So I have been trading for 6years+, I consider myself a professional ( so does the NASD). I work for a prop firm. My problem is as such, what made me a good trader from the get go was my ability to hold on to my winners for really nice gains, and cut my losers very quickly. (pretty obvious huh?) Over the last few months My P/L has fluctuated ridiculusly, I know the market has been super volatile but, I am a short term momentum trader. I have completely turned the table and now instead I am holding loser after loser for huge losses. Hitting out at the bottom no less. (or the top) I used to have a great balance for risk and reward and now I hold a point against me for 20ct winner. Furthemore, when I get down on the day I keep firing into a blackhole compunding my losses. When I get up I play ultra conservative to preserve up days. My question for anyone on this board is "has anyone that has been profitable consistently come across a rut like the one I am experiencing, and what worked for you to get back on track? Or have I just lost my touch?
Why did you change something that was working for you ? You took a perfectly sound approach and eclipsed it with something useless. Go back and find the winner inside you until you do let the loser trade on paper. Anek
Yeah it happens. I often get these ruts where I go 2-10 weeks where I just fluctuate and end up breaking even. Usually it's when there's a lack of volatility, but in your case it sounds like the opposite. During one of my good periods I printed up some charts of my best winners every day. When things stop working I refer back to them and see "yep, these charts just aren't happening right now" so I try to take it easy, or do they opposite (like reversals vs. breakouts). You just have to figure out what it is that has changed and adapt or take it easy until your p/l gets constistent again.
Maybe the market is changing. Trends are not continuing. Your method might be giving you information about the balance of supply and demand. My idea is to lose as little as possible during the losing streaks and survive until the next winning streak.
You have hit a black swan losing period (drawdown). All speculative trading has an element of luck to it. And sometimes that luck turns bad for long periods If you are making hundreds or thousands of trades a year then after several years the chances of seeing an extreme period of bad luck are pretty high. Your problem is that you are compounding it by being undisciplined. Cut your position size to a fraction of what you normally trade to avoid emotions taking over and to also avoid digging yourself into an even deeper hole.
(1) You do not "lose your touch". (2) Reconstruct and go back to what you were doing years ago. (3) If you cannot adapt your "momentum trading" to volatile markets... Do something else when things get too volatile. (4) ** Experienced ** pairs/basket arbitrage traders PRAY for volatility... It increases market inefficiency dramatically... And profits can double/triple in a month like August 2007.
I have traded for a living for ten years. I am a short term daytrader as well. I look to buy near daily lows and short near daily highs which is different than trading momentum. But I think the volatility we have seen lately requires an adjustment for daytraders. Time on trade becomes very very important. Sitting on trades in this market is very dangerous. To shorten time on trade, I have decreased my profit expectations from each trade and I am quick to make defensive or lateral trades and ask questions later. There are those that preach patience but in this market impatience on exits is more often rewarded than punished. The good thing about volatility is that it increases opportunities. Although I am willing to take less profit on each trade, the volatility is such that I often exceed those diminished expectations on many trades. October was my best month this year, and I am satisfied with what I have made already today and I am out for the day . This first day of November is better than my first day of October.
Here is prly your answer. You changed mindset when in a good run? Keep adding to winners like I assume you did earlier.
"For every style of trading there is a "perfect" market environment. When the market is aligned to your style, everything you touch will turn to gold. Your patterns will set up and run without stress to your target zones, your excitement and confidence will soar as your win cluster grows. But these glorious periods seldom last long. Stops will begin to appear again, and then perhaps a loss cluster. This constant cycle from "zero" to "hero" and back again is why trading is the manic depressive business it is. This constant shift from in alignment to out of alignment is what I call the payout/payback cycle." -Bo Yoder http://www.5minuteinvestor.com/blog/2005/05/12/what-is-the-payoutpayback-cycle/