A success story

Discussion in 'Risk Management' started by tradermn, Jun 8, 2011.

  1. tradermn

    tradermn

    Hello fellow traders, I've lurked here for years and want to share my success story with the crowd.

    I started trading stocks in 2005 and made all the newbie mistakes. I am a computer programmer and I created some really cool systems but I was a bad trader. I took a very analytical approach but in the end my trades were haphazard and unorganized in retrospect. At first I limited my universe to stocks on the IBD 100 and I tracked them all looking to trade breakouts.

    After a few years of unsuccessful stock trading I switched to trading the sector spiders ETFs. I thought "Ok, this stock stuff is too hard, let's just trade the sector ETFs". This didn't work out either, horrible trading, typical newbie stuff.

    I then switched to trading options on the SPY. I actually though that my problem was that I didn't have enough leverage. Laugh. This did not go well. I overtraded like mad and lost a bit of money. After a few blow ups I had to stop trading options. My strategy would be to just buy ATM calls and puts in the SPY in the direction I thought the market was going. As typical newbies do, I would let my losers go for too long and cut my winners too quickly.

    It's now several years later, maybe 2008. I needed a change, let's try futures trading with TOS. This seems really nice. I had convinced myself I needed something 24 hour so I wouldn't get ugly gap downs. I traded futures unsuccessfully for about a year. I would overtrade to the downside and take my winners immediately. I was starting to lose confidence in my ability to manage a trade.

    In this time I'd read many trading books, all the classics and some lame ones. However, I read "The Futures Game" and it really sparked me. It's a truly excellent trading book. It taught me to think about positive expectancy. Don't worry about THIS trade, just worry about whether you have a strategy that should work over the long run.

    I built an Excel spreadsheet with all the parameters that went in to trading: stop loss, limit, entry, probability success, spread, position sizing etc. I wanted to limit all the parameters and have my probability of success be the only free variable.

    I now trade where I always enter the /ES market with an OCO stop loss and limit order and my position size is (balance / 2 / ES margin) rounded down. The stop loss is always -5 and the limit is always +7 (swapped if I am going short, of course). This has brought tremendous order to my trading. I never end a trade based on my judgement, I just let the stop loss or limits hit. I have been tempted, but I have never fallen victim. This has forced me to think about my trades. Do I think I can make 7 points before losing 5? If so, I go for it. If not, I wait. The results have been incredible. I have long winning streaks which boost my confidence enough to survive a few losing streaks. My balance has never been healthy and I am much calmer.

    I just wanted to share this with everyone because I have made the transformation from lousy newbie whim trader that wanted to give up to a disciplined trader. There is hope for all.
     
    Joe6Pack likes this.
  2. Thanks for sharing your story, it's always inspirational to hear that this is doable. Congratulations on your success and keep trading well.
     
  3. Nice, How many months/years have you been profitable now?

    Your oco takes the emotions out which is good, just keep in mind as volatility changes throughout the years you will have to adjust accordingly. Your experience and persistence have also played a role.

    To your continued success!
     
  4. tradermn

    tradermn

    Almost two years, no real long vs short bias, it's 67%long/33%short

    You have a good point about the 7/5 spread. Currently 5 points about .40%. So going forward, maybe I should have my Excel tell me the spread to use based on finding .40% of the current SP500. Makes sense why 7/5 works now... the SP500 usually moves .40% in a day but not in an instant (not too big of a spread, not too small)
     
  5. Great post, shares a side of trading that is not discussed enough IMO. It's all about the setup, the setup, the setup on forums when really dissecting the numbers is equally important (if not more so).
     
  6. You've got a wonderful and outstanding story. Everyone can learn from you. By the way I’m Thomas Conacher from Queensland, Australia. I’m currently engaged in house investing and hoping to expand my principal investment. For over forty years, I endeavor and constantly excruciating several efforts in investing. I come across inevitable hurdles and dilemmas that honed my skills and made me an excellent trader. I’m hoping to have a great exchange of conversation and share my thoughts with you in return. Thanks! Have a nice day:) :D :)
     
  7. Good for you.

    I'm still at the first paragraph ! but its nice to see some one that went through some uncertainty make it and then all of a sudden just "get it"
     
  8. Misleading post. That is clearly a losing strategy.

    Tom
     

  9. Once I started using OCO my results improved greatly as well. I like them for the sole reason that they take the human element out of taking a profit or loss.
     
  10. es5es5

    es5es5

    For volente_00 and the OP, how did your experience differ with OCO versus trailing stop?
     
    #10     Jun 15, 2011