Confessions of a loser who need to quit

Thank you Big Money. I appreciate your advices, but unfortunately I am not smart (as you can tell), and I am very confused.

However, your post has inspired me to pursue 2 journeys:

1) To truly understand price actions instead of just recognizing patterns

2) To find out how pit traders trade and what their edge is

Once I completed these journeys, I will incorporate these new understanding into my trading plan.

I will continue the process to understand the market and to become a profitable trader.

I will not forget that the process will never end.

Thanks!

PA






Quote from Big Money:

Pension Admin,

You said, “I do not have complete plan and I haven't been good at keeping track of all my trades, but I did take screen shots of most of my losers. I will review them and incorporate into my plan as "setups to avoid".

I will come up with some gyration and trend following setups with multiple time frames taken into consideration. I will then track each set up in terms of their winning percentage in each currency pairs.”


First,

You are going about things backwards. Plotting and keeping every losing trade (which at this point is pretty much all of them probably) may sound great on the surface, but what you want to be doing is developing setups that have positive expectancies and NOT taking any other trades. In other words you will not have any questionable setups. Don’t take flyer trades. No trades to “see what happens.” More importantly, because you have not been tracking your trades in the past, you don’t know whether that trade that was a loser this time is not a net winner in the long run. Thus you don’t know if it really deserves to go in the “setups to avoid pile.” If you can’t find a real setup that works, why trade and waste your money to give yourself the appearance of success?

You said “I will then only trader those set ups with more than 50% winning probability.”

Again, you are missing the point and don’t seem to understand what expectancy means or how to use it. Look it up at google or on this site. The above sentence is not necessarily going to help you. Why? Just because a set up or potential set up has a greater than 50% winning probability, doesn’t make it a net, long term winner. It just means you win more trades than you lose on. For that statement to have any value, you must incorporate the size of the winning trade and the size of the losing trade into your thought process for the above to have any validity. Which is exactly what the trade setup’s expectancy tells you. Just because a trade has a 40% winning probability doesn’t necessarily mean it is a bad setup if the size of the winner 40% of the time is much larger than the amount you lose on the trade the 60% of the time you lose. Does this make sense to you? There is no combo that is perfect. But in general, the longer the timeframe, the larger the potential profit you must receive for taking the risk of longer market exposure to unforeseen market risks. You just have to develop strategies taking into account win/loss percentage and win size/lose size that you can live with. I hope you can understand the distinction I am pointing out here as well how these variables interact with each other.

Also, this is where the psychology comes into it. Not everyone can mentally handle being wrong 60% of the time/right 40% as in my above example (or whatever the setup percentage is). They might override the setup parameters if the 60% losing percentage gets to them. Once that happens they are gambling again by not following their setup parameters. So they would then need to develop strategies based on a higher winning percentage but with a lower expected profit (unless you can find both, LOL) for them to be able to mentally handle being wrong 20% of the time. These are questions that only each individual trader can answer as everyone’s psychological makeup is different.

There is no final step to becoming successful. The process never ends. NEVER forget that.

Good luck

BM
More...
 
Pension Admin,

Below is another explanation of Expectancy vs. Accuracy, exactly what I have been trying to get across. I did not write all of the below but it is a pretty good explanation. This explanation is about as simple as it gets and includes the expectancy formula for making calculations in your own trading and research. I hope it helps. PM me if you want me to reference the source to which I have no affiliation or knowledge of other than what I found here.

Initial Considerations: In nearly every activity where there is a measurable difference between doing well and doing poorly, there is a natural human tendency to want the majority of attempts to result in success. In most cases, this is entirely appropriate. For a basketball player who attempts five free throws, the ideal outcome is five successful shots. Intuitively, people think that same way about trading. If a trader takes several positions, the more winning positions, the better. Is this really the best way to measure a trader's effectiveness?

Applications to Trading: In our own system metrics, we use the term "directional accuracy" to refer to the number of winning trades divided by the total number of trades. For example, if we place 100 trades and make money on 40 of them, our directional accuracy is 40%. Instinctively, most people will discount the possibility that such a series of trades could be profitable. After all, we are losing more often than we win. What this fails to account for is the size of the typical win and the size of the typical loss.

Suppose that each trade that goes in our favor, we make $1500 and every time a trade goes against us, we lose $500. In this case, a 40% win rate is more than sufficient to bring in impressive profits. The typical profit per trade can be expressed according to the formula for expectancy:

Expectancy = (Probability of Win * Average Win) - (Probability of Loss * Average Loss)

Expectancy = (0.4 * $1500) - (0.6 * -$500)
Expectancy = $600 - $300 = $300

Counter intuitive as it may be, most trades are losers, but the average trade results in a profit of $300. This isn't just a mathematical curiosity. This is how real world trading works and it's why most traders wind up leaving the market with less than they go in with. Most traders want to be right more than they want to be profitable. Read that last sentence again. And again. Remember you comment about only wanting to take trades that are correct at least 50% of the time?

Closing Thoughts: Which would be more profitable for the trader, a system like the one just mentioned, or one in which 75% of trades make money, but the average win is $100 and the average loss is $400? Which would be psychologically easier to trade, a system which makes money but requires the discipline to deal with numerous tiny losses, or a system which looses money but always has another winning trade just around the corner? Our system is certainly not easy to trade from a psychological point of view, but we believe our overall profit performance speaks for itself. Figure this out for yourself to make sure you understand what we are doing here.

Your sentence "I will then only trade those setups with more than a 50% winning probability" refers to directional accuracy, not expectancy. I hope the above makes this clearer with the use of real numeric examples.

Remember, there is no shame in moving on to another endeavor. Maybe your field of best performance and happiness is not trading. Again, good luck in your trading and life.

BM
 
I totally understand that and I am a true believer in this. I think Mark Douglas has mentioned this in his book, but in finding the setups with the right combination of winning probability and average dollar winning to give a positive expectancy would be a difficult and confusing task for me.

PA



Quote from Big Money:

Pension Admin,

Below is another explanation of Expectancy vs. Accuracy, exactly what I have been trying to get across. I did not write all of the below but it is a pretty good explanation. This explanation is about as simple as it gets and includes the expectancy formula for making calculations in your own trading and research. I hope it helps. PM me if you want me to reference the source to which I have no affiliation or knowledge of other than what I found here.

Initial Considerations: In nearly every activity where there is a measurable difference between doing well and doing poorly, there is a natural human tendency to want the majority of attempts to result in success. In most cases, this is entirely appropriate. For a basketball player who attempts five free throws, the ideal outcome is five successful shots. Intuitively, people think that same way about trading. If a trader takes several positions, the more winning positions, the better. Is this really the best way to measure a trader's effectiveness?

Applications to Trading: In our own system metrics, we use the term "directional accuracy" to refer to the number of winning trades divided by the total number of trades. For example, if we place 100 trades and make money on 40 of them, our directional accuracy is 40%. Instinctively, most people will discount the possibility that such a series of trades could be profitable. After all, we are losing more often than we win. What this fails to account for is the size of the typical win and the size of the typical loss.

Suppose that each trade that goes in our favor, we make $1500 and every time a trade goes against us, we lose $500. In this case, a 40% win rate is more than sufficient to bring in impressive profits. The typical profit per trade can be expressed according to the formula for expectancy:

Expectancy = (Probability of Win * Average Win) - (Probability of Loss * Average Loss)

Expectancy = (0.4 * $1500) - (0.6 * -$500)
Expectancy = $600 - $300 = $300

Counter intuitive as it may be, most trades are losers, but the average trade results in a profit of $300. This isn't just a mathematical curiosity. This is how real world trading works and it's why most traders wind up leaving the market with less than they go in with. Most traders want to be right more than they want to be profitable. Read that last sentence again. And again. Remember you comment about only wanting to take trades that are correct at least 50% of the time?

Closing Thoughts: Which would be more profitable for the trader, a system like the one just mentioned, or one in which 75% of trades make money, but the average win is $100 and the average loss is $400? Which would be psychologically easier to trade, a system which makes money but requires the discipline to deal with numerous tiny losses, or a system which looses money but always has another winning trade just around the corner? Our system is certainly not easy to trade from a psychological point of view, but we believe our overall profit performance speaks for itself. Figure this out for yourself to make sure you understand what we are doing here.

Your sentence "I will then only trade those setups with more than a 50% winning probability" refers to directional accuracy, not expectancy. I hope the above makes this clearer with the use of real numeric examples.

Remember, there is no shame in moving on to another endeavor. Maybe your field of best performance and happiness is not trading. Again, good luck in your trading and life.

BM
More...
 
Quote from Big Money:

Pension Admin,

First I am going to tell it to you straight, as if I was talking to a friend in person in your position. Second, you probably won’t like it but I hope you at least consider this side of things. Many others have hinted at this, but I am going to come out and say it, as I would expect a friend of mine to do if I was in your position.

You aren’t confident because you are just gambling. Period. You have no real plan and haven’t learned much in 7 years of dabbling. Having random entries and no idea of your statistics reminds me of the saying, “the definition of insanity is doing the same things over and over and expecting different results.” Even if you stumbled upon a winning strategy, you wouldn’t know it because you don’t track your trades so you wouldn’t even know you were on the right track. As Aegis says, you need to know your win and loss percentage, and just as importantly, you average win and average loss. Once you have a positive expectancy trade setup, your job is to let the math work for you and put it into action as many times as possible. The more trades you take or the larger your sample size, the closer to certainty your results become. Let the math side work for you and you will have the confidence to follow your system because you know it is plausible. Any one trade doesn’t matter. What you care about is your positive expectancy tells you what will happen over the next 1000 trades or whatever, depending on you timeframe.

Pros know their setups backwards and forwards and will follow their trade setup rules, ALWAYS and with CONFIDENCE, because they know it is in their best interest to do so. As someone else says, good trading is boring because you have a contingency for just about every situation or event that could happen, and some that are improbable. Data feed, broker failure or internet failure occur? An inconvenience? Certainly. Not a big problem or time to panic because you already know what to do when those things happen, per your trading plan. Of course this assumes you actually have a detailed plan in the first place, which based on your posts you do not.

Face the facts. You don’t have a system. You may think you do but you don’t IMHO. If you continue to trade without a system and plan those who take this seriously will keep taking your money until you give up the ghost, which at this point is probably a good idea. Sorry.

Having said all that, you should be commended for at least trying to admit to yourself (which is why you posted in the first place probably) that you know you are just putting on a trade and hoping for the best, i.e. gambling. But if you are honest with yourself, you probably game to this conclusion a long time ago and are just now finally admitting it on some level to yourself. Most would continue to ignore the facts and go broke and then come to ET and say trading is impossible. There is no shame in moving on to other endeavors as trading is certainly not for everyone. It takes a truly confident person to say that however and just move on.

If you absolutely have to continue trading (not recommended), make sure you have a real method and plan in place that is thorough and complete before placing another live trade. That is were most get into trouble thinking they are not important. Trading is a lot of work and not as glamorous as it is portrayed. We sit in a semi-dark room with a bunch of screens changing colors and call it a career. Most can’t handle it. But I wouldn’t trade if for all the tea in China.

Someday I will learn to shorten my posts but there is a lot to say. No matter what you decide, best of luck in trading or whatever you decide to do. The truth, in my humble opinion, is rarely spoken these days. But it will set you free.

BM
More...



+1, My vote for Post of the year so far. Every damm paragraph is truthful.

thanks,

EF
 
"I haven't failed. I've just found 10,000 ways that don't work" - Thomas Edison

Of course, this is true. The problem is that unless you are fanatical in your pursuit, you are likely to put yourself in financial ruin by the time you become profitable.

It is so hard to give advice without really seeing everything about your trades and your thinking process.

I still find posts like this amazing given that there are literally thousands of posts like it in past threads, and there is some really good advice in them. Instead of starting a new thread on it, if you are really interested in changing your fortunes, search the site and listen to how others have gone wrong and some of the advice given to them.

Without knowing you, I would say you should try to just have small victories and try to so something simple, like pairs trade or stat arb.

Remember, there are many ways to lose, so you have to isolate how you lose. For example, if you have a problem with stop losses, use ITM options. That way your risk is always limited, and the tool forces the correct discipline on you. Solve the problem with the right tool...

If nothing works, try sticking a $2 bill in your wallet and NEVER spend it. My dad says it is good luck.

Quote from Pension_Admin:

I have been trading on and off for 7 years. Over those 7 years, I have slowly learning and unlearning what trading is about.

Confession #1: I read the book by Mark Douglas and I believe in what he mentioned in his book.

Confession: #2: I am close to "getting it" because I now see through all the BS guru's make.

Confession #3: I have a sound money management system, reward-to-risk ratio, and am highly disciplined in my stop and exit, but it never made me a profitable trader.

Confession #4: I have once again come to the point where I found the right system, but I no longer have the confidence in myself and in the system.

Confession #5: I started this system on Tuesday and I have 3 trades open. I keep thinking that they will all be losers.

Confession #6: I wonder how many traders have came to the stage that I am in, and quit because they couldn't be profitable even with a disciplines, good money management and a good trading system.

Confession #7: This is likely my last attempt because if I fail, I would not know what my system is missing.

Thanks!

PA
More...
 
Quote from Pension_Admin:

I have been trading on and off for 7 years. Over those 7 years, I have slowly learning and unlearning what trading is about.

Confession #1: I read the book by Mark Douglas and I believe in what he mentioned in his book.

Confession: #2: I am close to "getting it" because I now see through all the BS guru's make.

Confession #3: I have a sound money management system, reward-to-risk ratio, and am highly disciplined in my stop and exit, but it never made me a profitable trader.

Confession #4: I have once again come to the point where I found the right system, but I no longer have the confidence in myself and in the system.

Confession #5: I started this system on Tuesday and I have 3 trades open. I keep thinking that they will all be losers.

Confession #6: I wonder how many traders have came to the stage that I am in, and quit because they couldn't be profitable even with a disciplines, good money management and a good trading system.

Confession #7: This is likely my last attempt because if I fail, I would not know what my system is missing.

Thanks!

PA
More...

Its all about EDGE.

Find a good edge, then trade it.

If your current strat is a net loser, then walk away, and try something else. Keep doing that until you find ONE that works.

That's the Big Secret.

Keep throwing out trash until you find something of value. Needle in the haystack. That's what this Journey is all about.

And yes, there is something to find. And no, it doesn't lie within the realm of mathematical esoterica, or quant-finance-algo BS. Yea, the real egg-heads can squeeze juice from that rock. But there are Far more profitable wells to drill. And far easier. Even an average guy like me with no background in math or computer sci can easily exploit. Keep looking. Do not give up. Period. End of story.

If you give up without finding one good edge, it meant you never looked long enough. I hope I'm clear. Good luck.
 
Oh yea, and stop wasting time on these sub-forms.

Spend ALL YOUR TIME in the Journals Forum.

IDENTIFY, LEARN AND COPY THE STRATEGIES OF PROFITABLE TRADERS POSTING IN THE JOURNALS SECTION.

Stop wasting time with this crap. Go to the Journals section AND START DIGGING.

Guys in there are trading the easiest, dumbest sh*t making SICK returns. That's the market. Stupid. Now go figure it out.
 
Quote from retaildaytrader:

Thats why. Forex is a fool's game. Who on ET is successful at trading FOREX? If 100 guys can't make it in forex, then how can you? Some games of chance are simply fool's games and that is forex.

The most successful traders here wait for good setups and then execute.
More...

No, its not. You don't know what you're talking about.

Classic case of "Because-I-couldn't-figure-it-out-nobody-can".

Yea, okay.

FX is not rigged, or a fools game. Stay with it.
 
Quote from Pension_Admin:

Here is a chart of the EUR/USD I traded with a really small amount.

I got lucky in the first trade, but I wasn't that lucky on my second trade. I should have been more patient on my second trade.

The first trade was made based on the gyration of price. The second trade was based on the anticipation of a trend.
More...

Use candles or bars. Lines are crap. The market uses OHLC.

Lesson#1.
 
You must log in or register to reply here.
Back
Top