Enforcing Discipline

I primarily trade ES and do well on most days except in the following circumstances.

1) If I start the day with a loss and it gets bigger, I end up overtrading and trading more contracts than I should as per my system. I start making discretionary trades as well at this point

2) When I give back my gains later in the day after being profitable. That makes me reckless too.

I feel that the technique that I use works, but my ocassional recklesness (maybe once in 2 weeks) and lack of discipline has made it very difficult to make progress.

I use IB and was wondering if there was a broker whose software could limit the number of contracts that I could trade and the max. loss in a day. If I could some how step away from my trading on a bad day, it would help me tremendously.

I have read all the good books on this topic by Mark Douglas and others, but I've not been able to get over this.


PLease suggest alternatives.

thanks

 

Most brokers I know can enable you to trade x # of contracts and not more.

Many brokers can disable your software after a maximum daily loss is hit.

Never heard of a broker that can limit the amount of trades though.

 

I had the same problem for the longest time -- years in fact.

Having limits imposed on your trading might help you in the short-term, but you need to look at the source of the issue. In the long run, the band-aids and quick fixes just don't hold up if you still have those urges. Revenge trading and overtrading are just symptoms of lack of confidence in your edge; make sure you are 100% committed to your method and ultimately you will be convinced your past gains/losses have nothing to do with the next trade.

 

Externally imposed discipline (i.e. software limiting the number of contracts, or brokers stopping you from placing further orders after a certain amount of loss, etc.) will only go so far and does not cure the problem. When the "urge" becomes strong enough, you will likely find ways around them and end up doing further damage.

Before you begin your next trading day, visualize in as much details as you can what you will do if you started the session with a loss (or have given back gains made from earlier in the day) and how you will handle that episode (perhaps by calmly walking away from your computer or just shutting off your PC altogether for the reset of the day) and the reward yourself for having the fortitude to step away from a bad day. The key here is to go through the mental exercise of handling it prior to the event occurring. If the physical event does occur, then you can actually exercise your contingency with greater ease.

You may also want to reexamine your definition of a "bad day". Just starting a session with a loss or giving back gains from earlier trades by themselves may not necessarily make the day bad, if those trades are within your rules for entry, position size and exit. But starting to take more frequent trades or increasing size above and beyond your current rules will qualify as a bad day. But one step at a time. Let’s just try practicing the art of "stepping away" first.

Discipline must emanate from within.

 

One thing that has helped me was to stop thinking of the "except" as some sort of problem that was foreign to my trading activity, as in, if I just got rid of the "except" stuff then I would really be trading. Or the "except" stuff is not really trading it just gets in the way of what really should be trading.

Instead, try to think of the "except" as the CORE of your trading, the real meat and bones of your success or failure.

If you think about it, there are certain basic concepts anyone can learn about trading that could give them a meager edge. But then the "except" behavior seems to come along and gets in the way.

This must be some sort of illusion right? It's precisely NOT doing these incorrect things EVER that will be the cause of your success. It's not that the stuff outside your plan gets in the way of your good trading, the stuff outside your plan is actually how you trade now.

 

This may be the problem. Do you just "feel" that it works? Or do you "know" that it works? If the latter, what do you mean by "know"?

You say you read Douglas, but did you go through the process he detailed? Did you define and test your setup? Did you forward-test it? Paper trade it? Do you know your ratio of winners to losers? Your profit to loss ratio? How much of a drawdown you can expect? How long a string of losers you can expect in n trades?

If you haven't done all of that, then it's no mystery that you have trouble following your strategy since you don't have the necessary confidence in it. If you were confident in it, you'd trust it and follow it.

 

=================
Dev17;
I have read Mark Douglas books;
and they didnt help me at all either & muddy water doesnt necessarly run deep. DR.Van Tharp & Jack Schwager help much.

1] Mainly FIX lack your lack of a well researched trading plan;
revenge trading shows me you
need to do much more research,
-so get smaller after losses or,
put that in a written plan ,
or all three.

1.3] Anothr way of putting it, correct that rookie error;
of trading AGAINST your equity trend.
And wrote that in my written plan=trade with equity trend.

1.7] Paul Tudor Jones put it more bluntly;
''Losers average losers.''!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!

2] While it is true you have more 0pportunities earlier in day;
enter most of my swing/positions late in afternoon.

And let us take a bit more responsibility, giving back gains doesnt make you'' reckless'';
buddy you CHOSE, you CHOOSE to be ''reckless'' at the time.

I made the same mistake years earlier in trading, but;
kept reading common pattern of top traders/Schwager cutting back size after losses.
Again ,% of capital/contracts is written down/plan;
less after losses.

Hope this helps, it helped me.


Wisdom is profitable to direct-Solomon,trader king.

 

I agree with whoever it was that said you would find a way round any risk limit if you didn't first find a way to limit yourself. Having said that, Button Trader is a front end for IB which includes a risk matrix which you can use to impose limits on yourself (eg maximum daily loss per contract, as well as stop losses on individual trades). Not having reached (or even got close to) my "game over" limit, I don't know whether this limit would be effective if one did breach it.

But at least, if you then wanted to carry on, it would force a degree of inconvenience and maybe a moment of shame. My experience of traders who break limits in a professional trading environment is that unless severely disciplined, they just do it again. An individual trader is no different, except that there is no external discipline, other than the fact that when you have blown up your account you can't do it again, for a while.

Maybe the trick for you is to keep the minimum amount of cash at IB, so that when you reach your internal limit, it is also a hard limit (you get closed out). It will always take a day or two to transfer cash into the account, creating time to think about why you blew up.

 

I am aware that when I have 2 or more losing trades there is a possibility that I will enter non optimum trades, in the back of my mind, the reason is to get back the negative painfull score, quickly.

However when I reflect, by doing that I am just digging my own grave at a faster pace.

With mine ( and most systems) there should be times when even with the edge you are trading that you can get 3/4 losers in row.

So one has to be aware and diciplined to stick to your best way of trading, what ever the score, positive or negative. Best way of trading includes staying detached from your score and just trading your system.