What's Wrong with Me?

Quote from Gringinho:

If you are trading from home and have a swimming pool ready, jump in - do a few laps and get up again - refreshed. Or do some situps/pushups if you like physical training, it get's your adrenaline up.
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That's an excellent advice too :p A swimming pool can reduce the volatility in one'e equity curve :D
 
Quote from caplan8293:

Let's say I buy a stock at $11, which my analysis shows should go to $13 in about two weeks. Instead, it drops down to $9 about two days later.

I am disappointed and want to get out, but do not want to take a $2 loss, so I hold on to it, hoping for a rebound. A week later, it goes back up to $11, which would allow me to exit flat. Do I sell it? NO. Instead, I feel that if I hold on to it a little longer, it will still go up to $13.

So what happens? I hold on to it and it drops back down to $9. The cycle starts over.

What is wrong with me?
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Actually, there is absolutely nothing wrong with you. This is just human nature at work. It is human nature to want to hold your losers all the way down (the slope of hope), as well as panicing and selling winners too soon. Most people buy high, and sell lower. The masses get fleeced every time (in the long run anyway).

You will hear people say that "trading is the hardest thing I ever tried to do", etc. This is because trading is contrarian in nature, it goes against popular ways to think. A very few people have a natural ability, most do not. Few can seperate emotions from the numbers and charts. Real traders with years of experience do not rely on HOPE, FEAR, or GREED, or for that matter WOULDA, SHOULDA, COULDA.

You have to learn how to trade and retrain your natural thinking. Don't feel bad, most everyone has to learn this. I think the best thing is take the time (months, years, etc) to come up with a system that has a slight edge in winners over losers and with a ratio that has average winners gaining more per trade than average losing trades , and come up with a ABSOLUTE stop level (like 3%, 5%, 7%, etc) that works within your system.....and PLAY THE SYSTEM!. Stops are for a reason. If you take 20% beatings like you described for very long, you will sour on trading or go bust and never trade again. If I took several 20% beatings in a row I would be so afraid of the next trade I do not think I could pull the trigger. My system does absorb several 3-5% losing trades in a row though. Never forget you can lose money two or three times faster than you can make it, and it is ten times easier to lose money than make money!

Always remember, stops are for a reason. Preservation of capitol and your nut is king. Live to trade another day. If your system works, in the long run you will win. You may have several losing trades in a row, but you will know your system will be profitable for the week, or month because you papertraded and forward traded it for something like a year before commiting money to it.

Trading is not easy, if it was easy everyone here would be rich. Look around....they are not. :-)
 
Quote from caplan8293:

Let's say I buy a stock at $11, which my analysis shows should go to $13 in about two weeks. Instead, it drops down to $9 about two days later.

I am disappointed and want to get out, but do not want to take a $2 loss, so I hold on to it, hoping for a rebound. A week later, it goes back up to $11, which would allow me to exit flat. Do I sell it? NO. Instead, I feel that if I hold on to it a little longer, it will still go up to $13.

So what happens? I hold on to it and it drops back down to $9. The cycle starts over.

What is wrong with me?
More...


WHY take any losses in trading... ??! That's a crazy thing to do!

After all you didn't get into this to take losses... did you? You wanted to make money and be right all the time. NO?!

So never take a loss.. and then see what happens. THEN decide which drives you more crazy... second-guessing your discipline or missing an opportunity to "make back" that $2 you might have had to lose if you stopped out too soon. OR... finally selling at a random time when you get so impatient that anger or frustration and the like, forces you to get out.

OF COURSE... you forgot one thing many of us have forgotten in the past... you can always re-enter via a buy-stop, or buy ITM calls or sell puts etc. to participate in the same equity when it finally establishes some clear inidcation of a more probable direction!

IcE
:cool:
 
Quote from caplan8293:

Could it be possible that the market makers are pushing it way lower just to get everyone out so they can then push it back up and make a killing?

Thanks
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It is possible but only in a very thin stock. Market makers have very limited influence on a stock's activity unless it is very thin. If the stock is strong (that's the stock you want to be in) any attempt to push the stock down will be met with fresh buying and it shouldn't get very low that easy. You should perceive a decline of such magnitude in the stock price as a weakness and a warning sign and not as a deliberate manipulation. Besides you can't tell if the stock will rebound immediately (it will if it is a shakeout) except in hindsight so your only correct action is to get out first and look back later.
 
Quote from neutrino:

That's an excellent advice too :p A swimming pool can reduce the volatility in one'e equity curve :D
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:D Sure, here in Brazil a swimming pool is 2 - 3000 USD, not a big dent in most traders budgets, but e.g. in northern europe, Canada or other freezing plazes, costs could be prohibitive. A nice shower is just as refreshing sometimes. If you're lucky - then you already bought a house with a nice swimming pool.

The point is forcing body and mind to get a grip and control one's actions with reason and strategies, not emotions only. Nothing wrong with intuition per se, but rapid changes between despair and hopeful sunshine emotions is not healthy in the long run. Flatten it out with a beer, it's better than a valium ... :)
 
This thread is great, there is some very good advice here.

Someone should make a 365-day calendar with some of this stuff.

Thanks for the responses.
 
They do - its called the stock traders almanac by yale hirsch

I have no interest in the company, great stats and comments and things like expiration(triple witch) and other great gems concerning the market - everyday.
 
January: Learning To Trade! Gonna Make a Million!

February: Got a email from Wingit Trading Systems, Their system wins 89% of the time, Million$ Here I come!

March: Finally Took the plunge and subscribed to Wingit Wizard Trading System, Will just paper trade for a while...Will Pack in Day Job Soon.

April: Did some real trades! 5 Losers average loss $250 4 Winers Average win $35 (could have been bigger but Wanted to Cut and Run!)

May: Dumped Wingit Trading Systems, Found Holy Grail Trading setup! Can't understand why no one's latched onto this already?

June: Holy Grail Method prefers Trending Market.. Will work well when things get Trendy! (Sent off for Swimming Pool Brochure and Lexus Catalouge)

July: Looking at changing over to Currencies? Been using Demo Platform and made 150% in one week while I was away on holiday!

August: Made a Cashflow forecast. If I can just make $750 a week will pack in Work to concentrate on Trading.

September: Went to large on a trade after getting a tip from Top Market Guru. Lost half trading capital now. Will do a search on google for Top Trading Prediction Software, Heard a lot about neural nets...

October: Wow this Neural Net FibGan Optomiser is unbelievable. Got 4 CDs with over 12 hours tuition. Will be making Mega$ soon when I get used to it.

November: Hope to pack in work soon. Neural Net showing 98% winners on paper!

December: Been working overtime at work because boss saidI'm not concentrating on Job. Can't wait to see his face when i turn up to work in my Lexus and tell him where to put job!
 
Easy:

Risk of ruin = 1-P[K]=1 - {1 - (q/p)^K0}/{1 - (q/p)^K}.
p is the probability of winning 1$ at each bet and q = (1-p) the probability of losing 1$ at each bet, K0 is your initial Capital and K the fortune you would like to reach.

Since you said
>Let's say I buy a stock at $11, which my analysis shows should >go to $13 in about two weeks. Instead, it drops down to $9 >about two days later.
the formula above applied just use K0/2 instead since it is 2$

And Since you said that "The cycle starts over" I suppose it means over and over again then q/p is even < 1/2 that is to say you don't even have a "fair game", a casino could be even more fair than you ... with yourself :D

Prob faqs work in progress interrupted at the moment by other tasks on my site :p
http://www.econometric-wave.com/faqs/probability/home.html.html#Q_what_is_the_probability_of_ruin

Quote from caplan8293:

Let's say I buy a stock at $11, which my analysis shows should go to $13 in about two weeks. Instead, it drops down to $9 about two days later.

I am disappointed and want to get out, but do not want to take a $2 loss, so I hold on to it, hoping for a rebound. A week later, it goes back up to $11, which would allow me to exit flat. Do I sell it? NO. Instead, I feel that if I hold on to it a little longer, it will still go up to $13.

So what happens? I hold on to it and it drops back down to $9. The cycle starts over.

What is wrong with me?
More...
 
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