Discussion in 'Psychology' started by genetrader, Feb 20, 2004.

  1. I have been in the financial markets for over 10 years. I recently left my full time job as a professional trader to trade my own money.

    Prior to the move, I would swing trade my personal account and have done extremely well since June (over 130% return).

    However, once I went out on my own I have fallen victim to my own incredible lack of discipline. Im not sure if its because I secretly feel guilty about the money I have made or I just dont want to day trade (which would be silly because I love doing it), but I become that 'compulsive gambler' type once I start digging a hole and basically bury myself.

    Since I have started I have drawn my account down over 22%. I really believe I can trade (as I did it professionally) and I have been successful.

    Did anyone ever go through one of these incredibly destructive periods where they were 'almost' trying to lose money? Can anyone give some advice of things they did to stop it, control it and mitigate this problem?

    One thing I am trying to do is have a fixed amount of money to be down and then turn off the machines. However, there must be other methods people use to develop iron-clad self discipline...?

    Any help, advice or thoughts are greatly appreciated. Sorry if this post sounds nuts but I feel like one of you might have been in a simliar rut...

    Thanks again,

    -- Geno
  2. What type of trading do you do right now on your own? What type of trading did u do professionally?

    If u are still using the same methods as u did before then its more of a psychological issue. For that I would recommend getting the book " Trading in the Zone" by Mark Douglass. It deals with all psych issues your typical trader has to deal with.

    If u are using different methods of trading I would advise to stick with your bread and butter...

    A lot of traders think that certain styles of trading are better or more ideal than others. One style has less risk.. one style has more leverage.. etc

    Truth is the best style is whatever u actually make money with.. regardless of what anyone says or whatever u read. Remember there is no asterik near performance. As long as u are making good $ and feel u can consistenly do so.. then never stop or change directions.

  3. traderob


    Well I was down about $20,000 for 2003. Since January I have cut back my trading so that I place only 1or 2 positions a day and have been focussing on education and strategy development. Have sworn not to increase size until I have compelling reason (i.e. obvious understanding and good probability). I had to take most of my money out of my broker account to make sure this was enforced. I put it into an account that means I can't get to the money till August (don't trust myself).
    However I have another source of income so can afford to be patient - this would be hard working as a full-time trader.
  4. I am in a 7% drawdown for the last few weeks, but my equity curve is still trending up... think longer term...
  5. I'm in the same boat. I had been in the industry for 12 years before I attempted to trade professionally. I traded as an amateur with moderate success.

    The reality is that daytrading is "swimming with the sharks". The margin for error on a trade is very small compared to swing trading.

    The fact is that you probably know all you need to know about the market to trade successfully, but you probably need to learn more about yourself. If you have any personality hang-ups, they will show up in the first 5 minutes.

    I didn't realize that I was so messed up!

    So? How do you turn the tide? I am still trying to figure that one out. But what I have determined for myself is that I need to:

    Manage risk, both through position size and loss limits. I also have a daily loss limit. I hit it yesterday at 11 and just shut down and walked away.

    Let my profits run. I find that if I have a winning position, I close it and then quickly find a losing one in its place. I am trying to focus on staying in winning positions. Its tough to do, but its paramount to my success.

    Know thyself. Reflect on your emotions when you are trading. Determine any destructive behaviors and address them. For me, I like to be in trades so I find myself churning and taking small losses. Those small losses and their transaction charges are eating me alive. I can trade profitably gross, but can't net.

    I can't be sure how helpful this will be to you, but I know that just typing it out has made me THINK about it. Keep a journal. Its easy not to... do it.

    Good luck, hang in there.
  6. Hey Geno,

    When you were a pro trader at a firm...

    What measures were in place there to keep you discipline?

    Is it possible to apply the same rules or whatever to encourage the same type of discipline now that your on your own?

    Also to anybody else that doesn't find success at daytrading when they previously had it in swing trading...

    It's simple...go back to swing trading and vice versa if you dont have success at swing trading but had success at daytrading.

    Last of all...if discipline is a major reason to a drawdown or consistent losses...

    try getting a trading partner (someone that doesn't have a discipline problem) in which you two trade side by side in an expanded home office.

    Check out ET hook threads to find someone in your area where you live.

    P.S. Traders that had discipline in another area of trading but don't have it in a different area of trading...

    most likely something is going on...psychological or negative home trading environment.

  7. 007Arb


    I apologize if I misunderstand your post. But are you saying you are finding it much more difficult to trade your own money vs. when you were trading the house money? I would think that is two entirely different psychological disciplines. I've heard lots of stories about traders who were great at trading their own money but failed miserably while managing or trading the money of others and vice versa.
  8. http://www.elitetrader.com/vb/showthread.php?s=&postid=259359&highlight=alpha+risk#post259359

    In statistics there are two kind of risks: alpha and beta. Translating into trading alpha is the true risk (risk of loss), beta is the risk of opportunity. The two are not independant so wanting to decrease one (beta by taking more big positions) without increasing the other is nearly impossible task .

    Institutional traders which trade with OPM (Others People Money ) and don't have any legal obligation of results will privilege low BETA RISK so that alpha risk is high: they don't care since alpha risk is supported by their clients not by them .

    Whereas a trader that trades for himself should care more to lower the ALPHA RISK than the beta risk because if he doesn't care about alpha risk he can find himself into a survival game one day.

    That's why perhaps one of the reason why institutional traders that try to trade for themselves after they lost their job have the reputation of being losers : because they have never been accustomed with alpha risk .
  9. lescor


    Did someone steal Harrytrader's moniker? Four paragraphs and I understood them all. Way to go Harry! Did you stop taking mind-altering drugs, or are you on new medication that has cleared the fog? :p
  10. Hi lescor,

    I'm sure Harry will reward your kindness with one of his etherial nicely colored graphs.

    Be good,

    #10     Feb 21, 2004