Rookie Trader Journal - Advice Welcome

Discussion in 'Journals' started by krolyk55, Apr 11, 2008.

  1. rickf



    When I hit a rough streak in trading I stopped using real money and went back to virtual for nearly 2 months, (re)learning price action and market flows. I both blew out and profited insanely well during this time as I refined my trading style "in the sandbox" where it only cost me time. And on days where I lost big, you betcha I was peeved that night, and would always know what it was I did -- which usually came back to me not following my trading style and thus being "stupid." It also helped build my confidence to get back into the real world again using real money.

    While I don't use fixed stop-losses on the futures because of the whipsaw action of certain contracts (unless I'm leaving the desk) I have mental stops and will stick by them at all times. Also, when I am getting ready for what looks to be a runner (ie, 5+ point moves) is to enter my ES or ER2 trade and before the confirmation shows up on my screen, I almost immediately set a first take profit (usually 1/2 the position) at (say) 2 points. That way I'm not getting all excited (greedy) about X contracts increasing in value as the trade goes my way -- I hit my first TP point, my position gets smaller, and then I can further refine the trade and either set a new profit point, set a stop at breakeven (just to be safe), or start to scale in/out further as I think appropriate. But having my first TP point fixed and automated allows me to control the risk of the position in case the trade goes against me after it becomes profitable -- and keeps me from letting greed take over too quickly in the case where the trade is working well for me.

    Other times I'll enter a position and within a minute or two sense it won't go my way -- ie, in cases where the price action gets really choppy and just "hovers" there on the chart. I'll see if I can exit at breakeven, wait for a more viable and confident entry, and then go back in. Sometimes that's meant I miss out on a few ticks/points on a big move....but mostly it's saved me from being on the wrong side of a poorly-entered position, and NOT losing money is the next best thing to earning it. I also rarely 'chase' big moves out of impulse -- if I don't have the right setup in mind first, I'm not going to enter on a whim, and certainly not with a big position.

    (Translation: I'd rather leave some money on the table and exit a position early at a decent profit - or breakeven - according to my trading style than fight to get every single tick or point there is. That's a sure way to blow your account!)

    Regarding your stop discipline: USE THE COMPUTER AUTOMATION - that's what it's there for. Set your profit and/or protective stops and just watch the trade develop either way but DO NOT change them until they get hit. [*] If you're profitable, awesome -- assess the action and either exit completely or put a new stop in. If you're stopped out for a loss -- the good news is that the damage has been contained, you're out of the position, and there's no urgency or need to panic and thus make your problems worse. You're flat. Bruised, perhaps -- but not killed.

    Trust me, the computer automation really helps remove the emotion (namely, fear, greed, and worst of all, hope) and keeps you disciplined -- which is the hardest part of trading anything, and something we all face.

    One final point: While there's the old saying "you have to be in to win" there's a corrollary to that truism that says "there'll always be another opportunity." Don't force a trade -- if you're not confident, confused, unsure, SIT IT OUT AND WAIT for something to develop that you feel confident about risking money on. There's no shame in protecting your capital by waiting for a better pitch. :)

    [*] - Unless it's Fed Day or there's major economic news around. Then, even if you have fixed stop losses, be ready to manually exit your position if the stop loss gets blown through as the result of such intense volume in a short period of time. I've seen stops get bypassed and ended up $4K in the red on Fed Day, but I was able to manually fix things and either break even or come reeeeal close to it -- one of the few times I've averaged-down, come to think of it.
    #81     Apr 24, 2008
  2. krolyk55


    In a way these last two days have been good for me. Even though I wish I didn't lose as much, I believe it will ulitmately make me a better trader in the future now I know what it feels like to lose big. It's one of those things that you can be told and told but you have to experience it for yourself.

    I'm not going to quit or take a break yet. The fact is I really have nothing better to do right now, I happen to have alot of rare time on my hands for the next month or two, but that won't always be the case, and I've already spent two months in simulation trading, I feel I need to keep doing it with real money to progress further cause paper trading just isn't the same. I still wouldn't know what a loss feels like if I had never started trading live. I did have losing days like this in paper trading as well, I was just able to shake it off alot easier.

    I will however take some of the other great advice posted today from Jorge and rickf (not from Pivot this time, I like my fingers). I am adjusting my rules and trading plan from this point forward, to avoid more huge loss days.

    I'm not going to take money out of the account, but I am going to exit trades quicker when they aren't going my way, I REALLY am now, I am thinking maybe somewhere around a $300-$400 per trade loss limit or maybe 6-8 ticks. Instead of averaging down like I have so far I'm just going to take the loss. I like Jorge's idea about setting stops and targets and just letting it hit whichever one it hits. I was just looking at my statistics and about 70% of my trades are profitable over the past two weeks, so theoretically, if I set all my stops right, I should be fine. It has just been the two or three big blowout trades that have killed me. My faith in the averaging down theory is now officially shaken. While it did well for me the first 8 days, and made me some good money, if had stopped the big losses out at $300, I would be in better shape right now. If I can concentrate on avoiding those in the future, I should be better off.

    I am going to try and move away from averaging down so much, I'm not saying I'll never do it, but I'm going to concentrate more on waiting for the best trades instead. Before I would only ever try for a 4-6 ticks at a time, so my number of trades and commissions would be very high and I wasn't as patient for the best setups. As Rick pointed out, maybe I should try for 2-5 point trades and trade less. I also like taking off half at 2 points idea.

    In any case, I am going to hold my stops from now on.
    #82     Apr 25, 2008
  3. I think it's silly that Pivotas is is being so hard on you for losing. Let's face it, if there weren't people like you losing their money, there wouldn't be anyone making any either. The markets are a zero sum game (well, almost, some goes to the brokers) so for 50% to make money the other 50% MUST lose. That's the cold hard truth of it.
    #83     Apr 25, 2008
  4. Pivotas


    >>I think it's silly that Pivotas is is being so hard on you for losing.

    What is silly is continuing to trade in the same manner. For a system to be viable it not only needs to be theoretically profitable but it also needs to be executable. Assuming the system's rules are profitable, K clearly has a problem following them. Therefore it is a system that is not viable...... for him. An obvious solution would be to develop a profitable system that falls within his emotional comfort zone and would allow him to execute it without fail.

    Calm reasoning hasn't helped so perhaps the bigger hammer of harsh satire will drive the point home.

    What matters is that he figures it out.

    Keep your fingers on K, you'll need them to count all the money you'll make once you solve the problems.

    #84     Apr 25, 2008
  5. krolyk55


    I stuck to my new rules today about not allowing more than a $300 loss per trade. My stop losses are like magnets for the market, every time I set one, even though well outside of the logical resistance levels, it somehow barely gets hit and then retracts. I lost my money today in $300 chunks instead of one big chunk, so at least that gave me some satisfaction.

    It comes back again now to my impatience in waiting all day for those two or three great setups that will appear. I tend to jump the gun and get punished for it. Now that I’ve had 3 losing days in a row and decreased my account by a total of $5000, I am ready to finally take the rest of the advise on this thread, take a break, possibly reduce my account, or possibly find another hobby.

    Hopefully this thread can be educational and a good resource for other beginners in the future as they search for advice, there really is a lot of great material on here. Ultimately I still think new traders just have to experience this for themselves, and I am not really as upset about all this as I thought I would be. I got what I set out for, an education. I don’t think it could have come any other way than to go out and lose a few hard earned bucks. I paid some tuiiton, and now I need to revise my plan and see if this is still for me.

    My trading is officially on hold for now, and I will revive the thread if I decide to begin again, it has been invaluable for me, and hopefully some other readers have benefited as well. I really appreciate all the posts. Elitetrader is an excellent resource.

    Thanks again.

    Day 11 Results:

    # of Trades: 25
    Contracts Bought: 50
    Contracts Bought Range: 1-6
    Highest down: ($1184.90)
    Highest up: $640.00
    Net Profit/Loss: $(1184.90)

    Starting Account Balance: $45,000.00
    Ending Account Balance: $40,003.40
    Total Net Loss to Date: ($4997.60)
    #85     Apr 25, 2008
  6. Pivotas


    Good for you my friend. You've survived round 1.

    It might be more helpful if you posted your charts showing entries and exits so those who have been interested in your efforts could reverse engineer the trades and come up with some recommendations that may be useful in the future.

    See you next time.

    #86     Apr 25, 2008
  7. Hey krolyk55,

    I've been reading your journal for the past week and I am rooting for you. Here is one lesson I've learned the HARD way: Trading to recover losses from the previous day is one of the greatest trader sins. It promotes trading for trading's sake instead of being as patient as you would normally be and waiting for the right setups. Also, it promotes greater risk-taking behaviour... more than you'd take, often much more than you'd take, when you are ahead.

    Best of luck..
    #87     Apr 25, 2008