Trader Dave, I have been dealing with and working to overcome the exact same problem. You say it works on paper but not in real life. You also say you're entering fine but then freaking and bailing when you've got a little profit, but then a full stopped loss hit and that one loss takes out 5-10 (small) winners (right?) You also say you're now hesitant to pull the trigger... OK, here's what's going on and what I did to work through it. 1. Are you SURE (and I mean a robberâs gun to your child's head sure) that your method/edge is actually profitable - it's just that you're screwing it up by trading it badly? I'm going to assume yes. 2. Are you placing trades, making a few tics/dollars, then freaking and bailing as it's coming back towards your entry, thus giving back your âprofitsâ, and thus you jump out so you at least have SOMETHING of a profit? Because youâve been told (and believe that âyou never go broke taking a profitâ)? Again, I'm assuming yes. 3. Are you trading with stops that seem correct for the volatility of the stock(s) you're trading? And those stops are sometimes hit (even with paper trading) but not that often (e.g. #1 above is really true?) Thus, youâre happy with the probability? Again, assuming yes.. If so to all three, here's your problem and a possible solution...... 1. You don't REALLY trust the probability results of your system. You know it can make $, but you're not a 1000000% sure it will, so you don't give it enough time to work in your favor. Example⦠Assume you play blackjack. You know full well can't remove your wager when you're actively playing a hand. The rules don't allow bailing mid hand. But ahhhhh, trading does. You're willing to wager XXX to play but when XXX actually turns into XXX + a little Y of profit, and then Y gets smaller, you try to get all your XXX back and that little (shrinking) Y. That's a problem. You're afraid to lose the initial bet. Ergo, you're trading too big for your comfort zone. If you play a $5 blackjack table in Vegas, you have no problems.. It's just a $5 max loss per hand. But can you go to Vegas and play the $100 (or even the $500) tables and not care if you lose it? Probably not. Same basic thing with trading. TRADE MUCH SMALLER for now. 2. You donât actually have any rules (and I mean IRON CLAD) rules of how you will trade, thus you have nothing to lean on. You play blackjack â you know the rules of the game and you must follow them to participate. The casino wonât adjust them just for you. Follow them or you arenât allowed to play. Simple as that. But since in trading you're both the blackjack player AND the casino (at least in wide terms of how your particular game is played) you're changing your personal rules each hand/trade. How can that be reliable? 3. You are not following (or are unaware) of how probabilities work in trading, just like in a casino. Why are casinos so ridiculously profitable? Because they know that over XXXXXXX hands, their game has a profitability factor. So they know statistically that even if they lose a few HUGE bets on their table games, enough hands will be played that theyâll make it back. What youâre doing is not giving your edge a chance to really work, plus you canât even bank on your edge because youâre changing the rules (and expectancy) of the system by not following it perfectly. You canât truly work the system because youâre not following the system and giving it a true chance to reward you OVER TIME. Youâre shortchanging the results by changing the rules mid game. Stop doing that. (I know, easy to say). But thatâs one BIG contributor to your problem. 4. You are hesitant to take trades. Of course. You have been burned enough times on the hot stove that youâre hesitant to keep cooking. Welcome to Psych 101. You need to kill off that fear. And the only way youâre going to do that is to trade more. Yep, you need to get over your fear of pulling the trigger. And the only way to do that is to pull the trigger (PERFECTLY) a whole lot of time with no concern for the result. Buy and sell ALL DAY LONG and not care at all about what the $ results are. Youâre gun shy. You canât read your way out of it. Youâve got to just keep shooting and eventually the pain will subside because you will stop looking at each trade as important. Think about it⦠Think every shot a basketball player makes weighs on him? Or each at bat for a baseball player? Or any one hand to a professional blackjack player? (Iâm leaving out no limit poker players since you can go bust on one hand easily) No â itâs just one shot/at bat/hand/TRADE in an entire lifetime of trading. One trade shouldnât mean a damn thing. Get to that point. Now, how I did it⦠I decided that FOR ME, I need to just pull the trigger a lot. And I mean 40 trades a day to get past my fear of trading. By doing so, I stopped caring about any one trade because I know that many many more trades will occur during the day. And how did I do that? I tossed my old buy and hold method and started scalping. And I mean for nothing results. Once I got used to pulling the trigger, it stopped being a problem to do it when it came time to do so. So, instead of an intraday trader, I realized I had to make more trades, so now I scalp, and am doing much better. Of course, my stops have to be really tight too. Every time I place a trade, I expect to lose the ante. I expect a 2 5 with a dealer showing two face cards. So if I lose the max bet, I DONâT CARE! Just like I wouldnât in blackjack. Shit happens. Sometimes the dealer is good to you; sometimes not. Will I always scalp? Probably not (it IS exhausting) but itâs helping me eliminate my fear of each tradeâs results. That is helping me realize that lots and lots of small winners with damn near perfect execution will reward me over time. Also, read both of Mark Douglas' books 'The Disciplined Trader' and 'Trading in the Zone.' Explains a lot more that I did here. Trust me - two of the best books I've ever read. My $.02.. Hope this helps. EDIT: Just read a few posts in your blog (link in this thread has a comma at the end and thus is a dead link). You are absolutely placing too much life and death importance to each trade. Since you have a small amount of capital, you need to preserve ALL of it, while you're getting this psych stuff figured out. TRADE SMALLER! And make sure your commissions are nothing. Like IB nothing. Not some $9.99 per trade flat rate thing. Go cheap while you're learning. Trade so damn often that any one trade is of no concern to you. You're terrified you'll go broke before you 'make it' so you're making all the 'I'm scared' mistakes.
Trader Dave -- You have received some great advice here already. I believe the key to solving your "problem" has been answered in the quote below from Optioncoach... (afterall he wrote a book on it and is highly respected) You just need to digest what he wrote here. Read it again, carefully -- your answer is there from someone who Knows ! One other thing -- you are trading prop -- guess they are not able to help you and I wonder why? If this post is not clear enough -- PM me and perhaps I can make it clear to you... (Hang in there your wife and kids need this to work as well as you do...)
Another quote that is spot on... If you understand this advise presented by golablue you will "own" the solution... But again it's not reading it -- it is "understanding" the point -- what got you in gets you out as well.
Thanks MACD. One more piece of advice for the OP is to read Mastering Daytrading Futures by Bo Yoder. I have had the pleasure to read this book and to talk with Bo and several occasions and his strength is picking entries and recognizing where to place the stop. I know the poster is talknig about stocks but the approach is still valid and working with him briefly has helped me further refine my entries and stops. Every little refinement and improvement just to stop placements is a boost to profits if you know how to use the info. In his book he talks about how he trades and his method for entries and stops. he also includes 6 weeks of journaled trades on daytrading the YM and 10-year notes and seeing how he set-up each trade and where and when he set and took the stops will give you (the OP) a start in the right direction. Again, when I enter a trade, the set-ups and signals I have worked so hard to put together immediately outline where I should put my stop. It has become much easier for me to take off the losing trade because I am more confident in where the stops are. On the flipside, it lets me stay in trades longer as well. For example, if I go long the ES at 1328 my "method" (nothing fancy and amazing just my approach to trading) immediately shows me that if the ES moves below 1326 (for example, the stop amount is different each time) then i stay in the trade as long as it does not move below 1326. I therefore do not get whipsawed out when it dips to 1326.50 and stay in as it moves to 1331 (hypotheticallly speaking). These numbers are for show they are not a representative of a risk/reward profile so just loko at the bigger idea being expressed. If your approach does not immediately call out a stop to you then study to find where stops should go. This alone will improve your bottom line. I am not "there" yet with the futures daytrading (i.e. I am not claiming I am the shizzle), but grasping entry set-ups and stops is what finally pushed my daytrading to consistent profits and iI think that is what most traders lack and what you need. You are not afraid you are just blind when you get in.
=========== Dave hope this doesnt come out too harsh; but it will save some some time & perhaps lots of money, if heeded. OK?? Obviously you do NOT have a well reserched plan , by your own admission you tried to play catch by loading up.[Excellant way to lose capital] Amazing how most all of us made that position size error; some never get that one right, too bad. Wisdom is profitable to direct.
I have two words for you. Risk Management. Sir, this is not gambling. When entering a trade, you have to ask yourself two seperate questions. How much is an acceptable gain and then how much is an acceptable loss. . . When you have reached either of these criteria, then its time to exit your position.
you say that you are trading off chart/price patterns and that your winners far exceed your losers. like 70-80% winners? and you say you take profits too soon. what % of your profitable trades gain .20c or more AFTER you have exited the trade? if that % is high (like 70%), then there is good reason to set your target profit higher.
Respectfully guys, he's scared. Case closed. And until he stops being scared, no suggestions of logical things to do is going to override his emotions. All the 'place your entry here' and 'place your exit there based on this' makes perfect sense. And you would think that you could override your emotions with proper logic. But that won't work. Not yet. He's afraid of going broke. And he goes on tilt and throws ALL his rules out the window when he's actually in a trade, because each trade is weighing too heavily in his mind. He has not mastered probability, and until he does, all the system tweaks in the world won't fix it and he won't gain confidence to actually follow his system until he stops being scared. Thus, tweaking the system won't help, because his subconscious won't allow his logical side to actually follow through on his rules. Unless and until he conquers his emotions, (suggestions of better systems made here won't do it on its own), he's cooked.