Hey, I am a somewhat new trader, and I'm currently dealing with ~19% drawdown from a position I foolishly held over an exam period without monitoring. To put this into perspective, I started with around $27k placed on the trade and now have around 21k. I am debating selling at a loss and continuing trading, because when I was more actively trading I made 7k in one month starting at 30k. This quickly changed as my focus changed to school. I have been practice trading to keep my skills up, but I've been holding for nearly 3 months now. My average % daily is 1.2% in the practice sessions. What do I do here? The buying power of 21k is way too low for me to trade, and I don't want to place 100% risk on any one trade like before because of this. Thoughts? Suggestions?
https://www.google.ca/finance?cid=720336 Got in around March. Foolishly held because exams distracted me. Got hit by Fed speculation on interest hikes. Held because wanted return to higher buying power for future trades. If I'm pulling 1.2% in practice trades I can reasonably expect 0.8% (adjusted for emotional effect) or something daily p/l in real time trading, but my biggest concern right now is the risk situation.
I don't normally respond to these "faux-subjective" ET posts. But, here is my suggestion to the 1-post OP. Trading boils down to 1 thing... discipline. Discipline to act(buying AND selling according to YOUR buy/sell criteria), and discipline to financially manage a trade (according to YOUR financial criteria) while "waiting" to act. YOUR first sentence, I'm currently dealing with ~19% drawdown from a position I foolishly held... You acknowledge the trade is a mistake. Later you say, buying power of 21k is way too low for me to trade, and I don't want to -blah blah blah-... You don't want to accept the trade is a mistake. You can't have it both ways. Discipline. To act. To financially manage. There is one question that might help, IF you have the discipline to suppress your conflicting mindset. "Would I enter this same position right now at the current price? If the answer is yes, then you must reformulate your expectation to reflect current conditions, and requires the discipline to financially manage, and act, accordingly. If the answer is no, if you don't act, you are just hoping, which has nothing to do with trading. Good luck
You are sitting on an unrealized loss for whatever reason. What happened, happened. Now isolate the problem, and look forward and decide what to do based on the chart (if trading technicals). Everything else is secondary. From the word "loss" onward everything you typed is of secondary importance. To put things in perspective I'd be looking at volatility and leverage i.e. Did you use any leverage on that trade? How much? How volatile is the asset you traded? Its not the same sitting on a 19% unrealized loss on a long from a 4% drop using 5x leverage than sitting on a 19% unrealized loss on an unlevered position. It is also not the same sitting on a 19% unrealized loss from an asset that moves 4% on average everyday than from an asset that moves 0.4% on average everyday. Finally, answer yourself what your time frame / time horizon is.
Sounds like you have no clue about what you are doing and therefore should just take the hit and move on. You smoked an expensive vacation. Move on. Read the book Market Wizards. Its not abnormal for new traders to take big losses. Make it a learning experience. On another hand, are you trading technicals, equity fundamentals, or maybe a macro story? From a macro perspective: - BTo is a Canadian gold producer ... need to have a view on gold. - BTo is CAD based but would presume not highly correlated to CAD (assuming mines/projects are not in Canada) ... if profits CAD based, then need to also have a view on a) oil and b) BoC vs Fed monetary policy. Look at the chart of gold. Its as bearish as it gets. If I had to take a 1-2 months view on gold, I'd say it will flush hard before it decides where to go next.
I trade technicals, I only look at fundamentals briefly to ensure there's no absurd cash flow risks to even short term holds. I noticed an exploitable correlation between gold price changes before the open and a gap (1-3%bod) reversion to vwap , rsi, and volume based strategy I backtested on this stock and a few others of a similar nature. My mistake was not setting a stop, and not paying attention to a hold, or even holding when I am not a long term investor. I know what I did wrong and how to fix it, I am just struggling with risk management at so low capital. The long term trend for BTO in the 3 year with weekly chart implies it is due for an advance to the resistance level of ~$4.15-4.20 range. Issue is, in the meantime I am making no money, and I am wondering if the expected value of trading based on my backtesting and practice trades is higher than the expected value of holding for the period it would take to advance. When I was trading I was making ~0.75-1.2% a day. With a win rate of ~45%. So I am not entirely new to how the game works, I am just in a bit of a capital problem pickle which I hoped more experienced traders could advise me on getting out of. I am not sure whether selling is worth it, considering the adjustments to the expected value from the 6 or so hours of work I'd spend trading from only 21k buying power.
This is general advice, not for your situation in particle. Never hold a position hoping to regain a profit, unless you feel strongly it is a buy right now. Never ignore positions that are material in size. If you can't watch them, set a stop or don't enter the trade. After you make or lose money, learn what you can from it and move on. Never say that you are paying with the house money-if there is a profit, it's your money. Always view your P/L mark to mark-don't think you have not won/lost money until you exit. You can lock that in at anytime. Always know that if you protect your capital, you can play another day. I'll get yelled at for this-trading is a business. Don't enter any business under capitalized. You will make bad decisions. Good luck........Bob
Take/book the loss. and learn; Hoping and dreaming and praying...for a turn or break-even point return is one of the Worst things you can do in the market, Things have to happen relatively now; If nothing is happening, consider that a failed attempt and close. As for your next trade...plan and structure it with discipline -- like you're planning a war, No weird wishy-washy stuff,