What is psychology needed for make living from trading ??

Discussion in 'Psychology' started by nell, Sep 20, 2008.

  1. nell


    Hi guys,

    I'm in my thirty right now, and wants about make living from trading. My previous work is self employed, I have some trading (the real trading) business - anyway, i have seen Stock trading is the best way and I focusing in this right now.

    I just want to know, who's using credit spread as their strategy month to month and compounding them ?

    I use Iron Condor, and use them for a nice whole year, until recently my accounts blew up :(

    It took my whole profit + 15% loss from my whole capital. It's around $20,000 loss up to now. Damn !!

    My Iron condor criteria, i always using probability of touching 90% (based on IV), if you using TOS - you will know that. Usually the range between strike price and current price is about 10% And target for 6%-10% profit only.

    Most of the time i let it expired worthless, because with my target only 6%-10% it hard for me to close it 10 days before expiration and else I already do a backtest, I calculate month to month highest close-lowest close and it rarely exceed 10% ranging.

    If it's close/touch to my strike price, most of the time i roll it down around 5% of the strike price to lower the loss. I never let it go below my strike price whatever the market issue is. And most of the time is works

    I usually trade with index RUT/SPX/NDX - and some IWM/SPY/QQQQ/DIA/DJX.

    I have a nice profit during 8-9 months and I compound it step by step, I think i already get around 50%-60% profit because of my compound. Yes, there's some lose, but entirely my portfolio was good, if I loss 1-2, i still win on the other.

    My blue print plan is, I know within 1 year - I will loss 1-3 times eventhough my Iron condor is high probability strategy, I already prepare to risk 30% of the margin of each stock, and based on my calculation - it still give profit for a whole year.

    But this month, i blew up - i only use half of my money, but I loss around 70%, it sucks man !! It's because panic selling (only in a week, most of index go down more than 10% and it makes me to close/roll down my put spread). Honestly, I put my emotion too that time, and let fear controlling me.

    The things right now, I'm about to make living from trading. But the time I want to start, my accounts blew up. I confuse right now, i decide to not trading anything from now. But who's paying for my living cost ?

    The best way is i trade again, but with my current mindset and my emotion i need time to gain more confidence and clear my mind.

    What is the best credit spread strategy that give consistent profit (eventhough it's small) with high probability ?
    What do i need to trading for living ? I know I must eliminate emotion and to be discipline, i already apply that.

    I have loss my confidence right now, but i still believe i can make living from trading

    What must i do right now ?
    I want to ask some advice with you guys, most of you more professional and more experience.I only need positive advice, please do not give any comments if you are only want to pick a fight and just to make me down. My future depends on this.

    I think i need input from you, especially those who already do trade for a living from your own pocket money (not a broker/fund manager/etc), I want to learn from you as I about to start.

    Hope get the best from you !!
  2. sg20


    If 50 - 60% is what you are after, I think futures or forex can do better. I don't particularly like trading option due to unforeseeable events however it's always up to the individual trader to trade what he's comfortable with... Everyone gets blown up once or twice but being diversified you can switch to other market as a temporary relief and stay positive until you can feel confident to trade again. Good luck.
  3. nell


    actually not 50-60% what i after, it's the "compound" power, as Albert Einstein said compounding is the most powerful force in the earth !

    the problem with future/forex, we have hard time to compound that, because of the probability ratio and risk/reward ratio. The probability cannot consistent to be always right at the time, and the reward is too big. So most person will not risking big money, because their chance to loss quite big and anyway the reward is very big for small capital

    Anyway, thx for your suggestion buddy, appreciate it !

    I still have faith in options market though :)
    my basic from here
  4. Rimping


    If you want predictable, steady returns, the end is always a blow-up.
    Read: Fooled by Randomness (Taleb)

    Trader A:
    year 1: 35%
    year 2: -15%
    year 3: 75%
    year 4: 104%
    year 5: -20%
    year 6: -5%
    year 7: 15%
    year 8: 28%

    Trader B:
    year 1: 21%
    year 2: 20%
    year 3: 18%
    year 4: 23%
    year 5: 21%
    year 6: 21%
    year 7: 22%
    year 8: 22%

    Both traders make on average 21% per year.
    Which trader is the safest? It is trader A and not B. Trader A is likely to go on like this. Trader B in one bad year will lose 98% and then it is over.
  5. Rimping


    The results of trader A are indicative of a sound (trendfollowing) trading programm.

    The results of trader B are indicative of some "magic" or a "100% sure strategy". The end result is always the same. If you don't want to have any risks the end is often a catastrophe.
  6. Nell,

    (You are looking for improving on your trading technique so why is this in Psychology?)

    The options industry's micro focus on statistics is bull to a large extent because directional events often override even the best constructed strategies.

    Being able to trade condors is a valuable skill but you may want to educate yourself further to apply directional trading techniques in addition to statistics.

    If you pulled up a 60 or 90 minute chart of SPY with some moving averages, oscillators and volatility bands like Keltner and breadth indicators you would quickly see that from that perspective - at least - the market has been negative and people employing condors should construct them taking account of the persistent weakness.

    You will also see how would you have done if you did not put your spreads on based on the expiration calendar but at exhaustion points.


  7. Thanks,

    It is the greatest if simple works for you.

  8. This is the mantra of the 95% of traders who lose all their money.

    You see, compounding works in both directions. It is the most powerful force on earth for making your money disappear also!!!

    Unfortunately, many have to blow out their account before they learn this lesson. You are well on your way.
  9. nell


    Sorry Rimping, it seems I also agree with Jasonn !

    anyway, it's a good ilustration you've been giving me-i have think that for this whole year

    I always in argue with my brother about this too :) because he's the trader A, and I'm the trader B

    I think there's no bad or no good with trader A or B, everyone have their own stance. Mostly, their character is :

    Trader A : Reward bigger than risk, smaller winning ratio, targeting for the big bang but do very small stop loss

    Trader B : Reward and risk almost equal, maybe some of them risk 3 only to get 1 in order to buy bigger probability and consistency, bigger probability ratio, range of stop loss wider

    But you know what, imagine you're businessman, and you must choose whether to sell as a retailer or wholesaler, in normal business industry, retailer usually have a big margin profit but smaller volume and wholesaler have a small margin but bigger volume. Are retailer better than wholesaler and vice versa ?

    So that's why I think, trader A and trader B is equal. And actually you know what, i also think the basic principe is also same, eliminate the emotion - discipline - good MM.

    How do you think ?
  10. nell


    thx for the input ! Appreciate it

    I put in this psychology trade also - because I feel I have mindset problem instead of trading system, more over I feel my mindset is the major factor of what happened to me. (Anyway, you also can find the same thread on options forum, sorry if i post double -it's because i also need input from psychology point of view)

    Anyway. I like your comments and I feel it's very valuable, but can you explain to me in a simple words ? I have bad english :D
    #10     Sep 20, 2008