Crushed

Rough day today...i developed a working mean reversion strategy a few months ago, and recognized from the outset that, while it was a solid producer, there were/are outlier days that are devastating to such an approach.

I run this as both an automated and as a discretionary system. For my automated system I eventually solved it by simply stopping for the day after a single loss. Not exactly sophisticated but it has been effective.

However, the discretionary approach has been another matter. Today I recognized that this was most likely one of those days, and yet somehow I continued to trade on what i can only call 'hope'. It was not hope in the purest sense, but it was 'hope' that statistics would prevail, that the averages would prevail, and that my suspicion that this was an 'outlier' day would not prove true.

Obviously, today was no day for mean reversion.

 

Hmmm, that would depend on the time frame. Many shorts have been looking for the same thing for months.

 

The secret to trading, if there is one, is to keep losses small.

Easier said than done.

 

My time frame for discretionary trading is only intraday. Most of my trading is done via a system and its all swing trades, but i have been doing some discretionary intraday futures trading, all based on mean reversion.

Anyway, my losses today were enough that it will probably take me two months to recoup. Not good execution.

i lost about 5% today in just discretionary trading, and it probably should have been 1%-2%, if anything.

I find it amazing how frequently bad behavior is punished...if you are in a trade or context and are relying on hope that is in contradiction to what you know is proper execution or your sense of where the market is going, you are 90% of the time toast.

 

Would it be comforting to you if I tell you that this is not your last time to be crushed?

 

I'd put hope right up there with greed and fear.......

 

Dangerous phrase... I always say, "The market will do everything it can to trick you into bad trades and scare you out of good ones. Your only HOPE is sticking to your strategy... everything is suicide! LOL

 

Sir,

Learn this…., adopt this…, assimilate, and drill it – into your very core

It will serve you well


MHO of course


RN

 

BPTrader i have been crushed before...Ive been trading about 10 years with two complete wipeouts, one after being up 1000% in a year (1999) and another about 4 years ago.

I'm no longer at risk of that, but i seem to have developed a pattern of behavior where about once every 3 or 4 months i have one bad day, much like today, where i screw up bad enough to create a serious setback in my profitability.

Anyway, the point from all is well taken -- keep losses small. I think i need another rule for discretionary trading -- maybe it will be "if two losses intraday, no more trades for that day."

I do best with solid rules, and i think that might help...i usually am not letting individual trades get out of hand, it is probably more overtrading than anything.

peace

 

Or possibly you’re getting so many wins you’re forgetting about the importance of keeping losers small – been there

Just know one loser will kill tens, hundreds, even thousands of wins


Losers are the one thing I respect ultimately about trading

And I respect the mkt's ability to take "every" penny I own - if I allow it

RN