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My Path To Success
- Thread starter Lucias
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Don't blame your journal and other stuff for distracting you. That is not the problem.
Here are your problems:
1. You take more pride in your fake account than your real account. Stop focusing on your fake account. If that fake account was live you would probably be experiencing similar problems. Fake accounts are never a measure of actual skill unless the fake account is automated, in which case, results will be similar to live trading. Don't let the success of your fake account impact your decision making on the live account.
2. Take profits, for your accounts sake. If you can rack up $1000 in a day on your trades, that is a huge gain for your account size. Your system needs to let you take profits. Money management.
There are two rules in trading, if you don't follow them you will lose.
- Don't lose
- Take your profits and keep them
3. Determine the probability of trades going in your favor before pulling back and becoming a loser. You should tweak your 'system' to take advantage of this probability.
If 60-80% of your trades work at first, you should take some profits earlier than you normally would to capture profits and buy the risk on the remainder of your position...
At this point, any amount of profits give your account a nice % boost. Next week, try taking profits and walking away. You'll probably be up $1000 by the end of the week.
4. I don't think you are reading the tape. You are expecting your winners to keep running when they have no reason to. Why should the market have continued to trade higher yesterday afternoon? Obama's speech was well received? No. People do not want to aggressively buy the market right now. Take profits on longs more quickly than you would on shorts. Your system does not seem to adapt to market conditions, and that is why it is failing. Winners do not run forever in choppy, volatile markets. The probability of the market closing at highs is low in this market. Perhaps your system was designed in a bull market, where winners can run? Backtested systems fail. The market changes, you must adapt.
I mean look at the facts. You were making money in the bull market, and ever since the market topped, you've been draining your account. Why hasn't coach mentioned this?
Here are your problems:
1. You take more pride in your fake account than your real account. Stop focusing on your fake account. If that fake account was live you would probably be experiencing similar problems. Fake accounts are never a measure of actual skill unless the fake account is automated, in which case, results will be similar to live trading. Don't let the success of your fake account impact your decision making on the live account.
2. Take profits, for your accounts sake. If you can rack up $1000 in a day on your trades, that is a huge gain for your account size. Your system needs to let you take profits. Money management.
There are two rules in trading, if you don't follow them you will lose.
- Don't lose
- Take your profits and keep them
3. Determine the probability of trades going in your favor before pulling back and becoming a loser. You should tweak your 'system' to take advantage of this probability.
If 60-80% of your trades work at first, you should take some profits earlier than you normally would to capture profits and buy the risk on the remainder of your position...
At this point, any amount of profits give your account a nice % boost. Next week, try taking profits and walking away. You'll probably be up $1000 by the end of the week.
4. I don't think you are reading the tape. You are expecting your winners to keep running when they have no reason to. Why should the market have continued to trade higher yesterday afternoon? Obama's speech was well received? No. People do not want to aggressively buy the market right now. Take profits on longs more quickly than you would on shorts. Your system does not seem to adapt to market conditions, and that is why it is failing. Winners do not run forever in choppy, volatile markets. The probability of the market closing at highs is low in this market. Perhaps your system was designed in a bull market, where winners can run? Backtested systems fail. The market changes, you must adapt.
I mean look at the facts. You were making money in the bull market, and ever since the market topped, you've been draining your account. Why hasn't coach mentioned this?
Quote from ksmetana:
Don't blame your journal and other stuff for distracting you. That is not the problem.
Here are your problems:
There are two rules in trading, if you don't follow them you will lose.
- Don't lose
- Take your profits and keep them
Wow. You tell em Kurt! Lol. Btw..."don't lose" is not a rule of trading. Averaging losers is for losers. Losing is a real part of real trading. Cutting those losers fast is also a real part of successful trading. My $.02.
Thanks KSMeta.. Very good points. I trade about 60% discretionary and 40% my systems. I learned these past weeks that it is definitely worth reviewing my system to see if I can add some rules for these situations. What was so frustrating was that I actually using my market read called most of the highs on these days and took profits but reversals were so strong they erased my wins. Interesting, my system manage to eek out a small profit because the futures contracts were more efficient. It doesn't set targets and only uses catastrophic stops.
Definitely one rule I want to test is to determine if there is a certain retracement level from highs that tells me that I should take profits. I had this on my list to test out before you mention it. But, that is a great point and only by trading the system these past weeks would I have got this idea. I'm always learning.
I only use catastrophic stops for most of my trades. I've heard from many traders who claim to use tight stops and make money. I recommend traders who are struggling to adopt my methodology. However, I am tempted to push myself to see if it is possible to use tight stops without hurting drawdown because it would allow me to decrease the MAE. There is an important relationship between the MAE and the max drawdown because those 2 variables will determine how well a system can scale.
I am running some analysis on the usage of stops and targets. I go into some of these concepts in my special report "Even More Edges". In my report, I share a concept that any stop/target relationship in a random entry is equivalent and is defined by the zero expectation. Basically it is a tradeoff between winning % and loss size. On most systems that I've tested, I've found that stops hurt the net performance. But, they reduce the catastrophic risk. It makes sense that stops should hurt net profit performance when we see that one who trades without a stop is taking unlimited risk.
I assume the same would hold true for targets. I assume that targets would hurt performance in a similar way that stops did. What is interesting and granted this is just one system and one type of system (i.e many types of systems) targets trade off the net profit but improve the win ratio. It is very fascinating that using targets makes a futures system trade more like a binary options.
I mean I seen the same type of graph using binary options. If a systematic edge is largely dependent on volatility then low volatility will often hurt the performance. But, when one sets targets then they can overcome the low volatility cost.
Anyway, again these results may vary depending on system but I've found for in this case:
* Setting large targets and small stops is the least optimal rule set.
* Setting no targets and large/no stops is the most optimal rule set for net profit.
* Setting small to moderate targets with large/no stops produces a very appealing equity curve with very high win ratios and would be a system I could trade. Total net profit is reduced but consistency is maintained. More over, setting targets in low volatility environments may help performance. But the bigger idea is that we need to trade a way that fits both the market and our mentality. Sometimes it is best just to take good enough.. certainly that was true the last few weeks for me. Good enough was great. Optimal was a disaster.
* It makes sense that you lose net profit but increase win ratio with a target because in essence setting the target is a form of reducing risk (and risk is reward if we have an edge). One trades potential reward for guaranteed profit. Yet, one also gains from becoming more consistent the ability to take more risk by adding more contracts. The deciding factor may be personality and the rate of opportunity: when one has more frequent opportunities then it is likely going to be better to take the guaranteed profits. But, if one only has relatively rare opportunities then it may be costly to sell the insurance on the strategy, in essence by using the target.
This relationship may go some way to explaining Neke's huge swings. If his strategy is bounded by fewer opportunities then he will be shooting for more big runs and need them versus the trader who is in the market every trade, i.e the local. Likewise, it goes someway to explaining why successful frequent day traders tend to largely recommend setting and using targets.
Definitely one rule I want to test is to determine if there is a certain retracement level from highs that tells me that I should take profits. I had this on my list to test out before you mention it. But, that is a great point and only by trading the system these past weeks would I have got this idea. I'm always learning.
I only use catastrophic stops for most of my trades. I've heard from many traders who claim to use tight stops and make money. I recommend traders who are struggling to adopt my methodology. However, I am tempted to push myself to see if it is possible to use tight stops without hurting drawdown because it would allow me to decrease the MAE. There is an important relationship between the MAE and the max drawdown because those 2 variables will determine how well a system can scale.
I am running some analysis on the usage of stops and targets. I go into some of these concepts in my special report "Even More Edges". In my report, I share a concept that any stop/target relationship in a random entry is equivalent and is defined by the zero expectation. Basically it is a tradeoff between winning % and loss size. On most systems that I've tested, I've found that stops hurt the net performance. But, they reduce the catastrophic risk. It makes sense that stops should hurt net profit performance when we see that one who trades without a stop is taking unlimited risk.
I assume the same would hold true for targets. I assume that targets would hurt performance in a similar way that stops did. What is interesting and granted this is just one system and one type of system (i.e many types of systems) targets trade off the net profit but improve the win ratio. It is very fascinating that using targets makes a futures system trade more like a binary options.
I mean I seen the same type of graph using binary options. If a systematic edge is largely dependent on volatility then low volatility will often hurt the performance. But, when one sets targets then they can overcome the low volatility cost.
Anyway, again these results may vary depending on system but I've found for in this case:
* Setting large targets and small stops is the least optimal rule set.
* Setting no targets and large/no stops is the most optimal rule set for net profit.
* Setting small to moderate targets with large/no stops produces a very appealing equity curve with very high win ratios and would be a system I could trade. Total net profit is reduced but consistency is maintained. More over, setting targets in low volatility environments may help performance. But the bigger idea is that we need to trade a way that fits both the market and our mentality. Sometimes it is best just to take good enough.. certainly that was true the last few weeks for me. Good enough was great. Optimal was a disaster.
* It makes sense that you lose net profit but increase win ratio with a target because in essence setting the target is a form of reducing risk (and risk is reward if we have an edge). One trades potential reward for guaranteed profit. Yet, one also gains from becoming more consistent the ability to take more risk by adding more contracts. The deciding factor may be personality and the rate of opportunity: when one has more frequent opportunities then it is likely going to be better to take the guaranteed profits. But, if one only has relatively rare opportunities then it may be costly to sell the insurance on the strategy, in essence by using the target.
This relationship may go some way to explaining Neke's huge swings. If his strategy is bounded by fewer opportunities then he will be shooting for more big runs and need them versus the trader who is in the market every trade, i.e the local. Likewise, it goes someway to explaining why successful frequent day traders tend to largely recommend setting and using targets.
One more note, some years ago I was reading something about strategies designed for a game. What the authors found was that "near extremes" strategies performed best. While just a vague idea.. it is something I'm keeping in mind but it is something that seems to make some intuitive sense to me.
Likewise, Sun Ra spoke about how he didn't make the rules, that somehow he was bounded. Often when I'm trying to trade perfectly, I feel the same way that the perfect action does change but at each step one has a new perfect action. A good example is when the market correctly anticipates the future then a new and different future is created because the previous future was based on the previous past. In other words, when the market gets it right then it gets it wrong because the conditions for getting it right were that the market would get it wrong.
Math isn't my best subject. Yet, it does feel that there is some structure that may be constraining and defining things, creating contradictions, and solutions.
A good example is found that many people I've talked to who are system developers do not set profit targets or stops. The systems are likely taking advantage of very selective, i.e rare opportunities so that it doesn't make sense to take insurance to gain consistency. Now, the day trader in the market everyday is nearly always willing to take the guaranteed profit, i.e consistency, because his edge is typically marginal and he has plenty of opportunity. A similar idea was found when I read that Rotter stated they only used systems for his long term strategies but for day trading they trading using discretion. If someone is trading everyday then they are by definition taking the most marginal opportunities. It stands to reason that marginal edges then they will be much more difficult to detect.
Likewise, Sun Ra spoke about how he didn't make the rules, that somehow he was bounded. Often when I'm trying to trade perfectly, I feel the same way that the perfect action does change but at each step one has a new perfect action. A good example is when the market correctly anticipates the future then a new and different future is created because the previous future was based on the previous past. In other words, when the market gets it right then it gets it wrong because the conditions for getting it right were that the market would get it wrong.
Math isn't my best subject. Yet, it does feel that there is some structure that may be constraining and defining things, creating contradictions, and solutions.
A good example is found that many people I've talked to who are system developers do not set profit targets or stops. The systems are likely taking advantage of very selective, i.e rare opportunities so that it doesn't make sense to take insurance to gain consistency. Now, the day trader in the market everyday is nearly always willing to take the guaranteed profit, i.e consistency, because his edge is typically marginal and he has plenty of opportunity. A similar idea was found when I read that Rotter stated they only used systems for his long term strategies but for day trading they trading using discretion. If someone is trading everyday then they are by definition taking the most marginal opportunities. It stands to reason that marginal edges then they will be much more difficult to detect.
Frustration level is running higher then usual. I'm estimating that I'm down about $200 but may it will be less if things turn around today.
I started the review period for the prop firm today. To reduce my workload, I've decided not to place any discretionary trades in either my C2 account or my real money account until the review period is completed. I have decided to continue to place system trades though.
Unfortunately, due to withdraws from my NADEX account, it is almost to nothing. While my actual loss is modest, having such a small account and knowing I can blow it out in 1 trade isn't appealing. I rather withdraw a little then leave with nothing.
I opened a Tradestation account for the backtesting. I am very pleased with what Tradestation is offering me and highly recommend this platform to others who want to test or get serious about trying out their ideas. Yes, I'm frustrated because if I had just taken profits I'd have a small drawdown but be up huge. But, I can't focus on that.
This isn't where I wanted to be at this point in the journal. But, realistically I have a great opportunity if I can get funding to trade the actual futures and, also, I've had a couple autotraders trying out my system too which could turn into another revenue stream.
Yes, I'm frustrated with my temporary setback. But, I know am I making progress toward longer term goals. And, this has been a great opportunity for me to practice and get more experience trading and turning my predictions into trades.
I started the review period for the prop firm today. To reduce my workload, I've decided not to place any discretionary trades in either my C2 account or my real money account until the review period is completed. I have decided to continue to place system trades though.
Unfortunately, due to withdraws from my NADEX account, it is almost to nothing. While my actual loss is modest, having such a small account and knowing I can blow it out in 1 trade isn't appealing. I rather withdraw a little then leave with nothing.
I opened a Tradestation account for the backtesting. I am very pleased with what Tradestation is offering me and highly recommend this platform to others who want to test or get serious about trying out their ideas. Yes, I'm frustrated because if I had just taken profits I'd have a small drawdown but be up huge. But, I can't focus on that.
This isn't where I wanted to be at this point in the journal. But, realistically I have a great opportunity if I can get funding to trade the actual futures and, also, I've had a couple autotraders trying out my system too which could turn into another revenue stream.
Yes, I'm frustrated with my temporary setback. But, I know am I making progress toward longer term goals. And, this has been a great opportunity for me to practice and get more experience trading and turning my predictions into trades.
Update:
Ended up breaking even. I would have made a small profit had I had stayed with my original plan. My system actually made a decent profit. I even called how the market would play out. I had a small loss on my prop/sim account. Even though I was right on the way market played out, my agreed risk limit was too low for me to take advantage -- although honestly I thought I was going to lose today. My spread went to zero before I got out for break even/tiny profit.
I've notice I've been take on unhealthy type A personality traits. I'm extremely driven and that's good but also a lot of the time: it doesn't matter. It is like an astronaut said, they didn't worry when they were going to the moon because they couldn't do anything about it -- they were in a tin can. I need to be aware when my drive is producing results versus just causing me to waste my energy and cause angst.
I'm going to take more time to list all the things that are going well in my life. I've been frustrated and doing this million mile march to get funding. But, also, not many people have trading systems as profitable as mine. Not many people can call the market like I can. So, I have a lot to be thankful for -- instead of being resentful or angry. My plan with this project has been to serve and that service should eventually lead to wealth. But, I think I've let money concerns in general become too big a deal. As Barry conveyed, if you know the value of a dollar then trading might not be for you.
I have some work to do on my psychology and also I'm focus on my health. To help with that and set the mood, music such as this tune by Delroy Wilson should help and Sun Ra's sentiments are invaluable:
https://www.youtube.com/watch?v=hK96fDanUn0&
http://www.youtube.com/watch?v=djBKQNVj5Cc
What's the journey worth if I don't enjoy it?
Ended up breaking even. I would have made a small profit had I had stayed with my original plan. My system actually made a decent profit. I even called how the market would play out. I had a small loss on my prop/sim account. Even though I was right on the way market played out, my agreed risk limit was too low for me to take advantage -- although honestly I thought I was going to lose today. My spread went to zero before I got out for break even/tiny profit.
I've notice I've been take on unhealthy type A personality traits. I'm extremely driven and that's good but also a lot of the time: it doesn't matter. It is like an astronaut said, they didn't worry when they were going to the moon because they couldn't do anything about it -- they were in a tin can. I need to be aware when my drive is producing results versus just causing me to waste my energy and cause angst.
I'm going to take more time to list all the things that are going well in my life. I've been frustrated and doing this million mile march to get funding. But, also, not many people have trading systems as profitable as mine. Not many people can call the market like I can. So, I have a lot to be thankful for -- instead of being resentful or angry. My plan with this project has been to serve and that service should eventually lead to wealth. But, I think I've let money concerns in general become too big a deal. As Barry conveyed, if you know the value of a dollar then trading might not be for you.
I have some work to do on my psychology and also I'm focus on my health. To help with that and set the mood, music such as this tune by Delroy Wilson should help and Sun Ra's sentiments are invaluable:
https://www.youtube.com/watch?v=hK96fDanUn0&
http://www.youtube.com/watch?v=djBKQNVj5Cc
What's the journey worth if I don't enjoy it?
Now that I'm in the evaluation period, I'm going to be really focusing and tightening up my systems. This was part of the reason that I setup a Tradestation account, which will allow me to better test my trading concepts on the smaller time frames.
I'm going to be trying to do things I think may be very difficult in terms of return. This will be simulated so I don't have to worry about losing money and if I get funded then it won't be my money either except a split of profits. Additionally, I'll be trading the real futures contracts which should help me to tighten up my game too and extract a bit more profit.
I want to know from those who read this if they'd be interested in seeing the sim profits I'm producing. As an update, this has been my real money thread which were proxies to futures trades taken in my sim accounts. In order to get funding, I am undergoing an evaluation period for a backer. I expect this period to last around 3 months.
I'll primarily be taking sim trades except for my systems trades which I'll still take with real money but even with that I am viewing this sim account as being more important to me. Because it will help me to get funding to make a lot more money then I can with my own capital -- not a fortune mind you but enough to make more then I can with my current capital and what I anticipate I will have in the near future.
For those who read and enjoy my journal, I'm asking an open question if you want to see the simulated P&L tracked. I'm actually thinking that is what I'm going to do.
I'm going to be trying to do things I think may be very difficult in terms of return. This will be simulated so I don't have to worry about losing money and if I get funded then it won't be my money either except a split of profits. Additionally, I'll be trading the real futures contracts which should help me to tighten up my game too and extract a bit more profit.
I want to know from those who read this if they'd be interested in seeing the sim profits I'm producing. As an update, this has been my real money thread which were proxies to futures trades taken in my sim accounts. In order to get funding, I am undergoing an evaluation period for a backer. I expect this period to last around 3 months.
I'll primarily be taking sim trades except for my systems trades which I'll still take with real money but even with that I am viewing this sim account as being more important to me. Because it will help me to get funding to make a lot more money then I can with my own capital -- not a fortune mind you but enough to make more then I can with my current capital and what I anticipate I will have in the near future.
For those who read and enjoy my journal, I'm asking an open question if you want to see the simulated P&L tracked. I'm actually thinking that is what I'm going to do.
You need 5k to open a futures account: so I have a 5k funded account. However, this is not the software I am using for the trial. It is CTS T4. I funded the TS account for the software. They gave me a great deal.
I've looked at a lot of backtesting software and many professionals just said use Tradestation. Tradestation has a lot of potential and they recently made purchases that should give them more potential. Currently it does have limitation in that it can't backtest on T&S volume data, unfortunately.
Tradestation primary strengths are that it is fast, has integrated data, relatively easy, and a strong community. The only major weakness I've ran into is that it lacks historical T&S data.
I've looked at a lot of backtesting software and many professionals just said use Tradestation. Tradestation has a lot of potential and they recently made purchases that should give them more potential. Currently it does have limitation in that it can't backtest on T&S volume data, unfortunately.
Tradestation primary strengths are that it is fast, has integrated data, relatively easy, and a strong community. The only major weakness I've ran into is that it lacks historical T&S data.
Quote from ksmetana:
How much $$$ do you need for a Tradestation futures account?
Are you trading a demo on Tradestation or a live account?
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