I thought long ago after reading his past journals on his automation efforts and seemingly random results. I think his past success relied on using his gut feeling, and instinctive read on stocks. I believe automation, if he is still doing it, has caused him to lose focusâ¦maybe trying too many things at once. He once was like the Boy Plunger. He must return to his roots.
+1 I have been thinking on these lines but didn't have the conviction to write this. If someone has a systematic strategy that works (lets say PF > 1.8 or so), and if he is only following that sys. strategy, then such a DD shouldn't happen. Maybe, the subjective/abstract/news related ideas that Neke used to incorporate in his discretionary trading is missing from his systematic strategies. Neke if it helps - Think about it theoretically. If you are trading options on expiration Friday with size, it means you are assuming your strategy is good enough to use high percentage of optimal f. Now, using high percentage of optimal f is justified only if you have a very 'tightly controlled strategy' which has a 'well-defined maximum loss', doesn't have too many losing trades in a row and is very consistent. If you think about it, trading options expiration is very different from a tightly controlled strategy, so using high value of optimal f (large size) is definitely wrong theoretically. Rather, trading options expiration is like a binomial distribution (kind of head-tail bet) which inherently has large losses associated with it, so using high percentage of optimal f is fraught with danger for such a strategy. Its one thing to tell oneself not to use high risk on option expiration days trades. Its another thing to have a sound theoretical justification which explains why using large size on option expiration days is fraught with danger and is a sub-optimal strategy. I hope my theoretical explanation above will help you become more disciplined in not trading size on option expiration. Good Luck
Weekly Update for week 37/50 ended 9/24/2011 Another disastrous week, down 22K (11.4%). The big culprit was NFLX. I thought I could try my hands on a new thing: writing uncovered option. Sold $15K worth of Oct150 PUT on Monday as the stock was putting behind two days of huge declines, thinking all is over, I could pocket the rich premiums holding till expiration. needless to day I was massively wrong as I had to bow out two days later with losses bigger than 20K - more than I could have ever realised from that trade. One costly experiment that ended almost as soon as started. Never ever again going to trade something I could easily lose more than the maximum upside, however good the odds. After taking a look at my contrarian approach, and the NFLX move above, it has become clearer I need to cut-off the contrarian, and do more of momentum (trend). Just to think that I actually bought some PUTs on NFLX last thursday on the first down day, when the price hit $180 soon after the open, and yet got out at a loss when the price bounced as far ar 184, before the price came down to close that day @ 169, followed by several more days of big declines. Just one of such being right could have made up for a lot of stop-outs. It's been a horrific draw-down. My account hit a week-end balance of $635K on 10/24/2009. Adjusting for a cash withdrawal of $150K since then, the current balance is down 65% from the adjusted high of $485K. Alternatively, adding back withdrawals, the current balance would be $322K from the $635K, a drawdown of 49%. Both are well above my maximum expectation of a 40% drawdown. Will be shutting down all manual contrarian strategies, and sizing down on the automated ones even further while I explore other possibilities. Code: Opening Balance: 194,247 Net loss for the week 22,244 ------------------------------------------------- Net Balance: 172,003 Since Inception of Thread 01/8/2011 - 9/24/2011 Opening Balance: 335,899 Net loss (Less Margin Interest) 163,896 (Down 49%) ------------------------------------------------ Net Balance 172,003
Neke, I'm going to do a huge favor for you. I'm going to re-post this everytime and every week you post a loss to remind you that what you're doing is NOT WORKING. Had you listened to me last week, you'd have $22k still sitting in your account. Don't think I'm a heartless jerk. I'm not. I've been where you are right now and know from experience exactly what you're going through. Believe me. Taking a break right now will be the best move you'll ever make. You're going through a serious tunnel vision syndrome right now. Take a break and when you come back start with a smaller account, let's say 30k, 40k, or 50k max. Right now you're destroying everything you've built up because of your stupid ego.
"explore other possibilities"??????? Take 3 months off and learn how to read charts... Then learn proper risk mgmt/trade mgmt and position sizing based on max $ amount u r willing to lose... correlating that with price on a chart where u r proven wrong. Be a robot...
Starting this week, Step 6 is no longer optional. You need to feel pain in order to stop yourself from making more stupid ass moves. I'm going to be your worst enemy until you stop your madness.
To follow up and clarify: Let's say 1% of acct size is your risk threshold ($ 1700). If you go long on a stock u feel has hit support at entry price of $ 50... and u believe $ 49 is your stop loss price- that represents a $ 1 stop-- therefore 1700 shares is your position size. If $ 200 is your entry... and $ 196 is your stop-- then $4 stop allows for 425 share size... etc etc. This cannot be arbitrary however! It MUST be based on price action on a chart-- NOT ON A "GUT FEELING"!!! Right now your risk if ruin has an extremely high probability of occuring. Do something about it b4 its too late Neke. Discipline is key.
agree w/ agent 007 been there. Nevermind the money. you are doing psychological damage to yourself and your future trading . take time off then come back and trade very, very small. your future as a trader depends on it. GL
The Losing Streak - Marty Schwartz Every trader faces it. Only the winners know how to handle it. The dreaded losing streak rears its head every so often and attacks every great trader. It eats away at your judgment; it saps your confidence. Sometimes, it can take you so low that you think you`ll never get out. You`re sure that something has gone wrong, that you`ve lost your touch, that you`ll never be a winner again. When you`re in the middle of it, you think it`s never going to end, but mostly, your judgment and rhythm are off and what you have to do is stop and regain your composure. The best way to end a losing streak is to cut your losses and divorce your ego from the game. I learned this lesson many years ago at the crap tables in Vegas. The old clichè says "never send good money after bad", and it`s true. You have to manage your resources and not lose too much of your stake. Many people when they`re losing increase their bets; they double up hoping to win it all back on one roll of the dice. That strategy can be devastating. The best way to stop a losing streak is to STOP! STOP THE LOSSES, STOP THE BLEEDING. Take time off and let your intellect take charge of your emotions; the market will be there when you return. But believe me, this simple advice is much easier to give than to take. In August 1996, I was in the worst losing streak of my career. What was driving me crazy was that I would see the trades, but I was so scared of losing, I wasn`t thinking about winning. This fear of losing was slowing down my reaction time, and while I was seeing everything, I was reacting later and later, which meant that I was taking more risks, not less. What I had to do was to step back and recharge my batteries, but I couldn`t stop. A guy called me and wanted to play some golf. I knew that I needed a break so I told him I`d play eighteen, but as I got up to leave, I couldn`t go out the door without a piece of the action. I couldn`t let the market go up without me. I bought ten lousy contracts and ended up losing twenty-five grand. It ruined my day and further sapped my confidence. You can never shift from reverse to first gear without first going through neutral. YOU MUST FIRST CHANGE THE DIRECTION OF BAD TRADING BY FIRST SHIFTING TO NEUTRAL. YOU MUST STOP. What happens is that as your fear of losing rises, your emotions start to short-circuit your intellect and you no longer have confidence in what you`re doing. Stopping lets your emotions calm down and lets you reestablish your momentum with your intellect. Remember, time is always your ally. Use it to relax, clear your head, and regain your energies. Once you`ve stopped, digested your losses, gone through a period of preparation, and feel comfortable with your work habits and methodology, you`re ready to start trading again. The best way to do that is to trade small and to concentrate on being profitable. DON`T START BY TRYING TO MAKE A KILLING. When I came back, I`d see a trade I liked and I`d do it small with a very tight stop, so if I was wrong, I`d get right out. All the time I kept telling myself, make little profits, make little profits, make little profits. Black ink, black ink, black ink. It`s all psychological. I felt sick and I wanted to make myself feel good again. I wanted to regain my confidence because CONFIDENCE IS ESSENTIAL TO A SUCCESSFUL TRADER. I had three contracts the other day, which is a tiny position for me, but I ended up making $15 000 on them. Fifteen thousand dollars is real money, and I took that and built it into $40,000 the next day, and all of a sudden, I`m hot again, and I feel great. If for some reason this process doesn`t work initially, try it again by stopping longer and coming back to trading even smaller. The most important thing is to protect your trading capital until you can regain your equilibrium and put all the shadows of the losing streak behind you. Losing streak are an unfortunate part of the game, but if you are a good disciplined trader who can shift into neutral, the losing will end and black inc will start to flow again.
Well as I wrote about in a thread earlier this week you did not listen, Neke. NFLX is clearly an overvalued company, and all you would have had to do was take a look at a PE ratio. A little fundamental analysis behind that trade would probably have stopped you. Does a 50+PE mean anything to you? It should to everyone, and even if you think earnings can be manipulated there's no reason ever to pay above 1.5 on a PEG. Stupid. Will you do a little research before heading back into next week? I bet GDP day will nail you if you take any discretionary plays short there.