My Path To Success

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Coach:
How was the trading?

Me:
I had the opportunity to close out $700 in profits (or 70% return) on account last 2 days. Today, I had opportunity to close out over $300 in profits. I ended up closing out for a trivial gain. I closed out 1/2 my position at highs and left the rest to run all the way against me and into the red.

Coach:
You executed really excellent today by protecting profits but also leaving on a small position to capture any more upside. I only have a comments. You got out at the high tick on the simulator. Was that the order you used in your real money account?

Me:
I decide to set it for a tick or two higher. I was going to the bathroom and expected to be taken out. It didn't fill.

Coach:
And, what did you learn?

Me:
I payed enough to learn to always run my orders exactly the same. I also learned that at least in today's market locking in profits is very important. Even though I closed out 1/2 position at the highs, I learned that even a small position can turn a big winning day into a losing day.

Coach:
And when you are up big in profit, have you started to think about taking a break even? I'm curious about that play.

Me:
If it is late game and a position has reversed hard against me. I should always exit for a small profit or break even because it is very hard to take the loss after being up big in profit and there is not time for it to recover.

Coach:
What about your NDT pattern, why didn't you act on that?

Me:
Well NDT's do not typically setup huge reversals. I recognized the NDT and the uncertainty over some bearish news. In hindsight, I should have gave the NDT pattern more respect.

Coach:
Right, if you're up big in profits and there is a great deal of uncertainty and price isn't acting right. Take off another lot. Now, what's this I hear you about being a rail bird, telling people to buy options and asking for advice?

Me:
I will no longer do that. I will no longer ask for advice either.

Coach:
Exactly, your strength is calling the market. You don't ask for advice for in a trade. This is a terrible sign that you've lost operational awareness and need to exit. If you feel like getting second opinion then get out of the trade -- by time you figure it out then it will be too late. If you are fishing, then do it when not in a trade.

Overall, excellent by-the-book plays today. If you had executed exactly as we talked about then you may have walked away with a little more profit. In this market, now you know you need to be getting out at targets. This is probably not a lesson for all time. Sometimes you have to forget things. But, you've been successful at many styles of trading, you may want to pull one for consistency and hitting targets.

True, you don't have stops at NDX. So, you probably don't want to wait until you are break even. You may want reconsider the 50% giveback rule. If you are down to small profit then it is time to start trying to get out. If you are down to break even, exit.

I can't think of anything else. Again, very good trading today. We've identified ways we may have turned it into an excellent day.
 
Coach:
Walk me through your trading with a focus on improving performance.

Me:
Well, I took another system trade today. Market was up big. It was hard to get filled. I had a hard time getting a good risk/reward on any narrow spreads. Premium felt like it was jacked up too high. I decided to take the high risk option and cut my size to $20 per point. I had about $400 at risk.

To get a bit more leverage and because I was bullish, I also bought a contract that expired 11 AM. I did pay a little premium on it but I felt it wasn't much and that I"d have time. Market reversed deep and 11 AM expired worthless.

After that, I was down to 1/2 position. I was maxed out on risk. My market read finally told me things were turning around. I bought 1 OTM spread with low risk to get more leverage.

Market never really went anywhere. I used my time phasing period, in terms of my game plan. Early morning I was aggressive, backed off until late evening, and late evening came and heavy sell pressure. My tape read told me the lower levels were at risk of getting taken out.

Market probability of getting any type of win was really low. So, I felt reducing risk was the optimal action. I was able to get 1 contract off without at a decent price and then it hit me hard again. Started pegging the lows. And, I just exited on any small bounce.

I still had my OTM position which I payed about $20 for. I just decided to put in a limit to exit it at 50% of value. It didn't look like there was any chance of breaking even.

In last few minutes of day, market popped up and would have hit my 1st target. Really rough day. System held until the close and walked away with a small winner. I took fairly large hit on my discretionary account too.

Coach:
Granted you took a hit but lets move beyond that. Forget about the money for a moment. What did you do well and what do you think didn't work?

Me:
First, gotta stay away from those 2 hours spreads until I get a reliable edge on them. My trading style just doesn't fit that with. So, that's something that for now isn't for me. Buying a slight OTM position is actually a fairly low risk way to get some extra leverage. That works. I like that better then buying at highs -- less risk. Buying the high risk position was a mixed because it made it such that there was a huge risk if things went wrong but it was also the most efficient way to trade.

Ideally I could have bought with a slight premium but the premiums were terrible today and the market wasn't located to where I could find a spread that worked in terms of risk/reward and premium.

I felt like I did well even when I closed out my position at a loss. I felt like it was reasonable. Normally I would have just my size down but last couple days I got hammered really hard even with small positions n. So, maybe that was a mistake.

The perfect trader always exits on a high. So, I did wait for a bounce. I fought for every point. But, the selling was just relentless. Other strategies would be;

1. Waiting for a definite stop level to be taken out and a rebound.
2. Accepting the risk of the system and trusting it - even in late game phase.
3. Recognizing the trade went bad but only accepting a break even loss.

I'm not sure about which strategy is best. I don't know. Maybe, i was a bit slow in getting out and then I didn't get back in. I was really, really nervous about taking a big hit the way market was acting though.

Coach:
It sounds like you played a strong game today. The lesson is stay away from the shorter expire contracts. If you can find a good risk/reward with a small premium take it but if not then go to the most efficient spread. Using OTM to get leverage without risking a lot.

I think that for sure taking that loss on the expiry today was most of your losses today and also a big part. In terms of the exit strategy, you need to do some analysis on that and see what you find. Given limited information your strategy does seem sound generally but it sounds like you need to do some more research and testing.

Overall strong trading in difficult times.
 
Goal Review:

The good news, I did many things I thought were impossible:

Return 50% on account
Return 150% on capital
Take every trade that I've put in my sim accounts with real money
Not blow out trading at 30x-40x leverage
Keep my account above break even most entire time

The bad:
Total return is 4%
Gave back most of my profits. My strongest skill is not giving back profits.

Overall, I feel like this has been a successful and very worthwhile project. In general, I've learned that for a highly skilled sim trader like myself that going to real money is difficult but my decisions are still sound.

As Barry noted in his "Ace On The River" about losing, the one thing I have noticed is trading with real money versus on the simulator is that when I'm losing then that's when it has shown up for me or when I get a big winner and big loss. I mean that unusual losing streaks or big open trade profits that turn into large losses are the types of events that seem to trigger stronger reactions when I've real money on line.

There is probably no difference when I'm winning. When losing, it certainly is more difficult to continue on with real money on the line.

The other aspect is I'm trading with about 30x leverage in my real money account and only about 8x in my sim account at max leverage. This is surely part of the reason for the larger emotional swings.

I've found a potential backer who will fund me to trade. But, I have go through a training phase. So, I'm already managing 3 accounts as is. 4 accounts is too much for to manage.

So during the this training phase then I'm only going to be taking system trades and working on the training to get funding. I'll continue to share my insights but I thin that I need to go ahead and accept I wont be trading real money the next few weeks until I either pass or determine I can't meet the requirements to get funding.

Managing 4 accounts is just too much. I'll continue to take system trades with my real money, and I may have to add some more to the account. I'll continue to do that. And, I hate to go back to sim because felt that I never would go back to sim. But, this is a good opportunity to get worthwhile funding to trade the full contracts. and I need to be fully focused on doing the best that I can.
 
NET P&L: $253

I've been trading small size. Even with the smaller then usual size, kinda surprised at how quickly I've recouped from the worst of my losses.

I'll still be conversing with Coach. But my main focus will be on satisfying the requirements to get the full backing to trade the full contracts versus running this account up.

I'm going to be really looking at how I can limit my risk and boost my returns. My traditional style is to use catastrophic stops only. But, in order to boost returns and gain more leverage then I will be looking to if I can use tighter stops to increase my leverage.

I did analysis of all my trades. I found that my average MAE was only 3 points. I then did a further analysis and that my best trades and constituting 99% of my profits didn't move against me more then 8 points. Trades that went against me 10 or more points were always losing. However, this doesn't mean I can use a tighter stop because I didn't compute the realized loss.

The data analysis tells me that my entries are much better then I would have thought. Many of my best trades didn't move against me more then even 1 point.

So, I'll continue to think about this data. I will, also, be running a lot more studies on the smaller time frames and trying to refine my existing edges and trading systems.
 
NET P&L: $191

Took a small loss today. This is approximate. I had to make some withdraws. I'm focusing primarily on running studies/refining my trading systems right now and trying to get ready for evaluation.
 
NET P&L: $71

Very tough day.. my last 3-4 big trades I bought at the lows, went deep into profits, and sold a portion at the very highs for the day. I had open profits over $1,000 if I had closed out my trades instead I have run a realized loss of around $300 on those.

I never thought I could buy the low, capture a massive trend, and sell the high and still lose money. I scaled out at every time 25% to 50% of my contracts at highs.

I always try to learn from my mistakes. Historically I've been hit with reversals about 1x every 6 months but never like this.

I don't know. The setups have been the same. Big trend day. Some uncertainty or news. Wavering at the highs. I scale out part of my contracts at the high. Market turns and runs to new lows. This type of market is very aytpical because typically you might get a small pullback but not a run to new lows after new highs.

Next week I will start the evaluation period for funding from the investor. I am honestly looking forward to taking a break from trading at 30x to 60x leverage.
 
Probably went negative today. I can't pull up my account information. I was up over $280. Same old story. I had open profits of over $1200 on my last several trades and I'm down about -$300 to -$400.

Very disappointing... in most cases I called the exact high but my systems holds until the close. Interestingly, my system was profitable today but it trades the futures outrights where I traded the spreads.

In every case, I executed at least a partial position at the optimal time and price. In every case I should have exited a full position. And that makes it seem all the more senseless.

But, I try to trade optimally. Sometimes I kick myself for not just grabbing profits. I was a bit a late in recognizing the change in the market.

My losses have came about due to very fine distinctions, very fine differences due to the instruments I'm trading and my very slight differences in my decisions.. i.e take full position off rather then half position.

If things had been slightly different I'd be up probably 3k-4k now.

i've learned what I've did wrong. But, I didn't adapt quick enough. While I internalized the lessons from my losses because I was trading a dual system/discretionary approach, my internalization didn't lead to huge differences. They only led to small improvements. The small improvements weren't enough to overcome the massive leverage I've been trading with.

Also, in some cases I didn't fully understand the ramifications of my products at NADEX. I didn't fully understand that.

I do now. Maybe I'll write a book to sell "How To Trade Like A Pro @ NADEX". I've learned a lot.

But, I'm not happy with my performance. I'm extremely driven. I realize that has been part of my problem: that my drive is not being translated into beneficial actions in every case.

We'll see if my backer/prop firm is still desiring to fund me. I'm somewhat skeptical. Most people are too weak to ever become traders..

Barry had it right: mental toughness is essential.

I am very tough. I am trading just like I would on simulator. I made a few mistakes though:

A. I'm not trading the exact same instruments. The full ramifications and subtle differences have only became fully apparent now.
B. I'm trading at far more leverage. 30x to 60x leverage on margin. My methods aren't capable of handling this long term.
C. I failed to adapt quick enough. I internalized patterns but tried to take a dual approach with my system.

I don't know.. I don't think it was pure greed. But, yes I thought today I'm going to b a dumb greedy idiot and not take my profits even though its 11:30 AM and we did this every day.

I'm always questioning my beliefs. Which is good.. but I'm so leveraged and then you add in the minute differences of the way spreads works...

It was a combination of fine hair distinctions. I know gamblers are driven by near misses and it makes me angry that I came so close.

Maybe its time to take a break. Hope the prop will fund me because trading at this much leverage has became stressful.
 
Coach:
What led to your losses today?

Me:
A lot came down to the premium on the spreads. I was up over $280 at one point. My futures positions were either break even or profitable whereas with my spreads I took a larger loss -- $160. I was up $800 on my system with $200-$300 profits, $2000 on my sim account with $25 loss, only $300 on my spread with a $160 loss. With the spreads, I took less risk but my entry was terrible. It fooled me because early on my position behaved similar to my futures position.

Coach:
What's the lesson in this? Is it not possible to trade profitable with spreads?

Me:
Well, it is always a cost to pay the insurance. The lesson is that when there is premium on these spreads that it pays to go ahead and take profits. Its not like with the futures where you get a great entry and just give back prior profits. A large portion of those profits are premium profits. The spread works in a very fine way. It works when the position goes in your favor. The higher probability is to take the spread off while there is still premium left. This screwed me up pretty bad today. The spread does protect limit your max loss and increase leverage but it does so at cost of increasing a probable loss.

Coach:
So, why didn't you take profits?

Me:
Good question. We had a similar setup to previous days. A HOD made at 11:30 and no follow through coinciding with previous day low. Very similar.. No more one time framing. Uncertainty on news. I was close to taking a profit there. But, then Obama makes an announcement which I felt changed the equation. It seemed my read was right.. we move above the 93/94 area. I was looking for a close in the 98 to 1304 range. But, I felt I made the optimal play at that stage of the game. Although I should have taken off profits at first HOD.

I didn't understand the long positions are playing out like short positions in a bull market. I just didn't understand. I was looking for a gap higher today and we had that. So I felt the pattern was pretty strong.

Coach:
What else?

Me:
Well we couldn't hold the 96 level. I knew this was bad. I knew that the order imbalance could still be to long side. I knew to get out by 3:45 to front run the close. I exit one of my 3 positions for a small. I was a hair breadth away. I mean it was just a click away. My goal was be out by 3:45. THen in a second market dropped out.. i couldn't get any rebound.

After I couldn't get out.. spread went to zero. At that time, the optimal play was to set a limit and wait for a reversal at a new imbalance inflection after the close. However, I didn't realize it but because it was friday I didn't have that window.

Coach:
Again we see if you execute 1 then you should execute all.

Me:
Exactly. My actions are nearly always optimal. My actions are perfect.

Coach:
And, yet you didn't take all positions off. Why?

Me:
I didn't want to take full responsibility if I got it wrong.

Coach:
You have to learn accept being wrong. Why did let you $1300 in profits get away?

Me:
I guess it was trying to get back to even, sure a part of it. The other part was I was just splitting between my discretionary and the system. I understand now that getting in that break-even mindset screwed me up. I will no longer try to get back to break even.

Coach:
Forget about trying to get back to break even. Forget about scaling out. It is not working. What do you need to do to get back to consistently winning? Do you need to drop the Nadex?

Me:
I'm considering it. I don't think that is required but a few things are required:

* I must quit trying to get back to break even.
* I must quit comparing my wins to my sim wins. I get used to a certain size win on sim but I'm trading smaller.
* I must reduce my leverage to something to 8x to 10x max.
* I must start taking more risk on my trades OR I must make adaptations to take my profits before the premium expires.

NADEX is still a good place to learn. Nobody forces me to take the wrong spreads. It is just when I look at risking $700 to $800 on a trade versus $160. It is hard to see otherwise. Even then it is not the wrong decision provided one uses the premium to advantage.

I didn't fully understand this premium situation. Because I pay up in price, I can't afford to let price go back on me. When price goes back on me, I am facing both premium loss and a poor entry. With futures, I usually am just facing a net basis loss with a risk of a catastrophic loss.

While the spreads DO allow for price to come back. They expire so soon that the value one gets from that is negligible. If I had a 2-3 day spread then I would have cleaned up with thousands in profits.
 
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