Two concepts: 1. Knowing what you are doing 2. Doing it without fail The second is by far the more challenging. Over the last 20 years I have had periods where I have made 2-15% every day for 20 - 45 days only to have a 30% drawdown on day 46 because of mania and associated lapses of good judgement caused by the high of winning. Dialing down the aggression (oversize) and overconfidence (overstay) that come from steadily winning and compounding is the biggest challenge for me.
Escuse me to ask, but I want to make sure that I do understand well: - you have been into trading for 20 years - nowdays, you have issues related to oversizing and overstaying in a trade ? If that is so, when did you identify these issues : how many years ago? What have you done, thought of , so as to resolve the problem?
I started trading equities in 1997. I started trading futures and have only traded futures since 2003. Although I have had years where I traded every day, I have never relied only on trading income. I have always had income from one or more other businesses that I owned. I have typically traded in short bursts 3-6 months when I've had the excess capital to trade. I never had sufficient trading capital to comfortably replace the income my other businesses were generating or to meet my monthly expenses. After good periods, sometimes I would close trading accounts to address cash flow shortfalls with the other businesses. I started recognizing the winning begets winning begets mania in 2014. To address it: I closed my trading account I started working on various psychological issues in Trading Tribe I recognized how I used trading and the drama of big equity swings as a way to shut down other feelings and avoid real issues in my life I began developing a plan for recognizing and being proactive about my issues outside of trading I invested my time and energy in my most important relationships The result has been some big changes in my lifestyle, businesses and relationships I finally feel prepared to revisit trading and to take it slowly
Very interesting: so basically, after 17 years of trading, you started to look at the psychology. I suppose that was because of the Trading Tribe who hinted to you about working on the psychology? Looking forward to follow your journal.
Actually I've been part of Tribe since 2002 but when I began I was concerned about what personal issues were preventing me from doing the work of making good systems. Once I resolved some of those issues I was able to create systems and still no nirvana... I felt crappy (guilty, disliked) when wining and relieved when I took risks big enough to give me a reason to stop trading for a while. I was involved in bad relationships, a business that was very unpleasant to me and always had plenty of drama to distract e from the real issues. By 2014 the pattern was clear and I was e-engaging with Trading Tribe and doing work that seemed unrelated. After working on some of my issues and helping others with theirs, I realized that I did not want to delegate trading to a system. I accept that that I like the research and learning but I really like doing it (risk) myself. I accept that I like the drama of big risk and that I like to feel heroic, taking small accounts up quickly and the drama that comes with it. That's when I stopped discretionary trading. I wrote some more systems to "prove" that even basis things can work but I got zero satisfaction from it and lost interest. I spent the last several years re-orienting my life to be less about drama and more about rapport with others. I find that I want to trade and would like to see where it takes me. I have a few ideas that I will be trading manually and that I will work on automating . I'll use a tiny account. My intention is to trade profitably, to grow the account and to enjoy the process. I will report on my process and how I feel about it. I'll also post my sketches and notes on what I look and how I think about it. I say sketches because my collection of methods, journals, code, research is not standardized. It's in all kinds of different formats. I'll post some of the stuff I've made money with.
I'll start posting some research/ sketches that explain the things I look at. Here is a very simple test to see if linear regression can provide any edge for mean reversion. I tested it on a few things using continuous data supplied by Tradestation/Portfolio Masetro and then ran a MonteCarlo sim on the results. I never traded it as is but found it useful. Code is included. Note: In development, I use a time based entry/exit to compare edges. Te amount of time is not important If I'm comparing entry signals, I test them with X bar exits to see if the entry signal has any value. If I think it does I look more closely to see what usually happens...
Here are some more informal "sketch" of a ideas that apply to discretionary trading and understanding why systems work/fail: "Directed intensity" I used this to track my passive/active behavior relative to pleasure/pain "Biases" were a couple from a list of well known biases that I immediately recognized impact traders.
You just keep saying and doing the same thing. In order for things to change, you must change what you are doing. Bog basic stuff!