Adventures of a Trader

I think I finally got it.It took me “only” 8 months to figure it out, but I now have my own trading style. I’m not trying to walk in the footsteps of somebody else. I’m Markus Heitkoetter, Trader!I am trading the Ping Pong Strategy, but since I can only trade it when the markets are moving sideways, I start looking for a way to trade trending markets.

I already use Bollinger Bands to determine the direction of the market: When the Bollinger Bands are flat, I trade the Ping Pong Strategy, but when the Bollinger Bands are pointing up or down, I sit on my hands, since THOSE are the market conditions in which my Ping Pong Strategy doesn’t work.

And then I remember Tom’s words again: “If you are losing money, why don’t you do the opposite?”

It makes sense: When the Bollinger Band are flat I SELL at the high of the bar and I BUY at the low of the bar. But when the Bollinger Bands are pointing up, I would BUY the high. And when they are pointing down, I would SELL.

I spent many days testing this idea. By now I know that I MUST thoroughly test every single trading idea that I get. Having a programming background, I develop a systematic way for my testing:

  • Select a market to test
  • Select a time frame to test
  • Test the entry signal
  • Add a stop loss and test the “best” stop loss
  • Add a profit target or trailing stop and test the “best” profit taking exit
  • Evaluate the strategy – test at least 200 trades in different market conditions.
  • Improve the trading strategy if needed.

I use these steps to test my idea of buying the highs and selling the lows when the markets are trending, and I discover that using a stop loss and a profit target based on the “Average Daily Range” works best. And I realize that adding MACD and RSI as a filter improve the accuracy or the strategy.

The “Simple Strategy” is born. Now I have two (2) trading strategies and I follow four (2) futures markets. Both strategies worked great when testing it, but now – in real markets – I start losing money again!

I thought I got it, but now my account is going in the wrong direction again!

I’m making a fundamental mistake, but I don’t know if yet!

Read the next chapter to find out what I’m doing wrong and how I fixed it.