR. I closed my laptop and went home from university. In the evening I opened Metatrader again and saw my stupid mistake. I was at ~60 EUR in loss and I hoped that the next day would open higher. And it did… but not for a long time. Soon, prices did fall and hit – you guess it – my stop loss.
Now, that would not make me angry, alone. It was a stupid mistake and I could live with it – should not happen again, never ever! But ok.
But… what really made me angry was, that the price hit exactly my stop loss, TO THE POINT! And in the next moment, it went off more than 100 ticks. So, instead of ending up with a huge, substantial loss of 90 EUR, I would have now been in the profits with ~80 ticks, which would have been 200,00 EUR according to my position size. Instead of 500,00 EUR, I am now ending up with ~250,00 EUR.
It would be ok for me, if prices would have fallen 20, 40 or 50 ticks below my stop loss. Then I could say “I was wrong”. But I was right. I had a long bias on the BUND and it proved right. But I have had my stop loss 1 tick to high and so the market proved to me: you were not right 
Here are some screenshots of this situation:
I had a bad start this month. I’ve lost ~30% on the first day (instead of 3%, which I planed to risk), pulling me back to 250,00 EUR. I hope that I can get back some of my money in the next days. Today, I already made it back to 266,00 EUR. But mentaly, this was the badest day since the start of this challenge.
Point & Figure indicator
As I’ve mentioned before, I have a new website which I am developing. The new forum is ready and I’ve got a new server. Everyone who is interested, can get a free 30 day trial version of the indicator. The usage of the indicator is limited to one account, so that it’s not possible to get a new trial each month
At the moment, I have to compile this indicator for each account by hand. But my new server is up and hopefully I can get it done, so that it’s compiled automaticaly without my interventions.
No, this blog is not dead, yet
Well, where shall I start to explain why I didn’t make any updates for nearly 2 months? Again, you guess, I have been very busy with different things. I got involved into a new online-project which costs me a lot of time. And beside that external project, I have to maintain and update my own website(s) – and still find some time for trading and programming the Point & Figure indicator – not forgot to answer all of your questions I receive from you via email So I hope you understand
Before I give you some updates on my trading account, I want to let you know, that I am developing a new website for the Point & Figure indicator, as I see that there are many people out there, that like to trade the purce price actions provided by Point & Figure charts. I wanted to thank everyone for your conversations, questions and recommendings…
Updates
Soon, I will set up a forum for all customers to let them share their experiences with Point & Figure trading and to answer most of the questions that occur concerning the usage of the indicator (like which timeframes to use or which box sizes and reversal are best for which trading style and market).
New instructional videos are also in the creation right now, plus many basic and advanced informations on Point & Figure charts in general. And there will be a time limited trial version for everyone that is interested in buying this indicator soon, as this has been asked from some visitors.
Trading in July and August
I don’t remember everything what happend the last 2 months right now, because some time has already passed since then. But the trading the last weeks was kind of hard. No real trends have established and markets did range. I had to adjust my trading style to this and made some losses in the beginning. After that, I got more aggressive, because I was not satisfied with the whole development of my trading account… not that the results are not good, so far. But I wish that I my account would already have made a steeper progress. To achieve this, I made some:
Changes in my $100.000 Challenge
I live in Germany and because of this, I decided to switch my trading account from Dollar to EUR. I have also switched my broker because the current one (Liteforex, see commercial at the top of this blog) doesn’t support EUR accounts. To keep up my trading history, I have decided not to only pay out my current balance, but to add as many Euro to it, until the amount is the same… I ended in August with $352, which I have payed out, and started a new trading account with 350 EUR. For this, I had to add another ~100 Euro…
So my new goal in this challenge will be to make 100.000 EUR. To speed things up a little bit, I also decided to add another 50 EUR each month from the next month on. I know that this is not the same as if I had started with $100 and made no addional payment, but it’s still a challenge to make some serious money out of small, monthly savings.
My new broker (ActivTrades) also offers some interesting CFDs, which I also started to trade – didn’t do well at first and lost ~16% in a few days. But I could recover soon and am currently at ~ 370 EUR now. To make my trading account more transparent, I have added some widgets from this great website, that I wand to recommend everyone: www.myfxbook.com
You can get live updates of my account wich are updated every 5 minutes. Plus, new trades and closed trades will automatically be send to my twitter-account. I have added this account on my website, too.
Any comments will be appreciated.
The last month increased my trading account by $65, which equals more than 31%. The current balance of my $100 to $100,000 challenge is $270. Still a lot ahead, but the first milestone has been reached, which was $250.
After 5 months of trading, the account has grown by 170%. That’s an average of 21.98% per month. Should I be able to keep this performance, I would reach $1,000 in 6 1/2 months, $10,000 in 18 months and $100,000 in 30 months. But I wouldn’t bet on it 
The more money you have to trade, the less risky you want to be and the mental pressure will be massive compared to such a small account.
Why didn’t anyone mention that I made a mistake calculation the profit on the current trading balance page? The profit for February was 9% and not 7%. But I will replace this site soon and provide to you a link to a spreadsheet that I update after each trading day. I write down the current balance and can see the current profit of the week and day. The account is a cent account, so don’t wonder – the balance is $27,000… cents that is
This spreadsheet has been started a few weeks ago and can be found here: http://spreadsheets.google.com/pub?key=r4l57pP1lT0c_tlocMtqSKQ&output=html
Trading
I have been trading with a setup of 10 x 2 (10 pips box size and reversal of 2 boxes) for most currency pairs (EURUSD, GBPUSD and EURJPY) and 5 x 2 for EURGBP. This has worked very well and I will keep this setup for the next month, too. But I will also take a look at the 5 x 2 setup for the other pairs. Plus, I added USDCHF to my watch list.
I know that 5 pips box size is very small and more noisy than 10 pips box size, but it gives some clear signals, though. And I hope I can spot some better exits or trail my stop loss earlier with each new signal:
Trading the Bund didn’t work out for me. It’s not the system itself, because Point & Figure charts work well on this instrument. But I was greedy and wanted more profits. After I have closed my position with profit, I watched the Bund go further into my directions a few days. So next time I wanted to earn more than before – and this was a bad idea. I lost my profits, got angry and made even more mistakes. So I stayed away from this market for a few days… but will definitaly give it another try next month.
Indicator
Though it seems that I have been lazy in regard of the Point & Figure documentation and new versions of the indicator, this is not true. I have decided to create a brand new website for the Point & Figure indicator and will give a detailed overview of Point & Figure charting on this site. This blog will remain, but I will only use it as my personal trading diary and won’t sell any software on this blog.
At this point, I want to thank all customers that have had interest in the Point & Figure indicator for Metatdaer so far. Some of you have written my emails or with Skype/ICQ and mentioned some things they would like to have implemented. This conversations are apprecciated a lot and I will give my best to develop the best Point & Figure indicator out there.
If you have any questions, always feel free to contact me via the contact form.
The last month ended with a plus of $25, which equals 13.89%. So my current account balance is $205 now. That’s a 105% profit in less than 5 months.
I could enhace the Point & Figure indicator during the last month, too. At the moment I am implementing a real time based chart creation. So the chart will be updated with every tick instead of after the close of a bar. But this leads to some problems:
It’s not possible to access tick data in Metatrader, so I have to build the chart based on the current method (high/low or close values of closed bars) first and then switch to tick data. If I would start with tick based chart creation right away, without building the chart on closed bars first, the chart would always be empty in the beginning and some time has to pass before the chart is filled with much enough data to be usefull for trading.
If the chart is updated in realtime, based on tick data, the cpu usage will be much bigger than it is now. If you are using the chart on the 1 hour timeframe, it’s only updated once per hour. In realtime mode, it’s updated up to a few times per second. So it could slow down Metatrader if you’re using many charts together with a long history (which leads to a bigger chart). I will add a maximum history value, so that you can select the number of bars that shall be used for the creation of the chart. It’s not necessary to have a history back to 1990 when you’re daytrading with small box size.
I am still in a learning process – and trading will always be a constant learning process – and so I am not yet finished with my trading method and style. That’s why I am still testing different setups and timeframes, as well as trading instruments. At the moment, I have filtered out my 4 favorite pairs that I trade:
EURUSD, GBPUPS, EURJPY and USDJPY. I don’t have any other pairs that I watch at the moment.
Though I wanted to close each trade overnight, it happens that I hold a position for more than one day. And often, this trades become very profitable for me. So beside daytrading, I apparenty also am a swing trader… But it doesn’t happen very often. Most of the time this happens when I open a smaller position where a bigger drawdown wouldn’t hurt me much and I am not so afraid of a losing position.
Moving averages is something that I have been using to filter out some of my trades. I wait for two moving averages to cross and then I look out for the next buy signal. The crossing of two EMAs is not a signal itself, though! Very often, the crossing of two EMAs (I am using 10 pips boxsize with a reversal of of lenght 2, one EMA 3 and one EMA of lenght 8) is near the crossing of a bullish or bearish trendline.
Here is a screenshot:
Future trading
Beside Forex, there are also other interesting markets. I have demo traded Euro Bund and Euro Bobl and this seems very interesting to me. The opening time of the exchange is from 8-22 in my local time, so there’s no need to be afraid that in asian session the markets made a major up- or down move. Each day at 8 it’s “tabula rasa” and everyone starts at the same time. In combination with pivot prices, this instrument is nice to trade:
I will demo trade the Bund and Bobl for the next weeks and maybe add it to my watch list.
Future Point & Figure indicator versions
As mentioned before, I will implement realtime based chart updates as the next major enhancement. Beside that, I will split up the current indicator and have seperate indicators for Point & Figure moving averages, Bollinger bands and MACD. At the moment only one Bollinger band is possible and a maximum of 3 moving averages. The next version won’t have this limitation anymore.
Wyckoff method. Point & Figure charts with a reversal of 1 have one common issue. If there are many columns with only 1 box, the chart becomes very broad. And also 45 degree trendlines aren’t useful anymore. The solution is, that whenever there is one column with only one box in it, it gets merged with the next or previous one. That means there is an X and an O allowed in the same column. There always have to be at least 2 boxes in each column – this method is named Wyckoff method – you may take a look at this type of charts here.
In my last post, K.I.S.S – Keep It Simple Stupid, I have mentioned that it’s of utmost importance, to be disciplined in your trading. There are a few general rules, that every trader should know and should follow, like “cut your losses and let your profits run” and to always use a stop loss to save the traders capital.
I want to give you two great links, that I recently found and find very useful:
The 25-Point Mantra: Discipline for Day Trading by Douglas E. Zalesky.
Those 25 rules are what it’s really all about in trading. Being disciplined to master the markets each and every day. I have printed this 25 rules and from now on, I wil read it before I start my trading session to recap those rules and becoming a better, successful trader. You can get the PDF file here, if you want to print it, too.
Citations from successful traders
If you don’t want to read the whole books, you can find the most important citations about trading on this website. Those citations are from some of my favorite books:
- Market Wizards: Interviews with Top Traders
- The New Market Wizards: Conversations with America’s Top Traders
- Trading for a Living: Psychology, Trading Tactics, Money Management
- Trade Your Way to Financial Freedom
In my opinion, those citations are really helpful to understand how to become a successful trader. I mean, hey… those cited traders should know what they are talking about – some of them make millions of dollars each year.
HalloWhen developing a trading system, people often tend to make it more complicated than it needs to be. And to my regret, I haven’t been any better in former days. How come that? After a couple of weeks, after I started trading, I began reading books and websites about technical analysis. There were plenty of chart patterns and indicators mentioned, and as indicators were easier for me to use, when it comes to identifying buy and sell signals, I tried many of them in backtests. One after another… RSI, MACD, Stochastics and some fancy indicators, too. And guess what – it worked very well. But by then, I didn’t know that I was over-optimizing the backtests to fit to a give timeframe. They performed well in the past, but were useless when it came to real trading – at least for me. As soon as I found out, what I was doing wrong, I was thinking that I only had to combine different indicators to filter out false signals. I have been using moving averages, RSI and stochastics to find signals and used ATR for setting stop loss points. Many signals were contrary and signals were rare – and not as successful as I hoped they would be. After a while, I have stopped reading books about technical analysis and started reading books from traders or interviews with traders. What I found out by reading this, was:
- There were about 40 different traders and 40 differents methods (technical and fundamental). Successful traders and successful methods so to say. There is not “the best system”.
- Many of the methods were very simple. They could explain their trading style in just a few sentences. Some used only one indicator, only trendlines, looking for a special pattern to occur or using no charts at all. But they all had one thing in common: they mastered their system to the excellence!
- What is very important is to find a system that fits to ones personality:
- Going with the trend or following a counter trend approach
- Trading in small or higher timeframes – looking for the big move or only for the next few pips
- Trading only technical, fundamental or a mixture of both
- …
- But most important is not to only find a system that fits to your personality, but to stick to it. You have your rules? – Follow them. Each and every trade, each and every day. Without discipline you won’t last very long in this markets.
There is no need to make trading more complicated than it needs to be. It’s still hard enough to stick to the easiest system, because we all are only human and we all make mistakes. Be it, because of fear, of greed or any other reason. I once read that a successful trader said, that he could explain his trading system (profitable, of course) to a second person in detail, but this person would nonetheless not be able to become a successful trader. Trading is learning every day in every trade. So keep your trading system simple. Here’s a nice scene that illustrates this very well
Though this month has not yet finished, I am writing my review today, because I won’t trade for the next two days.
The loss of the last month has been fully recovered and has ended with a total profit of 32%. So my current trading balance is $180 now – that’s a total of 80% profit in 3 months of trading. 80% in 3 months equals ~21% per month. Should I be able to keep this quote up the next months, then I would reach the $100,000 in 3 years
Oh well… I guess I will reduce the risk, if I should ever reach more than $1,000. And taxes – 25% of all profits are eaten by the tax.
Point & Figure indicator Updates
I have been busy again and have updated the Point & Figure indicator. Though the indicator is already quite fast and I can have more then 20 charts opened simultaneously, I have found some code that I could speed up a little bit. I don’t think anyone will notice the difference anyway
For the time beeing, I am satisfied with the result – but I will try to find more bottle necks in the future.
Another major update is the implementation of Moving Averages in Point & Figure. This is still in experimental phase and I will have to check it out for the next weeks, before I go public with this. By now, it’s possible to plot up to 3 Moving Averages, each of which can be calculated as simple, exponential, linear weighted and smoothed average – as known from the candlestick and bar charts. I could add more than 3 Moving Averages, but this is sufficient for me. If anyone needs more, please let me know.
Here’s a screenshot of EURUSD 2 x 10 (h/l) with 2 moving averages 5 SMA and 10 EMA:
Recommended books
I have read and am still reading 3 books about Point & Figure charts. One of them is Friedrich W. Tölke, it’s from 1986 and in German. Some interesting ideas I got from that book, like trading the shoulder-head-shoulder pattern in Point & Figure Charts, as if it were bar charts. But this assumes that I should use non-45-degree trendlines – and that’s something I try to avoid.
But those two books are really worth beeing read: The Definitive Guide to Point and Figure
Both books cover in detail the construction of Point & Figure charts, different chart patterns, drawing trendlines, using stop orders etc. The first one is more detailed and also covers aspects like Moving Averages – guess where my idea came from
The second books covers some analysis of the efficiency of Point & Figure charts through various studies (Kermit & Zieg, Prof. Robert E. Davis…) and has suggested to use a reversal of 2 boxes instead of 3 for short time trading. I followed this advise and tried 2 x 10 on EURUSD (see screenshot above). Worked very well and I will use it further on.
I really want to write some reviews of my favorite Point & Figure books – I hope to find the time for that.
To-Do
I have not forgotten the short scalping video, that I wanted to make. But the problem was, that I wanted to keep it short. Everytime I started the screen capture software, I couldn’t get an entry. I just don’t want you to watch 20 minutes of prices moving up and down, before I enter a position for only a few seconds. I’ll try to get a video cutting software and cut out the interesting part.
The pages about Point & Figure Charts are still empty, and I am really sorry for that. I have started to make some screenshots of basic buy and sell signals, trendlines and how to apply risk management. But the text is still missing. I will catch up on that!
Implementing more features in the indicator:
- Giving access to the Point & Figure charts for software developers through iCustom
- Applying chart construction on realtime tick data instead of high/low or close values
- (Maybe some other indicators like Bollinger Bands?)
- Basic Pattern recognition
I can’t wait to have all those things finished, that I’ve mentioned above. Because then I could focus more on trading than on writing and programming (not to speak of my normal life beside all that )
This month has been the first month, that I’ve lost more money than I have earned. A total los of 18% reduces my current trading balance by $30. So my current balance is $136.
I know the mistakes I made. The main reasons for the losses were:
- Lack of discipline
- Lack of concentration
- Testing
This website, as well as trading, is not my main business and I have been busy with other things. That’s why I have only been trading from time to time – which was not a good idea at all. I have not prepared my trades well and didn’t follow the price movements closely. I have opened positions that I did regret within the same minute.
Another big loss was due to something I wanted to test. A few weeks ago I made a trade in GBPJPY where I earned more by the swap than by the trade itself (klick for zoom):
I wanted to reproduce this but that was a bad idea (klick for zoom):
This trade went completly wrong and resulted in a loss of $20.
For the next month, I will take some time to update this website again and add a video of a scalping approach with Point and Figure charts, that I have promised a guy who wrote me an email. I am sorry I didn’t answer yet.
I have been very busy the last month with other things than trading. That’s why I didn’t trade so much the last weeks, still the monthly return has been 7% and my current balance is updated to $166 now. The january has been a much better month, but at least I ended with a small profit.