How not to overtrade?
- Thread starter LeeD
- Start date
Hehe - then it may be difficult to accept the truth. I'll keep trying... (Do I sound like someone who has watched "Matrix" too many times?)
Taking profit isn't as easy as it may seem. One may think that larger profit targets are necessary to offset potential losses... So, the advice is to stop after a successful trade....
Just did exactly what's described in this post.
A few books just arrived. I'll start reading.
Thanks again to anyone who replied to the opening post of this thread.
An update.
I have been trying to follow this advice since the start of the year. I didn't make a firm rule out of it but till this week the maximum number of trades I had had per day was 3 and I often finished after just one trade.
As I mentioned above, a few days ago I started with a loosing trade. I did a few more trades in an attempt to break even and ran into a substantial loss after just a few round trips. I decided to take a loss and stop trading for the day.
Today I strated with 2 consequitive loosing trades but I decided not to stop and try, at least, to reach break-even. The result is 28 round trips, profit equivalent of 15 ES points per contract, out iof which equivalent of 39 ES points per contract gain, and 24 loss. This brings me to positive on a week.
Issues I am still having:
1) When a winning trade reaches minor level of support/resistance, I often close the trade and open it when the level is broken. So, I re-enter a trade at a worse level
2) When I set a narrow stop I often re-enter a stopped trade at a worse level after a potential massive move against me fails to materialise
3) I enter trades with less than perfect set-up because I think there might not be a single perfect set-up for the whole day. Contrary to what some may say these are not always loosers but the gain on the winning ones is usually smaller than with a good set-up, while the drawdown is larger. Net-net it's still probabbly not a good idea.
4) Finally, I often fail to realise substantial profit on winning trades because I still aim more than a trade ( especially when set-up is less-then-perfect) can provide.
An update.
I have been trying to follow this advice since the start of the year. I didn't make a firm rule out of it but till this week the maximum number of trades I had had per day was 3 and I often finished after just one trade.
As I mentioned above, a few days ago I started with a loosing trade. I did a few more trades in an attempt to break even and ran into a substantial loss after just a few round trips. I decided to take a loss and stop trading for the day.
Today I strated with 2 consequitive loosing trades but I decided not to stop and try, at least, to reach break-even. The result is 28 round trips, profit equivalent of 15 ES points per contract, out iof which equivalent of 39 ES points per contract gain, and 24 loss. This brings me to positive on a week.
Issues I am still having:
1) When a winning trade reaches minor level of support/resistance, I often close the trade and open it when the level is broken. So, I re-enter a trade at a worse level
2) When I set a narrow stop I often re-enter a stopped trade at a worse level after a potential massive move against me fails to materialise
3) I enter trades with less than perfect set-up because I think there might not be a single perfect set-up for the whole day. Contrary to what some may say these are not always loosers but the gain on the winning ones is usually smaller than with a good set-up, while the drawdown is larger. Net-net it's still probabbly not a good idea.
4) Finally, I often fail to realise substantial profit on winning trades because I still aim more than a trade ( especially when set-up is less-then-perfect) can provide.
First of all, I'm currently struggling so don't take anything I say as gospel. But I'd thought I jump in anyway.
I'm glad that worked out for you. Every single time I try some thing like that I end up with a massive loss for the day. What was your max loss for the day while you were doing that?
It's become one of my absolute rules never to do that.
2 thoughts on this:
1. When I am backtesting I look at the distribution of winning trade amounts. I try to pick a target that is commonly reached and give up the on riding the winners. I don't think this is a great way to handle it except maybe for scalps.
2. Maybe it would be better to not set your profit target at exactly the resistance level. Instead, once it reaches the resistance level, move your stop up halfway between your entry and resistance. Then you get some profit if it fails and can let it run if it breaks through.
I make it a rule to never re-enter stopped out trades. But all of my backtesting of different strategies consistently shows that that larger stops result in better overall peformance, up to a point.
Also, placing a narrow stop is equivalent to insisting that you have to be precisely right to make a profit, rather than just mostly right.
I'm sure you've already considered the well known implications of setting your stops at obvious places.
I think your #3 and #4 are best answered by reviewing the trades you have taken that meet these criteria.
Bottom line is that I don't think any one aspect of your trading plan can really be considered in isolation. All of you rules have to work together to form a good system.
I'm glad that worked out for you. Every single time I try some thing like that I end up with a massive loss for the day. What was your max loss for the day while you were doing that?
It's become one of my absolute rules never to do that.
2 thoughts on this:
1. When I am backtesting I look at the distribution of winning trade amounts. I try to pick a target that is commonly reached and give up the on riding the winners. I don't think this is a great way to handle it except maybe for scalps.
2. Maybe it would be better to not set your profit target at exactly the resistance level. Instead, once it reaches the resistance level, move your stop up halfway between your entry and resistance. Then you get some profit if it fails and can let it run if it breaks through.
I make it a rule to never re-enter stopped out trades. But all of my backtesting of different strategies consistently shows that that larger stops result in better overall peformance, up to a point.
Also, placing a narrow stop is equivalent to insisting that you have to be precisely right to make a profit, rather than just mostly right.
I'm sure you've already considered the well known implications of setting your stops at obvious places.
I think your #3 and #4 are best answered by reviewing the trades you have taken that meet these criteria.
Bottom line is that I don't think any one aspect of your trading plan can really be considered in isolation. All of you rules have to work together to form a good system.
There aren't really any techniques to follow. You just have to be patient and wait for high probability set-ups to occur in trading. Then take advantage of those set-ups when they come.
Discipline and Patience is tested.
Welcome to the thread!
Thanks for the support! Yesterday, the maximum loss during the day was around 10 points including commission (probabbly 8-9 points before commission).
If you want to run the winners the target should be probabbly based on the set-up. Having a small high-probability target is still great if you can keep drawdown under tight control. A few small winners is better than one big loser.
I tried this and the new stop-loss gets almost certainly hit for me. It seems it's better to take profit outright and get out.
I tend to set a narrow stop in case there is a fast move against me. On the occasions I can re-enter at a better level, it's pleasant.
This makes sense. The point is the narrower the stop the more attempts you have before the accumulated loss is too large to continue. So, in my view it's worth trying to be right.
Fear is not my idea of perfect state of mind when trading
Looks like today I failed this test. I did 12 round trips and ended up with a marginal gain after commission. Need to remember that calmness when I was happy to have no trades at all if the set-up didn't appear perfect.
Experience is a cure because it simply allows you the time to progressively learn the lessons you need to learn.
I am referring to actual emotions. You feel so profoundly about something, you can feel it literally rushing through your entire body. It's not necessarily thought, in as much as it is desire, faith, yearning...
One more piece of advice, if I may, is to keep everything simple. Do not fall into the trap that 98% of online traders face by over-analysing everything, and seeking too much information. Keep is basic. Understand what the fundamentals are of the process, and let yourself become the system that evolves to best match between you and your environment. Your confidence will grow as begin to sense that in the long term you will be successful. Lose a point or two here or there doesn't matter because you'll win it all back and then some.