rs7: Over time I realized that trading with somebody else's money doesn't carry the burden of anxiety and fear. You know, it is not scared money. Therefore it is just easier to be disciplined and objective. Hence the good results. In my experience, attempts to get disciplined with my own money just didn't work. It would appear that the only way out of this dilemna is the use of sound risk management techniques and probabilities play. The idea is to get detached from the micro level performance of our trading and put the odds (and no certainties) in our favour in the macro level. Once the trader doesn't focus anymore on the micro level performance of his trading, he would have the carefree state of mind to be as disciplined and objective as he would be with somebody else's money. Please let me know what you think. cpo
I think you are exactly right. I know in my case it was a mistake to trade my own money. My whole approach was different. Not objective, and trading "scared" was a major factor. It does not play well into my personal style. I was trading too defensively. As Mark Douglas said in "Trading in the Zone", you must be "fearless but not reckless". I found myself unable to be "fearless". I felt out of control because I had a firm looking over my shoulders, and I felt too much self doubt. I lost my aggressiveness. I lost my conviction. It was replaced by trepidation. I know there are many here who trade their own funds. Obviously this is not for me. Even though I fully understand the approach we must use, I just think my style requires more freedom and more actual trading than the scalpers require. Or the swing traders. I am most comfortable trading a lot of positions and building on the good ones and dropping the bad. Getting on both sides of the market when appropriate, and all the other stuff that worked so successfully for me for so long. Thanks for the reply, RS7
Fear being part of the human condition cannot be overcome, only transcended. It would appear that the only way the individual trader would be able to transcend fear is by setting up a trading structure that allows him to completely embrace risk and error, as well as his fallibility. Then, and only then, clarity would be achieved. cpo
"I found two major faults in my arrangement. First I came from an environment in which large numbers of dollars were common in my daily P&L swings" anyone who has a style that has large p&l swings has a high probabiliy of washout.this style plus high leverage is a surefire way to go bust.
Awesome post! Although I'm still a humble newbie, I have experienced a few occastions where I did the right thing only b/c I'm trading someone else's money... Unfortunately this someone else also kinda let me play with other alternative strategies and experiment... I've found out that whenever I do smth I don't feel 100% comfortable doing (read, wouldn't have done with my parents money), I get my ass kicked. I felt that QQQ's where gonna drop today on the jitters and fears. I shorted some yesterday (on the 10th)... I turned out to be correct, eventually, but got out too soon... This was not completely related to the original strategy of course and I would not have taken the position had it been my dad's hard earned money... Although not completely the same, but I think what you are describing is very related to the well-documented "house-money" effect, whereby people tend to do dumb trades with the money they had earned on the previously good ones... Your post has made me think quite a bit of what I have been doing wrong and I think it will be very helpful for my future trading. Thanks. I wish I had read that on day one!
That is all relative. I think perhaps you misunderstood my position. Trading when I had large dollar amount swings, I was trading very large dollar amount positions. My take was always a very small percentage. It is a whole different thing. Being up or down a lot of money is not significant if say I am up or down 100k but it is still less than a 2% negative mark. Trading my own money, well that is a whole different story. I was never a "cowboy". I just had the kind of buying power that I could trade out of a bad situation. Trading my own funds, even with a lot of leverage doesn't permit that. I have to close positions to open others. Can't add significantly to winners, nor hedge adequately to buy me time to see which way to emphasize my money allocation. It is just a different style. So "large p&l swings" is not really indicative of anything. Other than account size. I always made money that way. Never had more than 2 consecutive losing months ever. This over about a 14 year period. It is what I need to get back to. I did an experiment, and it did not work for me. Had to try it. Now I know.
Thanks. Well, I had a professor to teach me those truths. Nice to see you back my friend, PEACE and good trading, cpo