That is a great statement and so true. The biggest challenge in trading - or at least trading based on a specific system and set of rules - is that success is statistically based. We expect to generate X profits over Y number of trades. But trades happen one at a time. Not statistically. So we're left with the issue of overcoming psychological obstacles while a single trade plays itself out. Overcoming the minute-by-minute and hour-by-hour obstacles of boredom, fear and greed, is what is so tough in this game, even for experienced traders. But it is the only way to succeed, and it often just takes time and getting kicked in ass enough that you finally learn.
I am starting to find that the main drag on my trading performance is overtrading. Quite often I enter a position or close a position for psychological reasons beyond coviction in a trade. I have figured out a few specific reasons: 1) Boredom, I want to have a position on most of teh time... and I enter a trade without serious conviction This is a lack of Patience! Profitable trading IS boring trading! 2) Panic. I may close a position due to a large drawdaown. Often I re-enter at a better level than the stop price. More often I re-enter at a worse price though We must accept our risk. Do you have a winning method/system that proves over 1000+ trades that you win more than you lose?? If so why does the drawdown matter? Why does the losses matter? Accept it and move on. Losing IS a part of winning there is absolutely no way around this. 3) Earge, sometimes I enter a trend which is about to run out because I picture how much potential profit I have already missed. I consider this missed profit as an indication of how much I could make if the trend continues This is a lack of Discipline! Trade your Plan and nothing else. Your plan is proven, your emotions of fear and greed are proven to be very un-profitable. Do you have a Plan? If not you must make one. 4) Fear of a loss, after I suffer a loss (even if I am seriously up on the day) I try to make the money back by entering many uncompelling trades, like in 1) "boredom" Once again Losing is a part of winning accept it and move on. 5) Stress., sometimes I close a position with great profit potential because the price has been fluctuating around the open price for a while. This is Discipline again! You are not trading your plan. What does your plan say to do? Are there any techniques you use to make your trading more rational? Are there specific cures against the irrational decision I described above? Yes many, but they are mine. You must find what is right for YOU. I have given you all you need to make your own. PATIENCE, DISCIPLINE, PLAN, TRADE YOUR PLAN.
First of all, there is no such a thing called "overtrading," so you don't have a problem. If you don't have a problem, you don't need a solution. Check Red_Ink's blotters and you will find "overtrading" will bring you big money. The guy before him called Millenium Man was doing "over-overtrading" and made even more money. I don't know where these people get this idea of "one trade a day keeps you sane." When you start day trading, you are already insane, crazy, nuts, so don't try to be otherwise, there is no return to sanity. This "overtrading" reminds me of "overbought" and "oversold." These terms made me very angry, because no stock can be overbought or oversold, for every trade there are a buyer AND a seller. Anyway, you don't have a problem of "overtrading." So relax and enjoy the beer or whatever you are drinking. ps: to advice givers, if a person has a cold but complains of a cancer, do you advise him to seek chemo-therapy?
Isn't that another way of saying you're taking trades as a discretionary trader that's not part of your trading plan just so that you can be active in trading even when the price action isn't suitable for trading. ??? Regardless, if you're a retail trader at home...I will guarantee you have outside influences not related to trading that's causing many of your trading problems. Start a real-time online trade journal (e.g. a blog) and update it during and after each trade to see if your discipline level returns or that you've reduced the overtrading. More importantly, lable each trade with any of the problems you've described in the above quote. Mark
There are two things that worked for me when I realized that I needed to beat the same issue. The first is that I started trading on a larger time frame and taking more risk per trade. That makes each trade more serious in my mind. In my case, it was a move from trying to catch 3 minute swings to trying to catch 15 minute swings. By taking more risk per trade, I find that I am much more diligent about stalking the perfect entry point, so there is a lesser chance that I will have to grit my teeth through a painful adverse swing. Thus I get an immediate emotional reward thats NOT detrimental to my trading. The second is that I started focusing on time of day setups, which automatically limit the number of trading opportunities per day. It fun to get "in the zone" and start grabbing small profits out of the mid-day noise (which was one of my problems), but in my case I could never do it well enough to make it worthwhile. So I stopped. Hope this helps.
Give yourself time! You see the problems in your trading, go on, and simply stay in game. With every trade your self confidence will improve! Everyone has these thoughts... A young dog that shits every morning in your room... If the dog gets every morning a slap on the cold nose, it will stop to shit in your room... Same with jump the gun trades...
Thanks to everyone who replied both in this thread and privately! I took some time off to relax using the festive period as an excuse (I enjoy travelling) and took time to reflect on the advice offered. I am working on improving my decision process. Thanks! The instrument is exchange rates, mainly vai currency futures. When I started the thread I was doing 2-5 trades on a typical day. I was concerned that occasionally I did up to 10 trades and these days were usually deep-down days. Further, I often utilised a narrow stop. So, I got stopped and re-entered the same trade at a worse level than the stop price. I am not sure I can have a picture of how many trading oppotunities a day may present. However, now I am attempting to create a picture of what levels at which I may want to enter and exit trades before the trading session starts. This plan helps look at the price action from a "larger" prospective and avoid trade entries based on fear of missing a fast price move. This is one of the best pieces of advice I have ever received. My best day have been when I was rested and could keep positive attitude. My worst days have been when I was tired, distressed, in a rush, or felt pressed to produce fast profit. I am not prepared to do just 1-2 trades per day as an absolute rule yet. However, in the last month (since I read this suggestion) I did more than 2 trades in a day just once and a typical day involved just one trade. This means I could finish some trading sessions in just an hour or 2 and have lots of time to rest, reflect and research. I am not prepared yet to aim 80 ticks in 3-4 trades. I understand bigger trades wil come with experience and patience. However, being able to moderate my expectations regarding gain on a single trade (along with aiming just 1-2 trades per day) has apparently improved my performance more than I could expect. Thanks! The toughest bit here is to keep working on a particular trade without a concern regarding the performance of previous trades... ... and at the same time keep capital preservation in check. I'll keep working on a mental state that could make these non-issue. I see a number of threads on this forum regarding how to make trading less boring... by I appreciate trading becomes prfitable when most emotions are left behind and it feels like a trade rather than art. It's purely an emotional issue. When you are at the end of a month you may want to hit a certain target such as a round number. The same counts for the end of a week or a day. Further, if there is a sequence of loosing trades, not everyone is prepared to run it forever. This was exactly the question in the opening post. How to keep emotions in check so as to follow the plan? This makes sense. However, my original question was regarding doing trades I shouldn't have really done if I could keep emotions in check. I know frequent trading can be very successful but closing a trade and re-entering at worse a level isn't an example of where it works. In this thread the advise is mainly given against cold. This is a good one! I am currently running a journal with entry/exit pojnts and motivation for entry as well as whether the trade was stopped and other details. Marking each trade with potential psychological problems is a good idea. Similarly, some tme ago I discovered it was ridiculously easy to make a few ticks on a trade. The issue (besides being highly stressful) was that after doing five 2-tick trades I would loose 8-12 ticks in a single trade neagating the profit. I realised that by learning to hold position for longer a time I could get the same gain in fewer trades with less uncertainty. Traders that can anticipate laonger moves and keep a trade on for days or weeks must be massively profitable but I am not there yet. This is an interesting point. I identified a few time periods when I seemed to consistently loose money but as my skills improved these time periods didn't seem to present as much of an issue. Thanks for sharing your experiences! They are a great material for thought! Thanks! As long as the capital preservation prevails, I'll see another day.
1) This tells me your expectations are higher than the oblivious. I day trade the ES for eighteen years now, my daily goal is 2 points and then cut back 90% of my contract size. My day is boring all day long, this has become a job of sitting in front of my screens, or on my stationary bike or treadmill. It is not for excitement of making big bucks on any one trade, but for making consistent daily profits. I concentrate on steady growth, not wild swings. 2) Any time I want to change or backtest my methods, I use a sample size of 1000 DAYS.. Backtesting shows me largest drawdowns. And if I have a losing trade in a trend trade, one of my rules are either waiting for trend reversal or higher highs for uptrend or lower lows for downtrend before I can enter another trend trade. If I miss the move, so what, more later on or tomorrow. Only element I can control is risk, if I get in worse, risk increases as well most of the time. 3) I don't know if my heart will beat a second from now, so I don't know where the price will go when it reverses. Unless I know there is a past S/R to extend my target, I have set targets. All I can ever do is guess where trend might end, but there is no such thing as overbought or oversold. 4) In my backtesting, my goal is perfect for me, once I make my 2 points, it is impossible of having a bad day. I have learned my method has a "mean" of six trades a day, if I reach six trades and down on the day, I quit for the day. It doesn't mean I am doing something wrong, but price is not lining up right for my method. My main concentration on each trade is getting to a Breakeven protective stop, I have stopped long ago of finding better entries, but keep studying for better money management ideas. 5) Ever trade has great profit/loss potential. Each trade by itself is 50/50 of success, how you manage it determines what your losing percentage will be. I concentrate on having a low losing percentage.
Wow, you must be from the future cause last time I checked, the ES hasn't been around for that long. I believe it was the end of 97.