How can someone blow up in day trading?

Quote from patoo:

I think a better way to put this, traderzhangSan, is that you need to blow up your account at least once to know that it is possible.

How that happens is up to you.

It is a right of passage.

The key is to keep going even after you have lost all your money and figuring how to never do it again. Its up to you.
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True

You must learn what it feels like to "tilt" or become "psyched out".

It happens, you might as well start in a micro FOREX account and do it actually and not lose a large % of your net worth. I would get aggressive with it and lose, just to show you how it feels.

It will not feel good when your ego becomes bigger than your head and you throw 5-10 contracts more than you are comfortable with in the ES and watch your account get sucked out by your friend JP.
 
Now we are at 3 points...ok. A bad month, lets say 100 trades(5*20), if you are losing 60% of your trades when first starting off, a very real number possibly, you will be down 40% of that 10K. Now, do that 2 months in a row, you are left with 2K, I would call destroying 80% of your acc in 2 months a blow up.
 
your question is the same as what's odds of 20 heads in a row when you flip a coin. it is 1 in 1 million. it is possible, but unlikely.




Quote from elduerino:

Now we are at 3 points...ok. A bad month, lets say 100 trades(5*20), if you are losing 60% of your trades when first starting off, a very real number possibly, you will be down 40% of that 10K. Now, do that 2 months in a row, you are left with 2K, I would call destroying 80% of your acc in 2 months a blow up.
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Quote from traderzhangSan:

your question is the same as what's odds of 20 heads in a row when you flip a coin. it is 1 in 1 million. it is possible, but unlikely.
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it is indeed very likely once u start doing it, not when you are a dispassionate observer, why is it like this? i dont know, maybe karma or quantum mechanics
 
OK Revised:

With a $10K account trading the system as the op described:

1 ES Contract Stop and take profits set at 3 Points: 5 trades per day $5 RT trading cost. Each win nets $145.00 each stop loses -$155.00

5 wins = Net $725.00
4 wins 1 stop = Net $425.00
3 wins 2 stops = Net $125.00
2 wins 3 stops = Net Loss -$175.00
1 Win 4 Stops = - $475.00
5 Stops = Net Loss -$775.00

Statistically you still will lose -$50 per day

If you use this exercise to trade random numbers you should realize you need to increase your winning odds and profit payouts.

One example would be to introduce a one step average down to shift the odds on the initial stop out and increase your profit taking x 2. ie. Start with 1 Contract average down at -2 points from entry and stop at -2.50 from entry. Take Profits at 6 points from entry with one contract or 2 points from entry with 2 contracts.

With these changes each win nets $290 but each stop only loses -$160.00.

5 wins = $1450
4 wins 1 stop = $1290
3 wins 2 stops = $550
2 wins 3 stops = $100
1 win 4 stops = -$350
5 stops = - $800

If you consistently win 2/5 you make a little dough.

The idea for certain styles of algorithmic trading is to keep increasing your odds at winning by systematically averaging down, pyramiding exits, reversing so there is a very limited and precise pattern the market must move for you to stop out. Outside of this one specific losing pattern every other iteration makes you money.

For the above instead of stopping at 2 1/2 points reverse and add 1 contract. Same base algo flipping sides until you catch a break out.
Adjust the profit taking portion of the algo to pyramid and ride out the trend.

When you do this as a sequence of trades 7 - 10 times inside a tight range you can increase your odds of winning to > 98% provided you can bank and stomach the trading size. Your losses from the 2% blows ups are fixed and substantially absorbed by your overall winnings.

Its all about ratios: keeping the odds of winning not only in your favor but the rewards substantial enough to absorb inevitable losses.

Quote from traderzhangSan:

what I meant is point in ES. not ticks(as one point has 4 ticks)
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Here is an example of how someone can easily blow up day trading:

You notice that MIL has had a long steady climb over the months, yet has run against resistance in the 70's again and again. On 1/13 it made a higher high, then started a series of lower highs and lower lows, and actually dipped below the 200-day moving average on 2/5. You're now watching what happens on the next rally to an overbought condition, because you'd like to catch one of those days like 2/3, 2/4 and 2/5, nice intraday moves to the short side.

On 2/18 fast and slow stochastics indicate a fully overbought condition. On 2/19, price moves up, tests the previous day's high looking to breakthrough, and fails, pulling back before the close. The table is now set and you look to feast on a nice short the next day if price fails to break above the 2/19 close of 71.34.

Next trading day (2/22), price opens below the 2/19 close, ranges for quite a while, finally tests the 2/19 closing price and fails to break out of the range. Shortly before noon, you put on a larger-than-average short position @ 71.28, looking to catch a nice breakdown of a point or two, because you've seen this happen before and you always regret trading such small size. You're very comfortable with using nearly your full day trading margin to short 1500 shares on this trade because your mental stop is only .10 cents, so it's a very low risk/high reward trade and if it continues to stay in a narrow range all day, you'll just go flat and try again tomorrow.

Suddenly, price disappears from your DOM. For a moment you think your trading platform locked up. You notice as if in a dream that your unrealized P&L is -$28,000. Huh??? In the time it takes you comprehend that this is a real move and not a platform error, your P&L is now -$37,000. Your entire day trading account was only $32,000.

There it is, over in about 3 minutes.

Now if you'd placed a hard stop, I've no idea what would've happened, because the move was so fast, just the slippage of a stop order triggering at market would likely have been a few points.
 
Quote from henry76:

But the true "cost" of trading underlying markets is only commission /expences , not spread , as your entitled to take advantage of spread just as much as any other trader.
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the bid/ask spread is a COST, not an ADVANTAGE.

people trading in their underwear using their $10K accounts pay RETAIL, not WHOLESALE.
 
Quote from traderzhangSan:

But what you said is another matter. I mean you should be able to control your emotion(easy said than done).

I am just discussing the possibility.
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It is may not be necessary or possible to control one's emotions. Controlling one's actions may be a more realistic practice.
 
Quote from TraderZones:

the bid/ask spread is a COST, not an ADVANTAGE.

people trading in their underwear using their $10K accounts pay RETAIL, not WHOLESALE.
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In any business there are costs. You MUST explain to them that there are reasonable metrics- even in retail

If you pay 4.80 R/T and routinely look for 3.5 points for profits with a .75 stop. That is decent measures.
 
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