Adventures of a Trader
After extensive backtesting of the Ping Pong Strategy, I start trading it live. I just trade 1 contract, because I know that I can always add more contracts if the strategy works. On the other hand, if it doesn't work, I'm not losing my shirt.
And I start to make money!
Not much, just a few dollars per trade. But since I place a lot of trades, it adds up. I start calling this strategy "The Coin Collector", since it seems that I am putting nickels and dimes into a large jar.
There's only one problem with this strategy: It works really well in a sideways market, but I'm getting killed in a trending market. If I could just try to figure out a way to easily identify when the market is trending and when it is going sideways. I am looking through all the books and courses again. But I have a different angle now: I am NOT looking for a trading strategy.
I am simply looking for a way to identify whether the market is going up, down or sideways. I try using different indicators like the ADX, Stochastics, RSI - but nothing is really helping me.
Then I remember that somewhere I read about Bollinger Bands. I heard that prices close up to 95% within the Bands, depending on the setting. But what if prices closed OUTSIDE the Bands? It appears that once prices close at the Bollinger Bands - or even outside - then the market seems to continue to move in that direction.
Therefore I am using the Bollinger Bands as a filter. I'm trading the Ping Pong Strategy while the Bollinger Bands are moving sideways, and I stop trading it when the Bollinger Bands are indicating a trend. And it seems to help the strategy: My average profit per trade increases. Not a whole lot, but it's getting better.
And I get it!
Instead of trying to become Larry Williams, John Carter, John Bollinger, Welles Wilder or any other trader, I need to develop my own trading style. Every trader is different, and there are many ways to trade the markets.
I start to realize that over the years I've chased a ghost. The solution was there, right in front of me on the charts. But I didn't see it, because I tried to become an exact replica of whatever trader I was following. I read all the books and courses again, but now with a different angle. Instead of trying to find "The Holy Grail", I was looking for "trading ideas."
I use Ken "Woodie" Wood's idea of Range Bars.
I use John Bollinger's Bands.
I use Welles Wilder's RSI, but in a different way than he presented it in his book.
I use Larry Williams' idea of trading multiple markets.
I read about an idea, then I thoroughly test it and see how it fits into my trading plan.
Sometimes I'm taking the idea as is, e.g. Range Bars.
Sometimes I am doing the exact opposite, since my testing shows that the opposite works better - at least for me and my trading style. As an example, Welles Wilder suggests that if the RSI moves above 70, the market is overbought and should turn around. But through extensive testing I found that for my trading it works best if I BUY when the RSI moves above 70 instead of selling. And my trading improves. I'm now 8 months into my one-year experiment of becoming a trader, and things are looking bright!
I have no clue that the storm is brewing....