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My Path To Success
- Thread starter Lucias
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EMG, yes but not the crude futures contract. I'm trading the CRUDE at NADEX. So, I had maybe $300 at risk and $300 to make. They offer small spreads/binaries for retail traders. Each tick was $2.
I mostly trade the SP500 using spreads. Each "futures point equivalent" is worth $10 vs the $50 of the ES. So, I'm typically scaled at $20 to $60 per point. My standard is $30. Small is $20 and large is $40 or more. (Each tick is $1 per contract0. At max leverage, I'm slightly over 1 ES contract.
Even when I was at $60 per point, I had less MAX risk then I would in the ES futures because I used a spread (limited risk/reward). However, I think I will keep it under $40 per point because I find that I take on greater realized risk then in the futures market (i.e premium risk).
The amount I have at risk depending on what spread I buy. So last night, I had all my account at risk because I bought a wide spread. I was only able to size at $20 per point. Due to the limited risk/reward, I'm able to get more leverage at less risk then in futures market. But, I give up some edge to get this -- trading outside the best bid and best ask.
Hope this helps.. so I'm typically trading about 50% to 60% the ES futures point contract. Every tick is always $1 no matter the instrument. I agree that it would not be possible to trade the ES (or other futures) without a larger account. My best system needs about $7,000 to trade the ES. So, by trading $30 per point.. obviously I only need 3k.
Hope this helps, some of my account swings were real and some were caused because the way it works is that you just put up the money for the trade (unlike in futures) and it goes out of your account. You can't ever lose more then you put. I really like this aspect of the contracts.
There are some new skills required to learn because the premium changes. So, one has to factor that in: am I paying too much premium for the risk/reward? And then you have to factor in the time to expiry too. I would have made probably $2,000 more dollars if i had 1 extra day to expiry. There are always trade offs.
Max risk to realized risk
End point risk vs path risk
Leverage vs premium cost
You can see all my trades audited at C2 under my systems predictor day and predictor discretionary. I can't link them. I take almost every trade at NADEX that you see. (I didn't take the second losing crude trade today though -- that was my mistake due to a C2 error).
I mostly trade the SP500 using spreads. Each "futures point equivalent" is worth $10 vs the $50 of the ES. So, I'm typically scaled at $20 to $60 per point. My standard is $30. Small is $20 and large is $40 or more. (Each tick is $1 per contract0. At max leverage, I'm slightly over 1 ES contract.
Even when I was at $60 per point, I had less MAX risk then I would in the ES futures because I used a spread (limited risk/reward). However, I think I will keep it under $40 per point because I find that I take on greater realized risk then in the futures market (i.e premium risk).
The amount I have at risk depending on what spread I buy. So last night, I had all my account at risk because I bought a wide spread. I was only able to size at $20 per point. Due to the limited risk/reward, I'm able to get more leverage at less risk then in futures market. But, I give up some edge to get this -- trading outside the best bid and best ask.
Hope this helps.. so I'm typically trading about 50% to 60% the ES futures point contract. Every tick is always $1 no matter the instrument. I agree that it would not be possible to trade the ES (or other futures) without a larger account. My best system needs about $7,000 to trade the ES. So, by trading $30 per point.. obviously I only need 3k.
Hope this helps, some of my account swings were real and some were caused because the way it works is that you just put up the money for the trade (unlike in futures) and it goes out of your account. You can't ever lose more then you put. I really like this aspect of the contracts.
There are some new skills required to learn because the premium changes. So, one has to factor that in: am I paying too much premium for the risk/reward? And then you have to factor in the time to expiry too. I would have made probably $2,000 more dollars if i had 1 extra day to expiry. There are always trade offs.
Max risk to realized risk
End point risk vs path risk
Leverage vs premium cost
You can see all my trades audited at C2 under my systems predictor day and predictor discretionary. I can't link them. I take almost every trade at NADEX that you see. (I didn't take the second losing crude trade today though -- that was my mistake due to a C2 error).
Quote from emg:
u are trading crude with an account size $3000?
Yes, of course. Yes, you never get filled unless you are outside the best bid/best ask. This is the price I pay to trade tiny. But, also it is probably true to a degree on any surrogate based instrument (i.e any options)
They do usually have good size placed on either side, i.e 50 contracts. If I had the size to trade futures then I'd obviously just trade futures outright. However, I do like a lot about these contracts compared to futures.
There is a lot advantage for the small trader though: futures leverage, limited risk/reward, many markets, and no PDT. I might could get up enough to just barely trade the ES (I traded it on sim for 3 years). But, no way I could venture into other futures markets like crude. This is another benefit too.
While trading outside the best bid/besk ask is significant cost, my biggest cost has came actually from not being able to hold my positions a bit longer. My average trade is under 24 hours but it is not uncommon that I hold over the 4:15 close.
I also also backtest my systems with realistic estimates using NADEX and they are still strongly profitable. One benefit is my futures system needs a 35 point stop ($1750) for optimal trading. Using the spreads, I can trade with maybe $400 to $600 max risk. Any small edge is important when active trading, i.e just squeezing 1 point more per trade over 50 trades = $2500. But also paying a bit in insurance when first starting is worth it to me..
I am looking at the CME options market as well. I think these could give me a good avenue into placing longer term trades with good risk/reward. But, it is a lot more complicated.
BTW: they really push the Forex trades which they claim are often the same as in spot Forex market. I don't trade Forex. So, I don't know. But, I think their Forex markets are more efficient.
Forex is also structurally good for the tiny trader. I just have an aversion. probably more psychological, to Forex because I don't know any professional Forex traders. If I knew professional Forex traders then maybe I'd trade it.
They do usually have good size placed on either side, i.e 50 contracts. If I had the size to trade futures then I'd obviously just trade futures outright. However, I do like a lot about these contracts compared to futures.
There is a lot advantage for the small trader though: futures leverage, limited risk/reward, many markets, and no PDT. I might could get up enough to just barely trade the ES (I traded it on sim for 3 years). But, no way I could venture into other futures markets like crude. This is another benefit too.
While trading outside the best bid/besk ask is significant cost, my biggest cost has came actually from not being able to hold my positions a bit longer. My average trade is under 24 hours but it is not uncommon that I hold over the 4:15 close.
I also also backtest my systems with realistic estimates using NADEX and they are still strongly profitable. One benefit is my futures system needs a 35 point stop ($1750) for optimal trading. Using the spreads, I can trade with maybe $400 to $600 max risk. Any small edge is important when active trading, i.e just squeezing 1 point more per trade over 50 trades = $2500. But also paying a bit in insurance when first starting is worth it to me..
I am looking at the CME options market as well. I think these could give me a good avenue into placing longer term trades with good risk/reward. But, it is a lot more complicated.
BTW: they really push the Forex trades which they claim are often the same as in spot Forex market. I don't trade Forex. So, I don't know. But, I think their Forex markets are more efficient.
Forex is also structurally good for the tiny trader. I just have an aversion. probably more psychological, to Forex because I don't know any professional Forex traders. If I knew professional Forex traders then maybe I'd trade it.
Quote from emg:
I hope you know that nadex exchange is not liquid. Trading nadex instruments or almost all of their instruments is like trading milk or lumber futures/commodity market which is not liquid.
Are your trading live?
I want talk about some of the factors that have made me successful.
And, two of the biggest factors would be:
Self honesty
Learning from my mistakes or self correction
I want to talk about self correction first. The natural response to pain is avoidance. The natural response when one exits a trade is not to look to see if you would have made more money. Selling at the low of the day or buying at the high is painful. I always watch when I exit to see because I need to learn. The trader who is going to be successful will have enough arousal to care and to feel something but not so much that he can't learn. If you have leave the computer when you lose a trade then you're a loser. I'm always going to feel that bit of pain to learn from it.
And, I think that ability to learn and to stay open to the market even when it is pain is much of my success.
That also is why some people shut down.. we've had a huge rally. You missed it. Why? Because it wasn't doing what you expected and it was painful. I missed it too because I've somethings going on outside the market. The idea of staying tuned to market feedback loops can help with this. Staying tuned to market feedback loops can help with this. Getting into negative or even self critical psychological loops is unproductive.
The second factor is self-honesty. I do go around and claim I'm one of the best. But, I monitor that. I check myself. When I do poorly then I say I do poorly.
The people who I don't get are the paper traders who are completely delusional. They have terrible track records. Terrible paper track records and they go around thinking they know what their doing. And there is a lot of those at C2.
So, self-honesty is the second found to success. If I do great then sure I can say I'm great. But, if I do poorly then I have to be honest. It is not about what they say to others but these guys believe in it in their minds.
My advice for both you and me would be:
Be honest your self. Learn from your mistakes.
And, two of the biggest factors would be:
Self honesty
Learning from my mistakes or self correction
I want to talk about self correction first. The natural response to pain is avoidance. The natural response when one exits a trade is not to look to see if you would have made more money. Selling at the low of the day or buying at the high is painful. I always watch when I exit to see because I need to learn. The trader who is going to be successful will have enough arousal to care and to feel something but not so much that he can't learn. If you have leave the computer when you lose a trade then you're a loser. I'm always going to feel that bit of pain to learn from it.
And, I think that ability to learn and to stay open to the market even when it is pain is much of my success.
That also is why some people shut down.. we've had a huge rally. You missed it. Why? Because it wasn't doing what you expected and it was painful. I missed it too because I've somethings going on outside the market. The idea of staying tuned to market feedback loops can help with this. Staying tuned to market feedback loops can help with this. Getting into negative or even self critical psychological loops is unproductive.
The second factor is self-honesty. I do go around and claim I'm one of the best. But, I monitor that. I check myself. When I do poorly then I say I do poorly.
The people who I don't get are the paper traders who are completely delusional. They have terrible track records. Terrible paper track records and they go around thinking they know what their doing. And there is a lot of those at C2.
So, self-honesty is the second found to success. If I do great then sure I can say I'm great. But, if I do poorly then I have to be honest. It is not about what they say to others but these guys believe in it in their minds.
My advice for both you and me would be:
Be honest your self. Learn from your mistakes.
Coach:
I see you've been posting a lot of messages lately. You have a need to be right huh?
Me:
I'm sorry coach. Yes, I do. And then when I answer all these questions it puts me into a left brain dominant mode when I need to be in a right brain dominant money.
Coach;
Why did you miss the rally? Why weren't you in market flow? Did you try to block out the rally because of pain?
Me:
Good questions coach. Good questions. Some truth to that. But, also I'm been in a "make money mode". I'm just in my mind, make money, make money. I feel like I need to bring in some extra money.
Coach:
And why do you need all that money?
Me:
Well, I'm just not meeting my goals. I feel like I'm not going anywhere. But, I'm also divided... because my main goal in life is to serve. I can serve now by just trading. I don't know why I need more money because I have money to trade at NADEX. But, I'm just thinking ahead.. I guess. Plus, I'm much more intelligent then most people.. I feel like I should be able to make a 100k or even a million. It makes me angry like I'm not doing enough.
Coach:
What else?
Me:
I started my blog with an idea to strengthen my market feedback loops. To serve to higher degree. However, I can't really share my best insights. Its too risky. So, I'm always divided between trying to share and from trying to hide and obscure. I have felt that taking on a "student" to mentor would help me. But, then I just create a clone, a competitor. Plus few traders have the money to pay me enough to make it worth my time. So, I'm trying to find the value in that. the other side is that I need a partner, I need to share my work. It is rather lonely.
Coach:
Trading is a privilege. What is life but struggle without art? If you just focus on making money then where is the art in that? You become a hollow man and unhappy. Yet, there is a rational bent to your desire in that capital (having capital) is a primary factor in trading success. You've went too left brain dominant. You've left your fears get to you.
Whether you focus on making money now or trading.. never forget trading is a privilege and your trading is your art. You're running. We all are. Make it a good run. Make it a good run.
I see you've been posting a lot of messages lately. You have a need to be right huh?
Me:
I'm sorry coach. Yes, I do. And then when I answer all these questions it puts me into a left brain dominant mode when I need to be in a right brain dominant money.
Coach;
Why did you miss the rally? Why weren't you in market flow? Did you try to block out the rally because of pain?
Me:
Good questions coach. Good questions. Some truth to that. But, also I'm been in a "make money mode". I'm just in my mind, make money, make money. I feel like I need to bring in some extra money.
Coach:
And why do you need all that money?
Me:
Well, I'm just not meeting my goals. I feel like I'm not going anywhere. But, I'm also divided... because my main goal in life is to serve. I can serve now by just trading. I don't know why I need more money because I have money to trade at NADEX. But, I'm just thinking ahead.. I guess. Plus, I'm much more intelligent then most people.. I feel like I should be able to make a 100k or even a million. It makes me angry like I'm not doing enough.
Coach:
What else?
Me:
I started my blog with an idea to strengthen my market feedback loops. To serve to higher degree. However, I can't really share my best insights. Its too risky. So, I'm always divided between trying to share and from trying to hide and obscure. I have felt that taking on a "student" to mentor would help me. But, then I just create a clone, a competitor. Plus few traders have the money to pay me enough to make it worth my time. So, I'm trying to find the value in that. the other side is that I need a partner, I need to share my work. It is rather lonely.
Coach:
Trading is a privilege. What is life but struggle without art? If you just focus on making money then where is the art in that? You become a hollow man and unhappy. Yet, there is a rational bent to your desire in that capital (having capital) is a primary factor in trading success. You've went too left brain dominant. You've left your fears get to you.
Whether you focus on making money now or trading.. never forget trading is a privilege and your trading is your art. You're running. We all are. Make it a good run. Make it a good run.
You should try trading naked. It makes it even more awesome.
Me:
I'm thinking it is time to bet big. I mean really big. For first time in a long time, I'm in agreement with my system.
Coach:
It is clear when you have an advantage then you need to take a shot. How much are prepared to lose?
Me:
I"m not sure yet. I don't want to lose a dollar. But, I'm thinking, I need to be betting at least $330 to $400. I need to be at max size $40 per point or maybe even a bit more.
Coach:
Yes, I advise you to push yourself if you feel like this is a good time. But, be open to new market information. There is no reason to damage your account beyond what is reasonable. Keeping risk below $400 seems reasonable. If you have to size to $425 or $430 then do so carefully.
What's your plan?
Me:
I'll be buying binaries overnight and in the morning I'm going to go to market. I'm going to market.
Coach:
Don't delay on those market orders tomorrow. If you have to pay up then pay up!! Don't be flat footed. Do you have a plan for running the orders tomorrow?
Me:
Yes, I'll set binary limits overnight. I'll start looking for a good low risk entry at 9 AM but if I can't get it then I'll go market at 9:30 AM. I think maybe getting in at 9 AM would be even better then 9:30 AM.
Coach:
Okay it sounds like you have a game plan. Don't size too large where you can't trade well.. trade aggressive even if it means smaller size. Don't give up too much in premium. Be open to new information, as well. You're still not up to your normal level of market read. And most importantly: get good sleep tonight. Keep your size small, sleep good, and come in tomorrow and run the orders.
I'm thinking it is time to bet big. I mean really big. For first time in a long time, I'm in agreement with my system.
Coach:
It is clear when you have an advantage then you need to take a shot. How much are prepared to lose?
Me:
I"m not sure yet. I don't want to lose a dollar. But, I'm thinking, I need to be betting at least $330 to $400. I need to be at max size $40 per point or maybe even a bit more.
Coach:
Yes, I advise you to push yourself if you feel like this is a good time. But, be open to new market information. There is no reason to damage your account beyond what is reasonable. Keeping risk below $400 seems reasonable. If you have to size to $425 or $430 then do so carefully.
What's your plan?
Me:
I'll be buying binaries overnight and in the morning I'm going to go to market. I'm going to market.
Coach:
Don't delay on those market orders tomorrow. If you have to pay up then pay up!! Don't be flat footed. Do you have a plan for running the orders tomorrow?
Me:
Yes, I'll set binary limits overnight. I'll start looking for a good low risk entry at 9 AM but if I can't get it then I'll go market at 9:30 AM. I think maybe getting in at 9 AM would be even better then 9:30 AM.
Coach:
Okay it sounds like you have a game plan. Don't size too large where you can't trade well.. trade aggressive even if it means smaller size. Don't give up too much in premium. Be open to new information, as well. You're still not up to your normal level of market read. And most importantly: get good sleep tonight. Keep your size small, sleep good, and come in tomorrow and run the orders.
Crushed.. went from a huge winning day to what will be a large losing day. It should have been a small losing day at worst. I may have to take a break after today for a few weeks. From peak equity, I will lose $400-$500 today.
I had 2-3 chances to get out for break even. I just had a difficult time in doing the right thing. Barry noted the gambler is afraid to miss a play (to not make a bet) whereas the skilled player realizes he'll probably lose and doesn't frequently make bets.
Really I needed today pretty bad. I've had a lot of near misses since starting this journal, at least $1500 in near misses.
I have to rethink things. I was also opening and closing position today, scaling out and adding but all of that added up to only net +$14.
My sim account was up +$1700 today ($500-$800 is normal) will be break even or a small loss. I was able to do that because the futures trade more efficiently and I took more risk.
I did most everything right today except manage my losses.
I had 2-3 chances to get out for break even. I just had a difficult time in doing the right thing. Barry noted the gambler is afraid to miss a play (to not make a bet) whereas the skilled player realizes he'll probably lose and doesn't frequently make bets.
Really I needed today pretty bad. I've had a lot of near misses since starting this journal, at least $1500 in near misses.
I have to rethink things. I was also opening and closing position today, scaling out and adding but all of that added up to only net +$14.
My sim account was up +$1700 today ($500-$800 is normal) will be break even or a small loss. I was able to do that because the futures trade more efficiently and I took more risk.
I did most everything right today except manage my losses.
Me:
We got a lot to talk about..
Coach (Stine Berger?):
i imagined so. Why don't you tell me how it went today?
Me:
I executed just as planned. I was up nearly 2k my sim account and over probably $250 in my real money account.
Coach;
What happened?
Me:
I added to my positions at the HOD and it reversed strongly. I didn't exit for a small loss ended up taking a $260 loss. I was able to close some of my trades and risk but the profits didn't amount to much compared to my losses.
Coach:
You were generally right about the day's action. You recognized the sentiment shift and knew to get out. We've talked about how you would rather be generally right and make money then precisely wrong and lose money.
Me:
This was a rare case where I really did not want to be wrong. I added on the highs and would need to close out the position for a trivial gain or even a small loss. Also, I was trading my system and that made it more difficult.
Coach:
And what gave you the confidence to add to your position?
Me:
Obviously the money cushion and ability to break even. By adding to my position, I was obviously seeking greater return or break even. NOT a huge loss. That was terrible on my part.
Coach;
I want to get back to the part about trading the system. It seems you were concerned about the optimal logic versus just reacting to your market read. Is that correct?
Me:
For sure.. my left brain was interfering with what I should do. In the futures market, it is easier because I'm always scared but with spreads, they make it possible for me to say okay I'll give it room which is usually a mistake.
Coach:
Your notion of trading the system today both helped and ultimately hurt your performance. It helped you when it gave you confidence to ride out a stormy market. It ultimately cost you when you completely trusted it and didn't listen to your market read. It is very important to use case-based reasoning.. First, your best talent is in reading the market. So, you obviously have to use that. But, also, you do have some very profitable systems that you want to trade, and that is one reasonable way to try to get more profit centers. Case-based reasoning would allow you to realize that early in the trade, you give it plenty of room but by late in the trade then if you're losing or only a little ahead then cut your risk. Your contracts expire and your performance was for sure the result of faulty logic and over left braining thinking it. Sometimes the optimal action is to transfer risk to another even if it may not be optimal over 5 years: today it was optimal to do that.
Speaking of transferring, your attempt to add to your position was worthwhile. But, you should have considered taking some off the table. You had $250 in profit or 25% and an additional $260 at risk (26%) if the trade went against you: you had 50% of your account at risk. It would have made sense to factor that into the equation and took risk off.
What would you do if I said, I'll give you million dollars and I'll give you pocket Queens against any random hand and if you win -- you win a million dollars but if you lose then you lose everything -- your job, your house, your possessions. Rational theory dictates to risk everything. What should you do?
Me:
I go to another and buy insurance.
Coach:
Exactly, you never risk everything! Besides for the global consideration that you had 25% of your account at risk, adding to your position was not your mistake. Your mistake was not taking off your risk and admitting you were wrong. Why couldn't do that?
Me:
I bought at the top and it was just very hard to take a small winner even and it became more difficult to take a loser. It usually isn't difficult for me but I think that the noise from the idea of just trading my system was a part of it. If I had been trading well, I would have used my market read and respected that and also I would have calculated the time in the trade and realized we were in a late-game situation and that the probability of huge returns was low. There was no sense in me to any lose money today. If the trade against me early on then it would have made sense for me to lose money but not in late-game.
Coach:
Exactly. That's what I wanted to realize. You've got early game, mid game, and late game. Late game if the trade isn't working out then take some risk off. I also noticed you tried to "tweak" your live trading instead of tradiing just your sim decisions? Why did you do this?
Me:
This is true. I have a good knack for taking off a trade at the best time on the simulator. I have to adjust the trade to account for the spreads at NADEX (bid/ask) spread and the premium difference. But, in some cases I also got greedy and tried to adjust the ticks to get a bit more. That cost me.
Coach:
From now on, execute EXACTLY as you do in your sim. Only making adjustments for the tick and premium difference. ONLY.
Now what's working for you in terms of making adjustments to the system and what's not working?
Me:
Working: Trading around the system, i.e measured moves (my own bias). Getting involved late game.
Not working: Getting involved early game. Trying to outwit the open. Sometimes I beat but not often.
Mostly I'm deriving added benefit by taking my own trades in the direction of the system but not by beating it per se at its own game.
Coach:
Focus only on what is working. Cut out the rest. Focus on what works and get better at it. Finally let's talk about risk. How did the spreads work out/
Me:
Typically the spreads do a poor job of limiting my REALIZED risk. In the futures market, I take a lot more MAX risk but realize less. I could do the same on the spreads if I were willing to risk huge amounts like in the futures but one mistake would cost me my entire account because I'm leveraging higher. The spreads do a great job of limiting my theoretical risk. I actually lost more trading the spreads today then trading 14 full size ES contracts on the sim. But, it is a give and take.
Coach:
I'm not sure that you should take on the widest spreads with any size. You did take on a few positions. But, I think that limiting the max loss makes sense. You're not psychologically prepared or financially to blow out your entire account on a rare trade. But, this is another good reason to keep in mind the time left to expiry on the trade because you can still take that premium home with you. And, this is part of the minute differences in trading spreads and futures, is that there are some minor differences that make a difference and instead of ignoring those differences, you really need to focus on them.
Overall, you traded well today but you didn't manage your risk which is something you do best. You were divided in your actions which made it difficult to act decisively. Remember, PRINCIPLES over RULES.
You need to work on these mental blocks so that next time you can act without hesitation. Keep it simple and act on your decisively on your market read, especially it is late game. Early game, you can't faulted but late game there is no excuse for losing any money. It is important to be in the best trade but when the clock is running down the n you gotta get out or cut your size in half. Overall, you are doing well and doing a great job of transferring your sim skills to real money (without risking a fortune).
Remember, work out the logic before hand. Focus on your market read and managing risk in the trade. No more noise. It is important for you to push yourself to get into the trades because you're not a gambler. But, remember what Barry said too -- sometimes you have to be willing to be willing to forgo the action when it becomes a gamble.
We got a lot to talk about..
Coach (Stine Berger?):
i imagined so. Why don't you tell me how it went today?
Me:
I executed just as planned. I was up nearly 2k my sim account and over probably $250 in my real money account.
Coach;
What happened?
Me:
I added to my positions at the HOD and it reversed strongly. I didn't exit for a small loss ended up taking a $260 loss. I was able to close some of my trades and risk but the profits didn't amount to much compared to my losses.
Coach:
You were generally right about the day's action. You recognized the sentiment shift and knew to get out. We've talked about how you would rather be generally right and make money then precisely wrong and lose money.
Me:
This was a rare case where I really did not want to be wrong. I added on the highs and would need to close out the position for a trivial gain or even a small loss. Also, I was trading my system and that made it more difficult.
Coach:
And what gave you the confidence to add to your position?
Me:
Obviously the money cushion and ability to break even. By adding to my position, I was obviously seeking greater return or break even. NOT a huge loss. That was terrible on my part.
Coach;
I want to get back to the part about trading the system. It seems you were concerned about the optimal logic versus just reacting to your market read. Is that correct?
Me:
For sure.. my left brain was interfering with what I should do. In the futures market, it is easier because I'm always scared but with spreads, they make it possible for me to say okay I'll give it room which is usually a mistake.
Coach:
Your notion of trading the system today both helped and ultimately hurt your performance. It helped you when it gave you confidence to ride out a stormy market. It ultimately cost you when you completely trusted it and didn't listen to your market read. It is very important to use case-based reasoning.. First, your best talent is in reading the market. So, you obviously have to use that. But, also, you do have some very profitable systems that you want to trade, and that is one reasonable way to try to get more profit centers. Case-based reasoning would allow you to realize that early in the trade, you give it plenty of room but by late in the trade then if you're losing or only a little ahead then cut your risk. Your contracts expire and your performance was for sure the result of faulty logic and over left braining thinking it. Sometimes the optimal action is to transfer risk to another even if it may not be optimal over 5 years: today it was optimal to do that.
Speaking of transferring, your attempt to add to your position was worthwhile. But, you should have considered taking some off the table. You had $250 in profit or 25% and an additional $260 at risk (26%) if the trade went against you: you had 50% of your account at risk. It would have made sense to factor that into the equation and took risk off.
What would you do if I said, I'll give you million dollars and I'll give you pocket Queens against any random hand and if you win -- you win a million dollars but if you lose then you lose everything -- your job, your house, your possessions. Rational theory dictates to risk everything. What should you do?
Me:
I go to another and buy insurance.
Coach:
Exactly, you never risk everything! Besides for the global consideration that you had 25% of your account at risk, adding to your position was not your mistake. Your mistake was not taking off your risk and admitting you were wrong. Why couldn't do that?
Me:
I bought at the top and it was just very hard to take a small winner even and it became more difficult to take a loser. It usually isn't difficult for me but I think that the noise from the idea of just trading my system was a part of it. If I had been trading well, I would have used my market read and respected that and also I would have calculated the time in the trade and realized we were in a late-game situation and that the probability of huge returns was low. There was no sense in me to any lose money today. If the trade against me early on then it would have made sense for me to lose money but not in late-game.
Coach:
Exactly. That's what I wanted to realize. You've got early game, mid game, and late game. Late game if the trade isn't working out then take some risk off. I also noticed you tried to "tweak" your live trading instead of tradiing just your sim decisions? Why did you do this?
Me:
This is true. I have a good knack for taking off a trade at the best time on the simulator. I have to adjust the trade to account for the spreads at NADEX (bid/ask) spread and the premium difference. But, in some cases I also got greedy and tried to adjust the ticks to get a bit more. That cost me.
Coach:
From now on, execute EXACTLY as you do in your sim. Only making adjustments for the tick and premium difference. ONLY.
Now what's working for you in terms of making adjustments to the system and what's not working?
Me:
Working: Trading around the system, i.e measured moves (my own bias). Getting involved late game.
Not working: Getting involved early game. Trying to outwit the open. Sometimes I beat but not often.
Mostly I'm deriving added benefit by taking my own trades in the direction of the system but not by beating it per se at its own game.
Coach:
Focus only on what is working. Cut out the rest. Focus on what works and get better at it. Finally let's talk about risk. How did the spreads work out/
Me:
Typically the spreads do a poor job of limiting my REALIZED risk. In the futures market, I take a lot more MAX risk but realize less. I could do the same on the spreads if I were willing to risk huge amounts like in the futures but one mistake would cost me my entire account because I'm leveraging higher. The spreads do a great job of limiting my theoretical risk. I actually lost more trading the spreads today then trading 14 full size ES contracts on the sim. But, it is a give and take.
Coach:
I'm not sure that you should take on the widest spreads with any size. You did take on a few positions. But, I think that limiting the max loss makes sense. You're not psychologically prepared or financially to blow out your entire account on a rare trade. But, this is another good reason to keep in mind the time left to expiry on the trade because you can still take that premium home with you. And, this is part of the minute differences in trading spreads and futures, is that there are some minor differences that make a difference and instead of ignoring those differences, you really need to focus on them.
Overall, you traded well today but you didn't manage your risk which is something you do best. You were divided in your actions which made it difficult to act decisively. Remember, PRINCIPLES over RULES.
You need to work on these mental blocks so that next time you can act without hesitation. Keep it simple and act on your decisively on your market read, especially it is late game. Early game, you can't faulted but late game there is no excuse for losing any money. It is important to be in the best trade but when the clock is running down the n you gotta get out or cut your size in half. Overall, you are doing well and doing a great job of transferring your sim skills to real money (without risking a fortune).
Remember, work out the logic before hand. Focus on your market read and managing risk in the trade. No more noise. It is important for you to push yourself to get into the trades because you're not a gambler. But, remember what Barry said too -- sometimes you have to be willing to be willing to forgo the action when it becomes a gamble.
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