I have a slightly different approach to losses from you all. I just do not think that the end result of my trades profit or loss is due to me being good or bad. Actually, since I have been trading quite systematically, I know that some profitable streaks will be followed by unprofitable ones. This is the law of probabilities, more than concepts of performance or merits. This phenomenon is not only in trading but in all aspects in life, especially competition, be business or sport. We often believe that the output is entirely due to our merits/failures. I do believe that luck has a big role to play. As far as trading is concerned, I believe that if I stuck to my trading plan, I performed well, even if the trade turns to be unprofitable. Most of my misatakes are when I have a profit that I did not let run because I was afraid to lose it, while my system should have kept me in the trade. Drawdowns cannot be avoided, statistically, this is a fact of trading.
I have a slightly different approach to losses from you all. Your Special I just do not think that the end result of my trades profit or loss is due to me being good or bad. This is Trading were talking about right? Your profitability is a reflection of your success Actually, since I have been trading quite systematically, I know that some profitable streaks will be followed by unprofitable ones. This is the law of probabilities, is it? more than concepts of performance or merits. This phenomenon is not only in trading but in all aspects in life, especially competition, be business or sport. We often believe that the output is entirely due to our merits/failures. I do believe that luck has a big role to play. I humbly disagree...actually you cannot be more incorrect. Posturing and postioning plays an important role in trading and Life As far as trading is concerned, I believe that if I stuck to my trading plan, I performed well, even if the trade turns to be unprofitable. This I agree with Most of my misatakes are when I have a profit that I did not let run because I was afraid to lose it, while my system should have kept me in the trade. Yes this is another side of it, I agree Drawdowns cannot be avoided, statistically, this is a fact of trading. exposures can be adjusted, hedges and averaging and the such...
Electric, I will put aside the "philosophical" aspect of my mail, for now and focus on the drawdowns. I am not sure if I understand you correctly. Are you saying that your Equity account never comes down? Or are you saying that when it comes down, it is because you are not trading well? Someone said that we are trading our beliefs of the markets. Clearly, I have a strong belief of randomness. I am not saying that I am right or wrong, this is just my belief. I try to develop trading systems with robust returns and accept the drawdowns, which have been tested in the past. Would a drawdown in real time exceed the drawdowns of the test, then I would have to stop trading the system. Maybe we are just saying the same thing, but have different definition of drawdown.
ok...I see. Drawdown begins from Entry...Yes technically speaking. This is not only a zero sum game but a negative sum game because of commissions and slippage. I edited my blue reply in your post... Michael B. Disclaimer: Trading can be "not gambling"
Thanks for all of the speedy responses. Many are full of excellent ideas that I can begin applying this week. ElecSav, your post was especially good. "Take the numbers out of your trading." I like that alot. Perhaps I have set my goals up back asswards. In my trading outline for 2006 I state, "Make at least 3% profits a week." Perhaps I should change that goal to 12% a month, or 100% a year? Chariste, excellent post as well. I have seen my system of swing trading bring me very nice success over my relatively short trading career. You would think a person would have the intelligence to stick with such a system at all times. It just seems that I get blinded by greed (or ego) and subconsciously ignore details within the system. For instance one of my rules: "only trade stocks that are above their 13wk MA." I find myself rationalizing like this, "Well this stock is above it's 10wk MA and it has been strongly trending, plus the transportation sector has been picking up this month...." etc. etc. etc. After reading through these posts and writing this post at least one of my flaws has become apparant: Lack of discipline. I will focus on overcoming this in a variety of ways. Perhaps I will even discipline myself in ways outside of the market (make myself excercise more, wake up 30 minutes earlier than I have in the past, give up smoking [yeah right!], etc.) I guess I'll have to see how it goes. Thanks again for the responses, they are appreciated, -Dutch