Need to eliminate the big losses

[Risepoint1879]

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)

I'm sure you know the answer: Stick to your rules no matter what. Especially now that you know that you would be profitable if you just kept your stops.

 

[SteveM]

Day 3:

-$320

Close to daily loss limit being hit, so I am shutting it down for the day.

1) Enter and honor stops on every trade? YES
2) Lose no more than $175 on a single trade? NO (Lost -$225 on my first trade of the day)
3) Stop trading completely and come back tomorrow if I lose $350 during the day? YES
4) No social media/FinTwit during market hours - complete focus on markets? YES
5) No impulse/revenge trading? YES
5) End the day flat - no carrying day trades overnight? YES
6) Keep detailed trading journal every day? YES

Score 5/6

First trade of the day was a reasonable entry - DAX made a beeline 90 point rally in 30 minutes off the open, but then pulled back and I bought above a bull bar looking for trend resumption up. Got stopped out, and the market grinded lower for the next 2 hours erasing the prior move. Seemed unthinkable based upon the strength that it showed on the open, but alas, the market always has a way of surprising, regardless of how strongly it might be doing something at the time. Adding to the frustration, the market came within 8-points of my profit target (which is small when it comes to the DAX points), but because I set my profit target at 1X risk and didn't want to overmanage (like I did yesterday), the target was not reached and then the market reversed lower and stopped me out. Ouch.

2nd trade of the day was pretty foolish in retrospect. Fading a soft-bull trend with a wide stop during the mid-day lull hours is usually a low probability bet. I think part of the reason I took it is because it was the opposite of what I would normally do, so I figured it might work since my trading results are not going well right now. Well I was wrong about this trade as well.

Keeping my discipline, which is allowing me to lose less money. But I am still losing regardless. Just going to have to keep pressing forward and stay as objective as possible.

 

[SteveM]

Things have been going better for me over the last few days. Occasional lapses, but I am doing better at sticking to my rules. I actually reached out to Linda Raschke, and to my amazement, she got back to me with some useful advice which I am also implementing into my plan.

FYI, here is a freebie for anyone reading. The VIX made a "Connors VIX reversal" today, which (historically) has lead to short-term bearishness for the S&P 500 over the next few trading days. Obviously, nothing is guarenteed in the markets. Here is Larry's work below on the topic below: