Need Advice

[trader99]

So today I went to a restaurant and ordered a take out for lunch. The tab was like $8.90 or something. Then a thought came to me. So that's how the restaurant survives: a series of small orders and occasional family dinner and feasts.

Then I made the same analogy with daytrading. I used to scoff at scalping. But maybe I'll return to it. Scalp for under $100 per trade and on good trendy day go for the jugular and 100pts+ ride. No difference.

That's the right thinking about daytrading. Think of it as a business. You can't hope and swing for the fence everytime. But make steady profits and when the good trend comes ride for it all its worth.

Good analogy?

 

[trader99]

I really don't agree with this at all: the proportion of people fitting that description, who are trading in the forex market, is absolutely tiny, Carlll.

There may be a (very) few full-time, retail traders in that group, but most people with the skills, experience and capital to be trading their own funds full-time are no longer dealing with that market, simply because the criteria that make that market attractive and relevant to so many people no longer apply to its tiny minority of long-term survivors who have "turned professional". (If nothing else, they'll have switched to forex futures both because it's easier to trade with volume than without it and especially because the dealing-costs are so much lower. Few - if any - people can be more resistant to doing that than I was, and even I did so eventually.)

I would totally agreed with @Xela. The number of full-time retail traders who actually make a decent living is probably less than 1 in a 100. The ones who are good enough go the prop trading route or hedge fund route or set up their trading as a trading business LLC. Because once you have an edge you need scale to profit from it.

But to think a retail guy/gal sitting at home making tons of money on a stable basis is very rare. And even more rare in the overleveraged retail FX market..

 

[Overnight]

Good analogy?

I understand your thinking here but, I don't think the analogy can stick.

At a restaurant, so long as the chefs keep churning out good dishes, people will keep buying those dishes. When the chef has an off-day for whatever reason and produces a bad dish, it would put-off the customer, BUT THE RESTAURANT WILL STILL COLLECT PROFIT ON THE BAD DISH.

The downside is that the customer may not come back ever again, so that is "lost trade potential".

If the customer comes back and orders the same dish and it is good again, the customer will shrug the previous experience off and come back the next time and order the same dish.

That side of the market, (the chef) can be controlled (he/she gets better from the off-day, or you replace the chef to get back the good dishes.).

But the market (chef) is going to be a good dish or a bad dish every day, and you cannot control the market (chef).

So long as your chef maintains his standards of making good dishes, you will always be swinging up. On the occasional bad chef day, you will still make money on those bad days.

A restaurant survives by constantly providing good dishes, and by brining in business by word-of-mouth and positive reviews, keeping overhead low, etc. among other things.

A trader does not have past "good trades" (dishes) helping them to keep swinging up in the future market, because the market is not a customer that remembers you and will favor you and your good dishes (trades).

 

[Jzwu2017]

A restaurant does lose money from time to time on bad dishes and mixed up orders, by waiving the charges and giving out free dishes, etc.

In a sense, it’s same as those losing days in day trading.

 

[trader99]

Good news. I know it's afterhours and low liquidity and stuff. I long when I should have. I shorted when I should have. It's not many points. For me that's success. Following my rules for entry and exits and risk management.

Instead of being biased long or short, I just followed the rules. When my setup said to go long, I went long. When my setup said to go short, I short.

At least for me, that was a difficult problem to get rid of. Rather than following rules, I would have a crazy bias one way or another. In some sense, to be successful you have to have a blank Zen mind so to speak. You let the market tell you where to go. Follow rather than predict is difficult for academically/intellectually oriented people like myself... hehe

The rules aren't even hard. Following them is. Overtime hopefully I'll be able to stick with this discipline.

Progress.

 

[ironchef]

The real crux of the problem I found after digging deeper is NOT necessarily the timeframe. but rather poor risk management. I could make good money daytrading AND swing trading if I had cut my losses sooner. I'm working on that one in 2018. I think fixing that would make me a profitable trader.

I personally don't understand risk management so cannot comment.

However, cutting your losses sooner often means having a tighter stop. Have you done any back tests or review your outcome to make sure, for your trading system, tight loss does not mean less winning trades. I looked back on my option trades and if I tighten my stop losses, my net profits would be reduced because some of the eventual big wins were stopped out as losses.

 

[murray t turtle]

I really don't agree with this at all: the proportion of people fitting that description, who are trading in the forex market, is absolutely tiny, Carlll.

There may be a (very) few full-time, retail traders in that group, but most people with the skills, experience and capital to be trading their own funds full-time are no longer dealing with that market, simply because the criteria that make that market attractive and relevant to so many people no longer apply to its tiny minority of long-term survivors who have "turned professional". (If nothing else, they'll have switched to forex futures both because it's easier to trade with volume than without it and especially because the dealing-costs are so much lower. Few - if any - people can be more resistant to doing that than I was, and even I did so eventually.)

%%
I do believe in specialists, +single focus is fine.........
BUT as you noted +Ela to limit one to only one market[FX]is simply not wise. Sure one could make big bucks [+pounds, Sterling LOL, true], but that does not mean its best or even wise- no disrespect intended to anyone.

 

[murray t turtle]

I personally don't understand risk management so cannot comment.

However, cutting your losses sooner often means having a tighter stop. Have you done any back tests or review your outcome to make sure, for your trading system, tight loss does not mean less winning trades. I looked back on my option trades and if I tighten my stop losses, my net profits would be reduced because some of the eventual big wins were stopped out as losses.

%%%
Good point iron Chef; its seldom seen, tight stops + big trends. A very few have pulled it off [huge comissions.....];but BIG TRENDS tend to require big stops. Stops can be tightened after some good %%; then if market hits stops = well happy+ happy day as the song says ..................................

 

[trader99]

I personally don't understand risk management so cannot comment.

However, cutting your losses sooner often means having a tighter stop. Have you done any back tests or review your outcome to make sure, for your trading system, tight loss does not mean less winning trades. I looked back on my option trades and if I tighten my stop losses, my net profits would be reduced because some of the eventual big wins were stopped out as losses.

@ironchef While I agree with you in theory that tighter stops could potentially reduce some of the trades that became eventual winners because I gave it extra wiggle room, this is not what I meant when I say tighter stop losses.

If I look at the distribution of my losses, there are the normal small losses and the occasional medium losses(which I do want to get smaller but I accept them as part of sometimes giving too much wiggle room). Then there are the outsized losses that are like 10-20x larger than the average losses!!! Those are the losses that is killing my performance.

Those are the ones I'm trying to get rid of. Just getting rid of those in themselves would be sufficient to make me nicely positive since I do believe I have a positive edge that is getting wiped out by outsized losses.

Well, the good news is I believe I'm heading in that direction. This morning I put on a trade and as soon as I realize that it's not heading my way I got out in 2 minutes! That loss was a medium sized loss. I guess I could have gotten out much sooner. But this is a huge improvement as compared to that fateful Monday February 5 where I was like deer in the headlights and sat there for like 20+ minutes before getting out. In a market that moved as violently as that you can easily lose hundreds of points(of which I did).

Yep, I just checked the screen. It's been about 25mins since I exited and the market moved a 100 points against me had I held! The next area is to realize that the direction has reversed and reversed my trade after exiting for a loss. But I think that should be taken carefully and only when it's evident. Sometimes reversing can result more losses as the market whipsawed and you get chopped up.

So in this sense, cutting losses HELPED! The medium size loss is offsetted by some gains I had earlier. So totally manageable and recoverable.

I just did a trade and it cut the medium sized losses by half. Another trade and I'm back in the green. Medium sized losses are recoverable. Small losses are scratch trades(noises).

One other thing I regret this morning I let a winner turned into a loser. Ouch! Then in my most recent trade I exit before it turned into a loser.

Slowly piece by piece I'm building the good habits of consistent profitable trading while doing consulting on the side...

Hopefully it will all come together in 2018 to be a good year.

 

[murray t turtle]

I would totally agreed with @Xela. The number of full-time retail traders who actually make a decent living is probably less than 1 in a 100. The ones who are good enough go the prop trading route or hedge fund route or set up their trading as a trading business LLC. Because once you have an edge you need scale to profit from it.

But to think a retail guy/gal sitting at home making tons of money on a stable basis is very rare. And even more rare in the overleveraged retail FX market..

%%
Good points T99; DEBT is not a friend, like trend is a friend. And even more so= while learning ,debt can be a enemy. 100% of foreclosures in RE are leveraged; sure millions + billions have been made investing/Trading RE+ stocks, with leverage.

Still amazing how many ''Different '' hamburgers chains/chicken chains, LOL are still making money; not a stock tip