I do the same thing. But trading futures instead of stocks has made me a lot more careful. With stocks, I would usually make a point or two per day on my good days and lose anywhere between 2 and 10 points on a bad day. It would actually have been very profitable if only I could have overcome the emotions resulting from the down days faster. Now that the NYSE is going down the drain, I basically do the same thing in futures. I make between 10 and 50 ticks on good days and lose maybe 40 ticks on bad days, which happen about twice a month. The problem I am currently battling is the same as yours: If I have a big loss in one single trade, I find it extremely difficult if not impossible to do the kind of (discretionary) trading that usually makes me money. But knowing that I simply won't be able to do it, I don't even try anymore. Instead, I use the simplest strategy I can think of, and I use it rigidly, without the slightest bit of hesitation or discretion: When an up-trend has just started in the ES (meaning a higher low and subsequent higher high), I put a limit order to buy one tick above the higher low with a bracket (hard, live stop) attached to it that has the stop three ticks below the entry and the target one tick below the higher high. (And the exact opposite for shorts.) I keep doing this for however long it takes, which is usually the whole day. After more or less breaking even before commissions and thus losing a couple (or sometimes as much as 10) of ticks worth in commissions trading this system, I somehow reach an emotional state where I realize that a few losing trades won't ruin me, and somehow I am proud of the fact that I have lost only a tiny amount compared to what would most likely have happened if I had traded emotionally. And from there, it is only a small step to the right mindset, I just think to myself, I could go on like this for weeks if I had to, but I might as well get back to making money, and that's usually the end of it. I realize that this approach is by no means optimal, and I certainly hope I will find a better one eventually, but for now this is good enough.
I'm with you, Flashboy. There are some days when I never recover from losing on the first trade. One of the biggest keys to trading is HONESTY!!! I know I 'm in bad trade within seconds after clicking the button. I can pare that loss if I'm honest and ask myself "why the hell did you do that?" If I BS myself and stay in it, it just gets worse. One of the worst things that can happen is having a BS trade become profitable, that can destroy not only the day but several days. I used to have a Clint Eastwood sound byte, "Do YOU FEEL LUCKY PUNK?" that would play when I got filled. If I was hoping for lady luck than I knew it was time to close the trade. We are not as good as our last trade. We are as good as our next trade, that's what helps us become good traders. To help myself recover from a trade like that, I walk away from the screen, refill my beverage, and kiss my son. Then I go back and adjust my size downward for the next trade. If I can't regain the confidence and mental state, I call it a day and go to the driving range and crush a few balls. Trading capital not lost is earned. The NYS Lottery once had a famous tagline..."You have to be in it to win it." When you're head is not there, "You have to be in it to lose it." The market is forever, our capital, patience and time is limited. Be honest, take a deep breath and pace yourself, the market will continue on long after you and I are dead and buried!
It's tough . try to stay focused and wait for your pitch. when you become focused and try to make the money back quickly you become desperate. trade like you would normally trade the day is long the oppurtunity WILL come just be smart No EMOTION!!!
One thing that I've been doing is not let myself go lose over $150 in the beginning. If I know I'm getting close I'll stop and take a break or I'll tell myself to be extremely disipline. I'll cut down my size from usual 500 to around 300 or 200. I know that if I keep my lost small I still have the motivation to keep going and come back. If I'm down over $300 it's hard for me to trade the same way I usually do because I'll be trading scared.
I think it is very similar to people trying to lose weight... Some people eat bad in the morning, and think, "screw the rest of the day, I will start off better tomorrow". Then the same thing happens tomorrow. They get in this downward spiral that is very difficult to beat. It is good that you are acknowledging the problem, as that is the first step to success. If you are following a system, I would suggest letting the software make the trades for you whenever you see a signal. That way, the computer doesn't care how you have been trading and will trade exactly how the system says you should. If not, I agree with the rest of the posters and say that you should try a combination of things, taking a little time off if you think you are in a bad mindset, taking a deep breath, writing down a business plan, thinking of each trade as individual, not looking at your P/L, etc. I am not trading as actively as I want to, but I know that when I do, this will be a real issue for me. I hope that I can beat it like I am sure you will. Good luck.
What works for me on this issue is as follows, in this order: 1. Any area of stress or failure to reach an expectation of your trading, where you truly believe it should or could be, needs to be not defined as a mistake, but as the perfect representation of your skill level, at that point in time. If you are frustrated, seek information and put together a daily plan that will get from where you are (reflected in your results, yes i look at P/L) and where you feel you want to be, or "should BE." Once you have done this, refuse to let this type of frustration confuse you or even worse let you feel bad about your abilities, use that frustration as a sign that something in your value system knows you can do better, and you just need to look for the way. Create little experiences associated with trading that show you trust yourself, and that you will adapt. If you are committed then the following will probably work, it has worked for me and a few others I know: 1a. For example, if you find yourself shaken after losing money in the morning, you do not have confidence in two things: the method of your trading (which if executed properly would produce money over time) and your ability to do what needs to be done while the market moves. I have read the posts here and reflected, and almost all fear, stress, problems that happen if you lose in the morning and feel crappy, and it affects your subsequent trading, can be well explained by this idea. 2. Each trader needs to figure out where comfort is and where fear is, and set up rules to be abided by in order to eliminate the effect of fear on one's ability to observe, think, and act. Duh, Follow your rules right? Sounds like we have heard this before But if you are not doing this, HOW do you get yourself to? One thing that helps me is I practice trading outside of trading. I visualize my weak area, which is cranking out money all morning long, then letting my stops go, getting sloppy. I visualize myself snapping out of it. Not getting all bummed, but taking the next closest exit to my stop. And feel really good about it. Like a weight has been lifted, feel my sense getting clearer. I am sure most of you have experienced the objectivity you experience when you finally dump a trade thats gone past your stop. YOu see more, you feel confident not because you lost money but because you begin to condition trust in yourself, in your ability to follow the plan. Then plan makes money, now you feel good because you are trusting yourself to follow it. If you are not following your plan EXACTLY, then feel good when you at least following it CLOSELY, do not berate yourself. In psychology I think its called successive approximation...you can read up on it if you want, or Shaping. It is here I engage in a little fantasy sometimes...but it helps. I have my goal from here to the end of the year. It is a defined monetary goal. That goal is something like," By the end of November and December 2003, I have generated $100K in net income from trading." In fact, thats what it is. So, since I get sloppy on my stops sometimes, I have practiced a pattern interrupt to get myself out of that mode of thinking. I actually stand up, and say (if I am alone on my side of the trading room) but it works better if i say it out loud, "$100K.". Then I right myself, and sit down and do what needs to be done. I say weird things to myself like," I am the steward of this capital, and I am trusted to grow it." Whatever I can think up. Whatever works. Ask yourself, "If I was the best trader in my firm, in my state, in the world, what would I do in this situation?" Then do that without regret, and give up the worry about losing money in the morning, the market doesn't care, and neither should you IF you are committed to improving and taking an active role in it. I again rehearse this in my head outside of trading hours. At first, I couldn't even rehearse it in my head, there was a lot of internal resistance. Now its fun. Feels just as good as trading, and there are multiple positive things that comes from this type of activity for me. Ok its almost 2pm, nobody else in my firm is here, but I wanted to write this because today was one of those days where I successfully applied all of the above. I slipped a little today, but righted myself and kept on trading with no ill effects, no frustration, and literally looked at my "mistake" as the real mark of my true development as a trader. AFter the close I wrote down what happened and how I will practice and rehearse it over the weekend. Hope I didn't clog the server with this long post. But I hope that someone gets something good out of it.
Reread my post...forgot to include: If you are worried about the losses, then reduce your position size to the smallest tradable increment until you can take the loss with no emotional upset, at least a neutral feeling, if not a good feeling. Do this for some prescribed number of times.....E.G. "I will trade 50 lots (you can do this on NASDAQ LIQUID stocks, use ARCA or ISLD) , or at least scale in in 50 lots until I achieve 20 trades in a row, executed by my rules, with a neutral or positive emotional makeup. " You can even to 25 lots (I mean shares, 25 shares) and still be "trading". I havent' tried it but maybe ill try 1 share. It would be nice to know you can scale back to a meaningless number if you wanted to? right? When you can do 20 in a row like that, you can scale up to 100, etc. But only after your prescribed number of right trades, again instilling trust in yourself that you can follow a plan. Thats just a suggestion and exactly what I do. ok im out