Progress

I've always considered myself to have two jobs, with trading being the "side hustle" for the time being. That's just the reality of preparing myself to make the transition full time one day when I'm fully ready. This is a journey that Nico and Peter Brandt have taken - progress and advance in their daytime jobs while mastering their participation in the markets. As for me, I've recently found my situation to be inversely weird. It's almost funny to think about it, but it definitely weighed on my mind.

2020 and 2021 were a complete shitshow for me. Nothing seemed to be working and I was bleeding every single month. It was so observably bad that I stopped posting my EdgeWonk equity curve in the latter half of last year. I knew my mistakes and I suffered setbacks. The primary being trying to scale and grow an account too fast without really understanding and having a set of clearly defined strategies. Furthermore, I was burning a candle on both ends by spreading my time even more thinly with the Topstop Combine.

While the monetary loss I painfully wrote off, the experience was necessary. I believe it has led to tremendous progress this year. Otherwise, you would've witnessed a repeat of last year's performance. Below is this year's EdgeWonk equity curve.

EdgeWonk Equity Curve

Here are my key takeaways:
  1. I distinctly remember having a rough start in January when betting on reversals didn't work. In fact, I was "underwater" or in the negative territory in Quarter 1 of 2022. But, I climbed out of it. I didn't get suckered into overtrading or revenge trading. I'm very proud of the fact that I have been able to stay disciplined and not force a setup where none exists.

  2. My progress this year shows my ability to adapt. Or at least I hope so. For the longest time, I never factored in the daily timeframe into my analysis. My analysis and entries were historically on the 1-hour (H1) and 4-hour (H4) timeframes, which were quite prone to false signals. I admittedly moved away from this methodology a bit too late. Nevertheless, I was able to do so. By incorporating daily levels into my analysis, I was better able to set directional biases and capitalize on structural moves accordingly.

  3. Tying into point #2, I've also gotten better with being more stringent with my filtering. I consciously noticed this in April when I removed certain currency pairs from my watchlist because the price action didn't produce clean enough signals. Rather than trying to force a trade with a low quality signal, I was comfortably able to sit out regardless of the price movement outcome. In other words, I spent less time having FOMO over shitty setups, forcing shitty trades, and staying underwater longer.
With my current progress, the thought of scaling has been creeping into my mind. More specifically, this means increasing my account size along with starting up Topstep again. But deep down, I know better as doing it too soon could be detrimental. But this is on my mind more than it should. Why?

While I've been making progress in terms of refining my strategies and optimizing my entries, I feel stagnant in my daytime career. Interviewing for job transition and career growth seems to get harder and harder. This certainly contrasted with last year where I seemingly had more interview opportunities while making zero headway with my trading. Just thinking about this, it really sucks to not be making progress on all fronts. The darker thought is self-doubt - do I still have the necessary skills to advance or am I suffering from complacency?

Now, this isn't meant to be a self-congratulatory post where I also bitch and moan at the same time. However, I do want to consider devising an action plan to scale at a sustainable pace. The dayjob career advancement will continue to be a grind. I've done it for poker. I've done it for trading. I'm pretty confident I can do it with this as well.

In terms of the scaling action plan, I've narrowed it down to a few possibilities to keep things sustainable:
  1. Do nothing as a conscious action. I'm viewing the markets with a lot more clarity this year, which is something I haven't experienced much in 2020 and 2021. There's certainly no rush to take on bigger position sizes simply because my equity curve is in positive territory.

  2. Scale my FX account slowly. If I aggressively save and double my deposit, this means I can double my position size while maintaining a 1% risk per trade with the ability to scale to 2% total. This might have consequences. By slowly and incrementally depositing smaller amounts, my "per trade" size will gradually increase at a more manageable rate.

  3. Getting back into futures trading. Yes, I already learned the hard way that this isn't feasible because time is not on my side. There's simply no way to scalp the market open and then quickly hop over to work.

    However, I revisited a "strategy" that I first came across when I was quite active on ForexFactory trying to absorb whatever I could on trading. Bringing it over to futures, I think there's an opportunity to make it work with the Micros contracts. The hard part is determining if I want to do it in a Tradovate discretionary account or through Topstep's Micro Combine. There are pros and cons to each.

    The Topstep Micros Combine will provide me with immediate exposure to the futures market. The downside is that this swing trading strategy could mean sitting out for days or weeks at a time. As a result, the monthly combine fee will rack up, making this an overly costly endeavour. On the other hand, a self-funded Tradovate account will give me more discretion, entering trades only at their most optimal point and sitting out otherwise. The downside, of course, is that it'll take me longer to save up and fund it since incremental deposits are not ideal due to accumulating wire costs.
Fortunately, none of these routes require me to take immediate action. If anything, it's probably best to sit on the sidelines and observe the entry signals of this "strategy," which I will now reveal.

I certainly didn't come up with it. In fact, it has quite a few variations, each going by a different name. Some call it the Cyrox Scalping System, while others refer to it as the VMA Fantails System. In any case, the technical configurations are the same.

MA Fantails

What is this?

This is a visual system rather than a quantitative or algorithmic one. It relies on the trader manually checking, observing, and executing trades based on the behavior of price and moving averages.

How does it work?

The moving averages are grouped into three "speeds" composing of short term, medium term, and long term periods. This enables the trader to visually spot when momentum is picking up. The arrows I've plotted represent long and short entry points. While it's certainly possible to trade with in the FX market, I think this system is better suited for futures.

Why futures over FX?

FX is an oscillating market where price moves in relative strength terms. As a result, it's much harder to ride trends when using a moving average fantails system. That's why pretty much every forum or variation of this system instructs that the trader scalps. This is personally problematic for me in two ways. The first is transaction costs because I do not have access to an ECN broker. The second is that it requires time-intensive, real-time monitoring for scalping opportunities.

The beauty of trading this system in the futures market is that there is a natural upward bias. By monitoring the daily timeframe, it becomes less time intensive while allowing the trader to capitalize on larger trend moves just as efficiently. The reasons become even more compelling with the introduction of Micros contracts as it means smaller traders can better control risk and better meet maintenance margin requirements.

With that said, time is on my side with this moving average fantails system. I would need to assess the best way to execute this in a cost efficient manner. In the meantime, FX will still be my main market of focus.