Complacency in trading.

[Tradess0610]

Sweep profits quarterly at longest. Monthly works well. Always pay taxes from past profits not future profits.

Buy things from profits to put into your trading office. When you sit at your computer and almost everything you see around you has been bought with trading profits, you will literally and figuratively be in a different place.

Good advice!

 

[neke]

How would you define favourable market conditions? Simply something suited to my strategy?

My definition of favourable market conditions means the wind in your sail. You went long, and the market rallied - not because you called it, but the market was going to rally anyway. That magnifies your 'rightness'.

As for the problem with leverage. Here is a simple fact: most people (including me) will trade based on the size of their account (It's hard to do otherwise by the way).

Let's say you settled for 1 contract per $5,000 in your account (S&P e-mini). At current value of 4,000 that represents $200,000 face value.

You take a position, the market goes in your favour +1% (not unusual intraday for the SPY). You make $2,000 (or +40%). You now have $7,000, and can now afford 1.4 contracts (assume fraction is allowed for the illustration). The market goes against you 1%. Your loss is now $2,800. Account now $4,200. What should have been flat for your account is now a big 16% loss because of leverage. Of course the less leveraged you are, the less the impact of this. So whenever you trade with leverage, just remember your edge has to be big enough to overcome this before thinking of sustained profitability - and no, the problem does not go away by using smaller stops, and does not matter whether the gain comes before the loss.

 

[tiddlywinks]

Let's say you settled for 1 contract per $5,000 in your account (S&P e-mini). At current value of 4,000 that represents $200,000 face value.

You take a position, the market goes in your favour +1% (not unusual intraday for the SPY). You make $2,000 (or +40%). You now have $7,000, and can now afford 1.4 contracts (assume fraction is allowed for the illustration). The market goes against you 1%. Your loss is now $2,800. Account now $4,200. What should have been flat for your account is now a big 16% loss because of leverage.

The problem is failure to adhere to the original leverage of 5000 per contract.
Additionally, regarding the fractional position, using MES tick value is 1/10th... your loss math for the fractional is wrong.

That said, if you adhere to the initial leverage of 5000 per, and had 10,000 in the account and put on 2 full contracts, a 1% loss would leave 6000 in the account, enough to play one contract per 5000 tomorrow!!

 

[neke]

The problem is failure to adhere to the original leverage of 5000 per contract.
Additionally, regarding the fractional position, using MES tick value is 1/10th... your loss math for the fractional is wrong.

That said, if you adhere to the initial leverage of 5000 per, and had 10,000 in the account and put on 2 full contracts, a 1% loss would leave 6000 in the account, enough to play one contract per 5000 tomorrow!!

And that illustrates it. You started with $10,000 on 2 cars. Then back to 1 car because of a -1% market move. if the market now goes in your favour +1%, you account is at $8,000, way below your starting of 10,000 - even when somebody with no leverage would be basically flat. That is the huddle I mean you have to cross on leverage.

 

[s256]

I programmed my own rule set which consists of maximum risk, minimum stop loss width (I was making trades with really tight stop loss so I can use more leverage and my profits would be bigger), maximum amount of trades per symbol per direction.

Also, I force myself every day half an hour before open to chart about 20 charts from W and D timeframes down to 4h and 15min.

With the issue of trading 24/7 tradable stuff, I can’t really help.

 

[Pica550]

I had similar issue before, what had helped me is to use my daily average (60 days) to cap my daily drawdown, I had the urge to go beyond the limit at the beginning but it’s to train yourself be disciplined and consistent.

 

[Illini Trader]

First I congratulate you on being a good trader that can make a profit when you are doing things that you KNOW you need to do. All you have to do now is read your own original post and identify the changes you make to your trading plan after you are profitable.

1. You give trades more room to breathe
2. You trade an unfamiliar time period
3. You trade when you are tired when you should be sleeping
4. You trade and not give it your full attention in that you multitask
5. You focus on the money after a bad trade (caused by the above mistakes)
6. Then you take bigger risks to make back the money lost in the bad trade.

Scat said it best in post #2 "Discipline" (to stay with what works for you)

 

[Jzwu2017]

I believe this is fairly common in trading and it's caused by human psychology.

The underlying reason is we humans tend to associate separate trades with some kind of logic or correlation, whereas they are completely random outcomes statistically. Gambler's fallacy is one example. Think about it this way - your edge, if there is one, won't magically change whether you win or lose the next trade or the next 10 trades, at least not significantly. Therefore, one should not become euphoric after winning trades or dejected after losing trades. But we simply can't help it, can we?

Now how do we deal with this problem? Stick to a consistent process/rules for every single trade, no matter last trade or last 10 trades were winning or losing trades. For every new trade/day like nothing has happened before it. That's starting afresh every trade, every day, every week, etc. It's easy said than done because we are emotional humans.

Previous posts talked about this thing creeping up from time to time and automating trading, etc. precisely for this exact reason.

 

[virtusa]

BTW I would not call it complacency but fatigue and inability to stay on point, razor sharp, ALWAYS.

As I am also a discretionary trader, to stay on point, razor sharp, ALWAYS, is essential.
After the close, I every day, review my trades and what I should have done. Each time when I trade differently from what I should have done, it is because I lost concentration or got distracted. The motivation is partially gone.
The higher the profits go, the lower the concentration goes after a while. After trying out several solutions, I found out that the only thing that works is to punish myself if I get "lazy".
So if I have to punish myself, I force myself to do something that I really hate. Each punishment consists of a six month period that, outside the US trading hours, I have to get up at 5:20 AM, eat, and then punish myself for the next six hours. It was horrible but it worked. It was so effective that, till now, I had to do it only once.
As it is very heavy physically, I lost a few kilos and my condition is much better. So a win-win.

Psychological things didn't work at all.

Just make sure that your are more afraid from the punishment then from not trading well.
It's comparable to torture, but still at an educated and human level.

if I compare my weekly profits, some weeks can be 10 times better than other weeks. But that is irrelevant. What is essential is that you see what the market offered that week, and what you could catch. Some weeks there is a lot to catch, and some weeks there is not.
If you followed your system, you should feel good. If you did not follow your system you should feel bad.

 

[damnpenguins]

A lot of good responses here and in truth you need to find your own specific answers / triggers...

As another person mentioned, you are in a great position if you have the ability to generate profits when on your A-game... Maybe you need to focus more on your B or even C-game... Those actions you take that are detrimental to your results... Jared Tendler outlines a great process to help with this in the book "The Mental Game of Trading". Self Awareness is key. Be 100% Honest with yourself in reviewing your past mistakes....

Additionally to the above book, one thing that has worked for me for a long time - instead of going down the route of automation which a lot of people do - is to committ 100% to my process. I don't trade the market, I trade my process.... Rinse and repeat....

Each morning I go through a pre market routine outlined in a slideshow that highlights my trade plan, specific trade process i.e Setup Models, Entry Models, Trade Mgmt Models.... Also such things as relevant quotes, and reminders... but most importantly, a collection of Playbook trades, and Anti-Playbook trades...

I don't just need to see what I am looking for and past trades I executed perfectly, but I place a lot of emphasis on the examples from my trade history when I traded poorly... Keeping the worst of my actions front and center prior to starting each day helps me to back away from trading against my best interests....

Best of luck!