most time averaging down trading (the market actually is in the range, not go far away from this range) is great, but sometimes it easily breaks the original trading plan, particularly loss goes a little bigger than first thought. it is a very attractive stragety, the damn market just keeps luring me doing that, just recently I was lured into it again, almost 4k in crude is flushed to the toliet. so I try to do average up, but it is hard, the market keeps changing its direction. so now I do it "all in and gradually out", lock most profits, and let a tiny holding to do some extra work.
Weekly Update: They got me. I am still coming to terms with the situation, so I'm going to go light on details for the moment. I will be back here with a full accounting of the situation next weekend. Needless to say, I succumb to just the exact fate i knew full well was likely to happen. Its rather surprising and disappointing given that i spent at least 6 hours on Sunday documenting my trade risk profile for the last 4 months, and developing strict capital preservation rules. I did that specifically to avoid this. The situation is rather simple, 1) I knew what made me 70% on the year would eventually cost me dearly, and thats what happened 2) The most fundamental problem i have is trading too frequently while working and having two children under 2. It's fine most of the time, but, with split focus, a moment or a few minutes of chaos can cost you dearly. 3) I am still up for the year, but now only meagerly. I have suffered the greatest one day loss, dollar and percentage wise, of my trading life. Sadly, i can't even blame the robot panic as the cause, it was all me + split focus. I'll be back next week and share the gory details....
Avoiding trading on suboptimal set-ups is very tough psychologically. Do you feel you experience greed or any pressure to make money?
I had already hit my goal for the year, and was up 75%. And on a pretty decent size capital base (mid 6-figures). So i did not feel pressure to make money; i actually was feeling pressure not to lose money. I have a tendency to not to want to take losses. Its not uncorrectable, but because i work full time and have two small children, my focus is sometimes split...during these times i am making subsecond decisions that tend to be more driven by libido than by intellect. I just simply cant trade on this time frame while working. Its the same thing that happened to me on 2/5/2010 when i lost 15% (see the beginning of this thread). Anyway, I screwed up much bigger this time.
That was impressive return! If you don't mind me asking, do you set a maximum dollar loss when you open a trade? Or do you just extend the acceptable loss according to what "feels right"?
In making those returns, my losses were contained to under 2% on individual trades. I had not lost more than 2% in a week in 10 weeks. However, and I knew this and said it in this thread last week, that was only because the market tempo and style recently had meshed perfectly with my recent trading style. When the market changed Wednesday, I was murdered.
I may be missing something in the reply given it's late Saturday night but... When you start a trade do you always set a stop loss that you don't extend under any circumstances? Or are you more flexible in this respect?
Sorry. I am generally more flexible. I have been averaging down quite often (but far from always) over the last few months. I would have to give that technique credit for most of my 70% in profits. I knew it would bite me eventually. Even with averaging down, I generally limit my losses to 2% max, and almost always less than 1%. The main problem is not averaging down, its that i failed to respect my critical daily max loss level. Averaging down makes it easier to fail in this regard, however. It conditions the mind to not to want to take losses, and during times of high stress or poor focus, can lead to poor decision making.
Now I am getting the grasp of the thread title. In case I haven't mentioned it earlier, you have my respect for coming out and talking about this.