Interesting quote. Is this due to your short bias and the bear rally we're in the past month? Or is it due to trade management? Or is it due to something else? Is it time to develop different strategies? Is it time to put fading on the backburner until the intermediate downtrend takes hold again? What are your thoughts on this, NoD? Personal Observation: Fading techniques that worked VERY well in August, Sept, October, Nov 2008 no longer worked Dec, Jan, Feb... Some days (like todaY) everything is so wicky and indecisive you put on the scalping hat and take profits quick. Some days we let things ride. So why not adapt not only the duration of our trades, but the style and direction, to current or near future conditions?
Thanks to everyone for your kind words. Mad, my large losses this year are not a result of fading a trend or averaging in or taking on bad setups; they are strictly the result of getting so comfortable with a stock that I decide there's no need for a stop. It's letting down one's guard and becoming complacent. You start trading certain setups with huge confidence because "it always does X". Until it doesn't. And then it REALLY doesn't. My friend sent me a book called "Pit Bull" and there's a chapter called Honor Thy Stop, with a great line: "Most people have a tough time doing this, and instead of selling out a losing position, they'll hang on hoping that the market will realize the error of its ways and behave as they believe it should. The market's just reacting to supply and demand and if you're cheering it one way, there's always somebody else cheering just as hard that it will go the other way." Mad, you have an example on your blog (excellent blog, by the way: http://mad.blocks.com/), in which you violate your $500 rule more than once. You've been there and so you know exactly how the mind plays games when you "know" the market is going to come to its senses, dammit! My test now is to maintain total discipline with a stop on EVERY trade, not just 95% of them. I will also consistently ask myself the question Rashid posed in his journal: "Can my stop survive?" This determines whether the setup is worth trading and also helps determine position size. I've proven I can do this successfully. Now I have to prove I can do it without exception. I realize now that trading for a living is like being a pilot or a soldier. You train and train and train until absolute routine and discipline are ingrained into your very soul; because when you're doing the real thing and something goes wrong, you simply cannot hesitate while you think things through; you have to react swiftly without pause.
Geez, trust me, it was very tempting to resolve the whole loss thing by simply viewing my P/L in a different light (see attached)
Nodoji, I am sure the big loss today will serve its right purpose in making you a better trader down the road. The only question I have regarding your trading style is that you daytrade and you swing trade as well -- these two styles sometimes conflict with each other. It is easier to implement strict stop rules for day trades but not for swing trades as next day's gap ups and downs are not within your control. Perhaps it is wise to only focus on day trades for now just to get yourself comfortable with the level of discipline you were talking about. I wish you a very successful day tomorrow! OC
If I may offer my .02. Regarding day trading and swing trading. I've have found that for me it is far better to have seperate accounts specifically dedicated to one type of trading. Here's what used to happen to me. My day trading is consistently profitable. Throughout the year I would eventually get into some stupid swing trade that wasnt working and at the same time I would be on fire with my day trading. Because my day trading was doing well I would believe I could afford to keep the swing. But all I was really doing was making money day trading to offset my swing losses. Then at some point either my day trading would suffer because I "need" a good day to balance out that pos swing or the swing would finally run so far against me that I had to unload for a huge loss. What I found was as soon as I dumped the swing my trading improved overnight. So now I use 2 seperate accounts so I cannot lull myself into pretending it's okay to hold a loser. Hope this makes sense. Good Luck
Hermit! I really missed you yesterday! I'm afraid to click on links since my PC crash, so you'll have to tell me YOUR COMMENT!
- $84 Went to short DNDN pre-market @ 25.00. I hit the order key with a big grin on my face, when suddenly my vision of taking the rest of the day off and enjoying a delightful hike in the mountains was dashed against the rocks by NO SHARES AVAILABLE TO SHORT! This had to be the gap-up of the century, aaaargh! 10:28 a.m.: APOL establishes strong support just below 60.00 and I go long @ 60.47 when it bounces off a higher low. Closed @ 61.01 pull back from overbought for a $108 gain, expecting to re-enter on the completion of the pull back, but it then shot to the moon right after I exited and never looked back. 11:49 a.m.: Very nice short setup on CREE and no shares available. (I have to wonder if I'd been able to short CREE @ 27.65 at this time, would I have had the patience to stay in the trade as it remained below the intraday moving averages all the way to 26.64.) 11:55 a.m.: Short POT @ 89.74, stop @ 90.10, pullback from double top. Covered @ 89.90 for a $35 loss when the chart pattern changed and I did not feel the trade remained valid. My original stop wouldâve kept me in a very profitable move. 12:15 p.m.: Short ESRX @ 60.59 pull back from overbought, stop @ 60.86 above HOD. It moved very close to my stop, then pulled back where I considered scratching the trade for a small profit because the L2 action appeared troubling, but every trade today I was exiting too soon, so I stayed in and my stop was hit on a hard move through 61.00 for a $135 loss. 1:35 p.m.: ESRX running up hard with the price and the spread insane, and I placed an "oh shit" limit order @ 61.50 which was actually touched for a second but no fill for me! 2:17 p.m.: Small short on MYGN @ 44.90, stop @ 45.20, looking for a retest of the LOD. Price just ranged around there forever, so I exited near the close @ 45.01 to end the day flat. 2:35 p.m.: Short BDX @ 68.88, overbought, failure to make a significant new high; covered @ 68.77 for a $50 gain when there was a huge volume of buy orders parked at 68.75, stochastics were already oversold, and price was on the 20-period SMA. There was quite a bit more down move eventually after several attempts to resume an uptrend, and this was yet another case where leaving my original stop wouldâve kept me in for significantly more profits. Iâm having difficulty deciding the best way to manage stops. I exited three very profitable trades too soon as a result of not leaving original stops in place. When I select a stop, itâs because I am willing to accept that level of loss, but once the trade moves in my favor Iâm torn between moving the stop to break even/locking in a small profit or leaving it in place until my target setup is reached. Three of my trades today wouldâve been very profitable if original stops left in place (APOL, POT, & BDX). The fourth trade I had but to replay for a nice profit and I tried, but missed the fill and was not confident enough to chase this one as it was quite strong on the runs and displayed huge price spreads. Though I wasnât pleased with the money left on the table today, I did adhere to strict discipline on setting a hard stop for all trades. I will do some backtesting on leaving initial stops vs. moving them mid-trade, and determine if today was simply an anomaly, or if this is really the better way to trade. Geez, geez, geez, you are so good at this, enlighten me!
I'm interested in reading your eventual conclusions on stop management- as I have the same problems. I also have to stop trying to trade FAS.. that thing is just a wild animal that I don't seem to be able to catch right. During its end of day selloff today, it got into serious oversold territory and I tried to catch it reversing, but it never seems to regard the stochastics- it just keeps moving in whatever direction as long as it likes. I've eaten it on FAS before trying to do what I did today (catch a bounce) but I think I just need to leave that one alone. The first time I traded it, I did well, and thats what got me into thinking FAS was a good one to trade.. but ever since then its been biting me.. it certainly is difficult trading overbought/oversold with that one- at least for me.
NoDoji, I like your determination. That's something a trader needs, I think. Many traders here said it would take 5 years to succeed. I don't know how long ago you started to trade, but your talk sounds like you have been trading for some years. At least you memorized those terms. In my case, I know very few technical terms after the first 1 or 2 years of reading and sporadic trading. It took me a long time to realize what stoploss is. I don't use stoploss, despite what I read. You are using stoploss religiously, that's something really unusual.