Day Traders: Losing Days

Gabfly1 · Jul 8, 2010

Quote from NoDoji:

I've found that EVERY losing day came down to a violation of one or more of these rules:

1. Picking and choosing trades instead of trading all valid signals.

2. Trading lukewarm setups...

Are the lukewarm setups nevertheless valid signals? Just seeking clarification.

Quote from NoDoji:

3. Having a bias based on...S/R levels instead of trading the price action itself.

Personally, I think that acting in anticipation of, rather than in response to, S/R generally leads to disappointment of one form or another. That's one of the reasons why I don't think very highly of firm profit targets well before the fact. Your No. 3 possibly suggests a similar realization.

QuikrRetirement · Jul 8, 2010

Quote from NoDoji:

I've been honing a list of rules based on a long running analysis of my losing trades/losing days. Though I often have losing trades, I rarely have losing days. In reviewing my losing days over the past year and working on my basic rules over time, I've found that EVERY losing day came down to a violation of one or more of these rules:

1. Picking and choosing trades instead of trading all valid signals.

Although I see people saying this (your #1), statistically I really do not buy it. Assuming the person is not doing anything DIFFERENT in their choice, there is no reason to think that a subset of one's signals are going to fare any worse/better than the entire set.

If they ARE doing something different in their choices, and it produces better or worse results (documented, not guesses), then that means there is something in their choice process that should be honed or eliminated.

In statistics, this is called sampling. So if flipping a coin 5,000 times yields about 50% of each, so would a sample of 500 from the 5,000.

It is important to base things on sound principles, thorough testing, and skill/experience. Not based on feeling and guesswork.

NoDoji · Jul 8, 2010

Quote from Gabfly1:

Are the lukewarm setups nevertheless valid signals? Just seeking clarification.

Personally, I think that acting in anticipation of, rather than in response to, S/R generally leads to disappointment of one form or another. That's one of the reasons why I don't think very highly of firm profit targets well before the fact. Your No. 3 possibly suggests a similar realization.

No, lukewarm setups are basically opinions formed while price is in no man's land. It's usually a case of conflicting signals: Oh there's higher low (but look there's also a lower high); this is overbought, looks like a good short (uh, yeah, but price is in an uptrend...). You know, that kind of thing.

As for acting in anticipation of S/R, I absolutely agree with you; it can be a good way to churn money away. I always let price test or at least try to and fail before I consider a signal put in. I had enough of being the early short or long who throws money away.

I certainly didn't take all my signals today, but I rarely trade CL pre-inventory, so it was a day where I sampled trades from other platters:

Right after the job report in pre-market I traded ES, buying the post news high and selling higher, so that was a nice start to the day (but I entered the trade with 3 lots and had no exit strategy other than "sell somewhere higher". I was actually laughing at myself because of how quickly I was vacillating back and forth between "all out" and "scale out" - "scale out" won).

I had a POT trade that worked for a while then stopped out b/e.

I had a post news crude trade based on pure downward momentum, no particular signal bar. It showed $150 and came right back to a b/e stop. I was rather late on that entry.

I took a break at one point to let CL price action paint me a better picture after the inventories and returned to find that one of the best signals of the entire day was put in and a huge move was in progress without me. I then had some scratch trades that showed me around $150 and came right back to b/e stop outs.

Frustrated, I noticed my old standby POT setting up a lower high late in the day and captured a .40 cent move, which was a nice way to close out, after the frustrating $650 miss in crude.

Picaso · Jul 8, 2010

Quote from Arthur Deco:

I am a broken record. And you are a scratchy needle. The only way to fix the problems you describe is to codify your systems into sets of clear, simple, unambiguous rules, create algorithms for them, code, backtest and optimize. After you have had some months of stable system performance in testing, you can start eliminating your issues one by one with the systems as disciplinarians. First take only indicated trades, even if you don't take all of them. Then take all of them. Then scruupulously observe your loss stops. Then patiently wait for your profit stops. And don't forget to continuously reoptimize so you can make yourself thoroughly sick realizing how much money you lost by not honoring the system. Each of the issues you listed is a serious psychological problem. But they WILL go away in trading if you are conscientious. Then you have the rest of your existence to worry about. For that there is no cure. Even old age doesn't help, as I am now painfully aware. And stay away from Jack. He will rot your mind by insidiously bathing it in verbal bullshit.

I like the one by one system.

I started with *never* averaging (down - up is part of my system), then *always* respecting my stop, then only taking the excellent setups and now I'm in the not picking valid signals phase

What (has so far) helped me was to track non-forced errors and their cost. For taking *all* signals I'm doing visualization exercises (as per Steenbarger's blog/books).

Arthur Deco · Jul 8, 2010

Congratulations on inventing on your own such a disciplined structured approach. You might also like Mark Douglas' books on trading discipline. THE best. I found that keeping track of how each individual lapse cost me helped.

Picaso · Jul 8, 2010

Nodoji, if you have a hard-coded system that you can automate as a strategy, you can do that and yet, if for some reason you prefer to take the signals manually (say, because you think/know that you can do better than an automated execution in terms of slippage, heat, etc.) you may want to try generating the signals automatically on the chart (without generating actual trades) so you can "see them", not just in your mind, but black on white.

Then - and I know this sounds kind of silly - you can have your platform play a recording of your voice saying "Go long", "Short tight", "Short swing", or whatever your strategies call for. Listening to yourself commanding you to take action may be all you need. Also, since you seem to have a good relationship with some of the more experienced traders that kind of mentored you in your trading journal, you could have *them* record the messages and then you'll have no choice but to move your butt!

Think of a drill sergeant: you don't get to choose this push-up I do, this one I skip, this one I'm going to wait to see if the guy to my left does it and then I'm doing two...

I know, I know, but this thread was looking excellent, so I thought I'd bring it down to the level of the average thread

NoDoji · Jul 8, 2010

Quote from QuikrRetirement:

Although I see people saying this (your #1), statistically I really do not buy it. Assuming the person is not doing anything DIFFERENT in their choice, there is no reason to think that a subset of one's signals are going to fare any worse/better than the entire set.

The market isn't a simple coin toss though. Time of day and previous price action make it more like throwing dice, where 2 numbers represent the strongest moves, 2 numbers represent smaller moves and 2 numbers represent signal failures (and potential losses), where I limit my downside by making sure I have a 2:1 R:R or better on all trades.

For example, today my break coincided with missing a trade off one of my signals. That trade, managed following my trade management rules, would have given me .65 ticks profit ($650). Similar signals I took later showed much smaller gains and reversed to break even without even coming close to target. The price action had "tightened up" as the midday doldrums set in.

NoDoji · Jul 8, 2010

Quote from Picaso:

Then - and I know this sounds kind of silly - you can have your platform play a recording of your voice saying "Go long", "Short tight", "Short swing", or whatever your strategies call for. Listening to yourself commanding you to take action may be all you need. Also, since you seem to have a good relationship with some of the more experienced traders that kind of mentored you in your trading journal, you could have *them* record the messages and then you'll have no choice but to move your butt! Think of a drill sergeant: you don't get to choose this push-up I do, this one I skip, this one I'm going to wait to see if the guy to my left does it and then I'm doing two...

I know, I know, but this thread was looking excellent, so I thought I'd bring it down to the level of the average thread

I have a Skype group together for a few weeks now and we know each other's setups really well now. We are progressing from the polite getting-to-know-each-other stage to the "Are you long? No! Why the hell not, that's your prime setup!"

The last step in this process is to start sounding like a family with sullen teenagers:

"You're not already moving your stop to break even are you?"

"Uh, yeah, but it's because..."

"Give me that trade and to your room right this minute!"

Redneck · Jul 10, 2010

Quote from NoDoji:

Outside of totally automating one's strategy, have any discretionary traders here managed to overcome these issues and simply trade like a machine, following rules for entry, stop and target on every valid signal?

Hey NOD

Iâve been lurking and waiting to see how this thread develops â now as usual I am going to take a totally different pathâ¦
Such as life I suppose

Btw â you are at another crossroad (they never end so might as well get use to it)

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In the beginning, in order to find our approach/ system/ methodology â we must be somewhat intelligent, possess a modicum of common sense, be tenacious, head strongâ¦ and yet remain bendable, moldable and open

All great qualities â which you obviously possess

Another btw â if you havenât figured it out by now â profitable approaches/ systems/ methodologies are a dime a dozenâ¦
(one of the reasons I will never say one way is better than another â if it makes money for a trader â itâs all good)

Anyway time passes - we've figured out what works us â we start making moneyâ¦.

The crossroad

We been smart enough to figure out what works for us â now we must become dumb enough to follow it

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Dumbass (doesnât try to outsmart the market â simply follows)
Disciplined (strict adherence to rules â sans all else)
Childlike (doesnât question simply follows what they see)
Matters not what you think â only what you do

Admittedly these descriptions span the spectrum â but they all lead to one basic premise

We must think like â and act like â a trader

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On another note

Some get to the point of developing a system/ approach/ methodology â but fall short of completely developing a trader (doing the internal work necessary to revert to the above)â¦ Possibly theyâve tried to revert and failed, possibly they didnât even consider reverting â no matter â for what they do â do is automate

Automated trading â imo â is a proxy for thinking like and acting like a trader (no emotion, no opinion, simply identify setups, placing trades, exiting when appropriate â for a gain or acceptable loss)

And do not interpret this as me saying a trader with an automated approach â is somehow less of a real trader â that would be total bullshitâ¦

I am saying a trader with an automated approach, if they can learn to leave their hands off the box and simply monitor it/ modify it as appropriate when conditions change â has resolved the issues of dealing with most (certainly not all) but most of the mental aspectâ¦.

Neither is better â or worse â just differentâ¦. Both absolutely make money

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So here we sit at a crossroad Maâam â should you

Revert to thinking like and acting like a trader (internal work)

OR

Proceed with automating your method (external work)

Some will say one is better than the other â so be itâ¦

I will say the choice is yours â decide and get to it

RN

NoDoji · Jul 10, 2010

Quote from Redneck trader:

So here we sit at a crossroad Maâam â should you

Revert to thinking like and acting like a trader (internal work)

OR

Proceed with automating your method (external work)

Some will say one is better than the other â so be itâ¦

I will say the choice is yours â decide and get to it

RN

Hi RN, I know exactly what you're saying. I still have confidence that in far less time than it would take to fully automate what I do now, I can master my own trading method. It seems so absurd to me that something as well-defined as my trading method can be so easily screwed up by passing it through the human filter of the developer.