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Trading Price Action On Renko Charts - Live Trades
This was a nice conclusion to my week. I woke up this morning with my emotions telling me not to trade: "you'll lose money, it'll ruin your weekend." I tried to just accept that they were there and move on. I'm the type of person who needs to confront the fear head-on, so that's one thing I did well today. I'm also trying to treat this like a normal job; unless I'm sick, I need to show up for work and do my job despite how I feel about it...
I'm hanging out with wifey this weekend, so no updates until next week. Hope everyone else has a nice holiday!
Can you help answer these questions from other members on NexusFi?
I felt a bit unsettled and lethargic today, which I'm assuming is probably due to the extended holiday. Nonetheless, I tried hard to stick to the plan and let it work for me.
Since I've felt comfortable trading 3K, and statistically I've been doing well at that size, I decided to step up to 5K today. I'll trade this size for a while until the same is true. Realistically, I could risk $20-$40 per trade, so this is still smaller than it could be. But while I'm learning to use the correct stops and scale in, I don't want any distractions - especially the kind that comes from knowing you're right at your max risk on each trade. If things continue to go well, I hope to be trading 10-20K positions in a few months. I'd be very happy with that for a while, and it would give me the chance to make decent enough money as a small account holder without risking too much capital.
I am considering always scalping out a part of my trade at +10 ticks when I trade the 33% PB levels. I generally only want to take these trades if I think they will quickly move to a scalper's profit. It's my way of trading a strong BO - sort of like taking a H1/L1 trade. They work often enough to make them worth the risk, but I don't want to give them too much room since the premise really is more that of a momentum type trade. I'll be testing out ideas over the next few weeks and gathering data, so that I can make a decision.
Terrible day; I gave back all of my profits from the last 5 days or so today. But I learned something very, very important: I have not been using position size correctly at all. My win rate since 4/15 is 75% with R:R of about 1:1.5. So, I should be making some good money. I couldn't figure out why these wide stop/scale in trades were killing my account (bad management aside...) As it turns out, I feel fairly dumb because it's simple math, and I just didn't get it until now. But hey, it happens, and now I know, so I can improve.
Here's an example of what I've been doing vs. what I should be doing (numbers are just made up):
Scale-in Trade:
Max position size: 5K units
Stop from 1st entry: 40 Pips
Stop from 2nd entry: 20 pips
Regular, non Scale-in Trade:
Max position size: 5K units
Stop: 20 pips
What I've Been Doing:
I've been adding 5K per entry when scaling in, so:
The problem here is that I want my max risk to be the same as my non scale-in trades, which is usually around a 20 pip stop, so about $10 per trade. Effectively, my scale-in trades when they lose result in a loss about 3x larger than my average win. That's terrible and unnecessary.
What I Should Be Doing:
Based on the wide stop alone, without scaling in, the entry should be half the size of a regular trade: 2.5K*40 pips stop = $10 risk. But since I am adding on one more time, the position size for each entry needs to be smaller than a regular trade. There are different possible combinations to achieve this, but I like to keep position size as constant as possible, so that I don't have to think too much about when trading.
I may try the following:
1st Approach
1/4 size for 1st entry
1/2 size for 2nd entry
The advantage to this combination is that the risk will be the same as every other trade. Also, the larger 2nd entry will help in raising/lowering the average entry price in case I need to exit breakeven (like today for example).
2nd Approach
1/4 size for 1st entry
1/4 size for 2nd entry
This approach makes the total risk a bit less than the average trade. This might be good for now because:
1. I'm still learning and often fubar the management of scale-in trades - makes the learning experience a bit less costly.
2. I don't have to scale-in all that often, so probably won't affect the probabilities too much
3. Easier psychologically - I'll be risking more on regular trades, so knowing that I'm risking less when I scale in will likely make it easier to tolerate and execute
Either way, this makes far more sense than what I've been doing: my 3 scale-in losers have cost me around $76 when they should have resulted in a net loss of about $20-$30. I originally planned to scale-in to every trade, which is why I didn't worry as much about the position size. But now that I have more experience, I understand more about when and when not to scale-in. Position size will now play a much larger role for me.
I think I will probably go ahead and move up to trading 8K units with a max risk of $15-$20 per trade. I can only trade in increments of 1,000, and it's easy to divide 8K into 1/2s and 1/4s.
I made a small profit today but honestly, I'm not thrilled with my performance. I was far too emotional and concerned with outcomes in both markets. That caused me to hesitate on 4 other trades in the YM. The more I learn about myself, the more I don't think it's the money that bothers me. I'm not sure what it is yet, but I definitely need to be more diligent in working on my psychology, so that I can figure it out.
I felt like I was fighting myself today and not trusting my plan/read enough. My main reason for passing on trades today was: "I'm not sure this will work." That's never a good reason because it implies that I am focusing on outcomes instead of being logical and following the market.
Another small win today. I've been thinking about my plan quite a bit the last few days, and I think I will:
1. Just ditch the 33% PB levels, or at least devise some firmer rules about trading them. I definitely don't think I will scale in when trading them. These seem to be my worst trades.
2. Either: 1) continue to scale in above the H/L of the leg as planned when trading the 66% PB levels, or 2) don't scale in but use the wide stop (~33% higher than the extreme). I'm not sure which I like better, but I don't want to use a stop so wide that I have to ride out a large move opposite to my position. This is just to catch trades that go a few ticks/couple bars below/above the extreme of the leg. It's not designed to prevent losers by riding out a 50 tick move against my position. All of my losers from the last 2 days would have been winners with at least the wider stop, so I think it's worth using one until I have a large sample of trades (like 100+). I'll also try to work out some firmer management rules so that I don't panic as much when trades don't immediately go my way (especially if I am going to scale in).
3. Try to decide if I should scale in/use wide stop when trading in a channel. Technically, the channel (bear example) should stay below the most recent lower high, but at the same time, usually the channel converts into a TR. So scaling in is probably still ok. I'm undecided about what I should do here. My worst trades really have been selling too low in a bear channel and using a wide stop.
4. Stop looking at any other charts. I started looking at the 5 minute chart again just to see if these levels applied to it. It's just a distraction. I've never really trusted signal bars very much, which is part of why I switched to the renko charts. But I'm found myself unintentionally trying to incorporate 5 minute info into my decisions. My loser today was partially due to this: I saw a nice SB on the 5 minute and didn't process the renko information as well, the bear TL for example...
5. Try to stop cherry picking. This is a hard decision for me. On the one hand, I read price action pretty well most of the time, which helps me avoid bad trades. On the other, I pass on too many trades that fit the plan and usually work. I'm considering trying to take every trade that fits the plan, but I need to develop firmer rules for this. I'd like to still be able to use my discretion, but I don't need to constantly over-think things and talk myself out of reasonable trades.
6. Try not to have too many rules. I've never been big on rules for anything. I'm happy to have some for trading, but I don't want to entirely turn my brain off. In short, I don't want to be so boxed in by rules that I can't think about the PA in a flexible way.
I'm trying to optimize my process, so that I can execute it better. But I don't want to make too many changes since the basics have been working very well. In a way, I'm trying to get back to the original plan. I think I've made too many changes based on a few losers, so I need to re-evaluate all of that this weekend.
Today was a nice way to start the month. I tried something a bit different today: I looked for H2/L2s at the 66% PB levels. It worked out pretty well, but I don't know if I prefer this method vs. just entering with a limit order. It may be useful when the legs are very large. The 66% levels on these large legs are fairly reliable, but sometimes the market is ignoring that information since it occurred so far in the past. Waiting for a signal bar and using a tighter stop might be useful in these cases since the market will sometimes just ignore the level. I'm undecided but willing to continue investigating.
When the range is tighter like last Thursday (5/28), I am much more comfortable entering without a signal bar/with limit orders.
I also tried using different colors for the bars today. It's supposed to be easier on the psychology since the colors are more neutral and have less association with stop/go/danger/caution. I don't know about this yet either, but I do like looking at these colors more than the others. So, I'll stick with it a while and see.
One thing I have to stop doing: entering in the with trend direction after the market has made 3 legs in that direction. This is effectively a wedge and usually leads to 2 legs in the opposite direction. I get burned almost every time I do this. I think I just get impatient and decide I might as well see if I can scalp a trade while I wait for a strong first leg in the opposite direction. Almost all of my losers since I've started using this "new method" are solely due to this... and I know better!!! Good example of practical irrationality here.
I felt relaxed and calm for the most part today. I still felt the strong emotions, but they didn't interfere as much with my performance. I decided to stop for the day. I was getting tired and starting to think about the money, so that's probably a good call. My internet was also dropping out randomly for 45-60 seconds at a time. This happened in the middle of my last trade, which was part of the reason for my indecisiveness there - distracted by tech problems...
Note: +20 ticks on the 2nd trade today; I forgot to mark it on the chart.
Not a lot of great today. I didn't markup the chart with my reasoning like usual because I'm too tired. But I wanted at least a record of the trades, so that I can review them this weekend.
Money-wise, I'm only down 60 cents after commissions, which makes me laugh at least. Performance-wise, I was ####### terrible today. The early quick profits suckered me in to being greedy, and then the 2 consecutive losers made me feel like I needed some big wins (which I didn't - I was still better than BE at that point). Out of my last 6 trades, all of them except 1 was good for +10 ticks (and the one that wasn't would have been BE). But I mismanaged 4 of them by trying to go for larger profits even though I thought it was a TRD, and I didn't want to sit through PBs. Instead of making +50 ticks, I made +5 ticks because of this. And that's really sad.
In my defense, the trades did in fact go for small swings, but I was unable to sit through the small PBs. I'm hoping I'll get better at this as I work on psychology, but in the end, scalping is really my nature, so I should scalp instead of being greedy at least - especially on a TRD.
One change I'm going to try tomorrow: size up to the 6 renko chart. I'll trade the same way, but I think I'm having trouble processing all of the information on the 5 renko. I don't necessarily want to take a lot of trades, so I think the 6 renko will help me catch the bigger signals and eliminate some of the smaller, marginal trades.
I have headache, so no markup today. I ended up down $185. Today was the first gross deviation from my method in a long, long time - which is a good thing and a bad thing.
I learned from the last few days that days with these huge legs that spike up and then down are very difficult for me to trade. I use the concept of buyers below, seller above, but I don't trust the larger legs - especially if I think it might be a TRD. So, that makes it hard because I'm never confident of placing a trade either way. I'll have to see if I can come up with something here.
I think I will ditch the H2/L2 stop entries / tight stops again. I'm having the same inconsistent experience with them that I had before, which is the reason I developed the "new method." I think I abandoned it due to a few losers, and that was probably an unwise mistake.
Also, I'll probably go back to forex for a while to rebuild confidence and focus. I am not well capitalized for even the YM, and I think that is becoming a serious distraction. It's causing hesitation issues, over-focusing on outcomes/money, failure to use the correct stop, etc. I also don't have the ability to scale in with wide stops, and its just difficult for me when I can't do that - at least psychologically.
Overall, I'm pleased with most of my performance in the YM, but I'd like to have a firmer plan and mindset before I continue. I haven't totally decided, but it might be the best course of action.
Following your thread with interest (and thanks for it!).
I've never traded from Renko charts but can see the interest and appeal and am curious about them, and will do some research/reading about them, having read your thread.
I'm curious about one thing, if you don't mind a question:-
I'm wondering why just "to rebuild confidence and focus" rather than just "go back to forex because I can do better there"? Plenty of people making their livings trading forex, after all?
