Hey everyone! I just stumbled across this forum. Wish I would've found it earlier. Here's my story so far. I am quite young, recently graduated college. I began investing a while ago, but began trading around one year ago which hasn't been particularly rosy to date. I immediately jumped into options trading. I was familiar with the theory from college, but had no practical experience. I had what I believed to be a strategy and the infamous edge by knowing basic theory. I placed all my savings of around 15k dollars into my trading account. Some of it later turned out to be scared money. I had began reading about technical analysis, did some rough back-testing with simple indicators (RSI, moving averages etc.) and came to the conclusion that this was foolproof; charts never lie. Indeed, chart don't lie, but they can't predict the future. Not once did it cross my mind that: If it really is this easy to make money, why isn't everyone doing it? I began trading options on the equities and indices with complete disregard for the theory which I believed was my edge. Give me a break, I was young, arrogant, and stupid. We've all been there. Here is the worst part: my account grew, I was actually making money. Why is this bad? You ask. It led me to believe that I was doing something right. My strategy (which there was none) was working! As money was piling up at a suspicious rate, I laughed at the funds who have consistently returned 20% a year. It should be evident by now who will get the last laugh. Over time, as with any random walk, I began losing. But I was confident that my strategy was working, so what was my solution? Just double up! Increase bet sizes to make up for the losses. Things turned exponentially more sour. At one point, I had my entire (yes, 100%) account bet on an option. Heres the kicker: It was just a gut feeling. In hindsight, Ive noticed that I entered into trades just to have some market participation. Panic buying and selling was becoming routine, trade sizes were increasing and were regularly in excess of 50% of my account. I was chasing my losses. As my account hit 3k, I wanted out of the game: I closed my account. Losing 12k was one of the best things that could have happened to me. Had I kept making money/breaking even I would have kept dreaming of making a living off of day trading. The loss motivated me to throw my job search into top gear, and I have landed a good job which pays far more than I could have realistically earned with my measly 15k account. I would be lying if I said the 12k hole in my account doesn't still disappoint me to this day, but, at the end of the day it's only money. I have a job, good health, great family and friends; no percentage gain from trading comes close. I also noticed that a significant portion of my losing trades would have turned out winners, had I only waited a few hours/days/weeks. But with such large bets (percentage wise) I simply couldn't afford or make myself hang on to the temporary losers. You name a trading mistake, and I will have most likely made it. As I began writing this, I was unsure of what kind of responses I was actually looking for. I might just have wanted to get my thoughts down on paper, or maybe to share my story with others in a similar situation. Some day I will definitely trade again, but with strategy and more importantly RISK MANAGEMENT. I repeat: I DO NOT WANT TO TRADE FOR A LIVING. I want to keep a separate account for saving/investing and one for speculation. I would just like some guidance/support. Does anyone have any similar experiences? Book recommendations? Huge percentage/monetary losses? How did you start out building a strategy? Thanks for reading!
Hi OAKUS Your story sound similar to mine. I've tried to find a way to make consistent money and over 100% a year but in the end decided there isn't one. Unless you want a goal of 20-30% a year, I have a system that can generate that but with small capital it's not worth it. If you want to learn how trading systems are like you should play European roulette. There are a few system that you can use like the martingale system where you bet 1 on red and double it each time black pops up until you get red again. The goal is you're hoping red will show up before you end up having to bet the maximum allowed. If that happens you blow up. I have a few graphs showing the results of them with data from a random number generator. They all range from making money to losing money in 10,000 spins. A few are a lot but most is close to break-even. But there are a few charts that shows a consistent steady rise for the first 5000 spins until a black swan event (like black popping up over 10 times in a row) occur that the system starts to break down. I think most trading system are similar to roulette. There are some trading system that can generate consistent returns, but then blow up when those black swan event occur. I agree with you that you should get out of trading. IMO it's really not worth it unless you have a lot of money. Even if you're profitable, the possibility of blowing up a few years from now is too great of a risk. For one, trading gives you no skill that you can transfer to other jobs. When you fail at trading, what are you gonna do? So with all that, I think you're making the smart move by quitting. With a job at least you have a guaranteed income. With trading there are no guarantees. Everyone who decides to go into trading need to have a backup plan just in case it does not work out. You should also take note on how the 5% success rate of trading mirror the 5% success rate in professional poker. How do you know if you have a method or are just getting lucky?
Time. There's an inherent amount of good/bad luck in any given trade. But over a long period of time, luck is not a factor.
Its mostly a question of if you stay liquid for long enough to develop a functioning system and survive through the losing streaks which will inevitably happen.
1) I didn't have experience of betting all account on a single trade and losing on it, used to bet whole account on a single option trade back in 2005/6, but that was kind of sure rare opportunity caused by mispricing and it doesn't exist anymore. And I was still the loser as for outright trading, profits were more result of luck of finding those opps than result of deep market understanding, analysis and decent trading methodology. 2) My favourite books are Trader Vic II by Vic Sperandeo and Trading in The Zone by Mark Douglas 3) Keep max risk on the single trade @ 2% now. 4) Watched markets... For many hours. Really many hours, thousands of hours. Tried to see patterns and eventually did see them. The rest was up to collecting stats to create proper entry points, optimal stop-loss and profit amounts etc.
dont forget to detach ur emotions... kinda like gambling. cuz that'll throw u off ur game plan...speakin' from experience. and dont gamble drunk. lol.....also from experience.