I'm sick to death of Jack coming into threads, mine included and posting page long off topic psuedo intellectual rants... he's the thread killer!
Hey Pekelo! How've you been? Happy and Prosperous New Year to ya!! This is an interesting thread (once the normal bs is filtered) you started. First I have to say that I agree AND disagree with using % vs $. For small (futures) accounts I think $ value is much more useful. Pedantically 2% is 2%, regardless of account size. psychologically however, at least for me, a $50 win or lose day on a $2500 account is way less meaningful than $500 up or down day on 25k. Since futures provide fast results, up and down, a small account should use $ value, at least on a per trade basis. The trick to this in my estimation for small newbie accounts, is having realistic expectations, and judiciously and constantly having $ rangebound losses. Myself, when I started out I used a % figure (8%) as a daily goal, but per trade stops and daily loss parameters were always based on $ values. To this day I use similar money management. The difference being account size. While Im thinking about it, another key is to use account leverage parsimoniously. Just because you qualify for a million dollar mortgage doesn't mean you have to buy a million dollar house. Just because you've got $500 (or less) day trade rates doesn't mean you have to trade max contracts. Lots of posts here on ET about the newbie who doubled account size in a week or two trading small (1 or 2 contracts) only to blow up in week 3 trading triple or quadruple size. My rule of thumb, max contracts per trade = (account size * .30) / daytrade margin... Just another money management safety valve. The ultimate overriding goal of every trading day is to able to say "good night mister market, see you in the morning." I began tackling the size issue about 6 months ago. Mind you, the term "size" likely holds different meaning for each trader. psychologically I needed to learn how to deal with larger real-time dollar values. I used 2 methods 1) side-by-side paper trading in real-time (sim-broker in Ensign) with triple my actual trade size and 2) entry in all the *free* half day marketzar contests. For me, larger size keeps me in winning trades longer and provides an easiness for cutting losses. Second guessing a loss is a thing of the past. Larger money values hold more meaning to me psychologically, winning and losing, period. As long as per trade size, and per trade and per day loss parameters are maintained, trading larger size gave me a new confidence about who I am and what I do.
Thanks. First I thought I was the only one who saw his preaching that way.. Quote from osorico: Hey Pekelo! How've you been? Happy and Prosperous New Year to ya!! This is an interesting thread (once the normal bs is filtered) you started. Many happy Returns to you too! Pedantically 2% is 2%, regardless of account size. Thank you. Finally somebody pointing out the obvious. Thinking in % only helps when the % changes with the account size or the strategy. If it stays the same, it is no help at all.... I guess the comfortability level is different for every trader and depends on lots of factors. The ultimate overriding goal of every trading day is to able to say "good night mister market, see you in the morning." Well said, thanks for the input...
I'm not a futures trader, but something similar happened to me. I started by trading equities and after a relatively short period of time, my account grew ten-fold after I sold some property. I tried to think in terms of percentages, but this didn't work well. How could it? I'd spent months treading a $20 loss as large and a $200 loss as devastating, and now I was trying to treat $1,500 as minor! It just wasn't going to work. Not that I didn't try. I traded this way for a month and just bled money. I was consumed by greed and fear. The stress of the money gave me tunnel-vision. I couldn't see things properly anymore and was making one mistake after another because of it. After a month, I stepped back and reduced my size to a minor fraction of my account. It was still larger than when I started trading, but it was small enough that I wasn't going to care much whether I won or lost, letting me focus on the trading. With time, I grew comfortable with the level of risk. Perhaps it was just familiarity with the numbers on my P&L column, perhaps it was consistency and profitability, I'm not sure. After I felt that I'd proved myself able to trade at one level profitably and consistently (surely this means different things to different people), I would increase my risk and observe how I traded. After five months risking between 1/16th and 1/4th of what I was when I first got the money, I've more than recovered my losses. I just doubled my risk last week and my friends have been saying I'm "ballsy" and "gutsy" to risk so much. I don't see it. I don't feel scared anymore, I don't feel like I'm gambling, I don't feel like I'm doing anything gutsy. I know intellectually that the money is substantial, but because I've come here slowly after proving it to myself, I can look at it relatively dispassionately. I will say that after each increase, there is a period where I must mentally and emotionally adjust to the new level of risk. For that period I trade very conservatively and rack up some quick and easy profits. After this, I relax a bit more and become more aggressive, shooting for more speculative trades which have proved profitable in the past but which entail a greater emotional roller coaster Hope that helps. I wish I could offer more insight, but I'm learning also.
It just happens over time. As you become more confident in your trading you will evolve. Try turning off the pnl on the dome and just sit back and play the game without focusing on the money.
Thanks Foile for your input. So basicly your cure for the increased stress was time, scaling back to an acceptable trading size level and increasing from there gradually and slowly... I think pretty much that should be the way for everyone...
Except the true players are already back at the crib long before last call with the 9's and 10's while the wanna be's are fighting over the 5's. Kind of like trading, FIFO.
The best analogy I can give to growing your contract size is like lifting weights. On day one you don't try to jack 400lbs on the bench press. Baby steps toward an infinite target.
and of course, REAL MEN don't life weights lying on their back - iow the bench press. they clean and jerk the weight overhead!!! (sorry, my olympic lifter bias coming out ) also, real men squat. and if the bar aint bendin' yer just pretendin'