Fearless trading

[Cheese]

Quote from romik:
THE AIM OF THIS THREAD IS TO HELP NEW TRADERS, GOING INTO REAL TRADING, DEVELOP THE RIGHT ATTITIDE TOWARDS PAPER TRADING.

Has anyone experienced higher returns when fear wasn't present in their trading? What I find interesting is that quite a few people do better on a simulated account compared to a real money account. If a trader applies the same approach to real trading as to paper trading (assuming that paper trading system is based on realistic fills/etc), surely both should almost match each other in terms of returns generated. What are your thoughts on this issue?

Fear and greed go together most of the time, let's just concentrate on absence of fear here.

When you are a new trader testing your strategy on a simulated account, I think you tend to trade without fear of losing a big chunk of your capital by widening your stops, starting to average, allocating higher %age of your trading capital per trade after a losing streak, leaving an open position overnight hoping it will be OK, etc. That is fearless trading that does not work well in real life situations. When you start having this approach in real trading, your capital is at a huge risk. Please stop being naive, it does not have to be a casino, unless you want it to be one. I would go into a casino for fun, I take $1000 knowing that the odds are against me and that I will probably lose it on the night, but I will have fun while at it. In trading the aim is to make money, not lose it.

Greed is a silly issue. Greed for what? Greed for stupidity. Greed to be trading when you don't know what you're doing. Greed to doubly prove yourself a loser

Now, what is fear? Fear simply means that you don't know what the living horsesh*t is going to happen next.
But if you know your market thoroughly, you're comfortable.

 

[romik]

Quote from Cheese:

Greed is a silly issue. Greed for what? Greed for stupidity. Greed to be trading when you don't know what you're doing. Greed to doubly prove yourself a loser

Now, what is fear? Fear simply means that you don't know what the living horsesh*t is going to happen next.
But if you know your market thoroughly, you're comfortable.

And what advice are you giving by posting the above? This thread is meant to HELP people understand how money is lost in the early stages of trading and hopefully make them realise what causes failures, not call them losers or stupid, come on guys, there are other threads for that.

 

[Johnnie T-Bond]

Paper trading can be useful in developing a profitable system in theory, but as most of us should know, few of us traders can follow a proven system religiously in actual practice. There are lots of good systems out there that could make most traders millionaires IF THEY COULD FOLLOW THEM. Many traders have trouble handling uncertainty very well so they second-guess their systems and either miss the opportunities or dump their profits too soon. I think it is important to trade with real money as soon as you think you have a proven edge or system and not waste too much time with paper trading or over-optimizing. Good systems are often simple to understand. I think it helps to start small, keep your expenses very low and go for smaller, consistent profits in the beginning. Once you master the technique and get used to trading consistently, start SLOWLY increasing your position size. If you try to grow your position size too fast your sub-conscious mind will lead you to give back a lot of your profits. This is because your equity will grow faster than your sub-conscious financial self-image and the resulting TENSION will make you do lots of dumb things to make you correct back to your smaller self-image by donating your money back to the market for you automatically. I've seen this happen countless times to traders who try to up their size too fast, despite the mathematical ability to do so. It takes time to methodically increase and hold your position size, which is the key to really big money. Most of us can only adapt slowly. There are very few Tom Baldwins out there who can take quantum leaps in size and hold them. Paper trading does not develop the kind of mental toughness one needs to make big bucks.

Reading Arnold Schwarzenegger's body building encyclopedia or watching Pumping Iron will not make you look like him. It takes years of very hard, sweaty workouts with larger and larger weights. Building capital through trading is a lot like building muscle. To quote from Arnold's book: "Confidence comes from doing. Much of what can intimidate you is simply fear of the unknown. Becoming a champion, packing on mountains of muscle mass, being able to handle huge weights can all seem hopelessly difficult to a beginning bodybuilder... continue on your own path and simply do each workout as well as you can. Your confidence will grow as it comes to rest on foundation of solid achievement." p205

Solid achievement gives a trader real confidence, where paper trading does not.

 

[bitrend]

Premature optimization is the root of all evil [Donald Knuth, king of computer scientist]. However, if the system found and used in paper trading doesn't reach the robustness and efficiency level then the confidence will be quickly lose when emotions come to play in real trading. Because trader will question about his system performance rather than about his own emotions that could be responsible for the losses.

I think trader that is using paper trading should spend time to secure his system until it is consistently proven profitable before moving to real world. And he should beware that it's only the first part done, you need to get second part done in order to succeed and should not go on cruise control after having a winning system in paper trading. Most often, new traders falsely believe that they are ready after having success in virtual trading and tempt to go on cruise control since they are not aware about the unexpected obstacle, their own emotions.

Quote from Johnnie T-Bond:

I think it is important to trade with real money as soon as you think you have a proven edge or system and not waste too much time with paper trading or over-optimizing.

 

[ksonsinc]

vhehn
fearless trading + not knowing what you are doing = job at mcdonalds
ahahahahhahah
That was really funny
I have to say i blew my account once and i have recently started trading future but my experinece with(trading stock blow up my account ) has made me more smart and knowledge
I dont think it has to do anything thing with fearless trading it has to do more with not holding losser or cutting your losser no one on the stock market can be %100 right so what does he do , take the loss and look for a better oppournity

 

[Steve Tvardek]

The market has made me more smart too!! LOL

Quote from ksonsinc:


I have to say i blew my account once and i have recently started trading future but my experinece with(trading stock blow up my account ) has made me more smart and knowledge

 

[bitrend]

The more we know, the more we will argue with Mr. Market! The same as Samson, the more he knows, the more he argues with ET members.
Do not misunderstood me, I have nothing against him since we are living in the same lovely country.

Quote from Steve Tvardek:

The market has made me more smart too!! LOL

 

[romik]

Quote from Johnnie T-Bond:

Paper trading can be useful in developing a profitable system in theory, but as most of us should know, few of us traders can follow a proven system religiously in actual practice. There are lots of good systems out there that could make most traders millionaires IF THEY COULD FOLLOW THEM. Many traders have trouble handling uncertainty very well so they second-guess their systems and either miss the opportunities or dump their profits too soon. I think it is important to trade with real money as soon as you think you have a proven edge or system and not waste too much time with paper trading or over-optimizing. Good systems are often simple to understand. I think it helps to start small, keep your expenses very low and go for smaller, consistent profits in the beginning. Once you master the technique and get used to trading consistently, start SLOWLY increasing your position size. If you try to grow your position size too fast your sub-conscious mind will lead you to give back a lot of your profits. This is because your equity will grow faster than your sub-conscious financial self-image and the resulting TENSION will make you do lots of dumb things to make you correct back to your smaller self-image by donating your money back to the market for you automatically. I've seen this happen countless times to traders who try to up their size too fast, despite the mathematical ability to do so. It takes time to methodically increase and hold your position size, which is the key to really big money. Most of us can only adapt slowly. There are very few Tom Baldwins out there who can take quantum leaps in size and hold them. Paper trading does not develop the kind of mental toughness one needs to make big bucks.

Reading Arnold Schwarzenegger's body building encyclopedia or watching Pumping Iron will not make you look like him. It takes years of very hard, sweaty workouts with larger and larger weights. Building capital through trading is a lot like building muscle. To quote from Arnold's book: "Confidence comes from doing. Much of what can intimidate you is simply fear of the unknown. Becoming a champion, packing on mountains of muscle mass, being able to handle huge weights can all seem hopelessly difficult to a beginning bodybuilder... continue on your own path and simply do each workout as well as you can. Your confidence will grow as it comes to rest on foundation of solid achievement." p205

Solid achievement gives a trader real confidence, where paper trading does not.

Very good post IMO, what %age of total capital would you advise allocating per trade to control maximum loss? I personally use 3% maximum.

 

[Johnnie T-Bond]

Thanks. It' s been my experience that one should risk no more than 2 to 3 % on any trade, no exceptions. Take a quarter and flip it 100 times and write down the results on a sheet of paper. Start with, say $ 100,000.00. Use your calculator percent key and subtract a certain test percentage for every "tails" you flip. Try that experiment with 2%, 5%, 10%, 25% and 50% losses each time a "tails" comes up. You'll soon realize how crucial money management is! You'll also see how easy it is to blow out your account when you hit a series of bad trades if you take large risks! If you consistently take large risks, you are destined to blow out. It is mathematically guaranteed over time. I believe that risking no more than 2 or 3% is a major factor in surviving long-term, let alone earning a fortune in the market. It also gives you fearlessness to trade on through a series of losses. You must protect your capital above all else or you will become easily demoralized. Once that happens fear commandeers your mind and your confidence to pull the trigger is greatly diminished.

 

[fhl]

Fear does not come from a lack of control, as some have stated. Fear comes from expecting something bad to happen. In our case, losing money. If you watch a successful trader go about his business without fear, he is no more in control of what is going to happen to the trade he is in than the trader who is scared stiff. The difference is he expects to make money on the series of trades. That is his point of reference. He is confident that there will be increase over time. The fearful trader is looking at the trade he is in and expecting loss.