Successful Trading and Compounding - On Steroids

[gmst]

Finally, I haven't done any weekly posting for last 3 weeks. My account went below 2k and I can't trade anymore. I will come back to post again in this same journal once I have managed to build a bankroll (this time I will start with a minimum of 8k in my account). I am either going to take a job or going to raise some money, so that I can trade again.

I was at 2400 after last posting - I got stopped on ES trades couple of times losing 150$ each time, that took it to 2100, and then I had a 'very small' long AUD position but just couldn't get out of it in time before the AUD 50 bps rate cut decision. That forced me to stop trading after a 20% DD (<2000 equity from 2500 starting balance). After the rate cut, I wanted to be short AUD for a parity target, but just couldn't trade because of 2k minimum equity. As a result, I missed all this volatility in these last 3 weeks - even more painful. I could have easily doubled my account these last 3 weeks. Anyways, whats done is done.

 

[Wide Tailz]

Kudos for respecting your risk threshold.

 

[HurricaneUS]

Quote from gmst:

Finally, I haven't done any weekly posting for last 3 weeks. My account went below 2k and I can't trade anymore. I will come back to post again in this same journal once I have managed to build a bankroll (this time I will start with a minimum of 8k in my account). I am either going to take a job or going to raise some money, so that I can trade again.

I was at 2400 after last posting - I got stopped on ES trades couple of times losing 150$ each time, that took it to 2100, and then I had a 'very small' long AUD position but just couldn't get out of it in time before the AUD 50 bps rate cut decision. That forced me to stop trading after a 20% DD (<2000 equity from 2500 starting balance). After the rate cut, I wanted to be short AUD for a parity target, but just couldn't trade because of 2k minimum equity. As a result, I missed all this volatility in these last 3 weeks - even more painful. I could have easily doubled my account these last 3 weeks. Anyways, whats done is done.

Let's realistically examine what went wrong here. From my perspective and experience (because I have gone through it before):


Cons:
1. You were severely undercapitalised.

2. You did not have an edge. You thought you had an edge but what you actually had was fools gold. This is what gets 95% of traders - inability to adequately evaluate whether you have a true edge or fools gold.

3. You were and still are unrealistic about your goals. Instead of trying to best Richard Dennis, just try to make more money than the fry guy at McDonald's for a start.


Pros:
1. You are very persistent and determined.

 

[bornwarrior]

Quote from gmst:

Finally, I haven't done any weekly posting for last 3 weeks. My account went below 2k and I can't trade anymore. I will come back to post again in this same journal once I have managed to build a bankroll (this time I will start with a minimum of 8k in my account). I am either going to take a job or going to raise some money, so that I can trade again.

The young man is hoping to raise money after 2 unsuccessful attempts.

Quite unrealistic. He needs a reality check .

 

[gmst]

Quote from bornwarrior:

The young man is hoping to raise money after 2 unsuccessful attempts.

Quite unrealistic. He needs a reality check .

Talking about money from friends - like 10k-20k or so. Not millions!

 

[flipside21]

Quote from gmst:

Talking about money from friends - like 10k-20k or so. Not millions!

If you were an objective observer looking at your own trading track record, would you be willing to put 10-20k to fund your trading account?

Be careful mixing friends with money. If history repeats and you blow up the accounts, will you destroy your friendships?

 

[gmst]

Quote from flipside21:

If you were an objective observer looking at your own trading track record, would you be willing to put 10-20k to fund your trading account?

Be careful mixing friends with money. If history repeats and you blow up the accounts, will you destroy your friendships?

I wrote about this in one of my last posts in the previous journal. I haven't provided stats for my fx only performance on ET; it has been pretty solid. So, yes looking at fx only performance, I would fund the account as a third party objective observer. Without seeing FX only performance, I won't fund.

 

[logic_man]

Quote from gmst:

I wrote about this in one of my last posts in the previous journal. I haven't provided stats for my fx only performance on ET; it has been pretty solid. So, yes looking at fx only performance, I would fund the account as a third party objective observer. Without seeing FX only performance, I won't fund.

I have a difficult time understanding why you trade anything other than FX.

Unless you don't get a sufficient number of signals in your profitable market, I don't think it makes sense to trade another market. Certainly not with real money at first.

 

[gmst]

Quote from logic_man:

I have a difficult time understanding why you trade anything other than FX.

Unless you don't get a sufficient number of signals in your profitable market, I don't think it makes sense to trade another market. Certainly not with real money at first.

There are a lot of things that human beings agree on in principle, but when it comes to execution, they screw up. They need to learn from their own experiences. Its fundamental human nature.

Think about the behavior of a 3yr old kid. He is told not to touch the stove as it is hot, but you leave him alone and chances are out of curiosity he will go and touch it. In this case, 'curiosity' was the fundamental reason for his behavior. Once he burns himself, he won't go and touch it again even if you promise him toys.

Similar is the case for grownups. It has taken me 5 months of thinking through the fundamental reason that prompted me to keep trading ES when I was losing money on it from October 2011 onwards ? Well the reason (as I understand it now) is twofolds:

1. I was profitable in FX and I was finding it hard to imagine how I could be unprofitable in ES. It took a lot of cash burning before it sink in me that every instrument has different liquidity dynamics and different price behaviors. ES is a combination of 500 stocks whereas Euro is a single underlying and they simply trade differently. Because of these differences, some strategies that are profitable in Euro are not profitable in ES and vice versa. Having learnt this lesson now, this thing has sinken in deep inside me that I need to do lots of research before I start trading any new instrument.

2. Another big reason was complete confidence in myself that I will eventually become profitable trading ES. This complete confidence has come from a life long series of positive experiences in which I have manged to overcome formidable challenges. Am happy to report that finally my confidence has been proven correct and I am profitable trading ES. I don't make stellar amounts of points but I can consistently make on average more than 1 point a day trading ES, which is very good imo for someone who was on average losing 2 points a day till 4 months back.

 

[gmst]

I AM BACK after a break of 5 months! There will be periodic withdrawals.

Starting Capital 26,000 USD. Profits for this week 1000. Ending capital 27,000 USD. Will post detailed stats from next week. I have become very busy over the last few months, so I will sparingly answer questions. Please don't be offended. Will do weekly summary of results.