Great posts guys, thanks for all the input. I once wrote half-jokingly on the top of my 'rules to trade by' list that trading was the business of taking losses. I've come a long way since then in most aspects of my trading, but this is still the one overarching rule that needs to be dealt with in a more systematic manner. I wish I could open every position knowing exactly how much I would lose (guys at IB -- possible to have automatic stop-loss orders sent immediately after a position is open?), but the problem I encountered is that with the type of trading I'm doing now, I've found that the majority of the times I am better off adding to my position when it goes against me, so it makes me lax in handling my first entry. Nothing like the idea that an open loss gives you an excuse to double down to really blow the risk parameters out the window -- I know this can't last even if I consider every entry as just a half-leg in. So what I'm working on now to maintain that stop discipline is the following: put hard stops in on every entry; then, if I am stopped out and the market goes even further in that direction to the point where I would have doubled-up, I will re-enter with a double lot. If I get stopped out again, and the price moves even further, I will repeat for a triple. Any trade re-entered at a worse price than my prior entry will remain a single lot. Not sure if getting a better avg price with additional cost of spread/commissions outweighs the number of missed opportunities from a tighter initial stop (tighter than none, I should say), but at least discipline will be maintained throughout, and there will be no room for hope or wishful thinking on my part. For all you addicted to averaging down, perhaps you can give this method a shot; might be a good way to deal with situations where you have the attitude of "the lower it goes, the better the buy" and v/v. Think of the doubling down as a privelege for having the discipline to be stopped out on every trade. Thoughts?
No, I am the best loss taker, in the world. LOL, OK, let's say we tie for 1st. I'm the co-leader in taking losses.
Aphex, You do understand that not all "losses" in the market will be a learning experience right? Commisso
i'm currently in a losing streak right now. I don't know what happened. I think overconfidence got in the way. I just started trading futures, and I happened to make a lot of money on a trading range day. The next day, I started too aggressively, and proceeded to lose allof my profits, and then some more. My account has a serious drawdown, and I don't know what to do to get my edge back. I'm considering taking time off from the markets for now... how have you guys snapped out of your "losing streaks", if any?
i used to have big problems handling losses. i'd always want to give the trade a little more room. this lead to doubling down and just blind hoping. it's so funny when i look back now at what an idiot i was. the need to make the current trade a winner was just soooo important...what an idiot... the thing that turned it all around was having an objective stop loss when i got into the trade and taking a big picture look at what i was doing. i know that sounds like generic cut and paste advice, but i really can't put it any simpler. i realised that i basically knew what i was doing with trading, and that over time, if i adhere to my stops, and do a half decent job of managing the winners, there was no way i wouldn't come out ahead. i recently made a foray into the world of listed stocks, because i wanted to try out a new strategy involving taking multiple positions at once. in dollar terms, this didn't really go too well, although i didn't really lose a whole lot, i certainly didn't make anything. the point here (in this thread) is that the losses (pretty much day after day, like my rookie days!) didn't really bother me much at all. it was more a case of being fascinated (honestly!) about just why i wasn't achieving the kind of results i had planned on. if anyone asks me what the key to turning profitable for me was, i always say that learning to handle losses was THE one biggest factor. learning to handle losses in such a way that i barely even focus one them; very much indifferent towards them. there have been some times where i take 6 or 7 losses in a row and i just have to sit back, shake my head and smile, curse the market for the diabolical bitch she can be (in a light-hearted way) and then back into the fray; accutely aware that that day will be only one among the thousands that are yet to come. anyway, i'm starting to sound a bit 'psycho-babbly' so i'll get the hell out of here!
I know the above scenario and pure averaging down are a little different. But still, you are increasing your size/risk as the price moves against your initial guess of what a good price should be. What is your "uncle" point? Would you quadruple your size or quintuple it? Why not use the same size for each perceived opportunity and treat them independently? Sorry for so many questions. I'm just trying to grapple with how different this technique is as compared to pure averaging down. They are slightly different, but maybe not in "worst case" scenarios. Carl
"There is much to be learned from a rainstorm. When meeting with a sudden shower, you try not to get wet and run quickly along the road. But doing such things as passing along the eaves of houses you still get wet. When you are resolved from the beginning, you will not be perplexed, although you will still get a soaking..." ~Hagakure~ Does that mean anything to you Illiquid? PEACE and good-trading, Commisso