somewhere out there this has probably been discussed before but I find it increasingly frustrating that I have left alot of money on the table ( for others I guess ) by giving up my gains for certain weeks and then turning those weeks into bad weeks that take me weeks to recover from I know one must go small when one senses this happening but it sometimes happens so quickly that I do not adjust to the fact until after it happens.
What is the behavior pattern that exibits itself during this down time, that is absent during new equity peaks? Have you identified it? Can you identify it quicker? What have you done that successfully counters this type of behavior and gets you back on the right track? If you see the problem earlier, and begin changing direction earlier, is it possible to right the ship earlier? I really don't have answers just questions to get you thinking. But let me bottom line it for you: on some level you are fighting against yourself.
The worst thing about losing streaks is that it affects you psychologically. I mean by that that you become less averse to place trades that could turnout profitable. I found that I lose more by forgoing profits due to hot stove effect rather than to the actual losing trades that cause my behaviour to change in the first place.
I have struggled with losing days since I started trading last year. My big problem is that I would make a few hundred bucks several days in a row, but on the next losing day, whoa boy would the wheels unravel and I would give back 75% to sometimes 100% of the previous days profits. This was very hard for me to deal with psychologically and emotionally. So the last three months I finally realized that I have to limit the big losing days or I would never achieve consistent profitability. I have concentrated on keeping losing days small, by doing everything in my power to do so. When I get down for a day, I constantly tell myself that the next day will bring new opportunities and when I get really frustrated I just leave the office. (I used to just keep trading to make losses back, which would lead to even more losses- there were some days where I was totally out of control with my trading-it was just pathetic and also very emotionally draining). Live and learn though.
I haven't been day trading for a bit, mostly swing trading, but I found daily and weekly circuit breakers in my trading to be helpful. I quit if I go down by a certain amount (or number of trades) for the day. I have other numbers for the week and for the month, although I've never invoked those yet. I also have a "give-back" circuit breaker, once I get up by so much in day I quit if my P&L retraces back below that level or will on the next losing trade. Once you're gained a lot of experience with trading and with your emotions, these circuit-breakers may become a hindrance. But when you're learning I've found them to as vital as "cut your losers" and "follow your plan". Regards.
Hey Seth, Below is the answer I gave to DayTraderPete in a similar question to yours. I think it applies to you as well. http://www.elitetrader.com/vb/showthread.php?s=&threadid=20238&perpage=6&pagenumber=3 I think every trader goes through the point you are going through: you reach a phase where some (most?) days you make decent money, and then go on to lose much of it in these "I went crazy" losing days. What solved the problem for me was to set restrictions, and stick by them: 3 losing trades in a row within a day and I STOP! It means the market is either in its random (sideways) mode or I'm out of tune. I shut the computer and go for mountain biking to relax. If I don't follow this and do more than 3 trades, then the punishment for that when I go back and review my trading at night with a more rational mind, is no more trading for a week. I've only had to go through this once, and it was enough punishment watching the market and many opportunities go by but not take positions for 3 whole days (the runaway day happened on a Tuesday). The though of this made me stop the next times this came around. Now it's mechanical. 3 losing trades and I stop trading. Full stop. Iron discipline. Take a look at the following article, I think you'll find some answers there. To manage to get to the next phase of consistent profitability with small controllable losses, you need to minimize the max loss you'll have on a losing day, so that your winning days get you ahead. http://www.themasteryoftrading.com/...firstlesson.htm Regards, Loukas
Good advice for beginners: If you dont know what has gone wrong then circuit breakers at least limit the damage and allow you to come back after re-analyzing the problem. Once you have the discipline in place you wont need this: by discipline I mean knowing all the paramters of a trade before you take the position, i.e. profit target, stop/loss target, rationale for the position, risk parameters that qualify this as a good position, timeframe for the position etc. ....
I've read my previous post and it sounded pompous & all-knowing. Believe me, I wish I had put circuit breakers in place BEFORE I started daytrading. But, hey, I'm still in the game and learning more everyday.
GapTrader, I'd swear you are writing about me here.. I know a lot of us go through this.. And you're right.. the best thing to do when starting out a losing day or week is to remind yourself of all the opportunities that will present themself in the coming week or two.. you don't have to make the money back right away.. because when I try.. I inevitably fail THERE IS ALWAYS ANOTHER TRADE.. I have my worst days after my best periods.. probably due to cockiness.. in Market Wizards most of them say the same thing.. they experienced their worst drawdowns/trade after some good trades.. nice to know we're keeping good company.. Good Luck