Knowing When Enough is Enough, and When It's Not Enough RAMOUTAR REPORT Vol 9 To reiterate the disclaimer: The ignorant and malicious are free to reveal themselves with replies that I will not acknowledge. The inquisitive and intellectually stimulated are invited to post constructive replies, and or questions. Knowing When Enough is Enough, and When It's Not Enough I was inspired to write this report after helping three traders over the last several weeks. I helped one trader admit that it was time to end his career, and the other two get back on track. There comes a time when each of us has reached the crossroad, and we must make a choice: to continue on trading in spite of not reaching our goals and objectives, or cut our losses and quit. When making that fateful decision, there are a few more items we need to consider and questions we need to ask ourselves: Rule Number One: YOU ARE 100% ACCOUNTABLE FOR ALL OF YOUR ACTIONS. Placing the blame on someone else other than you is a self-destructive path and obstacle to self-improvement. I know a trader who has arguments with his wife, and blames her when he has a losing trade. She wasnât in the room and she didnât click the button. Question Number One: How Did I Get Here? I often get lost while driving, and I donât always stop and ask for directions. One of the first things I do I make a U-turn and drive back to the first familiar site. Whenever I have a map and a clear set of directions my chances of getting lost are minimal. What event or (more likely) chain of events brought me here? One of the key ingredients in trading, and life isâ¦honesty. You must be completely honest with yourself if you expect to succeed or reach your goals. As painful as it may be, recall as many events as you can and document them. This task is much easier when itâs done on a regular basis, if you donât already have one consider keeping a trading diary. If possible, document the attributes for the result of every trade. Start with the personal reasons first. Did you follow your plan? Did you get greedy or fearful? Why did you get greedy or fearful? Trading is as much about losses as it is about profits. Thatâs why you have stops; you assume that you will take a loss as much as you hope for a gain. Reading through your own entries can be very enlightening, and disappointing. Rule Number Two: THE DEFINITION OF INSANITY IS DOING THE SAME THING OVER AND OVER AGAIN, AND EXPECTING A DIFFERENT RESULT (A. Einstein) Question Number Two: What is the cause of my chronic losses? Am I following my Personal Trading Plan? Am I following my plan for every trade? Am I chasing? Do I have predetermined entry, stop, and target and risk reward ratio for every trade? Etc, etc, etc. The diary will help you pinpoint these reasons if you have the memory and patience to record them. When you have identified the most frequent reason, focus on eliminating it. How do you eliminate it? Ask yourself if you repeated it after youâre in the trade. Ask it aloud, thereâs nothing wrong with talking to yourself Rule Number Three: THE DIRECTION IN WHICH WE ARE HEADED HAS A LOT TO DO WITH OUR DESTINATION (Confucius) Question Number Three: Should I decrease my exposure (share size) until I conquer the trading demon(s)? Many of us do not possess the discipline to eliminate the weakness shortly after we discovered it. Reducing your exposure until you have conquered the trading demon(s) will put a tourniquet on your equity will and will help ease the pressure. Rule Number Four: ONE TRADERâS STRATEGY AND TIMEFRAME MAY BE ANOTHERâS DOOM Question Number Four: Are the requirements of your primary strategy and timeframe compatible with your resources? I spoke with a trader who is battling a sickness that has decreased her daytrading P&L. However, her swing trading P&L is consistently profitable. When reviewing her trading diary, she found that many of her swing trades losses were caused by daytrading distractions. She stopped daytrading, and focused on swing trading. Her Sharpe Ratio on ROI increased dramatically. She later told me that she was afraid to stop daytrading in fear of what her trading buddies would think of her, and what the firm would do with her commission schedule. Even though sheâs lonely at the water cooler, and her commissions went up slightly her P&L speaks for itself. Rule Number Five: YOU ARE THE ENVIRONMENT AND COMPANY YOU KEEP Question Number Five: Does the environment I trade in and the company I keep help or hurt my trading? If you are not comfortable in your environment, change it or adapt. In the long run, changing the environment is easier than adapting to it. The company you keep is not just the traders you mingle with, but web-based groups and forums as well. Negative people and surroundings will not help you. Positive reinforcement and sources of help and healthy discussion will help you achieve success. Rule Number Six: HAVING THE RIGHT TOOLS, HELPS YOU GET THE BEST RESULTS Question Number Six: Am I using the right tools? I am often amazed and amused by traders who pinch pennies on their tools, but chase stocks for several hundred dollars. Until broadband was available in all areas, there were several traders that I knew who would not trade up to DSL or cable modem because the cost was too high. If youâre not maximizing what technology has to offer without breaking the bank, then you will continue to suffer the consequences. My results improved dramatically when I dropped a quote platform after using it for eight-years. Platforms and providers like eSignal are on the cutting edge of technology, and offer the reliability that is a necessity. Rule Number Seven: THE LONG TERM EFFECT OF AN ACCOUNT WIPEOUT IS FAR MORE DAMAGING THAN THE BRUISING OF AN EGO Question Number Seven: Am I committed to changing my future? The only way you stand a chance of becoming successful is having the fortitude to execute the change. Our egos have a tendency of standing in the way of our success, and at the end of the day the ego is meaningless. Your evolution, and honesty with yourself will make you a superior trader. If you are not willing to be honest with yourself and execute the change, you should say, âenough is enoughâ and close your account immediately. If you donât, it will be closed for you soon enough. Rule Number Eight: YOU CAN ONLY DO WITH WHAT YOU HAVE. Question Number Eight: Do I have the resources to change and continue? Do you have the time, capital, education, discipline and patience to continue trading? The only way to be certain about this is to create a Personal Trading Plan. If you do not have the required resources, you do not have enough and you may harm more than one person if you continue on. Admitting that itâs time to end it is a big step and very difficult to accept. Sometimes enough was not enough, and you if you have the required resources, you should take some time off and reevaluate your plan before turning a new leaf and trading again. Rethink your strategy, and get some more education. The best education is given by the market, and for that reason you should re-enter with a substantially lower exposure until you find some positive consistency. These are eight rules out of a possible one thousand. The most important lesson here is being honest with yourself. You may find previous reports at these links: Volume 1 â Fear an the Market http://www.elitetrader.com/vb/showthread.php?s=&threadid=19559 Volume 2 â Switching Timeframes http://www.elitetrader.com/vb/showthread.php?s=&threadid=19881 Volume 3 â Elements for Successful Trading http://www.elitetrader.com/vb/showthread.php?s=&threadid=20208 Volume 4- What Are You Looking At? http://www.elitetrader.com/vb/showthread.php?s=&threadid=20285 Volume 5 â Building Your Trading Stable http://www.elitetrader.com/vb/showthread.php?s=&threadid=20510 Volume 6 â What Really Drives Prices. http://www.elitetrader.com/vb/showthread.php?s=&threadid=20998 Volume 7 - Trading Is War (typo as Vol 6) http://www.elitetrader.com/vb/showthread.php?s=&threadid=21849 Volume 8 - To Adapt and Evolve is To Succeed http://www.elitetrader.com/vb/showthread.php?s=&threadid=22821 If you have any problems with the links go to search, and type in Ramoutar report, or PM me for links. You may also find me at www.esignalcentral.com I sincerely hope this post helps those of you have reached the crossroads!
I enjoyed your articles and the ones you have been doing for esignal, keep them coming. I noticed that you're using esignal now, and saw your review here on elite. I'd like to hear some of your thoughts on them and why you "dumped" RealTick. Thanks.
I'm glad you enjoy the articles. I actually have liked eSignal for many years, and had the pleasure of working with many of the staff members on several projects. Like many human beings, I am a creature of habit and was just used to using the same thing for so long. eSignal's reliability and product development is unmatched in my opinion. Their recent interface with the BTS execution also offers many advantages in order execution. The institutional arena and many individual traders like myself are fed up with RealTick's performance, reliability and split business model (quotes and execution). When using a quote vendor who also makes money on the service bureau, the list of priorities changes. The reliability, open resources, interfaces, backtesting, efs's and competitive pricing make the choice obvious. I regret not using eSignal a long time ago.
Free trial- I have recommended to others, going to www.esignal.com and clicking on support then "live support", a rep will be there to answer any questions you have. Layouts- I have several purpose specific layouts: trading, daily scanning, multi-timeframe analysis, momentum analysis, broadband and dial up layouts, etc. etc. Send a PM with your email address and I'll send the attachments with instructions of where to insert them. Plan revision- Absolutely. I always adjust my trade size and frequency lower, until I feel comfortable with the new system. It was a little different for me, because I knew eSignal quite well. Articles- I'm not quite sure of the duration or frequency of my eSignal articles, but will try and inform you once they are out. If you'd like to learn more about how I use eSignal or would like to view other articles, come visit me at http://forum.esignalcentral.com/ in the "Trading Strategies and Software" forum.