Why can't I make money - when I know what do do?

you might as well trade spy.

 

You don't really know your system. And several losses following it in the beginning made you thinking: "Wish I did the opposite." And it stuck. You did the opposite, and still losing.

In trading, you should be smart in between trades. During evaluation, system reviews, comparing results.

But, during trades, or starting to, be the dumbest person alive. "You are so stupid a person that you follow only what your system tells you to do."

In other areas of life we have to be smart all the time, move and countermove everything and everyone around us. In trading the smart trader is the dumb trader, whom didn't even dream to try and countermove every move the market makes.

Did you study them with "I'm ignorance and wants to study further" thinking or "I'm smart and let see if you're smarter than me"?

All of the above three, and your claim that you have some 25 years experience in stock...maybe you're just too smart for your own good. Maybe, underneath, you think that you're a veteran and you should know better than the rest, so, "Why the hell should I listen to my inferior buddy or his no-good mentor?"

Consciously you want to "upgrade" yourself. Subconsciously you think you are already good enough.

And subconscious always win, buddy. All the time.

 

Nkhoi,

do you trade SPY??

I've been watching trading videos from Steve Gomez on youtube and he always brings up the SPY. it sure looks easier to trade than the ER and ES.

You have any opinion on trading it versus futures?

 

I had a discussion and the question is if you keep watching sp500 in order to trade stock why not just trade it? And if you decide to trade SPY you might as well trade the ES for tax and leverage advantage. No I don't trade SPY just ES.

 

Thanks for all the feedback on this thread guys.

I appreciate all the sincere responses and for ET I would call this thread a successful one.

I'm working hard at this.

 

There are two things probably contributing to your lack of discipline. First, fear of success. You have become so used to failure that it has become comfortable and your subconsciously self sabotaging yourself to maintain that pattern. Humans don’t like change, generally one has to force change with sheer willpower. The second thing is issue of accountability. If you trade by yourself then you have no one to hold you accountable for taking stupid trades except yourself. If you are unable to hold yourself accountable then a possible temporary solution is to find someone that can hold you accountable. Most of the time simply, the thought of someone watching your every trade and knowing when you screwed up is enough motivation to stop self sabotaging trades. Every time you break rules/ trade undisciplined there should be some negative consequence associated with it. And every time you go for a day making only disciplined well thought out trades there should be positive reward.

Or it may because you haven't defined your rules exactly so that they are crystal clear. Vague rules can allow for contradiction which can make you fall into trap of believing you should have taken the trade when it the pattern worked(after the fact) and you shouldn’t have taken the trade if it didn’t work(after the fact). Whatever your edge is you need to define rules in such ways that a complete idiot or a robot with no knowledge could execute. Only when your trading becomes highly systematic rule based can you start to achieve some level of consistency.

Before taking a trade try to say out loud what your reason for the trade is. Almost every good trade is based on anticipation. Trades that are put on without a reason and done on impulse are majority of the time emotional losing trades.

When faced with losing streak of trades one needs to fall back on confidence/belief. Confidence/belief that the trade you take is profitable if you take it every time you would come out with a profit over long term (months). Short term results (days) can test your confidence/belief and you need be strong enough to stick to being consistent. Just because one instance your edge didn’t work doesn't mean it isn't profitable. If you always change strategy reacting to short term result you will find yourself falling into the herd’s beat and lose.

Sleep is very important thing to trading well. If you don't get full night sleep don't trade. It’s already hard enough if to trade in well rested state, trading in sub par tired mental state you will crack too easy under pressure.

Reduce external distractions. It depends on your personality type but some people cannot function well in a cluttered environment. So clean up and keep things organized. It is easier to focus in silence then it is with a lot of noise.

Exercise and maintain healthy body. When your body/health deteriorates to the point where you experience pain/ have injury money doesn’t matter anymore. Health is more important then any money you could earn from trading.

Scared money can't make money. You have to be willing to lose in order to gain. If you trading with money you can't afford to lose then trade very small. Try to risk a very small amount so that your draw down would not really bother you so much. If your edge is profitable you will build up profits above initial roll over time. When you get enough profits you can increase your risk per trade because your just trading with profits, not money you weren’t willing to lose. Hopefully, you start run good and don't look back. If you lose profits and back to initial roll drop the risk down again and rebuild profits and try again until finally your edge gives you a good run with higher risk level. Cash out the money you weren't willing to lose as soon as possible.

Emotionally you can either be in a low state (feel bad), neutral state (feel nothing), high state (feel good).Best state of mind when trading is a neutral state.

Low state either manifests itself with anger/frustration, where you become more risk taking. Or fear, where you become more risk adverse.

Generally, fear is not an issue if you risk money you are willing to lose and you have confidence that your edge really works. Fear is only issue when you lose significant amount of money you weren't willing to lose. Often times it is denial. Denial that your account’s current balance is what it is. You are still thinking of your balance as what it was. At any give moment in time your balance is what it is. You are not down or up anything. Thinking you are up or thinking you are down relative to past balance, only leads to negative psychological issues. So the key is accept what your balance is and forget what your balance was. The only thing in your control is the present. The past cannot be changed so there is no point obsessing over it.

Don’t trade half-assed or for fun (paper trading). Don’t even watch the markets period if you aren’t willing to trade full out(100%) with risk level just outside your comfort zone. There is nothing worse then anticipating a move that you didn’t take Full advantage of when you had the capability to do so. The problem lies in the perception that you could have or should have made a profit if you had been trading full out. This can lead to many negative psychological issues. The key is to trade consistently always risking the same amount so you become comfortable and numb to that risk level. Then when you feel very comfortable where losses don’t affect you, you increase the risk slightly just outside your comfort zone. If you do the opposite by suddenly switching to paper trading/watching without risk mode, you end up shifting your comfort level of risk down where if you try to go back to your normal risk level it will be far more stressful / difficult.

The more significant the loss the more time it will take to accept it. Losses where you took a big risk but within your max risk per trade limit can usually be resolved from a simple 5 min break. Big losses may take a day to sink in. Enormous losses may take weeks/months.

 

Your only goal when Trading should be to make trades that followed your rules. A trade with a loss as a result where you followed your system/rules is counted as a win. A trade that doesn't follow your rules but gives positive result is counted as a loss. So the goal puts focus is on the execution and not on the results. Goals based on results have a net negative impact on trading. When you fail to reach a result goal and have limited to time left to do so you may start to feel urgency/impatience and start forcing trades & taking more risk. When you do reach your goal you may start to relax & get more risk adverse because you don’t want to give up your profits. This means you increase your potential losses & also curb your potential profits. A sure fire way to under perform your edge’s potential.

Anger/frustration can be problem even when risk per trade very small where fear isn't issue. The problem lies in your short term expectations with each individual trade. The best state of mind a trader can have is long term expectation he will make profit but short term expectation is that every trade will lose. By expecting the worst result short term, when it actually occurs, there is no surprise, very little emotion/reaction occurs. Then telling yourself you made a good trade, Long term if made that trade every time profit will come helps to balance the Low feeling back to neutral. Once you are able to handle low state and shift it back to neutral your focus should shift to dealing with high.

High state of mind is more difficult to recognize and deal with. Pain alerted you to Low state. However, high state is only good feeling which is intoxicating. The thing trader need to realize is that High state is far more dangerous then a low state. The higher your state of mind the farther you have to fall and more pain/emotion/stress results. Being too high causes your mind to get clouded by obsessive positive thoughts & then laziness/recklessness results. Your mind almost gets hypnotized in a trance where you forget to do very basic things that were essential to your success. Eventually, the market will catch you if you are trading reckless and loss sends you back down to earth. However, for most it doesn't stop there they spiral out of control due to the shock of sudden emotional drop & pain and end up blowing their accounts up.

One way to deal with high state is review all your trades and look for any faults/mistakes after you have finished trading for the day. Even if you had very positive day you should still review & look for improvement. From losses reviewing trades is almost automatic to see if there is anything wrong. But from gains we tend to assume nothing was wrong and don't review. This is very bad, because it can lead to overconfidence/recklessness and then eventual Down fall into extreme low state of mind.

Another strategy for handling high state is to write down and make sure that you have done everything you need to do to make good trades. Since high state causes us to forget to do things then double checking by writing things down should help catch you from being lazy/forgetful. Don't assume you can remember everything in your head.

Know how much you are risking on every trade before you execute. Predefine a max loss you are willing to take and position size according to that. Not knowing how much you risked on the trade and being surprised and how large the loss is when it goes bad can make one very emotional quickly.

Keep an open mind to others ideas. Don’t think of yourself as a master/genius who got the markets all figured out. I can count 10 times where I thought I had it figured out then I realized something else and it made me realized I know nothing! Best to accept you will never master it and tell yourself this repeatedly. Fortunately, mastery isn’t necessary to be profitable.

Set mistake limit (bad trades), daily loss limit and # of trade limit. If you reach any of these limits you must quit trading for the day. Make it reasonably loose so it would only hit majority of time from lack of discipline and not short term negative variance of making good trades.

The loss limit prevents you from falling into a escalating spiral that blows up your account, It also gives you peace of mind that you can only lose a certain amount on any given day and your entire balance isn't at risk.

The # of trade limit is to curb over trading. If you scalp very short time frame over trading is huge issue you have to deal with. Sometimes, the trade opportunity is so sudden and requires you to react right away you don't even have time to really think it through or state your reason for taking a trade. Mistakes in execution are inevitable. However, these should only be rare occurrence. Many mistakes in short period of time is not good and if this happens u should quit and analyze what went wrong. Better to quit early then let it spiral out of control into loss that hits your daily loss limit.

Something very important to trading is willingness to miss moves. Sometimes you can anticipate the move but there is no high probability entry point to get in. Or, maybe you get in with a high probability entry point, get stopped out then there is no high probability entry point to get back in. The problem for most people is they get stopped out and they immediately jump back in chasing the first low probability entry point just so they don't miss the move. You just need to accept that you can't catch every move when you trade with discipline. Don't take it personally when you get stopped out and it goes without you because that's just part of the trading.

When anticipating price. Direction/Trend is only half of the equation. The other half is deviation/chop(shorter time frame trends within the trend). Most people aren't even aware of this. They only focus on trend/direction and their blind assumption is that deviation will be very low. High deviation will destroy a trading strategy based on assumption of low deviation. On the other hand a very high deviation strategy used during low deviation trend will also perform very poorly. A solution is to assume a moderate average level of chop/deviation, and trade every trend consistently with that strategy. This way you will do ok during high deviation & ok during low deviation, instead of doing very well in one & very poor in the other. You will never absolutely kill it catching entire moves but, you will achieve more consistent results which is better for mental state.

 

Awesome post ThuNd3r.

I'm going to print that and read it every morning, and after every close. What a great piece of writing.

 

Yeah me, too. Excellent post, excellent thread! ET should have a special archive for threads like these.

 

NoDoji...

Wasn't sure you'd be back in this thread. I read all .. ugh yes! Every page in your blog since the beginning. I've been at this a while, so the fact that you CAN turn the page and a new story begins was refeshing, positive, and really played at my heart.

I've surpassed 'level 2' in the respect that I know the patterns, when to take a stance and fold them.

There is a lot of great info in your blog, but the one thing that really helps me personally is that you can take a hit, even majorly take some damage (and our own fault) but stick with the plan and method and the odds will work out in our favor, even if it doesn't appear it will for a bit.

Peace, and thanks.

John