Journal of ashes and Eminis

I suppose it's time for another post.

3 RTs / 1 contract / +0.75 points
2 wins / 1 loss = 66%
stop / target = 5 tix / 4 tix

1. Sell 09:46:51 @ 901.50 for -1.25
2. Buy 09:55:18 @ 903.25 for +1.00
3. Sell 10:20:00 @ 906.75 for +1.00

Not much to say today. First trade was a loser, but was a reasonable one to take for the most part. Going short so early and so close to the low might not have been a good idea. Suppose I should have waited for the low to break first.

As for stop/target analysis, a stop loss of less than 1.25 would have stopped me out of the third trade for a loss on the day. So it would appear that 1.25 was a good value even though it would have been nice to cut the first trade sooner. Targets on both winning trades would have hit 2.00 points without problem. I should have at least gone for a 1.25 to match the stop.
 

Attachments

Just thought I'd resurrect this thread with at least one more post. I have traded nearly every day since my last post and still find this job difficult. I have however determined what I believe to be my number one problem. Reading a section of Schwager's The New Market Wizard's, I came across this quote that describes my situation perfectly.

From William Eckhardt, "While amateurs go broke by taking large losses, professionals go broke by taking small profits."

At least I can be happy that I fit into the "professionals" category (maybe?). :) I have analyzed a large number of my trades and have determined that my view of the markets certainly isn't any worse than most and that I should be making some money if I could stick to my targets. I realized this was one of my issues a while back, but months later, it is still an issue and I would consider it my number one problem.

I am posting a perfect example of my self-sabotaging actions that continue to haunt me. The attached screenshot is from this morning. You will notice that if I had just let the market action take out my target as planned, I would have made +3.25 points on this trade. If the trade had gone against me, my stop would have taken 1.50 points from my account. Both target and stop orders were placed immediately upon my entry fill and were OCA orders, so I could have walked away from my computer.

So what did I actually do? I bailed with a +1.0 point profit. A profit is good, right? Problem is that if the trade was going sour, I would have let my stop get hit instead of bailing for only a 1.0 point or less loss. -1.5 points is not a large loss, but is certainly bigger than the 1.0 point gain I took.

After analyzing a huge portion of my trades I learned that if I had let my initial targets and stops get hit, bailing from neither, I would be doing pretty well by now. So why do I find it so hard to stick to the plan? The million dollar question. And even if I do find THE answer to the question, that doesn't mean the problem will be instantly solved. Sigh.

Anyway, this point is argued, but for me it is definitely false that "no one ever goes broke taking a profit". YMMV.
 

Attachments

Oops. I just noticed a little mistake on the screen shot. In the summary text of the trade I said that I bailed at 826.50. The actual price I bailed at was 828.50 (still +1.0 point).
 
Quote from phoenix_rising:
After analyzing a huge portion of my trades I learned that if I had let my initial targets and stops get hit, bailing from neither, I would be doing pretty well by now. So why do I find it so hard to stick to the plan? The million dollar question.
More...
Why do we bail a winning trade too soon ?
Because we think that the trade won't go higher/lower.
Why we don't think so ?
Because we don't trust ourselves. Lack of self esteem.

With time, I learned to trust my trades. When before i said to my self "It's time to exit", I now know that it is time to wait a little more because experience proved that these trades can reach their target.

I needed to expand my vision of the market. I forced myself to believe that the market could go farther than I thought.

Hard work but it's worth it.
 
I think in my case it isn't so much a lack of trust in myself. I have looked at enough of my trades to realize I can make money if I can modify my behaviours. For me I think it is a bit more Pavlovian. Haven taken so many hits in this learning process, I hear the dinner bell go off when I am in positive territory on a trade. The thought of the lab worker taking away the promised food is enough to force me to scarf down what scraps I can get, just in case.

There is also fear of being yanked from the game if I "let a winner turn into a loser". All these sayings, not sure if they really help anyone. Enough losers and the game stops. Unless there are any nice people out there willing to stake me a nice $100,000? Anyone?
 
This is par for me today. I had a good idea were the price was going to go, so I put in my target order. Entered my short. Then decided I wanted a 2-to-1 reward/risk ratio, so placed my stop based on that. When, of course, I should have placed my stop in a place that would have actually made a little better sense, even though the r/r would have been less than 2-to-1. Needless to say, the stop was hit exactly and then the market proceeded to prove my target order was in a reachable location. What fun!

Almost every time I adjust my stop based on trying to get a specific r/r, I have been burned. Note to self: Don't do that anymore.
 

Attachments

Is a stop location a good location for the stop if you would consider entering an actual trade at that price? In that last trade I would have felt safe entering a short at my stop price, so among other reasons, maybe that was a sign that it was a poorly placed stop. Hmmm...
 
Quote from phoenix_rising:

Is a stop location a good location for the stop if you would consider entering an actual trade at that price? In that last trade I would have felt safe entering a short at my stop price, so among other reasons, maybe that was a sign that it was a poorly placed stop. Hmmm...
More...

1. Stop should be placed at the point where you say, "I shouldn't [or don't want to] risk more".... making it ARBITRARY in all cases.

2. Ideally, it should be at a place where you think the market has "told" you is a good place to make a decision.
 
Quote from phoenix_rising:

This is par for me today. I had a good idea were the price was going to go, so I put in my target order. Entered my short. Then decided I wanted a 2-to-1 reward/risk ratio, so placed my stop based on that. When, of course, I should have placed my stop in a place that would have actually made a little better sense, even though the r/r would have been less than 2-to-1. Needless to say, the stop was hit exactly and then the market proceeded to prove my target order was in a reachable location. What fun!

Almost every time I adjust my stop based on trying to get a specific r/r, I have been burned. Note to self: Don't do that anymore.
More...

You're figuring your r:r incorrectly. You're deciding what the reward should be, then deciding what your risk should be. But the market couldn't care less what you think about the degree of either; therefore, it's just as likely to back up and hit your stop first, then move in the desired direction, if that happens to be what it wants to do.

Your supposed reward is going to depend on the setup and on the probability of price reaching your reward before it hits your stop. Therefore, leaving probability out of the equation practically ensures that your stop will be hit more often than you expect, particularly if it's tight.

--Db
 
Quote from gnome:

1. Stop should be placed at the point where you say, "I shouldn't [or don't want to] risk more".... making it ARBITRARY in all cases.
More...

True. In this case if I had thought about where I really wanted the stop, it would have delayed my entry. Which would have been good in this case, and pretty much every other case I made this type of mistake.

2. Ideally, it should be at a place where you think the market has "told" you is a good place to make a decision.
More...

I realize this, but I screwed up. I seem to suffer from a trader's form of the Heisenberg Uncertainty Principle.
 
You must log in or register to reply here.
Back
Top