Convinced on strategy but...

Discussion in 'Psychology' started by callahan, May 19, 2011.

  1. callahan

    callahan

    OK guys... I would really like to hear your two cents on this, I relly on your advice as traders.

    I have been trading for several years now but not until now I have felt comfortable with an specific strategy that I've developed to increase the size of my portfolio.

    I developed a system (nothing fancy, lets say it is an strategy that is elegantly simple), after backtesting and paper trading I decided to start with a small portfolio, the results were good (again, I am not going to break the bank but they were good enough).

    I have been trading with $10,000 and my plan all along was to increase it to $100,000 (most of my trading capital) if it proved to be good in real life... well I could not be more convinced the strategy gives me a small edge and it provides for decent returns. But here is where the problem comes in...

    Even though I believed I was convinced and that I believed I had the balls to increase the size with no problem, I find my self (I'm even ashame to write it) afraid that I will not be able to stand the volatility in the bad days. It is different to lose $500 in a day than $5,000 even if it is the same % of the capital you are trading. What makes me crazy is that I KNOW the strategy works but as all strategies there are good days and also bad days... I am so chicken shit that I believe I will not be able to take the bad days...

    Guys, how can I grow some balls????


    PS: some more info, the strategy is US stocks, trading at the close (long or short) and holding for 24 hours (until next day's close). The $100k is money that has cost me an arm & a leg to save but I am willing to risk it as I don't need it for my daily expenses. This strategy was backtested 5 years and paper traded 3 months, I have been trading it with $10k for the last 4 months now.
     
  2. There's no rule you have to go from 10k to 100k in 1 step. It's probably not a good idea for the psych reasons you're aware of. Increase acct to 20,000 and trade that till you feel comfortable and it grows. Then add again later if you want to trade more size.
     
  3. oh yeah and don't think in dollar terms think in points won/loss for the day or in terms of percent.
     
  4. had this problem some time ago.

    however i goota be honest with u, and u have to be honest with yourself...

    It's not about not standing the bad days. It's about the fact that u feel pressure because you know that if you keep trading small you are not gonna get to 100.000 too soon...

    For you it's not about growing balls. You get balls if you trade your strategy long enough with small risk. You increase the risk marginally over time.

    But for this to work, you need to let go of the pressure of getting too high, too fast....

    It's like you're trying to run 10miles when you can only run 1 mile.
    When you tell yourself "I gotta run 10 miles" you'll never do it.

    However if you say, next month i gotta run 1 mile more, you will discover after 10 months that you can run 10 miles without any problem....
     
  5. dalen

    dalen

    Why jump 10 fold? Why not increase to 20k first.. Why kind of DD can you expect on the account of 10k? What if you had 40% draw down on your 100k? From the sounds of it you are no where near ready for that size. Baby steps, the market ain't going anywhere..
     
  6. callahan

    callahan

    You guys rule... its so nice to hear intelligent arguments... believe it or not I didn't even consider (before now) to take baby steps like you are recommending... I had this urge and as dumb as it sounds I felt I was losing money if I didn't put all the disposable money in the strategy...

    We traders are definetly weird animals... it takes one to understand one... thank you.
     
  7. Just man up and do it. Stepping up to much bigger size can be nerve-wracking for a few days but you quickly get used to it.

    The important thing is that your risk (in terms of % of account) is tightly controlled and you have faith in the strategy. With those out of the way you've got no problem.
     
  8. i would have to disagree here.
    Man up and do it: YES, BUT.... what about when the strategy proves itself as being a failed one?

    I always like to think of my money as being other people's money.
    That way... I don't want to show a two-figure % drawdown and lose that client (the client being me).

    Again, ask yourself. If your money-manager would show you a -20% drawdown for the week let's say and told you that that's normal and he's gonna get it all back... would you still trust him? Wouldn't you normally pull your money out and look for another one?
     
  9. There's a very easy solution.

    Continue trading with that 10k via the same position size until it grows big enough where you won't even consider tapping into the remainder of your initial 100k starting capital.

    For example, when you turn 10k into 20k...increase your position size proportionate to having an additional 10k to trade with. Hopefully, you'll continue growing your trading account and position size without risking the bulk of your initial trading capital.

    Grow your capital via real trading instead of via adding funds to it. One of the best ways to developing confidence.

    Mark
     

  10. yap. let the market prove you right consistently...

    plus, always be on the lookout to improve your current approach, and always try to find other good approaches. trust me, you'll need them....
     
    #10     May 20, 2011