by the way ... if you meant "revenge trading" ... thats even worse than "impulse trading" the good news is ... you are doing this in small size ... so your lessons learned will be worth it just do not waste too much money on this approach if you see it is not working out for you ps ... do you sometimes do this sort of thing at a casino or racetrack ?
the gut feelin' u are referrin' to is a particular emotion, very characteristic, u feel when u see an attractive set up or a tale tell signature on the tape that u've seen countless times before...at the time u will act immediately but it is not an impulse, rather an action u take after, in your brains, u unconsciously complete the process of calculatin' the odds, scannin' in your memory for similar situations u've encountered already.
I dont revenge trade, I never have..UNLESS you consider trading the same stock after a loss, trying to make a gain. But I look at it as "Trial and error", NOT revenge. I dont just make a trade, lose money, then go "Well that sucked" and re-enter. After a bad trade I ask myself why I lost. Most the time its because my stops are too tight, or because I'm inpatient and sell before the market goes in my direction. ps ... I dont go to the casino or track, i'm too young. - nathan
That is actually revenge trading in action if not in affect. The reason you are getting such a strong response in this thread is that impulse trading is the enemy of most traders and has at one stage or another done most of us harm. Part of the problem is that you can get away with it at times. Another part is that it can feel more satisfying than "real" trading. Perhaps the worst part is that it is likely to suck you into a pattern that may work well for a while (months maybe) and will then destroy your account. But you might be lucky. If not you will feed the other more disciplined traders and thats not a bad thing either. If you don't want to rely on luck you need to think carefully about what you've been doing that works and turn it into your method of trading. Systematize it. Right it down. Then follow it with discipline. Carry on noting what doesnt work so you can improve your system (but dont confuse didnt work today with probability of some failures) BUT don't introduce new things until you have gone back and tested them on your old data and perhaps forward tested them on paper or very small size. Good luck whichever approach you take.
Kiwi Thanks, I'll take the advice from the more experienced traders such as yourself, with one last question. Is there any such thing as "good" impulse trading..or is it all bad? And what about the traders in the pit and on the floor who've traded for many years..Would it be safe to say that they've gotten to a point where they can impulse trade successfully? - nathan
They are almost certainly not "impulse" trading ... at least not the good ones. What they will have done is taken whatever rules they used/were taught and internalized them to the point where they appear to be impulses. A very small number may have been lucky and their original impulses may have been "great" and they never had to figure out a set of rules to govern their approach. One of the difficulties floor traders face is that if they have internalised their approach to the point where they can't explain much of it to themselves or others a change in the markets may leave them with a faulty set of behaviours. Thats one of the reasons why traders may be successful for a while and then fall to the markets seasons. Or they may inject an extra impulse thats not compatible with what they have been doing - you read stories of wildly successful and unsuccessful floor traders. One of the best things about writing down what works is that you can test it and 1) prove it, 2) see if you are missing something, 3) see if the market has changed in some way (summer doldrums? bull, bear, sideways) so that your rules need to be adjusted. You might want to look for Mark Douglas's "The Disciplined Trader" in your library or download the interview on it from the TASC shop.
Yes there is. If you want to trade actively do it. There is nothing to feel guilty about. What you are calling an impulse is the "edge" that sets you apart from all other traders. Now a lot of experienced traders reading this post will say I am crazy. Your "impulse" is impatience, addiction to activity, boredom, etc.... etc.... etc... You know they might be right 50% of the time. You being a young inexperienced trader you probably will mistake these feelings for "impulse"(edge). As you get used to trading more actively you will develop an understanding of yourself and what works and what does not. Some people have recommended that you trade at a prop shop. That is probably a good idea for a young trader like yourself. You will be surrounded by other traders who will be trading in a similar style. Also you are right Chicago pit traders did and DO trade actively. If you read some of my posts you will see that I trade actively and do not use charts. If you want to trade actively you will have to follow some simple rules. 1. Your commissions must be very low. If your commissions are not very low the only one who will benefit from your active trading style will be your broker. 2. You must keep your losers very small. 3. Do not add to losers!
Kiwi wrote They are almost certainly not "impulse" trading ... at least not the good ones. What they will have done is taken whatever rules they used/were taught and internalized them to the point where they appear to be impulses. A very small number may have been lucky and their original impulses may have been "great" and they never had to figure out a set of rules to govern their approach. One of the difficulties floor traders face is that if they have internalised their approach to the point where they can't explain much of it to themselves or others a change in the markets may leave them with a faulty set of behaviours. Thats one of the reasons why traders may be successful for a while and then fall to the markets seasons. Or they may inject an extra impulse thats not compatible with what they have been doing - you read stories of wildly successful and unsuccessful floor traders. One of the best things about writing down what works is that you can test it and 1) prove it, 2) see if you are missing something, 3) see if the market has changed in some way (summer doldrums? bull, bear, sideways) so that your rules need to be adjusted. After I read Kiwi's post I needed to add to what I said. Kiwi is right you will have to understand what your edge is. Writing a journal will be important. Also making a spreadsheet that breaks the trading day down into average winners and average losers is helpful to understand what works and what does not. I have attached the spreadsheet I use to analyze my trading day. Hope this helps.
Another thing if you are interested in scalping you should read the posts from Futurestrader71. He is a very successful day trader. Do a search on his ID and read. He has written some very useful stuff!