Actually, I think he had less than 5 days of down days in 2001. No kidding. Just wanted to be on the sfae side, I said 10 days...lol...But this guy is a "freak of nature" as one of his traders said.
someone previous said "For me, it works like this: + 1500, +780, + 2000, + 1250, + 3000, - 15,000. There goes my week." that is the whole problem right there. Some people call it eating like a chicken and sh*tting like an elephant.
Well at least I'm not alone with this problem. I do have a daily loss limit. Its that point where, after the day is over, I realize I should have quit. I have an actual figure but I do not stick to it. Many times I will quit for the day at my stoploss but later I will pull up the charts "just to see how the market is going" and Voila, the market is just making a double bottom. A perfect chance to make my money back but the volume is gone, the bounce peters out and I have exceeded my stop limit. Now I'm mad. Goddam market is going down. I know it. I place a short with 10 pt stoploss, to allow for the wiggles, go to work grinding my teeth all the way, get to work, check my laptop to see that the market went to my stop, took it out, then proceeded on down, smirking all the way.
most daytraders have a very high percentage of winning trades vs. losing trades, and a high percentage of winning days vs. losing days, and yet most daytraders don't make much money. A good trader with bad money management ( hypothetical ) trade 1: + 500.00 trade 2: + 500.00 trade 3: +750.00 trade 4: -3,000.00 right 75% of the time, but should have never got out of bed in the morning. I think that is what happens when large amounts of money are put at risk to make small amounts of money.
sometimes I break up my stop loss for the day into two sessions....for ex. if my stop loss is $500 for the day i stop myself from trading if i hit $250 before 11:00 am ...then i resume trading again by 2 pm...if i saw something setup nicely.....keep it tight ...
It would be interesting if one of these big brokerages did some tabulating on the trades made by traders. Take the ES e-mini for example: I wouldn't be a bit surprised if the statistics shows the average customer makes about a 1 to 1 ratio on his trades. And as we all know, your dead- meat in the long run with those kinds of numbers. The bottom line is, we don't hold our winners long enough. I have a little note stuck on my computer to remind me that I only need to be right 4 out of 12 trades to break-even if I maintain a 3-1 profit/Loss ratio.
IMO, disciplined money management is at least half of the equation for profitable trading. You can have a system with a high mathematically positive expectation and lose money with sloppy money and risk management. There are two performance numbers that completely define profitability: your win ratio (or if you prefer, your win/loss ratio), and your gain/loss ratio. IMO, the second is more important. It directly represents your ability to cut losses and let profits run. I believe this number can and should be directly targeted. For example if youâre trading CSCO your parameters may be to risk .05 to make .10. If youâre trading LLTC it may be to risk .25 to make .50. With e-minis it may be to risk 5 ticks to make 10. In each of these cases the gain/loss ratio over time would be 2:1 if youâre right half the time, and you will still do well. If youâre right more than that you can clean up. You can experiment with tweaking these parameters in Excel with a RAND function and assumptions including number of trades/day, trade size, etc. Then plot the P&L series for 250 days. Youâll easily see that if youâre right only half the time and youâre G/L ratio isnât higher than some threshold like 1.75, stop now!
The only real reason to have a hardcoded daily stop loss, is to protect you from trading in markets that you can't handle. Of course theres nothing to say that as soon as your stop sends you back to the locker room, the market moves back into a trend that you trade well. Very arbitrary.