Aphie's REAL Trading Journal

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Here is an answer. Trading involves strict discipline. If you have a cut and dry system, it is immensely hard to sit there for 6 hours at a time and not do anything with the market. Basically, it almost feels like you are some "order operator" that is just mechanically operating according to your system. Another part of me wants to be discretionary.
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If you wanted to rate the job of trader on a coolness continuum where on the low end was an "order operator" and on the high end was a "rock star", the job of trader would be much closer to "order operator". This isn't to say you can't get satisfaction out of being a trader. But trading isn't sexy. Trading is work and work is boring, tedious, frustrating at times. The sexy part of trading is being your own boss and making good money, it isn't in doing anything you want and making money. I don't know any job where that is possible. When you start out you don't have any reliable discretion, so I'd say lean heavily towards the systematic side rather than the discretionary side. Your ego is telling you it can trade better than your system. Tell your ego to take a hike!

Now to the point about trading your system. If it is truly objective, and knowing that you have computer skills and use IB which has a nice order entry API, why don't you just fully automate your system (or automate the entries) and forward test that until you are comfortable with the results it is giving, then just turn it on live?
 
Although it may not sound like a revelation, it is to me.

I've determined through my own thought processes and from the advice from others that the psychological implications of being in the market under a highly leveraged instrument is extremely tough on my emotions.

When I trade QQQ or SPY (100 shares let's say), even if the market moves hard, I may only go down $20-$50. If the market moves in futures, that could be $200 or more.

It is critical that I use my three daytrades wisely. I also have the option of swinging options over a longer time period. I may also attempt to make some YM trades during the market provided MSFT isn't going to announce anything beforehand (my first trade will probably be going short 10 seconds before Greenspan makes a surprise interest-rate cut).

I am very upset that I will not be able to daytrade QQQ and SPY more than three times. If I blew out my account trading 100 shares of these, I'd probably get far more experience trading than blowing out my account with futures.

Probably the most critical thing a new trader can learn is this (from my observations). You cannot exceed your own emotional limitations. In other words, no matter how hard you try to convince yourself, your mind knows precisely how much is at risk relative to your trading capital. One ES contract on 5k is, as I am slowly finding out, a sure fire way to blow out an account quickly and efficiently.

Apparently proper capitalization and money-management are, among dealing with your emotions, the pivotal points to being successful in this game.

I must now review my own options and find out how I can make the best use of my trading money by not exposing myself to unnecessary risk.

My mind's eye does not see the P/L as dollars, it quickly converts that into a risked-percentage of my account and there is no way to fool my mind into believing that trading the ES with 5k is a winning proposition over the long-term (if it even got to the long-term).

I must now realize that I will be faced with the boring and mundane task of watching the market for hours just so I can win or lose a few dollars. However, the long-term benefits, if I am successful, will be well worth it.
 
Daytrading the QQQ and SPY is great practice for trading the ES since they move in similar fashion. The ES spikes more of course, so when you trade them maybe use a 5 or 10-minute trading plan. Trading off 1-minute bars is difficult even for the seasoned trader. The longer timeframe bars filter out a lot of the noise; of course, the longer the bar the more risk you'll have to assign each trade, but the easier trading becomes. Realtively of course. Trading is never easy!

I've been actively trading 2 years and now just starting to make consistent money. This ain't no learn-it-overnight gig.
 
Originally posted by TriPack

Now to the point about trading your system. If it is truly objective, and knowing that you have computer skills and use IB which has a nice order entry API, why don't you just fully automate your system (or automate the entries) and forward test that until you are comfortable with the results it is giving, then just turn it on live?
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I don't think a beginning trader should apply a mechanical system and let a computer trade it. What would I learn? I'm already learning, just by watching the ECN's, how specialists operate. I can see the kind of games that are played with putting up a bunch of shares at ask and then pulling it away, just to confuse the other traders. I can also see how, apparently, people with deep pockets in the S&P pits will run the ES opposite of where they really want to take it, just to trigger hard stops and pull more dough with them as they then take it back in another direction.

What I am finding out by observing the market is how these "mind games" are played by people with deep pockets and lots of experience. Apparently these people will do whatever it takes to shake out money from the proverbial "beginning trader money tree" and then let the market continue to move in whatever direction it was going in the first place.

If, however, I observe this while inside the market, then I now receive two components of training. I learn how to deal with the emotions of having my money in the market while also observing how specialists and pit bulls will jerk around the quotes just to shake my change into their pockets.

So, if I have a mechanical system, I want to learn how to trade that with my mind and not transistors in a CPU chip. I don't think any mechanical system would ever be able to take into account all the subtle nuances of the market and take optimal advantage of each opportunity.

I want to continue to trade until something "clicks" in my subconscious and I use the most powerful computer in the world to start to pull patterns out of the chaos in the market.
 
I disagree Aphie. I think a mechanical system *is* a good way to start out. Lookit - it takes the emotions out of the game and emotional trading is what causes most new traders to fail.

I use my own experience as an example. When I first started out I traded by the seat of my pants and made a lot of money and lost even more. Then I developed a mechanical syatem that while it's not as glamorous, it returns profits over time. I also don't hesitate to take a trade now because I know the plan will get me out at a small loss if I'm wrong, and historically has worked well.
 
It's funny - when things happen in the market that cause people to lose money, it's because of these "games" that "they" (these supposed people that do this sort of stuff) play caused our method to temporarily stop working. But if things happen in the market that cause people to make money, it's because their method was "right" or was developed to take advantage of these "games".

I've yet to ever see any proof that, for example, during lunch at Hooters, "they" plan to come back and run the hard stops, or do this or do that.

But I'll admit, it does feel better to think that you lost because someone else "cheated" - or to feel like you understand why you lost. All this sort of thinking does is drive you deeper into the hell hole of thinking you know what is going to happen instead of simply trading what you see.
 
Originally posted by aphexcoil


I don't think a beginning trader should apply a mechanical system and let a computer trade it. What would I learn?

If you stay alert and watch the market you will learn the same lessons you would have learned if you were trading only with discretion, without making as many mistakes. Just because a program is trading the market doesn't mean that you don't have to monitor the program, and can't be learning from the price movement and can't incorporate that knowledge into version 2 of your method.

If, however, I observe this while inside the market, then I now receive two components of training. I learn how to deal with the emotions of having my money in the market while also observing how specialists and pit bulls will jerk around the quotes just to shake my change into their pockets.
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You will have very strong emotions even if your program is doing 100% of the trading for you. The lessons you will be learning with automated trading will be learning to stick to the system and not override it. You will learn the system inside and out, how it reacts in any given market environment. And over time as your reflexes improve you will eventually become better than your system. You will learn what market environments call for just turning the system off and sitting on the sidelines.

A program won't hesitate to enter, won't miss setups, won't hold on past the exit point, will be quicker in placing the orders and managing them than you can. If the system actually makes money then you will be getting paid at the same time you are learning about the markets, and how to control those emotions, rather than losing the money and wondering what you really know.

Choose wisely because it reflects on your motivations for trading. The decision between following a system or being totally discretionary may be the equivalent to the choice offered in the movie The Matrix between the blue or the red pill.
 
Originally posted by TriPack

Choose wisely because it reflects on your motivations for trading. The decision between following a system or being totally discretionary may be the equivalent to the choice offered in the movie The Matrix between the blue or the red pill.
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Did you ever stop to wonder what would have happened if Neo took both?
 
Originally posted by aphexcoil

Did you ever stop to wonder what would have happened if Neo took both?
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If you cannot even control your impulses that deal with comments on a message board, how do you think you are ever going to deal with the impulses of fear, greed, and ego that are the trader's enemy?

You will never be able to control your emotions!

That is a fact. What you will be able to control is your ability to accept them, and not have to act upon them. This is the reality of life. This is the difference between women, children, and a grown man. A grown man feels all the same feelings of his childhood---fear, insecurity, etc., but he acts according to his will and his purpose. He stays on his path, despite the emotions that continue to flow through him.

After a while, he learns to simply ignore these feelings, and they lose their power.

You must first accept that you have no control over the feelings....yet learn to act against them. Don't fight the feelings, simply accept them the way you would if you were stuck on an airplane with someone next to you that you didn't like. Be neutral about them, and proceed with your plan.

What you continue to feed, only grows stronger.

An elder Cherokee Native American was teaching his grandchildren about life.
He said to them, "A fight is going on inside me, it is a terrible fight and
it is between two wolves. One wolf is evil -- he is fear, anger, envy,
sorrow, regret, greed, arrogance, self-pity, guilt, resentment, inferiority,
lies, false pride, competition, superiority, and ego.
The other is good --
he is joy, peace, love, hope, sharing, serenity, humility, kindness,
benevolence, friendship, empathy, generosity, truth, compassion, and faith.

This same fight is going on inside you, and inside every other person, too."
They thought about it for a minute and then one child asked his grandfather,
"Which wolf will win?"

The old Cherokee simply replied, "The one you feed."
 
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