An interesting journal with some very good insights. If I may chime in with two pennies of my own. It has also taken me much longer than most here to get any traction in the markets, and whatever modest progress I may have made was hard won. I experienced painfully large losses in relation to account size in my earlier years, and I fully understand the boredom of trading a mechanical method as well as anyone. What presently works for me is a mechanical method with a very tight initial protective stop. The setup critieria, while simple enough, are very strict. However, setup frequency is adequate because I use a very short time frame. My two cents: pre-trade capital is sacrosanct. Initial entry criteria and the corresponding tight protective stop are strictly adhered to. However, once a profitable trade is in progress, I allow myself some discretion with somewhat more elastic rules as they relate to scaling out and, much more recently, pyramiding, depending on the price action. These allowances permit me to let my hair down but only insofar as open profit is concerned. I know that open profit is real money, but it must be in place before I allow myself to even toy with the idea of discretion. Better that than messing with pre-trade capital. And so, capital preservation remains key while the boredom of an otherwise strictly mechanical style is alleviated. Further, by pyramiding into a position that is already in profit with smaller size than the initial entry, you can capitalize on a good move that keeps on going without necessarily forfeiting all of the open profit if price action goes awry. Until fairly recently, I have always been against the idea of pyramiding and focused exclusively on scaling out. The added flexibility makes it all more interesting. Nothing I wrote here is either new or exciting. However, I think it has some value and is worth remembering.
RN, Thank you for taking the time. The more i think about what you say regarding seperating yourself from the profession and nurturing your human side off market hrs, the more it makes sense to me. Especially when you cited examples of doctors, military personnel, etc. I've never realized to look at it in this perspective. One issue that i suffer greatly from is the ability to take a loss and not have it effect the next trade. It is the reason why my P/L can be positive one day and deep in the red the next, only to end the week somewhere in the middle (similiar to Illiquid). Quite frankly, it is very stressful for me and has probably taken a toll on my overall health as well as my relationships with my family/freinds. If the first few trades in the morning are winners, it leads to me being in a good mood and i usually make very sound decisions about when to enter, and especially when not to enter. If that continues, then my day will always end green no matter how slow or crappy the market is. My trading is very much discretionary. I don't have trade setups or solid rules printed out in front of me. I just assess the market situation and if I determine that the market condition is right i will look for an entry as i go, or on the fly. But on the flipside, if i start off the morning in the red then I am usually in a fustrated mode and my decision making is impaired as a result. The rest of the day will be spent either digging my hole deeper or just trying to climb my way out of the hole. Am I just an unhappy person? Maybe I need a new hobby outside of market hours. PS. Illiquid, I know this is your journal and if I am intruding in any way, please let me know.
LOL, Well I would like to buy his course on the keys to the trading kingdom but Iâm too busy saving up for Obamacare.
This was very difficult for me too, and I had to find a way to get through it, because it was causing me to hesitate on the next setup, or to revenge trade/overtrade. Here's what I did: Every morning I reminded myself again and again that 1 great trade is all I needed each day to pay the bills and I had 7 hours to find that trade. Then, what I worked on at length (using my sim account to anchor my actions and build confidence) was waiting very patiently for only the best setups. I discussed the setup with myself as if I were trading in front of an audience and had to explain why the heck I thought this was a high probability setup. Then I practiced jumping on the trade without hesitation, cross-referencing a 1-min chart for guidance to a quick entry. By getting in quickly, I was able to place a very tight stop. By placing a very tight stop, I was able to very comfortably take the loss if the setup failed. By keeping losses very small, there was much less tendency for that trade to affect the next trade. I still have a problem with letting previous trades and previous price action in general affect subsequent trades, but it's much less to do with losses; now it's more about letting winners run. It's what's keeping me from trading oil futures live. When my average stop on 2 lots of CL would result in a $200-$400 loss, I think I need to learn to take larger profits on the winning trades.
Instynct, All due respect to your Sir â here is how I interpret this sentence: I am shooting in the dark, at a moving target, while blindfolded â when I hit the target Iâm happy â when I miss it Iâm pissed In the meantime â because I donât really understand exactly what Iâm doing, or why â I never know if I will be able to hit the target again⦠And because of all this â my life is in turmoil⦠Minimum I say you need to formulate a trading plan (a solid external framework) â you can still decide to trade discretionary, but at least it wonât be random discretionary⦠Do not overlook the importance of a solid external framework â it is half of the equation â albeit the less important half (imo) â it is still absolutely necessary for success. btw â every day I go into the market â I expect to make money â period As far as you being happy or needing more hobbies â ask yourself Sir â I have no clue Regards RN
The way you've describe your method -- mechanical entries with tight initial stops while adding size when profitable -- and your strict adherence to pre-trade capital preservation seems on the surface very different from my approach. But change "mechanical" to "discretionary" and we would probably not be very far apart, especially if one were just to look at our trade blotters. There was a time when I got pretty aggressive with my size, maxing out my position limit within minutes or so upon initial entry whether I had to average down or pyramid up. But that just led to very severe p/l swings (with the occasional 'wtf was I thinking' trades); I've learned to ease in relatively slowly now and back off my aggression once a trade doesn't go "smoothly". So the result: smaller initial entries, tighter initial stops, adding size as the trade goes my way. Sound familiar?
Instynct, by no means are you intruding. In fact it sounds like you are describing my usual emotional pattern to a T. I hate starting the morning with losses; even worse, knowing I had a decent first hour and realizing I've gone into red by lunchtime. This is why I would never look at my total p/l throughout the day until I was about to logoff -- I knew I would be prone to revenge trading even if I was still well into green but had given back alot off some peak. Pretty stupid right? Here's my take: the only real reason a trader like you or me would fall into this pattern of flailing while down is a loss of confidence. If you are a pure fly-by-the-seat-of-your-pants trader without any structure or framework, you will always be vulnerable to this fault since your mind, if desperate enough, will always be able to talk you into any trade for the sake of "getting it back now". Been there, done that, over and over. The only thing to remedy this is to tighten your ship dramatically. You need, ultimately, to put your faith in your methodology and not your p/l -- that is the only way you'll ever get to the point where you can say "hey, even though I'm losing today, I can just stop because tomorrow is another day full of opportunites". Even though you consider yourself "purely discretionary", you must focus upon which trades work best, your bread-and-butter, and zero in exactly on what triggers these entries. Discard all the unsure trades -- the gambles, the win-some-lose-some, the coin flips -- as just not good enough. Dissect your biggest losers, if you find something consistently bad enough consider flipping them for trades going the other way. But the point is, you can't just lump all your trades into "market assessments on the fly", it's just too vague and will expose you to overtrading alot easier than if you had some defined "rules'. I know it's hard sometimes to define an intuitive feel that just works out, but trust me, the elements are there to lock-in to. And the more you explicitly realize what these elements are, the easier it will be to forgo those revenge trades as suboptimal and counterproductive, even if you maintain that urge to make things "whole". PS -- on the more nuts-and-bolts side, I've almost always found that, if I'm not in the green and mopping up my last winning positions by 11am, there's really very little chance for me to make up for a bad morning the rest of the day. The volume just dries up, while the programs have their way with you. It might just be me, but recognizing this really put the clamp down on my over/revenge trading.
Hi Nodoji, I like your idea of knowing that you only need 1 solid trade per day and you have 7 hours to find it. Itâs a simple way to reason with yourself that thereâs no need to rush into a trade because you have all day if needed. Thanks for that and I hope things work out well for you and CL.