Quote from murrica:
Not sure if this belongs in psychology. If not, my apologies.
After reviewing my trading records from this year, and after thinking about my 'bad beats' this past year, I was hoping to get some input from some of the more experienced traders on the forum.
The two trades that I am hoping to discuss here were attempts at shorting the 30 Year futures in the spring (around 148-149+), and shorting the Nikkei futures around the 16,000 top. Both of these moves were well anticipated in advance, especially the 30 year (what a beautiful topping pattern around 149 if you just sat patiently for the pattern to complete!)
What I did not anticipate was the exact price at which the top would occur. Obviously, if one were to have a crystal ball, they could just go 'all in' using 94% of their capital or what have you, and retire relatively wealthy inside of 18 months. But, through my own follies in times past, I have learned to be prudent with regard to position sizing and stop loss sizing. Even if my trading style sucks currently, at least I have been able to preserve my risk capital (imo, a much more important consideration).
Missing valuable opportunities that were well-anticipated can be demoralizing. And, to me, missing these is not much different than taking a loss.. perhaps even worse in a way (especially when the reward is large relative to risk).
In the case of these two trades from above, I was attempting to get in at or near the turn, which may be the fundamental issue. This is clearly related to the need to be 'perfect', which is not necessarily congruent with being a highly profitable swing trader. What happened, however, was that I got stopped out on both attempts to get in on the trade, and was quite unwilling to hop aboard once it was clear that the price structure broke to the downside.
Especially in the case of the Nikkei, the way it was behaving that day it topped at 16,000 was so wild and volatile, almost purely to the downside, that it was ostensibly a very high probability short trade, even as the price was dropping like a rock (post blow-off). I wanted to hop aboard, knowing that it was a high probability trade, but various factors stopped me:
1) I had already lost a bit more than a typical trade on the losing attempts to 'predict' the turn.
2) The volatility seemed scary once the turn was in progress. "What if the thing does some huge upward spike and puts me heavily under water?" I don't have millions under management (small retail piker) and thus cannot scale into a longer term position. In other words, my account size requires achieving 'separation' into a winning position relative to entry.
3) Getting in at worse prices seemed like a 'loss', even though the point was to make money. This might, on the surface, seem to be related to some psychological need to be 'right', and this might be true in part, but it seems to be related also to a fear of getting in at the lower price only to be shaken out as a weak hand.
Some thoughts to fix this:
1) Stop trying to predict the turn. While there are limited circumstances where getting in at 'resistance' makes sense, particularly with regard to risk:reward, it seems better to think of looking for higher probability scenarios (more likely for trade to work).
2) Do better analysis. My charting analysis on the 30 year was crappy and in hindsight the 149`xx top was very clear and clean. This was one of this limited circumstances if one were patient enough to wait for that super clean sniper shot and would have lead to 1:100+++ risk:reward. While it would be nice to discuss the merits and follies of hindsight analysis, the fact is that researching backwards and/or in real time is all we have as technicians. So in that sense, I would ask to stay on topic.
Anyway, I can embellish more about this topic, but just wanted to get the basic ideas down first and spark some (hopefully useful) conversation on this topic. I am quite sure that this is not a problem unique to me, and hopefully others can benefit. I notice that there are a number of troops on the boards who are clearly not overthinking things, are not looking to short the US indexes, yet. This makes way too much sense to me, and this perhaps goes back to one of the core issues of needing to get in at the extremes and being unwilling to hop aboard mid-trend on pullbacks or breaks from consolidation.
As a general consideration, I seem unable/unwilling to get into a trend that is in progress. This is absolutely a requirement if you are not sitting on standby waiting for the exact break or turn.. so maybe the solution to this dilemma is simple?
All on-topic and constructive input is greatly appreciated. Thanks.
