surviving the first weeks

[pterodacytl]

Hi,

I read a little of someone’s psychological day trading journal here, and I thought it was a good idea, so I’m going to start one of my own.

I’m completely new to day trading, only started using the simulator late November last year, and have started using real money (beginning of the year).

I’ve lost almost 1000 so far! Out of an account that started with 2450.

A few things I’m thinking about:

You need to look back at your trades and think about the ideal. What is the ideal? Is the ideal predictable? How much uncertainty remains when you lay a bet on the winning side (buyers or sellers) — such as, when you buy at the bottom of a pullback (which can move either way). Because I needed more certainty, I would wait for the very beginning of a strong green candlestick before jumping into a trade but would end up on the weak end of further consolidation, too often getting stopped out of trades that would have worked fine otherwise. What is the ideal entry point? Where in the pullback is an ideal entry? Sometimes, going long, there would be large orders in the Level 2 Ask. I would wait until the orders would be filled -- but there could be a massive red candle once they are. So perhaps when the price returns to that same level at the Level 2 resistance and there are no more large orders sitting at the Ask, that is a good entry point.

Day trading is severely rule bound. I’m going to stick to the 3 strikes you’re out rule.

Yesterday, I lost 400, with an account balance of 1700. That’s 23.5% of my account.

Keeping strictly to a 2% risk tolerance per trade and 3 strikes rule, I would have lost only 6% of my account — i.e., 102.

PT

 

[pterodacytl]

How I'm managing risk on Tuesday. Using only 800 to trade, with a 1340 account balance.

2% maximum risk per trade
1340*.02=26.8

 

[ET180]

How do you know your strategy is profitable? Ideally, this can be determined through backtesting. But what's your edge?

 

[pterodacytl]

How do you know your strategy is profitable?

To answer that question, I think I’ll need to retroactively apply the “3 strikes rule” to my first days of trading (9 days altogether), as well as another rule I’ll probably stick to: 1 good trade a day.

Some days were profitable and others could have been if I followed a 1 good trade a day rule.

But what's your edge?

Maybe I’ll know what my edge is if I go back to the winning trades. They were all longs, pretty obviously moving up — insane tape action, series of long body candles, etc.

Thanks for the questions. I’m going to think some more about them.

 

[wrbtrader]

To answer that question, I think I’ll need to retroactively apply the “3 strikes rule” to my first days of trading (9 days altogether), as well as another rule I’ll probably stick to: 1 good trade a day.

Some days were profitable and others could have been if I followed a 1 good trade a day rule.



Maybe I’ll know what my edge is if I go back to the winning trades. They were all longs, pretty obviously moving up — insane tape action, series of long body candles, etc.

Thanks for the questions. I’m going to think some more about them.

Basically you're saying you have not backtested your trade strategy although you have simulated traded your strategy.

If you backtest your strategy and then compare it to your simulator results...then compare it with your real money trading results...

You'll have a more in-depth perspective about the strength / weakness of the strategy and your own flaws in applying the strategy. Thus, you'll then know if your edge is the strategy, you as a trader or both.

In fact, many traders that are not using an automated trading system and find a positive expectancy in the backtests, then trade positive in the simulator test...they have problems trading the same strategy when they traverse into real money trading.

Its a tough pill to swallow for most that their trade problems is not the strategy but its the trader. Some are not able to face that reality will then sabotage everything via making changes to a working profitable strategy in hopes that the changes will inspire them to follow the rules of the strategy.

Also, I highly recommend you use professional trade journal software that works with your broker trade execution platform. It'll provide you with all the statistics and much more that you can then use the info to help adapt your trading whenever market conditions change.

If your broker has embedded a statistic analysis with your trade execution platform...they're basic whereas professional trade journal software will give you much more advance info.

wrbtrader

 

[pterodacytl]

Man, I got a lot of homework to do! Maybe I'll have to skip trading for the coming week, at least, just to do all that analysis. I'll likely be back with some insights on what I found. Thanks!

 

[smallfil]

Hi,

I read a little of someone’s psychological day trading journal here, and I thought it was a good idea, so I’m going to start one of my own.

I’m completely new to day trading, only started using the simulator late November last year, and have started using real money (beginning of the year).

I’ve lost almost 1000 so far! Out of an account that started with 2450.

A few things I’m thinking about:

You need to look back at your trades and think about the ideal. What is the ideal? Is the ideal predictable? How much uncertainty remains when you lay a bet on the winning side (buyers or sellers) — such as, when you buy at the bottom of a pullback (which can move either way). Because I needed more certainty, I would wait for the very beginning of a strong green candlestick before jumping into a trade but would end up on the weak end of further consolidation, too often getting stopped out of trades that would have worked fine otherwise. What is the ideal entry point? Where in the pullback is an ideal entry? Sometimes, going long, there would be large orders in the Level 2 Ask. I would wait until the orders would be filled -- but there could be a massive red candle once they are. So perhaps when the price returns to that same level at the Level 2 resistance and there are no more large orders sitting at the Ask, that is a good entry point.

Day trading is severely rule bound. I’m going to stick to the 3 strikes you’re out rule.

Yesterday, I lost 400, with an account balance of 1700. That’s 23.5% of my account.

Keeping strictly to a 2% risk tolerance per trade and 3 strikes rule, I would have lost only 6% of my account — i.e., 102.

PT

You risk no more than 2% per trade if you hope not to blow up your account. Personally, I limit myself to 5 trades at any given time. That is 10% of your capital at risk on a worst case scenario. I also, adhere to mental stops or rigid stop losses in addition to that. Most times, you do not lose the 2% maybe, 0.5% to 1%. If your gains are multiples greater than your losses, you should do fine. Now, if you are taking 90% wins with tiny gains and one huge loss in that 10% losses then, you are in deep trouble. And if you have only $1,000 capital, 2% would only be $20 so, I would adjust it to only risking $100 or 10% of your capital with one trade position only. That will give you 10 chances before blowing out. If you use stop losses and have a trading system with an edge, you might still do nicely on just one trade at a time. First, backtest a trading system and make sure you have an edge before risking one thin dime.

 

[Trade Theory]

Something nice to know is PDT rule doesn't apply to futures. Micro futures are 1/10 the size of normal contracts and they make day trading futures in a small account possible. If you're gonna stick to stocks, keep your allocation very low. Trade with a broker with no commissions and practice with much smaller position sizes than you're doing right now until your profitable.

 

[schizo]

You need to look back at your trades and think about the ideal. What is the ideal? Is the ideal predictable? How much uncertainty remains when you lay a bet on the winning side (buyers or sellers) — such as, when you buy at the bottom of a pullback (which can move either way). Because I needed more certainty, I would wait for the very beginning of a strong green candlestick before jumping into a trade but would end up on the weak end of further consolidation, too often getting stopped out of trades that would have worked fine otherwise. What is the ideal entry point? Where in the pullback is an ideal entry? Sometimes, going long, there would be large orders in the Level 2 Ask. I would wait until the orders would be filled -- but there could be a massive red candle once they are. So perhaps when the price returns to that same level at the Level 2 resistance and there are no more large orders sitting at the Ask, that is a good entry point.

Why don't you post a chart indicating where you got in and perhaps we could give you a pointer or two? As they say, a picture is worth a 1000 useless words.

 

[ET180]

Also, are you sure you want to be a daytrader rather than a swing trader? Day trading comes with a higher opportunity cost. You can swing trade and still handle a full-time job.