Smacking the ER2

Macaw,

Totally agree.

I have no problem taking a small loss if the signal is good, I make a good entry but the market thinks otherwise.

As you say the killer for me is that fear of letting any profit slip away.

My personal take on the reasons are mainly that trading is so important for my self esteem (new career away from IT, financial independence, want to be able to earn $xk per day etc) that when the small profits start to grow, general fear of failure takes over and I just take what I've got.

I'll post below the Mirror Test post from Rogue Trader that sums it up well for me....I'm still in the "If you see the test as fear or loss of money, you will be giving away your scared money."

Many thanks for the feedback .....

 

Post originally from Rogue Trader - but up on my noticeboard - because it is the holy grail IMHO....

Anyone who contemplates trading should ask themselves one simple question....."Why Do I Want To Trade?" There are many wrong answers to this question, and only one right one....."I Want To Find Out Who I Really Am"

When you trade your monitor will do a funny thing. It will become a mirror. A special type of mirror. A mirror that reflects your self-confidence, your self-esteem, your self-worth. The numbers and lines you see on your screen are just that, numbers and lines. Market information. At your choosing, when you decide to become part of those numbers and lines (putting on/off the trade) a sort of test begins. A test about you.

• If you see the test as threatening, you will feel threatened.
• If you see the test as war, you will be engaging in war.
• If you see the test as one more failure, you will fail.
• If you see the test as the need to prove yourself right, you will administered the pain of being wrong.
• If you see the test as certainty, you will be rudely introduced to uncertainty.
• If you see the test as a battle of wills, you will sacrifice your soul.
• If you see the test as fear or loss of money, you will be giving away your scared money.

• If you see and believe the test to be an exchange of information, you now become the one to confirm or deny information.
• If you believe the test to be one of giving up what you want in order to get it, you will get it. Get it?

There is an irony in trading of both price and time. It is exactly what you have to give of yourself in order to trade it with understanding.

 

Macro,

"The main point is that it helps to have a higher timeframe chart to see what the overall trend is at the time you are entering trades."

Agree - I'm realising this slowly.

I must have a higher TF to really gain from my main signals. Been doing some research this weekend on just taking the exact same signals on 3min charts - with a 10 min chart for general trend & overbought/oversold, MP levels etc. My main signals can be good intraday reversals that sometimes run over into 1-3 day bull or bear runs.

Thanks again

 

one thing i have found is the use of a tick chart {i use 1200 tick for the er2} for your longer period chart has the ability to "clean up" the indicators versus the use of a 10 minute or 15 minute based chart --- and that helps me to keep an eye on the general trend at the time I am taking {or not taking} signals from my 3 minute er2 chart for the type of scalp trading i do in the russell.

 

A few new additions to the setup & rules……I added a 5 min chart for the trend and primary signals and then use the 2min charts to time the entry…..take all signals in direction of the trend and any primary reversal signals.

S1 (L) – failed to take – CT play so declined
S2 (S) – entered at 15:56 (673.8) – exited early for 672.3
S3 (L) – failed to take – CT play (probably should have taken this one with a 1pt profit target etc)
S4 (S) – entered at 17:50 (672.7) – exited using signal for 672.5
S5 (S) – failed to take – looking into why the 18:30-18:40 spike up occurred on little volume (like it really matters !!)

Entries – two ok – the best one of the day not taken!!
Exits – one slightly early and one on signal
Points today +1.7pts (not including comms)

Onwards and upwards…..

 

I missed the first 30 mins due to business commitments….and then had one signal with trend ..... and quite a drop

S1 (S) – entered at 16:42 (673.8) – exited for 671.9 on a signal and initial profit target 672. I had no intention of holding through the news because that is a total lottery. But then again a 1:12 risk reward ratio does look attractive in hindsight.

S2 – failed to take

Entries – one good one
Exits – exit to trading plan – but painful to watch later!!
Points today +1.9pts (not including comms)

Onwards and upwards…..

 

Two things to mention, hopefully they will help a bit.

The first I'm surprised no one has mentioned yet... When you develop a system, then only take certain signals from that system, then you are effectively changing your system's "edge". Because the market has the magic ability to make everything that's uncertain work against you, you are probably effectively reducing your "edge". Now, if your system is a good, solid system, you probably have a VERY small positive expectancy so reducing the edge at all could very easily make your system a negative expectancy system.

Secondly, turn off the pl. DO NOT look at it during the day. Seriously, you won't even believe how much that influences your decision making to the wrong side. Take the trade when it's good, close it when it's bad and the PL will take care of itself.

Also make sure you've accounted for the possible risks of your system, especially max DD and money at risk. Really understand these concepts and that may help.

You may also want to revisit the preliminary factors of this system you built and see how they are different from what you are doing now. For example, does the system know/care that there's news coming? Should you? If you aren't certain of the effect of an event on your system, you should probably stick to what it tells you to do statistically... imho.

Hope this helps a bit!

-The New Guy

 

TNG,

Thanks for the feedback

First point – totally agree – working on this all the time, but I am currently the weakest link in the system and painfully aware of that fact

Second point – agree - I have the P/L off in Ninja but I can still see the +/- ticks – but not having $$ signs up helps for sure

Third point on news – I think I will always stand aside of Fed news – but more routine news is still a future option in terms of how I should react. My trading plan says I will not hold a trade through a news event I have deemed significant. However, I’m starting to feel this maybe too rigid and simplistic and needs a spot of back-testing with various signal types to fine-tune with some rules for when to close/hold.

BTW do you hold trades thru Fed News or is it just me who wimps out !!

Cheers

 

Before I answer, let me state that I think it totally depends on your system. The one I'm currently using is sorta based on volatility, so *generally* I try to be flat going in to a fed meeting, and look to put a position on in the resulting chaos.

Generally tho, I think backtesting or sim testing should dictate this. I don't think it's impossible to think that holding through the fed meetings and other big news is detrimental to your trade, when in actuality that could be the biggest gaining days.

Another quick point... and this is possibly just me, but the psychology of using language like "wimps out" might be important too. If you start refering to it as making the wrong decision, rather than wimping out, or even making a rash, or uninformed decision, you might find a mental shift towards profitability.

And as for the poster who recommended walking away for a few minutes, I'm a little torn on that advice. On one hand if it's the only thing that works for you, I guess it's ok, but on the other hand, I've never seen a pro trader (and I've been around a lot) that you could PRY from his machine while they had a trade on. Just something to munch on....

-The New Guy

 

TNG,

"Another quick point... and this is possibly just me, but the psychology of using language like "wimps out" might be important too. If you start refering to it as making the wrong decision, rather than wimping out, or even making a rash, or uninformed decision, you might find a mental shift towards profitability."

Yes that was a negative reference indeed - point taken

"And as for the poster who recommended walking away for a few minutes, I'm a little torn on that advice. On one hand if it's the only thing that works for you, I guess it's ok, but on the other hand, I've never seen a pro trader (and I've been around a lot) that you could PRY from his machine while they had a trade on. Just something to munch on...."

Agree. I am currently working on controlling certain subconcious fears and as an interim measure it calms me down. But yes this isn't my planned 'pro trader' end game for sure.

Thanks again