Sommi, it seems you are a kind of "short gamma" trader like option sellers or MMs/Liquidity providers( You make money most of the time but hit a monstrous loss once in a while ). I am too, and I wonder : Do you see yourself doing the same thing in 10 years when you will have kids to take care of, responsibilities...?That's a question I have trouble answering for myself( even though I never lost more than 1-2 month of gains in a "black swan")
I have many stories about friends who I've tried to help (and even told them to copy my trades 1 for 1 every day until they get the hang of it after a month) but it's not enough. Some people just want to figure it out by themselves. This game doesn't reward ego or pride or doing it yourself unfortunately. That drawdown I took was big, but believe me there were about 4 times after that where I was 'tested' and I took the loss every time. I was very proud of that and I'm actually taking smaller losses today. I don't worry about myself but I worry about others who haven't been tested yet but are taking double the risk they should (because in a mass skew event they can lose 6 months instead of say 3 months worth). I'm forever haunted and scarred by that day so it's impossible for me to have a gambling tendency to just let it all go forever now. Hey friend, I used to have that style for the first 4 years of my trading but I have significantly changed that this year. My losses are now a little more frequent (~2-3 days a month instead of mostly 0 or 1), with less Win percentage days in the month, but my downside is obviously way more protected because I have specific time stops which are even shorter duration than they used to be (in other words I have an earlier "I give up" button because markets arent as healthy moving as it used to be). So the reason why my loss frequency went higher is because of adapting to these conditions. Maybe you can do the same thing to protect yourself? Ask yourself, how often when you go 30% of your black swan stop, does it actually come back and how far? For me, it was 1/5 times it comes back. So I actually changed to the point to not get too aggressive like I used to, and now I can accept -$30k losses and move on. Much better than staring at -$100k imho We've had to change with the times because there is much less 2-way action in spreads across all markets, so risking heaps in on any one trade makes no sense.. you just can't make it back. By the way, I didn't change to this style on purpose.. its because the spreads we are involved in have less binary payoffs, and forced me... I was trading them wrong in the early period and would do very very bad and harmful pnl damage until my friend helped me out with the conditions. So its not like I was doing it right, I was wrong many times first. Having the best risk/reward metrics necessarily because you may never get exposed... but in these conditions, with lower volatility and lower 2-way action the bad trades get exposed time and time and time again. In 10 years we hope that trading is still going well but these risk principals will never die! Losing 1-2 months of gains in a Black Swan is where you want to keep it at. Be very proud of that. Ive heard of one of the big traders going ~8 months down, and multiple times over the past few years, and having to scalp and trade it back! Its not worth being that guy... so we always build a buffer and keep sizing up to cover expenses for the year and a nice safety net. I'll give a little explanation of what we did to evolve our risk metric trading if anyone is curious: Risk Metrics For current market conditions across all interest-rate related products, volatility is heavily subdued even in the long-end. It is statistically bad/red to be leaving larger drawdowns on the table to accept the now (lower) average profit per day. If youre only ending up half a black swan stop on average then you need to be even more careful with your downside approach. I do not trust market conditions to be positive EV if you set conditions on price movement with a dollar stop. Every trade I've seen like this is RED Ev (aka. do not trade with a "Im making point A money or losing at Stop B point". You must use all dimensions in these conditions I feel: 1. Do not trade with a dollar stop -- instead make it a function of Time and Volume (when most of the days volume is done and its a certain time region, its time to exit because the session is pretty much done for your trade) 2. Mark out all volume indicators and jump in on them -- noise trading is dogshit compared to news/top tier data trading so you are way better off participating (with either scalps or momentum level plays) in higher volume periods. This is usually just 15-20mins around data figures or the most active period of your product (for example I have the 4hr session pre/open area for the U.S. Curve products marked) 3. If you have a problem exiting at one point, put a 2-hour time window and get half out at the beginning, and then half out at the end. This helps a lot of people trying to get that golden spread price who just hate paying across a slippage intensive market when we are hunting for ticks badly Finally i'll add, every time you don't think "I am exiting this trade at time [whatever] if it hasnt come back.. its a ticking time bomb. I can only say this because its happened too many times and I've learned the lesson! I hope someone can instinctively fix theirs now before its too late. Literally.. I had to learn this lesson 7-8 times before someone had to tell me Im a f*cking idiot and need to exit. We all want a magic potion to drink to fix our trading but the truth is that its the tiniest, little actions (after some heavy philosophical/statistical work in the head) that actually make the big impacts over a month or quarter.
totally agree. Managing ego is really hard. After a long string of winners, cutting a trade for a small loss and not re-entering is tough. You have to know yourself really well and have the presence of mind to manage yourself real time.
Well, if that's really the case, then I can only envy your altruism and open-minded nature. I'm still really far from getting to this level of self-consciousness.
I am one of those that benefited from your posts and helps. Thank you sir. I don't day trade anymore, too hard for me. I am now full time trading options (for the last 3 1/2 years) as I find that a lot less risky.
Thanks for your insights s0mmi, great stuff. Would like to ask you what your thoughts are on order flow trading and the related software coming out these days and if it helps your type of trading? It seems to be getting popular as a way of trading for the retail trader to help against algos etc?
You should always be skeptical. Always. I can tell if someone is scamming or genuine because Im in the game every day, but its unfortunate when people get conned. I have a record of my entire trading career from starting. I haev struggled this entire year (can see by the giant 100k swings up the top), but am working on some brand new strategies and my confidence has been restored. Hoping for another mountain climb in the upcoming months, years and decade. Im always open to helping people if theyre willing to commit to the game. Im taking on a friend at the end of the year and if I can get him on the path to my level then I may consider others. My pNl is nothing special especially considering its full time and that I have to start from scratch again. I am a peanut compared to many guys I know.
One of the Best informative posts I have seen in awhile as this subject seldom talked about on Interest rates. If it not day trading Indexes or swinging stocks, most won't see this as a gem cause people want to "see" signals instead of creating their own. Excellent post, thank you. Do you carry positions over night? The only spread I day trade in ES/NQ, the Financials are mostly in/out in a month. I use to love doing the mob spread, too bad exchanges get rid of Muni futures.
Hey friend. I Used to do some over night positions (I have tried many many things like EUrodollar spreads, Oil spreads, Oil butterflies, and other Bond stuff) but I have since stopped them. THe risk/reward does not compare to Day Trading using some better strategies. If you are day trading the ES/NQ, I really recommend doing the following: 1. Bring up 3 ladders: --> Nasdaq, Eminis, Dow Jones All of them should be fat and thick. Hopefully you use a proper scalping program like X_Trader or Jigsaw (ninja trader addon), CQG is also possible for it. You line up the ladders and trade it from the U.S. 8am to midday I also advise: Eurostoxx with Dax ladders. Scrunch the dax up. Use market profile and volume leads, its very very transparent. Trading outright is 10 times easier than spreads. Janet Yellen is a wh0re and a f*cking sl*t, there is no hope for spreaders next year or the year after. She catered to Wall street and is continuing this credit bubble at dangerous interest rates. Instead of fighting it, we have to just go with whats easy. Btw when you trade those products, just trade the Emini and just trade the Eurostoxx. Theyre the thickest. ANy other Q's let me know