Gotta say this is one hell of a thread! Just signed up and have taken the time the read this whole thing, very educational to say the least. This is my first year live trading so I have tons to learn. Surprising I am up 78% since Feb, which for a newbie is quite an accomplishment from what I hear. This thread has definitely educated me in one respect, how not to trade. I wish you luck Neke in your future trading, but it is obvious you are a gambler, not a trader. Now I can see how traders blow up, it is very sad. Hope you pull yourself out of this predicament.
It's annoying letting psychological factors derail my trading. It was clear I was trying too hard to recover after the initial loss (on the SPY calls). I am drawing up some set of guidelines on my averaging down. I know in general I said I should not average down, but in reality I haven't let it go, and sometimes it has helped. I will lay a set of rules for averaging down that is clear enough for one to follow and enforce. The maximum number of entries for an averaging down process should depend on the strategy, but certainly no more than 3 times. the initial SPY call on Tue involved 5 X 200 contracts, which is too much. Same for IAG ( 7 entries of 7k shares each). By this rule, I should never have taken more than 600 contracts on SPY. Moreover I am drawing up rules on the spacing of the entries. Too many times I have averaged into very small losses and increased my risk way too early. Example if I go long AIG at 39.9, there is no reason to average down at 39.30, since that is too close given the volatility in the stock (average move on the stock has been 67% per month for the last one year). Moreover, there is a time limit within which all averaging should take place from the first entry. Generally, all entries should be complete within 2 hrs of the first trade for a day trade. The longer it goes, the greater the chance one is indeed wrong on the premise. The second area for improvement is my inability to hang on to winners longer. Had I held to the CME puts to the end of day (Tue), I might have been break-even for the week. Maximum holding time frame should be determined at time of initial entry, and I should be willing to let the winners run till then when I am right: that is going to be tough.
I guess you too are a gambler with lesser risk parameters. I've never played the lottery, and will not, because I believe the statistics do not line up in my favour. I do this (trading) believing I have an edge and statistics of probability lines up in my favour. Sure I do not execute perfectly some of the times - glad for those that have been trading for long who have never deviated from a plan of execution.
every decision in life is a gamble. reward involves risk, some of us chose to embrace that fact. It's just about how much your willing to lose and your ability to stick to that no matter what.
$300,000 of your capital? Is it how much you are willing to lose? If so then good for you. What if you lost it in a week? Would it be fun?
I calculated that he had only a 15% recent draw down which is fine related to his goal of going for a 300% profit. The higher % of profit you go for, the greater the draw down, you are going to have. Also, he noted the problems with the recent trades and took steps to solve them. Unless you run a hedge or mutual fund then you are going to be taking risks with your own money and need accept that you will have losing trades and have draw downs.
Do you like baseball? Treat each day as an inning, 3 losses and its over force yourself to wait until the next day. And always have stop limits on your trades, based on the risk/reward ratio of each. Create a $ scale for your trades, small gains are singles, medium gains doubles etc. And as someone said aim for the fences every once in a while, a couple of home runs each week will do... Learn to use momentum and trendlines to read when the ball is heading out the park..... And secure it with a limit..... Sometimes youll be able to reach nirvana (a grand slam secured with a stop loss) j
This is good advice. The volatility for increasing an account 10 fold I'm willing to cede is part of the reason, but I've backtested my own systems with $500k and I don't think I could ever stomach losing 65k let alone about 120k over any period of time.
While I agree I wouldn't quite characterize your trading here as gambling, I don't think you actually know if you have edge in your discretionary calls. Mostly your only indicator of edge is the last two years of trading we have on et, here. Maybe there's something there, but unless you're trading systematically it's really hard for me to say that you do have the "probability lines" in your favour, especially given what I've seen in this thread. I never really bothered to look at the past for the reason being it's caveat emptor.