If you lost money trading in 2016 here is my xmas gift to you

propwarrior said:
Post 3/10

Why nothing in this thread (or anything else) will help 90%+ of you

This is the most important post in the thread. What separates winners and losers in this business is their ability to not make and continue not to make the below mistakes. Losing traders will continue to make the same and new mistakes over and over again. The key is to stop trying to make mistakes and just stop them. The vast majority of aspiring traders will not be able to stop the below behavioural mistakes, this is why even if someone tells you exactly what to do you will still fail. You must adopt a winning mindset of someone who does not make mistakes and have lapses, you need to fully commit. Never associate with losers or with anyone who has a losing mentality. Over time you will stop these mistakes as your behaviour becomes automatic. If you cannot stop making these mistakes the best advice I can give you is to quit trading.

The classical mistakes

Lack of focus on one market nuance

I have outlined a specific price behaviour that occurs in the markets and given conditions where a trader can find a substantial edge. The majority of people cannot put dedicated work into one thing. The majority of people will not follow my instruction of going through the charts on their chosen timeframe and find the 50 (minimum) examples, study them to the point of obsession and make it their own. They will get distracted by many thoughts, for example another trading idea or method, they will mix/match/distort. Others will say to themselves ‘it cannot be this easy’. You shouldn’t take what I am saying as an edge. You need to prove it to yourself. Humans are confused by choice, it is that simple, in trading you need to be single minded to the point of obsession.

Patience & Discipline – the widow maker

Once conditions for a trade setup have been clearly established most people cannot sit there and wait for those conditions to appear and then and only then act. I can’t put it any simpler than that. This is a very basic skill a trader must learn. If you cannot control yourself and only act in the conditions that have been clearly established there is literally no hope you will ever make it. Most people will get bored and start looking for ‘extra’ setups or try and make whatever current price is showing to enter right NOW. At the time this will be justified as a one off or a separate trade system. Most traders are locked in a cycle of constantly trying something new when in reality trading is about doing the same thing over and over again.

The fact is if you give someone EXACT instructions on what to do most will fail. Take the example of someone who is obese. I could give them exact instructions of what to eat every day and what simple exercise to do every day and within 1 year they would be the correct weight with very mild discomfort on the journey. How many of those people would follow it? <5%. It’s the same in all facets of life only a small % resolve themselves to achieve something.

Leverage & Psychobabble

My opinion is that nearly all of the psychobabble you hear about in trading is rubbish. Think about it, when do people consult a psychologist, when they are sick. What I am suggesting is that people only consult a trading psychologist or zen guru when they are a losing trader. If you were making money consistently you wouldn’t need the psychobabble. Forget this nonsense, just follow my method and cut out the mistakes. Stop trying and just stop. If you lapse take a break then resolve to not do it again. If you keep lapsing you should quit.

It doesn’t matter that you tell people to never risk more than 1% of their account on any one trade. It doesn’t matter that you tell them to only trade micro stakes and scale up slowly AFTER proving to themselves their methodology is profitable by making 100+ SIM trades. It doesn’t matter because most people will not follow this, they try and take shortcuts and then they blow up and blame the system not themselves.

The root cause of over leveraging is that with the account size the trader has they cannot make a meaningful amount of money in 1 week. I will lay this out nice and simple. If you take 1 trade per day risking R and you have a 50% strike rate on 2:1 RR you expectancy is 0.5R. Your expectation is 2.5R for the week. If you risk the maximum 1% you should be risking that is 2.5%. If you account size is $10k then if you are extremely successful and trade very well you will make $250 for the week. The fact is that is not meaningful to someone in a developed country. Trust me only $1000 per week will pass the meaningful test. So you will need an account size of $40,000 to make a meaningful amount per week. This is the root cause of why people who have <$40k accounts overleverage.

Do you think it is easier to stay patient and focussed if you take a $400 loss on a $40k account or a $1000 loss on a $5000 account. This is why people go off plan, lose focus. After 3 losses in a row they get wound up and frustrated and then go in maximum clip and the losing cycle continues. With a 50% strike rate you will have many times when you get a string of 4,5,6+ losers. If you are risking more than 1% you will blow up your account.

If you don’t have a $40k account then you have to accept that your returns are not going to be meaningful. This means not over leveraging a small account and saving money from an hourly wage. Again <5% of people can do this. In my opinion you should not be trading at all if you have <$40k savings. In any developed country it is possible to save $1k per month doing unskilled labour unless you are disabled. If you want it bad enough you will do this and cut your costs. Again <5% cant or wont do this.

The Day trade small account fail

Day trading requires complete focus during the main market volume hours. You cannot work at the same time. You either need to move to longer time frames H4+ which is perfectly possible with this methodology and continue working OR switch to a job that is evening and weekends only. If you have <$40k in savings you should be working and saving. Again <5% wont do this.

A note on studying for a degree. Most people will fail at trading for all of the above reasons. In my opinion you should never quit studying to try and trade. You can study and swing trade if you want it badly enough.

Listening to others

Never listen to others, trading is not a team sport. Don’t listen to me, all I am saying is if you are not making money then follow what I say and see what the results are. Follow it properly though, don’t skip, don’t cut corners.

Broker Fail

Only use a broker which is regulated in the US or UK. Only ever deposit enough cash in your account to cover the margin for your trades. So if you have a $40k trading account, you only deposit what is needed to cover the margin c. $5k-10k. The balance should be held in a cash savings account.


Compound Mistakes

It is not enough to cut out most mistakes you need to cut out all mistakes. eg. You cannot master patience and over leverage and expect to be successful. You cannot cut out all mistakes apart from trading on your phone from work. You cannot have excellent money management skills whilst flipping between strategies. I can’t make it any simpler than that.

The topic of the next post will be time frames & instruments.
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propwarrior,

I truly thank you for this detail post for us struggling traders.

What are you thoughts on :

1. Taking all systems trades per day.
2. Taking more trades after winning for the day.
3. Should a trader have profit goal per day to stop trading?

Thanks
 
SimpleMeLike said:
propwarrior,

I truly thank you for this detail post for us struggling traders.

What are you thoughts on :

1. Taking all systems trades per day.
2. Taking more trades after winning for the day.
3. Should a trader have profit goal per day to stop trading?

Thanks
More...

Sure I can answer these.

1. I am not a systematic trader so this wouldnt apply to me.

2. There is no right or wrong answer to this imo. Personally I dont have a daily goal but i do have weekly goals. Again personally if I am in closed profit for the day I will continue trading however if there is only a short time in my chosen session left i will stop for the day. So for example if I am in closed profit at lunchtime I do not stop for the day but if it is mid afternoon I stop. It is important to treat each trade individually and not trade your PnL, each trade should be managed inidividually and whether your previous trade was a loss or win should have no bearing on your actions, just the same as if you are up/down for the week/day this should have no bearing on your actions in managing/taking the current trade.

3. I have kind of answered this in my reply to 2. If you are a manual discretionary day trader I dont think it helps you to have a daily goal. I have a weekly goal as I am not intrested in the results of what any one day gives me. Again though I do not get hung up on my weekly result, I tolerate losing weeks where I have followed my plans and managed risk well, sometimes this happens. For me personally losing months are more problematic, if I have a losing month that says to me something serious has and is going wrong. Having a losing month would cause me to take a break and re-evaluate things. Coming back to weekly goals I have a base goal and a stretch goal. If for example I hit my stretch goal for the week by Wednesday (which is rare) I continue trading but I have been known to just take the Friday off and do something else if my goal is hit.

Interesting that you only asked about what i do if I have hit my goals, it's more important to know what to do when you take losses. I do have a daily loss limit which is 2R or 2 full stop outs. If I lose this in any given day I just stop for the day, history has told me if I continued I would likely lose more. This happened to me yesterday where I took 2 losses by lunchtime and finished for the day. Sometimes I dont trade if I feel the conditions are not right, today for example I am just watching as a lot of the factors I look at are conflicting.
 
The items presented here are not the holy grail and are antiquated line analysis that is not useful anymore if it ever was. Today there are more dynamic and easier ways to achieve entry/exit discovery. Unfortunately, this thread contains nothing pertaining to risk on one's overall financial picture and it also lacks the testimonial aspect of the OP demonstrating the technique with live calls and stops. Thus it is inherently unproven.
 
Buy1Sell2 said:
The items presented here are not the holy grail and are antiquated line analysis that is not useful anymore if it ever was. Today there are more dynamic and easier ways to achieve entry/exit discovery. Unfortunately, this thread contains nothing pertaining to risk on one's overall financial picture and it also lacks the testimonial aspect of the OP demonstrating the technique with live calls and stops. Thus it is inherently unproven.
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Did you even read my posts. If you did you would realise I am saying that the 'holy grail' does not exist. I have specifically said that most people will fail no matter what the strategy used is and I have outlined why this is. This strategy IS totally unproven to anyone else, that's what 90%+ just don't get about trading. You cannot just 'plug and play' another traders strategy and step into their details experience and understanding of the price nuances they are focussed on. What I have given is a framework for a losing trader to work on finding their own edge and detailed exactly why they have likely failed in the past. If I gave live calls or uploaded a trading statement showing how I can make money it does not mean others could do the same with it, on the contrary I know the vast majority couldn't make money from it no matter what the strategy.
 
propwarrior said:
Did you even read my posts. If you did you would realise I am saying that the 'holy grail' does not exist. I have specifically said that most people will fail no matter what the strategy used is and I have outlined why this is. This strategy IS totally unproven to anyone else, that's what 90%+ just don't get about trading. You cannot just 'plug and play' another traders strategy and step into their details experience and understanding of the price nuances they are focussed on. What I have given is a framework for a losing trader to work on finding their own edge and detailed exactly why they have likely failed in the past. If I gave live calls or uploaded a trading statement showing how I can make money it does not mean others could do the same with it, on the contrary I know the vast majority couldn't make money from it no matter what the strategy.
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The trader needs to get past the snake oil of this antiquated line analysis (SCRIBBLES) and focus on risk management. That is the edge in trading. There are no live calls here and thus no one can see if this system works or not. Beware.
 
Buy1Sell2 said:
The trader needs to get past the snake oil of this antiquated line analysis (SCRIBBLES) and focus on risk management. That is the edge in trading. There are no live calls here and thus no one can see if this system works or not. Beware.
More...

oh yes you are the 'risk management is an edge' guy. the child who has their own special teacher at school, that's you.
 
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