03/13/09: Total P/L +444.50 3 trades 2 wins 1 loss Week ending 03/13/09: 14 trades 6 wins 7 losses 1 B/E P/L + 971.26 YTD P/L +9,556.96 53 wins 47 losses 5 B/E 53% win % 1.77 r/r ratio
Let's try 1 more time to post the pic for Mr Weinstein's young traders headed ou to Vegas. This is the G-man at breakfast right after a 20 hour poker tourney...if you want to know how I finished..I tell you.
Geez, your disciplined trading is nothing short of amazing and it has resulted in significant gains in a short period of time. Since you adhere to absolute inviolable risk:reward trading strategy, are you considering putting on larger positions? When I reach the point that I can adhere without exception to the kind of discipline you exercise, I will be ready to take on larger size.
Nodoji, Thanks for posting this question to me because I never got a chance to respond to DDlee earlier in the week in regards to letting a stock go .15 in my favor only to stop me out for a .20 loss. I'm going to make a short answer into a long one: For me, I try to take as much emotion out of trading as possible. I try to take the easiest set ups I can find and then I turn trading into a numbers (or mathmatical) game. Here is how I got my ratio for trading: I took an average of 20 trades a week (4 trades a day). IF I can avg. a 50% ratio and a risk/reward of 1/2(or, for every $200 I lose I gain $400 minus comm.) my weekly total should look like this: 20 Trades: 10 wins =$4,000 10 losses=$2,000 Minus $280 comm. ($14 per round trip) Total P/L +1,720 (times 50 weeks of trading=$86,000) Of course this does not include slippage, postions I close break even or postions I may split. So I enter EVERY trade going for a 2.0 reward/ risk ratio and I look for my ACTUAL ratio to be 1.8(for every $200 risked , gain $360) Anytime I close a position at b/e, or take a profit before I get to my target I cut into that ratio.....and it's that ratio that gets me to where I want to be. I want to be comfortable losing a trade. With a $200 max loss, if I lose 3 trades in a row that's only a $645 drawdown. That is a number I can easily deal with. Now let's say I bumped that up to a $400 max loss: First off, if I lost 3 trades in a row my drawdown would be $1400. That's a number I can deal with, but a number that may ge me to start "revenge trading" or start going for a lesser target to get some money back(which will bring my R/R ratio down) Let's take a Max loss of $400 and do the same numbers as I posted above, but instead of a 2.0 ratio, I'll use a 1.5 ratio. 20 trades 10 wins +6,000 10 losses -4,000 minus $280 comm. P/L +1,720 Hmmmmm....it's the same EXACT number as using a $200 max loss! I use a 1.5 ratio here because I put in the variable that by having larger share size out there I will be more inclined to take more breakeven trades and cut more profits before the actual target price (even being off .05 from a target can do this) So what it comes down to is this: I am very comfortable with a max loss of $200. I enter EVERY trade knowing that the most I will lose is $225 with some slippage. This is WELL within my threshold. In trading, I believe mental "comfort" is a huge key. I don't want to be nervous while I'm in a trade (nervous=emotion). I want to be in a trade, be able to set the stop alert and target alert and walk away if I have to. When you start to raise your max loss, other factors enter the equation (taking profits too early, exiting because of "fear", revenge trading...etc) and adding a different variable may change the way you trade. So, to answer your question......I am very content with my max loss, but I fully understand that with my style of trading, the only way for me to make more money on a yearly basis would be to raise my max loss. I do not want to add that variable into a system that has worked for me at this point. But the option is always there....
Geez, I'm still a bit confused. Is your max loss per trade (~ $200) of paramount importance, rather than the risk:reward ratio? If you were to begin doubling your position size, while maintaining your risk:reward ratio, you should end up generating twice the profit. Unless...the larger position size subtly affects the trades you enter, thereby changing the landscape in which you've built your successful model. This is my fear: I will reach a point of taking all my setups without hesitation, stopping out at a precise point on every trade without exception, then decide it's time to increase my position size, only to discover that putting more on the line subconsciously affects the trades I take.
Nodoji, As the famous trader Yogi Berra said "90% of trading is mental, the other half is physical" You said it perfect : "decide it's time to increase my position size, only to discover that putting more on the line subconsciously affects the trades I take." This is the NEXT stage for traders. Remember what it was like going from paper trading to live trading? That's exactly what happens when you jump up in share size. No matter how much you think you are ready, that subconscious comes into play. So why should I risk $400 a trade and (most likely sweat more and have my ratio fall towards 1.5) when I can risk $200 and gain the same amount(if I'm hitting a 2.0 ratio)......... But I add this caveat: I have a full time job. If trading was my ONLY source of income, of course I would look to increase share size (and risk), but I'd rather keep trading as stress free as possible. This brings up another good point. I think any trader who is struggling w/ trading or sticking to a plan should move down in share size and see how much better they trade and adhere to a plan. Hope that helps explain it better.
03/16/09: Mon a.m.: I will be looking to get into AAPL short early and possibly on the first reversal of the market. As for the indexes, I'll be watching to scalp short today, but over the next couple days it may be time to take some longs......