I didn't Think I'd do it Again

[Scientist]

Quote from Girlpower:

Hi Flashboy,

The scientist made some really excellent points in what he said to you.

I assume you have a good trading plan, and from time to time you just get reckless and deviate from it?

This is something that does happen and is in fact a kind of self-sabotage. I know, I've done it too. There is only one way to prevent it as well.

Your method needs to have a number of elements in it.

1 Clearly defined entry points, that have tested in as having a good probability of success. They will not all win. some will go against you straight away, others will go a little in your favour and then fail.

2 A clearly defined failure point for the trade. i.e. the point at which it is clear that the trade is not going to succeed and therefore must be abandoned immediately. This will not be an arbitrary stop level measured always as the same number of ticks, but will be defined by the setup and the market as it presents itself at that time.

3 A clear set of targets for taking profits. I say a set of targets, because every set-up will have a range of probabilities associated with different levels of profitability from the same setup. Again, since no 2 setups are ever quite the same, the profit targets will vary slightly and wil not be totally arbitrary as measured in ticks.

4 From this information you will have a profit/loss ratio available to you for this particular trade. It needs to be better rather than worse and to give yourself the best profit opportunity versus the risk you are taking.

5 When calculating p/l ratio for the trade, it needs to take into account the possibility of exiting the trade by taking partials at various stages in the trade using multiple contracts to do this.

6 You need to know the probability of a successful outcome otherwise there is no point in placing the trade. i.e. playing with the odds in your favour. this does not guarantee the trade will be successful, but if say 70% or whatever (a decent number) of trades with these characteristics succeed, and the risk/reward is at an acceptable level, then you have a trade you can take.

Without even 1 of these items present, then the trade is improperly planned, or unplanned, and has a significantly lower probability of succeeding. Enough improperly or unplanned trades will drive you out of the market eventually.

Another point to consider is that there are times of the day that no trades should be placed at all. If it is one of those times (like 1 min before a scheduled news release etc.) then an embargo on taking positions should be in place.

Also, markets have particular time ranges and or general conditions that are more conducive to set-ups being successful than others. This has a bearing on the successful outcome of the trade.

Most importantly, If it doesn't conform to the above - dont take the trade.

It was only when I started to approach taking trades in that way that I became consistent.

Hope this helps.

Best

Natalie

Excellent post!

Go and read this post very carefully, Flashboy!
Then print it out and internalize it.
Hang up a copy on your office wall, toilet wall, bedroom wall.

Don't ever forget those rules. These are the rules all traders must follow. Learn them inside out!

Every trade must be fully accounted for before it happens.
You already know the probability of success and failure, Reward:Risk ratio, half-and full stops for exit, profit targets relative to the range you're expecting the trade to move (what's the expected range of your issue? Do you know how much profit you're gonna make on the trade? If not, you might as well not put it on!), calculate your target and, for example, take 1/2 the profits halfway. This works amazingly well in retracement trading, for example. In order to do this, you always have to know all your support and resistance levels, of course. Be all-informed.

Assume that everybody out there is smarter than you, desperate to rob you, and your only mission is to protect your capital!

Basically, you have to have everything tested a thousand times before you enter the trade! You have to <i>have won the game already before you even start.</i>

Another good point in this thread was to use a daily disaster stop to keep you from trading - Dead on! Say you have a stop of $5,000 a day or whatever it is (shouldn't be more than 3%, I'd say better is 1.5%-2%!), after which you will take no further trade, no matter what happens.

This way you will discipline yourself, and use the rest of the day to study and think about your mistakes, rather than immersing yourself in vengeance trading etc.

Remember: You can't lose any money when you're not trading.
Cash is a position, too. Knowing when to stand aside is the virtue of a truly magnificent and accomplished trader, and something we should all strive for. Pick the good trades and forget the rest. Seriously! It's not worth it!

Remember this quote?

<i>"Men who can sit tight are uncommon. I found that it is one of the hardest things to learn. But it is only after a stock operator has firmly grasped this, that he can make big money." -Edwin Lefevre, Reminescences of a Stock Operator</i>

Let me just add another quote, from <i>Market Wizards:</i>
<i>Top Traders believe:
-Money is not important.
-It is OK to lose in the markets
-Trading is a game.
-Mental rehearsal is important for success.
-They've won the game before they start.</i>


I hope this helps you a bit.
Good Luck to you, Flashboy!

~The Scientist

 

[ptt]

Quote from estrader:



Did the same this month. Was up and chargin ahead, then last week got relaxed, made two ah-what-the-hell trades (exactly against my system) and lost 75% of this months gains. I am at work too, though.

'what the hell' trades are gambling, and not even good gambling

 

[ptt]

Quote from howardy2k:

flashboy,

just becareful not to blow urself up tomorrow. a scratch or small profit is what u need to recover mentally

disagree, you need to follow your method

Quote from howardy2k:

flashboy,

say to urself that u will take ur time to make it back no matter how long it takes.

yes, you need to have patience, and not compound your losses by trying to win them back

 

[resinate]

Quote from TMTrader:

I simply don't understand how people trade without using bracket orders. Under which type of trading you will not be able to use bracket?

TM Trader

I suppose one could use brackets trading options with large spreads like the spx. I wouldn't....

 

[Flashboy]

Quote from Scientist:


1) How large was your position size? If you lost 80% of your profits, you either had little profits or too large a position size.


My position size was too large.. I do this when I try to trade too many markets..


2) Why did you put in a limit order? Never, NEVER put in a limit order when you need to get out of a trade!
Limits are for entries, not for exits - Unless in special situiations, such as sometimes when scalping etc...
Again: You MUST put an open stop in when you need to get out. Limit orders are only appropriate if the market is already on your side (profit). Next time you do it in a fast-running issue, you could go broke! Be lucky you survived.


Lesson learned.. the market came back to my price for a second so I thought I could get it.. then it took off.. but you're right.. and I've done this before.. its best to get out and let the dust settle..


3) The "scalping temptation" is something many traders fall for. I scalp quite frequently when the market changes from good long trends - However, you need a 100% watertight scalping plan with rules in order to succeed. It's the hardest form of trading there is. Really.

Its so tempting.. and I've promised myself I won't do it anymore..


4) Why didn't you see the reports coming? You always need to do your homework and due diligence before you start trading. There's no way around it. If you're trading multiple issues and it's too much work - Specialize! Trade just i.e. 1 index and get to know all about it!

I agree..and will become more adament about checking for them..


5) Take your collected quotes and rules and memorize them! You don't have to have them in visible sight! Just look at them in the morning, and repeat them in your mind. Memorize them as if you'd want to be able to tell them to others. Like a poem. Present them to yourself. Never let them go. They're your rules.
Without rules - There's anarchy!

I do do this every morning on my way to work.. I talk to myself.. remind myself of my rules.. and the most important part for me is.. you only need to take the best trades.. only need to avg. 2 points a day out of the emini and within 1 year you'll have plenty of money.. but I get too excited wanting to get rich NOW!!

6) Exercise your discipline. There are many ways to go about it - It has been discussed on here extensively. Try to do Martial Arts if you have access to it - I've done it for years and I swear on it!
In terms of disciple trading, it's the best you can do!


Glad you mentioned it.. I just starting taking a Karate class 3 weeks ago.. about to test for my next belt.. long way to go though but I thoroughly enjoy it..

Don't let the turkeys get you down, Flashboy. You learn the most from the mistakes, remember? You'll be up again soon! Good luck to you!

Agree again.. and I do keep learning from them.. the biggest dissapointment for me is I keep making the same mistakes over and over..

Thanks for the response..
Jeff

 

[Flashboy]

Quote from Trend Fader:



Maybe you are just trading the way you are supposed to trade.

Instead of saying you made a mistake... maybe you should just accept the losses as a loss.

Giving back 80% of profits is not a mistake.. its just an unfortunate outcome of your trading.

There are basically 2 types of trades.. profit or loss. Nothing in between and nothing outside.

When you lose money.. you think of it as an error or mistake.. but in reality.. its just the way the game works.


--MIKE

Not to sound condescending (spelling?).. I do accept losses.. but if my system were to give back 80% of profits I would be looking for a different system..

my problems were psychological.. too much risk and taking trades outside of my plan...

 

[Flashboy]

Quote from McCloud:



Maybe using a physical stop loss order would have prevented most of that loss?!


As far as using "stops" I always remember the "hot air balloon" scenario, it goes something like this, "immediately after the take off if you think the balloon is in trouble you better jump out otherwise the higher it gets the harder it is to jump!!"

The same goes with getting out of a losing position, that is why I think placing a physical stop loss order immediately after entering a position may not be a bad idea after all ...IMO

I always place a stop loss right after I am filled.. with this trade.. as I was clicking the sell button the market starting taking off..

Like I said.. I put in a limit order to sell at 75..and got filled at 84.. because the market took off.. and within 30 seconds I was down the 30 points...

 

[easyrider]

Well I did it again too. Started the morning off with a nice textbook trade then gave half of it back on a "hunch" trade. I have to fight this impulse to play hunches all the time. Im getting much better at it but find it hard to believe that im doing it at all after this much time. Bad habits die hard.

 

[iceman1]

Quote from Flashboy:

Yep.. Did it again.. Doing great since the 1st of July only to give back 80% of the profits in the last 3 days.. 80%.. wow can't believe it.. How dumb can I be.. promised myself I would never do this again..

Psychological errors.. too wrapped up in the moment.. taking trades that are not in my plan.. trying to scalp for a few ticks and getting burned by market continuing to go against me.. and before I know it down 3 points..

Shorted the Euro today..clicked to sell it at 10:00 at 114.75.. market took off.. actually got filled at 114.84.. at 10:00 the release of the consumer confidence report.. didn't know.. getting lazy and not paying attention to when reports are coming out... tried to get out quickly but put a limit order in and it wasn't hit.. before I knew it I was down 31 points... if I had 1 minute more before hitting that sell button wouldn't have taken the trade..

Funny thing is .. when I'm in control.. of my emotions that is.. I trade so well.. I cut losses very quickly.. wait for my setups and I'm always profitable when I'm in that mindset.. I need to find a way to keep that discipline... I can't put any quotes or anything in visible sight because I am at my regular job when I'm trading..

I've cried about this here before.. sorry to be repetitive.. just releasing some frustration ..

Hope everyone else's trading is going well..

Jeff

ever think... Hmmmm, maybe I shouldn't be so "greedy", which is what I think is a large part of the problemo... when you're doing great... step aside, wait for the perfect "wave".

No rush.......

NO impatience.

Like Poker.... why chase or bluff on nothing, just because you got a lot of chips right now


G'luck bro!

Ice

 

[deet]

I can relate to your dilemma. I too go through the same cycle you do. Here is an analogy:

Person wants to lose weight.

Person knows how to lose weight.

Person starts to lose weight.

Psychological change takes place, person goes on eating binge, gains weight back.

Person thoroughly disgusted and disappointed in self.

At some level, person fulfills an inner need.

Repeat cycle....