I Discovered the Reason I Lose Money Trading.

GrowleyMonster · Jun 14, 2020

volpri said:
A day trader has to drill himself on the mechanics (strategies and tactics)until they become second nature or the amount of energy expended in the heat of trading will drain you and colosal mistakes will result. That is why I tell people SIM..SIM..SIM. Trading is a very high performance activity. And as a human you cannot perform well if you have not trained and practiced. You cannot be at the top of your form sitting on the couch eating potato chips. In day trading hundreds of decisions have to be made and made quickly. A day trader cannot afford to have the mechanics of trading become rusty and unused. If I am having a bad day and losing money and just can’t seem to get on the right side of the market I just stop trading with money and go to SIM trading and keep pushing. If that fails I may just need a break. Grab a fishing pole and go fishing....

There are a lot of factors that can affect performance in trading. Environment (market conditions), psychological conditioning at the moment, other stresses one faces unrelated to trading, lack of focus, too many things on your plate, size of your account....etc

Don’t keep throwing good money after bad. Find ways to circumvent that. In trading going to SIM for a bit can help. It is practice. Practice builds routine. Routine lowers stress levels and increases focus and clarity.

It is easy to fall into the error sunk cost fallacy. A trader can fall victim to sunk-cost fallacy. It is a cognitive tendency or bias referring to the act of making future decisions based on past investments. For example, when you have trouble throwing away those old tools you are thinking to yourself, “what a waste to throw away these garden tools away“ (even though they are old and used up). “I’ve spent all this money on these tools.” Even though you never garden anymore and clearing them out of the shop would open up space for tools you actually need. We are the only animals that act in this irrational way. Even rabbits are smarter than us and keep looking for rewards in the future rather than dwelling on the past.

In trading the next trade has nothing to do with the previous trade. It is a total independent activity. We have to learn to psychologically “let it go” or we will find ourselves caught in a downhill spiral the rest of the trading session building one loss upon another.

Also we best not forget that the implementation of mechanisms can get rusty and practice is needed to rejuvenate the implementation of doing what you already know to do.

“DISCIPLINE is paying attention to detail and doing WHAT you need to do, HOW you need to do it, and WHEN you need to do it even when you don’t FEEL like doing it.”

Practice perfects discipline as it ingrains habits and good habits render good results over time, and habits lower the amount of energy needed to implement something because much of the decision making has already been made. You see, when the market gives me profits I take them. I can always go back in and grab some more. I know...I know...“but commissions will eat you alive...hang on for more profit make less trades and lower commission cost” BS for a scalper. If you are gonna scalp you are gonna pay out commissions. It is a cost of doing business. Worry more about devising a “modus operandi” that puts you winning over and over and commissions cost will fade in the background of potato chip money....cracker jack change. Besides don’t you care about your broker? He has a family to feed and he has to make a living too. Let him get a slice of the pie. LOL

We even fall into this trap of sunken cost with our trading strategies and tactics. “But I have invested so much in learning this....I just got to keep trying...I can’t just set it aside...” We won’t let go what cost us a lot to get even if it isn’t producing for us. “It has to work my guru is making piles of money”

The tendency to become a victim of sunken cost is connected to a theory called “Prospect Theory”. Prospect theory explains how we make decisions when risk is involved. There is a phenomenon called loss aversion within prospect theory. Loss aversion means we are willing to give up a lot of potential reward to avoid a chance of loss. We fear the pain of losing more than we value the reward of winning. We despise and fear the consequences of losing way more than we embrace or value the feeling of winning.

Traders often use such concepts to construct a “modus operandi“ for long term investing. They will sing the ole tried and supposedly true song of ivory tower construction... “Let your profits run” To some degree, for investing, there is a ring of truth to this. The loss aversion they fear is the FOMO on bigger profits. The problem is in a very bad year they will hold and their advisors tell them “hold it will come back”. In the end it WILL probably come back but can you hold and hold without your account getting decimated and can you add to your position and how long will you have to wait for it to come back? This “modus operandi” does not work for a day trader who is scalping 1 to 8 points in say the ES or MES or NAZ.

I have always despised losing. Since I was a child. So it, on the surface, may seem like I have fallen prey to loss aversion since I sing a different tune namely “cut your profits short” and “average into your losers”. Surely I have fallen into the trap of loss aversion. Actually, it is just the opposite. I value the reward of winning and embrace the feeling of winning more than I despise losing. Hence I develop mechanisms (strategies and tactics) that keep me winning. I lock in those profits! There is no metric more important in trading than winning. I know the arguments. “Yes but you can have a low win rate and make more money than with a high win rate.” NOT IN SCALPING. And in my opinion it is a piss poor way of looking at even investing. Why would a trader or investor just “wanna” have a low win rate? If he can make money with a low win rate he can make even more money with a high win rate.

Look we can sit down with calculators and in theory prove just about anything. But in the real world of push and shove theories can get blasted to the moon and crash there. The markets can never be completely nailed down. NEVER! We can never know all the variables, the whys, of price moving the way it has. However, we can capitalize on the inertia and momentum of market moves. They a generally brief. Especially in scalping. So, do those things that puts you winning. Dispense with “hang on to your winners” as a standard operating procedure. The only time you should do that in scalping is when the dynamics of price movement, AFTER your entry, is clearly in favor of hanging on and letting your profits run. SL’s have to be placed correctly or successive losses will nickel and dime your account to death on too tight of SL’s. Not understanding and identifying contexts can decimate your account. Not seeing and understanding price patterns, the when, and how, they will probably work, or not work, can do damage to your account. Not taking profits at the appropriate time will diminish your account, especially when scalping.

ALL OF THE ABOVE ARE MY OPINIONS ONLY. I would not advise you to follow them even though I try to myself.
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Well, I don't eat potato chips so should be good to go!

volpri · Jun 14, 2020

GrowleyMonster said:
Well, I don't eat potato chips so should be good to go!
More...

Lol

Tradex · Jun 14, 2020

Grantx said:
You sound like you are paraphrasing books and articles.
More...

While I did read hundreds of trading books (and I am still reading new ones each month), my knowledge of the market comes strictly from the School of Hard Knocks.

It is impossible to become a successful trader just by reading books, just as you cannot become a Kung Fu Master just by watching a couple of Bruce Lee movies.

taowave · Jun 14, 2020

100 bucks to each member who read that from start to finish

volpri said:
A day trader has to drill himself on the mechanics (strategies and tactics)until they become second nature or the amount of energy expended in the heat of trading will drain you and colosal mistakes will result. That is why I tell people SIM..SIM..SIM. Trading is a very high performance activity. And as a human you cannot perform well if you have not trained and practiced. You cannot be at the top of your form sitting on the couch eating potato chips. In day trading hundreds of decisions have to be made and made quickly. A day trader cannot afford to have the mechanics of trading become rusty and unused. If I am having a bad day and losing money and just can’t seem to get on the right side of the market I just stop trading with money and go to SIM trading and keep pushing. If that fails I may just need a break. Grab a fishing pole and go fishing....

There are a lot of factors that can affect performance in trading. Environment (market conditions), psychological conditioning at the moment, other stresses one faces unrelated to trading, lack of focus, too many things on your plate, size of your account....etc

Don’t keep throwing good money after bad. Find ways to circumvent that. In trading going to SIM for a bit can help. It is practice. Practice builds routine. Routine lowers stress levels and increases focus and clarity.

It is easy to fall into the error sunk cost fallacy. A trader can fall victim to sunk-cost fallacy. It is a cognitive tendency or bias referring to the act of making future decisions based on past investments. For example, when you have trouble throwing away those old tools you are thinking to yourself, “what a waste to throw away these garden tools away“ (even though they are old and used up). “I’ve spent all this money on these tools.” Even though you never garden anymore and clearing them out of the shop would open up space for tools you actually need. We are the only animals that act in this irrational way. Even rabbits are smarter than us and keep looking for rewards in the future rather than dwelling on the past.

In trading the next trade has nothing to do with the previous trade. It is a total independent activity. We have to learn to psychologically “let it go” or we will find ourselves caught in a downhill spiral the rest of the trading session building one loss upon another.

Also we best not forget that the implementation of mechanisms can get rusty and practice is needed to rejuvenate the implementation of doing what you already know to do.

“DISCIPLINE is paying attention to detail and doing WHAT you need to do, HOW you need to do it, and WHEN you need to do it even when you don’t FEEL like doing it.”

Practice perfects discipline as it ingrains habits and good habits render good results over time, and habits lower the amount of energy needed to implement something because much of the decision making has already been made. You see, when the market gives me profits I take them. I can always go back in and grab some more. I know...I know...“but commissions will eat you alive...hang on for more profit make less trades and lower commission cost” BS for a scalper. If you are gonna scalp you are gonna pay out commissions. It is a cost of doing business. Worry more about devising a “modus operandi” that puts you winning over and over and commissions cost will fade in the background of potato chip money....cracker jack change. Besides don’t you care about your broker? He has a family to feed and he has to make a living too. Let him get a slice of the pie. LOL

We even fall into this trap of sunken cost with our trading strategies and tactics. “But I have invested so much in learning this....I just got to keep trying...I can’t just set it aside...” We won’t let go what cost us a lot to get even if it isn’t producing for us. “It has to work my guru is making piles of money”

The tendency to become a victim of sunken cost is connected to a theory called “Prospect Theory”. Prospect theory explains how we make decisions when risk is involved. There is a phenomenon called loss aversion within prospect theory. Loss aversion means we are willing to give up a lot of potential reward to avoid a chance of loss. We fear the pain of losing more than we value the reward of winning. We despise and fear the consequences of losing way more than we embrace or value the feeling of winning.

Traders often use such concepts to construct a “modus operandi“ for long term investing. They will sing the ole tried and supposedly true song of ivory tower construction... “Let your profits run” To some degree, for investing, there is a ring of truth to this. The loss aversion they fear is the FOMO on bigger profits. The problem is in a very bad year they will hold and their advisors tell them “hold it will come back”. In the end it WILL probably come back but can you hold and hold without your account getting decimated and can you add to your position and how long will you have to wait for it to come back? This “modus operandi” does not work for a day trader who is scalping 1 to 8 points in say the ES or MES or NAZ.

I have always despised losing. Since I was a child. So it, on the surface, may seem like I have fallen prey to loss aversion since I sing a different tune namely “cut your profits short” and “average into your losers”. Surely I have fallen into the trap of loss aversion. Actually, it is just the opposite. I value the reward of winning and embrace the feeling of winning more than I despise losing. Hence I develop mechanisms (strategies and tactics) that keep me winning. I lock in those profits! There is no metric more important in trading than winning. I know the arguments. “Yes but you can have a low win rate and make more money than with a high win rate.” NOT IN SCALPING. And in my opinion it is a piss poor way of looking at even investing. Why would a trader or investor just “wanna” have a low win rate? If he can make money with a low win rate he can make even more money with a high win rate.

Look we can sit down with calculators and in theory prove just about anything. But in the real world of push and shove theories can get blasted to the moon and crash there. The markets can never be completely nailed down. NEVER! We can never know all the variables, the whys, of price moving the way it has. However, we can capitalize on the inertia and momentum of market moves. They a generally brief. Especially in scalping. So, do those things that puts you winning. Dispense with “hang on to your winners” as a standard operating procedure. The only time you should do that in scalping is when the dynamics of price movement, AFTER your entry, is clearly in favor of hanging on and letting your profits run. SL’s have to be placed correctly or successive losses will nickel and dime your account to death on too tight of SL’s. Not understanding and identifying contexts can decimate your account. Not seeing and understanding price patterns, the when, and how, they will probably work, or not work, can do damage to your account. Not taking profits at the appropriate time will diminish your account, especially when scalping.

ALL OF THE ABOVE ARE MY OPINIONS ONLY. I would not advise you to follow them even though I try to myself.
More...

destriero · Jun 14, 2020

taowave said:
100 bucks to each member who read that from start to finish
More...

Dude is special. Can you imagine anyone who's successful posting that garbage. A real autiste.

taowave · Jun 14, 2020

..I can't imagine anyone having the time to read it let alone post it

destriero said:
Dude is special. Can you imagine anyone who's successful posting that garbage. A real autiste.
More...

Grantx · Jun 14, 2020

Tradex said:
While I did read hundreds of trading books (and I am still reading new ones each month)[/IMG]
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Wow, hundreds?

Master shifu said it best There's so much wisdom in here, I can't find anything.

Tradex · Jun 14, 2020

Grantx said:
Wow, hundreds?
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Just 2 books a month for 20 years = 480 books.

murray t turtle · Jun 14, 2020

Nobert said:
Congratz.

How much of the real $ it took you, to learn this / to make this decision ?
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%%
Good news& bad news,Nobert.
The bad news is swing/position trades+ investments can crush your emotions also.
The good news is dividends/profits/more dividends help ease the pains.
With college costing between $25k to 250,000 for 4 years, consider yourself blessed if you learn to trade /invest for less than that...……………………………………………………..

murray t turtle · Jun 14, 2020

Tradex said:
Just 2 books a month for 20 years = 480 books.
More...

%%
Good math;
2 top trader books by jack schwager/ 480 times can help much also. I gave away a jim rogers book to the library + then checked out my own book again /LOL/true. [i'm not jim rogers/ I mean his book I gave to library]