Need to eliminate the big losses

[Buy1Sell2]

it's all semantics, many small losses could be the same as a big loss

FALSE. --Prudent Risk Management gives you positive expectancy.

 

[FreakofNature]

FALSE. --Prudent Risk Management gives you positive expectancy.

Close minded brute lol

 

[_eug_]

If you are having big losses you should be paper trading.
Putting "skin in the game" does not make a bad strategy or poor trading behavior better; all you're going to do is get poorer.

I dont know if paper trading can help with the psycology of taking loses. I believe this is learned through taking some nasty loses and learning your lesson the hard way. Or maybe through mental work like visualization.

 

[777]

Thank you all for your thoughtful replies. Starting tomorrow I am going to size my positions relative to defined risk established before I put on a trade, risk much smaller amounts, and keep my stops in the market no matter what.

Even if I get stopped on five trades in a row, I will still lose significantly less than what I lost today. At this point my focus is not about making money, I just want to get into good habits and prevent another one of the soul-crushing losses that I took today. The feeling is awful.

I've heard it takes 100 days to get new habits ingrained to the point where they come naturally, so I am going to need to keep this updated daily for a while. Thanks again.

Honest sharing.

Please keep us posted.

 

[maxinger]

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)

seems like your problem is mainly due to mind managment.

we cannot earn money if we are

angry, nervous, vengeful, frustrated,
wishy washy, reckless, fickle minded,
ill disciplined, unable to stay focus.

put simply, if the mind is not calm and alert, very difficult to earn money
even if you have very good trade plan with all the vital information documented in stone/concrete.

so controling one's mind very important.
There are quite a few articles about mind management in ET.

 

[jinxu]

You don't necessarily need to eliminate the big losses. For instance, my winners are small, my losses are big, but I have positive expectancy.

What you people need is an edge, instead of generalizing how to skin the cat, because there are many ways to do it.

The formula to "Positive Expectancy" involves (Win Ratio) X (Reward) X (Risk).
So you can win with small losses and big losses as long as your win rate is high enough.
Therefore I don't doubt your system is possible. I could do the same but generally I prefer the opposite. There are multiple ways to skin a cat and make money.

Problem is (Frequency) becomes the deciding factor.

 

[FX xtc 2]

If you took 100 people off the street, I believe I would be in the lower-half in the terms of self-discipline

Then you're going to suck at being a discretionary trader . Go mechanical .. automated or not .

and treat every trade like a woman .. always keep an eye on the exit door.

 

[Scataphagos]

Make a new rule, every time you want to not do the rules, hedge the position. If you had hedged Friday, you not had this Huge loss today, you can continue to do dumb till you either get hypnosis or have wife/gf use electric devise on your Rocky Mountain oysters, one time of that might do the trick. I tried the signs on the computer, after awhile you don't even see them. Years worth of hypnosis did the trick for me. There are two of me, smart me designs systems, 2nd me is dumb as a rock pushing buttons. You letting them get tangled up and you lose, no changing the rules when market is live.

A question that's been asked many times on ET... "How do you make yourself do the right thing"? Relates to discipline. Many/most times traders are uneasy and have difficulty pulling the trigger (including stops)... fear of being wrong, fear of loss, uncertainty of outcome, et al.

I don't have the answer.

 

[Frederick Foresight]

let me know when your avoiding big losers doesn't also cost you the big winners.

no rush

when you figure out how to only have big winners and no big losers, you let me know.

i can wait

Those are two different statements, neither of which is particularly inspired for its own reason. Collect your thoughts and try again.

No rush; I can wait.

 

[TreeFrogTrader]

If you do it wrong enough, big enough... you could lose 20 YEARS profit on one bad patch of decisions.

I think that's called a divorce.