Trading practice – learn it to earn it

That’s possibly too grand a title but I’ll try to explain where that’s come from based on what I’ve been doing recently to improve my trading skills.

What I’ve been doing is ‘trading’ through a lot of historical EUR/USD price data using Trade-Interceptor‘s great charting package.

You can wind back the clock and do simulated trading for free and their ‘Trading Intelligence’ module records all the results and gives you a summary.

Now for a number of reasons I didn’t do any significant amount of paper trading before I opened a trading account. I was fed the line that ‘demo doesn’t count’ and I wanted to get onto the ‘making money’ bit.

This basically proves what an idiot I am. Yes, from a psychological perspective it’s not the same BUT you can still learn an awful lot about how you see the market and the technical aspects of trading before you even begin to throw money about (or away).

If you’re looking at trading you absolutely need to spend time getting familiar as to how the instrument you’re trying to trade actually moves. You’ll also learn what sort of path your equity curve might follow. Here’s mine after 32 ‘sim’ trades.

Just looking at this graph shows a number of different things.

1) I lost 4 trades in a row there. What was I doing wrong?
2) It goes up!! 😀

Trade Interceptors package also give you a bunch of useful summary data…

Key take home points from this are as follows: –

12 Wins (1159 pts) and 20 losses (418 pts) resulting in +741 pts
11 shorts and 21 longs

Delving a little deeper and using excel I found some interesting underlying challenges.

Holding period for winners was 25% more than for losers. In other words I’m holding winners for about 10 hours and losers about 8 on average.

Maybe cut losers earlier? Anyway, the results data I’ve used for this post is also really old but hopefully you get the point.

Once you’ve traded through this sort of thing look for information you can use. In this ‘run’ 16 of the 20 losing trades I had in EURUSD were longs. That’s a really large amount and goes to show I have a long bias – probably attempting to pick the bottom of a falling market 😉

Anyway – this type of analysis is mandatory in my humble opinion and also (for me) long overdue. I hope this helps illustrate a tiny, tiny, tiny amount of what’s actually required to get better at this skill. Practice!

I wrote this post about 8 weeks ago now and realise the following – having done this a dozen more times…

  1. I wasn’t structured enough in what I was looking for/trading/trying to understand about the market when I did this exercise
  2. Be very clear before you start what time-frames/other inputs you’re going to accept
  3. Your ‘success’ rate should theoretically be higher in live trading because you don’t have access to whatever the sentiment of the market was 29 days ago and so on.

Any new or would be traders out there reading this you need to do  a LOT of this type of work and if you decide not to ’cause it’s boring for you and you just want to get to the making money bit then you are a fool… and you know what they say about fools and their money.

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11 thoughts on “Trading practice – learn it to earn it

    1. robertsweetman Post author

      No worries – please make sure you read this page here and also this one before you decide to invest serious time and money in this endeavour.

      It’s also worth you knowing that No One I know of that’s consistently making money got there in under three years. Think of it like learning to become a surgeon, or an architect but without a course curriculum or any text books.

      On the other hand the rewards are potentially staggering. If you’re still interested then go look at the new Trading Resources page that I posted today which will save you at least 9 months to a year of going in the wrong direction…

      Good Luck!

      Reply
  1. Simon Massey

    Hey Robert. Mark Douglas has an interesting perspective on demo accounts. Rather than writing them off as most people do, he suggests that they represent the ‘ideal us’ (no fear etc) and allow us to see the psychological gap between where we are now, and where we could be. An interesting angle.

    I’ve been recording all my trades since July. I mean recording on ‘video’. Partly this is for our members, but it’s a very powerful tool for analysis and goes beyond even the most detailed Excel-type record keeping.

    One to consider in the future.

    All the best,
    Simon.

    Reply
    1. robertsweetman Post author

      Hi Simon

      Hadn’t thought of video recording to be honest – interesting idea that! I’ve been building a database for this job in Filemaker because you can use it to hold pictures (screenshots) and it’s more compelling/easier to capture this sort of data than using Excel.

      Cheers

      Robert

      Reply
    1. robertsweetman Post author

      Thanks Jess – yerp, I get that now 😉

      Takes a while to get a realistic perspective on what/how a system behaves so running this type of exercise is very valuable. Wish I’d known this what… about 18 months ago? 😉

      Thanks for the comment!

      Reply
  2. The1LotTrader

    Looking good Rob,

    In my view:

    1. Trading Simulation = Learning how to technically make a consistent return in the market.

    2. Trading Live = Learning how to implement that knowledge by becoming a master of ones own psychology.

    I personally do not understand proponents of the “simulation is not like live, therefore it is a waste of time” theory. Perhaps strong affiliations to brokers maybe? I don’t know, I would love for someone to explain to me why trying to learn how to technically make money in a live market while expending all ones mental resources and burning up ones seed capital in the process is a good idea; Never made much sense to me anyway. Point 1 is hard enough on its own without the challenges that Point 2 brings.

    I read that book you mentioned – really decent. I like his unique angle and approach. Especially like his thoughts on achieving consistent flow and its application to trading. It’s funny because I was thinking about something along those lines a few weeks prior. Definitely a worthwhile read for that part alone. Thanks for recommending.

    Cheers
    1Lot

    Reply
    1. robertsweetman Post author

      Indeed I have to agree although I do wish I’d been rather less of a dickhead and implemented some simulated based trading a hell of a lot sooner than I have. Oh well, I am fast catching up! 😀

      Yep – Michael Bigger’s book on achieving creative flow in trading has a very interesting view echoed also by Chris Lori.

      There’s a lot bubbling in the back of my mind on this kind of thing for my next major blog post but the structure of what I want to put down is eluding me right now. It’s gonna be good though. Stay tuned

      Cheers

      Rob

      Reply
  3. Mark S

    Hi Rob,

    Good to hear you are are making progress.

    Does Trade Interceptor allow testing on stock indices or is it just for FX?

    Keep the reports coming.

    Mark

    Reply
    1. robertsweetman Post author

      Hi Mark

      Trade Interceptor contains access to a multitude of data feeds from >6 brokers

      Main indices are included as well as gold, silver and oil

      It’s pretty funky

      Cheers

      Robert

      Reply

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