OK - this is going to cause a stir.... What I WANT is to execute consistently. I have a Trade Plan at present that calls for 5pt stops. On trending days this trade plan gives me more entries. I'm fine with that. Removing the exit / profit target criteria was a simple means to reduce the complexity and stress of what I was doing. It added another hurdle in the development process and so I took the variable out of the equation. My performance metrics improved as soon as I did that. Could I take 1 contract off at 5pts and let the second one ride? Yes. Absolutely. Throughout this whole sim / demo trading process have I curtailed the profits by taking 5pt trades? Yes. Absolutely. Could I reduce the amount of trades (and commissions!) by sticking with the one entry at a pivotal level? Yes. Absolutely. Is my trade plan optimised in terms of profit potential? Absolutely Not. However - at present this reflects my 'level of development'. The trade plan I have at the moment will no doubt evolve over time. Maybe it's my experience in I.T but I consider this an iterative process. I am on Trade Plan v1.3 - in a year I will be on v1.5 etc.... I don't need to stay in for the big moves today - the market will still be there tomorrow and a year in the future. It will present challenges and opportunities in equal quantities just as it does at present.
This post is just saying what several others have said in a slightly different way: At about 42 min Mark Douglas talks about sim trading versus live for about 5 min. I’d read his book many times and done the 20 trade exercise many times – but when I heard him talk about sim trading it meant something different. And a big part of the difference was having DB’s process of observe to back test to forward test to sim to live… and having your statistics carry over from one phase to the next. I paid thousands of dollars for classes and one-on-one mentors who all said that sim trading was a waste of time. It wasn’t until I heard Mark Douglas talk in the video that a light went on and I understood a value for DB’s process. Let me back up one step further. A couple of years ago I watched a trading video of some lady trading psychologist (I don’t recall who) who said if you have a single losing trade, or if you are losing from day to day, stop trading until you figure out why. That made no sense to me, because I was taught that by trading small and trading often I would work my way thru to trading success. Gain experience, pay my dues. And if I did stop trading, it would be only for a short time and I’d try something different by trading live, small and often. That never worked. And with the people I kept up with from my classes, I don’t know one single person for whom it worked either. I’m saying all that to say that trading live with one contract can do total damage if you keep learning to lose with one contract. In contrast, if you plug whatever you are doing into the process of back testing, forward testing etc, and actually stop trading anytime your stats are not carrying over to the next phase – and figure out why, then you have a chance. Mark Douglas says that if you are consistent in sim and your stats don’t carry over to live, it is a ‘graphic demonstration of the gap that exists in terms of mental skills that you need to acquire.” You can work on those mental skills in forward testing and sim; in the process. So yes, trade live. But if your stats don’t carry over – stop. Figure out why by looking back through your process and get it right before you go live again. You may have to do that a few times. As a slightly different topic, some people may quit trading when they realize this process can be never ending. The market keeps changing, or you see something new you want to test. And there you go again. Some find that endlessly fascinating. Speaking of going, its vacation time for me. Look forward to seeing how you are doing on return! Thanks for posting.
Just stepped back in and saw this post. I've heard people mention that specific video but hadn't found it yet. Much appreciated. "trading live with one contract can do total damage if you keep learning to lose with one contract." That really resonates. I guess the question is what to do next? Should I keep sim trading? Gather more data..? At what point is enough enough? I've always heard the recommendation to double your account 3 times in sim before trading live. I had thought that 3 batches of sim trading with the same results +/- say 5% was a good threshold. Though from what people are saying it is less about the metrics and more about ingraining the right habits, mindset etc Hence why I thought undertaking the 20 Trade exercise live whilst minimising the potential loss. I'd appreciate peoples thoughts on this.... Thankyou for taking the time to post Hooti! Enjoy the vacation!
Trading plans invariably become egocentric. A few traders get past that and move on to a different level, but most of those who begin the process of developing a trading plan do not (most traders, of course, don't begin at all). Because the process is egocentric, the chief concerns are where do I enter, where do I exit, what should my target be, what should my stop be, how much risk can I tolerate, and so on. The character of the market itself is a secondary issue at best. What is paramount is how the market can serve the ego rather than the other way around. The market couldn't care less about the trader's entries and exits and stops. The market couldn't care less about what the trader wants. The market couldn't care less about the trader's personality. The market functions in a certain way. It has a certain structure. If a trader is to be truly successful, i.e., more than just "getting by", he must understand these functions and this structure, neither of which have anything whatsoever to do with him. One begins, of course, again, by observing the market, characterizing it, then formulating hypotheses that tentatively explain its movements. One then tests those hypotheses in order to determine whether or not they are true, i.e., predictable and reliable. Only after all this do the matters of how to take advantage of what one has determined come into the picture, i.e., entrances, exits, stops, etc. It is at this point that the process becomes almost entirely egocentric, e.g., how much risk can I tolerate, and the market itself becomes largely ignored except insofar as it serves the trader's needs and wants. But the market couldn't care less about the trader's needs and wants. And this results in a perpetual frustration among those who focus on themselves rather than on the behavior of price (which is the aggregate of the behaviors of everyone who is participating in the market). If, for example, the trader is focused not only on breakeven but on getting to breakeven as quickly as possible, he is focusing not on the market but on himself. One of the more obvious consequences of this, particularly if the trader is "stopped out", is that the trader dwells or even obsesses over his "failed trade" and completely ignores what the market has told him by having come back to or exceeded his entry point, thus preventing him from evaluating the situation and preparing for the next trade, especially if it happens to be in the opposite direction. I suggest, therefore, that those who are serious about developing trading plans focus on the market and on price behavior rather than on themselves, unless they want to spend years trying to reconcile two forces which are in many ways mutually incompatible. If one enters correctly, for example, issues of stops and breakeven and size and "targets" become irrelevant. If one doesn't enter correctly, then of course he has to exit. But his doing so has nothing to do with his hopes and needs and wants and desires. Rather it has to do with the fact that he read the market incorrectly. One should, in fact, once he has entered a trade, forget about the fact that he entered the trade at all and instead focus on the market. Only in this way will he become "available" to profit from what the market has to offer. Nearly all traders except for beginners are in a quandary: they are eager to trade yet are afraid to trade. Thus they seek to exploit the market while simultaneously insulating themselves from any negative consequences of attempting to do so. That's what the bulk of these millions of posts here and elsewhere are all about. Only an infinitesimally small number of them are focused on why price moves as it does. Which is why there are so many millions (billions?) of posts.
Thankyou for yet another considered posting dbphoenix! It is appreciated. I agree with the need to detach the ego from ones actions and observations in the market. I think I noted it before in this journal that in my experience the specific entry level becomes almost immaterial once I have detected the shift in Supply / Demand. It therefore sounds contradictory when I say that taking 5pt profits reduces the stress - after all if I was so sure of the shift in dominance of one party over another then I should simply wait until the next shift occurs in order to exit..... Maybe people are reading between the lines and finding inconsistencies and errors in judgement with what I've written to this point...?
Inconsistencies such as there are or may be are part of the process of divorcing the ego from the development of a trading plan. Of course taking 5pt profits reduces the stress. But what is the source of the stress? Perhaps looking at what you have to see in the market to tell you that you were right and what you have to see in the market to tell you that you were wrong, without regard to where you entered or even if you entered at all, is one avenue to explore. The SLA doesn't include stops for a reason. Nor does it include targets, again for a reason.
In hindsight, when things had gone from bad to worst, we can sit down and review a poor trading day to determine what went wrong. In contrast, its extremely tough for many traders to do such while trading live between trades before the trading day completes. This is where the mental skills are needed and maturity to be able to adapt the mental approach (not so much the trading plan) and properly be ready for the next trade. Simply, I'm a big fan that if there's a losing trade and I don't know what happen...I will stop trading until I figure out what went wrong. Yet, as soon as I determine what went wrong in a losing trade, I will begin preparing to trade again. If I can't figure out what went wrong in real-time...I'll call it a day and then rely on hindsight analysis after the markets close when I'm more relax (not in the stressful trading environment) to try to figure out what went wrong. Most of the time, the answer is just me (not the trading plan). I then need to resolve the issue(s) quickly as possible so that they don't sabotage my trading when I resume trading. To keep trading when losing and not understand why one is consistently losing...its a trader that's learning to stay that way.
Damn - it's good to have a conversation on this forum rather than flame war isn't it?! No offence meant @Buy1Sell2 - your replies to my thread have always been civil and I appreciate you responding.... In terms of stops, I leave the danger point to tell me a trade hasn't worked for the most part, however I also look at it from the other side of the ledger. So say for a long trade, my decision to enter is based on the observation that demand has overcome supply at that particular time. Should buyers therefore not continue to assert their dominance and price fails to move higher, that is also a valid reason to exit the trade. Perhaps the buyers weren't ready yet.... For whatever the reason the move away isn't sustainable yet. The initial demand wasn't of sufficient quantity etc to entice other buyers into the market..... So I'll exit and await the next development....
Thanks for that great post WRBtrader. How did you go about integrating that into your daily trading? Was it difficult to interrupt and stop trading to conduct said review? Was it a learned habit or an easy response for you? Just interested....