Working on Consistent Profitability
- Thread starter tlow
- Start date
Most of us have emotional issues when trading in that we will violate our rules since we don't want to take a loss. That means sometimes holding losers longer and not letting winners reach targets.
What would suggest doing on Mon, is to wait for a valid setup that you will usually use for a trade entry.
Once in the trade, have your stops and targets set, and stop watching the market till you hear target filled or stop filled.
This should take some of the emotion out of trading. This works better for a slow market. If market is moving quickly, you may need to have a finger on the mouse to get you in or out of the trade.
Also, in the future if you are reading price action candle by candle, you may need to focus on the market after getting in the trade.
Now, after the trade is completed on Monday, you need to review the trade.
1) Trade worked out and was according to rules.
2) Trade did not work out but was according to rules.
3) Trade worked out but was not do to rules, for example, you just thought price was going to go up or down, and decided to take the trade.
4) Trade did not work out, and you also did not follow your rules.
After trade is done do not revenge trade especially if the trade went against you. Instead take a break, and decide if you want to try to trade the afternoon session. The goal should be to try in the future to have an equal amount of profit for both winning and losing days rather than over trading and having a big losing day. This may be caused by taking too many trades, so set a limit on the number of trades you are willingly to take either good or bad to get better consistent results. I know some like to take every trade that meets their setup. However, this can become difficult when you had 2 or more losing trades in a row. This is why maybe you say that today, I am going to do 2 good trades based on my setups, and no matter what happens I will wait till the next day to do similar. Then if things are working out well going forward, you can decide to increase the number of trades you are willing to take. This does not mean you have to take 4 trades in a day since its possible you only get 1 good setup, but also you don't want to avoid days where all your setups might have worked out.
For example, I took 1 trade today, and plan to take 1 trade on Monday. Todays trade for me was not based on a double confirmation setup with both indicator and price action agreeing but instead on just price action breakout. For me I am going to try to limit the trades I take in order to develop more patience to wait for a valid setup. For example, price may be going down, but instead of waiting for my indicator to confirm a reversal to the long side, I will just buy and get stopped out. Instead now, I rather wait for confirmation of the indicator and/or for price to be going in my direction rather than picking tops and bottoms since I believe going with the current trend even if its not the overall trend of the day is sometimes a higher probability trade than fighting it.
Also, I plan to watch and see if price is respecting support and resistance levels or just breaking them like they are not there. In a strong trend market, price will just break through the levels whereas in a range bound market, price will bounce off of them.
However, if price has hit the level and bounce 2 times, its possible on the 3rd or greater strike for price to break through the level and trap the range bound traders. Also, of course and I have seen this on CL and ES, you can have price break through the level just a little and then come back up into the channel trapping the break out traders.
Just remember, that there is no perfect way to trade, and sometimes you will be the one caught, but the goal is to not kill yourself in a bad trade because you don't want to be wrong.
What would suggest doing on Mon, is to wait for a valid setup that you will usually use for a trade entry.
Once in the trade, have your stops and targets set, and stop watching the market till you hear target filled or stop filled.
This should take some of the emotion out of trading. This works better for a slow market. If market is moving quickly, you may need to have a finger on the mouse to get you in or out of the trade.
Also, in the future if you are reading price action candle by candle, you may need to focus on the market after getting in the trade.
Now, after the trade is completed on Monday, you need to review the trade.
1) Trade worked out and was according to rules.
2) Trade did not work out but was according to rules.
3) Trade worked out but was not do to rules, for example, you just thought price was going to go up or down, and decided to take the trade.
4) Trade did not work out, and you also did not follow your rules.
After trade is done do not revenge trade especially if the trade went against you. Instead take a break, and decide if you want to try to trade the afternoon session. The goal should be to try in the future to have an equal amount of profit for both winning and losing days rather than over trading and having a big losing day. This may be caused by taking too many trades, so set a limit on the number of trades you are willingly to take either good or bad to get better consistent results. I know some like to take every trade that meets their setup. However, this can become difficult when you had 2 or more losing trades in a row. This is why maybe you say that today, I am going to do 2 good trades based on my setups, and no matter what happens I will wait till the next day to do similar. Then if things are working out well going forward, you can decide to increase the number of trades you are willing to take. This does not mean you have to take 4 trades in a day since its possible you only get 1 good setup, but also you don't want to avoid days where all your setups might have worked out.
For example, I took 1 trade today, and plan to take 1 trade on Monday. Todays trade for me was not based on a double confirmation setup with both indicator and price action agreeing but instead on just price action breakout. For me I am going to try to limit the trades I take in order to develop more patience to wait for a valid setup. For example, price may be going down, but instead of waiting for my indicator to confirm a reversal to the long side, I will just buy and get stopped out. Instead now, I rather wait for confirmation of the indicator and/or for price to be going in my direction rather than picking tops and bottoms since I believe going with the current trend even if its not the overall trend of the day is sometimes a higher probability trade than fighting it.
Also, I plan to watch and see if price is respecting support and resistance levels or just breaking them like they are not there. In a strong trend market, price will just break through the levels whereas in a range bound market, price will bounce off of them.
However, if price has hit the level and bounce 2 times, its possible on the 3rd or greater strike for price to break through the level and trap the range bound traders. Also, of course and I have seen this on CL and ES, you can have price break through the level just a little and then come back up into the channel trapping the break out traders.
Just remember, that there is no perfect way to trade, and sometimes you will be the one caught, but the goal is to not kill yourself in a bad trade because you don't want to be wrong.
Hey Guys,
Thanks for all the input and suggestions. I stepped away from most of the "trading stuff" over the weekend and have started spending this morning focusing on other issues. Im hoping I can maybe start a discussion to resolve some of my issues...
The first point I would like to bring up is the set-up issue. While I agree that I have a lot of work to do, I truly do not believe this will solve my issues. Hypothetically, if I were to make my winrate 100% and trade all my set-ups absolutely perfectly through backtesting and SIM, I still think my emotions would screw that up once I went live. So while I agree that tuning set-ups more, only taking my most confident ones, etc,etc, may help, I do not believe it will solve the issue over the long run. I may be naive about this, but I do not feel this is the root problem.
Which brings me to my next point....I spent some time over the weekend just "thinking" about my thinking/emotions. I basically thought to myself, if trading weren't in the equation and I was "feeling or thinking" this way, why would that be? Basically, trying to get to the root cause of my brain function/psyche and what causes those emotions.
I feel I've come to realize that my line of thinking once I become emotional is completely irrational. The reason i say this is because there is a giant disconnect between my thinking and cognitive decision making. This is what really made me realize I have major issues other than my set-ups to resolve. Which brings me to the conclusion of either I don't have the ability/skills to make rational decisions based on a certain emotion or they just haven't been developed.
Anyway, I 've been doing some reading about the actual thought process of emotionally charged cognitive decision making...just learning about the brain and thought process. (Trading is just a vehicle for those emotions). Man, Im such a geek. Anyway, in the little reading I've done, there is definitely things the brain does to prevent things from being seen clearly in heightened emotional states...and in my case, my thinking/decision making becomes completely irrational...
So what to do about this? Well, my plan for right now, is to change my routine up for a bit. First and foremost, Im going to read up on learning some exercises and skills to recognize and change my line of thinking. The next thing, is Im going to start keeping an emotional journal similar to my trade journal looking at my pretrade feelings, while the trade is in progress and then my exit...basically how I feel about the trade...Am I anxious b/c I just had a loser? Do I feel confident b/c I just had a winner but the current trades set-up isn't all that great? etc. etc. Im hoping to exactly pinpoint those feelings similar to how one would pinpoint a trade set-up...and then...change the negative thought process thru skills/exercise that I develop. (btw, Im not coming up with this on my own, this is from reading material
)
Lastly, the real problem with all of this, is that its is going to be nearly impossible to do in a SIM situation. Im going to have to put real money on the line. So while Im going to spend some time developing my routine a bit, I need to put real money at risk to figure this stuff out.
So Im going to give myself one last go. If I see mental progress then I will continue trading, if it spirals out of control and I can't regain that control, Im calling it quits.
If you guys have any input both positive and negative feel free to let me know. Thanks again to everyone who wrote me both in this journal and thru IM. Im always happy to get feedback. I know my situation isn't unique at all. In fact, I would guess its more the norm. But Im going to do my best not to be stubborn about this. I guess I can equate it to sports b/c that is what I know best...I know at suck at basketball, no matter how much I practice and develop Im still terrible so I focus my attention on other sports and then play basketball for fun. Thats the way day trading may turn out for me. But I don't want to give up until I've exhausted trying to fix/change all the possible issues.
Thanks for all the input and suggestions. I stepped away from most of the "trading stuff" over the weekend and have started spending this morning focusing on other issues. Im hoping I can maybe start a discussion to resolve some of my issues...
The first point I would like to bring up is the set-up issue. While I agree that I have a lot of work to do, I truly do not believe this will solve my issues. Hypothetically, if I were to make my winrate 100% and trade all my set-ups absolutely perfectly through backtesting and SIM, I still think my emotions would screw that up once I went live. So while I agree that tuning set-ups more, only taking my most confident ones, etc,etc, may help, I do not believe it will solve the issue over the long run. I may be naive about this, but I do not feel this is the root problem.
Which brings me to my next point....I spent some time over the weekend just "thinking" about my thinking/emotions. I basically thought to myself, if trading weren't in the equation and I was "feeling or thinking" this way, why would that be? Basically, trying to get to the root cause of my brain function/psyche and what causes those emotions.
I feel I've come to realize that my line of thinking once I become emotional is completely irrational. The reason i say this is because there is a giant disconnect between my thinking and cognitive decision making. This is what really made me realize I have major issues other than my set-ups to resolve. Which brings me to the conclusion of either I don't have the ability/skills to make rational decisions based on a certain emotion or they just haven't been developed.
Anyway, I 've been doing some reading about the actual thought process of emotionally charged cognitive decision making...just learning about the brain and thought process. (Trading is just a vehicle for those emotions). Man, Im such a geek. Anyway, in the little reading I've done, there is definitely things the brain does to prevent things from being seen clearly in heightened emotional states...and in my case, my thinking/decision making becomes completely irrational...
So what to do about this? Well, my plan for right now, is to change my routine up for a bit. First and foremost, Im going to read up on learning some exercises and skills to recognize and change my line of thinking. The next thing, is Im going to start keeping an emotional journal similar to my trade journal looking at my pretrade feelings, while the trade is in progress and then my exit...basically how I feel about the trade...Am I anxious b/c I just had a loser? Do I feel confident b/c I just had a winner but the current trades set-up isn't all that great? etc. etc. Im hoping to exactly pinpoint those feelings similar to how one would pinpoint a trade set-up...and then...change the negative thought process thru skills/exercise that I develop. (btw, Im not coming up with this on my own, this is from reading material
)Lastly, the real problem with all of this, is that its is going to be nearly impossible to do in a SIM situation. Im going to have to put real money on the line. So while Im going to spend some time developing my routine a bit, I need to put real money at risk to figure this stuff out.
So Im going to give myself one last go. If I see mental progress then I will continue trading, if it spirals out of control and I can't regain that control, Im calling it quits.
If you guys have any input both positive and negative feel free to let me know. Thanks again to everyone who wrote me both in this journal and thru IM. Im always happy to get feedback. I know my situation isn't unique at all. In fact, I would guess its more the norm. But Im going to do my best not to be stubborn about this. I guess I can equate it to sports b/c that is what I know best...I know at suck at basketball, no matter how much I practice and develop Im still terrible so I focus my attention on other sports and then play basketball for fun. Thats the way day trading may turn out for me. But I don't want to give up until I've exhausted trying to fix/change all the possible issues.
From "All I Know About Options Trading, I Learned in Flight School"...
The ideal pilot is the perfect blend of discipline and aggressiveness.
tlow, I was worried the day you posted: "Looking back I feel like I should've taken my 10 ticks and walked away and waited for the chop to dissipate and/or the action to pick and wait for better set-ups. Its definitely a tough thing...I want to catch those 30+ tick runners but then on the flip side making 10-15 ticks 2-3 times per day vs a b/e will add up quick."
I encouraged you to try it and I have to assume it didn't work.
I mentored a few CL traders and we all arrived at this same fork in the road and contemplated this strategy. I tried it in sim at length and not only was it stressful, it failed to produce even a small portion of the profit my standard strategies produce. None of the traders I mentored found success down this path, either.
You said, "So while I agree that tuning set-ups more, only taking my most confident ones, etc,etc, may help, I do not believe it will solve the issue over the long run. I may be naive about this, but I do not feel this is the root problem."
You are absolutely right.
Defining setups that provide an edge is a first step.
Defining rules for managing trades based on those setups is a second step.
Trading all your setups and following your rules day after day is the final step, mastery of which indicates you have achieved the trader's mindset.
There are many styles of short term trading, none of which is the "right way" or "wrong way", just different ways.
Examples of traders on ET who have attained a trader's mindset despite very different strategies:
Ammo - market profile RTM
Geez - trend-following off rel. strength/weakness with fixed R:R
Me - trend-following/breakout with fixed risk/variable reward
Robert Weinstein - pure counter-trend fading
What is the magic ingredient that defines the trader's mindset?
Trust
In an environment of total uncertainty, we have all come to trust our edges to the degree that a losing trade, or even a series of losing trades, based on following our rules, leaves no influential negative residue.
I encouraged you to try it and I have to assume it didn't work.
I mentored a few CL traders and we all arrived at this same fork in the road and contemplated this strategy. I tried it in sim at length and not only was it stressful, it failed to produce even a small portion of the profit my standard strategies produce. None of the traders I mentored found success down this path, either.
You said, "So while I agree that tuning set-ups more, only taking my most confident ones, etc,etc, may help, I do not believe it will solve the issue over the long run. I may be naive about this, but I do not feel this is the root problem."
You are absolutely right.
Defining setups that provide an edge is a first step.
Defining rules for managing trades based on those setups is a second step.
Trading all your setups and following your rules day after day is the final step, mastery of which indicates you have achieved the trader's mindset.
There are many styles of short term trading, none of which is the "right way" or "wrong way", just different ways.
Examples of traders on ET who have attained a trader's mindset despite very different strategies:
Ammo - market profile RTM
Geez - trend-following off rel. strength/weakness with fixed R:R
Me - trend-following/breakout with fixed risk/variable reward
Robert Weinstein - pure counter-trend fading
What is the magic ingredient that defines the trader's mindset?
Trust
In an environment of total uncertainty, we have all come to trust our edges to the degree that a losing trade, or even a series of losing trades, based on following our rules, leaves no influential negative residue.
And not to get too far off topic and confuse you, but I was reading the Turtle Traders' Rules yesterday and one of the biggest things they emphacized was that they always followed the rules that were set forth for them even through losing streaks. Because they knew that if they kept following them that doing that would eventually result in significant winning trades that would cumulatively far outweigh any losing trades. And the traders that failed to do this were let go. https://www.bsp-capital.com/documents/turtlerules.pdf
Tlow
Iâve got Tharpâs âPeak Performanceâ course â if you want to borrow it â As long as you send it back when youâre finishedâ¦
It has a whole section on dealing with emotions
One of the tools is to take sheets of paper and write down your emotions
Then on separate sheets write down the cause of each of the above
Then write the causes of each of those
Keep drilling down till you can go no further â thatâll be what you need to focus fixing (the root cause/ causes if you will)
It may be one, or a couple of issues
Simple but it works
eta - it does boil down to what NOD said... trust in what you're doing... and trust you'll do it 100% of the time
RN
Iâve got Tharpâs âPeak Performanceâ course â if you want to borrow it â As long as you send it back when youâre finishedâ¦
It has a whole section on dealing with emotions
One of the tools is to take sheets of paper and write down your emotions
Then on separate sheets write down the cause of each of the above
Then write the causes of each of those
Keep drilling down till you can go no further â thatâll be what you need to focus fixing (the root cause/ causes if you will)
It may be one, or a couple of issues
Simple but it works
eta - it does boil down to what NOD said... trust in what you're doing... and trust you'll do it 100% of the time
RN
Right, this is the core of successful trading! You have to keep doing the thing that gives you the edge; once you pick and choose, or stop managing trades according to rules, you ruin the edge.
A trader whose trading is influenced by ego will feel stupid for buying a high tick or selling a low tick in a move. Once you erase ego from your trading, you just laugh when that happens. I know that for every 10-tick loss I take buying a high tick or selling a low tick in a breakout, I will have at least three 20-tick or better profits. So who cares! Some of these CL breakouts produce 50 ticks before you even know where price is on your DOM. I will risk being the "idiot" who buys or sells the high/low tick any day of the week to participate in odds like this in my favor.
A trader still governed by ego hems and haws and second-guesses and hesitates and chases entries after-the-fact. Why? Because a 10- or 20-tick loss will wipe out their account? No! Because they can't stand the thought of appearing to be wrong or stupid. Notice I said, "appearing to be". Because there is nothing wrong or stupid about trading your edge, no matter what the end result is.
I'm sure my trading roomies thought I was either nuts or an idiot for allowing a 25- or 30-tick profit evaporate to break even because price didn't reach my target. I know they did, because I remember being in a trading room with Geez and thinking the same thing.
But now, nearly two years later, I finally understand the reasoning and the value in planning your trades and trading your plan without allowing individual outcomes in a game of probabilities influence the game.
So I think some of you may be missing my point about trusting your system and what "i believe" is going on right now. Currently, my systems, trust (and in myself), how I take profits, etc don't really matter. There became such a disconnect between what I was thinking/writing down and what I was actually doing it was a completely irrational response.
An analogy of irrational thought (just an analogy, don't read into it)
An alcoholic of 10 years has a really bad emotional week for whatever reason. He trusts in himself to stay sober, not take a drink and he can even be around others who are drinking. He knows when he needs to step out of a situation and when he can handle being around certain situations. At the end of this really bad week he finds himself in front of a bar and he tells himself not to step into that bar b/c he knows how he's feeling and he shouldn't be putting himself in a situation to get himself into trouble. Before he knows it, hes inside the bar...ok...no problem he tells himself, just don't sit down and make sure I do x,y,z to ensure I don't sit down...sure enough, he doesn't even know what happened but he is now on top of that bar stool...ok, next step, call me sponsor, do a,b,c and get up and walk out of the bar...in a blink, there is a drink at his finger tips...you get the idea.
What happens when one trusts him/herself and their own actions, but then does completely the opposite?
Everything is rationally planned out and thought about, but then when it physically comes time there is a giant disconnect to the physical actions.
For you seasoned traders....
Assuming you trust in yourself, your system, know how your stats work out, etc,etc and then lets say you are near perfect in always taking your set-ups and doing the right thing...
How would you respond if, say tomorrow, you did the exact same thing you normally do to make your systems work and make money, but when it actually came time to hit the keys on your computer, you hit another key? Maybe you chalk it up to a fat finger, human error, computer error ,whatever...now say you do it 5 times more, now you look at your stats on the day, R:R, whatever, and nothing is making sense for the day. What just happened?
This may be an untrue scenario, but Im trying to get across the idea of doing something completely irrational for what seems like either no reason or a really bad one at best.
An analogy of irrational thought (just an analogy, don't read into it
)An alcoholic of 10 years has a really bad emotional week for whatever reason. He trusts in himself to stay sober, not take a drink and he can even be around others who are drinking. He knows when he needs to step out of a situation and when he can handle being around certain situations. At the end of this really bad week he finds himself in front of a bar and he tells himself not to step into that bar b/c he knows how he's feeling and he shouldn't be putting himself in a situation to get himself into trouble. Before he knows it, hes inside the bar...ok...no problem he tells himself, just don't sit down and make sure I do x,y,z to ensure I don't sit down...sure enough, he doesn't even know what happened but he is now on top of that bar stool...ok, next step, call me sponsor, do a,b,c and get up and walk out of the bar...in a blink, there is a drink at his finger tips...you get the idea.
What happens when one trusts him/herself and their own actions, but then does completely the opposite?
Everything is rationally planned out and thought about, but then when it physically comes time there is a giant disconnect to the physical actions.
For you seasoned traders....
Assuming you trust in yourself, your system, know how your stats work out, etc,etc and then lets say you are near perfect in always taking your set-ups and doing the right thing...
How would you respond if, say tomorrow, you did the exact same thing you normally do to make your systems work and make money, but when it actually came time to hit the keys on your computer, you hit another key? Maybe you chalk it up to a fat finger, human error, computer error ,whatever...now say you do it 5 times more, now you look at your stats on the day, R:R, whatever, and nothing is making sense for the day. What just happened?
This may be an untrue scenario, but Im trying to get across the idea of doing something completely irrational for what seems like either no reason or a really bad one at best.
That to me says stress
There was a time whenâ¦
I knew what to do, but couldnât do it..., or I would do the exact opposite
But always after the fact it was all so crystal clear
Drove me nuts... and I lost faith in my ability to always do the right thing...
I, to this day, donât know how stress affects our thinking / actions⦠But I know it does in a very adverse way
RN
There was a time whenâ¦
I knew what to do, but couldnât do it..., or I would do the exact opposite
But always after the fact it was all so crystal clear
Drove me nuts... and I lost faith in my ability to always do the right thing...
I, to this day, donât know how stress affects our thinking / actions⦠But I know it does in a very adverse way
RN