If you cut large losses, you also cut winners (some small, some very large).
Trading is a zero sum game.
Need to eliminate the big losses
- Thread starter SteveM
- Start date
Trading is a zero sum game.
Friday 2/23/2018:
Took 3 trades today, made money on 2 of them. Finished the day in the green.
Trade 1: Long 300 TQQQ @ $163.89 as bar3 was breaking above bar3 and scaled into another 400 TQQQ @ 162.59 as bar4 was closing, hoping that this was just a bear trap (hoping for failed bear BO below the bar1 low and that we would reverse back up into the bull trend).
Result: Took profit on 400 shares @ $163.94 near the bar19 2nd leg high.....took profit on final 300 shares @ $164.35 at YH during bar22 (notice other traders took profits here as well).
I'm happy with the outcome of this trade, but not happy with how I went about structuring it.
Firstly, after an overnight gap up, and a bad bull followthrough on bar2, I should have expected that a bull breakout on bar3 would not get very far. I think part of my problem is that I have become so conditioned over recent months that buying any tiny dip works, that I am having trouble transitioning into this "new" market structure, where there is 2-sided trading and not everything is a low-volatility long entry. End rant.
I scaled into my 2nd position near the bar4 low, and did not take profits on the nice bar5 bull reversal and therefore had to sit through a drawdown to the confluence of EMAs at bar12 before the market reversed up in my direction.
Another problem that I continue to have is exiting winning trades too soon. I must find a way to keep at least a small position open to ride trends to their conclusion. TQQQ closed at $169.29...I exited my entire 700 share long position at $164.35 - ouch. Once again, not to make excuses, but for the last 18 months, the vast majority of days were not these wonderful long intraday bull trends. I need to adjust to the market I am in and let some of these winners ride longer to pay for my losers.
Best TQQQ trades in retrospect:
Buying 1-tick above bar5 - although this would have been a losing trade I think it is a reasonable long entry, hoping for a swing up after the stops were run below bar1.
Buying 1-tick above bar13 or bar14 - 3rd reversal/wedge entry, right at the confluence of 3 EMAs, hoping for to make 1X risk or more.
Buying 1-tick below the bar16 low - expect reversal to fail/second leg up.
Buying 1-tick above bar17 high.
Buying 1-tick above bar23 high - expecting that short attempts coming off the YH
touch would fail and stops would get run above the bar22 high
The rest of the day is tough. I could say now in retrospect that there are a bunch of wonderful long entries, but in real-time, the buying looked climactic and dangerous to buy so high (which is probably exactly why the market ran so much higher).
Trade 2: Long 1500 SVXY @ $12.87 as bar58 was forming. H2 buy at the 20EMA.
Result: Took profit @ $12.97 as bar63 was forming. Once again, in retrospect I could have made a lot more profit, but I think it was reasonable to take profits where I did (3rd leg up) and would probably take profits in the same place if I had the same trade tomorrow. The last 90 minutes of trading on Friday were atypical, and I am trying to make consistent money, which I feel means that it would be better to take profits in locations that are appropriate 90
% of the time, rather than not take profits there and bet on the 10% event occuring. Yes, you make a windfall, but it is lower probability.
Trade 3: Bought 630 SQQQ (short Nasdaq) small position during bar68 thinking that the buying looked climactic.
Result: Exited the trade at breakeven during bar73. Another lesson why it doesn't pay to fade moves.
Thanks for reading.
Took 3 trades today, made money on 2 of them. Finished the day in the green.
Trade 1: Long 300 TQQQ @ $163.89 as bar3 was breaking above bar3 and scaled into another 400 TQQQ @ 162.59 as bar4 was closing, hoping that this was just a bear trap (hoping for failed bear BO below the bar1 low and that we would reverse back up into the bull trend).
Result: Took profit on 400 shares @ $163.94 near the bar19 2nd leg high.....took profit on final 300 shares @ $164.35 at YH during bar22 (notice other traders took profits here as well).
I'm happy with the outcome of this trade, but not happy with how I went about structuring it.
Firstly, after an overnight gap up, and a bad bull followthrough on bar2, I should have expected that a bull breakout on bar3 would not get very far. I think part of my problem is that I have become so conditioned over recent months that buying any tiny dip works, that I am having trouble transitioning into this "new" market structure, where there is 2-sided trading and not everything is a low-volatility long entry. End rant.
I scaled into my 2nd position near the bar4 low, and did not take profits on the nice bar5 bull reversal and therefore had to sit through a drawdown to the confluence of EMAs at bar12 before the market reversed up in my direction.
Another problem that I continue to have is exiting winning trades too soon. I must find a way to keep at least a small position open to ride trends to their conclusion. TQQQ closed at $169.29...I exited my entire 700 share long position at $164.35 - ouch. Once again, not to make excuses, but for the last 18 months, the vast majority of days were not these wonderful long intraday bull trends. I need to adjust to the market I am in and let some of these winners ride longer to pay for my losers.
Best TQQQ trades in retrospect:
Buying 1-tick above bar5 - although this would have been a losing trade I think it is a reasonable long entry, hoping for a swing up after the stops were run below bar1.
Buying 1-tick above bar13 or bar14 - 3rd reversal/wedge entry, right at the confluence of 3 EMAs, hoping for to make 1X risk or more.
Buying 1-tick below the bar16 low - expect reversal to fail/second leg up.
Buying 1-tick above bar17 high.
Buying 1-tick above bar23 high - expecting that short attempts coming off the YH
touch would fail and stops would get run above the bar22 high
The rest of the day is tough. I could say now in retrospect that there are a bunch of wonderful long entries, but in real-time, the buying looked climactic and dangerous to buy so high (which is probably exactly why the market ran so much higher).
Trade 2: Long 1500 SVXY @ $12.87 as bar58 was forming. H2 buy at the 20EMA.
Result: Took profit @ $12.97 as bar63 was forming. Once again, in retrospect I could have made a lot more profit, but I think it was reasonable to take profits where I did (3rd leg up) and would probably take profits in the same place if I had the same trade tomorrow. The last 90 minutes of trading on Friday were atypical, and I am trying to make consistent money, which I feel means that it would be better to take profits in locations that are appropriate 90
% of the time, rather than not take profits there and bet on the 10% event occuring. Yes, you make a windfall, but it is lower probability.
Trade 3: Bought 630 SQQQ (short Nasdaq) small position during bar68 thinking that the buying looked climactic.
Result: Exited the trade at breakeven during bar73. Another lesson why it doesn't pay to fade moves.
Thanks for reading.
Monday 2/26/2018:
Took 2 trades today, 1 of them is still open. Finished the day in the green. I have a tendency of doing stupid things during the first 30 minutes after the Monday open, so I tried to avoid impulse trading today.
Trade 1: Long 150 TQQQ @ $172.79 as bar19 was forming. I was hesitant to take this long entry because we gapped so high above the bull channel from Friday afternoon. Also, we had an unfilled overnight bull gap from Thurs to Friday, followed by a strong bull trend day on Friday and had another overnight gap up from Friday to Monday. To me this seemed overly strong and I was hesitant to buy too high early in the day.
With that said, we had a 3rd reversal wedge buy at bar14 and at the 20EMA, which I thought about taking, but did not in case it was a trap - however, once I saw bar19 getting another bullish bounce off the 20EMA, I thought it was right to get long, even though we were still above the bull channel from Friday.
Result: took profit on all 150 shares @ $173.85 as bar25 was forming. For the 3rd consecutive day in a row, I took profits only to watch a bull trend march higher without me participating. One thing that made me nervous about staying in the trade too long was that the buyers who got long 1-tick above bar14, were looking at a 2x profit at $174.17 (see measured move targets on chart) , while I was looking at a 1X profit in the same location. So in my mind, at the time it was reasonable to take my 1x profits with the thought that they would likely be taking their 2X profits and unlikely to press their long bets too much after so much bullishness during the last 3 days. Well, needless to say none of those fear came to pass and the market continued to move higher and higher in a soft bull trend.
TQQQ best trades in retrospect:
Buying 1-tick above bar14 - 3rd reversal/wedge buy @ 20 EMA after testing the opening price. I didn't love this entry when I saw it real-time, but it was reasonable.
Buying 1-tick above bar19 - big bull trend bar, recaptured the VWAP, 2nd bounce off the EMA, reasonable to assume more upside coming
Buying 1-tick above bar31 - hold for 1 or 2x risk
Buying 1-tick above bar39 @ the 20EMA - hold for 1 or 2x risk
Buying 1-tick above bar51 @ the 20EMA - hold for 1 or 2x risk
Buying 1-tick above bar65 @ the 20EMA - hold for 1 or 2x risk
summary - just plenty of great bull trend entries all day long today.
I'm starting to read "Trading in the Zone" by Mark Douglas in attempt to help me with my psychological roadblocks in my trading. I also read somewhere recently that if you should write down exactly what you want in life on a piece of paper and read it aloud to yourself 3 times every single day, and supposedly over time you will actually manifest what you desire. Needless to say I've written a lot about trading on that piece of paper and am reading it to aloud regularly.
Trade 2: Bought 3 20APR2018 DIN puts @ 2.60 during the last half hour of the trading session today. This stock looks overbought to me and due for some type of pullback. Will have to wait and see how it plays out.
Result: This position is still open.
Thanks for reading.
Took 2 trades today, 1 of them is still open. Finished the day in the green. I have a tendency of doing stupid things during the first 30 minutes after the Monday open, so I tried to avoid impulse trading today.
Trade 1: Long 150 TQQQ @ $172.79 as bar19 was forming. I was hesitant to take this long entry because we gapped so high above the bull channel from Friday afternoon. Also, we had an unfilled overnight bull gap from Thurs to Friday, followed by a strong bull trend day on Friday and had another overnight gap up from Friday to Monday. To me this seemed overly strong and I was hesitant to buy too high early in the day.
With that said, we had a 3rd reversal wedge buy at bar14 and at the 20EMA, which I thought about taking, but did not in case it was a trap - however, once I saw bar19 getting another bullish bounce off the 20EMA, I thought it was right to get long, even though we were still above the bull channel from Friday.
Result: took profit on all 150 shares @ $173.85 as bar25 was forming. For the 3rd consecutive day in a row, I took profits only to watch a bull trend march higher without me participating. One thing that made me nervous about staying in the trade too long was that the buyers who got long 1-tick above bar14, were looking at a 2x profit at $174.17 (see measured move targets on chart) , while I was looking at a 1X profit in the same location. So in my mind, at the time it was reasonable to take my 1x profits with the thought that they would likely be taking their 2X profits and unlikely to press their long bets too much after so much bullishness during the last 3 days. Well, needless to say none of those fear came to pass and the market continued to move higher and higher in a soft bull trend.
TQQQ best trades in retrospect:
Buying 1-tick above bar14 - 3rd reversal/wedge buy @ 20 EMA after testing the opening price. I didn't love this entry when I saw it real-time, but it was reasonable.
Buying 1-tick above bar19 - big bull trend bar, recaptured the VWAP, 2nd bounce off the EMA, reasonable to assume more upside coming
Buying 1-tick above bar31 - hold for 1 or 2x risk
Buying 1-tick above bar39 @ the 20EMA - hold for 1 or 2x risk
Buying 1-tick above bar51 @ the 20EMA - hold for 1 or 2x risk
Buying 1-tick above bar65 @ the 20EMA - hold for 1 or 2x risk
summary - just plenty of great bull trend entries all day long today.
I'm starting to read "Trading in the Zone" by Mark Douglas in attempt to help me with my psychological roadblocks in my trading. I also read somewhere recently that if you should write down exactly what you want in life on a piece of paper and read it aloud to yourself 3 times every single day, and supposedly over time you will actually manifest what you desire. Needless to say I've written a lot about trading on that piece of paper and am reading it to aloud regularly.
Trade 2: Bought 3 20APR2018 DIN puts @ 2.60 during the last half hour of the trading session today. This stock looks overbought to me and due for some type of pullback. Will have to wait and see how it plays out.
Result: This position is still open.
Thanks for reading.
Lost -$3700 on Friday trying to short the DAX and then the /ES.
Which for many traders wouldn't be a big deal at all, but is for me since this value is about 12X larger than my average winning trades. Which means, that after nearly 4 years of attempting to do this full-time as my sole source of income, I am still taking the "big losses" (see title of this thread.
I guess one positive note is that if this were 2 years ago, I would not have actually swallowed the -$3700 loss, and would have "held on just a bit longer hoping for a pullback", which of course would have probably wound up being another .50% gap against me over the weekend, making my -$3700 loss become a -$5700 by Monday morning. So in that sense, I guess I am grateful that I am not being a complete moron in handling losing trades like I used to.
But the truth of the matter is, I still don't have the right psychological framework to do this consistently. Yes, I make money on most trades, but even these occasional impulse/revenge/over-sized trades just kill my results....I do the right thing for 2-3 weeks, and boom, 1 bad decision takes all those profits away.
I'm not making this post hoping for pity from others - I just need to write it out loud so I can objectively look at the truth about what I am trying to do here (make my living from trading) and my actual experience over the last 4 years.
I took a break last year and took 6 weeks renovating my sister's house (free of charge because it was falling apart). Well after 6 weeks, the house was in much better shape and I was proud of the finished product.
Well with my trading, it is the equivalent of doing all the nice work, and then on the final day of week 6, taking a hammer to the walls and ripping up all the work that I just did. Just completely illogical, destructive, and a waste of life.
And what is bothering me especially now about my trading, is that I am starting to get a bit burned out and not as motivated to update my spreadsheets, read the trading books, watch videos, backtest, and all the other work I have been doing for the last 4 years. And then it doesn't help when I realize that I could made $20,000 per Emini contract if I had simply bought that huge up day on Dec 26 and held until now. (Obviously this huge rally is a bit outlier, but you catch my drift).
If I had instead spent the last 4 years focused on other efforts, I probably could be a master cabinetmaker or highly competent sculptor by this point. Again - I am not looking for sympathy here or throwing a pity-party for myself; I am writing this so I can objectively look at the reality of what is going here and stop lying to myself. I have some psychological problem that kills my ability to become consistently profitable. Or perhaps it is a market structure issue that I do not fully appreciate. In Jack Schwager's oldest Market Wizard book, he was profiling traders who consistently put up >50% annualized returns. In the latest book he wrote, traders with 15% annualized returns were being profiled. So maybe there is reduced opportunity that I am fully not appreciating.
Anyway. It is clear that I am going to need to update this journal daily and state whether or not I adhered to some trading rules regarding how I take losses. Thanks for reading.
Which for many traders wouldn't be a big deal at all, but is for me since this value is about 12X larger than my average winning trades. Which means, that after nearly 4 years of attempting to do this full-time as my sole source of income, I am still taking the "big losses" (see title of this thread.
I guess one positive note is that if this were 2 years ago, I would not have actually swallowed the -$3700 loss, and would have "held on just a bit longer hoping for a pullback", which of course would have probably wound up being another .50% gap against me over the weekend, making my -$3700 loss become a -$5700 by Monday morning. So in that sense, I guess I am grateful that I am not being a complete moron in handling losing trades like I used to.
But the truth of the matter is, I still don't have the right psychological framework to do this consistently. Yes, I make money on most trades, but even these occasional impulse/revenge/over-sized trades just kill my results....I do the right thing for 2-3 weeks, and boom, 1 bad decision takes all those profits away.
I'm not making this post hoping for pity from others - I just need to write it out loud so I can objectively look at the truth about what I am trying to do here (make my living from trading) and my actual experience over the last 4 years.
I took a break last year and took 6 weeks renovating my sister's house (free of charge because it was falling apart). Well after 6 weeks, the house was in much better shape and I was proud of the finished product.
Well with my trading, it is the equivalent of doing all the nice work, and then on the final day of week 6, taking a hammer to the walls and ripping up all the work that I just did. Just completely illogical, destructive, and a waste of life.
And what is bothering me especially now about my trading, is that I am starting to get a bit burned out and not as motivated to update my spreadsheets, read the trading books, watch videos, backtest, and all the other work I have been doing for the last 4 years. And then it doesn't help when I realize that I could made $20,000 per Emini contract if I had simply bought that huge up day on Dec 26 and held until now. (Obviously this huge rally is a bit outlier, but you catch my drift).
If I had instead spent the last 4 years focused on other efforts, I probably could be a master cabinetmaker or highly competent sculptor by this point. Again - I am not looking for sympathy here or throwing a pity-party for myself; I am writing this so I can objectively look at the reality of what is going here and stop lying to myself. I have some psychological problem that kills my ability to become consistently profitable. Or perhaps it is a market structure issue that I do not fully appreciate. In Jack Schwager's oldest Market Wizard book, he was profiling traders who consistently put up >50% annualized returns. In the latest book he wrote, traders with 15% annualized returns were being profiled. So maybe there is reduced opportunity that I am fully not appreciating.
Anyway. It is clear that I am going to need to update this journal daily and state whether or not I adhered to some trading rules regarding how I take losses. Thanks for reading.
An honest and modest account, well done to you for opening up on these issues.
Do not give up. Your trading problems appear to come from you rather than unanticipated market events which catch everyone out. So eliminate your personal input. Avoid intra-day trading where psycho-emotional inputs are strongest. Get hold of the simplest most objective strategy you can find, make sure it incorporates pre-set entries and responses in case of price rise or fall after entry. Set up the entry and exits and size your positions so you cannot be hit with a big loss. Let the system run.
tomorton's advice is good. Beyond that, I'll note that "psych" is often used to mask holes or flaws in a trading plan. Based on just the information presented here, I suspect that you routinely average down, hold through large MAEs significantly exceeding your average winner, or engage in similar behaviors that guarantee occasional large losses.
As far as revising your trade plan, in my experience good trading is all about getting good entries. Some trades fail immediately, some start green and mess around a bit before failing, some start green and mess around a bit before going to your target, and some run directly to your target with little hesitation. It follows that if you're going for 50% full-target winners you need a good 75%+ of trades to show clear momentum in your direction very soon after entry, relative to the TF being traded. If this is not the case for you then I'd take a hard look at your setups or entry tactics, and possibly consider a wholesale reconstruction of your trade plan.
Ever consider hypnosis? Early on was going once a month and many years later I go 3-4 times a year to iron out discipline in overall life. Automation, has allowed me not to have those stresses any more, but have other problems of life to work. But was part of turning point to become consistent.
For me entries comes last in system development, risk management comes first like should I be taking this trade at all based on to the left of now on the chart, then identifying last few bars and volume, no volume to me means larger traders don't see any reasons of getting in. I don't want to reinvent how to trade, just want to identify quickly and tag along.
Have you ever considered just getting in on the 20ema? Risk less, price either holds or it don't and take smaller loss, I can't stand breakouts, risk expands, so many traders take this momentum approach and why larger traders can't wait for so many to pile on then failures occur. Trendlines allows for lower entry as well, price holds or it doesn't. There is nothing magical on entries of one being better than another, they work cause others are doing as well, the more an entry scares the crap out of you, most likely they will be profitable. But always back test to see how patterns react, almost all stocks have unique personalities.
Good luck
For me entries comes last in system development, risk management comes first like should I be taking this trade at all based on to the left of now on the chart, then identifying last few bars and volume, no volume to me means larger traders don't see any reasons of getting in. I don't want to reinvent how to trade, just want to identify quickly and tag along.
Have you ever considered just getting in on the 20ema? Risk less, price either holds or it don't and take smaller loss, I can't stand breakouts, risk expands, so many traders take this momentum approach and why larger traders can't wait for so many to pile on then failures occur. Trendlines allows for lower entry as well, price holds or it doesn't. There is nothing magical on entries of one being better than another, they work cause others are doing as well, the more an entry scares the crap out of you, most likely they will be profitable. But always back test to see how patterns react, almost all stocks have unique personalities.
Good luck
IMO, a small loss should be expected. A big loss should not.
If it's a big loss - you probably did not follow your rules or moved your stop? Or was it a series of losses? I always trade with a hard stop. My current maximum stop on ES is 3,0 points and is placed automatically at 3,0 points from my entry price by my trading software. I usually use a smaller stop and don't wait for my stop to get hit if I see that I was wrong.
I would recommend something similar. Maybe your signals are subjective, also? Try to avoid interpretation and real time analysis. When day trading you should simply be executing your research and resulting signals/methodology. Leave the thinking to after hours.
About the other stuff and the dark thoughts. Well, I can certainly relate. It's very tough to be putting in huge amounts of work, rejecting other career options and in the end not have much to show for it.
If it's a big loss - you probably did not follow your rules or moved your stop? Or was it a series of losses? I always trade with a hard stop. My current maximum stop on ES is 3,0 points and is placed automatically at 3,0 points from my entry price by my trading software. I usually use a smaller stop and don't wait for my stop to get hit if I see that I was wrong.
I would recommend something similar. Maybe your signals are subjective, also? Try to avoid interpretation and real time analysis. When day trading you should simply be executing your research and resulting signals/methodology. Leave the thinking to after hours.
About the other stuff and the dark thoughts. Well, I can certainly relate. It's very tough to be putting in huge amounts of work, rejecting other career options and in the end not have much to show for it.