Broken all the rules - Help!

[sidinuk]

Totally agree, getting all the elements under control is the real holy grail. The problem is that that most new traders concentrate on the entry and don't realise how important all the other parts are, until things go wrong. But that's how we learn, so it's an important phase to go through. Reading Market Wizards shows that most of the successful traders got wiped out when they first started by letting a loss get out of hand or risking too much on a trade or some other fundamental error.

Let's face it, you can read something or be told something a hundred times but it only really sinks in when it happens to you. So Lard42, well done. Rejoice in learning a lesson which may well save you many more times what you have lost now in the future.


Who want's to live on the hill anyway, it's too far to walk into town or take a walk by the river! I might change my mind, though, if I had a spare couple of mil.

 

[JesseLivermoreII]

Full marks for your honesty Lard42. Has really struck a chord with everyone, hasn't it ?. From my experience I would suggest a few things. Firstly, cut down on your stake - with a larger stake you will naturally have a tighter stop if your trading account is small; with a smaller stake you have the 'room' to let it run further, with a slightly wider stop and with less anxiety. Secondly, and this is from Naz - so sincerely hope he doesn't mind me quoting him here (and with the utmost respect to him) - you could try having a tier system to your trading: paper trade level one, £1 stake level two, £2 stake level three and so on. If you trade for a week and come out on top, move on up to level two, if you profit week two, move on up to level three. If you lose, return to the previous level. Do not move up a level until you profit. Eventually you will be spending more time at higher levels. Lastly, the dow is volatile and tricky to SB, as all eyes are on the spread all the time aren't they ? Helenqu has commented on her relief of moving onto the futures market from SB on these very boards; it isn't easy with the spread moving around. I'd agree with all above who suggest a change to a less volatile index. Can you trade EOD stocks; slower moving and cheap ones, to practice taking losses ? If it's of any interest, I shorted the FTSE yesterday on it's way down, but stuck rigidly to my stop - which was breakeven on this occasion - on a retracement. Missed out on a 35 point move. It's all part of the journey to profitable trading it seems. Great post,
Happier Trading Lard42 !
Jesse.

 

[Zenda]

Money Management - A View!!

Just how do mental stops work? :cheesy:

Money Management - Keep records of every trade - Every day - If losing, bet smaller - Meticulous record keeping - Always establish loss position first.

learn to trade well & protect your capital - the most important aspects of trading

 

[Naz]

A Californian dentist once got fed up with losing and gave his account to his wife with strict instructions.She was fearful of his tantrums if things went wrong and followed his views to the letter.She then promptly traded his account into profit.

I trade Nasdaq stocks not indicies.When i'm uncertain i shadow the primary and secondary axe.They are the third parties that help me trade my account into profit.Where's my stop? its likely to be where the axe wants to hold a level . Where he goes i go.He'll tell me before we start trading at a level his true intentions.Let the primary and secondary axe signal to each other.Thanks guys you've just talked to me as well.

Many many times you look at a chart and think,oh yes thats what i should do.Then you look at the level 2 screen and the axe has other ideas.This will usually happen at the top and bottom of moves.Forget your own opinions they're probably going to be wrong,Shadow the ax and let him be the third party that trades your account into profit.

I saw Goldy run a stock up so hard once it had to pullback.Everyone started selling and he just sat there for ages and bought every last bit.Then gradually peeps said crikey he wants to take it for another run.Slowly they started nibbling and then bang off he went and up went the stock.He created a frenzy of buying,then out of the blue he started dumping stock on INCA whilst trying to make it look like he was a buyer.

That was the signal.That was the top.How could i possibly see that level on a chart except after the event had taken place.He made that level.When you dont know shadow the axe on a Nasdaq level 2 screen.Put your stops around his trading intentions.Its amazing how this works.

This is particularly prevalent in run away moves when the market opens.Try and trade it from a chart and you've got problems.Dont let your eyes stray from that level 2 screen and you'll make your days money withinin 45 mins and call it a day.Thats if you know how to read, use and play your level 2 screen.Sometimes it only takes 10 mins!

 

[TraderPattern]

Let's try and dissect what you have said:

As I am sure quite a few members can relate to never being able to pick the right direction in trading. I for one seem to be very good at it. Although every now and then I do get it right and I seem to be on top for a while.

First off, if you have the necessary elements in place to your overall strategy, you don't even need to be correct on direction 50% of the time to extract capital gains from the financial marketplace. So you should immediately dispel the myth that getting your direction correct most of the time is absolutely pivotal to your success.

Originally posted by Lard42
Then of course I go and do something very stupid and it all falls apart, like it is doing for me now. I use SB's for betting the Dow so don't like to use actual stops until I am in profit (my first mistake) because of the amount of times I have had them touched only to reverse on them.

I am not knocking SBs for tax efficient swing trading, but if you are SB'ing intraday, you should understand that the bid-ask spread will be at its maximum at precisely the time you want to enter. When trading intraday with SB, the spread betting company removes any execution advantage that you think you may able to foster. To overcome the execution advantage of the price-setter (the spread betting company) it may be an idea to enter on countertrends, when the spreads are more conducive to the intraday player. Of course, contingent on the precise nature of your strategy, countertrend entries may be risky; out of the execution frying pan and into the stop-out fire, perhaps? This, in itself, makes a good case for not SB'ing on an intraday basis.

Originally posted by Lard42
To cut a long story short I bet the Dow up on Monday (After most of it's rise) and then sat there and watched it come all the way down. I had my mental stop and as I saw it turn and I new I should get out, but just sat there frozen like a rabbit in head lights, my finger poised on the mouse. This is something I seem to do often.

You have no exit ruleset. You need a basic ruleset, otherwise there will be a continuous internal debate, to the long-term detriment of your profitability.

Originally posted by Lard42
To top this off the bet is too large and I can only survive down to around 8050 before my account is wiped out. My account is with D4F, so the futures is already makin it worse today. My question to the experienced traders out there is, what should I do now? Close out and take the loss and live to play another day or stay in because I may see a reversal to the upside (soon).

I assume that you would have by now exited your position. Going forward, if you want to merely survive a matter of months, you must maintain your stop losses. To survive and prosper in the arena of financial speculation, you must have a solid trading approach, which considers and integrates the major elements of trading. It is unequivocally not just about success at TA. For example, you can start by simply restricting the stop loss of each of your trades to half of one percent of the current value of your trading reserves.

Originally posted by Lard42
Secondly, do you have any tips for overcoming such stupid behaviour. As I write this it's making me feel even more stupid by the scentence.

I have now lost all confidence in my TA to really understand if I will make the right decision. I feel that if I get out now it will undoubtly rise back up but if I don't it will be sure go down.

If I survive this, I'm going to take a break for quite a while (or mayby I should just do it now).

Thanks for any help you can offer in advance

Part of the solution is a recognition that there is a problem and a wholehearted desire to rectify the problem. You are halfway there, in this respect. Your problem is most decidely not your aptitude (or lack thereof) within the field of TA. I would hazard a guess that if you were tape reading off Level 2, devoid of any TA, you would be enduring similar, if not identical, difficulties. Your areas for development are, in my opinion, primarily psychological. I would prescribe that you read some books on the psychological issues involved in trading, and instigate a regimen of attacking and resolving each of the psychological issues that you identify.

 

[tomorton]

TraderPattern - what a super analysis of the problem: I'm sure the time you have obviously put in is appreciated.

Re trading psychology books I would have to make the obvious suggestion of 'The Disciplined Trader' and 'Trading in the Zone' both by Mark Douglas.

I've seen both feature in a worst trading books poll on another site and they are laborious - but well worth ploughing through. They are essential reading for anyone wanting to stay in the game and win, and as the only way to lose the game is to get knocked out, we all want to stay in.

 

[TraderPattern]

Always a pleasure, Tomorton; that's what these boards are here for.

 

[Trader333]

Ax Selling When Appearing to Buy

Hi Naz,

How can you tell that the Ax is dumping stock on INCA whilst appearing to be buying ? The only way I could see this being achieved is by analysis of Time & Sales but then you would still not be sure that it is the Ax dumping stock as it could be any Market Maker ?

Thanks


Paul

 

[Naz]

Hi Paul,

Things like this need to be explained correctly and fully on a course.

 

[fltbear]

Hi Naz,

Posting at 5:32 on a bank holiday monday. Do you ever sleep?

 

[CityTrader]

Who or what are primary& secondary axe's???

 

[TraderPattern]

Who or what are primary& secondary axe's???

The primary ax is the market maker who, at a given time, is controlling most of the trading in a stock. By extension, the secondary ax is responsible for the control of the second largest amount of trading in a stock (again, at a given time).

 

[Lard42]

Hi and thanks to everyone for their comments on my original post. It's been a tough few weeks since I started this thread. I did get out that dreadfull day, taking a considerable loss (in more ways than one). I then continued my losing streak further, wittly away at my capital by being over cautious, getting in too late and then placing stops too close.

Thankfully I have since managed to take a step back and re-think my plan and have now broken this losing cycle. In the previous three months I had not had a losing week, although I did have many losing trades. What I guess this all boils down to is greed. I now understand where my limits are and at what size the bet will affect my judgement. In this case it was so far out of my comfort zone that it meant I was not able to conentrate on anything but how much I was losing, paralyzed by my computer screen. All rational thought just went out the window.

Thankfully it has given me the opportunity to go back and spend some time analysing the market and my strategy. I have now refined my entry and exit points and given greater consideration to my money management plan. A significant point being not to have to much money in my account in the first place, just in case I do falter again (which I wouldn't!).

I have now chilled out a great deal as well and that I think has helped enormously. I now don't trade as much, getting a better balance in other areas of life. It's only been a week since I put my improved plan in place, but it seems to be paying so far.

Best regards to all and thanks for making this such a great community.

 

[Skimbleshanks]

I'm pleased to hear that Lard42.

We all go through stages in our trading lives when things don't work as well as they used to. Not everyone though appears to be able to stop, reasssess the situation, and then go back into the market. You've succeeded where thousands have failed.

May your winning streak continue!