I had to do this when I wanted to trade QQQ with less than 25K. I noticed that I started to "save" trades i.e. push the SL a little bit away so it doesn't get hit (and it worked unfortunately) or I didn't get out of a trade when I saw that the trend was over. (My problem is not to cut my winners to soon but too late). I started trading futures a couple of days ago. I set a limit money I want to lose per day. But it does not save me from overtrading. Today I got into gambling and blew all my rules - I blew 2.5 times of my money limit and had dozens of trades. (on my best day I had 3 trades with perfect entry and exit - 2 were winners). The funny thing is: I knew that I was gambling and that I had to stop but I couldn't. My ambition kept me trading until I had my money back - and it didn't happen.
Obession: Reoccuring useless thoughts. Cumpulsion: Reoccuring useless behaviors. "Insanity results from doing the same thing over and over again expecting a different result" - Albert Einstein
When I had the problem, I think it stemmed from a lack of confidence in my ability to be a winning trader, time and time again. Until you have that confindence, you will never bet properly. You can get the confidence from trading a system, your own preferably. And see the "Brain Kills Profits" thread (this forum) once you have a system! My discretionary hell lasted about 10 months and I blew through about 15k. I felt like a loser the whole time, even on winning days (and there weren't too many of those). Now that i'm past it I feel like a winner all the time, even on losing days. It feels really good to have that confidence. I got out if it by cutting off my trading and spending a few months developing a system. I recommend a longer term system, not a daytrading system if you're going to figure one out. I could never figure out one for daytrading. But if you must check out Woodie's group. All you need for a system: entrance, exit, stop rules, and bet size. All are equally important. Don't just work on entrance. It's okay if you don't understand systems you read about on the web. I only understand about 10% of them. All that matters is that you understand the one you trade. Best accomplished by making your own. Also you can have a system that contains some discretionary rules. For example, I can vary my profit target between conservative and agressive (and the amounts come from backtesting). I know that 15 NQ points for the trade is my long term breakeven point, profits increase to 25 points, but a higher profit target might be better, might be worse. 50 points never gave good results in the past. So I get my kicks from setting the profit target. Even when I get scared I never set it below 20. Soon I hope not to be scared anymore. I still worry that my system one day won't work. But, I tell myself, I'll just trade another one. I don't want to fall in love with this system. But I take comfort in the fact that i'll never go back to that hell. It really was hell, it affected many things in my life in a negative way.
I guess people trade this way, but it is truly alien to me. When I put on a trade, it is because of some edge I see after having seen "this" situation hundreds of times and expecting a move or counter move to occur. Although there is some logic in immediately getting in after any trade, particularly a loss and in the same direction that you were in on the losing trade, what does that have to do with getting it back? The market has no idea that you just lost? The biggest maturity and leap in my trading came when loses became as natural as winners. I see my trading the way an engine works. It just keeps rotating doing it's job, only knowing that if the piston is in the down position, it goes next to the up position. To use a computer science term, I am "stateless." nitro
Good point! I think it was Ed Seykota who said that wanting to trade without losses is like wanting to breathe without exhaling. What the original post was describing is a Martingale system, and theoretically, it will ensure that you never lose money in the end. You double up on all of your losers, and eventually you will have a winner that will recoup your all of losses. The problem with this in the real world, is that while it will theoretically work in all circumstances, it also requires a theoretically infinite amount of money to be assured of sucess. Otherwise, after the 12th straight doubled loss, when you are down a billion dollars, you won't have the 2 billion needed to double again. For myself, I look at each trade as a completely new venture. If I get stopped out, I look at the market and ask myself, if I had no trades or losses in this market, and was looking at it fresh, what would I do. If I would get in, then I reestablish the position, adjusting as necessary. If not, then I eat the loss and stay out until my systems tell me to get back in. Past losses or profits are completely irrelevant as to when I establish or close positions. It is important to keep in mind that losing trades are not the same as bad trades, and winners are not the same as good trades. It takes absolute confidence in your systems to trade that way, but until you have that confidence, it will be hard to be unemotional and systematic. Jessie
Sanjuro, Doubling up when you are out of sync is like driving faster when you are lost. Would it not be better to pause and reassess the situation? I've heard it said that if you wish to gamble, the casinos will send a car for you. If you are a Martingale gambler, they will send a helicopter. Regards, Thunderdog
Thanks everyone for the input. I'm working on improving my beliefs and controlling my emotions. If I had an system with an edge, having two losses in a row doesn't increase my edge. My edge will remain the same and I need to accept the losses as part of reasonable drawdown of following the system. Losses are an unavoidable component of successful trading.