Realigning my Trading Focus

July marks the month where I finally transformed myself from discretionary trading into 100% mechanical approach........

........and I have not looked back since then!

Not only that, I have also decided to ditch stocks trading and simply focus 100% into forex, as I'm getting better results from the currency market compared to equities.

Looking back, I find myself more at ease as a trader. I am no longer excited about placing and closing trades. The only excitement comes when I'm researching & testing new trading ideas. The tried and tested ones.....well, they're getting pretty boring.

Is this a positive development, as I continue to evolve as a trader?

I think so, as my trading account continues to grow. Trading is no longer stressful, boring in fact. Heck, I now have a lot of free time that I end up yakking more on Facebook (a great way to waste time).

I am now in the middle of research into another medium-term trend trading strategy. And yes, it's 100% mechanical. I wouldn't have it any other way!

More Math!

I received a few questions regarding Risk-of-ruin & Expectancy. Well, the math is as follows:

Risk-of-Ruin
-------------
{[1-(W-L)]/[1+(W-L)]}power of U

where

W= probability of winning
L= probability of losing
U= number of units of money in trading account

The objective is to get r-o-r = 0%

Expectancy
------------
[probability of winning x (avg win/avg loss)]-[probability of losing x (avg loss/avg loss)]

The objective is to get a positive expectancy number. Obviously the higher, the better.

So, there you go! For more info, go read Dr Van Tharp's books (e.g. Trade Your Way to Financial Freedom).

In God I Trust, All Others Must Show Me Data!

Carrying out engineering evaluations were part & parcel of my job when I was working as an Engineer not too long ago. Whatever new things, system, materials, process.......anything new that I want to implement, I had to present hard data to my management as proof of project viability, before I can implement any of them.

Well, it's the same with trading. Whenever I'm looking at a new trading system, I will need to test it out first, before I start putting real money trading it.

I have just completed a forward-test on the new strategy on demo that I am looking at. The summary of result is as follows:

# of Win	28
# of Loss	15
Accuracy	65%
$ Win	$18,065
$ Loss	-$7,266
Avg Win	$645.18
Avg Loss	-$484.40
Avg W:L	1.33
% Exp	52%
# of units	40
W prob	0.65
L prob	0.35
Sub r-o-r	0.54
% r-o-r	0%

Over the test period, this system yielded 52% Expectancy with 0% risk-of-ruin. No real money involved, as the test was done on a demo platform. I am comfortable with these statistical figures, so I will trade live with this system starting this week onwards.

For those who are curious on these calculations, they're all based on Dr Van Tharp's work. Google 'em for more info.

This system is basically daytrading off daily timeframe, so it's a pretty active trading. Since I'll be trading practically everyday, I will not put live charts on each of the new trades that I'm taking.......just feels like a lot of work to me.