My focus is Algorithmic HS trading, and it's doing quite well. I haven't taken any losses worth mentioning. Part of one strategy involves a delta hedge on SPY. It went up; I pulled my cash out of the long position (which made money), but didn't want to take the loss on the short. The plan is to sell to close the short at the end of the day. I thought, "I'll leave it in overnight. With this Brexit thing, it's sure to go down." Well... it didn't, and I now have a black eye. This has left me a bit afraid to apply my proven strategy. I talked to an experienced broker friend, and he told me: stick to your plan. If you're trading algorithmically, don't start making wild bets. He also told me that it's not a big deal; it's part of growing in this business. Thanks for reading. It's still bothering me. I have to get back on the horse.
Your friend is giving you bad advice. Part of being a good investor is to learn from your mistakes and to evolve. Strategies and systems must be fine tuned or even changed. No one way to make money. Every trader goes through strings of winners and then the one really bad loser. Remember to manage your positions. Compounding makes big winners, but can also wipe out days of gains.
No, I think your friend meant that your initial algo strategy was good. But then you decided to manually do a trade which went bad. That said, I've been there before... lot's of times. It's how you learn trade management. You don't learn from making money, you learn more when you lose and think about why you lost. Analyse, dissect and make your conclusion on what went wrong, then adapt. Your algo strat might still be good. Just start again with a smaller size.
Jack Rab and your friend are right. There is no reason to be gun shy in trading your system because You actually did NOT trade your system and that is why you have a black eye. Had you traded it correctly and followed your rules you likely would not have a black eye. Trade what you see. Don't make up crap in the middle and try to get fancy and smart. Sometimes the market can be irrational. So again, trade what you see.
It would have been worse had you deviated from your system and made money. Then you might think, based on this one tiny piece of evidence, that you were a genius. Then you start deviating some more. Before you know it you're not an algo trader anymore. It's a valuable lesson. Stick to the system. GAT
Made a (Bad) Emotional Decision. Now a little gunshy. That sounds like a sentence or statement from a newbie trader -- how long have you've been trading I don't think anyone with three or five+ years experience in trading would say such a thing. Bottom line: live and learn. Trading is like war -- and you're the General. you need to see the greater picture of things, and the smaller/tactical one too. It's not something that should be winged on emotion.
What you can't test is not your system, is it? So your black eye was warranted although no one wants to lose or do they? I still believe the hardest part besides the other 100 reasons, is trading your system as the smart guy in you made the system, and don't let the smart ass guy in you trade something not tested. You can do it, but don't listen to voices that say something else.
Thanks All for your responses; In particular: Spot-on. Yes. That's also what my trader-friend said. I carefully did all the math to delta-hedge, and checked it with another broker friend. It was working as expected; then I impulsively tore it in half. Very insightful. Funny you should mention this; I thought that perhaps it was SPY's movement that was the problem, and was going to give it a go at Forex, but for this lesson learned. Yes, I've been back-office for a long time: Computer Programming and Mathematical roles. I'm taking a swing at front-office. It seems that I just grounded into a double-play. Nice. I will remember this.
"He did not stick to his own proved system. That's the trouble with most of them" -- ROASO And that book is almost a 100 years old. It really doesnt matter if you get a computer to execute your trades, your emotions will eventually seduce you (or force you) into jumping the system. If following a profitable system was emotionally easy we would all be rich by now.
..and thank you sir, for this: https://books.google.com/books?id=IztRCAAAQBAJ&printsec=frontcover#v=onepage&q&f=false