Kinggyppo I get you. When I quit credit spreads and other spreads and selling premium as a bad investment idea last December. I started out planning to trade a 3 to 5 day trend. However, I hate losing, so I started eliminating every type of whaffle, or zig zag or anything that threatened a loss and ended up now, with a 3 hours to over night trade. My preconceived notion that I was going to do 3 day to 5 day trends, simply disappeared in the weeding out process. I might take another look at it sometime later. I´m still working on winnowing out the losing type signal intrepretations on the SCALP trade. Even one 100% winning scalp trade per week, would put me in good money.
You might consider another line of work. Tough losses are part of the trading game, like missed putts in golf, or bad beats in poker. If losses get to your head so easily, you're in for lot of pain and suffering.
Rodney I think it depends on the type of trading system you develop. Not that a loss cannot occur. It is entirely possible. As you say, if it occurs you have to deal with it. I do not think it necessary to plan on a trading system that deliberately incurs losses. I´ve known some very rich traders, who trade commodities and futures, but only trade two or three times a year and do very well. They don´t have losses at all.
I agree with Rodney King. Seems to me, especially with the options arena, you have two choices: - lose regularly... if you're still able to come out net positive, then you just might have a real edge. - lose rarely... you'll never know if you have a real edge, and you're setting yourself up for hidden blow-ups.
If they don't record losses at all, it just means they're holding on during HUGE draw-downs. See my comment above, re: huge potential loss waiting in the wings.
I'm not a Mark Fisher expert, but I do like "The Concept of "Next!"" -- the idea being (in my words, not his) to treat your trades like a grocery checkout clerk scanning items as they come down the conveyer belt. Don't worry about whether a particular trade is a winner or loser. Don't "hate" losses. It's just business... Of course, this is an easier mindset to attain when you have a real edge, and are confident you'll come out ahead.
Well I guess I´ll bow out of this discussion, as Im just a naive amateur. Like others, I´ve read a lot over decades and formed some opinions, but they would not be appropriate for me to put them here, in the position I am in as a newbie cash trader. I´m just going to have to let the year run out and see how I do. Beech Made a good comment about setting yourself up for a huge blowup. It is a question I ask myself regularly. I won´t know until and if it happens. In the meantime, I have to trade based on my own ideas and not what I consider disinformation. Balancing the amount of cash to trade with waiting for a possible blowup, is a serious problem to me though. I worry about it. I chose options because of the idea of limited risk. So my maximum risk is the option cost, plus commissions round turn. I don´t consider the chatter or noise in the market to be risk, so long as the option is still good and within a sensible time frame, for breaking even. The idea of a draw down then doesn´t apply in the way I´m thinking. The maximum drawdown is already factored in, when I paid money for the options. Riding the waves of the market action and being able to hang on, if your directional guessing is anywhere correct and you have a backup plan if your guess is wrong.
I just got an email from a friend who trades in precious metals. He tells me he finally closed out his trade on SILVER with a gain in the several hundeds of percent. He is still worrying about GOLD though. Now that is what I call a trade! ( grin
I trade 60 days out for several reasons. Risk allocation over multiple time frames. More opportunities for roll. A roll implies exiting a spread and entering another on the same side in the same series. Exiting the spread freezes the return. Entering the new spread is no more risky than any other entry provided the same entry rules apply. 30 to 60 trading days left until expiration is generally thought of as optimum time to enter a spread to take advantage of time decay. There are also good arguments that nearer the expiration is optimum. This used to be my primary reason, however after several instances of rapid market movements, I find this less compelling than risk allocation in series with different time to expiration. If the companion spread meets my rules I enter it with the same number of contracts. I used to say that I wanted to be delta neutral as I am not good at predicting market direction. I now understand that delta neutral is in fact a bias on the market going sideways. Here I am with the probabilities as the market moves sideways about 80% of the time. My main fault is stretching my rules to accept more PoT to get the companion spread at my price. I no longer "stretch" on PoT and just pass if the credit I desire is not available. This gives me a market bias, but is the same one the options spread prices are giving me. I am now paying more attention to this. Sometimes. I use VIX as my proxy as well at the IV of the option series. Yes I have, but have not yet done so. I am still analyzing this "opportunity" to understand how best to manage it. This would have saved my bacon a couple of times, but I'm not confident enough to add it to my repertoire. If there is a spread that fits my rules, I do just that. I used some back testing and some analysis to inform my rules. I bail at 20% loss of capital at risk. It is my contention that all the information I need is in the PoT and credit available for a spread at that level. When I let emotions move me to go outside my tested limits, it has hurt me. I cannot deny what is in my trading journal. The dashboard comes out of a class I taught using airplane instrument panel design considerations and the requirements to manage situations under severe stress. Out of this class came the idea of a book I am still working on titled "All I Know About Options, I Learned in Flight School." The lesson for this point is "being a pilot is hours of boredom punctuated my moments of panic." It's the panic tools that help you too succeed. The images you see are provided by an application I wrote on my server (PHP with MySQL). It is a prettier version of my Excel version. The Excel version is hot linked to my ToS desktop platform so it has up to the second results. The web application was written to do the same thing for me when I am away from my desk, however ToS has suspended API links to their system for retail customers. I'm working on a solution, but it is not my highest priority. Whose class are you attending. You may wish to PM me so I can point out what may be problematic with respect to my methods. Don't forget that winning rates of 80% to 90% generally have a poor risk/reward profile. In practice this means that you will have many months of nice profit, and a setback that may set you back from 2 to 6 months. That still leaves you with an enviable yearly return, however you must properly prepare to survive these events both financially and emotionally.