Need to eliminate the big losses

SteveM said:
I've been trading for a while now, and on 7 out of 10 weeks I can finish the week profitably. One major problem that I have, however, is that I will occasionally take real big losses that wipe out many previous winners.

For example, on Friday I foolishly did not exit a losing position, only to take an even bigger loss today that wiped out my prior 6 weeks worth of profits.

While I continue to become a better discretionary trader (number of profitable trades continues to increase over time), these occasional big losing trades that wipe out many winners continues to negatively affect my performance (both capital and mentally) ever since I started, and it has gotten to the point now where my p/l is breakeven over the last 3 months, and I am questioning if I really will be able to be successful doing this long term.

How does this happen? Pulling stops, revenge trading using too big position size, not using stops, etc.

If there any long-term profitable traders here who used to have the same problem, how were you able to re-wire your instincts in order to do the "right thing" and no longer take these types of losses?

If you took 100 people off the street, I believe I would be in the lower-half in the terms of self-discipline, so I fear this might be some type of issue that is impossible to overcome, whereas trading "monks" make all of the money.
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I am starting this journal today in hopes that it will keep me more accountable going forward. It is not going to be a P&L journal per-se, but rather just an update every single day as to whether I honored my stops, took reasonable small losses, behaved rationally, etc.

Thanks for reading.

(edited for grammar mistakes)
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Dear Friend,

I had this problem before and finally fear took over and when it is over only rest and recovery is needed. This kind of payoff is indeed very difficult for the mind because for a long period the brain have a reward and one day the big slap comes and it is more painful than if previously no reward have been done before. What I find useful is to take a loss and feel good about it, very difficult to do but with practice it become more and more bearable.

Also this kind of problem tell you something that you know deep inside, there is a problem with your risk. Very difficult to acknowledge when fear and greed are under control. Try to look at your risk and strategy to see where can you do better to avoid this kind of fluctuation to your account. But definitely a break is needed to recover your perception and find the problem before the problem finds you.

Be also careful stop loss is not always the right solution to manage risk.

Best of luck in this endeavor and don't give up. This is a wonderful journey even if you need to die many times.

Mnevis
 
I only took one trade on the day before Thanksgiving (bought Deere call options on a pullback after their earnings conference call, and was profitable). So I made money on my first three trades since keeping this journal. Unfortunately, I lost on three trades today, and gave all my profits back from day 1 & 2, so I am slightly in the red since starting to keep this journal.

I was frustrated earlier today because on one of my trades, I got stopped out only to see the trade reverse right back towards my original profit target. But the good news is that adhering to stop loss discipline and ending the day flat saved me front taking what would have been a very large loss (cryptocurrency stock gapped down 20% afterhours). So while I am disappointed that all my trades were losers today, I am happy that stuck to my rules, which saved me money.

Starting tomorrow, I am going to add one additional rule: only take long entries if most recent bars are above 20EMA on 15M chart and vice versa for short entries.

I am adding this rule in hopes that by only looking to buy breakouts/breakout pullbacks I will no longer be fading moves, and find my trades more aligned with the underlying trend of the market.

Thanks for reading.

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No more reckless gambling, day #: 2 & 3
# of trades: 4
# of trades where stop orders were entered and adhered to: 4/4
# of trades where dollar-risk adhered to plan: 3/4
# of trades where profit taking orders were entered and adhered to: 4/4
# of trades where I entered long above bull bar or short below bear bar: 4/4
# of trades that could be reasonably justified to a boss or OPM: 4/4
# of trades that were not carried overnight: 4/4
Total Score: 23/24
 
Only took 1 trade today, exited at a slight loss. Was actually "bailed out" of my trade after that NK missile-launch news item hit the newswires.

I followed all of my rules today, except for that one rule I wanted to start implementing where I was not getting long anything below the EMA, and not shorting anything above the EMA. I wish I could be more robotic and simply get long the SPY as soon as I get a reasonable long setup, but in my head I'm convinced the market is due for a pullback despite it going up nearly every day, and as a result I am always looking for reversal entries rather than with-trend entries, which I've found to be a losing gameplan (generally speaking).

I feel a bit like a college QB at the moment....I was having a solid freshman season and completing passes (making money) for the first 8 games of the season - until one that game when I faced Alabama last week and threw 4 interceptions and lost 2 fumbles. Now all of a sudden, I've lost my confidence a bit and am afraid to make mistakes so I am holding onto the ball to long (hesitant to take reasonable setups that I would normally take) and not moving the team up the field. Not throwing interceptions, but getting a lot of 3-and-outs and am not able to move the offense up the field.

Anyway, the goal right now is to stick to the plan and do the right thing, so that is what I will continue to focus on. Thanks for reading.
 
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SteveM said:
Only took 1 trade today, exited at a slight loss. Was actually "bailed out" of my trade after that NK missile-launch news item hit the newswires.

I followed all of my rules today, except for that one rule I wanted to start implementing where I was not getting long anything below the EMA, and not shorting anything above the EMA. I wish I could be more robotic and simply get long the SPY as soon as I get a reasonable long setup, but in my head I'm convinced the market is due for a pullback despite it going up nearly every day, and as a result I am always looking for reversal entries rather than with-trend entries, which I've found to be a losing gameplan (generally speaking).

I feel a bit like a college QB at the moment....I was having a solid freshman season and completing passes (making money) for the first 8 games of the season - until one that game when I faced Alabama last week and threw 4 interceptions and lost 2 fumbles. Now all of a sudden, I've lost my confidence a bit and am afraid to make mistakes so I am holding onto the ball to long (hesitant to take reasonable setups that I would normally take) and not moving the team up the field. Not throwing interceptions, but getting a lot of 3-and-outs and am not able to move the offense up the field.

Anyway, the goal right now is to stick to the plan and do the right thing, so that is what I will continue to focus on. Thanks for reading.
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None of us can tell the future or determine what markets will do. All we can do is develop tested and defined signals, enter the position and observe the rules of our system. That's it...that's trading.
 
SteveM said:
Not throwing interceptions, but getting a lot of 3-and-outs and am not able to move the offense up the field.
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We've all BTDT. And some of us had our t-shirts taken.

Stay with a plan. Which one? Experiment (constantly!).
"The Right Plan" is the one that begins,
1) Don't lose money. (Capital Preservation, "Stop-loss Discipline", many other names/tools)
2) Make money with Steps 3) through.......
 
I keep doing the same sh*t over and over again (10 days of good disciplined trading followed by 1 day that erases all my profits and puts me in the red).

I can no longer afford to trade without accountability so starting today I am going to post every trade to this journal.



NQ - 1102018 - Gap Down & weak bull channel day.png


Trade 1: Bought small position at the bar 1 close. After overnight gap down on China news, I figured bar 1 strength was a sign that traders would buy this gap down like they have bought every other dip for months.

Result: stopped out 1-tick below bar 1 low.

Trade 2: Bought larger position as bar 8 as it was forming. After the bar 6 strength, I considered bar 8 to be a decent 2nd reversal attempt back up from below the Globex low. Reasonable to assume the market may try to close the gap between the bar 4 low and bar 6 high, which it did.

Result: took profit at 1X risk during bar 10, using bar 8 low as my stop, could have made 2X risk if I held until bar 19 instead, but would have had to sit through a pullback.

Trade 3: Bought bar 13 as it was forming expecting bull flag and bull trend continuation eventually. Placed my stop below bar 8 again. Scaled in lower and doubled my position as 17 was forming, expecting that the pullback would be bought and I could get out breakeven on my first position and maybe with a small profit on my second.

Result: Got out at the bar 18 close. My computer crashed so I was managing the trade from my phone. In retrospect I should have seen the bar 18 strength and continued to hold expecting more. Happy to make a profit regardless.

Trade 4: Bought the bar 61 close. Deep pullback, with nothing but red during the prior 5 bars, so it was a risky entry. Once I saw some strength at the 20EMA VWAP I thought we may get a bounce back up. Once again I put my stop below bar 8.

Result: Sat through a small drawdown during bars 60-63. Got out with a profit as bar 65 was forming. Could have had more if I just exited on the close of the day, and probably should have because my risk on the trade was twice as large as the profit I grabbed, which is mathematically bad over the longrun.

Profitable on 3 of 4 trades today, which was great - but it is meaningless if I'm not going to be disciplined every single trading day.

Horizontal lines:
Red - yest low
Green - yest high
Black - yest close
Yellow - today's open

EMAs:
Purple - 20 period VWAP
Solid Black - 20
Dashed Grey - 60
Dashed black - 240

Happy new year.
 
I have reading your journal looking to possibly suggest a thought or idea on your dilemma,
but I didn't want to say anything until you showed exactly what you were trading and the methodology you were using to trade it.
I get the just of it from your above post, but you left one bit of information out leaving me one
question to ask you,
"are you buying the actual TQQQ ETF stock? or are you buying the TQQQ options?
 
Here is my advice, no sugar coating, take it from someone that has seen very dark days and the light as well.

Trading is dangerous, get your discipline together or quit this nonsense.

Simple as that, better to recognize that you suck at this early rather than late, so test yourself and dont ever lie to yourself.

I've known people that took their lifes due to trading/discipline issues, you sure you wanna go down this route with discipline problems?

You decide if you are truly made for this line of work, most arent.
 
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